Document:

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                                                                   Exhibit 10.12
                            PAYLESS SHOESOURCE, INC.
                           DEFERRED COMPENSATION PLAN
                            (Amended July 20, 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.

         (2) 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).

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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 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

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                  (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 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.

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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 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

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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).

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:

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                  (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.

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.

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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 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

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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 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

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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

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

SECTION 14. TERMINATION AND ALTERNATE PLANS.

       (a) In the event that the Company adopts an alternate non-qualified
deferred compensation plan, then all obligations (except for such portion
invested at Participants' direction in the Participants' Stock Unit Accounts)
due Participants under this Plan as of the effective date of such alternate plan
shall be transferred to such alternate plan and shall become obligations under
such alternate plan pursuant to the terms of this Section 14;

       (b) In the event of termination of this Plan, and the prior adoption of
an alternate non-qualified deferred compensation plan, all obligations remaining
under this Plan

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prior to termination shall become obligations of such alternate plan in the
manner determined by the Committee and Participants shall not be permitted to
elect to defer the receipt of his or her compensation on or after the date of
termination of this Plan and have such amount be considered an obligation under
this Plan.

                                       11<PAGE>   1
                                                                   Exhibit 10.13

                            PAYLESS SHOESOURCE, INC.

                     EXECUTIVE INCENTIVE COMPENSATION PLAN

                           AMENDED NOVEMBER 16, 2000

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                            PAYLESS SHOESOURCE, INC.
                      EXECUTIVE INCENTIVE COMPENSATION PLAN

         This document constitutes and sets forth the terms of the Payless
ShoeSource, Inc. Executive Incentive Compensation Plan for Payless Executives.

         Section 1. PURPOSES OF THE PLAN. The purposes of the Plan are (i) to
provide a means to attract, retain and motivate talented personnel and (ii) to
provide to participating management employees added incentive for high levels of
performance and for additional effort to improve the Company's financial
performance. Payments of awards under this Plan are intended to qualify for tax
deductibility under the provisions of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"). Notwithstanding any other provisions of
this Plan, if any decision must be made before a specified date in order for
payments to qualify for such tax deductibility under the tax rules in effect
from time to time, then such decision is to be made before such date.

         Section 2. DEFINITIONS. Whenever used herein, the following terms shall
have the following meanings:

                  a.       "Annual Award" means, for a Participant for a Fiscal
Year, the product of the Participant's Minimum Annual Compensation for such
Fiscal Year multiplied by the aggregate of:

                           i. the Participant's Annual EPS Factor for such
                  Fiscal Year, plus

                           ii. the Participant's Annual RONA Factor for such
                  Fiscal Year.

                  b.       "Annual EPS Factor" means, for a Participant for a
Fiscal Year (i) five percent, if actual EPS Growth for such Fiscal Year equals
or exceeds the Participant's Threshold Annual EPS Growth Objective for such
Fiscal Year, plus (ii) ten percent multiplied by a fraction (not less than zero
and not greater than one), the numerator of which is the actual EPS Growth for
such Fiscal Year less the Participant's Threshold Annual EPS Growth Objective
for such Fiscal Year and the denominator of which is the Participant's Maximum
Annual EPS Growth Objective for such Fiscal Year less the Participant's
Threshold Annual EPS Growth Objective for such Fiscal Year; provided, however,

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                           i. that the Annual EPS Factor shall be subject to
                  adjustment as provided in Section 6(b);

                           ii. that the percentages referred to in this
                  definition may be adjusted by the Committee as provided in
                  Section 4(b); and

                           iii. that the percentages referred to in this
                  definition may be adjusted by the Committee as provided in
                  Section 4(c).

                  c.       "Annual RONA Factor" means, for a Participant for a
Fiscal Year (i) five percent if actual RONA for such Fiscal Year equals or
exceeds the Participant's Threshold Annual RONA Objective for such Fiscal Year,
plus (ii) ten percent multiplied by a fraction (not less than zero and not
greater than one), the numerator of which is the actual RONA for such Fiscal
Year less the Participant's Threshold Annual RONA Objective for such Fiscal Year
and the denominator of which is the Participant's Maximum Annual RONA Objective
for such Fiscal Year less the Participant's Threshold Annual RONA Objective for
such Fiscal Year; provided, however,

