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The following is an excerpt from a S-3 SEC Filing, filed by BAKER J INC on 9/18/1997.
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CASUAL MALE CORP /MA/ - S-3 - 19970918 - NOTES_TO_FINANCIAL_STATEMENT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 28, 1995

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

J. Baker, Inc. and subsidiaries (the "Company") is engaged in the retail sale of apparel and footwear. As of February 1, 1997, the Company's Casual Male Big & Tall, Work 'n Gear and Licensed Discount footwear businesses operated 1,443 locations in 47 states and the District of Columbia. The Company operates the 440 store chain of Casual Male Big & Tall men's stores which sell fashion, casual and dress clothing and footwear to the big and tall man and the 66 store chain of Work 'n Gear work clothing stores which sell a wide selection of workwear as well as health care apparel and uniforms for industry and service businesses, and sells footwear through 937 self-service licensed shoe departments in mass merchandising department stores. In all of these operations, the Company emphasizes the sale of quality products at comparatively low prices. See Note 2 for information regarding the divestitures of the Company's Shoe Corporation of America (SCOA) and Parade of Shoes divisions and the liquidation of the Company's Fayva shoe division.

Basis of Presentation and Principles of Consolidation

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

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses. Actual results could differ from these estimates.

Fiscal Year

The Company follows a 52-53 week fiscal year ending on the Saturday nearest January 31. The fiscal year ended February 3, 1996 contained 53 weeks.

Fair Value of Financial Instruments

The carrying amount of cash, cash equivalents, trade receivables and trade payables approximate fair value because of the short maturity of these financial instruments. The fair value of the Company's long-term instruments is estimated based on market values for similar instruments. At February 1, 1997, the difference between the carrying value of long-term instruments and their estimated fair value is not material.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid instruments with maturities of three months or less and are stated at cost which approximates market.

Merchandise Inventories

Merchandise inventories, which consist entirely of finished goods, are valued at the lower of cost or market, principally by the retail inventory method.

F-7

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Depreciation and Amortization of Property, Plant and Equipment

Depreciation and amortization of the Company's property, plant and equipment are provided on the straight-line method over the following periods:

Furniture and fixtures.............................................    7 years
Machinery and equipment............................................    7 years
Leasehold improvements.............................................   10 years
Building, building improvements and land improvements..............   40 years

Maintenance and repairs are charged to expense as incurred. Major renewals or replacements are capitalized. When properties are retired or otherwise disposed of, the asset and related reserve account are relieved and the resulting gain or loss, if any, is credited or charged to earnings.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

The Company adopted the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", on February 4, 1996. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Adoption of this Statement did not have a material impact on the Company's financial position, results of operations or liquidity. See Note 2 regarding asset write-offs as a result of the Company's decision to downsize its footwear operations.

Earnings Per Common Share

Earnings per common share of the Company is based on the weighted average number of shares of common stock outstanding during the applicable period. Primary earnings per share is based on the weighted average number of shares of common stock outstanding during such period. Stock options and warrants are excluded from the calculation since they have less than a 3% dilutive effect.

Fully diluted earnings per share is based on the weighted average number of shares of common stock outstanding during the applicable period. Included in this calculation is the dilutive effect of stock options and warrants. Included in this calculation for the period ended January 28, 1995 is the dilutive effect of common stock issuable under the 7% convertible subordinated notes due 2002. The common stock issuable under the 7% convertible subordinated notes was not included in the calculation for the periods ended February 1, 1997 and February 3, 1996 because its effect would be antidilutive.

Revenue Recognition

The Company recognizes revenue at the time of sale in its retail stores and licensed departments.

Store Opening and Closing Costs

Direct incremental store opening costs are amortized to expense over a twelve month period. All costs related to store closings are expensed at the time of closing.

F-8

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred Lease Acquisition Costs

Costs incurred in connection with the acquisition of license agreements were classified as deferred lease acquisition costs and were being amortized over the terms of the respective leases, which ranged from three to twenty years.

Stock Options

Prior to February 4, 1996, the Company accounted for its stock options in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. On February 4, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation", which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB Opinion No. 25 and provide proforma net income and proforma earnings per share disclosures for employee stock option grants made in fiscal 1996 and future years as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the proforma disclosure provisions of SFAS No. 123.

Income Taxes

Deferred taxes are provided for using the asset and liability method for temporary differences between financial and tax reporting.

(2) RESTRUCTURING AND OTHER NON-RECURRING CHARGES

During the fourth quarter of fiscal 1997, the Company restructured its footwear operations in order to focus its efforts on the management, development and growth of its Casual Male Big & Tall and Work 'n Gear apparel businesses. In connection with the restructuring, in March, 1997 the Company completed the sales of its Shoe Corporation of America ("SCOA") and Parade of Shoes divisions, and has begun to downsize its Licensed Discount footwear division. As part of the restructuring, the Company made a determination that it would reduce its investment in its Licensed Discount footwear business. The Company currently intends to concentrate the Licensed Discount division's efforts on its major licensors while exploring future strategic options for this business. The Company recorded a pre-tax charge of $166.6 million ($117.1 million, or $8.42 per share, on an after-tax basis) related to the sales of the SCOA and Parade of Shoes divisions, the write-down to realizable value of certain assets related to its Licensed Discount shoe division, and severance and consolidation costs related to the downsizing of the Company's administrative areas and facilities. Of the pre-tax charge, $122.3 million is included as a separate component of results of operations in the Company's Consolidated Statement of Earnings for the year ended February 1, 1997. The Company has also recorded a charge to cost of sales of $37.3 million related to a reduction in the Licensed Discount division's inventory to net realizable value. The remaining components of the charge include an increase in the allowance for doubtful accounts for the Licensed Discount division's accounts receivable, and losses incurred from actions taken in order to maximize the cash proceeds received for the assets sold in the Parade of Shoes and SCOA divisions subsequent to the Company's decision to dispose of each. In connection with the above events, the Company reduced its work force during the first quarter of fiscal 1998 by approximately 3,481 employees of whom approximately 1,693 were full-time and 1,788 were part-time.

Asset write-offs included in the restructuring and other non-recurring charges totaled $99.6 million, while the balance of the charge will require cash outlays, primarily in fiscal 1998. See Note 5 for information regarding the write-off of certain assets of the Company's footwear operations.

F-9

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The significant components of the restructuring and other non-recurring charges and the reserves remaining as of February 1, 1997 were as follows:

                                                       CHARGES       REMAINING
                                                       RECORDED      RESERVES
                                                     ------------   -----------
Loss on sales of divisions.........................  $ 63,737,000   $ 2,777,000
Asset write-offs and obligations related to the
  reduction of the Company's investment in its
  Licensed Discount shoe division..................    36,739,000     2,800,000
Severance and employee benefit costs...............     9,300,000     8,600,000
Lease obligations and asset write-offs for excess
  corporate facilities.............................     9,733,000     4,800,000
Other..............................................     2,800,000     2,550,000
                                                     ------------   -----------
                                                     $122,309,000   $21,527,000
                                                     ============   ===========

Sale of Shoe Corporation of America Division

On March 5, 1997, the Company announced it had sold its SCOA division to an entity formed by CHB Capital Partners of Denver Colorado, along with Dennis B. Tishkoff, President of SCOA, and certain members of SCOA management. The transaction involved the transfer to the buyer of the division's inventory, fixed assets, intellectual property and license agreements for the various department and specialty store chains serviced by SCOA as well as the assumption by the buyer of certain liabilities of the SCOA division. In connection with the sale of SCOA, the Company paid a total of $3.0 million to former stockholders of SCOA in order to satisfy a contractual contingent payment obligation, based on earnings, owed to such former SCOA stockholders. Net cash proceeds received from the sale, reduced by the amount of the contingent payment, by a $1.4 million two-year escrow account balance, and by transaction expenses of $1.3 million, totaled approximately $40.0 million. The Company also remains as guarantor on certain of SCOA's license agreements for periods not to exceed two years.

Sale of Parade of Shoes Division

On March 10, 1997, the Company completed the sale of its Parade of Shoes division to Payless ShoeSource, Inc. ("Payless") of Topeka, Kansas. The transaction involved the transfer to Payless of the division's inventory, fixed assets, intellectual property and leases on the 186 Parade of Shoes stores. Net cash proceeds from the sale, reduced by a $2.7 million two-year escrow account balance and the retained accounts payable of the division, were approximately $20.0 million. The Company remains contingently liable under certain of the Parade of Shoes store leases assigned to Payless.

Revaluation and Downsizing of Licensed Discount Shoe Division

As part of the restructuring of its footwear business, the Company made a determination that it would reduce its investment in its Licensed Discount footwear business. The Company currently intends to concentrate the Licensed Discount division's efforts on its major licensors while exploring future strategic options for this business. As a result, the Company undertook an evaluation of the value of the assets in the Licensed Discount business, and wrote off certain assets which did not benefit future operations and wrote down other assets to expected realizable value. Included in the restructuring and other non-recurring charges for the year ended February 1, 1997, are write-offs of intangible assets of $33.9 million, which the Company deems to have no future value, and $2.8 million in accrued costs relating to the repositioning and downsizing of the Licensed Discount business. In addition, the Company has recorded a charge of $37.3 million to cost of sales, representing the write-down of the Licensed Discount division's inventory to net realizable value and a charge of $2.2 million to selling, administrative and general expenses, representing an increase to the

F-10

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company's allowance for doubtful accounts related to amounts expected to be realized from the settlement of Chapter 11 claims with various licensors.

