<PAGE>
                                                                   EXHIBIT 10.18

                          TAX INDEMNIFICATION AGREEMENT


                  TAX INDEMNIFICATION AGREEMENT, dated as of January 3, 2004
(the "Agreement"), among Bakers Footwear Group, Inc., a Missouri corporation
(the "Company"), and the persons listed on SCHEDULE A attached hereto
(individually, a "Stockholder" and, collectively, the "Stockholders").

                  WHEREAS, the Company is and has been an "S corporation"
(within the meaning of section 1361(a)(1) of the Internal Revenue Code of 1986,
as amended (the "Code")) since January 1, 1984;

                  WHEREAS, the Company contemplates a public offering (the
"Offering") of its stock;

                  WHEREAS, the execution of this Agreement by the Company and
the Stockholders is a condition to the closing (the "Closing") of the
contemplated Offering;

                  WHEREAS, it is anticipated that the Company's election to be
an S corporation will terminate as a result of revocation of such status in
accordance with section 1362(d)(1) of the Code, the day prior to the day of the
Closing;

                  WHEREAS, in connection with the Offering, the Company and
Stockholders wish to provide for certain indemnification with respect to the
Company's prior status as an S corporation.

                  NOW, THEREFORE, in consideration of the covenants and
agreements hereinafter set forth and other good and valuable considerations, the
receipt and sufficiency of which are hereby acknowledged, and intended to be
legally bound hereby, the parties hereto agree as follows:

                                   ARTICLE I.
                                   DEFINITIONS

                  1.1. Definitions. The following terms as used herein have the
following meanings:

                  "Closing Date" means the date on which the Offering closes.

                  "Final Determination" means the final resolution of any income
tax liability (including all related interest and penalties) for a taxable
period. A Final Determination shall result from the first to occur of:

                    (i) the expiration of the period, if any, during which the
taxpayer may file a claim for refund following receipt from the Internal Revenue
Service (the "IRS") of a fully executed Waiver of Restrictions on Assessment and
Collection of Deficiency in Tax and

<PAGE>
Acceptance of Overassessment on IRS Form 870 or a fully executed IRS Form 870-AD
that, in either case, determines the tax liability of the taxpayer for the
taxable period (the "Waiver") (or any successor form or any comparable form with
respect to any comparable agreement under the laws of any other jurisdiction),
provided the taxpayer does not file a claim for refund during that period;

                    (ii) a final decision by a court of competent jurisdiction
in respect of which all rights to appeal have expired or have been exhausted;

                    (iii) the execution of a closing agreement under section
7121 of the Code that finally determines the tax liability of the taxpayer for
the taxable period;

                    (iv) the acceptance by the IRS of an offer to compromise
described in Treasury regulation section 301.7122-1(e)(5) that finally
determines the tax liability of the taxpayer for the taxable period;

                    (v) the expiration of the applicable statute of limitations
for the taxable period; or

                    (vi) any other event that the parties hereto agree is a
final determination of the liability at issue.

                  "S Taxable Year" means any taxable year (or portion thereof)
of the Company during which the Company was an S corporation.

                  "Tax Liability" means any federal or state income tax
liability. For purposes of this Agreement federal income tax liability shall be
deemed to be (i) the highest applicable individual federal income tax rate,
multiplied by (ii) a Stockholder's allocable portion of the Company's taxable
income. For purposes of this Agreement, state income tax liability shall be
deemed to be (i) the highest applicable individual state income tax rate of the
applicable state, multiplied by (ii) a Stockholder's allocable portion of the
Company's taxable income in that state. Tax Liability shall also include any
interest and penalties.

                  "Taxing Authority" means the IRS or any comparable state or
foreign taxing authority.

                  "Termination Date" means the date on which the S corporation
status of the Company will terminate pursuant to section 1362(d) of the Code,
which shall be January 4, 2004.

