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                                                                   Exhibit 10.12

                            PAYLESS SHOESOURCE, INC.
                           DEFERRED COMPENSATION PLAN
                             Amended March 16, 2000

SECTION 1.  PURPOSE.

     The purpose of this Plan is to provide an additional incentive to the key
employees of Payless ShoeSource, Inc. to achieve superior performance.

SECTION 2.  DEFINITIONS.

     (a) Board means the Board of Directors of Payless, as hereinafter defined.

     (b) Committee means the Committee appointed to administer the Plan, as
hereinafter defined, as provided in Section 8 hereof.

     (c) Common Stock means the Common Stock of Payless, as hereinafter defined.

     (d) Corporation means Payless, as hereinafter defined, or any subsidiary of
Payless which is an employer of an Executive, as hereinafter defined, who is a
Participant, as hereinafter defined, in the Plan, as hereinafter defined.

     (e) Executive means any individual employed by the Corporation in an
executive capacity who receives regular stated compensation in respect of such
employer-employee relationship other than a pension, retainer or fee under a
contract.

     (f) Fiscal Year means the fiscal year of the Corporation as established
from time to time.

     (g) Payless means Payless ShoeSource, Inc., a Delaware corporation.

     (h) Participant means an Executive who has been designated by the Committee
as eligible, and who has elected to participate in the Plan, as hereinafter
defined.

     (i) Plan means the Deferred Compensation Plan of the Corporation, as
described herein.

     (j) Stock Unit means an accounting equivalent of one share of Common Stock.

     (k) Stock Unit Account means an account on the records of the Corporation
in respect of Stock Units which have been and/or may be allocated to a
Participant in the manner hereinafter set forth.






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SECTION 3.  METHODS OF PAYMENT.

     (a) Except as hereinafter provided, prior to the commencement of the
calendar year that includes the first day of a Fiscal Year, each Participant
shall be afforded the opportunity of making an election to have any one or more
of the following alternative methods of payment applied to all or a part of any
portion (which such portion shall not exceed one-half, unless specifically
provided for to the contrary in the participant's written contract of
employment) of any compensation of which such Participant shall be the recipient
in respect of his performance during such Fiscal Year:

          (i) Alternative (i): Payment of any such compensation that is paid in
the form of a bonus on the first day of April next following the close of such
Fiscal Year or on such subsequent date as the amount thereof is ascertainable.

          (ii) Alternative (ii): Payment thereof at a deferred date or dates
either in a lump sum or in annual installments, as may be determined by the
Committee, such payment when made to include interest, as hereinafter provided,
from the first day of April next following the Fiscal Year in respect of which
the compensation was payable to the date of payment.

          (iii) Alternative (iii): Payment thereof at a deferred date or dates
either in a lump sum or in annual installments, as may be determined by the
Committee, and either in cash or in Common Stock or in both cash and Common
Stock, as may be determined by the Committee, in respect of Stock Units to be
allocated to the Participant as hereinafter provided.

If any Participant shall fail to make an election with respect to any year, he
shall be deemed to have elected not to defer any portion of his compensation for
such year. Notwithstanding the requirements imposed by this paragraph (a) with
respect to the time by which an election must be made, an employee who is
designated by the Committee as a Participant for the first time may, within 60
days of such designation, make any election otherwise permitted under this
paragraph (a) with respect to the Participant's compensation in respect of
employment subsequent to the date on which the election is made.

     (b) In connection with all determinations to be made by the Committee as
respects Alternative (ii) and, except for the determination of whether payment
thereunder is to be made in cash or in Common Stock or in both cash and Common
Stock (which determination shall be in the absolute discretion to the
Committee), Alternative (iii), the Participant shall be given an opportunity at
the time he makes his election of indicating his preferences, which preferences
shall be taken into account by the Committee in making its determinations.
Except as provided in Section 12 and Section 13 in no event shall payments under
Alternative (ii) or (iii) commence prior to the earliest of the Participant's
retirement, termination of employment or death (or prior to the occurrence of a
severe financial hardship, as provided below).