Disposal of Fayva Division

In the year ended February 3, 1996, the Company recorded restructuring charges of $69.3 million (which had an after-tax effect of $41.6 million or $3.00 per share) as a result of the liquidation of the Company's Fayva footwear division. Restructuring charges included actual costs for employee severance and other benefits of $3.5 million (a total of 2,545 full and part-time employees were terminated), fixed asset write-offs of $18.5 million and a loss on the disposal of inventory of $20.5 million. Also included in restructuring charges is a charge of $26.8 million for costs related to the disposition of the Fayva store leases. Accrued at February 1, 1997 are lease termination costs of $2.0 million which are expected to be paid by the end of fiscal 1998.

(3) BANKRUPTCY FILINGS OF LICENSORS

On June 23, 1995, Bradlees Stores, Inc. ("Bradlees"), a licensor of the Company, filed for protection under Chapter 11 of the United States Bankruptcy Code. At the time of the bankruptcy filing, the Company had outstanding accounts receivable of approximately $1.8 million due from Bradlees. Under bankruptcy law, Bradlees has the option of continuing (assuming) the existing license agreement with the Company or terminating (rejecting) that agreement. If the license agreement is assumed, Bradlees must cure all defaults under the agreement and the Company will collect in full the outstanding past due receivable. The Company has no assurance that the agreement will be assumed or that Bradlees will continue in business. Although the Company believes that the rejection of the license agreement or the cessation of Bradlees' business is not probable, in the event that the agreement is rejected or Bradlees does not continue in business, the Company believes it will have a substantial claim for damages. If such a claim is necessary, the amount realized by the Company, relative to the carrying values of Bradlees-related assets, will be based on the relevant facts and circumstances. The Company does not expect this filing under the Bankruptcy Code to have a material adverse effect on future earnings. The Company's sales in the Bradlees chain for the fiscal year ended February 1, 1997 were $57.7 million.

On October 18, 1995, Jamesway Corporation ("Jamesway"), then a licensor of the Company, filed for protection under Chapter 11 of the United States Bankruptcy Code. Jamesway liquidated its inventory, fixed assets and real estate and ceased operation of its business in all of its 90 stores. The Company participated in Jamesway's going out of business sales and liquidated substantially all of its footwear inventory in the 90 Jamesway stores during the going out of business sales. At the time of the bankruptcy filing, the Company had outstanding accounts receivable of approximately $1.4 million due from Jamesway. Because Jamesway ceased operation of its business, the Company's license agreement was rejected. The Company has negotiated a settlement of the amount of its claim with Jamesway which has been approved by the Bankruptcy Court. It is anticipated that, if approved, a partial distribution of the amount owed to the Company under the settlement will be made during the second half of fiscal 1998.

On April 26, 1990, Ames Department Stores, Inc., and related entities ("Ames"), a significant licensor of the Company (see Notes 5 and 12), filed for protection under Chapter 11 of the United States Bankruptcy Code. On December 18, 1992, the Company and Ames executed Amendment No. 2 to the Ames license agreement and the Company and Ames executed a certain Stipulation which was filed with the United States Bankruptcy Court for the Southern District of New York and approved on January 6, 1993, the consummation date of Ames' Plan of Reorganization. The Stipulation provided that the license agreement between Ames and the Company shall be modified and amended and the license agreement assumed by Ames. Further, pursuant to the Stipulation, the Company settled its $13.7 million pre-petition claim with Ames and, in return, the Company received $5 million in cash and a promissory note issued by Ames in the amount of $8.7 million bearing interest at the rate of 6.0% per annum and having a final maturity on December 1, 1997. At

F-11

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

February 1, 1997, the outstanding balance of the Ames promissory note is $2.9 million. The Stipulation further provided for a mortgage lien on and security interest in the real property and buildings in Rocky Hill, Connecticut comprising the executive offices of Ames, which mortgage lien and security interest shall be used as security in repayment for the promissory note, and which shall be senior to all other liens and security interests except those granted in favor of certain banks under a credit agreement with such banks.

(4) ACCOUNTS RECEIVABLE

Trade accounts receivable are principally comprised of amounts due from landlords of the Company's licensed shoe departments. The Company performs regular credit evaluations of its licensors, and generally does not require collateral from its licensors.

The following is a summary of the activity affecting the allowance for doubtful accounts receivable for the years ended February 1, 1997, February 3, 1996 and January 28, 1995:

                                               1997         1996         1995
                                            ----------   ----------   ----------
Balance, beginning of year................  $3,217,429   $1,972,723   $  521,922
Additions charged to expense..............   2,200,000    1,413,580    1,450,801
Write-offs, net of recoveries.............    (130,812)    (169,054)          --
                                            ----------   ----------   ----------
Balance, end of year......................  $5,286,617   $3,217,249   $1,972,723
                                            ==========   ==========   ==========

(5) OTHER ASSETS

Other assets, net of accumulated amortization, at February 1, 1997 and February 3, 1996 were comprised of:

                                                        1997           1996
                                                     ----------     -----------
Systems development costs, net of accumulated
  amortization of $4,529,842 and $9,566,062........  $4,529,811     $14,165,479
Deferred lease acquisition costs, net of
  accumulated amortization of $18,628,527 at
  February 3, 1996.................................          --      29,799,508
Excess of costs over net assets acquired, net of
  accumulated amortization of $1,828,479 at
  February 3, 1996.................................          --      10,131,228
Notes Receivable, net of current portion of
  $2,900,000 at February 1, 1997 and February 3,
  1996.............................................          --       3,888,000
Other intangible assets and deferred charges, net
  of accumulated amortization of $1,157,036 and
  $2,556,558.......................................   1,814,746       2,372,428
Cash surrender value of officers' life insurance,
  net..............................................      47,279         539,306
Deposits...........................................     917,575         402,931
                                                     ----------     -----------
                                                     $7,309,411     $61,298,880
                                                     ==========     ===========

As of February 1, 1997, the Company wrote off certain assets, primarily systems development costs and excess of costs over net assets acquired, in connection with the sales of the SCOA and Parade of Shoes divisions. In conjunction with the restructuring of the Company's footwear operations, the Company undertook an evaluation of the value of the assets in the Licensed Discount footwear business. As a result, as of February 1, 1997, the Company wrote off certain assets which did not benefit future operations and wrote down other assets to expected realizable value, including deferred lease acquisition costs, systems development costs and excess of costs over net assets acquired.

Remaining systems development costs are being amortized on a straight line basis over eight years. Deferred lease acquisition costs consisted primarily of payments made in connection with the acquisition of

F-12

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

license agreements and were being amortized over the terms of the respective license agreements. The excess of costs over net assets acquired was the result of the acquisitions of various businesses and was being amortized over periods of fifteen to twenty years. Notes receivable consist of a 6.0% note from Ames maturing on December 1, 1997 (see Note 3) and a $988,000 (at February 3, 1996) 10.25% note from Hills Department Store Company. Other intangible assets and deferred charges consist primarily of costs incurred for the issuance of debt and are being amortized over periods of three to ten years.

(6) DEBT

Long-Term Debt

Long-term debt at February 1, 1997 and February 3, 1996 was comprised of:

                                                      1997             1996
                                                  ------------     ------------
Credit facility (weighted average interest rate
  of 8.2% in fiscal 1997 and 7.9% in fiscal
  1996).........................................  $125,800,000     $133,000,000
Mortgage note, net of current portion interest
  rate of 9.0%).................................    14,987,673               --
                                                  ------------     ------------
                                                  $140,787,673     $133,000,000
                                                  ============     ============

The Company currently has a revolving credit facility on an unsecured basis with Fleet National Bank, The First National Bank of Boston, The Yasuda Trust and Banking Company, Ltd., Bank Hapoalim B.M., National City Bank of Columbus, Standard Chartered Bank and Citizens Bank of Massachusetts (the "Banks"). The aggregate commitment amount under this revolving credit facility was reduced from $205 million to $145 million upon receipt of the proceeds of the sales of the Company's SCOA and Parade of Shoes divisions. Borrowings under the revolving credit facility can, at the discretion of the Company, be in the form of any combination of loans, bankers' acceptances and letters of credit. Loans under the revolving credit facility bear interest, at the Company's discretion, at Fleet National Bank of Massachusetts' corporate base rate or at the London Interbank Offered Rate (LIBOR) plus a margin. The margin amount, as well as a commitment fee, is determined based on a financial ratio as defined in the revolving credit facility.

This facility expires on May 30, 1998. At February 1, 1997, the Company had $49.8 million available for borrowing under this facility.

On December 30, 1996, JBAK Canton Realty, Inc. ("Realty"), a subsidiary of JBAK Holding, Inc. ("Holding") and an indirect, wholly-owned subsidiary of the Company, obtained a $15.5 million mortgage loan from The Chase Manhattan Bank secured by the real estate, buildings and other improvements owned by Realty located at 555 Turnpike Street, Canton, Massachusetts. Realty leases the property to JBI, Inc. ("JBI"), a wholly-owned subsidiary of the Company. The property is used as the Company's corporate headquarters. Neither Holding nor Realty has agreed to pay or make its assets available to pay creditors of the Company or JBI. Neither the Company nor JBI have agreed to make their assets available to pay creditors of Holding or Realty. Proceeds of the mortgage loan were used to pay down loans under the Company's revolving credit facility.