                                   ARTICLE II.
          TERMINATION OF S CORPORATION STATUS AND ALLOCATION OF INCOME

                  2.1. Termination of S Corporation Status. The Company and the
Stockholders shall cause the Company to terminate its S corporation status
pursuant to section 1362(d)(1) of the Code no later than one day before the
Closing by filing the form attached hereto and marked as EXHIBIT 1 no later than
one day before the Closing. The Stockholders shall each consent to the

                                       2
<PAGE>
revocation of the S corporation election by providing the Company with the
statement of consent, attached hereto and marked as EXHIBIT 2, no later than one
day before the Closing.



                                  ARTICLE III.
                                   OBLIGATIONS

                  3.1. Company's Indemnification of Stockholders for Tax
Liabilities. The Company hereby agrees to indemnify and hold each of the
Stockholders harmless from, against and in respect of any Tax Liability incurred
by such Stockholder as a result of a Final Determination to the Company's tax
returns that increases the Tax Liability of the Stockholder for an S Taxable
Year in excess of amounts previously distributed to such Stockholder. With
respect to states in which the Company has previously filed composite returns
including a Stockholder, the foregoing obligation shall be accomplished by the
Company, as necessary, re-filing the composite returns and paying directly any
additional amounts owed.

                  3.2. Gross Up for Additional Tax. In all events and to the
extent not otherwise reimbursed, the Company hereby agrees that if any payment
pursuant to this Article III is deemed to be taxable income to a Stockholder,
the amount of such payment to the Stockholder shall be increased by an amount
necessary to equal the Stockholder's additional Tax Liability related to such
amount (including, without limitation, any taxes on such additional amounts) so
that the net amount payment, after reduction for all Tax Liability associated
with its receipt, is equal to the amount of the Tax Liability in respect of
which such payment is made.

                  3.3. Payment. Any payment required to be made pursuant to this
Agreement shall be paid within ten days after receipt of written notice from the
Stockholder that a payment is due hereunder.

                                   ARTICLE IV.
                              CONTESTS/COOPERATION

                  4.1. Cooperation. The parties shall make available to each
other, as reasonably requested, and to any Taxing Authority all information,
records or documents relating to any liability for taxes covered by this
Agreement and shall preserve such information, records and documents until the
expiration of any applicable statute of limitations or extensions thereof. The
party requesting such information shall reimburse the other party for all
reasonable out-of-pocket costs incurred in producing such information.

                                   ARTICLE V.
                                  MISCELLANEOUS

                  5.1. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, but all of which
counterparts collectively shall constitute a single instrument representing the
agreement among the parties hereto.


                                       3
<PAGE>
                  5.2. Construction of Terms. Nothing herein expressed or
implied is intended, or shall be construed, to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.

                  5.3. Governing Law. This Agreement and the legal relations
between the parties hereto shall be governed by and construed in accordance with
the substantive laws of the State of Missouri without regard to any choice of
law rules.

                  5.4. Amendment and Modification. This Agreement may be
amended, modified or supplemented only by a writing executed by all the parties
hereto.

                  5.5. Assignment. Except by operation of law or in connection
with the sale of all or substantially all the assets of a party, this Agreement
shall not be assignable, in whole or in part, directly or indirectly, by the
Stockholders without the written consent of the Company or by the Company
without written consent of the Stockholders. Any attempt to assign any rights or
obligations arising under this Agreement without such consent shall be void. The
provisions of this Agreement shall be binding upon and inure to the benefit of,
and be enforceable by, the parties hereto and their respective successors and
permitted assigns.

                  5.6. Interpretation. The title, article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties, and shall not in any way affect the
meaning or interpretation of this Agreement.

                  5.7. Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be illegal, invalid or
unenforceable in any respect, the same shall not in any respect affect the
validity, legality or enforceability of the remainder of this Agreement, and the
parties shall use their best efforts to replace such illegal, invalid or
unenforceable provision with an enforceable provision approximating, to the
extent possible, the original intent of the parties.

                  5.8. Entire Agreement. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect to the subject
matter contained herein. There are no representations, promises, warranties,
covenants or undertakings other than those expressly set forth herein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter, including without limitation the Tax
Indemnification Agreement sent to you in 2002.

                  5.9. Further Assurances. Subject to the provisions of this
Agreement, the parties shall acknowledge such other instruments and documents
and take all other actions that may be reasonably required in order to
effectuate the purposes of this Agreement.