                           i. that the Annual RONA Factor shall be subject to
                  adjustment as provided in Section 6(b);

                           ii. that the percentages referred to in this
                  definition may be adjusted by the Committee as provided in
                  Section 4(b); and

                           iii. that the percentages referred to in this
                  definition may be adjusted by the Committee as provided in
                  Section 4(c).

                  d.       "Average Annual Compensation" means, for a Long-Term
Performance Period, the Participant's average annual salary rate during such
period, determined on a monthly basis, or such lesser amount as the Participant
and the Company shall agree to, in writing.

                  e.       "Board" means the Board of Directors of the Company.

                  f.       "Committee" means a committee designated by the
Board, which shall consist of not less than two members of the Board who shall
be appointed by and serve at the pleasure of the Board and who shall be
"outside" directors within the meaning of Section 162(m) of the Code.

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                  g.       "Company" means Payless ShoeSource, Inc.,  a Missouri
corporation, provided, that immediately after the effective time of the Merger
such term shall mean Payless ShoeSource, Inc. (formerly Payless ShoeSource
Holdings, Inc.), a Delaware corporation.

                  h.       "Disability" means the inability of a Participant to
perform the normal duties of the Participant's regular occupation.

                  i.       "EPS Growth" means (i) for a Fiscal Year, the annual
growth rate in EPS measured from the immediately preceding Fiscal Year; and (ii)
for a Long-Term Performance Period, the compound annual growth rate in EPS
measured from the Fiscal Year immediately preceding the Long-Term Performance
Period to the last Fiscal Year in the Long-Term Performance Period. For purposes
of this definition, "EPS" for a Fiscal Year means the Company's EPS for such
Fiscal Year as reported in the Company's annual report to its shareholders for
the year of determination (or, in the event that such item is not included in
such annual report, such comparable figure as may be determined by the
Committee) adjusted by the Company's independent certified public accountants to
exclude such non-recurring or extraordinary items as the Committee shall
determine are not representative of the on-going operations of the Company.

                  j.       "Fiscal Year" means the fiscal year of the Company.

                  k.       "Long-Term Award" means, for a Participant for a
Long-Term Performance Period, the product of the Participant's Average Annual
Compensation for such period multiplied by the aggregate of:

                           i. the Participant's Long-Term EPS Factor for such
                  period, plus

                           ii. the Participant's Long-Term RONA Factor for such
                  period

as such product is adjusted in accordance with Section 5(b) of the Plan.

                  l.       "Long -Term EPS Factor" means, for a Participant for
a Long-Term Performance Period, (i) five percent if actual EPS Growth for such
period equals or exceeds the Participant's Threshold Long-Term EPS Growth
Objective for such period, plus (ii) ten percent multiplied by a fraction (not
less than zero and not greater than one) the numerator of which is the actual
EPS Growth for such period less the Participant's Threshold Long-Term EPS Growth

                                       3
<PAGE>   5

Objective for such period and the denominator of which is the Participant's
Maximum Long-Term EPS Growth Objective for such period less the Participant's
Threshold Long-Term EPS Growth Objective for such period; provided, however,

                           i. that the Long-Term EPS Factor shall be subject to
                  adjustment as provided in Section 6(b); and

                           ii. that the percentages referred to in this
                  definition may be adjusted by the Committee as provided in
                  Section 5(c).

                  m.       "Long-Term Performance Period" means three
consecutive Fiscal Years; provided, however, that the first Long-Term
Performance Period under the Plan shall be Fiscal Year 1996 and the second
Long-Term Performance Period under the Plan shall be Fiscal Years 1996 and 1997.

                  n.       "Long-Term RONA Factor" means, for a Participant for
a Long-Term Performance Period (i) five percent if actual RONA for such period
equals or exceeds the Participant's Threshold Long-Term RONA Objective for such
period plus (ii) ten percent multiplied by a fraction (not less than zero and
not greater than one), the numerator of which is the actual RONA for such period
less the Participant's Threshold Long-Term RONA Objective for such period and
the denominator of which is the Participant's Maximum Long-Term RONA Objective
for such period less the Participant's Threshold Long-Term RONA Objective for
such period; provided, however,

                           i. that the Long-Term RONA Factor shall be subject to
                  adjustment as provided in Section 6(b); and