Senior Subordinated Debt

In June 1989, the Company issued $35 million of senior subordinated notes with detachable warrants which enable the holders to purchase 600,000 shares of the Company's common stock at a price of $20 per share, subject to adjustments. At February 1, 1997, the detachable warrants enable holders to purchase approximately 640,000 shares at $18.80 per share. Subject to certain conditions, the Company may repurchase all, but not less than all, of the outstanding warrants for 150% of the then per share warrant exercise price. The

F-13

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

senior subordinated notes of $4,451,411 at February 1, 1997 ($5,912,711 at February 3, 1996) are presented net of $48,589 ($87,289 at February 3, 1996), which reflects the unaccreted portion of the $1,710,000 value originally assigned to the detachable warrants. The value of the warrants was recorded as additional paid-in capital and is being accreted using the effective interest method.

The senior subordinated debt was reduced by $27.5 million in June, 1992 with proceeds from the $70 million 7% convertible subordinated notes referred to below. The senior subordinated notes are due in installments of $1.5 million per year beginning in May, 1995 with a final payment in May, 1999. Interest, currently at 11.21%, is payable quarterly.

Convertible Subordinated Debt

Convertible subordinated debt at February 1, 1997 and February 3, 1996 was comprised of:

                                                       1997            1996
                                                    -----------     -----------
7% convertible subordinated notes.................  $70,000,000     $70,000,000
Convertible debentures............................      353,000         353,000
                                                    -----------     -----------
                                                    $70,353,000     $70,353,000
                                                    ===========     ===========

In June 1992, the Company issued $70 million of 7% convertible subordinated notes due 2002. The notes are convertible into common stock at a conversion price of $16.125 per share, subject to adjustment in certain events. The Company used the net proceeds to repay all of the $20 million outstanding principal amount of its senior term notes, $27.5 million principal amount of its senior subordinated notes, and a portion of outstanding bank indebtedness under its unsecured revolving credit facility.

Prior to the Company's acquisition of Morse Shoe, Inc. ("Morse"), 94% of the Morse convertible debentures converted into Morse common stock. Since the acquisition of Morse on January 30, 1993, holders of $2.7 million of additional Morse convertible debentures converted their debt into 49,820 shares of J. Baker common stock. The remaining balance of $353,000 convertible debentures accrued no interest until January 15, 1997, at which time the rate became 8%, and no principal will be payable until January 15, 2002. The debt is subject, under certain circumstances, to mandatory conversion. Approximately 6,500 shares of J. Baker common stock are reserved for any future conversions of the remaining Morse convertible debentures.

The Company's revolving credit facility and senior subordinated notes contain various covenants and restrictive provisions, including restrictions on the incurrence of additional indebtedness and liens, the payment of dividends and the maintenance of specified financial ratios, minimum levels of working capital and other financial criteria. At February 1, 1997, the Company was in compliance with such covenants.

The Company is restricted, under various debt agreements, from paying cash dividends unless tangible net worth exceeds certain required levels. As defined by the most restrictive of those agreements, minimum tangible net worth, as so defined, was $199 million at February 1, 1997. At February 1, 1997, the Company's tangible net worth, as so defined, was approximately $258 million.

F-14

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Scheduled principal repayments of long-term debt, senior subordinated notes and convertible subordinated debt for the next five fiscal years and thereafter are as follows:

                      FISCAL YEAR
                    ENDING JANUARY
-------------------------------------------------------
1998...................................................  $  2,012,327
1999...................................................   127,860,387
2000...................................................     2,112,955
2001...................................................       670,455
2002...................................................       733,348
Thereafter.............................................  $ 82,763,528

(7) TAXES ON EARNINGS

Income tax expense (benefit) attributable to income (loss) from continuing operations consists of:

                                      CURRENT         DEFERRED          TOTAL
                                    -----------     ------------     ------------
Year ended February 1, 1997:
  Federal.........................  $        --     $(32,688,000)    $(32,688,000)
  State and city..................    1,764,000      (14,922,000)     (13,158,000)
                                    -----------     ------------     ------------
                                    $ 1,764,000     $(47,610,000)    $(45,846,000)
                                    ===========     ============     ============
Year ended February 3, 1996:
  Federal.........................  $(7,311,000)    $(13,271,000)    $(20,582,000)
  State and city..................    1,641,000       (6,882,000)      (5,241,000)
                                    -----------     ------------     ------------
                                    $(5,670,000)    $(20,153,000)    $(25,823,000)
                                    ===========     ============     ============
Year ended January 28, 1995:
  Federal.........................  $ 4,132,000     $  5,308,000     $  9,440,000
  State and city..................    2,100,000        1,743,000        3,843,000
                                    -----------     ------------     ------------
                                    $ 6,232,000     $  7,051,000     $ 13,283,000
                                    ===========     ============     ============

The following is a reconciliation between the statutory federal income tax rate and the Company's effective rate for the years ended February 1, 1997, February 3, 1996 and January 28, 1995:

                                                      1997      1996      1995
                                                      -----     -----     -----
Statutory federal income tax rate...................  (35.0)%   (35.0)%    35.0%
State income taxes, net of federal income tax
  benefit...........................................   (5.4)%    (5.3)%     6.8%
Jobs tax credits....................................     --      (0.6)%    (1.6)%
Change in beginning of year balance in the valuation
  allowance for deferred tax assets.................    7.4%       --      (2.6)%
Other...............................................    3.8%      0.8%     (1.6)%
                                                      ------    ------
                                                      (29.2)%   (40.1)%    36.0%
                                                      ======    ======

F-15

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at February 1, 1997 and February 3, 1996 are presented below:

                                                      1997             1996
                                                  ------------     ------------
Deferred tax assets:
  Accounts receivable...........................  $    550,000     $    550,000
  Inventory.....................................    32,692,000        1,500,000
  Intangible assets.............................    11,506,000          (71,000)
  Other assets..................................     1,227,000          516,000
  Nondeductible accruals and reserves...........    12,476,000        9,154,000
  Operating loss and credit carryforwards.......    46,759,000       42,443,000
                                                  -------------    ------------
     Total gross deferred tax assets............   105,210,000       54,092,000
     Less valuation allowance...................   (26,636,000)     (14,969,000)
                                                  -------------    ------------
     Net deferred tax assets....................    78,574,000       39,123,000
                                                  -------------    ------------
Deferred tax liabilities:
  Property, plant and equipment.................    (5,811,000)     (13,970,000)
  Intangible assets.............................    (6,426,000)      (6,426,000)
  Other liabilities.............................    (2,590,000)      (2,590,000)
                                                  -------------    ------------
     Total gross deferred tax liabilities.......   (14,827,000)     (22,986,000)
                                                  -------------    ------------
     Net deferred tax asset.....................  $ 63,747,000     $ 16,137,000
                                                  =============    ============

At February 1, 1997 and February 3, 1996, the net deferred tax asset consisted of the following:

                                                     1997              1996
                                                 -------------     ------------
Deferred tax asset -- current..................  $  37,548,000     $  9,198,000
Deferred tax asset -- noncurrent...............     26,199,000        6,939,000
                                                 -------------     ------------
                                                 $  63,747,000     $ 16,137,000
                                                 =============     ============

The valuation allowance for deferred tax assets as of February 3, 1996 was $14,969,000. The increase in valuation reserve of $11,667,000 is attributable to an increase in temporary differences for which a reserve is required.

At February 1, 1997, the Company has net operating loss carryforwards ("NOLS") and general business credit carryforwards for federal income tax purposes of approximately $97.0 million and $1.3 million, respectively, which expire in years ended January, 2002 through January, 2012. Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109"), requires that the tax benefit of such NOLS be recorded as an asset to the extent that the Company assesses the utilization of such NOLS to be "more likely than not". The NOLS available for future utilization were generated principally by restructuring and other non-recurring charges which are not expected to continue. The Company has determined, based upon the history of prior operating earnings in its ongoing businesses and its expectations for the future, that operating income of the Company will more likely than not be sufficient to utilize fully the $97.0 million of NOLS prior to their expiration in the year 2012.

The Company has minimum tax credit carryforwards of approximately $4.0 million available to reduce future regular federal income taxes, if any, over an indefinite period.

F-16

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(8) PENSION AND PROFIT SHARING PLANS

The Company has a noncontributory pension plan (the "Pension Plan") which covers substantially all nonunion employees and is administered by Trustees who are officers of the Company.

The following table sets forth the Pension Plan's funded status at February 1, 1997 and February 3, 1996:

                                                              1997             1996
                                                          ------------     ------------
Actuarial present value of benefit obligations:
  Vested................................................  $ 12,696,000     $ 11,420,000
  Non-vested............................................     1,170,000        1,053,000
                                                          ------------     ------------
          Total accumulated benefit obligations.........  $ 13,866,000     $ 12,473,000
                                                          ============     ============
Plan assets at fair value...............................  $ 15,737,000     $ 12,137,000
Actuarial present value of projected benefit
  obligations...........................................   (18,832,000)     (17,100,000)
                                                          ------------     ------------
Deficiency of plan assets over projected benefit
  obligations...........................................    (3,095,000)      (4,963,000)
Unrecognized prior service benefit......................      (449,000)        (494,000)
Unrecognized net transitional liability.................       979,000        1,100,000
Unrecognized net actuarial loss.........................       520,000        2,612,000
                                                          ------------     ------------
Accrued pension cost....................................  $ (2,045,000)    $ (1,745,000)
                                                          ============     ============

In December 1993, the Board of Directors of the Company established a Supplemental Retirement plan (the "Supplemental Plan") to provide benefits attributable to compensation in excess of $150,000, but less than $254,064. The following table sets forth the Supplemental Plan's funded status at February 1, 1997 and February 3, 1996:

                                                             1997              1996
                                                         -------------     ------------
Actuarial present value of benefit obligation:
  Vested...............................................  $     251,000     $    203,000
  Non-vested...........................................        110,000           89,000
                                                             ---------        ---------
          Total accumulated benefit obligations........  $     361,000     $    292,000
                                                             =========        =========
Plan assets at fair value..............................  $          --     $         --
Actuarial present value of projected benefit
  obligations..........................................       (700,000)        (829,000)
                                                             ---------        ---------
Deficiency of plan assets over projected benefit
  obligations..........................................       (700,000)        (829,000)
Unrecognized prior service cost........................        400,000          433,000
Unrecognized net actuarial (gain) loss.................       (149,000)          80,000
                                                             ---------        ---------
Accrued pension cost...................................  $    (449,000)    $   (316,000)
                                                             =========        =========

Assumptions used to develop the plans' funded status were discount rate (7.5% in 1997, 7.25% in 1996) and increase in compensation levels (4.5%).