                  5.10. Waivers, Etc. No failure or delay on the part of any
party in exercising any power or right under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power or any abandonment or discontinuance of steps to enforce such right or
power preclude any other or further exercise thereof or the exercise of any

                                       4
<PAGE>
other right or power. No waiver of any provision of this Agreement nor consent
to any departure by the parties therefrom shall in any event be effective unless
it shall be in writing, and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which it was given.

                  5.11. Set-off. All payments to be made by the Company under
this Agreement shall be made without set-off, counterclaim or withholding, all
of which are expressly waived.

                  5.12. Change of Law. If, due to any change in applicable law
or regulations or the interpretation thereof by any court or other governing
body having jurisdiction subsequent to the date of this Agreement, performance
of any provision of this Agreement shall be impracticable or impossible, the
parties shall use their best efforts to find an alternative means to achieve the
same or substantially the same results as are contemplated by such provision.

                  5.13. Notices. All notices under this Agreement shall be
validly given if in writing and delivered personally or sent by registered mail,
postage prepaid to the Company at:

                  2815 Scott Avenue
                  St. Louis, Missouri, 63103
                  Attention:  _____________________

or at such other address as any party may, from time to time, designate in a
written notice given in a like manner. Notice given by mail shall be deemed
delivered five calendar days after the date mailed.

                  5.14. Termination of Agreement. This Agreement shall terminate
and be void, as if it never had been executed, if the Closing does not occur on
or before March 15, 2004.



              [Remainder of this page is intentionally left blank]



                                       5
<PAGE>
                  IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.


                                  BAKERS FOOTWEAR GROUP, INC.

                                  By:
                                      -----------------------------------------
                                      Peter A. Edison, Chairman of the Board of
                                      Directors and Chief Executive Officer

                                  STOCKHOLDERS

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

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

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

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

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


                                       6
<PAGE>
                  Executed as of January 3, 2004 under the laws of the State of
 Missouri.

                                 /s/ Peter A. Edison
                                 --------------------------------------
                                 Peter A. Edison

                                 /s/ Bernard A. Edison
                                 --------------------------------------
                                 Bernard A. Edison Revocable Trust
                                 Dated 6/18/91

                                 /s/ Bernard A. Edison
                                 --------------------------------------
                                 Bernard A. Edison, Co-Trustee
                                 Beatrice C. Edison Irrevocable Trust F/B/O
                                 Bernard A. Edison

                                 /s/ Robin Haar
                                 --------------------------------------
                                 Robin Haar, Co-Trustee
                                 Beatrice C. Edison Irrevocable Trust F/B/O
                                 Bernard A. Edison

                                 /s/ Bernard A. Edison
                                 -----------------------
                                 Beatrice C. Edison Trust F/B/O
                                 Bernard A. Edison

                                 /s/ Susan H. Edison
                                 --------------------------------------
                                 Susan H. Edison

                                 /s/ David A. Edison
                                 --------------------------------------
                                 David A. Edison
                                 Trustee of David A. Edison Revocable Trust

                                 /s/ Bernard A. Edison
                                 --------------------------------------
                                 Bernard A. Edison
                                 Trustee of David A. Edison Revocable Trust

                                 /s/ Julian J. Edison
                                 --------------------------------------
                                 Julian Edison

                                 /s/ Marilyn Sue Edison
                                 --------------------------------------
                                 Marilyn Sue Edison

                                 /s/ Joseph Russell
                                 --------------------------------------
                                 Joseph Russell

                                 /s/ Michele Bergerac
                                 --------------------------------------
                                 Michele Bergerac
                                 Trustee of Michele A. Bergerac Revocable Trust

                                 /s/ Mark Jenkins
                                 --------------------------------------
                                 Mark Jenkins


                                       7
<PAGE>
                                 /s/ Andrew N. Baur, Trustee
                                 ---------------------------------------------
                                 Andrew N. Baur Trust

                                 /s/ Stanley K. Tusman
                                 ---------------------------------------------
                                 Stanley K. Tusman, Joint Trustee
                                 The Stanley K. Tusman and Gail F. Tusman
                                 Declaration of Trust Dated December 1. 1999