                           ii. that the percentages referred to in this
                  definition may be adjusted by the Committee as provided in
                  Section 5(c).

                  o.       "Market Value" means the average closing price of the
Stock on the New York Stock Exchange, Inc. during the month of February of the
year specified; provided, however, that "Market Value" for Fiscal Year 1996
means the arithmetic average of the high and low trading prices of the Stock on
the New York Stock Exchange for each of the first 30 trading days on which
trading in the Stock on that exchange occurs.

                  p. "Minimum Annual Compensation" means, for a Fiscal Year,
the Participant's rate of minimum annual salary on the first day of the fiscal
month of November in the Fiscal Year.

                                       4
<PAGE>   6

                  q.       "Participant" means an individual who has been
designated to participate in the Plan in accordance with Section 3 of the Plan.

                  r.       "Plan" mean the Payless ShoeSource, Inc. Executive
Incentive Compensation Plan for Payless Executives.

                  s.       "Relative Performance Rank" means, for a Fiscal Year
or for a Long-Term Performance Period, the relative rank of the Company (as
among the Company and a group of competitors designated by the Committee) based
on the EPS Growth and RONA, respectively, of all such corporations for such
corporations' comparable fiscal periods, as determined by the Committee.
Relative Performance Rank shall be determined based on data provided by the
Company's independent certified public accountants from publicly available
information about all such corporations, and adjusted by such independent
certified public accountants for comparability (adjustments for LIFO, major
non-recurring transactions, etc.) subject to the direction and approval of the
Committee. The Committee may change the number of competitors or corporations
included in the group when, as a result of extraordinary or unforeseen events,
it is no longer appropriate for a particular corporation to be included in the
competitor group (such as when one of the group ceases operations, merges with
another corporation, files for bankruptcy protection or significantly changes
the nature of its business).

                  t.       "Retirement" means, as to a Participant, retirement
as that word is defined in the Company's Profit Sharing Plan.

                  u.       "RONA" means (i) for a Fiscal Year, the Company's
return on beginning net assets for such Fiscal Year as reported in the Company's
annual report to its shareowners for the year of determination (or, in the event
that such item is not included in such annual report, such comparable figure as
may be determined by the Committee) adjusted by the Company's independent
certified public accountants to exclude such non-recurring or extraordinary
items as the Committee shall determine are not representative of the ongoing
operations of the Company; and (ii) for a Long-Term Performance Period, the sum
of the RONA for each Fiscal Year in the Long-Term Performance Period divided by
three.

                  v.       "Stock" means the common stock of the Company.

                  w.       "Subsidiary" means a subsidiary corporation of the
Company within the meaning of Section 425(f) of Code.

                                       5
<PAGE>   7

                  x.       The terms "Maximum Annual EPS Growth Objective,"
"Maximum Long-Term EPS Growth Objective," "Target Annual EPS Growth Objective,"
"Target Long-Term EPS Growth Objective," "Threshold Annual EPS Growth
Objective," "Threshold Long-Term EPS Growth Objective," "Maximum Annual RONA
Objective," "Maximum Long-Term RONA Objective," "Target Annual RONA Objective,"
"Target Long-Term RONA Objective," "Threshold Annual RONA Objective" and
"Threshold Long-Term RONA Objective" shall mean the respective objectives
determined by the Committee for each Participant pursuant to Section 7 of the
Plan.

                  y.       "Merger" means the merger of Payless Merger Corp., a
Missouri corporation and wholly-owned subsidiary of Payless ShoeSource, Inc.
(formerly Payless ShoeSource Holdings, Inc.), a Delaware corporation, with the
Company, pursuant to an Agreement and Plan of Merger among the Company, Payless
Merger Corp. and Payless ShoeSource, Inc. (formerly Payless ShoeSource Holdings,
Inc.).

         Section 3. ELIGIBILITY. Management employees of the Company and its
Subsidiaries shall be eligible to participate in the Plan. The Committee may, in
its sole discretion, designate any such individual as a Participant for a
particular Fiscal Year and/or for a particular Long-Term Performance Period
before the end of such Fiscal Year and Long-Term Performance Period,
respectively. Designation of an individual as a Participant for any period shall
not require designation of such individual as a Participant in any other period,
and designation of one individual as a Participant shall not require designation
of any other individual as a Participant in such period or in any other period.

