FOOTSTAR, INC.
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                           Deferred Compensation Plan
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                                 FOOTSTAR, INC.
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                           Deferred Compensation Plan
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1.  Purposes..............................................................   1

2.  Definitions...........................................................   1

3.  Administration........................................................   2

4.  Participation.........................................................   3

5.  Deferrals.............................................................   3

6.  Deferral Accounts.....................................................   4

7.  Deferral of Certain Stock-Denominated Awards..........................   5

8.  Settlement of Deferral Accounts.......................................   6

9.  Provisions Relating to Section 16 of the Exchange Act
    and Section 162(m) of the Code........................................   6

10. Statements............................................................   7

11. Sources of Stock:  Limitation on Amount of
    Stock-Denominated Deferrals...........................................   7

12. Amendment/Termination.................................................   7

13. General Provisions....................................................   7

14. Effective Date........................................................   9

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                                 FOOTSTAR, INC.
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                           Deferred Compensation Plan
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     1. Purposes. The purposes of this Deferred Compensation Plan (the "Plan")
are to provide certain highly compensated employees of Footstar, Inc. (the
"Company") and its subsidiaries with the opportunity to elect to defer receipt
of specified portions of compensation and to have such deferred amounts treated
as if invested in specified investment vehicles.

     2. Definitions. In addition to the terms defined in Section 1 above, the
following terms used in the Plan shall have the meanings set forth below:

          (a) "Administrator" shall mean the Deferred Compensation Committee set
forth in Section 3(b) to whom the Committee has delegated the authority to take
action under the Plan, except as may be otherwise required under Section 9.

          (b) "Beneficiary" shall mean any person (which may include trusts and
is not limited to one person) who has been designated by the Participant in his
or her most recent written beneficiary designation filed with the Company to
receive the benefits specified under the Plan in the event of the Participant's
death. If no Beneficiary has been designated who survives the Participant's
death, then Beneficiary means any person(s) entitled by will or, in the absence
thereof, the laws of descent and distribution to receive such benefits.

          (c) "Change in Control" shall have the meaning given to such term in
the Footstar, Inc. 1996 Incentive Compensation Plan.

          (d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
References to any provision of the Code or regulation (including a proposed
regulation) thereunder shall include any successor provisions or regulations.

          (e) "Committee" shall mean the Compensation Committee of the Board of
Directors of the Company or any other directors of the Company designated as the
Committee. Except as may be otherwise required under Section 9 or by applicable
law, any function of the Committee may be delegated to the Administrator.

          (f) "Deferral Account" shall mean the account or subaccount
established and maintained by the Company for specified deferrals by a
Participant, as described in Sections 6 and 7. Deferral Accounts will be
maintained solely as bookkeeping entries by the Company to evidence unfunded
obligations of the Company.

          (g) "Disability" shall have the meaning given to such term in the
Company's Long-Term Disability Plan.

          (h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended. References to any provision of the Exchange Act or rule thereunder
shall include any successor provisions or rules.

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          (i) "Participant" shall mean any employee of the Company or any
subsidiary who is designated by the Committee as an eligible Participant in the
Plan and who participates or makes an election to participate in the Plan.

          (j) "Retirement" shall mean a Participant's voluntary termination of
employment (i) at or after attaining age 60 or (ii) at or after attaining age
55, but prior to attaining age 60, if such termination is approved in advance by
the Committee.

          (k) "Stock" shall mean Footstar, Inc. Common Stock, or any other
equity securities of the Company designated by the Committee.

          (l) "Trust" shall mean any trust or trusts established by the Company
as part of the Plan; provided, however, that the assets of such trusts shall
remain subject to the claims of the general creditors of the Company.

          (m) "Trustee" shall mean the trustee of a Trust.

          (n) "Trust Agreement" shall mean the agreement entered into between
the Company and the Trustee to carry out the purposes of the Plan, as amended or
restated from time to time.

          (o) "Valuation Date" shall mean the close of business on the last
business day of each calendar quarter; provided, however, that in the case of
termination of employment for reasons other than Retirement, death, or
Disability, the Valuation Date shall mean the close of business on the last
business day of the month in which employment terminates, and in the case of a
Change in Control of the Company, the Valuation Date shall be the date of such
Change in Control.

