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                                                                   EXHIBIT 10.27

                            PAYLESS SHOESOURCE, INC.

                           INCENTIVE COMPENSATION PLAN

SECTION 1. PURPOSES: The purposes of the Payless Shoesource, Inc. Incentive
Compensation Plan are (i) to provide a means to attract, retain, and motivate
talented personnel and (ii) to provide to participating employees added
incentive for high levels of performance and for additional effort to improve
the Company's financial performance.

SECTION 2. DEFINITIONS: As used in this Plan, unless the context otherwise
requires, each of the following terms shall have the meaning set forth below.

         (a)      "Annual Award" shall mean, for any Plan Year, a payment made
                  to an Annual Award Participant under the terms of this Plan.

         (b)      "Annual Award Maximum Amount" shall mean $1,850,000.

         (c)      "Annual Award Participant" shall mean an Eligible Employee
                  selected by the Committee to participate in the Plan pursuant
                  to Section 5.

         (d)      "Board of Directors" or "Board" shall mean the Board of
                  Directors of the Company.

         (e)      "CEO" shall mean the Chief Executive Officer of the Company.

         (f)      "Code" shall mean the Internal Revenue Code of 1986, as
                  amended from time to time, and any references to a particular
                  section of the Code shall be deemed to include any successor
                  provision thereto.

         (g)      "Committee" shall mean a committee or subcommittee of the
                  Board of Directors, which shall consist solely of two or more
                  "outside directors" within the meaning of Section 162(m) of
                  the Code.

         (h)      "Company" shall mean Payless Shoesource, Inc., a Delaware
                  corporation.

         (i)      "Covered Employee" shall mean the CEO and each other executive
                  of the Company or a Subsidiary whom the Committee determines,
                  in its discretion, is or may be a "covered employee" within
                  the meaning of Section 162(m) of the Code for a Plan Year or
                  Plan Period to which an Annual Award or Long-Term Award, as
                  the case may be relates.

         (j)      "Eligible Employee" shall mean any officers or other key
                  employees of the Company or any Company Subsidiary, as
                  determined by the Committee in its sole discretion.



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         (k)      "Long-Term Award" shall mean, for any Plan Period, a payment
                  made to a Long-Term Award Participant under the terms of this
                  Plan.

         (l)      "Long-Term Award Maximum Amount" shall mean $1,500,000.

         (m)      "Long-Term Award Participant" shall mean an Eligible Employee
                  selected by the Committee to participate in the Plan pursuant
                  to Section 6.

         (n)      "Performance Goal(s)" shall mean the goal or goals established
                  for an Annual Award Participant or a Long-Term Award
                  Participant for a Plan Year or Plan Period, as the case may
                  be, by the Committee pursuant to Section 5 or Section 6, as
                  applicable.

         (o)      "Performance Measures" shall mean any of the following
                  performance criteria, either alone or in any combination, and
                  may be expressed with respect to the Company or one or more
                  operating units, groups, or any Subsidiary, as the Committee
                  may determine: cash flow; cash flow from operations; total
                  earnings; earnings per share, diluted or basic; earnings per
                  share from continuing operations, diluted or basic; earnings
                  before interest and taxes; earnings before interest, taxes,
                  depreciation, and amortization; earnings from continuing
                  operations; net asset turnover; inventory turnover; net
                  earnings; operating earnings; operating margin; return on
                  equity; return on net assets; return on total assets; return
                  on capital; return on investment; return on sales; revenues;
                  sales; market share; economic value added; expense reduction
                  levels; stock price; and total shareholder return. For any
                  Plan Year or Plan Period, Performance Measures may be
                  determined on an absolute basis or relative to internal goals
                  or relative to levels attained in a year or years prior to
                  such Plan Year or Plan Period or related to other companies or
                  indices or as ratios expressing relationships between two or
                  more Performance Measures. For any Plan Year or Plan Period,
                  the Committee shall provide how any Performance Measure shall
                  be adjusted to the extent necessary to prevent dilution or
                  enlargement of any Annual Award or Long-Term Award as a result
                  of extraordinary events or circumstances, as determined by the
                  Committee, or to exclude the effects of extraordinary,
                  unusual, or non-recurring items; changes in applicable laws,
                  regulations, or accounting principles; currency fluctuations;
                  discontinued operations; non-cash items, such as amortization,
                  depreciation, or reserves; or any recapitalization,
                  restructuring, reorganization, merger, acquisition,
                  divestiture, consolidation, spin-off, split-up, combination,
                  liquidation, dissolution, sale of assets, or other similar
                  corporate transaction, or stock dividends, or stock splits or
                  combinations; provided, however, in the case of a Covered
                  Employee, no such adjustment will be made if the effect of
                  such adjustment would cause the Annual Award or Long-Term
                  Award to a Covered Employee to fail to qualify as "qualified
                  performance-based compensation" within the meaning of Section
                  162(m) of the Code.


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         (p)      "Plan" shall mean the Payless Shoesource, Inc. Incentive
                  Compensation Plan, as amended and restated from time to time.