The Committee shall make its determination with respect to the payment schedule
(i.e., a lump sum payment or payments in annual installments) under Alternative
(ii) or (iii) prior to the commencement of the calendar year that includes the
first day of the Fiscal Year for which such


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alternative is elected. Except in the event of a severe financial hardship, as
provided below, the Committee's determination with respect to a payment schedule
shall become irrevocable as of the first day of the calendar year that includes
the first day of the Fiscal Year for which the determination is made. However,
upon the written request of the Participant (or if applicable, the beneficiary
or distributee) the payment schedule may be revised by the Committee, in its
absolute discretion, in the event that the Participant (or if applicable, the
beneficiary or distributee) incurs a severe financial hardship. Such severe
financial hardship must have been caused by an accident, illness or other event
which was beyond the control of the Participant (or, if applicable, the
beneficiary or distributee); and the Committee shall revise the payment schedule
that it had previously established only to the extent that the Committee
considers necessary to eliminate the severe financial hardship. Notwithstanding
the requirements imposed by this paragraph (b) regarding the date by which the
Committee must make a determination with respect to the payment schedule under
Alternative (ii) or (iii) and the date as of which such determination shall
become irrevocable (except in the event of a severe financial hardship), when a
Participant makes an election pursuant to the last sentence of paragraph (a) of
this Section 3, the Committee shall make its determination with respect to the
payment schedule at any time prior to the date as of which the Participant's
election becomes effective, and its determination shall become irrevocable
(except in the event of a severe financial hardship) as of such effective date.

     (c) In the case of a Participant who elects to have all or any part of his
compensation for a particular Fiscal Year paid under Alternative (iii), Stock
Units shall be allocated to such Participant by crediting the same to his Stock
Unit Account, and the number of Stock Units to be so credited for such Fiscal
Year shall be the sum of the following:

          (i) the quotient, disregarding fractions, resulting from dividing the
dollar amount of such portion of the Participant's compensation as is to be so
applied to Alternative (iii) by the average closing price of the Common Stock on
the New York Stock Exchange during the month of February ending in the Fiscal
Year next following the Fiscal Year in respect of which such compensation was
payable; plus

          (ii) the quotient, disregarding fractions, resulting from dividing the
aggregate dollar amount of cash dividends which would have been paid to the
Participant during such Fiscal Year had the Stock Units standing in his Stock
Unit Account from time to time during such Fiscal Year been shares of Common
Stock by the average dosing price of the Common Stock on the New York Stock
Exchange during the month of February ending in the year next following such
Fiscal Year; plus

          (iii) the number of shares of Common Stock, disregarding fractions,
which would have been received by the Participant as stock dividends during such
Fiscal Year had the Stock Units standing in his Stock Unit Account at the date
or dates of payment of such stock dividend(s) been shares of Common Stock.

Any allocation of Stock Units to a Participant's Stock Unit Account required to
be made pursuant to this paragraph (c) shall be made as of the first day of
April next following the Fiscal


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Year in respect of which such compensation was payable or such dividends were
paid, as the case may be. The aggregate value of the fraction or fractions
remaining after making the applicable calculations referred to in subparagraphs
(c)(i), (c)(ii) and (c)(iii) of this Section 3 (based upon the average closing
price of Common Stock on the New York Stock Exchange during the month of
February next preceding such month of April), shall not be converted into Stock
Units but shall be allocated and added to the amount elected by the Participant
to be paid to him under Alternative (ii) above, or, if the Participant shall
have made no such election under Alternative (ii), then such remaining amount
shall be paid to the Participant as if he had made an election under Alternative
(i) above to be so paid.

     (d) Notwithstanding the provisions of Section 3(c) to the contrary, in the
event of a recapitalization of Payless pursuant to which the outstanding shares
of Common Stock shall be changed into a greater or smaller number of shares
(including, without limitation, a stock split or a stock dividend of 25% or more
of the number of outstanding shares of Common Stock), the number of Stock Units
credited to a Participant's Stock Unit Account shall be appropriately adjusted
as of the effective date of such recapitalization.

