<PAGE>   1

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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A

(Mark One)

[ x ]    Annual report pursuant to section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the fiscal year ended:   January 30, 1999   OR
                                                        ---------------------

[   ]    Transition report pursuant to section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the transition period from:        to
                                                             --------  --------

Commission file number:  333-57009
                         ---------

                          IRON AGE HOLDINGS CORPORATION
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             (Exact name of registrant as specified in its charter)

           Delaware                                          04-3349775
-------------------------------                  -------------------------------
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                           Identification Number)

         ROBINSON PLAZA THREE, SUITE 400, PITTSBURGH, PENNSYLVANIA 15205
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        Securities registered pursuant to Section 12(b) of the Act: None
        Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes  X    No
   -----    -----
Applicable only to registrants involved in bankruptcy proceedings during the
preceding five years: Indicate by check mark whether the registrant has filed
all documents and reports required to be filed by Sections 12, 13 or 15(d) of
the Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes     No     Not Applicable.
                                      -----  -----

(Applicable only to corporate registrants:) As of April 26, 1999, Iron Age
Holdings Corporation had 99,624.89 shares of Common Stock issued and
outstanding.

Documents incorporated by reference: None

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part II of this
Form 10-K or any amendment to this Form 10-K.   [ X ]



<PAGE>   2



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

     The following is management's discussion and analysis of the financial
condition and results of operations of Holdings for the fiscal years ended
January 30, 1999("fiscal 1999"), January 31, 1998("fiscal 1998") and January 25,
1997 ("fiscal 1997"). For purposes of this discussion and analysis, the
financial condition and results of operations of Holdings for fiscal 1998
represent the combined results of Holdings and its predecessor, unless otherwise
indicated. This discussion and analysis should be read in conjunction with, and
is qualified in its entirety by, "Selected Financial Data" and the consolidated
financial statements and accompanying notes thereto included elsewhere in this
Annual Report on Form 10-K.

OVERVIEW

     Holdings' primary business is the specialty distribution of safety, work
and uniform related shoes directly to end users under the Iron Age and Knapp
brand names, which comprised 91.5% of fiscal 1999 sales. The Company also
distributes footwear directly to retail and wholesale customers through its
wholesale division and its manufacturing subsidiary Falcon. Holdings
manufactures approximately 20% of total pairs of shoes sold through Falcon. In
addition, the Company began distributing prescription safety eyewear, on a
limited basis, through its subsidiary IA Vision, in conjunction with the
acquisition of a regional distributor in May 1998. Holdings' net sales growth
was 4.7% in fiscal 1999, or 6.7% excluding the impact of the additional week in
fiscal 1998. Holdings' net sales growth has averaged 9.4% over the last three
fiscal years, excluding the impact of the additional week in fiscal 1998.

     Holdings has an extended history of sales and income growth. Historically,
Holdings' growth has been generated both internally and through the acquisition
of regional independent distributors. From fiscal 1987 to fiscal 1999, Holdings'
net sales and EBITDA have increased at a compound annual growth rate ("CAGR") of
14.2% and 20.1%, respectively.


ACQUISITIONS AND CAPITAL RESTRUCTURING


        The Fenway Acquisition occurred on February 26, 1997. Concurrent with
the Fenway Acquisition, (i) Holdings and Iron Age entered into the Old Credit
Facility, (ii) Iron Age issued the Old Subordinated Notes in the amount of
$14.55 million (net of a $0.45 million discount), (iii) Holdings issued 1,500
shares of the Holdings Series A Preferred Stock for an aggregate consideration
of $14.9 million, (iv) Holdings issued 88,625 shares of Common Stock for an
aggregate consideration of approximately $32.2 million, (v) Holdings issued
warrants to acquire approximately 7,000 shares of Common Stock of Holdings at an
exercise price of $185.52 per share for an aggregate consideration of $0.1
million, and (vi) management rolled over certain options to acquire
approximately 6,000 shares of the predecessor company at an exercise price of
$62 per share into options to acquire approximately 11,500 shares of Common
Stock of Holdings at an exercise price of $36.36 per share and were granted
additional options to acquire shares of Common Stock of Holdings at an exercise
price of $363.60 per share. The total fair value of the exchanged options was
recognized as a capital contribution to Holdings because the exchanged options
represented a portion of the purchase price for Holdings. The Fenway Acquisition
was accounted for by the purchase method and the purchase price has been
allocated to Holdings' assets and liabilities based on fair market value. The
Fenway Acquisition resulted in goodwill of approximately $84.1 million, which is
being amortized over 40 years. The exercise price of the options which were
rolled over by management is approximately $36 per share and represents the
difference between the fair market value of Holdings' Common Stock at the date
of grant and the total fair value of the exchanged options which was recognized
as a capital contribution to Holdings of approximately $3,772,700, or
approximately $328 per share.

       Holdings, through Iron Age, acquired Knapp Shoes, Inc. ("Knapp") on March
14, 1997 (the "Knapp Acquisition"). As part of the Knapp Acquisition, the Fenway
Fund and certain other stockholders of Holdings contributed an additional $4.0
million of common equity. The Knapp Acquisition was accounted for under the
purchase method for business combinations and, accordingly, the results of
operations for Knapp are included in Holdings' financial statements only from
the date of the Knapp Acquisition.

                                      -2-
<PAGE>   3


       On April 24, 1998 in the April 1998 Transactions, (i) Holdings
consummated the sale of the Discount Notes, its 12 1/8% Senior Discount Notes
due 2009, in an aggregate principal amount at maturity of $45.14 million, in a
transaction exempt from the registration requirements of the Securities Act,
(ii) Iron Age issued the Senior Subordinated Notes, its 9 7/8% Senior
Subordinated Notes due 2008, in an aggregate principal amount of $100 million in
a transaction exempt from the registration requirements of the Securities Act,
and (iii) Holdings and Iron Age entered into the New Credit Facility, which, as
amended, provides for a $52.0 million senior secured credit facility consisting
of a $30.0 million revolving working capital facility and a $22.0 million
revolving acquisition facility. Holdings and Iron Age used excess cash and net
proceeds from the Discount Notes, the Senior Subordinated Notes and the New
Credit Facility to repay the Old Credit Facility and the Old Subordinated Notes,
to make compensation payments to certain members of management, to pay a
dividend to Holdings' stockholders and to redeem the Holdings Series A Preferred
Stock.

     On October 21, 1998, Holdings consummated an exchange offer of Discount
Notes registered under the Securities Act of 1933, as amended. The Discount
Notes and the notes exchanged therefor are referred to as the "Discount Notes."

     In April 1998, Holdings, through IA Vision, acquired the stock of Safety
Supplies & Service Co., Inc. and acquired certain assets and assumed certain
liabilities of Safety Depot Ltd., ACT Safety, Inc. and J. Mars Knapp Shoes (the
"First Quarter Acquisitions"). The combined purchase price for the First Quarter
Acquisitions was approximately $4.64 million, including transactions costs of
approximately $0.15 million. In addition, on July 7, 1998, the Company acquired
certain assets of Work-Saf, Inc. for approximately $0.75 million (the "Second
Quarter Acquisition"). The First Quarter Acquisitions and the Second Quarter
Acquisition have been accounted for using the purchase method of accounting for
business combinations, and accordingly, (i) the results of operations for each
of the acquired companies are included in Holdings' financial statements from
the date of the respective acquisitions and (ii) the purchase price has been
allocated to Holdings' net assets based upon their fair market values. The First
Quarter Acquisitions and the Second Quarter Acquisition resulted in goodwill of
approximately $2.8 million, which is being amortized over 40 years.

DIVESTITURES

         Effective August 31, 1998, Holdings sold the Dunham trademark and
related trademarks with no carrying value to New Balance for $2.0 million and
recorded a gain of $1.7 million, net of certain transaction costs (the "Dunham
Sale"). Dunham wholesale sales were $3.1 million in fiscal 1999, consisting of
Dunham sales of $1.3 million prior to the Dunham Sale, sales of on-hand
inventory to New Balance for approximately $0.6 million in conjunction with the
Dunham Sale and sales of Dunham products of $1.2 million to New Balance after
the Dunham Sale. In conjunction with the Dunham Sale, Falcon agreed to
manufacture for New Balance certain products which New Balance will continue to
sell under the Dunham brand name pursuant to a two year supply agreement with
New Balance.


                                      -3-
<PAGE>   4


RESULTS OF OPERATIONS

     The following table sets forth for the period indicated certain historical
income statement data derived from the consolidated statement of income of
Holdings and its predecessor. The application of the purchase method of business
combinations resulted in a presentation of the results of operations for fiscal
1998 in two periods: a one-month period prior to the Fenway Acquisition and an
11-month period following the date of the Fenway Acquisition.


<TABLE>
<CAPTION>
                                                     SUCCESSOR                             PREDECESSOR
                                        --------------------------------------------------------------------------
                                                             FEB. 27, 1997      JAN. 26, 1997
                                                                THROUGH            THROUGH
                                          FISCAL 1999      January 31, 1998     FEB. 26, 1997        FISCAL 1997
                                        ---------------    ----------------    ---------------     ---------------
<S>                                     <C>                <C>                 <C>                 <C>
INCOME STATEMENT DATA:
Net sales                                   $124,294            $107,769           $ 10,937            $99,360
Gross profit                                  61,066              54,465              5,327             46,923
Selling, general and                          46,854              36,541              5,120             31,267
administrative
Depreciation and amortization                  5,193               4,426                238              2,751
                                                                                                         5,193
Operating income (loss)                        9,019              13,498                (31)            12,905
Gain on divestiture                            1,678                  --                 --                 --
Interest expense                              14,844               9,855              1,116              6,515
Provision (benefit) for income                  (874)              1,686               (452)             2,800
taxes
Extraordinary  item,  net  of tax             (4,015)                 --                 --                 --
effect

OTHER DATA:
Gross profit margin                             49.1%               50.5%              48.7 %             47.2%
Operating income margin                          7.2%               12.5%              (0.3)%             13.0%
</TABLE>

FISCAL 1999 COMPARED TO FISCAL 1998

     NET SALES. For comparability with fiscal 1999, net sales for the
predecessor and successor periods in fiscal 1998 have been discussed on a
combined basis. Management believes that a combined discussion of predecessor
and successor periods is reasonable and appropriate because there were no
adjustments to net sales for a change in basis resulting from the Fenway
Acquisition. Holdings' net sales for fiscal 1999 were $124.3 million compared to
$118.7 million for fiscal 1998, an increase of $5.6 million, or 4.7%. Excluding
the impact of the additional week in fiscal 1998, sales increased $7.8 million,
or 6.7%. The increase in fiscal 1999 was primarily attributable to growth in the
Company's primary business of $6.0 million, or 5.6%. Sales of prescription
safety eyewear and safety and medical products were $2.1 million in fiscal 1999.
Growth in net sales was partially offset by a $2.5 million decrease in wholesale
sales, including a $0.9 million decrease in Dunham wholesale sales. Dunham
wholesale sales were $3.1 million in fiscal 1999, consisting of Dunham sales of
$1.3 million prior to the Dunham Sale, sales of on-hand inventory to New Balance
for approximately $0.6 million in conjunction with the Dunham Sale and sales of
Dunham products of $1.2 million to New Balance after the Dunham Sale, compared
to Dunham wholesale sales of $4.0 million in fiscal 1998.

     GROSS PROFIT. For comparability with fiscal 1999, gross profit for the
predecessor and successor periods in fiscal 1998 has been discussed on a
combined basis. Management believes that a combined discussion of predecessor
and successor periods is reasonable and appropriate because there were no
adjustments to gross profit for a change in basis resulting from the Fenway
Acquisition. Holdings' gross profit for fiscal 1999 was $61.1 million compared
to $59.8 million for fiscal 1998, an increase of $1.3 million, or 2.2%. Total
gross profit percentage decreased 1.3% to 49.1% in fiscal 1999 compared to
fiscal 1998. Gross profit percentage increased in the Company's primary business
by 0.3% in fiscal 1999. The overall decrease in the gross profit percentage was
primarily related to integrating the operations of the prescription safety
eyewear and safety and medical products business and an increase in lower gross
profit margin private label Dunham sales resulting from the Dunham Sale. Gross
profit on Dunham product sales decreased $0.5 million in fiscal 1999 compared to
fiscal 1998. The decrease primarily related to decreased Dunham wholesale sales
as discussed above and lower gross profit margin on sales in conjunction with
the Dunham Sale.


                                      -4-
<PAGE>   5


     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For comparability with fiscal
1999, selling, general and administrative expenses for the predecessor and
successor periods in fiscal 1998 have been discussed on a combined basis.
Management believes that a combined discussion of predecessor and successor
periods is reasonable and appropriate because there were no adjustments to
selling, general and administrative expenses for a change in basis resulting
from the Fenway Acquisition. Selling, general and administrative expenses for
fiscal 1999 were $46.9 million compared to $41.7 million for fiscal 1998, an
increase of $5.2 million, or 12.5%. Selling, general and administrative expenses
for fiscal 1999 include non-recurring charges of $2.2 million of compensation
payments to certain members of management in connection with the April 1998
Transactions, a $0.2 million charge related to store closings scheduled for the
first and second quarter of fiscal 2000 and $0.2 million of recruitment fees.
Selling, general and administrative expenses for fiscal 1998 include a
non-recurring charge of $2.1 million of stock compensation expense and
compensation payments to certain members of management in connection with the
Fenway Acquisition. Selling, general and administrative expenses increased $4.6
million, or 11.6%, from fiscal 1998 to fiscal 1999, excluding non-recurring
charges in both fiscal 1999 and fiscal 1998. The increase in fiscal 1999 was
primarily related to the First Quarter Acquisitions and infrastructure added in
the Knapp distribution channel since the first half of fiscal 1998. Growth in
selling, general and administrative expenses in the primary business was $1.8
million, or 6.1% in fiscal 1999, excluding the non-recurring charges discussed
above.