Plan assets of both the Pension Plan and the Supplemental Plan consist primarily of common stock, U.S. government obligations, mutual funds and insurance contracts.

F-17

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net pension cost for the years ended February 1, 1997, February 3, 1996 and January 28, 1995 included the following components:

                                                 1997            1996            1995
                                              -----------     -----------     -----------
Service cost -- benefits earned during the
  year......................................  $ 1,828,000     $ 1,260,000     $ 1,223,000
Interest cost on projected benefit
  obligation................................    1,420,000       1,199,000       1,056,000
Actual return on plan assets................   (2,657,000)     (1,528,000)        (66,000)
Net amortization and deferral...............    1,734,000         655,000        (565,000)
                                              -----------     -----------     -----------
     Net pension cost.......................  $ 2,325,000     $ 1,586,000     $ 1,648,000
                                              ===========     ===========     ===========

Assumptions used to develop the net periodic pension cost for fiscal 1997 were discount rate (7.25%), expected long-term return on assets (9.0%) and increase in compensation levels (4.5%).

In January 1992, the Company implemented a qualified 401(k) profit sharing plan available to full-time employees who meet the plan's eligibility requirements. Under the 401(k) plan, the Company matches 25% (50% for the year ended January 28, 1995) of the qualified employee's contribution up to 3% of the employee's salary. The total cost of the matching contribution was $379,000, $441,000 and $915,000 for the years ended February 1, 1997, February 3, 1996 and January 28, 1995, respectively.

The Company has established incentive bonus plans for certain executives and employees. The bonus calculations are based on the achievement of certain profit levels, as defined in the plans. For the years ended February 1, 1997, February 3, 1996 and January 28, 1995, $145,500, $50,000 and $940,000, respectively, was provided for bonuses under the plans.

The Company does not provide post-retirement benefits other than pensions as defined under SFAS No. 106.

(9) STOCK OPTIONS AND PERFORMANCE SHARE AWARDS

The Company has options outstanding under the Amended and Restated 1985 Stock Option Plan, the 1992 Directors' Stock Option Plan and the 1994 Equity Incentive Plan (the "Stock Option Plans"). In addition, the Company has granted options which are not part of any Stock Option Plan.

The Amended and Restated 1985 Stock Option Plan provided for the issuance of incentive and non-qualified stock options to key employees at an option price of not less than 100% of the fair market value of a share on the date of grant of the option. Under this plan, there are no shares of common stock available for grant at February 1, 1997 as no options could be granted thereunder after June, 1995.

In fiscal 1995, the Company established the 1994 Equity Incentive Plan, which provides for the issuance of one million shares of common stock to officers and employees in the form of stock options (both incentive options and non-qualified options), grants of restricted stock, grants of performance shares and unrestricted grants of stock. At February 1, 1997, 26,500 shares of common stock are reserved for grants of performance shares, and 368,091 shares of common stock remain available for all other types of grants.

Options granted under the Amended and Restated 1985 Stock Option Plan and the 1994 Equity Incentive Plan become exercisable either ratably over four or more years or upon grant, at the discretion of the Board of Directors, and expire ten years from the date of grant.

The 1992 Directors' Stock Option Plan provides for the automatic grant of an option to purchase 2,500 shares of the Company's common stock upon a director's initial election to the Board of Directors and, in addition, at the close of business on the fifth business day following the Company's annual meeting of stockholders. Options under the Directors' Plan are granted at a price equal to the closing price of the Company's common stock on the date of grant. They are exercisable in full as of the date of grant and expire

F-18

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ten years from the date of grant. Under this plan, there are 15,000 shares of common stock available for grant at February 1, 1997.

The Company applied Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock options. Accordingly, no compensation cost has been recognized for stock options in the Company's results of operations. Had the Company recorded a charge for the fair value of options granted consistent with SFAS No. 123, net loss and net loss per common share would have been increased by $940,000 and $0.07 in fiscal 1997 and $300,000 and $0.02 in fiscal 1996, respectively. There is no effect on fully diluted earnings per share.

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes options pricing model, with the following weighted average assumptions used for grants in fiscal 1997 and fiscal 1996.

                                                            1997          1996
                                                         ----------    ----------
Risk-free interest rate................................     5.9%          6.2%
Expected option lives..................................  6.8 years     7.1 years
Expected volatility....................................    59.0%         59.2%
Expected dividend yield................................     0.8%          0.5%

The effect of applying SFAS No. 123 is not representative of the proforma effect on net earnings in future years because it does not take into consideration proforma compensation expense related to grants made prior to fiscal 1996.

Data with respect to stock options for fiscal years 1997, 1996 and 1995 is as follows:

                                      1997                   1996                   1995
                              --------------------   --------------------   --------------------
                                          WEIGHTED               WEIGHTED               WEIGHTED
                                          AVERAGE                AVERAGE                AVERAGE
                                          EXERCISE               EXERCISE               EXERCISE
                               SHARES      PRICE      SHARES      PRICE      SHARES      PRICE
                              ---------   --------   ---------   --------   ---------   --------
Outstanding at beginning of
  year......................  1,176,170    $15.30    1,091,395    $16.58      884,920    $15.42
Granted.....................    731,262      8.70      338,000     12.88      336,025     19.21
Exercised...................    (13,749)     7.65      (32,000)     4.82      (48,000)     9.26
Cancelled...................   (821,253)    16.55     (221,225)    19.43      (81,550)    19.36
                              ---------              ---------              ---------
Options outstanding at end
  of year...................  1,072,430      9.58    1,176,170     15.30    1,091,395     16.58
                              =========              =========              =========
Options exercisable at end
  of year...................    516,027                589,102                453,945
Weighted average fair-value
  of options granted during
  the year..................  $    4.94              $    8.08

Effective as of February 5, 1996, the Board of Directors offered all employee participants in the Stock Option Plans the opportunity to reprice to $9.00 per share any currently outstanding stock options with exercise prices in excess of $9.00 per share. On February 5, 1996, the fair market value of the Company's common stock was $5.25 per share. Pursuant to the repricing program, any employee electing to reprice outstanding stock options was also required to accept a reduced number of options shares commensurate with the reduction in price to $9.00 from the price of the original grant. Each repriced option retained the vesting schedule associated with the original grant. Holders of original option grants totaling 646,376 shares elected to reprice such options at $9.00 per share resulting in a reduction of such options held to 342,962 shares, which is contained in the number of options granted in fiscal 1997.

F-19

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth a summary of the stock options outstanding at February 1, 1997:

                                     OPTIONS OUTSTANDING
                      -------------------------------------------------
                                    WEIGHTED AVERAGE                           OPTIONS EXERCISABLE
                                       REMAINING                          ------------------------------
      RANGE OF          NUMBER          YEARS OF       WEIGHTED AVERAGE     NUMBER      WEIGHTED AVERAGE
   EXERCISE PRICE     OUTSTANDING   CONTRACTUAL LIFE    EXERCISE PRICE    EXERCISABLE    EXERCISE PRICE
--------------------  -----------   ----------------   ----------------   -----------   ----------------
$ 4.88-$ 8.63.......     347,920       7.3                  $ 7.35          135,320          $ 6.65
$ 9.00-$ 9.88.......     583,985       7.3                  $ 9.15          270,782          $ 9.18
$12.00-$16.63.......      72,000       6.9                  $13.41           55,575          $13.46
$17.00-$22.38.......      68,525       6.8                  $20.53           54,350          $20.64
                       ---------                                            -------
$ 4.88-$22.38.......   1,072,430       7.3                  $ 9.58          516,027          $10.18
                       =========                                            =======

During fiscal 1997, the Company granted Performance Share Awards that entitle certain officers to shares of the Company's common stock in fiscal 1999 if the price of the common stock attains a "Target Price" (the average closing price of the Company's common stock for the fifteen consecutive trading days prior to April 30, 1998) between $10.00 and $14.00. If such Target Price is attained, the Company will grant between 61,750 and 123,500 shares of the Company's common stock, respectively, to the eligible officers.

(10) COMMITMENTS AND CONTINGENT LIABILITIES

Leases

The Company operates mainly from leased premises under license agreements generally requiring payment of annual rentals contingent upon sales. The Company leases its computers, vehicles and certain of its offices and warehouse facilities, in addition to its retail stores.

The Company remains liable under certain leases and lease guaranties for premises previously leased by the Company for the operation of Parade of Shoes and Fayva shoe stores (the "Excess Property Leases"). The total liability under the Excess Property Leases is approximately $61.1 million as of February 1, 1997. The Company has reduced its actual liability by assigning or subleasing substantially all of the Excess Property Leases to unaffiliated third parties.