         (q)      "Plan Period" shall mean a period of one fiscal year or
                  longer, as determined by the Committee in its sole discretion.

         (r)      "Plan Year" shall mean a period of one fiscal year or such
                  shorter period, as determined by the Committee in its sole
                  discretion.

         (s)      "Subsidiary" shall mean any corporation, the majority of the
                  outstanding voting stock of which is owned, directly or
                  indirectly, by the Company, and that is not itself a publicly
                  held corporation within the meaning of Section 162(m) of the
                  Code.

SECTION 3. ADMINISTRATION: Subject to the express provisions of this Plan, the
Committee shall have authority to interpret the Plan, to prescribe, amend, and
rescind rules and regulations relating to it, and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
In exercising its discretion, the Committee may use such objective or subjective
factors as it determines to be appropriate in its sole discretion. Except to the
extent not permitted for qualification as "qualified performance-based
compensation" within the meaning of Section 162(m) of the Code or generally
prohibited by applicable law, the Committee may delegate all or a portion of its
responsibilities and powers to any one or more of its members or to any other
person or persons selected by the Committee. Any such delegation may be revoked
by the Committee at any time. The determinations of the Committee pursuant to
its authority under the Plan shall be conclusive and binding.

SECTION 4. ELIGIBILITY: The Committee shall designate which Eligible Employees
will be Annual Award Participants or Long-Term Award Participants in the Plan
for a particular Plan Year or Plan Period, as the case may be. Such designation
for any Plan Year or Plan Period shall not require designation of such Eligible
Employee as an Annual Award Participant or Long-Term Award Participant for any
other Plan Year or Plan Period.

SECTION 5. ANNUAL AWARDS:

         (a)      The Committee may make Annual Awards to Annual Award
                  Participants with respect to each Plan Year, subject to the
                  terms and conditions set forth in the Plan.

         (b)      Within 90 days after the commencement of each Plan Year (or
                  such other date as required by Section 162(m) of the Code and
                  the regulations promulgated thereunder), the Committee shall,
                  in writing, select which Eligible Employees will be Annual
                  Award Participants for such Plan Year and determine for each
                  such Plan Year the following:

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                  (i)      The Performance Goal or Performance Goals applicable
                           to each Annual Award Participant for the Plan Year
                           based on one or more Performance Measures; and

                  (ii)     The payment schedule detailing the total amount which
                           may be available for payment to each Annual Award
                           Participant as an Annual Award based upon the
                           relative level of attainment of the Performance Goal
                           or Performance Goals.

         (c)      Upon completion of a Plan Year, the Committee shall:

                  (i)      Certify, in writing, prior to payment of any Annual
                           Award, whether and to what extent the Performance
                           Goal or Performance Goals for the Plan Year were
                           satisfied;

                  (ii)     Determine the amount available for each Annual Award
                           Participant's Annual Award pursuant to the payment
                           schedule established in Section 5(b)(ii);

                  (iii)    Determine any increase or reduction in the amount of
                           an Annual Award Participant's available Annual Award,
                           as determined pursuant to Section 5(c)(ii),
                           (including a reduction to zero) based on any
                           subjective or objective factors that it determines to
                           be appropriate in its sole discretion; provided,
                           however, in the case of a Covered Employee, the
                           Committee may reduce (including a reduction to zero)
                           but may not increase the amount of an available
                           Annual Award; and provided further that the exercise
                           of such discretion to reduce an Annual Award with
                           respect to any Annual Award Participant shall not
                           have the effect of increasing an Annual Award that is
                           payable to a Covered Employee; and

                  (iv)     Authorize payment subject to Section 7 of such
                           amounts determined under Section 5(c)(iii).

         (d)      Notwithstanding any other provision of this Plan, in no event
                  shall the Annual Award earned by any Covered Employee for a
                  Plan Year exceed the Annual Award Maximum Amount.

SECTION 6.        LONG-TERM AWARDS:

         (a)      The Committee may make Long-Term Awards to Long-Term Award
                  Participants with respect to each Plan Period, subject to the
                  terms and conditions set forth in the Plan.

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         (b)      Within 90 days after the commencement of each Plan Period (or
                  such other date as required by Section 162(m) of the Code and
                  the regulations promulgated thereunder), the Committee shall,
                  in writing, select the length of such Plan Period, select
                  which Eligible Employees will be Long-Term Award Participants
                  for such Plan Period, and determine for each such Plan Period
                  the following:

                  (i)      The Performance Goal or Performance Goals applicable
                           to each Long-Term Award Participant for the Plan
                           Period based on one or more Performance Measures; and

                  (ii)     The payment schedule detailing the total amount which
                           may be available for payment to each Long-Term Award
                           Participant as a Long-Term Award based upon the
                           relative level of attainment of the Performance Goal
                           or Performance Goals.