     OPERATING INCOME. Operating income for fiscal 1999 was $9.0 million, or
7.2% of net sales, compared to $13.5 million, or 12.5% of net sales, for the
period from February 27, 1997 through January 31, 1998. The decrease was
attributable to the increased selling, general and administrative expenses as
discussed above. Operating loss and operating loss as a percentage of net sales
for the predecessor period January 26, 1997 through February 26, 1997 were $0.03
million and 0.3%, respectively. Operating income for the successor period
included increased selling, general and administrative expenses, as discussed
above, and additional depreciation and amortization of $0.8 million. The
additional depreciation and amortization is primarily due to the increase in
basis of goodwill, customer lists and other intangible and tangible assets
capitalized as a result of the Fenway Acquisition, the Knapp Acquisition, the
First Quarter Acquisitions and the Second Quarter Acquisition.

     GAIN ON DIVESTITURE. Gain on divestiture for fiscal 1999 was $1.7 million
which was related to the gain on the Dunham Sale discussed above.

     INTEREST EXPENSE. Interest expense for fiscal 1999 was $14.9 million
compared to $9.9 million for the period from February 27, 1997 through January
31, 1998, an increase of $5.0 million, or 50.5%. Interest expense for the
predecessor period January 26, 1997 through February 26, 1997 was $1.1 million.
Interest expense for the successor periods prior to April 25, 1998 reflect the
additional indebtedness of Holdings incurred in connection with the Fenway
Acquisition and the Knapp Acquisition. The successor periods subsequent to April
24, 1998 reflect interest incurred in connection with the April 1998
Transactions.

     INCOME TAX EXPENSE. Income tax benefit for fiscal 1999 was $0.9 million
compared to income tax expense of $1.7 million for the period from February 27,
1997 through January 31, 1998. Income tax benefit for the predecessor period
January 26, 1997 through February 26, 1997 was $0.5 million. Income tax benefit
for fiscal 1999 differs from that of the statutory income tax rate due primarily
to nondeductible goodwill amortization. Holdings recognized a state income tax
benefit of $1.1 million from net operating loss carryforwards for fiscal 1999.

Holdings needs to generate $10.0 million of state taxable income to realize this
benefit before expiration of the net operating loss carryforward periods, which
begin in fiscal 2002 through fiscal 2019. Holdings evaluates the adequacy of the
valuation reserve and the realization of the deferred tax benefit on an ongoing
basis. Management believes that future taxable income will more likely than not
allow Holdings to realize this benefit.

     EXTRAORDINARY ITEM. For fiscal 1999, Holdings recorded an extraordinary
loss of $4.0 million, net of a $2.9 million tax benefit, due to the early
extinguishment of indebtedness resulting from the repayment of the Old
Subordinated Notes and the Old Credit Facility in April 1998 in connection with
the April 1998 Transactions.


                                      -5-
<PAGE>   6


FISCAL 1998 COMPARED TO FISCAL 1997

         NET SALES. For comparability with prior periods, net sales for the
predecessor and successor periods in fiscal 1998 have been discussed on a
combined basis. Management believes that a combined discussion of predecessor
and successor periods is reasonable and appropriate because there were no
adjustments to net sales for a change in basis resulting from the Fenway
Acquisition. Holdings' net sales for fiscal 1998 increased to $118.7 million, an
increase of $19.3 million, or 19.4%, compared to fiscal 1997. The increase was
attributable to increased sales in the primary business of $6.2 million, or
7.1%, sales of $12.8 million from the operations of the Knapp brand sales
channel and $2.0 million for the additional week in fiscal 1998. The increase
was partially offset by a $1.7 million decrease in sales of Dunham brand
products, Iron Age's wholesale division and private label.

     GROSS PROFIT. For comparability with prior periods, gross profit for the
predecessor and successor periods in fiscal 1998 have been discussed on a
combined basis. Management believes that a combined discussion of predecessor
and successor periods is reasonable and appropriate because there were no
adjustments to gross profit for a change in basis resulting from the Fenway
Acquisition. Holdings' gross profit increased to $59.8 million in fiscal 1998,
an increase of $12.9 million, or 27.5%, compared to fiscal 1997. The increase in
gross profit was primarily attributable to the increase in net sales. In
addition, gross profit percentage increased 3.2% in fiscal 1998 compared to
fiscal 1997. The increase in gross profit percentage was attributable to higher
margin product sales of both Iron Age and Knapp branded products, through the
higher margin shoemobile and retail store channels, and stable product costs.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For comparability with prior
periods, selling, general and administrative expenses for the predecessor and
successor periods in fiscal 1998 have been discussed on a combined basis.
Management believes that a combined discussion of predecessor and successor
periods is reasonable and appropriate because there were no adjustments to
selling, general and administrative expenses for a change in basis resulting
from the Fenway Acquisition. Selling, general and administrative expenses were
$41.7 million in fiscal 1998, an increase of $10.4 million, or 33.2%, compared
to fiscal 1997. The acquired Knapp sales channels contributed $5.8 million of
this increase and the primary business contributed $2.5 million of this
increase, which represented a percentage increase of 8.8% over fiscal 1997.
Approximately $0.5 million of the increase was attributable to the Knapp
manufacturing operation within Falcon and $1.0 million related to compensation
payments to management in connection with the Fenway Acquisition. The additional
week in fiscal 1998 contributed $0.6 million of the increase.

     OPERATING INCOME. Operating income was $13.5 million and $12.9 million in
the period February 27, 1997 through January 31, 1998 and fiscal 1997,
respectively. Operating income in the period February 27, 1997 through January
31, 1998 reflects the direct result of Holdings' gains on both sales and
margins. Operating income as a percentage of net sales was 12.5% in the period
February 27, 1997 through January 31, 1998 and 13.0% in fiscal 1997. Operating
loss and operating loss as a percentage of net sales for the predecessor period
January 26, 1997 through February 26, 1997 were $0.03 million and 0.3%,
respectively. Operating income as a percentage of net sales in the period
February 27, 1997 through January 31, 1998 included additional amortization due
to the increase in the basis of goodwill, customer lists and other intangible
assets capitalized as a component of the purchase accounting related to the
Fenway Acquisition and the Knapp Acquisition.


     INTEREST EXPENSE. Interest expense was $9.9 million in the period February
27, 1997 through January 31, 1998 and $6.5 million in fiscal 1997. Interest
expense for the predecessor period January 26, 1997 through February 26, 1997
was $1.1 million. Interest expense for the period February 27, 1997 through
January 31, 1998 reflects the increase in indebtedness of Holdings incurred in
connection with the Fenway Acquisition and the Knapp Acquisition.

     INCOME TAX EXPENSE. Income tax expense was $1.7 million in the period
February 27, 1997 through January 31, 1998 and $2.8 million in fiscal 1997.
Income tax benefit for the predecessor period January 26, 1997 through February
26, 1997 was $0.5 million. Income taxes for the successor period reflect the
effect of additional non-deductible goodwill amortization.


                                      -6-
<PAGE>   7


LIQUIDITY AND CAPITAL RESOURCES

     Holdings' primary cash needs are working capital, capital expenditures and
debt service. Holdings anticipates that it may use cash in the future to finance
acquisitions. Holdings has financed cash requirements primarily through
internally generated cash flow and funds borrowed under Holdings' and Iron Age's
credit facilities.

     Net cash provided by operating activities was $1.4 million in fiscal 1999,
as compared to net cash used by operating activities of $0.5 million in fiscal
1998 and net cash provided by operating activities of $8.8 million in fiscal
1997. The increase in cash from operating activities in fiscal 1999 is primarily
the result of the decrease in inventory levels of $0.5 million, compared to an
increase of $6.2 million in fiscal 1998, due to the Knapp Acquisition. The
reduction in cash provided by operating activities in fiscal 1998 was the result
of a one-time increase in inventory of $7.0 million related to the Knapp
Acquisition. The major component of the increase in net cash provided by
operating activities in fiscal 1997 was income before non-cash charges of $5.6
million, primarily due to increased income from operations.

     Excluding cash paid for acquisitions and proceeds from the divestiture,
Holdings' investing activities consisted of capital expenditures of $2.3 million
in fiscal 1999 compared to $2.5 million in fiscal 1998 and $2.2 million in
fiscal 1997. Holdings' capital expenditures for fiscal 1999 included $0.2
million in remaining costs related to an addition to Holdings' central
distribution center building. The remaining $2.1 million in capital expenditures
was related to improvements in retail stores, shoemobiles and equipment in the
core business and installing the POS systems in stores and trucks acquired in
connection with the First Quarter Acquisitions and the Second Quarter
Acquisition.

     Holdings' total working capital as of January 30, 1999 was $47.5 million.
At January 31, 1998, working capital was $42.7 million. The primary reason for
the increase to working capital was the elimination of the current portion of
long term senior debt in connection with the April 1998 Transactions.

     Excluding cash paid for regional distributor acquisitions, Holdings used
approximately $3.0 million from financing activities in fiscal 1999, due
primarily to the April 1998 Transactions. of the New Credit Facility. In fiscal
1998, Holdings generated cash of $3.7 million due primarily to borrowings under
the Old Credit Facility. In fiscal 1997, Holdings used $7.0 million for
financing activities due primarily to principal payments on debt and the payment
of a dividend.

     Holdings is a holding company, and its ability to pay interest on the
Discount Notes in the future is dependent upon the receipt of dividends from its
subsidiaries. Holdings does not have, and may not in the future have, any assets
other than the common stock of Iron Age (which is pledged to secure the
obligations of Iron Age under the New Credit Facility). Iron Age is a party to
the New Credit Facility and the indenture for the Senior Subordinated Notes,
each of which imposes substantial restrictions on Iron Age's ability to pay
dividends to Holdings.

     Cash flow from operations for fiscal 1999 was sufficient to cover debt
service requirements under the New Credit Facility. Cash flow from operations
for fiscal 1998 was sufficient to cover debt service requirements under the Old
Credit Facility. Holdings' ability to make scheduled payments of principal, or
to pay the interest or premium (if any) on, or to refinance, its indebtedness
(including the Discount Notes), or to fund planned capital expenditures will
depend on its future performance, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. Based upon the current level of operations,
management believes that cash flow from operations and available cash, together
with available borrowings by Iron Age under the New Credit Facility, will be
adequate to meet Holdings' anticipated future requirements for working capital,
budgeted capital expenditures and scheduled payments of principal and interest
on its indebtedness for the next several years. There can be no assurance that
Holdings' business will generate sufficient cash flow from operations or that
future borrowing will be available under the New Credit Facility in an amount
sufficient to enable Holdings to service its indebtedness, including the
Discount Notes, or to make capital expenditures.

     As of January 30, 1999 Holdings' debt consisted of the Discount Notes, the
Senior Subordinated Notes, the New Credit Facility and certain other debt. As of
January 30, 1999, the New Credit Facility consisted of a $35.0

                                      -7-
<PAGE>   8

million multiple draw acquisition term loan facility (the "New Acquisition
Credit Facility") and approximately $30.0 million in revolving credit loans,
letters of credit and swing line loans (the "New Revolving Credit Facility").
Holdings' other debt of $1.0 million consisted of capital leases and other
notes. As of January 30, 1999, approximately $11.7 million of the New
Acquisition Credit Facility and approximately $11.0 million of the New Revolving
Credit Facility were outstanding, and Holdings had additional borrowing
availability under the New Acquisition Credit Facility of $23.3 million and
under the New Revolving Credit Facility of approximately $19.0 million. The New
Credit Facility was amended, effective March 5, 1999, to reduce the New
Acquisition Credit Facility to $22.0 million. The New Acquisition Credit
Facility matures in quarterly installments from July 2001 until final payment in
April 2004. The New Revolving Credit Facility will mature in April 2004 and has
no scheduled interim principal payments.

     The Senior Subordinated Notes are fully and unconditionally guaranteed on
an unsecured, senior subordinated basis by each Domestic Restricted Subsidiary
that is a Material Subsidiary (as such terms are defined in the indenture for
the Senior Subordinated Notes (the "Senior Subordinated Notes Indenture"))
(whether currently existing, newly acquired or created). Each such subsidiary
guaranty (a "Subsidiary Guaranty") will provide that the subsidiary guarantor,
as primary obligor and not merely as surety, will irrevocably and
unconditionally guarantee on an unsecured, senior subordinated basis the
performance and punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all obligations of Iron Age under the Senior
Subordinated Notes Indenture and the Senior Subordinated Notes, whether for
payment of principal or of interest on the Senior Subordinated Notes, expenses,
indemnification or otherwise. As of January 30, 1999, none of Iron Age's
Domestic Restricted Subsidiaries was a Material Subsidiary, and therefore no
Subsidiary Guaranty was in force or effect.


YEAR 2000 ISSUE

     Many existing computer programs use only two digits, rather than four, to
represent a year. The Year 2000 Issue arises because date-sensitive software or
hardware written or developed in this manner may recognize a date using "00" as
the year 1900 rather than the year 2000. This could potentially result in system
failures or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in normal business activities.

     Holdings classifies its response to the Year 2000 Issue into five phases:
inventory, assessment, renovation, validation and implementation. Inventory is
the process in which all electronic/computer components are defined for all
systems (information technology ("IT") and non-information technology
("non-IT")). Assessment is the process in which all components are classified as
either compliant or non-compliant. Renovation is the process in which a system
is upgraded, replaced or retired. Validation is the process in which compliant
systems are tested within Holdings' infrastructure to validate that either the
initial compliant assessment is correct or the upgrade or replacement from the
renovation phase is compliant with Holdings' infrastructure. Implementation is
the process in which a compliant system is installed into Holdings' production
environment and is used to support business operations.