     (e) Interest to be paid under Alternative (ii) shall be credited annually
as of April 1 of each year and shall be at a rate shall be equal to the average
yield on long-term United States Government Bonds (as determined by the Board of
Governors of the Federal Reserve Board and published in the Federal Reserve
Bulletin) for the calendar year prior to said April 1, compounded annually,
provided, however, that if the method of calculation of such average yield shall
be changed, or if the determination and/or the publication thereof be
discontinued, then the Committee shall substitute therefor such alternative
method of determining such interest rate as it, in its discretion, shall deem
appropriate.

SECTION 4.  LIMITATION OF STOCK UNITS.

     In no event shall the aggregate number of Stock Units allocated under this
Plan in respect of compensation for any Fiscal Year exceed a number equal to 1/2
of 1% of the total number of shares of Common Stock outstanding at the close of
such Fiscal Year.

SECTION 5.  DISTRIBUTION FROM THE STOCK UNIT ACCOUNT.

     (a) Distribution from a Participant's Stock Unit Account shall be made in
accordance with the determinations made by the Committee, as provided in this
Plan. Stock Units shall be adjusted from time to time in accordance with this
Plan until all distributions to which a Participant is entitled hereunder shall
have been made.

     (b) If the Committee determines that distribution to a Participant is to be
made in annual installments, the Committee may determine from time to time
whether each particular installment shall be distributed in cash or in Common
Stock or in both cash and Common Stock.

     (c) If the Committee determines that a distribution to a Participant is to
be made in a lump sum in Common Stock, the number of shares of Common Stock to
be so distributed to such



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Participant shall equal the number of Stock Units then in his Stock Unit
Account. For the purpose of determining the number of shares of Common Stock to
be distributed on a particular annual installment distribution date, the
Committee shall make its calculations as if that annual installment and all
subsequent annual installments were in fact to be made in shares of Common
Stock, as follows: the number of shares of Common Stock which would be then so
distributable, except in the case of the last distribution, shall be equal to
the product, disregarding fractions, of the total number of Stock Units then
credited to the Participant's Stock Unit Account, multiplied by a fraction, the
numerator of which shall be one and the denominator of which shall be the number
of remaining installments; and in the case of the last distribution, shall be
the number of shares of Common Stock equal to the Stock Units then remaining in
the Participant's Stock Unit Account. The Participant's Stock Unit Account shall
be decreased by one Stock Unit for each share of Common Stock distributed to a
Participant.

     (d) If the Committee determines that a particular distribution to a
Participant is to be made in cash, a computation shall first be made of the
number of shares of Common Stock which would then be distributable pursuant to
paragraph (c) of this Section 5 if such distribution were to be made in shares
of Common Stock. The number of shares thus determined shall then be converted
into cash in respect of each such distribution by valuing such shares at the
average dosing price of the Common Stock on the New York Stock Exchange during
the month of February next preceding the date of such distribution, and the
resulting amount of cash shall be distributed to the Participant. The
Participant's Stock Unit Account shall then be decreased by one Stock Unit for
each share of Common Stock which would have been distributed to the Participant
had such cash distribution been made in shares of Common Stock.

     (e) If the Committee determines that a distribution is to be made in part
in Common Stock and in part in cash, paragraphs (c) and (d) of this Section 5
shall be applied separately to the respective parts of such distribution and to
the respective parts of the Stock Unit Account with respect to which the
distribution is to be made.

SECTION 6.  DEATH OF PARTICIPANT.

     In the event of the death of a Participant prior to complete distribution
under Alternatives (ii) and/or (iii) hereof, all cash and/or Stock Units then
remaining undistributed, or which shall thereafter become distributable to him
pursuant to such Alternatives, shall be distributed to such beneficiary as the
Participant shall have designated in writing to the Corporation, or, in the
absence of such designation, to his personal representative. Such distribution
shall be made at such date or dates either in a lump sum or in annual
installments, as may be determined by the Committee prior to the beginning of
the calendar year that includes the first day of the Fiscal Year for which such
alternative is elected (or, where applicable, the date specified by the last
sentence of Section 3(b)); provided, however, that in the event of a severe
financial hardship, the Committee may subsequently revise its determination in
accordance with the applicable provisions of Section 3(b).