         Section 4. ANNUAL AWARD.

                  a.       Subject to the other provisions of the Plan, a
Participant for a Fiscal Year who is designated as such for an entire Fiscal
Year shall be entitled to an Annual Award for such Fiscal Year. Subject to the
other provisions of the Plan, a Participant for a Fiscal Year who is designated
as such for less than an entire Fiscal Year shall be entitled to a reduced
Annual Award for such Fiscal Year equal to the Annual Award for such Fiscal Year
multiplied by a fraction, the numerator of which shall be the number of complete
fiscal months between (i) the first day of the fiscal month in which occurs the
date as of which the Participant was so designated and (ii) the end of such
Fiscal Year and the denominator of which shall be twelve.

                  b.       The Committee may change the percentages referred to
in the definitions of "Annual EPS Factor" and "Annual RONA Factor" for any
Fiscal Year, provided that the maximum Annual Award which may be paid under such
different percentage may not be greater than 45% of the Participant's Minimum
Annual Compensation for such Fiscal Year.

                                       6
<PAGE>   8

                  c.       The percentages referred to in the definitions of
"Annual EPS Factor" and "Annual RONA Factor" may be adjusted by the Committee,
in its sole discretion, to provide that such percentages

                           i. with respect to the chairman of the Board and
                  chief executive officer of the Company may be up to two times
                  the percentages stated in such definitions (subject to a
                  maximum of 56.25% for each factor), and

                           ii. with respect to the president of the Company may
                  be up to one and two-thirds times the percentages stated in
                  such definitions (subject to a maximum of 31.25% for each
                  factor).

                  d.       Notwithstanding any other provision of the Plan, the
maximum dollar amount of any Annual Award for any Participant for any Fiscal
Year shall not exceed $1,850,000.

         Section 5.        LONG-TERM AWARD.

                  a.       Subject to the other provisions of the Plan, a
Participant for a Long-Term Performance Period who is designated as such for an
entire Long-Term Performance Period shall be entitled to a Long-Term Award for
such period. Subject to the other provisions of the Plan, a Participant for a
Long-Term Performance Period who is designated as such for less than an entire
Long-Term Performance Period shall be entitled to a reduced Long-Term Award for
such period equal to the Long-Term Award for such period multiplied by a
fraction, the numerator of which shall be the number of complete fiscal months
between (i) the first day of the fiscal month in which occurs the date as of
which the Participant was so designated and (ii) the end of such Long-Term
Performance Period and the denominator of which shall be thirty-six.

                  b.       The Long-Term Award otherwise payable pursuant to
Section 5(a) of the Plan for a Long-Term Performance Period shall be adjusted by
multiplying such Long-Term Award by a percentage equal to a fraction, the
numerator of which shall be the Market Value of the Stock in February of the
calendar year in which such Long-Term Performance Period ends and the
denominator of which shall be the Market Value of the Stock in February of the
calendar year in which such Long-Term Performance Period begins; provided,
however, that such percentage shall in no event be greater than one hundred
fifty percent nor less than seventy-five percent.

                  c.       The percentages referred to in the definitions of
"Long-Term EPS Factor" and "Long-Term RONA Factor" may be adjusted by the
Committee, in its sole discretion, to provide that such percentages

                                       7
<PAGE>   9

                           i. with respect to the chairman of the Board and
                  chief executive officer of the Company may be up to two times
                  the percentages stated in such definitions (subject to a
                  maximum of 37.5% for each factor), and

                           ii. with respect to the president of the Company may
                  be up to one and two-thirds times the percentages stated in
                  such definitions (subject to a maximum of 31.25% for each
                  factor).

                  d.       Notwithstanding any other provision of the Plan, the
maximum dollar amount of any Long-Term Award for any Participant for any
Long-Term Performance Period shall not exceed $1,500,000.