     Holdings has completed the inventory, renovation and validation of its IT
systems, and implemented these systems in March 1999. In the ordinary course of
business, Holdings upgraded applications software covering the main integrated
system. As of January 30, 1999, Holdings had expended $26,000 and has a total
expected cost of $50,000 to replace, renovate, validate and implement software
to address the Year 2000 Issue. The cost is being funded out of operating cash
flow with the entire amount being capitalized as new hardware and software, in
accordance with EITF 96-14.

     Holdings' inventory and assessment of its non-IT systems (including
telephone, heating/air conditioning, electricity and security systems) was
completed by year end 1998. This is being followed by any required renovation in
calendar 1999. Holdings is using internal resources to address the Year 2000
Issue of its non-IT systems and has not incurred significant costs through
January 30, 1999 and does not expect to incur significant costs in order to
upgrade its non-IT systems. All validation and implementation of these non-IT
systems is expected to be completed by mid-1999.


                                      -8-
<PAGE>   9


     The cost of systems implementation and Year 2000 modifications are based
upon management's best estimates, which are derived utilizing numerous
assumptions and future events, including continued availability of certain
resources, and other factors. However, there can be no guarantee that these
estimates will be achieved and actual results could differ materially from those
anticipated. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer codes, and
similar uncertainties. As of January 30, 1999, the cost of bringing Holdings' IT
and non-IT systems into Year 2000 compliance is not expected to have a material
effect on Holdings' financial condition or results of operations.



     In addition to reviewing its internal systems, Holdings has polled its
major footwear and other vendors, to determine whether they are Year 2000
compliant or to identify any potential issues. As a result of this
correspondence, management has no reason to believe that the Company's major
footwear and other vendors will not be Year 2000 compliant. If Holdings'
customers and vendors do not achieve Year 2000 compliance before the end of
1999, Holdings may experience a variety of problems which may have a material
adverse effect on Holdings. To the extent such vendors are not Year 2000
compliant by the end of 1999, such vendors may fail to deliver ordered materials
and products to Holdings and may fail to bill Holdings properly and promptly.
Consequently, Holdings may experience delays in sourcing product to sell to its
customers. Holdings plans to address potential problems with its vendors by
identifying and arranging for alternate sources of supply. Due to the nature of
its product, Holdings does not believe it has any exposure to contingencies
related to the Year 2000 Issue for the products it has sold.

RECENTLY ISSUED ACCOUNTING STANDARDS

     In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, which is
required to be adopted in years beginning after June 15, 1999. The Statement
permits early adoption as of the beginning of any fiscal quarter after its
issuance. Holdings expects to adopt the new Statement effective January 30,
2000. The Statement will require Holdings to recognize all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through income. If a derivative is a hedge, depending upon the nature
of the hedge, changes in the fair value of the derivative will either be offset
against the change in fair value of the hedged asset, liability or firm
commitment through earnings, or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings.
Holdings does not anticipate that the adoption of this Statement will have a
significant effect on its results of operations or financial position.


INFLATION AND CHANGING PRICES

     Holdings' sales and costs are subject to inflation and price fluctuations.
However, they historically have not, and in the future are not expected to have,
a material adverse effect on Holdings' results of operations.


FORWARD LOOKING STATEMENTS

     When used in this Annual Report on Form 10-K, the words "believes",
"anticipates", "expects" and similar expressions are used to identify forward
looking statements. Such statements are subject to risks and uncertainties which
could cause actual results to differ materially from those projected. Holdings
wishes to caution readers that the following important factors in some cases
have affected and in the future could affect Holdings' actual results and could
cause Holdings' actual results to differ materially from those expressed in any
forward looking statements made by Holdings: (i) economic conditions in the
safety shoe market, (ii) availability of credit, (iii) increase in interest
rates, (iv) cost of raw materials, (v) inability to maintain state-of-the-art
manufacturing facilities, (vi) heightened competition, including intensification
of price and service competition, the entry of new competitors and the
introduction of new products by existing competitors, (vii) inability to
capitalize on opportunities presented by


                                      -9-
<PAGE>   10


industry consolidation, (viii) loss or retirement of key executives, (ix) loss
or disruption of Holdings' relationships with its major suppliers, including
Holdings' largest supplier in China and (x) inability to grow by acquisition of
additional safety shoe distributors or to effectively consolidate operations of
businesses acquired.


                                      -10-
<PAGE>   11


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


                          Iron Age Holdings Corporation

                        Consolidated Financial Statements

                Years ended January 30, 1999 and January 31, 1998




                                    CONTENTS
Report of Independent Auditors...............................................12

Audited Consolidated Financial Statements

Consolidated Balance Sheets..................................................13
Consolidated Statements of Income............................................14
Consolidated Statements of Stockholders' Equity..............................15
Consolidated Statements of Cash Flows........................................16
Notes to Consolidated Financial Statements...................................18


                                      -11-
<PAGE>   12


                         REPORT OF INDEPENDENT AUDITORS


Board of Directors
Iron Age Holdings Corporation

We have audited the accompanying consolidated balance sheets of Iron Age
Holdings Corporation and subsidiaries ("Holdings") as of January 30, 1999 and
January 31, 1998, and the related consolidated statements of income,
stockholders' equity, and cash flows for the year ended January 30, 1999, the
period February 27, 1997 through January 31, 1998, the period January 26, 1997
through February 26, 1997 and the year ended January 25, 1997. Our audits also
included the financial statement schedule listed in the index at Item 8. These
financial statements and schedule are the responsibility of Holdings'
management. Our responsibility is to express an opinion on these financial
statements and schedule based upon our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Iron Age Holdings
Corporation and subsidiaries at January 30, 1999 and January 31, 1998, and the
consolidated results of their operations and their cash flows for the year ended
January 30, 1999, the period February 27, 1997 through January 31, 1998, the
period January 26, 1997 through February 26, 1997 and the year ended January 25,
1997, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.



Ernst & Young LLP

Pittsburgh, Pennsylvania
March 15, 1999


                                      -12-
<PAGE>   13


                          Iron Age Holdings Corporation

                           Consolidated Balance Sheets
<TABLE>
<CAPTION>


                                                                                           SUCCESSOR
                                                                                -------------------------------
                                                                                  JANUARY 31         JANUARY 30
                                                                                     1999               1998
                                                                                -------------------------------
                                                                                          (In Thousands)
<S>                                                                             <C>                  <C>
ASSETS
Current assets:
 Cash and cash equivalents                                                        $     517           $   2,069
 Accounts receivable, net                                                            16,965              15,996
 Inventories                                                                         36,681              36,841
 Prepaid expenses                                                                     4,469               1,640
 Deferred income taxes                                                                  861                 640
                                                                                -------------------------------
Total current assets                                                                 59,493              57,186
Other noncurrent assets                                                                 431                 290
Property and equipment, net                                                          11,008              10,479
Intangible assets, net                                                              109,100             106,846
                                                                                -------------------------------
Total assets                                                                      $ 180,032           $ 174,801
                                                                                ===============================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current maturities of long-term debt                                            $     544           $   3,699
  Accounts payable                                                                    3,307               3,510
  Accrued expenses                                                                    8,134               7,272
                                                                                -------------------------------
Total current liabilities                                                            11,985              14,481
Long-term debt, less current maturities                                             150,514              97,976
Other noncurrent liabilities                                                            516                 516
Deferred income taxes                                                                 4,956               6,949
                                                                                -------------------------------
Total liabilities                                                                   167,971             119,922

Commitments and contingencies                                                            --                  --

Redeemable preferred stock                                                               --              17,031
Stockholders' equity:
  Common stock, $.01 par value, 200,000 shares authorized, 99,625 issued
    and outstanding                                                                       1                   1
  Additional paid-in capital                                                         38,086              38,086
  Accumulated deficit                                                               (25,840)               (174)
  Other comprehensive income                                                           (186)                (65)
                                                                                -------------------------------
Total stockholders' equity                                                           12,061              37,848
                                                                                -------------------------------
Total liabilities and stockholders' equity                                        $ 180,032           $ 174,801
                                                                                ===============================
See accompanying notes.

</TABLE>
                                      -13-
<PAGE>   14



                          Iron Age Holdings Corporation

                        Consolidated Statements of Income

<TABLE>
<CAPTION>

                                                       SUCCESSOR                             PREDECESSOR
                                          ---------------------------------------------------------------------------
                                                             FEBRUARY 27 1997     JANUARY 26 1997
                                               YEAR ENDED         THROUGH             THROUGH           YEAR ENDED
                                            JANUARY 30 1999   JANUARY 31 1998     FEBRUARY 26 1997   JANUARY 25 1997
                                          ---------------------------------------------------------------------------
                                                                         (In Thousands)

<S>                                         <C>              <C>                  <C>                <C>
 Net sales                                    $124,294           $107,769            $10,937             $99,360
 Cost of sales                                  63,228             53,304              5,610              52,437
                                          ---------------------------------------------------------------------------
 Gross profit                                   61,066             54,465              5,327              46,923


 Selling, general and administrative            46,854             36,541              5,120              31,267
 Depreciation                                    1,670              1,443                121               1,322

Amortization of intangible assets                3,523              2,983                117               1,429
                                          ---------------------------------------------------------------------------
 Operating income (loss)                         9,019             13,498                (31)             12,905

 Gain on divestiture                             1,678                 --                 --                 --
 Interest expense                               14,844              9,855              1,116               6,515
                                          ---------------------------------------------------------------------------

  (Loss)income before income taxes              (4,147)             3,643             (1,147)              6,390
  (Benefit) provision for income
    taxes                                         (874)             1,686               (452)              2,800
                                          ---------------------------------------------------------------------------


 (Loss) income before extraordinary
   item                                         (3,273)             1,957               (695)              3,590
 Extraordinary item, net of tax                 (4,015)                --                 --                  --
                                          ---------------------------------------------------------------------------
 Net (loss) income                            $ (7,288)          $  1,957            $  (695)            $ 3,590
                                          ===========================================================================
See accompanying notes.
</TABLE>



                                      -14-
<PAGE>   15

                          Iron Age Holdings Corporation

                 Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>


                                                                                 RETAINED
                                      COMMON STOCK                               EARNINGS             OTHER
                                ------------------------       PAID-IN         (ACCUMULATED       COMPREHENSIVE
                                  SHARES        AMOUNTS        CAPITAL           DEFICIT)         (LOSS) INCOME      TOTAL
                                --------------------------------------------------------------------------------------------
                                                                       (In Thousands)
PREDECESSOR
<S>                              <C>               <C>         <C>              <C>                <C>             <C>
Balance at January 27, 1996      101,020           $ 1         $ 6,263          $  5,720           $(244)          $ 11,740
  Comprehensive income:
  Net income                          --            --              --             3,590              --              3,590
  Foreign currency
    translation adjustment,
    net of tax                        --            --              --                --              21                 21
                                                                                                                 -----------
  Comprehensive income                                                                                                3,611
  Stock-based Compensation            --            --           1,065                --              --              1,065
                                --------------------------------------------------------------------------------------------
Balance at January 25, 1997      101,020             1           7,328             9,310            (223)            16,416
  Comprehensive loss:
  Net loss                            --            --              --              (695)             --               (695)
  Foreign currency
    translation adjustment,
    net of tax                        --            --              --                --             (22)               (22)
                                                                                                                 -----------
  Comprehensive loss                                                                                                   (717)
  Stock-based compensation            --            --           1,054                --              --              1,054
                                --------------------------------------------------------------------------------------------
Balance at February 26, 1997     101,020           $ 1         $ 8,382          $  8,615           $(245)          $ 16,753
                                ============================================================================================
SUCCESSOR
Balance at February 27, 1997          --           $--         $    --          $     --           $  --           $     --
  Comprehensive income:
   Net income                         --            --              --             1,957              --              1,957
   Foreign currency
     translation adjustment,
     net of tax                       --            --              --                --             (65)               (65)
                                                                                                                 -----------
  Comprehensive income                                                                                                1,892
   Capital contribution           99,625             1          38,086                --              --             38,087
   Dividend accrued on
       preferred stock                --            --              --            (2,131)             --             (2,131)
                                --------------------------------------------------------------------------------------------
Balance at January 31, 1998       99,625             1          38,086              (174)            (65)            37,848
  Comprehensive loss:
  Net loss                            --            --              --            (7,288)             --             (7,288)
  Foreign currency
    translation adjustment,
    net of tax                        --            --              --                --            (121)              (121)
                                                                                                                 -----------
  Comprehensive loss                                                                                                 (7,409)
  Dividends paid on preferred
    stock                             --            --              --              (633)             --               (633)
  Dividends paid on common
    stock                             --            --              --           (17,745)             --            (17,745)
                                --------------------------------------------------------------------------------------------
Balance at January 30, 1999       99,625           $ 1         $38,086          $(25,840)          $(186)          $ 12,061
                                ============================================================================================
</TABLE>


See accompanying notes.