     3. Administration.

          (a) Authority. Both the Committee and the Administrator (subject to
the ability of the Committee to restrict the Administrator) shall administer the
Plan in accordance with its terms, and shall have all powers necessary to
accomplish such purpose, including the power and authority to construe and
interpret the Plan, to define the terms used herein, to prescribe, amend and
rescind rules and regulations, agreements, forms, and notices relating to the
administration of the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. Any actions of the Committee or
the Administrator with respect to the Plan shall be conclusive and binding upon
all persons interested in the Plan, except that any action of the Administrator
will not be binding on the Committee. The Committee and Administrator may each
appoint agents and delegate thereto powers and duties under the Plan, except as
otherwise limited by the Plan.

          (b) Administrator. The Administrative Committee shall consist of such
number of members as shall be determined by the Committee, each of whom shall be
appointed by, shall remain in office at the will of, and may be removed, with or
without cause, by the Committee. Any member of the Administrative Committee may
resign at any time. No member of the Administrative Committee shall be entitled
to act on or decide any matter relating solely to himself or herself or any of
his or her rights or benefits under the Plan. The members of the Administrative
Committee shall not receive any special compensation for serving in their
capacities as members of the Administrative Committee but shall be reimbursed


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for any reasonable expenses incurred in connection therewith. No bond or other
security need be required of the Administrative Committee or any member thereof
in any jurisdiction.

          (c) Limitation of Liability. Each member of the Committee and the
Administrator shall be entitled to, in good faith, rely or act upon any report
or other information furnished to him or her by any officer or other employee of
the Company or any subsidiary, the Company's independent certified public
accountants, or any executive compensation consultant, legal counsel, or other
professional retained by the Company to assist in the administration of the
Plan. To the maximum extent permitted by law, no member of the Committee or the
Administrator, nor any person to whom ministerial duties have been delegated,
shall be liable to any person for any action taken or omitted in connection with
the interpretation and administration of the Plan.

     4. Participation. The Administrator will notify each person of his or her
participation or eligibility to participate in the Plan not later than 15 days
(or such lesser period as may be practicable in the circumstances) prior to any
deadline for filing an election form.

     5. Deferrals. To the extent authorized by the Committee, a Participant may
elect to defer compensation or awards which may be in the form of cash, Stock,
Stock-denominated awards or other property to be received from the Company or a
subsidiary, including salary, annual incentive award, long term award, shares
issuable on stock option exercise and compensation payable under other plans and
programs, employment agreements or other arrangements, or otherwise, as may be
provided under the terms of such plans, programs and arrangements or as
designated by the Committee; provided, however, that a Participant who is an
employee of the Company or a subsidiary may defer, with respect to a given year,
receipt of only that portion of the Participant's salary, annual incentive
award, long term award, shares issuable on stock option exercise and
compensation payable under other plans and programs, employment agreements or
other arrangements that exceeds the FICA maximum taxable wage base plus the
amount necessary to satisfy Medicare and all other payroll taxes (other than
Federal, state or local income tax withholding) imposed on the wages of such
Participant from the Company and its subsidiaries. In addition to such
limitation, and any terms and conditions of deferral set forth under plans,
programs or arrangements from which receipt of compensation or awards is
deferred, the Committee may impose limitations on the amounts permitted to be
deferred and other terms and conditions on deferrals under the Plan. Any such
limitations, and other terms and conditions of deferral, shall be set forth in
the rules relating to the Plan or election forms, other forms, or instructions
published by the Committee and/or the Administrator.

          (a) Elections. Once an election form, properly completed, is received
by the Company, the elections of the Participant shall be irrevocable; provided,
however, that the Committee and/or the Administrator may, in its discretion,
permit a Participant to elect a further deferral of amounts credited to a
Deferral Account by filing a later election form; provided, further, that,
unless otherwise approved by the Committee, any election to further defer
amounts credited to a Deferral Account must be made at least one (1) year prior
to the date such amounts would otherwise be payable.