                                  /s/ Gail F. Tusman
                                 ---------------------------------------------
                                 Gail F. Tusman, Joint Trustee
                                 The Stanley K. Tusman and Gail F. Tusman
                                 Declaration of Trust Dated December 1. 1999

                                 /s/ Mark H. Brown
                                 ---------------------------------------------
                                 Mark H. Brown

                                  /s/ Elizabeth Brown
                                 ---------------------------------------------
                                 Elizabeth Brown

                                 /s/ Joseph R. Vander Pluym
                                 ---------------------------------------------
                                 Joseph R. Vander Pluym

                                 /s/ Janice K. Vander Pluym
                                 ---------------------------------------------
                                 Janice K. Vander Pluym

                                 /s/ Mark D. Ianni
                                 ---------------------------------------------
                                 Mark D. Ianni

                                 /s/ Kathy M. Ianni
                                 ---------------------------------------------
                                 Kathy M. Ianni

                                 /s/ Lawrence L. Spanley, Jr.
                                 ---------------------------------------------
                                 Lawrence Spanley

                                 /s/ Linda K. Spanley
                                 ---------------------------------------------
                                 Linda K. Spanley

                                 ALL OF THE CLASS A SHAREHOLDERS

                                 /s/ Sanford W. Weiss
                                 ---------------------------------------------
                                 Sanford W. Weiss, Voting Trustee of the Class B
                                 Shareholder Voting Trust Agreement

                                 ALL OF THE CLASS B SHAREHOLDERS

                                 /s/ Sanford W. Weiss
                                 ---------------------------------------------
                                 Sanford W. Weiss, as Trustee U/I
                                 Sanford W. Weiss



                                       8
<PAGE>
                                 /s/ Sanford W. Weiss
                                 ---------------------------------------------
                                 Sanford W. Weiss, as Trustee of
                                 Richard S. Weiss Marital Trust


                                 /s/ Sanford W. Weiss
                                 ---------------------------------------------
                                 Sanford W. Weiss, as Trustee U/I/T of
                                 Charles H. Weiss

                                 /s/ Ellen Weiss
                                 ---------------------------------------------
                                 Ellen Weiss

                                 /s/ Rochelle Weiss
                                 ---------------------------------------------
                                 Rochelle Weiss

                                 /s/ Stephen Weiss
                                 ---------------------------------------------
                                 Stephen Weiss

                                 /s/ David Weiss
                                 ---------------------------------------------
                                 David Weiss

                                 /s/ Michael Weiss
                                 ---------------------------------------------
                                 Michael Weiss

                                 /s/ Alyson Weiss
                                 ---------------------------------------------
                                 Alyson Weiss

                                 /s/ Jennifer Weiss-Kaslow
                                 ---------------------------------------------
                                 Jennifer Weiss

                                 ALL OF THE BENEFICIARIES OF THE
                                 CLASS B SHAREHOLDER VOTING TRUST AGREEMENT


                                 BAKERS FOOTWEAR GROUP, INC.


                                 By:  /s/ Peter A. Edison
                                      ----------------------------------------
                                      Name:  Peter Edison
                                      Title:  Chairman and CEO


                                 COLBY OLIVER

                                 /s/ Colby Oliver
                                 ---------------------------------------------
                                 Colby Oliver


                                       9

<PAGE>
                                   SCHEDULE A

                              LIST OF STOCKHOLDERS

     1.  Peter A. Edison

     2.  Bernard A. Edison Revocable Trust
         Dated 6/18/91

     3.  Bernard A. Edison, Co-Trustee
         Beatrice C. Edison Irrevocable Trust
         F/B/O Bernard A. Edison

     4.  Robin Haar, Co-Trustee
         Beatrice C. Edison Irrevocable Trust
         F/B/O Bernard A. Edison

     5.  Beatrice C. Edison Trust F/B/O
         Bernard A. Edison

     6.  Susan H. Edison

     7.  David A. Edison
         Trustee of David A. Edison
         Revocable Trust

     8.  Bernard A. Edison
         Trustee of David A. Edison
         Revocable Trust

     9.  Julian Edison

     10. Marilyn Sue Edison

     11. Joseph Russell

     12. Michelle Bergerac
         Trustee of Michele A. Bergerac
         Revocable Trust

     13. Mark Jenkins

     14. Andrew N. Baur Trust

     15. Stanley K. Tusman, Joint Trustee
         The Stanley K. Tusman and Gail F.
         Tusman Declaration of Trust Dated
         December 1, 1999