                                      -15-
<PAGE>   16


                          Iron Age Holdings Corporation

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                   SUCCESSOR                         PREDECESSOR
                                                      -----------------------------------------------------------------------------
                                                                                FEBRUARY 27          JANUARY 26
                                                             YEAR ENDED         1997 THROUGH        1997 THROUGH       YEAR ENDED
                                                           JANUARY 30 1999    JANUARY 31 1998     FEBRUARY 26 1997  JANUARY 25 1997
                                                      -----------------------------------------------------------------------------
                                                                                          (In Thousands)
OPERATING ACTIVITIES
<S>                                                        <C>                <C>                 <C>               <C>
Net (loss) income                                            $  (7,288)          $   1,957           $  (695)          $   3,590
Adjustments to reconcile net (loss) income to net
   cash provided by (used in) operating activities:
     Extraordinary item, net of tax                              4,015                  --                --                  --
     Gain on divestiture                                        (1,678)                 --                --                  --
     Depreciation and amortization                               5,592               4,727               246               3,109
     Amortization of deferred financing fees
       included in interest                                        606                 613                16                 384
     Accretion of original issue discount                        2,400                  --                --                  --
     Provision for losses on accounts receivable                  (107)                 30                10                  45
     Deferred income taxes                                      (2,383)               (596)               --                 369
     Stock-based compensation                                       --                  --             1,054               1,065
     Changes in operating assets and liabilities:
       Accounts receivable                                          85                 372              (954)               (690)
       Inventories                                                 502              (6,976)              797               1,554
       Prepaid expenses                                             99                 232                65                (143)
       Other noncurrent assets                                     (15)                (14)               20                (182)
       Accounts payable                                           (981)             (1,375)             (573)                (35)
       Accrued expenses                                            593               1,450              (882)               (249)
                                                      -----------------------------------------------------------------------------
Net cash provided by (used in) operating activities              1,440              (1,912)            1,436               8,817

INVESTING ACTIVITIES
Net cash used in business acquisitions                          (5,241)           (141,717)               --                  --
Proceeds from divestiture                                        2,544                  --                --                  --
Purchases of property and equipment                             (2,338)             (2,365)             (117)             (2,222)
                                                      -----------------------------------------------------------------------------
Net cash used in investing activities                           (5,035)           (144,082)             (117)             (2,222)

FINANCING ACTIVITIES
Borrowing under revolving credit agreement                      49,150              44,450            (1,909)             93,617
Proceeds from senior term notes                                     --              65,000                --                  --
Proceeds from senior subordinated notes                        100,000              14,550                --                  --
Proceeds from senior discount notes                             25,001                  --                --                  --
Capital contribution                                                --              40,000                --                  --
Issuance of Preferred Stock                                         --              14,900                --                  --
Issuance of stock purchase warrants                                 --                 100                --                  --
Principal payments on debt                                    (127,683)            (23,531)             (357)           (100,352)
Payment of financing costs                                      (6,897)             (7,468)               --                  --
Call premium on early extinguishment of old                     (1,562)                 --                --                  --
   subordinated notes
Redemption of Holdings Series A Preferred Stock,
   including cumulative unpaid dividends                       (17,664)                 --                --                  --
Dividends paid on common stock                                 (17,745)                 --                --                  --
Principal payments on capital leases                              (333)               (328)              (33)               (305)
                                                      -----------------------------------------------------------------------------
Net cash provided by (used in) financing activities              2,267             147,673            (2,299)             (7,040)
Effect of exchange rate changes on cash and cash
   equivalents                                                    (224)               (110)              (37)                 40
                                                      -----------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents                (1,552)              1,569            (1,017)               (405)
Cash and cash equivalents at beginning of year                   2,069                 500             1,517               1,922
                                                      -----------------------------------------------------------------------------
Cash and cash equivalents at end of year                     $     517            $  2,069            $  500            $  1,517
                                                      =============================================================================
</TABLE>

                                      -16-
<PAGE>   17


                Consolidated Statements of Cash Flows (continued)

<TABLE>
<CAPTION>

                                                                       SUCCESSOR                            PREDECESSOR
                                                      -----------------------------------------------------------------------------
                                                                                FEBRUARY 27         JANUARY 26
                                                            YEAR ENDED         1997 THROUGH        1997 THROUGH        YEAR ENDED
                                                          JANUARY 30 1999     JANUARY 31 1998    FEBRUARY 26 1997   JANUARY 25 1997
                                                      -----------------------------------------------------------------------------
                                                                                       (In Thousands)

<S>                                                       <C>                 <C>                <C>                <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
   Interest                                                   $ 10,377           $   7,837           $   552             $ 5,385
   Income taxes                                               $  1,254           $   1,138           $     7             $ 2,568

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
   FINANCING ACTIVITIES
Capital lease agreements for equipment                        $    373           $     206           $    --             $   340
                                                      =============================================================================
Assets acquired and liabilities assumed in connection
  with acquisitions:
      Fair value of assets acquired                           $  6,626           $ 171,328           $    --             $    --
      Liabilities assumed                                       (1,236)            (21,946)               --                  --
                                                      -----------------------------------------------------------------------------
      Cash paid                                                  5,390             149,382                --                  --
      Less fees and expenses                                      (149)             (7,468)               --                  --
      Less cash acquired                                            --                (197)               --                  --
                                                      -----------------------------------------------------------------------------
     Net cash used in business acquisitions                   $  5,241           $ 141,717           $    --             $    --
                                                      =============================================================================

</TABLE>

See accompanying notes.


                                      -17-
<PAGE>   18



                          Iron Age Holdings Corporation

                   Notes to Consolidated Financial Statements

                      January 30, 1999 and January 31, 1998


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND ACTIVITIES

The accompanying consolidated financial statements include the accounts of Iron
Age Holdings Corporation and its wholly owned subsidiaries, Iron Age Corporation
("Iron Age"), Falcon Shoe Mfg. Co. ("Falcon"), Iron Age Investment Company, Iron
Age Mexico S.A. de C.V., Iron Age Canada Ltd., IA Vision Acquisition Co., and
Safety Supplies and Service Company, Inc. (together, "Holdings"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.

Holdings is majority-owned by Fenway Partners Capital Fund, L.P. (the "Fenway
Fund"). Holdings was acquired by the Fenway Fund and certain other investors, in
partnership with certain members of management, effective February 26, 1997 (the
"Fenway Acquisition") (see Note 2).

The accompanying consolidated financial statements present the twelve-month
period ended January 31, 1998 in two components. The period January 26, 1997
through February 26, 1997 includes the historical results of Iron Age Holdings
Corporation prior to the Fenway Acquisition and the period after February 26,
1997 includes the results of Iron Age Holdings Corporation after the Fenway
Acquisition. In these financial statements, Iron Age Holdings Corporation is
referred to as the "Predecessor" prior to February 26, 1997 and as the
"Successor" or "Holdings" after such date.

Effective April 24, 1998, Holdings refinanced its old credit facility (the "Old
Credit Facility") and its old subordinated notes (the "Old Subordinated Notes")
with a new credit facility (the "New Credit Facility"), 9-7/8% senior
subordinated notes due 2008 (the "Senior Subordinated Notes"), and 12-1/8%
senior discount notes due 2009 (the "Discount Notes") (collectively, the
"Transactions") (see Note 7).

Holdings distributes and manufactures work footwear with operations concentrated
in North America. As a percentage of sales, 97% and 3% of Holdings' operations
are related to distributing and manufacturing, respectively. Holdings has one
reportable segment, distribution of work footwear in the United States.

                                      -18-
<PAGE>   19



1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FISCAL YEAR

Holdings' fiscal year ends on the last Saturday in January. The 1997 and 1999
fiscal years include 52 weeks. The combined periods of January 26, 1997 through
February 26, 1997 and February 27, 1997 through January 31, 1998 include 53
weeks.

CASH AND CASH EQUIVALENTS

Holdings considers all highly liquid investments with a maturity of 90 days or
less at the time of original purchase to be cash equivalents.

INVENTORIES

Approximately 93% and 96% of inventories at January 30, 1999 and January 31,
1998, respectively, are stated at the lower of last-in, first-out (LIFO) cost or
market. The remaining inventories are stated at the lower of first-in, first-out
(FIFO) cost or market.

CATALOG COSTS

Holdings produces periodic catalogs and amortizes the mailing and production
costs over the related revenue stream, generally four to twelve months. Holdings
has $766,000 and $749,000 of unamortized catalog costs at January 30, 1999 and
January 31, 1998, respectively. For the year ended January 30, 1999, the periods
February 27, 1997 through January 31, 1998 and January 26, 1997 through February
26, 1997, and the year ended January 25, 1997, advertising expense recorded by
Holdings was $2,455,000, $1,801,000, $110,000, and $1,134,000, respectively.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided on the straight-line method based on estimated useful
lives, as follows:

         Building and improvements                      40 years
         Machinery and equipment                      3-10 years




                                      -19-
<PAGE>   20



1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY AND EQUIPMENT (CONTINUED)

Leasehold improvements are amortized over the shorter of the useful life of the
asset or the term of the lease. Expenses for repairs, maintenance and renewals
are charged to operations as incurred. Expenditures which improve an asset or
extend its useful life are capitalized.

INTANGIBLE ASSETS

Goodwill--Goodwill represents the excess of amounts paid and liabilities assumed
over the fair value of identifiable tangible and intangible assets acquired.
This amount is amortized using the straight-line method over a period of 40
years. Holdings evaluates the carrying value of goodwill for potential
impairment on an ongoing basis. Such evaluation considers projected future
operating results, trends and other circumstances. If factors indicated that
goodwill could be impaired, Holdings would use an estimate of the related
undiscounted future cash flows over the remaining life of the goodwill in
measuring whether the goodwill is recoverable. If such an analysis indicated
that impairment had occurred, Holdings would adjust the book value of the
goodwill to fair value.

Customer Lists--Customer lists represent the estimated cost of replacing
Holdings' customer base and are being amortized by the straight-line method over
15 years. The amortization period of 15 years approximates Holdings' historical
customer loss experience.

Deferred Financing Cost--Deferred financing costs relate to the costs of
obtaining financing. These costs are being amortized over the period the related
loans are outstanding.

INTERNAL USE SOFTWARE COSTS

Effective February 1, 1998, Holdings adopted Statement of Position 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Holdings capitalized approximately $233,000 related to internal
use software costs for the fiscal year ended January 30, 1999. Internal use
software costs are being amortized by the straight-line method over 3 years.

FOREIGN CURRENCY TRANSLATION

The assets and liabilities of Holdings' foreign subsidiaries are measured using
the local currency as the functional currency and are translated into U.S.
dollars at exchange rates as of the balance sheet date. Income statement amounts
are translated at the weighted average rates of exchange during the year. The
translation adjustment is accumulated in "other comprehensive income." Foreign
currency transaction gains and losses are included in determining net income.
Such amounts are not material.

REVENUE RECOGNITION

Revenue from product sales is recognized at the time products are shipped.




                                      -20-
<PAGE>   21


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FINANCIAL INSTRUMENTS

Holdings periodically enters into interest rate swap agreements to moderate its
exposure to interest rate changes. Holdings has effectively converted its New
Credit Facility to a fixed rate basis and $25 million of its Senior Subordinated
Notes to a floating rate basis. The interest rate swap agreement related to the
New Credit Facility has a notional amount of $25 million and involves the
payment of amounts at a fixed rate of 6.225% in exchange for floating rate
interest payments computed at the LIBOR rate through March 14, 2000. The
interest rate swap agreement related to the Senior Subordinated Notes has a
notional amount of $25 million and involves the payment of floating rate amounts
computed at 4.16% above the LIBOR rate in exchange for fixed interest payments
at a rate of 9.875% through May 1, 2003. Interest payment amounts are exchanged
over the lives of the agreements without an exchange of the underlying principal
amounts. The differential to be paid or received is accrued as interest rates
change and recognized as an adjustment to interest expense related to the debt.
The related amount payable to or receivable from counterparties is included in
accrued interest. Based upon the terms of the agreements, the fair values of the
interest rate swap agreements are not recognized in the financial statements.
The fair value of the interest rate swap agreements are $225,000 and $(702,000)
at January 30, 1999 and January 31, 1998, respectively. Approximately 33% or $50
million of Holdings' outstanding long-term debt was subject to interest rate
swap agreements at January 30, 1999.

STOCK-BASED COMPENSATION

Certain members of Holdings' management are granted options to purchase stock in
Holdings. Holdings recognizes stock-based compensation using the intrinsic value
method. Compensation expense related to stock option grants is reflected in
Holdings' financial statements as a charge to income and as an addition to
paid-in capital. For disclosure purposes, pro forma net income is provided as if
the fair value method had been applied.

INCOME TAXES

Deferred income taxes are provided for the tax consequences of temporary
differences between financial statement carrying amounts and the tax bases of
assets and liabilities. The effect on deferred taxes of a change in tax rates is
recognized in income in the period of the enactment.

OTHER COMPREHENSIVE INCOME

As of February 1, 1998, Holdings adopted Financial Accounting Standards Board
Statement No. 130, Reporting Comprehensive Income. Statement No. 130 establishes
new rules for the reporting and display of comprehensive income and its
components. Statement No. 130 requires foreign currency translation gains and
losses, which are reported separately in stockholders' equity, to be included in
other comprehensive income. The adoption of this statement had no impact on
Holdings' net income or stockholders' equity.

USE OF ESTIMATES

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

                                      -21-
<PAGE>   22

RECLASSIFICATION

Certain reclassifications have been made to the January 25, 1997 consolidated
financial statements to conform to the January 31, 1998 and January 30, 1999
presentations.

2. ACQUISITIONS AND DIVESTITURE

IRON AGE HOLDINGS CORPORATION (PREDECESSOR)

On February 26, 1997, the Predecessor was acquired in a leveraged buyout
transaction by Holdings through an acquisition corporation for approximately
$143,550,000, including transaction costs of $6,962,000. Holdings was formed by
Fenway Partners, Inc. ("Fenway") and other investors, including certain members
of management, to effect the acquisition. The acquisition was financed by
capital contributions of approximately $34,037,000 (net of carryover basis
adjustment of $1,963,000), manditorily redeemable preferred stock issued for
$14,900,000 (the "Holdings Series A Preferred Stock"), common stock purchase
warrants issued for $100,000, borrowings under the Old Credit Facility of
$79,000,000, and the Old Subordinated Notes issued to certain Outside Investors
(see Note 12) in the amount of $14,550,000 (net of a $450,000 discount).