          (b) Date of Election. An election to defer compensation or awards
hereunder must be received by the Administrator prior to the date specified by
the Administrator. Under no circumstances may a Participant defer compensation
or awards to which the Participant has


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attained,  at the time of  deferral,  a  legally  enforceable  right to  current
receipt of such compensation or awards.

     6. Deferral Accounts. The following provisions will apply to Deferral
Accounts other than those established under Section 7:

          (a) Establishment; Crediting of Amounts Deferred. One or more Deferral
Accounts will be established for each Participant, as determined by the
Administrator. The amount of compensation or awards deferred with respect to
each Deferral Account will be credited to such Account as of the date on which
such amounts would have been paid to the Participant but for the Participant's
election to defer receipt hereunder. The amounts of hypothetical income and
appreciation and depreciation in value of such account will be credited and
debited to, or otherwise reflected in, such Account from time to time. Unless
otherwise determined by the Administrator, cash amounts credited to a Deferral
Account shall be deemed invested in a hypothetical investment as of the date of
deferral.

          (b) Hypothetical Investment Vehicles. Subject to the provisions of
Sections 6(c) and 9, amounts credited to a Deferral Account shall be deemed to
be invested, at the Participant's direction, in one or more investment vehicles
as may be specified from time to time by the Administrator. The Administrator
may change or discontinue any hypothetical investment vehicle available under
the Plan in its discretion; provided, however, that, subject to the authority of
the Administrator to disregard the directions of any Participant, each affected
Participant is given the opportunity, without limiting or otherwise impairing
any other right of such Participant regarding changes in investment directions,
to redirect the allocation of his or her Deferral Account deemed invested in the
discontinued investment vehicle among the other hypothetical investment
vehicles, including any replacement vehicle.

          (c) Allocation and Reallocation of Hypothetical Investments. A
Participant may allocate amounts credited to his or her Deferral Account to one
or more of the hypothetical investment vehicles authorized under the Plan.
Subject to the rules established by the Administrator, a Participant may
reallocate amounts credited to his or her Deferral Account as of the Valuation
Date following the Participant's election to one or more of such hypothetical
investment vehicles, by filing with the Administrator a notice, in such form as
may be specified by the Administrator, not later than the 15th of the month
preceding such Valuation Date. The Committee or Administrator may, in its
discretion, restrict allocation into or reallocation by specified Participants
into or out of specified investment vehicles or specify minimum amounts that may
be allocated or reallocated by Participants.

          (d) Trusts. The Committee may, in its discretion, establish one or
more Trusts (including sub-accounts under such Trusts), and deposit therein
amounts of cash, Stock, or other property not exceeding the amount of the
Company's obligations with respect to a Participant's Deferral Account
established under this Section 6. In such case, the amounts of hypothetical
income and appreciation and depreciation in value of such Deferral Account shall
be equal to the actual income on, and appreciation and depreciation of, the
assets in such Trusts. Other provisions of this Section 6 notwithstanding, the
timing of allocations and reallocations of assets in such a Deferral Account,
and the investment vehicles available with respect to such Deferral Account, may
be varied to reflect the timing of actual investments of the assets of such
Trust and the actual investments available to such Trust.


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     7. Deferral of Certain Stock-Denominated Awards.

          (a) Establishment. Subject to any terms and conditions imposed by the
Committee, Participants may elect to defer, under the Plan, awards denominated
in Stock specified in Sections 7(d) or 7(e) or otherwise specified by the
Committee or Administrator. In connection with such deferral of a
Stock-denominated award, a Deferral Account shall be established for such
Participant and a Trust (including sub-accounts under such Trust) may also be
established, on terms determined by the Committee, into which the Company may
deposit a number of whole shares of Stock equal to the number of shares subject
to such deferred award. With respect to any fractional shares of Stock or
Stock-denominated awards, the Administrator, in its sole discretion, shall pay
such fractional shares to the Participant in cash or credit the Deferral Account
with cash in lieu of depositing fractional shares into the Deferral Account. In
such case, the amounts of hypothetical income and appreciation and depreciation
in value of such Deferral Account shall be equal to the actual income on, and
appreciation and depreciation of, the assets in the Trust.