At February 1, 1997, minimum rental commitments under operating leases are as follows:

                    FISCAL YEAR                      NET MINIMUM       MINIMUM
                  ENDING JANUARY                       RENTALS       SUB-RENTALS
---------------------------------------------------  -----------     -----------
                                                           (IN THOUSANDS)
1998...............................................   $  43,709        $   661
1999...............................................      37,239            653
2000...............................................      28,100            648
2001...............................................      20,935            580
2002...............................................      16,014            409
Thereafter.........................................      36,504             --
                                                       --------         ------
                                                      $ 182,501        $ 2,951
                                                       ========         ======

F-20

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Rent expense for the years ended February 1, 1997, February 3, 1996 and January 28, 1995 was as follows:

                                               1997         1996         1995
                                             --------     --------     --------
                                                       (IN THOUSANDS)
Minimum rentals............................  $ 49,167     $ 52,284     $ 53,189
Contingent rentals.........................    83,084       93,289       90,275
                                             --------     --------     --------
                                              132,251      145,573      143,464
Less sublease rentals......................       317          336          409
                                             --------     --------     --------
  Net rentals..............................  $131,934     $145,237     $143,055
                                             ========     ========     ========

Other Commitments and Contingencies

The Company has employment agreements with certain of its officers under which it is committed to pay an aggregate of approximately $1.1 million through April, 1998.

During fiscal 1996, the Company's Board of Directors adopted executive severance agreements which create certain liabilities in the event of the termination of the covered executives within three years following either a change of control of the Company or the termination of certain key executives of the Company. The aggregate commitment amount under these executive severance agreements, should all thirteen covered employees be terminated, is approximately $2.2 million.

At February 1, 1997 and February 3, 1996, the Company was contingently liable under letters of credit totaling $11.2 million and $18.8 million, respectively. These letters of credit, which have terms of one month to one year, are used primarily to collateralize the Company's obligations to third parties for the purchase of inventory. The fair value of these letters of credit is estimated to be the same as the contract values based on the nature of the fee arrangements with the issuing banks. No material loss is anticipated due to the non-performance by counterparties to these arrangements.

On November 10, 1993, a federal jury in Minneapolis, MN returned a verdict assessing royalties of $1,550,000, and additional damages of $1,500,000, against the Company in a patent infringement suit brought by Susan Maxwell with respect to a device used to connect pairs of shoes. Certain post trial motions were filed by Susan Maxwell seeking treble damages, attorney's fees and injunctive relief, which motions were granted on March 10, 1995. Judgment was entered for Maxwell. The Company appealed the judgment. On June 11, 1996, the United States Court of Appeals for the Federal Circuit reversed the trial court's findings in part, affirmed the trial court's findings in part and vacated the award to Maxwell of treble damages, attorney's fees and injunctive relief. Maxwell subsequently requested a rehearing in banc of the matter which request was denied by order of the Court dated August 28, 1996. Maxwell petitioned the United States Supreme Court for a writ of certiorari to hear the case which petition was denied on March 17, 1997. The case has been remanded to the trial court for a redetermination of damages consistent with the opinion of the appellate court.

A complaint was also filed by Susan Maxwell in November, 1992 against Morse Shoe, Inc. ("Morse"), a subsidiary of the Company, alleging infringement of the patent referred to above. The Morse trial was stayed pending the outcome of the J. Baker appeal. In light of the decision of the Supreme Court and the remand to the trial court, it is not clear when a trial date will be set for the Morse case.

Morse has filed a breach of contract lawsuit against a former wholesale customer. There can be no assurance of what amount, if any, the Company will realize as a result of this lawsuit.

F-21

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(11) STOCKHOLDERS' EQUITY

The Board of Directors of the Company is authorized by vote or votes, from time to time adopted, to provide for the issuance of Preferred Stock in one or more series and to fix and state the voting powers, designations, preferences and relative participating, optional or other special rights of the shares of each series and the qualifications, limitations and restrictions thereof.

On December 15, 1994, the Board of Directors of the Company adopted a Shareholder Rights Agreement (the "Rights Agreement") designed to enhance the Company's ability to protect shareholder interests and to ensure that shareholders receive fair treatment in the event any coercive takeover attempt of the Company is made in the future. Pursuant to the Rights Agreement, the Board of Directors declared a dividend distribution of one preferred stock purchase right (the "Right") for each outstanding share of common stock of the Company to shareholders of record as of the close of business on January 6, 1995. Each right entitles the holder to purchase from the Company a unit consisting of one ten thousandth (1/10,000) of a share of Series A Junior Participating Cumulative Preferred Stock, par value $1.00 per share, at a cash exercise price of $70 per unit, subject to adjustment, upon the occurrence of certain events as are set forth in the Rights Agreement. These events include the earliest to occur of (i) the acquisition of 15% or more of the outstanding shares of common stock of the Company by any person or group, (ii) the commencement of a tender or exchange offer that would result upon its consummation in a person or a group becoming the beneficial owner of 15% or more of the outstanding common stock of the Company or (iii) the determination by the Board of Directors that any person is an "Adverse Person", as defined in the Rights Agreement. The Rights are not exercisable until or following the occurrence of one of the above events and will expire on December 14, 2004, unless previously redeemed or exchanged by the Company as provided in the Rights Agreement.

(12) PRINCIPAL LICENSOR

Sales in licensed departments operated under the Ames license agreement accounted for 10.5%, 9.4% and 9.5% of the Company's net sales in the years ended February 1, 1997, February 3, 1996 and January 28, 1995, respectively. On a proforma basis, excluding sales generated by the Company's SCOA and Parade of Shoes divisions, sales in Ames accounted for 15.8% of the Company's sales for the year ended February 1, 1997.

F-22

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(13) SEGMENT INFORMATION

The Company is a specialty retailer conducting business through retail stores in two business segments: apparel and footwear. Information about operations for each of these segments is summarized as follows:

                                                                           YEAR ENDED
                                                     ------------------------------------------------------
                                                     FEBRUARY 1, 1997   FEBRUARY 3, 1996   JANUARY 28, 1995
                                                     ----------------   ----------------   ----------------
                                                                           (53 WEEKS)
                                                                        ($ IN THOUSANDS)
Apparel
  Net sales........................................     $  293,775         $  263,322         $  224,759
  Operating profit.................................         24,123             24,814             26,974
  Identifiable assets..............................        113,117            104,923             89,111
  Depreciation and amortization....................          7,501              6,973              4,130
  Additions to property, equipment and leasehold
     improvements..................................          6,665             10,461             11,570
Footwear
  Net sales........................................     $  603,717         $  757,091         $  818,220
  Restructuring and other non-recurring charges....       (122,309)           (69,300)                --
  Operating profit (loss)..........................       (144,744)           (51,768)            44,993
  Identifiable assets..............................        231,812            377,530            456,552
  Depreciation and amortization....................         18,094             20,524             20,363
  Additions to property, equipment and leasehold
     improvements..................................          8,043             13,271             31,298
Consolidated
  Net sales........................................     $  897,492         $1,020,413         $1,042,979
  Restructuring and other non-recurring charges....       (122,309)           (69,300)                --
  Operating profit (loss) before general corporate
     expense.......................................       (120,621)           (26,954)            71,967
  General corporate expense........................        (23,851)           (27,014)           (25,968)
  Interest expense, net............................        (12,802)           (10,457)            (9,100)
Earnings (loss) before income taxes................     $ (157,274)        $  (64,425)        $   36,899
Identifiable assets................................     $  344,929         $  482,453         $  545,663
Corporate assets...................................         37,592             43,629             32,955
     Total assets..................................     $  382,521         $  526,082         $  578,618
Depreciation and amortization......................     $   29,430         $   32,428         $   27,883
Additions to property, equipment and leasehold
  improvements.....................................     $   16,421         $   28,062         $   44,514

F-23

J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(14) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

                                     FIRST        SECOND       THIRD        FOURTH
                                    QUARTER      QUARTER      QUARTER       QUARTER        TOTAL
                                    --------     --------     --------     ---------     ----------
                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
Year ended February 1, 1997
  Net sales.......................  $195,530     $231,805     $222,764     $ 247,393     $  897,492
  Gross profit....................    90,621      101,427       96,184        67,013        355,245
  Net earnings (loss).............  $    826     $  1,486     $  1,418     $(115,158)    $ (111,428)
                                    ========     ========     ========      ========     ==========
  Earnings (loss) per common
     share:
     Primary......................  $    .06     $    .11     $    .10     $   (8.29)    $    (8.02)
                                    ========     ========     ========      ========     ==========
     Fully diluted................  $    .06     $    .11     $    .10     $   (8.29)    $    (8.02)
                                    ========     ========     ========      ========     ==========
Year ended February 3, 1996
  Net sales.......................  $231,385     $272,520     $245,255     $ 271,253     $1,020,413
  Gross profit....................   103,532      120,202      104,600       112,012        440,346
  Net earnings (loss).............  $    638     $  1,397     $(41,328)    $     691     $  (38,602)
                                    ========     ========     ========      ========     ==========
  Earnings (loss) per common
     share:
     Primary......................  $    .05     $    .10     $  (2.98)    $     .05     $    (2.79)
                                    ========     ========     ========      ========     ==========

     Fully diluted................  $    .05     $    .10     $  (2.98)    $     .05     $    (2.79)
                                    ========     ========     ========      ========     ==========

(15) ADVERTISING COSTS

Advertising costs are charged to expense as incurred. The Company incurred advertising costs of $14.8 million, $20.5 million and $20.1 million in the years ended February 1, 1997, February 3, 1996 and January 28, 1995, respectively.