The Fenway Acquisition of the Predecessor was accounted for under the purchase
method of accounting because on a fully diluted basis, 90% of the existing
voting interest of Holdings common stock was acquired through a new holding
company which was capitalized by a group of new shareholders, constituting a
change in control of voting interest. The new holding company was capitalized
through the issuance of 88,625 shares of common stock and was owned 100% by the
Fenway Fund prior to the acquisition of Holdings. The new holding company was
subsequently renamed Iron Age Holdings Corporation. Accordingly, the purchase
price was allocated to the assets and liabilities assumed based on their
relative fair values. However, since certain members of management had ownership
in the Predecessor, the net assets acquired were recorded at the reinvesting
stockholders' carryover basis. Therefore, in allocating the purchase price of
Holdings among its net assets, the difference between the fair values of the net


                                      -22-
<PAGE>   23


2. ACQUISITIONS AND DIVESTITURE (CONTINUED)

IRON AGE HOLDINGS CORPORATION (PREDECESSOR) (CONTINUED)

assets acquired has been proportionately reduced by approximately $1,963,000
with such amount being charged against the gross stockholders' equity of
$36,100,000. The adjustment to stockholder's equity represents the difference
between the fair value of management's 10% ownership and the carryover basis.
Holdings recorded goodwill of approximately $84,073,000 in connection with the
transaction, which is being amortized on a straight-line basis over 40 years.
The 40 year amortization period was established based upon the characteristics
of Holdings, its distribution system and its products. Because of this purchase
price allocation, the accompanying consolidated financial statements of Holdings
are not directly comparable to those of the Predecessor.

Holdings' 1998 financial statements only include the Predecessor's operations
from the date of acquisition.

KNAPP SHOES, INC.

On March 14, 1997, Holdings acquired certain assets and assumed certain
liabilities of Knapp Shoes, Inc. ("Knapp") for approximately $5,832,000,
including transaction costs of approximately $506,000 (the "Knapp Acquisition").
The Knapp Acquisition was funded with capital contributions from Fenway, New
York Life Insurance Company, American Home Assurance Company, and Banque
Nationale de Paris of $4,000,000 and additional borrowings under the Old Credit
Facility of $1,326,000. The results of operations for Knapp are included in the
consolidated statement of income from the date of acquisition. Knapp was a
distributor and manufacturer of safety footwear. The Knapp Acquisition has been
accounted for using the purchase method of accounting and, accordingly, the
purchase price and transaction costs have been allocated to assets acquired and
liabilities assumed based on their estimated fair values. The excess of
consideration paid over the estimated fair value of assets acquired and
liabilities assumed of approximately $4,885,000 is being amortized on the
straight-line basis over 40 years. Holdings has not provided selected unaudited
pro forma information as if the Knapp Acquisition had occurred as of January 26,
1997 because the Knapp Acquisition was not a significant business combination.

OTHER ACQUISITIONS

During the year ended January 30, 1999, Holdings acquired the stock of Safety
Supplies & Service Co., Inc., and acquired certain assets and assumed certain
liabilities of Safety Depot Ltd., ACT Safety, Inc., J. Mars Knapp Shoes and
Work-Saf, Inc. for approximately $5,390,000, including transaction costs of
approximately $150,000. The results of operations are included from the date of
the acquisitions. The acquisitions have been accounted for using the purchase
method of accounting and, accordingly, the purchase price and transaction costs
have been allocated to assets acquired and liabilities assumed based upon their
estimated fair values. The excess of consideration paid over the estimated fair
value of assets acquired and liabilities assumed of approximately $2,849,000 is
being amortized on the straight-line basis, over 40 years. Holdings has not
provided selected unaudited pro forma information as if these acquisitions had
occurred as of January 26, 1997 because these acquisitions, individually and
collectively, were not significant business combinations.

                                      -23-
<PAGE>   24


DIVESTITURE

On September 9, 1998, Holdings announced the sale of the Dunham trademark and
related trademarks with no carrying value to New Balance Athletic Shoes, Inc.
and New Balance Trading Company, Ltd. ("New Balance"), effective August 31,
1998, for $2,000,000 and recorded a gain of $1,678,000, net of certain
transaction costs (the "Dunham Sale"). Dunham wholesale sales were $3.1 million
in fiscal 1999, consisting of Dunham sales of $1.3 million prior to the Dunham
Sale, sales of on-hand inventory to New Balance for approximately $0.6 million
in conjunction with the Dunham Sale and sales of Dunham products of $1.2 million
to New Balance after the Dunham Sale. In conjunction with the sale, Holdings'
Falcon manufacturing subsidiary agreed to manufacture products which New Balance
will continue to sell under the Dunham brand name pursuant to a two-year supply
agreement with New Balance. The supply agreement does not contain a minimum
purchase quantity and prices under the supply agreement are based upon the
volume purchased annually by New Balance.

3. ACCOUNTS RECEIVABLE

Accounts receivable are presented net of allowance for doubtful accounts of
approximately $275,000 and $382,000 as of January 30, 1999 and January 31, 1998,
respectively. Holdings does not require collateral for its trade accounts
receivable. Management continually evaluates its accounts receivable and adjusts
its allowance for doubtful accounts for changes in potential credit risk.
Holdings serves a diverse customer base and believes there is minimal
concentration of credit risk.

4. INVENTORIES
<TABLE>
<CAPTION>

The major components of inventories are as follows:
                                                                                     SUCCESSOR
                                                                   ---------------------------------------
                                                                            JANUARY 30          JANUARY 31
                                                                               1999                1998
                                                                   ----------------------------------------
                                                                                   (In Thousands)
<S>                                                                        <C>                 <C>
  Finished products                                                          $33,814            $33,527
  Raw materials                                                                3,143              3,470
                                                                   ----------------------------------------
                                                                              36,957             36,997
  Less excess of current cost over LIFO inventory value                          276                156
                                                                   ----------------------------------------
                                                                             $36,681            $36,841
                                                                   ========================================
</TABLE>

5. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>

Property and equipment consist of the following:
                                                                                     SUCCESSOR
                                                                   ---------------------------------------
                                                                            JANUARY 30          JANUARY 31
                                                                               1999                1998
                                                                   ----------------------------------------
                                                                                   (In Thousands)
<S>                                                                         <C>                 <C>
  Land and buildings                                                         $ 3,217            $ 3,158
  Vehicles                                                                     3,727              3,047
  Furniture and fixtures                                                       1,234                917
  Machinery and equipment                                                      5,471              4,133
</TABLE>

                                      -24-
<PAGE>   25
<TABLE>
<CAPTION>

<S>                                                                          <C>                <C>
  Leasehold improvements                                                       1,060                857
                                                                   ----------------------------------------
                                                                              14,709             12,112
  Less accumulated depreciation and amortization                               3,701              1,633
                                                                   ----------------------------------------
  Net property and equipment                                                 $11,008            $10,479
                                                                   ========================================
</TABLE>

6. INTANGIBLE ASSETS
<TABLE>
<CAPTION>

Intangible assets consist of the following:
                                                                                     SUCCESSOR
                                                                   ---------------------------------------
                                                                            JANUARY 30         JANUARY 31
                                                                               1999               1998
                                                                   ----------------------------------------
                                                                                   (In Thousands)
<S>                                                                        <C>                <C>
  Goodwill                                                                 $  91,823          $  88,592
  Customer lists                                                              17,188             16,150
  Deferred financing costs                                                     6,897              5,518
  Other                                                                          236                262
                                                                   ----------------------------------------
                                                                             116,144            110,522
  Less accumulated amortization                                                7,044              3,676
                                                                   ----------------------------------------
                                                                            $109,100           $106,846
                                                                   ========================================
</TABLE>


In connection with the Transactions, Holdings expensed approximately $4,927,000
of unamortized deferred financing costs related to the Old Credit Facility and
the Old Subordinated Notes. Such costs are included in Holdings' extraordinary
loss, net of tax, for the year ended January 30, 1999. Financing costs incurred
in connection with obtaining the Senior Subordinated Notes, the Discount Notes
and the New Credit Facility of approximately $6,897,000 have been deferred by
Holdings as of January 30, 1999 and will be amortized over the period the Senior
Subordinated Notes, the Discount Notes and the New Credit Facility are
outstanding (see Note 7).


                                      -25-
<PAGE>   26


7. LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of the following:

                                                                                     SUCCESSOR
                                                                   ---------------------------------------
                                                                            JANUARY 30         JANUARY 31
                                                                               1999               1998
                                                                   ----------------------------------------
                                                                                   (In Thousands)

<S>                                                                         <C>                <C>
  9-7/8% Senior Subordinated Notes due 2008                                 $100,000           $      -
  12-1/8% Senior Discount Notes due 2009                                      45,140                  -
  New Credit Facility                                                         22,700                  -
  Old Credit Facility (retired):
    Working capital advance                                                        -             23,000
    Term A Note                                                                    -             18,500
    Term B Note                                                                    -             19,850
    Term C Note                                                                    -             24,813
  Old Subordinated Notes (retired)                                                 -             15,000
  Other Notes                                                                    178                208
  Capitalized lease obligations                                                  796                754
                                                                   ----------------------------------------
                                                                             168,814            102,125
  Less:
    Current maturities                                                           544              3,699
    Unamortized discount                                                      17,756                450
                                                                   ----------------------------------------
                                                                            $150,514           $ 97,976
                                                                   ========================================
</TABLE>

9-7/8% SENIOR SUBORDINATED NOTES DUE 2008

On April 24, 1998, Iron Age issued $100,000,000 of Senior Subordinated Notes.
Iron Age used the net proceeds from the issuance of the Senior Subordinated
Notes, approximately $21,600,000 of borrowings under its New Credit Facility and
approximately $1,200,000 of cash to (i) extinguish certain existing
indebtedness, (ii) redeem a portion of the Holdings Series A Preferred Stock,
and (iii) pay fees and expenses related to these transactions. These
transactions resulted in the recording of an extraordinary loss during April
1998 of approximately $6,923,000, excluding related tax effect of $2,908,000.
The extraordinary loss on the extinguishment of debt is comprised of prepayment
penalties on the Old Credit Facility of $1,562,000; unamortized deferred
financing fees of $4,927,000; and unamortized discount on the Old Subordinated
Notes of $434,000.

The Senior Subordinated Notes accrue interest at the rate of 9-7/8% per annum
and are payable semiannually in arrears on May 1 and November 1, commencing on
November 1, 1998.

The Senior Subordinated Notes are subordinated in right of payment to all
existing and future senior indebtedness of Iron Age.

                                      -26-
<PAGE>   27


The Senior Subordinated Notes are redeemable at the option of Iron Age on and
after May 1, 2003 at prices decreasing from 104.938% of the principal amount
thereof to par on May 1, 2006 and thereafter. Iron Age is required to redeem the
outstanding Senior Subordinated Notes based upon certain events as described in
the indenture for the Senior Subordinated Notes.

The indenture for the Senior Subordinated Notes requires Iron Age and its
subsidiaries to comply with certain restrictive covenants, including a
restriction on dividends and limitations on incurrence of indebtedness, certain
payments and distributions and sales of Iron Age's assets and stock.

The Senior Subordinated Notes are fully and unconditionally guaranteed on an
unsecured, senior subordinated basis by each Domestic Restricted Subsidiary that
is a Material Subsidiary (as such terms are defined in the indenture for the
Senior Subordinated Notes (the "Senior Subordinated Notes Indenture")) (whether
currently existing, newly acquired or created). Each such subsidiary guaranty (a
"Subsidiary Guaranty") will provide that the subsidiary guarantor, as primary
obligor and not merely as surety, will irrevocably and unconditionally guarantee
on an unsecured, senior subordinated basis the performance and punctual payment
when due, whether at stated maturity, by acceleration or otherwise, of all
obligations of Iron Age under the Senior Subordinated Notes Indenture and the
Senior Subordinated Notes, whether for payment of principal or of interest on
the Senior Subordinated Notes, expenses, indemnification or otherwise. As of
January 30, 1999, none of Iron Age's Domestic Restricted Subsidiaries was a
Material Subsidiary, and therefore no Subsidiary Guaranty was in force or
effect.

Effective September 15, 1998, Iron Age filed a registration statement on Form
S-4 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to its offer to exchange an aggregate principal amount of up to
$100,000,000 of its 9-7/8% Senior Subordinated Notes due 2008 (the "Exchange
Notes"), which have been registered under the Securities Act, for a like
principal amount of its Senior Subordinated Notes, which have not been so
registered. The terms of the Exchange Notes are identical in all material
respects to the Senior Subordinated Notes, except for certain transfer
restrictions and registration rights relating to the Senior Subordinated Notes.

12-1/8% SENIOR DISCOUNT NOTES DUE 2009

On April 24, 1998, Holdings issued $45,140,000 principal amount at maturity of
Discount Notes, the proceeds of which were used (i) to pay a dividend to
Holdings' stockholders of $17,745,000, (ii) to redeem a portion of the Holdings
Series A Preferred Stock, (iii) to make a capital contribution to Iron Age of
approximately $2,245,000 for compensation payments to certain members of
management and (iv) to pay fees and expenses related to these transactions. The
Discount Notes accrete at a rate of 12-1/8% per annum compounded semiannually
until May 1, 2003. No interest will accrue prior to May 1, 2003. Interest will
accrue thereafter at a rate of 12-1/8% per annum and is payable semiannually in
arrears on May 1 and November 1, commencing on November 1, 2003. The Discount
Notes mature on May 1, 2009.

The Discount Notes are subordinated in right of payment to all existing and
future senior indebtedness of Holdings.

The Discount Notes are redeemable at the option of Holdings on and after May 1,
2003 at prices decreasing from 106.063% of the principal amount thereof to par
on May 1, 2006 and thereafter. Holdings is required to redeem the outstanding
Discount Notes based upon certain events as described in the indenture for the
Discount Notes.

The indenture for the Discount Notes requires Holdings and its subsidiaries to
comply with certain restrictive covenants, including a restriction on dividends
and limitations on the incurrence of indebtedness, certain payments and
distributions and sales of Holding's assets and stock.