     16. Gail F. Tusman, Joint Trustee
         The Stanley K. Tusman and Gail F.
         Tusman Declaration of Trust Dated
         December 1. 1999

     17. Mark H. Brown

     18. Elizabeth Brown

     19. Joseph R. Vander Pluym

     20. Janice K. Vander Pluym

     21. Mark D. Ianni

     22. Kathy M. Ianni

     23. Lawrence Spanley

     24. Linda K. Spanley

     25. Sanford W. Weiss, Voting Trustee of
         the Class B Shareholder Voting Trust
         Agreement

     26. Sanford W. Weiss, as Trustee U/I
         Sanford W. Weiss

     27. Sanford W. Weiss, as Trustee of
         Richard S. Weiss Marital Trust

     28. Charles H. Weiss, as Trustee U/I/T
         of Charles H. Weiss

     29. Ellen Weiss

     30. Rochelle Weiss

     31. Stephen Weiss

     32. David Weiss

     33. Michael Weiss

     34. Alyson Weiss

     35. Jennifer Weiss

     36. Colby Oliver
<PAGE>
                                    EXHIBIT 1

                       STATEMENT OF REVOCATION OF ELECTION



Internal Revenue Service Center
Kansas City, Missouri, [64999]



         RE:      Bakers Footwear Group, Inc., EIN 43-0577980
                  Revocation of S Corporation Election

                  The S corporation election under Internal Revenue Code section
1362(a) of Bakers Footwear Group, Inc., a Missouri corporation, with its
principal office located at 2815 Scott Avenue, St. Louis, Missouri, 63103, is
hereby revoked as of January 4, 2004, the first day of the fiscal year. At the
time of revocation the number of shares (issued and outstanding) of Bakers
Footwear Group, Inc.'s stock, including non-voting stock, is [___________]

                  Attached are the consent to the revocation by shareholders
owning more than one-half of the issued and outstanding shares of stock in
Bakers Footwear Group, Inc., including non-voting stock.



                                        BAKERS FOOTWEAR GROUP, INC.

                                        By:
                                           -------------------------------------
                                        [Name, Title]



       [FILE STATEMENT OF REVOCATION WITH SHAREHOLDERS' CONSENTS WITH THE
                     IRS REQUESTING A COPY STAMPED "FILED"]


<PAGE>
                                    EXHIBIT 2

          SHAREHOLDERS' STATEMENT OF CONSENT TO REVOCATION OF ELECTION



                  We, the undersigned, being shareholders of Bakers Footwear
Group, Inc. EIN 43-0577980, holding more than one-half of our corporation's
issued and outstanding shares (including non-voting stock), do hereby consent to
the revocation by our corporation of its S corporation election under Internal
Revenue Code section 1362(a). The revocation is to be effective as of January 4,
2004, the first day of our fiscal year.

                  Under penalties of perjury, the undersigned declare that the
facts presented in the accompanying statement are, to the best of our knowledge
and belief, true, correct and complete.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
  SHAREHOLDER NAME AND       SOCIAL SECURITY        NUMBER OF SHARES       DATE(S) ACQUIRED      TAX YEAR END (MONTH
        ADDRESS                  NUMBER             OWNED, INCLUDING                                   & DAY)
                                                   NON-VOTING SHARES
----------------------------------------------------------------------------------------------------------------------
<S>                          <C>                   <C>                    <C>                    <C>








----------------------------------------------------------------------------------------------------------------------
</TABLE>
                                               ------------------------------
                                               [Shareholder Signature]

                                               ------------------------------
                                               [Shareholder Signature]

                                               ------------------------------
                                               [Shareholder Signature]

                                               ------------------------------
                                               [Shareholder Signature]

         [FILE SHAREHOLDERS' CONSENTS WITH THE STATEMENT OF REVOCATION]