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SECTION 7.  PARTICIPANT'S RIGHT UNSECURED; INVESTMENTS.

     The right of a Participant to receive any distribution hereunder shall be
an unsecured claim against the general assets of the Corporation. Nothing in
this Agreement shall require the Corporation to invest any amount, the payment
of which has been deferred under Alternative (ii) or (iii), in Common Stock or
in any other medium.

SECTION 8.  ADMINISTRATION OF THE PLAN COMMITTEE.

     (a) The Plan shall be administered by a Committee of not less than two nor
more than five persons designated by the Board (which may, but need not, be the
compensation committee of the Board), all of whom shall be directors of the
Corporation and shall serve at the pleasure of the Board. In no event shall any
member of the Committee be a Participant. The Committee shall act by vote or
written consent of a majority of its members (except in the case of a two person
Committee in which case any vote or written consent must be unanimous). The Plan
may be amended, modified or terminated by the Board, except that no change may
be made without the approval of the Common Shareowners of Payless (i) the
maximum number of shares or Stock Units deliverable or allocable in respect of
any Fiscal Year under the plan or (ii) in the provisions of subparagraphs (c)(i)
and (c)(ii) of Section 3 of this Plan relating to the method of determining the
number of Stock Units allocable to a Participant.

     (b) The Committee shall prescribe such forms as it considers appropriate
for the administration of the Plan. The forms shall set forth such terms and
conditions not inconsistent with the terms of the Plan as the Committee may
determine and shall designate:

          (i) the alternative or alternatives elected by the Participant
pursuant to Section 3(a);

          (ii) the Committee's determination of the time or times when payment
of such compensation will be made to the Participant pursuant to Section 3(b)(in
the absence of a severe financial hardship);

          (iii) the beneficiary (if any) designated by the Participant pursuant
to Section 6; and

          (iv) the Committee's determination of the time or times when payment
of such compensation will be made after the Participant's death pursuant to
Section 6 (in the absence of a severe financial hardship).

SECTION 9.  SUCCESSORS.

     The provisions of the Plan with respect to each Participant shall bind the
legatees, heirs, executors, administrators or other successors in interest of
such Participant.



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SECTION 10.  ALIENATION.

     (a) Subject to the provisions of Section 6 and paragraph (b) of this
Section 10, no amount, the payment of which as been deferred under Alternative
(ii) or (iii), shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, levy or charge, and any attempt to so
anticipate, alienate, sell, transfer, assign, pledge, encumber, levy or charge
the same shall be void; nor shall any such amount be in any manner liable for or
subject to the debts, contracts, liabilities, engagements or torts of the person
entitled to such benefit.

     (b) Nothing in this Section 10 shall prohibit the personal representative
of a Participant from designating that any amount be distributed in accordance
with the terms of the Participant's will or pursuant to the laws of descent and
distribution.

SECTION 11.  WITHHOLDING.

     There shall be deducted from all amounts paid under this Plan any taxes
required to be withheld by any federal, state or local government. The
Participants and their beneficiaries, distributees and personal representatives
will bear any and all federal, foreign, state, local or other income or other
taxes imposed on amounts paid under this Plan as to which no amounts are
withheld, irrespective of whether withholding is required.

SECTION 12.  DISCRETIONARY PAYMENT.

     (a) Notwithstanding any other provision in any other Section of the Plan to
be contrary, the Committee may, in its sole and absolute discretion, direct an
immediate payment of cash and/or distribution of Stock with respect to amounts
(except those referred to in the next proviso) previously deferred under this
Plan if the Committee determines that such action is in the best interests of
Payless, the Participants and their beneficiaries.