          (b) Investment of Trust Assets. The Trustee of each Trust, which shall
be a party not under the control of the Company, shall be authorized, upon
written instructions received from the Administrator or investment manager
appointed by the Administrator, to invest and reinvest the assets of the Trust
in accordance with the applicable Trust Agreement, including the disposition of
such Stock and reinvestment of the proceeds in one or more investment vehicles
designated by the Administrator; provided that, except as may be permitted under
Section 7(c), no such disposition shall be made until the date that the shares
of Stock subject to the deferred award are no longer subject to a risk of
forfeiture by the Participant.

          (c) Cashless Exercise. If and to the extent permitted by the
Committee, and subject to such terms and conditions as may be established by the
Committee from time to time, a Participant may submit a request to the
Administrator to surrender (or constructively surrender) Stock allocated to his
or her Deferral Account to pay the purchase price of any stock options of the
Company granted to the Participant under another plan, program or arrangement.

          (d) Annual Incentive Award/STEP Program. To the extent Participants
elect, in accordance with election forms approved by the Committee and/or
Administrator, (i) to defer receipt of amounts otherwise payable pursuant to any
annual incentive award and (ii) to have such amounts credited to the
Participant's Deferral Account hereunder in the form of Stock (a "STEP
Deferral"), the Company shall credit the Participant's Deferral Account with an
additional number of shares of Stock (a "STEP Premium") equal to 50% of the
number of shares constituting such STEP Deferral; provided, however, that the
number of shares of Stock constituting the STEP Premium shall be reduced to the
extent necessary so that the value of such shares on the crediting date is no
more than 25% of the Participant's total annual incentive award. The number of
shares of Stock constituting the STEP Premium (together with any appreciation
and dividends thereon) shall become vested and nonforfeitable only if the
Participant continues to be employed by the Company or a subsidiary, and the
related shares constituting the STEP Deferral remain credited to the
Participant's Deferral Account, until the earliest to occur of (i) expiration of
five years after such crediting, (ii) a Change in Control, or (iii) the
termination of the Participant's employment with the Company or a subsidiary due
to death, Disability, or Retirement. Shares of Stock constituting the STEP
Premium shall be forfeited in the event the preceding conditions are not
satisfied. Notwithstanding the foregoing, in the event of a Change in Control,
shares of Stock constituting the STEP Premium that have not previously been
forfeited shall automatically become 100% vested and nonforfeitable and shall


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be distributed in accordance with the Plan. Shares credited to a Participant's
Deferral Account in connection with the STEP Deferral and STEP Premium shall be
deemed to be awards under the Footstar, Inc. 1996 Incentive Compensation Plan.

     8. Settlement of Deferral Accounts.

          (a) Form of Payment. The Company shall settle a Participant's Deferral
Account, and discharge all of its obligations to pay deferred compensation under
the Plan with respect to such Deferral Account, by payment of cash or, in the
discretion of the Committee, by delivery of other assets (including Stock)
having a fair market value equal to the amount credited to the Deferral Account.

          (b) Forfeited Shares. To the extent that Stock (i) is deposited in a
Trust pursuant to Section 7 in connection with a deferral of Stock or a
Stock-denominated award under another plan, program, employment agreement or
other arrangement and (ii) is forfeited pursuant to the terms of such plan,
program, agreement or arrangement, the Participant shall not be entitled to the
value of such Stock and other property related thereto (including without
limitation, dividends and distributions thereon). Any Stock or Stock-denominated
awards and other property forfeited shall be returned to the Company.

          (c) Timing of Payments. Payments in settlement of a Deferral Account
shall be made as soon as practicable after the date or dates (including upon the
occurrence of specified events), and in such number of installments, as may be
directed by the Participant in his or her election relating to such Deferral
Account, or earlier in the following circumstances:

          (i) In the event of termination of employment for reasons other than
     Retirement or Disability, a single lump sum payment in settlement of any
     Deferral Account (including a Deferral Account with respect to which one or
     more installment payments have previously been made) shall be made as
     promptly as practicable following the next Valuation Date, unless otherwise
     determined by the Administrator; or

          (ii) In the event of a Change in Control, payments in settlement of
     any Deferral Account (including a Deferral Account with respect to which
     one or more installment payments have previously been made) shall be made
     within fifteen (15) business days following such Change in Control.