         Section 6. ADJUSTMENTS.

                  a.       Discretionary Adjustment of Awards. In the event that
the Committee determines, in its absolute discretion, that an Annual Award or a
Long-Term Award payable to a Participant in accordance with the other terms of
the Plan should be adjusted, upwards or downwards, based on all the facts and
circumstances known to the Committee at the time, then, the Committee may, in
its sole and absolute discretion, increase or decrease any such Annual Award or
Long-Term Award to such amount as it determines; provided, however, that the
Committee may not adjust upwards any Annual Award or Long-Term Award of any
Participant who is a "covered employee" (as defined in Section 162 (m) of the
Code and the regulations thereunder) with respect to the particular performance
period for which the Annual Award or Long-Term Award is being granted.

                  b.       Adjustment for Relative Rank. A Participant's Annual
EPS Factor, Annual RONA Factor, Long-Term EPS Factor and Long-Term RONA Factor
shall be adjusted in the following manner based upon the number of competitors
in the group of competitors used to determine the Company's Relative Performance
Rank and the Company's Relative Performance Rank therein:

           Number of Competitor Companies (not including the Company)
<TABLE>
<CAPTION>

                                    16     15      14     13      12     11      10     9       8      7       6      5       4
<S>                                 <C>    <C>     <C>    <C>     <C>    <C>     <C>    <C>     <C>    <C>     <C>    <C>     <C>
Factor will be no less than         1st-   1st-    1st-   1st-    1st-   1st-    1st-   1st-    1st-   1st-    1st-   1st-    1st
"Target" if the Company's rank is:  4th    4th     4th    4th     3rd    3rd     3rd    3rd     2nd    2nd     2nd    2nd

Factor will be no less than         5th-   5th-    5th-   5th-    4th-   4th-    4th-   4th -   3rd-   3rd-    3rd    3rd     2nd
"Threshold" if the Company's
  rank is:                          8th    8th     7th    7th     6th    6th     5th    5th     4th    4th

Factor will be no higher than       14th-  13th-   12th-  11th-   11th-  10th-   9th-   8th-    8th-   7th-    6th-   5th-    5th
"Threshold" if the Company's
  rank is:                          17th   16th    15th   14th    13th   12th    11th   10th    9th    8th     7th    6th

</TABLE>

                                       8
<PAGE>   10

         Section 7. ANNUAL AND LONG-TERM TARGETS. Threshold, target and maximum
annual and long-term objectives with respect to EPS Growth and with respect to
RONA shall be determined by the Committee as soon as practicable prior to the
commencement of each Fiscal Year and each Long-Term Performance Period for each
Participant or within the period permitted by applicable law. The Committee
shall cause the respective objectives for each Participant to be provided to
such Participant as soon thereafter as practicable. Such objectives shall remain
in effect for the entire Fiscal Year or Long-Term Performance Period, as
appropriate.

         Section 8. PAYMENT OF AWARDS.

                  a.       Annual Awards for a Fiscal Year shall be payable in
cash within three months after the close of such Fiscal Year or as soon
thereafter as practicable.

                  b.       Long-Term Awards for a Long-Term Performance Period
shall be payable in cash within three months after the close of such Long-Term
Performance Period or as soon thereafter as practicable.

                  c.       A Participant may elect to defer all or a portion of
an award by making such election under the Payless ShoeSource, Inc. Deferred
Compensation 401(k) Mirror Plan with respect to such award. Such election must
be made not later than December 31 of the calendar year preceding the
commencement of the Fiscal Year or Long-Term Performance Period, as appropriate.

                  d.       The Company shall have the right to deduct any sums
that federal, state or local tax laws require to be withheld with respect to any
payment of awards.

                  e.       Before any award is paid to a Participant who is a
"covered employee" (as defined in Section 162(m) of the Code and the regulations
thereunder), the Committee shall certify in writing that the material terms of
the Plan have been satisfied.

         Section 9. TERMINATION OF EMPLOYMENT.

                  a.       Death or Disability.  In the event of either the
death or Disability of the Participant while employed (a "Section 9(a) Event"),
the Participant shall be entitled to the following:

                                       9
<PAGE>   11

                           i. An Annual Award with respect to the Fiscal Year in
                  which the Section 9(a) Event occurs equal to the Annual Award
                  otherwise payable (if any) for that Fiscal Year, prorated to
                  the end of the fiscal month in which such Section 9(a) Event
                  occurs; and

                           ii. A Long-Term Award with respect to each Long-Term
                  Performance Period which includes the Fiscal Year of the
                  Section 9(a) Event; provided, however, that for purposes of
                  this Section 9(a)(ii) the Long-Term Award for any Long-Term
                  Performance Period (1) shall be determined at the end of the
                  Fiscal Year in which the Section 9(a) Event occurs, (2) shall
                  be determined (and averages used in that determination shall
                  be calculated) based only on the Fiscal Year and any preceding
                  Fiscal Years otherwise included in the Long-Term Performance
                  Period and (3) shall be prorated to the end of the fiscal
                  month in which the Section 9(a) Event occurs.

                  b.       Retirement.