                                      -27-
<PAGE>   28

The ability of Holdings to pay principal and interest on the Discount Notes and
to satisfy other existing and future debt obligations will depend on Iron Age's
ability to distribute dividends to Holdings. Iron Age is party to the New Credit
Facility and the indenture for the Senior Subordinated Notes, each of which
imposes substantial restrictions (including the satisfaction of certain
financial conditions) on Iron Age's ability to pay dividends or make other
payments to Holdings. The ability of Iron Age to comply with such conditions
under the New Credit Facility and the indenture for the Senior Subordinated
Notes may be affected by events that are beyond the control of Holdings. Future
borrowings by Iron Age can be expected to contain restrictions or prohibitions
on the payment of dividends by Iron Age to Holdings. Applicable state laws may
also, under certain circumstances, impose significant restrictions on the
payment of dividends by Iron Age or Holdings' other subsidiaries.

Effective September 15, 1998, Holdings filed a registration statement on Form
S-4 under the Securities Act with respect to its offer to exchange an aggregate
principal amount of up to $45,140,000 at maturity of its 12-1/8% Senior Discount
Notes due 2009 (the "Exchange Discount Notes"), which have been registered under
the Securities Act, for a like principal amount at maturity of its Discount
Notes, which have not been so registered. The terms of the Exchange Discount
Notes are identical in all material respects to the Discount Notes, except for
certain transfer restrictions and registration rights relating to the Discount
Notes.

NEW CREDIT FACILITY

On April 24, 1998, Iron Age and Holdings entered into a $65,000,000 New Credit
Facility with a syndicate of lenders and a financial institution, as agent for
itself and the other lenders that is comprised of a $30,000,000 revolving
working capital facility and a $35,000,000 revolving acquisition facility. The
revolving acquisition facility was amended on March 5, 1999 to reduce the
borrowing commitment to $22,000,000. The working capital facility matures on
April 24, 2004. The balance of the revolving acquisition facility converts into
a term loan on April 30, 2001 and matures in quarterly installments from July
31, 2001 to April 30, 2004. Under the working capital facility, Iron Age has a
$2,000,000 letter of credit and a $3,000,000 swing line facility which will
expire April 24, 2004. Outstanding obligations under the letter of credit and
the swing line facility were $294,000 and $0, respectively, at January 30, 1999.

Borrowings under the New Credit Facility may be used to fund Iron Age's working
capital requirements, finance certain permitted acquisitions and general
corporate requirements of Holdings and pay fees and expenses related to the
foregoing. Iron Age is required to pay a 0.4375% fee on the average daily unused
portion of the New Credit Facility. Iron Age is also subject to mandatory
prepayment terms as described in the New Credit Facility.

Borrowings under the New Credit Facility accrue interest, at the option of Iron
Age, at either LIBOR plus 2.25% or the greater of the financial institution's
prime rate and the federal funds rate plus 0.5%. Borrowings on the New Credit
Facility accrue interest at 8.50% and 7.50% for prime rate borrowings and LIBOR
borrowings, respectively, at January 30, 1999.

Iron Age has classified its borrowings under the New Credit Facility as
long-term as of January 30, 1999 due to its ability and intent to maintain such
borrowings on a long-term basis.

The New Credit Facility is guaranteed on a senior basis by Holdings and is
collateralized by substantially all of Iron Age's and its subsidiaries' assets.
The New Credit Facility contains certain covenants which require Iron Age to


                                      -28-
<PAGE>   29


maintain leverage ratios, fixed charge coverage ratios and interest coverage
ratios. The New Credit Facility further limits capital expenditures and sales of
assets, declaration of dividends and other restricted payments, and additional
indebtedness. The New Credit Facility also restricts the sale or transferring of
Iron Age's assets or capital stock.

OLD CREDIT FACILITY (RETIRED)

On February 26, 1997, Holdings and Iron Age entered into a $100,000,000 Old
Credit Facility with a financial syndicate of lenders and a financial
institution, as agent for itself and the other lenders, that was comprised of a
$23,000,000 working capital advance and three term notes (A, B and C) of
$18,500,000, $19,850,000 and $24,813,000, respectively.

The Old Credit Facility obligations of $86,820,000, including accrued interest
of $253,000, were extinguished with the proceeds of the Senior Subordinated
Notes and the New Credit Facility on April 24, 1998.

OLD SUBORDINATED NOTES (RETIRED)

On February 26, 1997, Iron Age issued the Old Subordinated Notes in the
principal amounts of $10,000,000 and $5,000,000 at a discount. The Old
Subordinated Notes of $15,000,000 were extinguished with the proceeds of the
Senior Subordinated Notes and the New Credit Facility on April 24, 1998. The
extinguishment required prepayment premiums of $1,562,000 which are included in
extraordinary loss, net of tax, for the year ended January 30, 1999. The
unamortized debt discount of approximately $434,000 was also expensed in
connection with the extinguishment of the Old Subordinated Notes and is included
in Iron Age's extraordinary loss, net of tax, for the fiscal year ended January
30, 1999.

OTHER NOTES

Holdings has other notes of approximately $178,000 and $208,000 at January 30,
1999 and January 31, 1998, respectively. The notes will be paid during 1999. The
notes accrue interest at 9.5%.

FUTURE MATURITIES OF LONG-TERM DEBT
<TABLE>
<CAPTION>

Five-year maturities of long-term debt are as follows (in thousands):

<S>                   <C>
      2000            $    544
      2001                 226
      2002               2,760
      2003               3,574
      2004               4,400
      Thereafter       139,554
                      ========
                      $151,058
                      ========
</TABLE>


                                      -29-
<PAGE>   30


8. FAIR VALUES OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by Holdings in estimating its
fair value disclosures for financial instruments:

Cash and cash equivalents--The carrying amount reported in the balance sheet for
cash and cash equivalents approximates its fair value.

Long-term debt and interest rate swap agreements--The carrying amounts of
Holdings' borrowings under its new credit facility and old credit facility
approximate their fair values because the new credit facility and the old credit
facility are variable rate debt instruments. The fair values of Holdings' senior
subordinated notes and senior discount notes are estimated based upon quoted
market prices. The fair values of Holdings' old subordinated notes, capital
lease obligations, other notes and interest rate swap agreements are estimated
using discounted cash flow analysis, based on Holdings' current incremental
borrowing rates for similar types of borrowing arrangements.

The carrying amounts and fair values of Holdings' financial instruments at
January 30, 1999 and January 31, 1998 are as follows:
<TABLE>
<CAPTION>

                                                                           SUCCESSOR
                                             ------------------------------------------------------------------------
                                                      JANUARY 30, 1999                    JANUARY 31, 1998
                                             ------------------------------------------------------------------------
                                                  CARRYING           FAIR            CARRYING            FAIR
                                                   AMOUNT            VALUE            AMOUNT            VALUE
                                             ------------------------------------------------------------------------
                                                                         (In Thousands)

<S>                                               <C>               <C>              <C>              <C>
Cash and cash equivalents                         $    517          $   517          $ 2,069          $  2,069
9-78% Senior Subordinated Notes due 2008           100,000           75,000               --                --
New Credit Facility                                 22,700           22,700               --                --
12-1/8% Senior Discount Notes due 2009              27,384           15,799               --                --
Working capital advance (retired)                       --               --           23,000            23,000
Term notes (retired)                                    --               --           63,163            63,163
Old Subordinated Notes (retired)                        --               --           14,550            14,550
Other notes                                            178              178              208               208
Interest rate swap agreements                           --              225               --              (702)
Capital lease obligations                              796              802              754               761
</TABLE>

9. EMPLOYEE BENEFIT PLANS

Holdings and its subsidiary Falcon sponsor 401(k) profit sharing defined
contribution pension plans. In connection with the Knapp Acquisition, Holdings
assumed a third 401(k) defined contribution plan which was merged into Holdings'
plan on December 31, 1998. Contributions to the plans are based on a percentage
of profits, but may be increased or decreased at the discretion of the Board of
Directors. The plans cover substantially all of its salaried employees. For the
fiscal year ended January 30, 1999, and the periods February 27, 1997 through
January 31, 1998 and January 26, 1997 through February 26, 1997, and for the
year ended January 25, 1997, pension and profit sharing expenses were
approximately $520,000, $820,000, $156,000, and $744,000, respectively.


                                      -30-
<PAGE>   31


10. INCOME TAXES

Income tax expense consisted of the following:
<TABLE>
<CAPTION>

                                                        SUCCESSOR                             PREDECESSOR
                                                               FEBRUARY 27 1997    JANUARY 26 1997
                                          YEAR ENDED JANUARY       THROUGH             THROUGH           YEAR ENDED
                                               30 1999         JANUARY 31 1998     FEBRUARY 26 1997    JANUARY 25 1997
                                       --------------------------------------------------------------------------------
                                                                        (In Thousands)
<S>                                       <C>                  <C>                  <C>                <C>

  Income taxes:
    Current:
      Federal                                  $   533              $2,306               $(450)             $1,782
      State                                        145                 (24)                 (2)                649
                                       --------------------------------------------------------------------------------
                                                   678               2,282                (452)              2,431
    Deferred:
      Federal                                   (1,098)               (458)                 --                 321
      State                                       (454)               (138)                 --                  48
                                       --------------------------------------------------------------------------------
                                                (1,552)               (596)                 --                 369
                                       --------------------------------------------------------------------------------
                                               $  (874)             $1,686               $(452)             $2,800
                                       ================================================================================
</TABLE>

A reconciliation of U.S. income tax computed at the statutory rate and actual
expense is as follows:

<TABLE>
<CAPTION>
                                                        SUCCESSOR                             PREDECESSOR
                                                                FEBRUARY 27 1997    JANUARY 26 1997
                                               YEAR ENDED            THROUGH             THROUGH          YEAR ENDED
                                             JANUARY 30 1999     JANUARY 31 1998     FEBRUARY 26 1997   JANUARY 25 1997
                                       --------------------------------------------------------------------------------
                                                                          (In Thousands)


<S>                                          <C>                <C>                  <C>                <C>
    Amount computed at statutory rate          $(1,410)             $1,239               $(390)             $2,173

  State and local taxes less
    applicable federal income tax                 (203)               (107)                 (1)                460

  Goodwill and other amortization                  682                 657                  26                 232
  Other                                             57                (103)                (87)                (65)
                                       ================================================================================
                                               $  (874)             $1,686               $(452)             $2,800
                                       ================================================================================

</TABLE>

                                      -31-
<PAGE>   32


10. INCOME TAXES (CONTINUED)

The components of the net deferred tax asset and liability are as follows:
<TABLE>
<CAPTION>

                                                    SUCCESSOR
                                        ----------------------------------
                                            JANUARY 30     JANUARY 31
                                              1999            1998
                                        ----------------------------------
                                                 (In Thousands)
<S>                                         <C>            <C>
Deferred tax liabilities:
  Inventory                                  $2,244          $2,244
  Property and equipment                      1,147           1,088
  Customer lists                              5,584           5,783
  Other                                         257             349
                                        ----------------------------------
Total deferred tax liabilities                9,232           9,464
Deferred tax assets:
  Interest expense                            2,788           2,016
  State net operating loss carryforwards      1,100              --
  Inventory                                     556             568
  Accrued expenses                              553             526
  Other                                         140              45
                                        ----------------------------------
Total deferred tax assets                     5,137           3,155
                                        ----------------------------------
Net deferred tax liabilities                 $4,095          $6,309
                                        ==================================
</TABLE>

State net operating loss carryforwards ("NOLs") were generated during the 1999
fiscal year. Approximately $831,000 relates to the state income tax benefit from
extraordinary losses incurred in connection with the early debt extinguishment
(see Note 7). The NOLs expire at various times beginning in fiscal year 2002
through 2019.

11. COMMITMENTS AND CONTINGENCIES

PURCHASE COMMITMENTS

Holdings purchases the majority of its inventory through purchase order
commitments which are denominated in U.S. dollars. Holdings purchased
approximately 24%, 20%, 17%, and 17% of its inventory from one vendor for the
fiscal year ended January 30, 1999, and the periods February 27, 1997 through
January 31, 1998 and January 26, 1997 through February 26, 1997, and the fiscal
year ended January 25, 1997, respectively. At January 30, 1999 and January 31,
1998, Holdings had outstanding inventory purchase commitments of approximately
$16,189,000 and $15,275,000, respectively.

A significant amount of Holdings' products are produced in the Far East. As a
result, Holdings' operations could be adversely affected by political
instability resulting in the disruption of trade from the countries in which
these suppliers are located or by the imposition of additional duties or
regulations relating to imports or by the supplier's inability to meet Holdings'
production requirements.



                                      -32-
<PAGE>   33


11. COMMITMENTS AND CONTINGENCIES (CONTINUED)

LEASE COMMITMENTS

Holdings leases substantially all of its vehicles and certain other equipment
and facilities. These leases are subject to renewal options for varying periods.
Future minimum payments, by year and in the aggregate, under capital leases and
noncancelable operating leases with initial or remaining terms of one year or
more consisted of the following:
<TABLE>
<CAPTION>

                                                               CAPITAL   OPERATING LEASES
                                                               LEASES
                                                          -------------------------------

<S>                                                           <C>        <C>
2000                                                          $  451        $ 3,427
2001                                                             291          2,663
2002                                                             226          1,784
2003                                                              92          1,062
2004                                                              34            707
Thereafter                                                        --            811
                                                          -------------------------------

Total minimum lease payments                                   1,094        $10,454
                                                                          ===============
Less amounts representing interest                               298
                                                          ----------------
Present value of future minimum lease payments                   796
Less current maturities of capital lease obligations             366
                                                          ----------------
Capital lease obligations                                     $  430
                                                          ================
</TABLE>

Operating lease expense under such arrangements was approximately $3,972,000,
$3,785,000, $203,000, and $2,271,000 for the fiscal years ended January 30,
1999, the periods February 27, 1997 through January 31, 1998 and January 26,
1997 through February 26, 1997, and the year ended January 25, 1997,
respectively.