          (d) Financial Emergency and Other Payments. Other provisions of the
Plan (except Section 9) notwithstanding, if, upon the written application of a
Participant, the Committee determines that the Participant has a financial
emergency of such a substantial nature and beyond the individual's control that
payment of amounts previously deferred under the Plan is warranted, the
Committee may direct the payment to the Participant of all or a portion of the
balance of a Deferral Account and the time and manner of such payment.

     9.   Provisions Relating to Section 16 of the Exchange Act and Section
          162(m) of the Code.

          (a) Compliance with Section 16. With respect to a Participant who is
then subject to the reporting requirements of Section 16(a) of the Exchange Act,
the Committee and Administrator shall implement transactions under the Plan and
administer the Plan in a manner that will ensure that each transaction by such a
Participant is exempt from or otherwise not


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subject to liability  under Rule 16b-3,  except that such a  Participant  may be
permitted to engage in a non-exempt transaction under the Plan if written notice
is given to the Participant regarding the non-exempt nature of such transaction.

          (b) Compliance with Code Section 162(m). It is the intent of the
Company that any compensation (including any award) deferred under the Plan by a
person who is, with respect to the year of payout, deemed by the Committee to be
a "covered employee" within the meaning of Code Section 162(m) and regulations
thereunder, which compensation constitutes "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder, shall not, as a result of deferral hereunder, become compensation
with respect to which the Company in fact would not be entitled to a tax
deduction under Code Section 162(m). Accordingly, unless otherwise determined by
the Committee, if any compensation would become so disqualified under Section
162(m) as a result of deferral hereunder, the terms of such deferral shall be
automatically modified to the extent necessary to ensure that the compensation
would not, at the time of payout, be so disqualified.

     10. Statements. The Administrator will furnish statements to each
Participant reflecting the amount credited to a Participant's Deferral Accounts
and transactions therein not less frequently than once each calendar year.

     11. Sources of Stock: Limitation on Amount of Stock-Denominated Deferrals.
If Stock is deposited under the Plan in a Trust pursuant to Section 7 in
connection with a deferral of a Stock-denominated award under another plan,
program, employment agreement or other arrangement that provides for the
issuance of shares, the shares so deposited shall be deemed to have originated,
and shall be counted against the number of shares reserved, under such other
plan, program or arrangement. Stock actually delivered in settlement of Deferral
Accounts shall be originally issued shares or treasury shares, in the discretion
of the Committee.

     12. Amendment/Termination. The Committee may, with prospective or
retroactive effect, amend, alter, suspend, discontinue, or terminate the Plan at
any time without the consent of Participants, stockholders, or any other person;
provided, however, that, without the consent of a Participant, no such action
shall materially and adversely affect the rights of such Participant with
respect to any rights to payment of amounts credited to such Participant's
Deferral Account. Notwithstanding the foregoing, the Committee may, in its sole
discretion, terminate the Plan (in whole or in part) and distribute to
Participants (in whole or in part) the amounts credited to their Deferral
Accounts.

     13. General Provisions.

          (a) Limits on Transfer of Awards. Other than by will or the laws of
descent and distribution, no right, title or interest of any kind in the Plan
shall be transferable or assignable by a Participant or his or her Beneficiary
or be subject to alienation, anticipation, encumbrance, garnishment, attachment,
levy, execution or other legal or equitable process, nor subject to the debts,
contracts, liabilities or engagements, or torts of any Participant or his or her
Beneficiary. Any attempt to alienate, sell, transfer, assign, pledge, garnish,
attach or take any other action subject to legal or equitable process or
encumber or dispose of any interest in the Plan shall be void.