                           i. In the event of the Retirement of the Participant
                  with the written consent of the Company, such event shall be
                  deemed to be a Section 9(a) Event, and the Participant shall
                  be entitled to an Annual Award and to a Long-Term Award as
                  provided in Section 9(a).

                           ii. In the event of the Retirement of the Participant
                  without the consent of the Company (a "Section 9(b)(ii)
                  Event"), the Participant shall be entitled to the following:

                                    (1) An Annual Award with respect to the
                           Fiscal Year in which the Section 9(b)(ii) Event
                           occurs equal to the Annual Award otherwise payable
                           (if any) for the Fiscal Year, prorated to the end of
                           the fiscal month in which the Section 9(b)(ii) Event
                           occurs; and

                                    (2) No Long-Term Award following the Section
                           9(b)(ii) Event. The Participant shall forfeit any
                           right or entitlement to any award with respect to any
                           Long-Term Performance Period which has not been
                           completed on the date of the Section 9(b)(ii) Event.
                           Any Long-Term Award for a period which ended prior to
                           the Section 9(b)(ii) Event shall remain unaffected.

                  c.       Termination of Employment.

                           i. In the event of the termination of employment of
                  the Participant not covered by Sections 9(a) or 9(b) above
                  which occurs at the end of the term of the Participant's then-
                  current written employment agreement (if

                                       10
<PAGE>   12

                  any) with the Company or Subsidiary, or in the event of such a
                  termination of a Participant who has no current written
                  employment agreement with the Company or Subsidiary, such
                  event shall be deemed to be a Section 9(b)(ii) Event, and the
                  Participant shall be entitled to an Annual Award (but not to a
                  Long-Term Award) as provided in Section 9(b)(ii).

                           ii. In the event of the termination of employment of
                  the Participant not covered by Sections 9(a) or 9(b) above
                  before the end of the term of the Participant's then-current
                  written employment agreement (if any) with the Company or
                  Subsidiary, with the written consent of the Company (a
                  "Section 9(c)(ii) Event"), the Participant shall be entitled
                  to the following:

                                    (1) An Annual Award with respect to the
                           Fiscal Year in which the Section 9(c)(ii) Event
                           occurs equal to the actual award otherwise payable
                           for the Fiscal Year (if any); provided, however, that
                           in the event that the term of the Participant's then-
                           current employment agreement is due to expire during
                           that Fiscal Year, then the Annual Award shall be
                           prorated to the end of the fiscal month in which such
                           term is due to expire; and

                                    (2) A Long-Term Award with respect to each
                           Long-Term Performance Period which includes the
                           Fiscal Year of the 9(c)(ii) Event equal to the Long-
                           Term Award otherwise payable with respect to each
                           Long-Term Performance Period; provided, however, that
                           in the event that the term of the Participant's then-
                           current employment agreement (if any) with the
                           Company is otherwise due to expire during any such
                           period, then the Long-Term Award with respect to such
                           period shall be prorated to the end of the calendar
                           month in which such term is due to expire.

                           iii. In the event of the termination of employment of
                  the Participant not otherwise covered by this Section 9 before
                  the end of the term of the then-current written employment
                  agreement (if any) with the Company or Subsidiary, without the
                  written consent of the Company, the Participant shall not be
                  entitled to any Annual Award or to any Long-Term Award with
                  respect to any Fiscal Year or Long-Term Performance Period
                  which has not been completed as of the date of such
                  termination of employment. The Participant shall forfeit any
                  right or interest in any award for any such Fiscal Year or
                  Long-Term Performance Period. Annual Awards and Long-Term
                  Awards with respect to Fiscal Years and Long-Term Performance
                  Periods which ended prior to the date of such termination of
                  employment shall remain unaffected.