     (b) In the event that the Committee shall so direct an immediate payment,
distribution and/or release in accordance with Section 12(a), then

          (i) the amounts of cash and the numbers of shares of Stock to be so
paid and/or distributed shall be determined by the Committee so as to reflect
fairly and equitably appropriate interest and dividends since the preceding
April 1 and so as to reflect fairly and equitably such other facts and
circumstances as the Committee deems appropriate, including, without limitation,
recent price of the Stock;

          (ii) amounts which were otherwise deferred or to be deferred with
respect to the Fiscal Year or long-term period in which such payment or
distribution occurs shall be paid when otherwise payable (such amounts which
would otherwise have been payable prior to the date of such payment or
distribution shall be paid as soon as practicable thereafter);

          (iii) in the event that cash is not paid or made available to a
Participant when otherwise due or that shares of Stock are not distributed or
otherwise made available to a


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Participant when otherwise due, then such Participant may file a claim for such
payment or distribution and, if such Participant is successful, then the
Corporation shall reimburse such Participant for reasonable attorneys' fees
actually paid by the Participant in enforcing such Participant's rights to such
payment or distribution; and

          (iv) in the event that cash is not paid or made available to a
Participant when otherwise due, then interest will accrue with respect to such
unpaid amount from the date it was otherwise due until the date it is actually
paid at a rate equal to two percentage points over the prime rate as in effect
from time to time, as determined in good faith the Committee based on the prime
rate charged from time to time by major banks in the City of New York.

SECTION 13.  CHANGE IN CONTROL.

     Notwithstanding any other provision in any other Section of this Plan to
the contrary, (i) the value of all amounts deferred by a Participant which have
not yet been credited to the Participant's accounts under this Plan and (u) the
value of all of a Participant's accounts under this Plan shall be paid to such
Participant in each case in a lump sum cash payment on the occurrence of a
Change in Control of the Corporation or as soon thereafter as practicable, but
in no event later than five days after the Change in Control of the Corporation.
The amounts of cash credited to each Participant's accounts prior to determining
the amount of cash to be paid from these accounts shall be determined by the
Committee (which, for this purpose, shall be comprised of members of the Board
prior to the Change in Control of the Corporation) so as to reflect fairly and
equitably appropriate interest and dividends since the preceding April 1 and so
as to reflect fairly and equitably such other facts and circumstances as the
Committee deems appropriate, including, without limitation, recent price of the
stock. For purposes of payments under this Section 13, the value of Stock Unit
shall be computed as the greater of (a) the closing price of shares of Common
Stock as reported on the New York Stock Exchange on or nearest the date on which
the Change in Control is deemed to occur (or, if not listed on such exchange, on
a nationally recognized exchange or quotation system on which trading volume in
the Common Stock is highest) or (b) the highest per share price for shares of
Common Stock actually paid in connection with any Change in Control.

     For the purposes of this Plan, a "Change in Control" shall be deemed to
have occurred if:

          (a) any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (a "Person") acquires beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A)
the then-outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (B) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however,
that, for purposes of this Section 13, none of the following shall constitute a
Change of Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any affiliated
company or (iv) any acquisition by any corporation pursuant to a transaction
that


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complies with Sections 13(c)(A), 13(c)(B) and 13(c)(C) or (v) any acquisition by
the Company which, by reducing the number of shares of Outstanding Company
Common Stock or Outstanding Company Voting Securities, increases the
proportionate number of shares of Outstanding Company Common Stock or
Outstanding Company Voting Securities beneficially owned by any Person to 20% or
more of the Outstanding Company Common Stock or Outstanding Company Voting
Securities; provided, however, that, if such Person shall thereafter become the
beneficial owner of any additional shares of Outstanding Company Common Stock or
Outstanding Company Voting Securities and beneficially owns 20% or more of
either the Outstanding Company Common Sock or the Outstanding Company Voting
Securities, then such additional acquisition shall constitute a Change of
Control; or

          (b) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board;

          (c) a reorganization, merger, consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination") is consummated, in each case, unless, following such
Business Combination, (A) all or substantially all of the individuals and
entities that were the beneficial owners, respectively, of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50%, respectively, of the then-outstanding shares of common stock and
the combined voting power of the then- outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination, (including, without
limitation, a corporation that, as a result of such transaction, owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership immediately prior to such Business Combination of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities, as the case
may be, (B) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then-outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then-outstanding voting
securities of such corporation, except to the extent that such ownership existed
prior to the Business Combination, and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement or of the action of the Board providing for such Business
Combination; or



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          (d) the stockholders of the Company approve of a complete liquidation
or dissolution of the Company.













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