Document:

<PAGE>
                                                                  Exhibit (4)(u)

________________________________________________________________________________

                               GUARANTEE AGREEMENT

                                 BY AND BETWEEN

                              FIFTH THIRD BANCORP,
                                  as Guarantor

                                       and

                            WILMINGTON TRUST COMPANY,
                              as Guarantee Trustee

                                   RELATING TO

                          FIFTH THIRD CAPITAL TRUST VI

                              ____________________

                         Dated as of _________ ___, ____

                              ____________________

________________________________________________________________________________
<PAGE>
                             CROSS-REFERENCE TABLE*

<TABLE>
<CAPTION>
Section of
Trust Indenture Act                                                                                   Section of
of 1939, as amended                                                                                Guarantee Agreement
-------------------                                                                                -------------------
<S>                                                                                                <C>
310(a)..........................................................................................   4.1(a)

310(b)..........................................................................................   4.1(c), 2.8

310(c)..........................................................................................   Inapplicable

311(a)..........................................................................................   2.2(b)

311(b)..........................................................................................   2.2(b)

311(c)..........................................................................................   Inapplicable

312(a)..........................................................................................   2.2(a)

312(b)..........................................................................................   2.2(b)

313.............................................................................................   2.3

314(a)..........................................................................................   2.4

314(b)..........................................................................................   Inapplicable

314(c)..........................................................................................   2.5

314(d)..........................................................................................   Inapplicable

314(e)..........................................................................................   1.1, 2.5, 3.2

314(f)..........................................................................................   2.1, 3.2

315(a)..........................................................................................   3.1(d)

315(b)..........................................................................................   2.7

315(c)..........................................................................................   3.1

315(d)..........................................................................................   3.1(d)

316(a)..........................................................................................   1.1, 2.6, 5.4

316(b)..........................................................................................   5.3

316(c)..........................................................................................   8.2

317(a)..........................................................................................   Inapplicable

317(b)..........................................................................................   Inapplicable

318(a)..........................................................................................   2.1

318(b)..........................................................................................   2.1

318(c)..........................................................................................   2.1
</TABLE>

----------
*  This Cross-Reference Table does not constitute part of the Guarantee
   Agreement and shall not affect the interpretation of any of its terms or
   provisions.

                                      -i-
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                         Page
<S>                                                                                                      <C>
                                             ARTICLE I

                                            DEFINITIONS

SECTION 1.1. Definitions...............................................................................    1

                                            ARTICLE II

                                        TRUST INDENTURE ACT

SECTION 2.1. Trust Indenture Act; Application..........................................................    4
SECTION 2.2. List of Holders...........................................................................    5
SECTION 2.3. Reports by the Guarantee Trustee..........................................................    5
SECTION 2.4. Periodic Reports to the Guarantee Trustee.................................................    5
SECTION 2.5. Evidence of Compliance with Conditions Precedent..........................................    5
SECTION 2.6. Events of Default; Waiver.................................................................    5
SECTION 2.7. Event of Default; Notice..................................................................    6
SECTION 2.8. Conflicting Interests.....................................................................    6

                                            ARTICLE III

                        POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

SECTION 3.1. Powers and Duties of the Guarantee Trustee................................................    6
SECTION 3.2. Certain Rights of Guarantee Trustee.......................................................    8
SECTION 3.3. Compensation; Indemnity; Fees.............................................................    9

                                            ARTICLE IV

                                         GUARANTEE TRUSTEE

SECTION 4.1. Guarantee Trustee; Eligibility...........................................................    10
SECTION 4.2. Appointment, Removal and Resignation of the Guarantee Trustee............................    10

                                             ARTICLE V

                                             GUARANTEE
</TABLE>

                                      -ii-
<PAGE>
<TABLE>
<S>                                                                                                       <C>
SECTION 5.1. Guarantee.................................................................................   11
SECTION 5.2. Waiver of Notice and Demand...............................................................   11
SECTION 5.3. Obligations Not Affected..................................................................   11
SECTION 5.4. Rights of Holders.........................................................................   12
SECTION 5.5. Guarantee of Payment......................................................................   12
SECTION 5.6. Subrogation...............................................................................   12
SECTION 5.7. Independent Obligations...................................................................   13