                                       11
<PAGE>   13

                  d.       For purposes of this Section 9, the term "written
consent of the Company" shall refer to an express written consent of the
Company, duly executed by the Company, which, by its own terms, expressly refers
to this Section 9 of the Plan.

         Section 10. CHANGES IN RESPONSIBILITIES. In the event that (i) the
duties of a Participant change and the Participant becomes eligible to
participate in another bonus plan of the Company, or (ii) the duties of an
employee who is a participant in another bonus plan of the Company change and
the employee is newly designated by the Committee as a Participant in this Plan,
then the maximum amount that such Participant would be entitled to receive under
the Plan shall be

                  a.       the Annual Award determined in accordance with the
provisions of the Plan with respect to the entire Fiscal Year in which such
event occurred; and

                  b.       a Long-Term Award with respect to each Long-Term
Performance Period which has commenced at the time of the event, determined in
accordance with the provisions of the Plan,

subject, in all events, to the Committee's right to adjust such awards in
accordance with and subject to the restrictions set forth in Section 6(a), in
its absolute discretion, which may be exercised in such a way that the Committee
deems fair and equitable based on the performance of Participant while
participating in the other bonus plan of the Company.

         Section 11. RIGHTS OF PARTICIPANTS AND BENEFICIARIES.

                  a.       Nothing contained in the Plan shall confer upon any
Participant any right to continue in the employ of the Company or constitute any
contract or agreement of employment or interfere in any way with the right of
the Company to terminate or change the conditions of employment.

                  b.       The Company shall pay all amounts payable hereunder
only to the Participant or his or her personal representatives. In the event of
the death of a Participant, payments of all amounts otherwise due to the
Participant under the Plan shall be made to the Participant's beneficiary at the
time of death under the Company Paid Life Plan of Payless ShoeSource, Inc. or to
such other beneficiary as the Participant shall have designated, in writing, for
purposes of this Plan on a form provided by the Company.

                  c.       Subject to the provisions of Section 11(d), rights to
payments under the Plan shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, levy or charge, and
any attempt to do so shall be void; nor shall any such amounts be in any manner
liable for or subject to the

                                       12
<PAGE>   14

debts, contracts, liabilities, engagements or torts of the Participant or his or
her beneficiaries.

                  d.       Nothing in this Section 11 shall prohibit the
personal representatives of a Participant from designating that any amount that
would otherwise be distributed to the Participant's estate should be distributed
in accordance with the terms of the Participant's last will and testament or
pursuant to the laws of descent and distribution.

         Section 12. UNFUNDED CHARACTER OF THE PLAN. The right of a Participant
to receive any Annual Award or Long-Term Award hereunder shall be an unsecured
claim against the general assets of the Company. Nothing in the Plan shall
require the Company to invest any amounts in Stock or in any other medium.

         Section 13. CHANGES IN CAPITAL STRUCTURE. In the event that there is
any change in the Stock through merger, consolidation, reorganization,
recapitalization, spin-off or otherwise, or if there shall be any dividend on
the Stock, payable in such Stock, or if there shall be a stock split or
combination of shares, then the fraction provided for in Section 5(b) of the
Plan shall be adjusted by the Committee as it deems desirable, in its absolute
discretion, to prevent dilution or enlargement of the rights of Participants.
The issuance of Stock for consideration and the issuance of Stock rights shall
not be considered a change in the Company's capital structure.

         Section 14. AMENDMENT OR TERMINATION. The Committee may, by resolution,
amend or terminate the Plan at any time. Any amendment necessary to bring the
Plan into compliance with Section 162(m) of the Code and any regulations
thereunder shall not require shareowner approval and the effectiveness of such
amendment shall be as of the effective date of the provision in Section 162(m)
of the Code or regulations thereunder giving rise to the amendment. However, (i)
shareowner approval shall be sought for any changes to the Plan which would
require shareowner approval under Section 162(m) of the Code and (ii) except as
provided in the preceding sentence, the Committee may not, without the consent
of the Participant, amend or terminate the Plan in such a manner as to affect
adversely any Annual Award or Long-Term Award which would have been payable,
based on the terms of the Plan immediately prior to any such amendment or
termination, for any Fiscal Year or Long-Term Performance Period which has
already commenced as of the effective date of the amendment or termination.

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