(16) SUPPLEMENTAL SCHEDULES TO CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                  1997            1996            1995
                                               -----------     -----------     ----------
Cash paid for interest.......................  $12,670,073     $11,069,341     $8,765,653
Cash paid for income taxes...................  $ 1,168,901     $ 2,039,089     $4,162,348
Income taxes refunded........................  $(8,315,483)             --             --
                                               ===========     ===========     ==========
Non-cash investing activities:
Notes receivable (see Notes 3 and 5).........  $    23,000     $    47,000     $   95,000
                                               ===========     ===========     ==========

(17) SUBSEQUENT EVENT

Subsequent to February 1, 1997, the Company began to undertake an offering ("Offering") of $100 million of Senior Subordinated Notes due 2007. Under the terms of the Offering, repayment of the obligations of the Company will be unconditionally guaranteed, on a joint and several basis, by all of the Company's subsidiaries, except for one wholly-owned subsidiary, JBAK Holding, Inc., and its wholly-owned subsidiary, JBAK Canton Realty, Inc. which owns the Company's corporate headquarters. As of and for the period ended February 1, 1997, JBAK Holding, Inc., had net assets and earnings which consisted solely of its investment in and earnings of JBAK Canton Realty, Inc. At February 1, 1997, JBAK Canton Realty, Inc. had assets of $19,181,000 consisting primarily of its ownership of property and equipment and had liabilities of $15,701,000 consisting primarily of a mortgage note secured by the related assets. Since December 30, 1996, the inception date of the mortgage note (see note 6), JBAK Canton Realty, Inc. received rental income of $408,000 from the lease of the corporate headquarters for use by the Company, and incurred costs of $189,000 for debt service on the mortgage note and other operating costs associated with the corporate headquarters facility.

F-24

J. BAKER, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AUGUST 2, 1997 (UNAUDITED) AND FEBRUARY 1, 1997

                                                                   AUGUST 2,       FEBRUARY 1,
                                                                      1997             1997
                                                                  ------------     ------------
                                            ASSETS
Current assets:
  Cash and cash equivalents.....................................  $  1,711,896     $  3,969,116
  Accounts receivable:
     Trade, net.................................................    14,459,203       14,771,734
     Other......................................................     1,532,264        1,737,786
                                                                  ------------     ------------
                                                                    15,991,467       16,509,520
                                                                  ------------     ------------
  Merchandise inventories.......................................   164,268,910      146,045,496
  Prepaid expenses..............................................     9,649,621        6,031,033
  Deferred income taxes.........................................    36,159,000       37,548,000
  Assets held for sale..........................................            --       62,255,582
                                                                  ------------     ------------
          Total current assets..................................   227,780,894      272,358,747
                                                                  ------------     ------------
Property, plant and equipment, at cost:
  Land and buildings............................................    19,340,925       19,340,925
  Furniture, fixtures and equipment.............................    77,245,839       74,244,548
  Leasehold improvements........................................    24,280,284       23,100,973
                                                                  ------------     ------------
                                                                   120,867,048      116,686,446
  Less accumulated depreciation and amortization................    45,734,247       40,032,801
                                                                  ------------     ------------
          Net property, plant and equipment.....................    75,132,801       76,653,645
                                                                  ------------     ------------
Deferred income taxes...........................................    26,199,000       26,199,000
Other assets, at cost, less accumulated amortization............    12,367,151        7,309,411
                                                                  ------------     ------------
                                                                  $341,479,846     $382,520,803
                                                                  ============     ============
                             LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt.............................  $  2,035,817     $  2,012,327
  Accounts payable..............................................    48,720,653       57,006,085
  Accrued expenses..............................................    11,365,859       29,837,310
  Income taxes payable..........................................     1,198,881        1,380,664
                                                                  ------------     ------------
          Total current liabilities.............................    63,321,210       90,236,386
                                                                  ------------     ------------
Other liabilities...............................................     3,180,149        6,203,073
Long-term debt, net of current portion..........................   129,225,814      140,787,673
Senior subordinated debt........................................     1,470,761        2,951,411
Convertible subordinated debt...................................    70,353,000       70,353,000
Stockholders' equity............................................    73,928,912       71,989,260
                                                                  ------------     ------------
                                                                  $341,479,846     $382,520,803
                                                                  ============     ============

See accompanying notes to consolidated financial statements.

F-25

J. BAKER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE QUARTERS ENDED AUGUST 2, 1997 AND AUGUST 3, 1996
(UNAUDITED)

                                                                     QUARTER            QUARTER
                                                                      ENDED              ENDED
                                                                  AUGUST 2, 1997     AUGUST 3, 1996
                                                                  --------------     --------------
Sales...........................................................   $ 143,929,357      $ 231,805,391
Cost of sales...................................................      80,139,384        130,378,579
                                                                    ------------       ------------
     Gross profit...............................................      63,789,973        101,426,812
Selling, administrative and general expenses....................      53,926,913         88,310,932
Depreciation and amortization...................................       3,500,451          7,454,120
                                                                    ------------       ------------
     Operating income...........................................       6,362,609          5,661,760
Net interest expense............................................       3,242,501          3,224,038
                                                                    ------------       ------------
     Earnings before income taxes...............................       3,120,108          2,437,722
Income tax expense..............................................       1,216,000            952,000
                                                                    ------------       ------------
     Net earnings...............................................   $   1,904,108      $   1,485,722
                                                                    ============       ============
Net earnings per common share:
     Primary....................................................   $        0.14      $        0.11
                                                                    ============       ============
     Fully diluted..............................................   $        0.14      $        0.11
                                                                    ============       ============
Number of shares used to compute net earnings per common share:
     Primary....................................................      13,912,934         13,891,265
                                                                    ============       ============
     Fully diluted..............................................      13,970,527         13,928,732
                                                                    ============       ============
Dividends declared per share....................................   $       0.015      $       0.015
                                                                    ============       ============

See accompanying notes to consolidated financial statements.

F-26

J. BAKER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED AUGUST 2, 1997 AND AUGUST 3, 1996
(UNAUDITED)

                                                                  AUGUST 2, 1997     AUGUST 3, 1996
                                                                  --------------     --------------
Sales...........................................................   $ 281,279,618      $ 427,335,600
Cost of sales...................................................     155,491,836        235,287,939
                                                                    ------------       ------------
     Gross profit...............................................     125,787,782        192,047,661
Selling, administrative and general expenses....................     109,621,742        167,595,023
Depreciation and amortization...................................       6,153,844         14,662,623
                                                                    ------------       ------------
     Operating income...........................................      10,012,196          9,790,015
Net interest expense............................................       6,450,077          6,001,733
                                                                    ------------       ------------
     Earnings before income taxes...............................       3,562,119          3,788,282
Income tax expense..............................................       1,389,000          1,477,000
                                                                    ------------       ------------
     Net earnings...............................................   $   2,173,119      $   2,311,282
                                                                    ============       ============
Net earnings per common share:
     Primary....................................................   $        0.16      $        0.17
                                                                    ============       ============
     Fully diluted..............................................   $        0.16      $        0.17
                                                                    ============       ============
Number of shares used to compute net earnings per common share:
     Primary....................................................      13,902,952         13,882,729
                                                                    ============       ============
     Fully diluted..............................................      13,959,598         13,903,376
                                                                    ============       ============
Dividends declared per share....................................   $       0.030      $       0.030
                                                                    ============       ============

See accompanying notes to consolidated financial statements.

F-27

J. BAKER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED AUGUST 2, 1997 AND AUGUST 3, 1996
(UNAUDITED)

                                                                  AUGUST 2, 1997     AUGUST 3, 1996
                                                                  --------------     --------------
Cash flows from operating activities:
  Net earnings..................................................   $   2,173,119      $   2,311,282
  Adjustments to reconcile net earnings to cash used in
     operating activities:
     Depreciation and amortization:
       Fixed assets.............................................       5,701,470         10,054,455
       Deferred charges, intangible assets and deferred
          financing costs.......................................         471,724          4,627,518
     Deferred income taxes......................................       1,389,000          1,520,370
     Change in:
       Accounts receivable......................................        (931,947)        (5,443,623)
       Merchandise inventories..................................     (25,112,428)       (24,276,016)
       Prepaid expenses.........................................      (3,618,588)        (4,035,130)
       Accounts payable.........................................      (8,285,432)        (9,293,968)
       Accrued expenses.........................................     (16,671,451)       (10,856,406)
       Income taxes payable/receivable..........................        (181,783)         7,236,732
       Other liabilities........................................          36,908            111,558
                                                                    ------------       ------------
          Net cash used in operating activities.................     (45,029,408)       (28,043,228)
                                                                    ------------       ------------
Cash flows from investing activities:
  Capital expenditures for:
     Property, plant and equipment..............................      (4,180,626)       (10,450,045)
     Other assets...............................................      (1,313,109)           (15,660)
  Payments received on notes receivable.........................       1,450,000          2,438,000
                                                                    ------------       ------------
          Net cash used in investing activities.................      (4,043,735)        (8,027,705)
                                                                    ------------       ------------
Cash flows from financing activities:
  Repayment of senior debt......................................      (1,500,000)        (1,500,000)
  Proceeds (repayment) of other long-term debt..................     (11,287,947)        37,000,000
  Repayment of mortgage payable.................................        (250,422)                --
  Payment of mortgage escrow, net...............................         (47,076)                --
  Proceeds from sales of footwear businesses....................      60,134,835                 --
  Proceeds from issuance of common stock........................         183,646            210,887
  Payment of dividends..........................................        (417,113)          (416,566)
                                                                    ------------       ------------
          Net cash provided by financing activities.............      46,815,923         35,294,321
                                                                    ------------       ------------
          Net decrease in cash..................................      (2,257,220)          (776,612)
Cash and cash equivalents at beginning of year..................       3,969,116          3,287,141
                                                                    ------------       ------------
Cash and cash equivalents at end of period......................   $   1,711,896      $   2,510,529
                                                                    ============       ============
Supplemental disclosure of cash flow information
  Cash paid (received) for:
     Interest...................................................   $   3,342,945      $   5,888,750
     Income taxes...............................................         181,783          2,997,370
     Income taxes refunded......................................              --         (8,315,483)
                                                                    ============       ============

See accompanying notes to consolidated financial statements

F-28

J. BAKER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1) The accompanying unaudited consolidated financial statements, in the opinion of management, include all adjustments necessary for a fair presentation of the Company's financial position and results of operations. The results for the interim periods are not necessarily indicative of results that may be expected for the entire fiscal year.