At January 30, 1999 and January 31, 1998, property and equipment include
capitalized vehicle leases of approximately $1,627,000 and $1,223,000,
respectively, and accumulated amortization of approximately $592,000 and
$315,000, respectively.

LITIGATION

Holdings is involved from time to time in lawsuits that arise in the normal
course of business. Holdings actively and vigorously defends all lawsuits.
Management believes that there are no lawsuits that will have a material effect
on Holdings' financial position, results of operations or liquidity.


                                      -33-
<PAGE>   34



12. REDEEMABLE PREFERRED STOCK AND STOCK PURCHASE WARRANTS

Effective February 26, 1997, in connection with the Fenway Acquisition described
in Note 2, Holdings authorized 10,000 shares and issued to New York Life
Insurance Company and American Home Assurance Company (the "Outside Investors")
1,500 shares of Series A nonvoting, cumulative, redeemable preferred stock with
a par value of $.01 per share (the "Holdings Series A Preferred Stock") for
consideration of $14,900,000, with a liquidation preference of $10,000 per
share. Dividends are cumulative at an annual rate of 15.5% and are payable in
cash or, at the option of Holdings, in whole or in part in additional Holdings
Series A Preferred Stock. The Holdings Series A Preferred Stock ranks senior to
all classifications of stock. The Holdings Series A Preferred Stock is
optionally redeemable at any time, and mandatorily redeemable on February 26,
2007, upon not less than ten days notice at a redemption price equal to the
liquidation preference thereof plus accrued and unpaid dividends to the
redemption date. The Holdings Series A Preferred Stock, including accrued and
unpaid dividends of $2,764,000 were redeemed with a portion of the proceeds of
the New Credit Facility and the Senior Subordinated Notes.

In connection with the Fenway Acquisition and the Knapp Acquisition described in
Note 2 and in conjunction with the issuance of preferred stock described above,
Holdings issued to the Outside Investors 9,818 shares of Holdings common stock
for an aggregate consideration of approximately $3,570,000, or $363.64 per
share, and common stock purchase warrants ("Warrants") to acquire 6,962 shares
of Holdings common stock for an aggregate consideration of $100,000. The
Warrants can be exercised at any time through February 26, 2007 for an exercise
price of approximately $186 per share. The value ascribed to the Warrants to
purchase the Holdings common stock in the Securities Purchase Agreement dated
February 26, 1997 among Holdings, Iron Age and the preferred stockholders
resulted in a corresponding discount of $100,000 to the Holdings Series A
Preferred Stock and an addition to paid-in capital of approximately $100,000.
The discount is being amortized over the life of the preferred stock using the
straight-line method. The addition to paid-in capital is net of tax of
approximately $40,000.

13. STOCK OPTIONS

SUCCESSOR

The 1997 Stock Option Plan (the "Option Plan") provides for the granting of
either incentive stock options or nonqualified stock options to purchase shares
of Holdings common stock and for other stock-based awards to officers,
directors, key employees, consultants and advisors who, in the opinion of
Holdings' Board of Directors are in a position to make a significant
contribution to the success of Holdings and its subsidiaries. The Option Plan
authorized the issuance of options to purchase up to an aggregate of 20,245
shares of Holdings common stock; 11,528 of which shall be for Series A Options
and 8,717 of which shall be for Series B Options.

Nonqualified Series A Options of 11,528 were granted to certain officers of Iron
Age in connection with the Fenway Acquisition effective February 26, 1997 in
exchange for options to acquire shares of the Predecessor to Holdings. The
exercise price of Series A Options is approximately $36 per share and represents
the difference between the fair market value of Holdings' common stock at the
date of grant and the total fair value of the exchanged options which was
recognized as a capital contribution to Holdings of approximately $3,772,700, or
approximately $328 per share. The total fair value of the exchanged options was
recognized as a capital contribution to Holdings because the exchanged options
represented a portion of the purchase price of Holdings. The basis used to
determine the fair market value of Holdings common stock was the purchase price
paid by the Fenway Fund as of the date of the Fenway Acquisition, which was the
date of grant of the Series A Options. The Series A Options are fully vested and

                                      -34-
<PAGE>   35


exercisable as of January 30, 1999 and January 31, 1998.

Nonqualified Series B Options of 8,567 were granted in August 1997 in connection
with the Fenway Acquisition to certain officers of Iron Age with an exercise
price of approximately $364 per share. Approximately 65% of the options ("Series
B Basic") become exercisable , subject to the achievement of certain target
earnings by Holdings and continued employment of the optionholder, at the rate
of 20% per year commencing with Holdings' fiscal year ended January 31, 1998.
Holdings is deemed to have achieved the target earnings in a given fiscal year
if Holdings' net income before interest, taxes, depreciation, amortization,
extraordinary or unusual gains or losses, management fees payable to Fenway,
directors fees and expenses payable to Fenway representatives and fees and
expenses associated with acquisitions equals or exceeds the target amount set in
the Option Plan or by the Board of Directors for such fiscal year. The remaining
35% of Series B Options ("Series B Extra") vest upon a change of control of
Holdings and the attainment of certain internal rate of return objectives by
Holdings' stockholders as defined in the Option Plan. The exercise price of
Series B Options granted in August 1997 was approximately $364 per share at the
time such Series B Options were granted. On April 24, 1998, in connection with
the Transactions, the exercise price of Series B Options that were not vested as
of April 24, 1998 was reduced. The exercise price of (i) Series B Options of
7,465 that were not vested (as such term is defined in the Option Plan) as of
April 24, 1998 is approximately $186 per share and (ii) Series B Options of
1,102 that were vested (as such term is defined in the Option Plan) as of April
24, 1998 is approximately $364 per share. Upon the vesting of the Series B
Options, as defined in the Option Plan, Holdings will recognize compensation
expense related to the Series B Options based upon the difference, if any,
between the estimated fair value of Holdings' common stock at the time such
options vest and the exercise prices of $186 or $364, respectively. No
additional Series B Options vested during the year ended January 30, 1999.

Holdings applies APB Opinion No. 25, Accounting for Stock Issued to Employees,
and related interpretations in accounting for its stock option plan. At January
30, 1999 and January 31, 1998, no compensation cost has been recognized in
Holdings' financial statements.




                                      -35-
<PAGE>   36


13. STOCK OPTIONS (CONTINUED)

SUCCESSOR (CONTINUED)

Had compensation cost for Holdings' stock option plan been determined based on
the fair value of such awards at the grant date, consistent with the methods of
Financial Accounting Standards Board Statement No. 123, Accounting for
Stock-Based Compensation, Holdings' total net income would have been as follows:

<TABLE>
<CAPTION>

                                          FEBRUARY 27 1997
                            YEAR ENDED        THROUGH
                         JANUARY 30 1999  JANUARY 31 1998
                         ---------------------------------
                                  (In Thousands)
<S>                      <C>              <C>
Net (loss) income:
  As reported               $(7,288)          $1,957
   Pro forma                 (7,366)           1,801
</TABLE>

The fair values of options granted in February and August 1997 were estimated
using the minimum value option-pricing model based on the following assumptions:

<TABLE>
<S>                          <C>
               Risk-free interest rate                  6.0
               Dividend yield                           0.0
               Expected life                        3 years
               Volatility                    Not applicable
</TABLE>

A summary of the status of the shares under Holdings' stock option plan is as
follows:

<TABLE>
<CAPTION>

                                                          FEBRUARY 27 1997
                                            YEAR ENDED      THROUGH
                                         JANUARY 30 1999  JANUARY 31 1998
                                       -----------------------------------
<S>                                     <C>               <C>
Outstanding, beginning of year               20,095                --
Granted                                         100            20,095
  Forfeited                                    (100)               --
                                       -----------------------------------
Outstanding, end of year                     20,095            20,095
                                       ===================================
Options exercisable at end of year           12,610            12,630
                                       ===================================
</TABLE>

                                      -36-
<PAGE>   37



13. STOCK OPTIONS (CONTINUED)

SUCCESSOR (CONTINUED)

Additional information regarding stock options granted in connection with the
1997 stock option plan is outlined below:
<TABLE>
<CAPTION>

                                                             YEAR ENDED                            FEBRUARY 27, 1997 THROUGH
                                                          JANUARY 30, 1999                              JANUARY 31, 1998
                                          ------------------------------------------------------------------------------------------
                                                               SERIES B       SERIES B                       SERIES B      SERIES B
                                                SERIES A        BASIC           EXTRA         SERIES A         BASIC         EXTRA
                                          ------------------------------------------------------------------------------------------

<S>                                             <C>            <C>            <C>             <C>            <C>           <C>
Weighted average fair value of options
  at grant date                                      5             51             26               5             51             26
Weighted average exercise price of all
  outstanding options                               36            228            186              36            364            364
Weighted average exercise price of
  options exercisable                               36            364             --              36            364             --
Weighted average exercise price of
  expired and forfeited options                     --            186             --              --             --             --
Weighted average remaining contractual
  life of options outstanding                      8.1            8.1            8.1             9.1            9.1            9.1
Options outstanding at end of year              11,528          5,508          3,059          11,528          5,508          3,059
Options exercisable at end of year              11,528          1,082             --          11,528          1,102             --
</TABLE>

PREDECESSOR

The Predecessor had an option plan (the "Prior Plan") for eligible officers and
key management personnel. The Prior Plan authorized the issuance of up to 12,212
shares of Predecessor's Class A common stock. A summary of Predecessor's stock
option activity and related information for the period January 26, 1997 through
February 26, 1997 and the fiscal year ended January 25, 1997 is as follows:
<TABLE>
<CAPTION>

                                                   JANUARY 26, 1997 THROUGH                YEAR ENDED
                                                       FEBRUARY 26, 1997                JANUARY 25, 1997
                                         ----------------------------------------------------------------
                                                         WEIGHTED AVERAGE              WEIGHTED AVERAGE
                                            OPTION        EXERCISE PRICE    OPTIONS     EXERCISE PRICE
                                         ----------------------------------------------------------------

<S>                                         <C>          <C>                <C>        <C>
Outstanding, beginning of year              12,212          $    62          11,595          $62
Granted                                         --                              617           62
Exercised                                   12,212               62              --
                                         ------------                     ------------
Outstanding, end of year                        --                           12,212
                                         ============                     ============
Exercisable, end of year                        --                            9,536
                                         ============                     ============
Weighted average fair value of
  options granted during the year                                           $   611

</TABLE>



                                      -37-
<PAGE>   38



13. STOCK OPTIONS (CONTINUED)

PREDECESSOR (CONTINUED)

For the period January 26, 1997 through February 26, 1997 and the year ended
January 25, 1997, the Predecessor recognized compensation expense of $1,054,000
and $1,065,000, respectively, for vesting of stock options and warrants issued
to employees in accordance with APB Opinion No. 25, based on the intrinsic value
between the exercise prices of performance-based and fixed option grants and the
fair value of the Predecessor's common stock at the measurement dates.

Had compensation expense for the Prior Plan been determined based on the fair
value of stock option awards at the grant date, consistent with the methods of
Financial Accounting Standards Board Statement No. 123, Accounting for
Stock-Based Compensation, Predecessor's net income on a pro forma basis for the
period January 26, 1997 through February 26, 1997 and the year ended January 25,
1997, would have been as follows:

<TABLE>
<CAPTION>

                                                                    JANUARY 26 1997
                                                                        THROUGH           YEAR ENDED
                                                                    FEBRUARY 26 1997    JANUARY 25 1997
                                                                ----------------------------------------
                                                                               (In Thousands)

<S>                                                                 <C>                 <C>
Net (loss) income before stock options and warrants                      $  (695)          $ 3,590

Recorded APB No. 25 compensation expense                                  (1,054)           (1,065)
Pro forma compensation expense from stock options and warrants:
    Fiscal year ended January 27, 1996 grant                                 108               108
    Fiscal year ended January 25, 1997 grant                                  --               355
                                                                ----------------------------------------
Pro forma net income                                                     $   251           $ 4,192
                                                                ========================================
</TABLE>

The fair values of options granted under the Prior Plan were estimated using the
minimum value option-pricing model based on the following assumptions for all
periods presented:

<TABLE>

<S>                            <C>
               Risk-free interest rate                   6.0
               Dividend yield                            0.0
               Expected life                         3 years
               Volatility                     Not applicable
</TABLE>



                                      -38-
<PAGE>   39



14. RELATED PARTY TRANSACTIONS

In connection with the April 1998 Transactions, members of management of Iron
Age holding vested options received aggregate payments of $2,245,000 which
reflects the decrease in the equity value of the Company as a result of the cash
distribution to the stockholders of Holdings in the April 1998 Transactions.

Fenway provides management services to Holdings and Iron Age pursuant to an
amended and restated management agreement (the "Management Agreement") among
Holdings, Iron Age and Fenway. Fenway is an affiliate of the Fenway Fund, the
principal stockholder of Holdings. Pursuant to the Management Agreement, Fenway
provides Holdings and Iron Age with general management, advisory and consulting
services with respect to Iron Age's business and with respect to such other
matters as Holdings may reasonably request from time to time, including, without
limitation, strategic planning, financial planning, business acquisition and
general business development services. Prior to the Fenway Acquisition, a
similar agreement was in effect with Butler Capital Corporation. Holdings paid
management fees of $250,000, $250,000, $0, and $132,000 in the fiscal year ended
January 30, 1999, and the periods February 27, 1997 through January 31, 1998 and
January 26, 1997 through February 26, 1997, and the year ended January 25, 1997,
respectively, for management and other advisory services. In addition, Holdings
has reimbursed Fenway for certain related expenses incurred in connection with
rendering such services in an amount equal to $16,000 for the year ended January
30, 1999 and $80,000 for the 11 months ended January 31, 1998.