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          (b) Receipt and Release. Payments (in any form) to any Participant or
Beneficiary in accordance with the provisions of the Plan shall, to the extent
thereof, be in full satisfaction of all claims for the compensation or awards
deferred and relating to the Deferral Account to which the payments relate
against the Company or any subsidiary thereof, the Committee, or the
Administrator, and the Administrator may require such Participant or
Beneficiary, as a condition to such payments, to execute a receipt and release
to such effect. In the case of any payment under the Plan of less than all
amounts then credited to an account in the form of Stock, the amounts paid shall
be deemed to relate to the Stock credited to the account at the earliest time.

          (c) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for deferred compensation and
Participants shall rely solely on the unsecured promise of the Company for
payment hereunder. With respect to any payment not yet made to a Participant
under the Plan, nothing contained in the Plan shall give a Participant any
rights that are greater than those of a general unsecured creditor of the
Company; provided, however, that the Committee may authorize the creation of
Trusts, including but not limited to the Trusts referred to in Sections 6 and 7
hereof, or make other arrangements to meet the Company's obligations under the
Plan, which Trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan unless the Committee otherwise determines with the consent of
each affected Participant.

          (d) Compliance. A Participant in the Plan shall have no right to
receive payment (in any form) with respect to his or her Deferral Account until
legal and contractual obligations of the Company relating to establishment of
the Plan and the making of such payments shall have been complied with in full.
In addition, the Company shall impose such restrictions on Stock delivered to a
Participant hereunder and any other interest constituting a security as it may
deem advisable in order to comply with the Securities Act of 1933, as amended,
the requirements of the New York Stock Exchange or any other stock exchange or
automated quotation system upon which the Stock is then listed or quoted, any
state securities laws applicable to such a transfer, any provision of the
Company's Certificate of Incorporation or Bylaws, or any other law, regulation,
or binding contract to which the Company is a party.

          (e) Other Participant Rights. No Participant shall have any of the
rights or privileges of a stockholder of the Company under the Plan, including
as a result of the crediting of Stock equivalents or other amounts to a Deferral
Account, or the creation of any Trust and deposit of such Stock therein, except
at such time as Stock may be actually delivered in settlement of a Deferral
Account. No provision of the Plan or transaction hereunder shall confer upon any
Participant any right to be employed by the Company or a subsidiary thereof, or
to interfere in any way with the right of the Company or a subsidiary to
increase or decrease the amount of any compensation payable to such Participant.
Subject to the limitations set forth in Section 13(a) hereof, the Plan shall
inure to the benefit of, and be binding upon, the parties hereto and their
successors and assigns.

          (f) Tax Withholding. The Company and any subsidiary shall have the
right to deduct from amounts otherwise payable in settlement of a Deferral
Account any sums that federal, state, local or foreign tax law requires to be
withheld with respect to such payment. Shares may be withheld to satisfy such
obligations in any case where taxation would be imposed upon the delivery of
shares, except that shares issued or delivered under any plan, program,
employment agreement or other arrangement may be withheld only in accordance


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with the terms of such plan, program,  employment agreement or other arrangement
and any applicable rules, regulations, or resolutions thereunder.

          (g) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware, without giving effect to
principles of conflicts of laws, and applicable provisions of federal law.

          (h) Limitation. A Participant and his or her Beneficiary shall assume
all risk in connection with any decrease in value of the Deferral Account and
neither the Company, the Committee nor the Administrator shall be liable or
responsible therefor.

          (i) Construction. The captions and numbers preceding the sections of
the Plan are included solely as a matter of convenience of reference and are not
to be taken as limiting or extending the meaning of any of the terms and
provisions of the Plan. Whenever appropriate, words used in the singular shall
include the plural or the plural may be read as the singular.

          (j) Severability. In the event that any provision of the Plan shall be
declared illegal or invalid for any reason, said illegality or invalidity shall
not affect the remaining provisions of the Plan but shall be fully severable,
and the Plan shall be construed and enforced as if said illegal or invalid
provision had never been inserted herein.

          (k) Status. The establishment and maintenance of, or allocations and
credits to, the Deferral Account of any Participant shall not vest in any
Participant any right, title or interest in and to any Plan assets or benefits
except at the time or times and upon the terms and conditions and to the extent
expressly set forth in the Plan and in accordance with the terms of the Trust.

     14. Effective Date. The Plan shall be effective as of October 8, 1996.

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