2) Primary earnings per share is based on the weighted average number of shares of Common Stock outstanding during such period. Stock options and warrants are excluded from the calculation since they have less than a 3% dilutive effect.

Fully diluted earnings per share is based on the weighted average number of shares of Common Stock outstanding during such period. Included in this calculation is the dilutive effect of stock options and warrants. The Common Stock issuable under the 7% convertible subordinated notes was not included in the calculation for the quarters and six months ended August 2, 1997 and August 3, 1996 because its effect would be antidilutive.

3) During the fourth quarter of fiscal 1997, the Company recorded a restructuring charge related to its footwear operations. In connection with the restructuring, the Company has reduced its investment in its Licensed Discount footwear division, and, in March, 1997, the Company completed the sales of its Shoe Corporation of America ("SCOA") and Parade of Shoes businesses.

On March 5, 1997, the Company announced that it had sold its SCOA division to an entity formed by CHB Capital Partners of Denver, Colorado along with Dennis B. Tishkoff, President of SCOA, and certain members of SCOA management. Net cash proceeds from the transaction of approximately $40.1 million were used to pay down the Company's bank debt. Sales in the Company's SCOA division totaled $0 and $44.5 million for the quarters ended August 2, 1997 and August 3, 1996, respectively, and $9.5 million and $89.2 million for the six months ended August 2, 1997 and August 3, 1996, respectively.

On March 10, 1997, the Company completed the sale of its Parade of Shoes division to Payless ShoeSource, Inc. of Topeka, Kansas. Net cash proceeds from the transaction of approximately $20 million were used to pay down the Company's bank debt. Sales in the Company's Parade of Shoes division totaled $0 and $38.1 million for the quarters ended August 2, 1997 and August 3, 1996, respectively, and $8.2 million and $65.8 million for the six months ended August 2, 1997 and August 3, 1996, respectively.

4) On May 30, 1997, the Company replaced its $145 million credit facility by obtaining two separate revolving credit facilities, both of which are guaranteed by J. Baker, Inc. One facility, which finances the Company's apparel businesses, is a $100 million revolving credit facility with Fleet National Bank, BankBoston, N.A., The Chase Manhattan Bank, Imperial Bank, USTrust, Wainwright Bank & Trust Company and Bank Polska Kasa Opieki S.A. (the "Apparel Credit Facility"). The Apparel Credit Facility is secured by all of the capital stock of The Casual Male, Inc. and three other subsidiaries of the Company. The aggregate commitment under the Apparel Credit Facility will be automatically reduced by $10 million, $12.5 million and $12.5 million on December 31, 1997, December 31, 1998 and December 31, 1999, respectively. Borrowings under the Apparel Credit Facility bear interest at variable rates and can be in the form of loans, bankers' acceptances and letters of credit. This facility expires on May 31, 2000.

To finance its Licensed Discount footwear business, the Company obtained a $55 million revolving credit facility, secured by substantially all of the assets of the Licensed Discount division, with GBFC, Inc. and Fleet National Bank (the "Footwear Credit Facility"). The aggregate commitment under the Footwear Credit Facility was reduced by $5 million on June 30, 1997. Aggregate borrowings under the Footwear Credit Facility are limited to an amount determined by a formula based on various percentages of eligible inventory and accounts receivable. Borrowings under the Footwear Credit Facility bear interest at variable rates and can be in the form of loans or letters of credit. This facility expires on May 31, 2000.

5) On June 23, 1995, Bradlees Stores, Inc. ("Bradlees"), a licensor of the Company, filed for protection under Chapter 11 of the United States Bankruptcy Code. At the time of the bankruptcy filing, the Company

F-29

had outstanding accounts receivable of approximately $1.8 million due from Bradlees. Under bankruptcy law, Bradlees has the option of assuming the existing license agreement with the Company or rejecting that agreement. If the license agreement is assumed, Bradlees must cure all defaults under the agreement and the Company will collect in full the outstanding past due receivable. The Company has no assurance that the agreement will be assumed or that Bradlees will continue in business. Although the Company believes that the rejection of the license agreement or the cessation of Bradlees' business is not probable, in the event that the agreement is rejected or Bradlees does not continue in business, the Company believes it will have a substantial claim for damages. If such a claim is necessary, the amount realized by the Company, relative to the carrying values of the Company's Bradlees-related assets, will be based on the relevant facts and circumstances. The Company does not expect this filing under the Bankruptcy Code to have a material adverse effect on future earnings. The Company's sales in the Bradlees chain for the quarter and six months ended August 2, 1997 were $14.1 million and $23.5 million, respectively.

6) On October 18, 1995, Jamesway Corporation ("Jamesway"), then a licensor of the Company, filed for protection under Chapter 11 of the United States Bankruptcy Code. Jamesway liquidated its inventory, fixed assets and real estate and ceased operation of its business in all of its 90 stores. The Company participated in Jamesway's going out of business sales and liquidated substantially all of its footwear inventory in the 90 Jamesway stores during the going out of business sales. At the time of the bankruptcy filing, the Company had outstanding accounts receivable of approximately $1.4 million due from Jamesway. Because Jamesway ceased operation of its business, the Company's license agreement was rejected. The Company has negotiated a settlement of the amount of its claim with Jamesway, which has been approved by the Bankruptcy Court. The Jamesway plan of liquidation was confirmed on June 6, 1997, and the Company received a partial distribution of the amount owed to the Company under the settlement during the second quarter of fiscal 1998. In August, 1997, the Company received a fee from a third party by assigning its rights to any future distributions from Jamesway.

7) On November 10, 1993, the United States District Court for the District of Minnesota returned a jury verdict assessing royalty damages of $1,550,000 and additional damages of $1,500,000 against the Company in a patent infringement suit brought by Susan Maxwell with respect to a patent for a system used to connect pairs of shoes. The jury verdict was based on a finding that three different shoe connection systems used by the Company infringed Ms. Maxwell's patent. Post trial motions for treble damages, attorney's fees and injunctive relief were granted on March 10, 1995. The Company appealed the judgment. On June 11, 1996, the United States Court of Appeals for the Federal Circuit reversed in part and affirmed in part and vacated the award of treble damages, attorney's fees and injunctive relief. The appellate court's ruling was based on its holding that as a matter of law two of the three shoe connection systems used by the Company did not infringe the patent. A request by Ms. Maxwell for a rehearing en banc was denied by an order dated August 28, 1996. Ms. Maxwell petitioned the United States Supreme Court for a writ of certiorari, which petition was denied on March 17, 1997. The case has been remanded to the trial court for a redetermination of damages consistent with the opinion of the appellate court. The issues for trial on remand include a determination of what, if anything, is a reasonable royalty for the one shoe connection system that was not subject to the reversal by the Court of Appeals, how many pairs of shoes having the patented system did the Company sell, and whether the Company's sale of shoes having the patented system, after actual notice of the patent and while the Company was changing to the two systems found to be non-infringing, constitutes willful infringement in which event damages payable by the Company may at the discretion of the Court be doubled or trebled. The trial on remand commenced on September 8, 1997 and is expected to conclude by the end of September, 1997.

A complaint was also filed by Ms. Maxwell in November, 1992 against Morse Shoe, Inc. ("Morse"), a subsidiary of the Company, alleging infringement of the patent referred to above. The trial has been stayed pending the outcome of the aforementioned trial.

F-30


NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE NOTES TO ANYONE OR BY ANYONE IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE INFORMATION SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.


TABLE OF CONTENTS

                                        PAGE
                                        ----
Prospectus Summary...................     1
Risk Factors.........................     8
Use of Proceeds......................    15
Capitalization.......................    16
Selected Historical Financial Data...    17
Unaudited Pro Forma Consolidated
  Financial Data.....................    19
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations......................    24
Business.............................    33
Management...........................    46
Description of Notes.................    49
Certain Federal Income Tax
  Considerations.....................    76
Description of Credit Facilities and
  Other Indebtedness.................    79
Underwriting.........................    82
Legal Matters........................    83
Experts..............................    83
Available Information................    83
Information Incorporated by
  Reference..........................    84
Index to Consolidated Financial
  Statements.........................   F-1



$100,000,000

J. BAKER, INC.

% SENIOR SUBORDINATED
NOTES DUE 2007


PROSPECTUS
BEAR, STEARNS & CO. INC.

LAZARD FRERES & CO. LLC

BANCBOSTON SECURITIES INC.