In connection with the Fenway Acquisition and the Knapp Acquisition, Holdings
paid $2,070,000 and $200,000, respectively, to Fenway for financial advisory
fees.

Holdings, the Fenway Fund, the Outside Investors, Iron Age management and all of
the other stockholders and optionholders of Holdings are party to a
stockholders' agreement (the "Stockholders' Agreement") that, among other
things, provides for tag-along rights, take-along rights, registration rights,
restrictions on the transfer of shares held by parties to the Stockholders'
Agreement, certain rights of first refusal for Holdings and certain preemptive
rights for certain stockholders. The Stockholders' Agreement also provides that
the parties thereto will vote their shares in the same manner as the Fenway Fund
in connection with certain transactions and that the Fenway Fund will be
entitled to fix the number of directors of Holdings. Pursuant to the
Stockholders' Agreement, the Fenway Fund is entitled to designate a sufficient
number of directors to maintain a majority of the board of directors of Holdings
and Donald R. Jensen is entitled to designate one director.



                                      -39-
<PAGE>   40


ITEM 11.  EXECUTIVE COMPENSATION.

     The following table sets forth information concerning the compensation
earned for the fiscal years ended January 30, 1999 and January 31, 1998 by Mr.
Jensen, Holdings' Chairman, and the four other most highly compensated executive
officers of Holdings (collectively, the "Named Executive Officers").

<TABLE>
<CAPTION>
                                        SUMMARY COMPENSATION TABLE

                                                                                   LONG TERM       ALL OTHER
                                                          ANNUAL COMPENSATION    COMPENSATION($) COMPENSATION($)
                                                        ----------------------------------------------------------
                                                                                   NUMBER OF
                                                                                  SECURITIES
                                                                                  UNDERLYING
NAME AND POSITION                             YEAR (1)   SALARY ($)   BONUS($)    OPTIONS(2)
-----------------                             --------  ---------- ------------- -----------
<S>                                           <C>        <C>          <C>         <C>            <C>
Donald R. Jensen (3) .................          1998     404,740      554,900(5)   9,351.60        9,956(7)
Chairman                                        1999     397,961    1,488,774(6)         --       23,307(8)


William J. Mills (4) .................          1998     167,857      237,200(9)   3,189.75        9,956(7)
President                                       1999     172,780     431,394(10)         --      11,085(11)


Keith A. McDonough ...................          1998     118,269      224,760(9)   3,129.75       7,464(13)
Vice President-Finance and                      1999     122,777     416,495(12)         --      10,437(14)
Chief Financial Officer

William J. Taaffe (15) ...............          1998      99,176      206,100(9)   1,617.89       6,301(17)
Corporate Vice President                        1999     101,842     160,116(16)         --      10,609(18)


Theodore C. Johanson .................          1998     193,123      20,000(19)     200.00       5,075(21)
President and Chief Executive Officer,          1999     191,361      39,079(20)         --       4,485(22)
Falcon
</TABLE>

-------------
(1)  1999: Fiscal year ended January 30, 1999. 1998: Fiscal year ended January
     31, 1998.
(2)  Options to acquire common stock of Holdings.
(3)  In addition to serving as Chairman of Holdings, Mr. Jensen also served as
     Holdings' Chief Executive Officer and President until February 1, 1999.
(4)  Prior to February 1, 1999, Mr. Mills served as Executive Vice President of
     Holdings.
(5)  Includes $275,000 bonus paid by Iron Age in connection with the Fenway
     Acquisition.
(6)  Includes $1,202,966 bonus paid by Iron Age in connection with the April
     1998 Transactions.
(7)  Includes Iron Age allocations of $9,309 under defined contribution plan for
     the plan year ended December 31, 1997 and group term life insurance
     premiums of $647 paid by Iron Age during the plan year ended December 31,
     1997.
(8)  Includes Iron Age allocations of $6,020 under defined contribution plan for
     the plan year ended December 31, 1998 and group term life insurance
     premiums of $3,510 paid by Iron Age during the plan year ended December 31,
     1998.
(9)  Includes $175,000 bonus paid by Iron Age in connection with the Fenway
     Acquisition.
(10) Includes $367,881 bonus paid by Iron Age in connection with the April 1998
     Transactions.
(11) Includes Iron Age allocations of $6,020 under defined contribution plan for
     the plan year ended December 31, 1998 and group term life insurance
     premiums of $330 paid by Iron Age during the plan year ended December 31,
     1998.
(12) Includes $365,685 bonus paid by Iron Age in connection with the April 1998
     Transactions.
(13) Includes Iron Age allocations of $6,948 under defined contribution plan for
     the plan year ended December 31, 1997 and group term life insurance
     premiums of $516 paid by Iron Age during the plan year ended December 31,
     1997.

                                      -40-
<PAGE>   41

(14) Includes Iron Age allocations of $6,020 under defined contribution plan for
     the plan year ended December 31, 1998 and group term life insurance
     premiums of $386 paid by Iron Age during the plan year ended December 31,
     1998.
(15) Mr. Taaffe resigned effective January 13, 1999.
(16) Includes $128,360 bonus paid by Iron Age in connection with the April 1998
     Transactions.
(17) Includes Iron Age allocations of $5,865 under defined contribution plan for
     the plan year ended December 31, 1997 and group term life insurance
     premiums of $436 paid by Iron Age during the plan year ended December 31,
     1997.
(18) Includes Iron Age allocations of $5,632 under defined contribution plan for
     the plan year ended December 31, 1998 and group term life insurance
     premiums of $310 paid by Iron Age during the plan year ended December 31,
     1998.
(19) Includes $20,000 bonus paid by Iron Age in connection with the Fenway
     Acquisition.
(20) Includes $7,321 bonus paid by Iron Age in connection with the April 1998
     Transactions.
(21) Represents Falcon allocations under defined contribution plan for the plan
     year ended December 31, 1997.
(22) Represents Falcon allocations under defined contribution plan for the plan
     year ended December 31, 1998.

AGGREGATED FISCAL YEAR-END OPTION VALUES

     The following table sets forth information concerning the value of
unexercised stock options at the end of fiscal 1999 for the Named Executive
Officers.


                    AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>

                                NUMBER OF SECURITIES
                               UNDERLYING UNEXERCISED   VALUE OF UNEXERCISED
                                     OPTIONS AT         IN-THE-MONEY OPTIONS
                                FISCAL YEAR END(#)(1)      AT FISCAL YEAR
                                ---------------------         END($)(2)
                                                              ---------
                                     EXERCISABLE/            EXERCISABLE/
NAME                                UNEXERCISABLE           UNEXERCISABLE
----                                -------------           -------------
<S>                            <C>                      <C>
Donald R. Jensen
     Series A ............          6,404.83/0               1,188,224/0
     Series B--Basic B....          339.60/1,358.40          0/0
     Series B--Extra B....          0/1,248.77               0/0
William J. Mills
     Series A ............          1,929.75/0               358,007/0
     Series B--Basic B....          132/528                  0/0
     Series B--Extra B....          0/600                    0/0
Keith A. McDonough
     Series A ............          1,929.75/0               358,007/0
     Series B--Basic B....          120/480                  0/0
     Series B--Extra B....          0/600                    0/0
William J. Taaffe
     Series A ............          617.89/0                 114,631/0
     Series B--Basic B....          100/400                  0/0
     Series B--Extra B....          0/500                    0/0
Theodore C. Johanson
     Series B--Basic B....          40/160                   0/0

</TABLE>
------------

(1) Options to acquire common stock of Holdings.
(2) Value based on assumed value at January 30, 1999 of $185.52 per share.



                                      -41-
<PAGE>   42


COMPENSATION OF DIRECTORS

     Holdings pays no compensation to its independent directors and pays no
additional remuneration to its employees or to executives of Holdings for
serving as directors.

EMPLOYMENT AGREEMENTS

        Mr. Jensen is currently employed as Chairman of the Board of Directors
of Holdings and Iron Age pursuant to an agreement dated February 26, 1997. Under
this agreement, Mr. Jensen is entitled to receive an annual salary of $250,000.
In addition, Mr. Jensen is eligible for an annual bonus of up to $100,000
determined by Iron Age's achievement of EBITDA targets. If Mr. Jensen is
terminated other than for cause or resigns voluntarily for good reason, he is
entitled to receive continued salary until December 31, 2001 and continued
coverage under group health plans for himself and his spouse until his 65th
birthday, or until his spouse's 65th birthday if he dies prior to age 65. If Mr.
Jensen's employment is terminated by reason of his death and he is survived by
his spouse, his surviving spouse is entitled to receive a continuation of his
salary until the month of his 62nd birthday and continued coverage under group
health plans until her 65th birthday. If Mr. Jensen's employment is terminated
by reason of his incapacity, Mr. Jensen is entitled to receive continued salary
less amounts received by him under group disability plans and social security
disability benefits until earlier of his death or his 65th birthday and
continued coverage under group health plans for him and his spouse until his
65th birthday if he dies prior to age 65.

        Mr. Mills is currently employed by Iron Age pursuant to an agreement
dated November 20, 1995. Under this agreement, which is extended from year to
year in the absence of a notice of non-renewal given at least 90 days prior to
end of each fiscal year, Mr. Mills receives an annual salary of $210,000,
subject to annual increases, and is eligible for a bonus of not less than
$75,000 based upon Iron Age's achievement of EBITDA targets. If Mr. Mills is
terminated other than for cause or resigns voluntarily for good reason, he is
entitled to receive continued salary for 18 months and continued coverage under
group health plans for one year following his termination or resignation. If Mr.
Mills' employment is terminated by reason of his death and he is survived by his
spouse, his surviving spouse is entitled to receive continued coverage under
group health plans until the earlier of her 65th birthday or January 31, 2000.
If Mr. Mills' employment is terminated by reason of his incapacity, Mr. Mills is
entitled to receive continued coverage under group health plans until January
31, 2000.

       Mr. McDonough is currently employed by Iron Age pursuant to an agreement
dated November 20, 1995. Under this agreement, which is extended from year to
year in the absence of a notice of non-renewal given at least 90 days prior to
end of each fiscal year, Mr. McDonough receives an annual salary of $127,500,
subject to annual increases, and is eligible for a bonus of not less than
$50,000 based upon Iron Age's achievement of EBITDA targets. If Mr. McDonough is
terminated other than for cause or resigns voluntarily for good reason, he is
entitled to receive continued salary for 18 months and continued coverage under
group health plans for one year following his termination or resignation. If Mr.
McDonough's employment is terminated by reason of his death and he is survived
by his spouse, his surviving spouse is entitled to receive continued coverage
under group health plans until the earlier of her 65th birthday or January 31,
2000. If Mr. McDonough's employment is terminated by reason of his incapacity,
Mr. McDonough is entitled to receive continued coverage under group health plans
until January 31, 2000.

       Mr. Johanson is currently employed by Falcon pursuant to an agreement
dated August 1, 1994. Under this agreement, Mr. Johanson receives an annual
salary or $190,000 and is eligible for a bonus of 25-35% of base salary
determined by Falcon's achievement of operating income targets. If Mr. Johanson
is terminated other than for cause or resigns voluntarily for good reason, he is
entitled to receive continued salary, reduced by one-half of any compensation
received by Mr. Johanson from other employment, and continued coverage under
group health, disability and life insurance plans, to the extent such benefits
are not provided as a result of other employment, until January 31, 2000. If Mr.
Johanson's employment is terminated by reason of physical or mental disability,
Mr. Johanson is entitled to receive continued coverage under group health and
life insurance plans until January 31, 2000 and payments under Falcon's
disability income plan.

     Mr. Taaffe resigned from his executive officer positions with Holdings and
Iron Age effective January 13, 1999 and from his employment with Holdings and
Iron Age effective June 30, 1999. Pursuant to a Severance Agreement

                                      -42-
<PAGE>   43

dated January 13, 1999, Mr. Taaffe is on a terminal leave of absence until June
30, 1999 during which time he will continue to receive his current salary, will
remain fully covered by the Company's benefits plans except to the extent he
becomes covered by a medical plan of another employer and will continue to
participate in the Company's profit sharing retirement plan. In addition, Mr.
Taaffe has the right to exercise any of his vested options under the Option Plan
until such options terminate on July 30, 1999. Pursuant to an Agreement and
General Release dated January 13, 1999, and in consideration for the payments
and other benefits set forth in the Severance Agreement, Mr. Taaffe agreed to
release all present and future claims against Iron Age and its affiliates,
including past and present officers, directors and employees of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Messrs. Lamm, Geisser and Jensen were appointed to the Compensation
Committee by Holdings' Board of Directors on September 15, 1998. Mr. Jensen is
an executive officer of Holdings. Mr. Jensen's compensation for fiscal 1999 was
previously established by the terms of his employment agreement.



                                      -43-
<PAGE>   44




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

                                    Iron Age Holdings Corporation
Dated:  April 26, 1999              By:/S/ KEITH A. MCDONOUGH
                                           Vice President Finance,
                                           Chief Financial Officer
                                           (Principal Financial and
                                           Accounting Officer)

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

         SIGNATURE                    TITLE                            DATE
/S/ DONALD R. JENSEN          Chairman and Director               April 26, 1999
    Donald R. Jensen

/S/ WILLIAM J. MILLS          President and Director              April 26, 1999
    William J. Mills          (principal executive officer)

/S/ KEITH A. MCDONOUGH        Vice President Finance, Chief       April 26, 1999
    Keith A. McDonough        Financial Officer (principal
                              financial and accounting officer)

/S/ PETER LAMM                Director                            April 26, 1999
    Peter Lamm

/S/ ANDREA GEISSER            Director                            April 26, 1999
    Andrea Geisser

/S/ JOHN B. AYER              Director                            April 26, 1999
    John B. Ayer

/S/ REZA R. SATCHU            Director                            April 26, 1999
    Reza R. Satchu




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