         (c)      Upon completion of a Plan Period, the Committee shall:

                  (i)      Certify, in writing, prior to payment of any
                           Long-Term Award, whether and to what extent the
                           Performance Goal or Performance Goals for the Plan
                           Period were satisfied;

                  (ii)     Determine the amount available for each Long-Term
                           Award Participant's Long-Term Award pursuant to the
                           payment schedule established in Section 6(b)(ii);

                  (iii)    Determine any increase or reduction in the amount of
                           a Long-Term Award Participant's available Long-Term
                           Award, as determined pursuant to Section 6(c)(ii),
                           (including a reduction to zero) based on any
                           subjective or objective factors that it determines to
                           be appropriate in its sole discretion; provided,
                           however, in the case of a Covered Employee, the
                           Committee may reduce (including a reduction to zero)
                           but may not increase the amount of an available
                           Long-Term Award; and provided further that the
                           exercise of such discretion to reduce a Long-Term
                           Award with respect to any Long-Term Award Participant
                           shall not have the effect of increasing a Long-Term
                           Award that is payable to a Covered Employee; and

                  (iv)     Authorize payment subject to Section 7 of such
                           amounts determined under Section 6(c)(iii).

         (d)      Notwithstanding any other provision of this Plan, in no event
                  shall the Long-Term Award earned by any Covered Employee for a
                  Plan Period exceed the Long-Term Award Maximum Amount.

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SECTION 7. PAYMENT OF AWARDS: Annual Awards and Long-Term Awards under this Plan
shall be made in a lump sum payment in cash to the Annual Award Participant or
Long-Term Award Participant, as the case may be, or to the beneficiary, as
designated under procedures established by the Committee, of such Annual Award
Participant or Long-Term Award Participant as soon as practicable following the
Plan Year or Plan Period, as the case may be, or shall be deferred under such
plan as the Company may have established for such purposes. The Company may
deduct from any payment such amounts as may be required to be withheld under any
federal, state, or local tax laws.

SECTION 8. NO CONTINUED EMPLOYMENT: Nothing in this Plan shall give any person
any right to continue in the employ of the Company or any Company Subsidiary or
constitute a contract or agreement of employment or interfere in any way with
the right of the Company or any Company Subsidiary to terminate or change the
conditions of employment.

SECTION 9. NONASSIGNABILITY: Except as otherwise required by applicable law, any
rights of an Annual Award Participant or Long-Term Award Participant or a
beneficiary of an Annual Award Participant or Long-Term Award Participant under
this Plan shall not be anticipated, sold, assigned, transferred, encumbered,
hypothecated, or pledged nor subject to any levy or charge and shall not be
subject in any manner to the claims of any creditor of an Annual Award
Participant or Long-Term Award Participant or a beneficiary of an Annual Award
Participant or Long-Term Award Participant; and any attempt to take such action
shall be null and void.

SECTION 10. TERMINATION AND AMENDMENT: Subject to the approval of the Board,
where required, the Committee may at any time and from time to time alter,
amend, suspend, or terminate the Plan in whole or in part; provided, however,
that no amendment which requires shareholder approval in order for the Plan to
continue to comply with Section 162(m) of the Code with respect to a Covered
Employee shall be effective unless such amendment is approved by the
shareholders of the Company. Notwithstanding the foregoing, no termination or
amendment of the Plan may, without the consent of an Annual Award Participant or
Long-Term Award Participant to whom an Annual Award or Long-Term Award, as the
case may be, has been determined for a completed Plan Year or Plan Period, as
the case may be, but not yet paid, adversely affect the rights of such Annual
Award Participant or Long-Term Award Participant in such Annual Award or
Long-Term Award.

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SECTION 11. INTERPRETATION: Except in connection with a change in control of the
Company, as determined by the Committee in its sole discretion, it is the intent
of the Company that Annual Awards and Long-Term Awards made to Covered Employees
shall constitute "qualified performance-based compensation" satisfying the
requirements of Section 162(m) of the Code. Accordingly, the provisions of the
Plan shall be interpreted in a manner consistent with Section 162(m) of the
Code. If any other provision of the Plan, an Annual Award, or a Long-Term Award
is intended to but does not comply or is inconsistent with the requirements of
Section 162(m) of the Code, such provision shall be construed or deemed amended
to the extent necessary to conform to and comply with such requirements.

SECTION 12. UNFUNDED STATUS: Annual Awards and Long-Term Awards shall be made
from the general funds of the Company, and no special or separate fund shall be
established or other segregation of assets made to assure payment. No Annual
Award Participant or Long-Term Award Participant or other person shall have
under any circumstances any interest in any particular property or assets of the
Company.

SECTION 13. APPLICABLE LAW: This Plan shall be governed by and construed in
accordance with the laws of the State of Kansas, without regard to its
principles of conflict of laws.


SECTION 14. EFFECTIVE DATE: This Plan will become effective as of February 3,
2002; provided, however, that no Annual Award or Long-Term Award will be made to
a Covered Employee under the Plan unless prior to such payment, the holders of a
majority of the shares of the Company's common stock actually voting on the
matter approve this Plan at a meeting of the shareholders of the Company.

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