, 1997



PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The expenses in connection with the issuance and distribution of the securities being registered will be borne by the Company and are set forth in the following table (all amounts except the registration fee are estimated):

Registration fee.................................................  $30,303.03
Legal fees and expenses..........................................
Blue Sky fees and expenses.......................................
NASD filing fee..................................................   10,500.00
Accounting fees and expenses.....................................
Trustee fees and expenses........................................
Rating agency fees...............................................
Printing fees and expenses.......................................
Miscellaneous....................................................
                                                                     --------
          Total..................................................  $
                                                                     ========

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

As permitted by applicable Massachusetts law, Article 6A of the J. Baker, Inc.'s Restated Articles of Organization, as amended, provides that J. Baker, Inc. shall indemnify, except as limited by law or as otherwise provided in the J. Baker, Inc.'s Articles of Organization, each person who serves or has served as a director or in any other office filled by election or appointment by the stockholders or the Board of Directors of J. Baker, Inc. against all liability fixed by a judgment, order, decree, or award in any action, suit or proceeding, civil or criminal, brought or threatened in or before any court, tribunal, administrative or legislative body or agency incurred by such person in connection with each such action, suit or proceeding in which such person is involved as a result of serving or having served J. Baker, Inc. in such capacity or, at the request of J. Baker, Inc., as a director, officer, employer or other agent of any other organization. No indemnification will be provided under Article 6A to such a person with respect to a matter as to which it shall have been adjudicated in any such action, suit or proceeding that such person did not act in good faith in the reasonable belief that such person's action was in the best interests of J. Baker, Inc. Also, in the event that any such action, suit or proceeding is compromised or settled so as to impose any liability or obligation upon such person or upon J. Baker, Inc., no indemnification shall be provided to such person with respect to a matter if J. Baker, Inc. has obtained an opinion of counsel that with respect to such matter such person did not act in good faith in the reasonable belief that such person's action was in the best interests of J. Baker, Inc.

Article 6F of the J. Baker, Inc. Articles of Organization provides that no director of J. Baker, Inc. shall be personally liable to J. Baker, Inc. or to its stockholders for monetary damages for breach of the director's duty as a director notwithstanding any provision of law imposing such liability; provided, however, that Article 6F also states that that Article shall not eliminate or limit any liability of a director (i) for any breach of the director's duty of loyalty to J. Baker, Inc. or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Sections 61 or 62 of the Massachusetts Business Corporation Law, or (iv) with respect to any transaction from which the director derived an improper personal benefit.

Article 6F also provides that if the Massachusetts Business Corporation Law is subsequently amended to further eliminate or limit the personal liability of directors or to authorize corporate action to further eliminate or limit such liability, then the liability of the directors of J. Baker, Inc. shall be eliminated or limited to the fullest extent permitted by the Massachusetts Business Corporation Law as so amended.

II-1


ITEM 16. EXHIBITS.

EXHIBIT NO.                                      DESCRIPTION
-----------   ----------------------------------------------------------------------------------
    *1.1      Form of Underwriting Agreement among the Underwriters named therein and the
              Company
    *4.1      Form of Indenture among the Company, the Guarantors named therein and the Trustee
    *4.2      Form of Note (included in Exhibit No. 4.1)
    *5.1      Opinion of Goodwin, Procter & Hoar LLP as to the legality of the Notes being
              registered
    12.1      Statement re computation of ratios
    23.1      Consent of KPMG Peat Marwick LLP, Independent Accountants
   *23.2      Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1 hereto)
    24.1      Powers of Attorney (included in Part II of this Registration Statement)
   *25.1      Form T-1 Statement of Eligibility of Trustee under the Trust Indenture Act of 1939


* To be filed by amendment.

ITEM 17. UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described under Item 15 above, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(c) The undersigned registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Trust Indenture Act.

(d) The undersigned registrant hereby undertakes that:

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

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

II-2


SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, J. Baker, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Canton, Commonwealth of Massachusetts, on the 18th day of September, 1997.

J. BAKER, INC.

By:    /s/ PHILIP G. ROSENBERG

  ------------------------------------
  Philip G. Rosenberg
  Executive Vice President, Chief
    Financial Officer and Treasurer

KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of J. Baker, Inc. hereby severally constitute and appoint Philip G. Rosenberg, our true and lawful attorney with full power to sign for us and in our names in the capacities indicated below, the Registration Statement filed herewith and any and all amendments (including any post-effective amendments) to said Registration Statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act), and generally to do all such things in our names and in our capacities as officers and directors to enable J. Baker, Inc. to comply with the provisions of the Securities Act of 1933 and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorney, to said Registration Statement and any and all amendments (including any post-effective amendments) thereto (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act).

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

               SIGNATURE                             CAPACITY                      DATE
----------------------------------------  ------------------------------    -------------------

         /s/ ALAN I. WEINSTEIN            President, Chief Executive        September 18, 1997
----------------------------------------  Officer and Director
           Alan I. Weinstein              (Principal Executive Officer)

        /s/ PHILIP G. ROSENBERG           Executive Vice President,         September 18, 1997
----------------------------------------  Chief Financial Officer and
          Philip G. Rosenberg             Treasurer (Principal Financial
                                          Officer)

          /s/ SHERMAN N. BAKER            Chairman of the Board of          September 18, 1997
----------------------------------------  Directors
            Sherman N. Baker

      /s/ J. CHRISTOPHER CLIFFORD         Director                          September 18, 1997
----------------------------------------
        J. Christopher Clifford
           /s/ ERVIN D. CRUCE             Director                          September 18, 1997
----------------------------------------
             Ervin D. Cruce

          /s/ DOUGLAS J. KAHN             Director                          September 18, 1997
----------------------------------------
            Douglas J. Kahn

            /s/ HAROLD LEPPO              Director                          September 18, 1997
----------------------------------------
              Harold Leppo

II-3


               SIGNATURE                             CAPACITY                      DATE
----------------------------------------  ------------------------------    -------------------

            /s/ DAVID PULVER              Director                          September 18, 1997
----------------------------------------
              David Pulver

        /s/ MELVIN M. ROSENBLATT          Director                          September 18, 1997
----------------------------------------
          Melvin M. Rosenblatt

             /s/ NANCY RYAN               Director                          September 18, 1997
----------------------------------------
               Nancy Ryan

II-4


EXHIBIT INDEX

EXHIBIT NO.                                     DESCRIPTION
-----------   --------------------------------------------------------------------------------
    *1.1      Form of Underwriting Agreement among the Underwriters named therein and the
              Company
    *4.1      Form of Indenture among the Company, the Guarantors named therein and the
              Trustee
    *4.2      Form of Note (included in Exhibit No. 4.1)
    *5.1      Opinion of Goodwin, Procter & Hoar LLP as to the legality of the Notes being
              registered
    12.1      Statement re computation of ratios
    23.1      Consent of KPMG Peat Marwick LLP, Independent Accountants
   *23.2      Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1 hereto)
    24.1      Powers of Attorney (included in Part II of this Registration Statement)
   *25.1      Form T-1 Statement of Eligibility of Trustee under the Trust Indenture Act of
              1939


* To be filed by amendment.


EXHIBIT 12.1

J. BAKER, INC. AND SUBSIDIARIES
Statement Re Computation of Ratios
(Dollars in thousands)

                                                                                 Fiscal Years Ended
                                                   ---------------------------------------------------------------------------
                                                   January 30,    January 29,    January 28,    February 3,        February 1,
                                                      1993           1994           1995           1996*              1997**
                                                   -----------    -----------    -----------    -----------        -----------
Historical ratio of earnings to fixed charges

Earnings (loss) from continuing operations
  before taxes and extraordinary item per
  consolidated statements of earnings                $21,076        $36,424        $36,899        $(64,425)        $(157,274)

Add:
  Portion of rents representative of the
    interest factor                                    6,564         15,227         17,593          17,316            16,283
  Interest on indebtedness including the
    amortization of debt expense and
    detachable warrant value (1)                       9,863         11,728         14,231          18,754            19,554
                                                     -------        -------        -------        --------         ---------
Earnings (loss) before fixed charges,
  as adjusted                                        $37,503        $63,379        $68,723        $(28,355)        $(121,437)
                                                     =======        =======        =======        ========         =========
Fixed charges
  Interest on indebtedness including the
    amortization of debt expense and
    detachable warrant value (1)                     $ 9,863        $11,728        $14,231        $ 18,754         $  19,554
                                                     -------        -------        -------        --------         ---------
Rents                                                $19,691        $45,680        $52,780        $ 51,948         $  48,850
  Portion of rents representative of
    the interest factor (2)                          $ 6,564        $15,227        $17,593        $ 17,316         $  16,283
                                                     -------        -------        -------        --------         ---------
  Fixed charges (1)+(2)                              $16,427        $26,955        $31,824        $ 36,070         $  35,837
                                                     =======        =======        =======        ========         =========

Ratio of earnings (loss) to fixed charges                2.3x           2.4x           2.2x            (.8)x            (3.4)x
                                                     =======        =======        =======        ========         =========

(*) 1996 reflects the impact of restructuring charges of $69,300,000. (**) 1997 reflects the impact of restructuring and other non-recurring charges of $122,309,000.


Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
J. Baker, Inc.:

We consent to the use of our reports included herein and to the reference to our firm under the heading "Experts" in the prospectus.

                                            /s/ KPMG Peat Marwick LLP


                                            KPMG PEAT MARWICK LLP

Boston, Massachusetts


September 18, 1997

BROKERAGE PARTNERS