                                            ARTICLE VI

                                    COVENANTS AND SUBORDINATION

SECTION 6.1. Subordination.............................................................................   13
SECTION 6.2. Pari Passu Guarantees.....................................................................   13

                                            ARTICLE VII

                                            TERMINATION

SECTION 7.1. Termination...............................................................................   14

                                           ARTICLE VIII

                                           MISCELLANEOUS

SECTION 8.1. Successors and Assigns....................................................................   14
SECTION 8.2. Amendments................................................................................   14
SECTION 8.3. Notices...................................................................................   14
SECTION 8.4. Benefit...................................................................................   15
SECTION 8.5. Governing Law.............................................................................   15
SECTION 8.6. Counterparts..............................................................................   16
</TABLE>

                                     -iii-
<PAGE>
         GUARANTEE AGREEMENT, dated as of _________ ___, ____, between FIFTH
THIRD BANCORP, an Ohio corporation (the "Guarantor"), having its principal
office at Fifth Third Center, 38 Fountain Square Plaza, Cincinnati, Ohio 45263,
and WILMINGTON TRUST COMPANY, as trustee (the "Guarantee Trustee"), for the
benefit of the Holders (as defined herein) from time to time of the Capital
Securities (as defined herein) of FIFTH THIRD CAPITAL TRUST VI, a Delaware
statutory business trust (the "Issuer Trust").

                 RECITALS OF THE GUARANTOR AND THE ISSUER TRUST

         WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as
of _________ ___, ____ (the "Trust Agreement"), among Fifth Third Bancorp, as
Depositor, the Property Trustee, the Delaware Trustee and the Administrative
Trustees named therein, the Issuer Trust is issuing $___________ aggregate
Liquidation Amount (as defined in the Trust Agreement) of its ___________
(liquidation amount $_____ per Capital Security) (the "Capital Securities"),
representing preferred undivided beneficial interests in the assets of the
Issuer Trust and having the terms set forth in the Trust Agreement; and

         WHEREAS, the Capital Securities will be issued by the Issuer Trust and
the proceeds thereof, together with the proceeds from the issuance of the Issuer
Trust's Common Securities (as defined herein), will be used to purchase the
Debentures (as defined in the Trust Agreement) of the Guarantor, which
Debentures will be deposited with Wilmington Trust Company, as Property Trustee
under the Trust Agreement, as trust assets; and

         WHEREAS, as an incentive for the Holders to purchase Capital
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth herein, to pay to the Holders of the Capital Securities the
Guarantee Payments (as defined herein) and to make certain other payments on the
terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the purchase of Capital Securities
by each Holder, which purchase the Guarantor hereby acknowledges shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for
the benefit of the Holders from time to time.

                                    ARTICLE I

                                   DEFINITIONS

         SECTION 1.1. Definitions.

                  For all purposes of this Guarantee Agreement, except as
otherwise expressly provided or unless the context otherwise requires:

         (a) The terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
<PAGE>
         (b) All other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;

         (c) The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation";

         (d) All accounting terms used but not defined herein have the meanings
assigned to them in accordance with United States generally accepted accounting
principles;

         (e) Unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may be,
of this Guarantee Agreement; and

         (f) The words "hereby", "herein", "hereof" and "hereunder" and other
words of similar import refer to this Guarantee Agreement as a whole and not to
any particular Article, Section or other subdivision.

         "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

         "Board of Directors" means the board of directors of the Guarantor or
the Executive Committee of the board of directors of the Guarantor (or any other
committee of the board of directors of the Guarantor performing similar
functions) or a committee designated by the board of directors of the Guarantor
(or such committee), comprised of two or more members of the board of directors
of the Guarantor or officers of the Guarantor, or both.

         "Capital Securities" has the meaning specified in the recitals to this
Guarantee Agreement.

         "Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer Trust.

         "Event of Default" means (i) a default by the Guarantor in any of its
payment obligations under this Guarantee Agreement or (ii) a default by the
Guarantor in any other obligation hereunder that remains unremedied for 30 days.

         "Guarantee Agreement" means this Guarantee Agreement, as modified,
amended or supplemented from time to time.

         "Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Capital Securities, to the extent not
paid or made by or on behalf of the Issuer Trust: (i) any accumulated and unpaid
Distributions (as defined in the Trust Agreement) required to be paid on the
Capital Securities, to the extent the Issuer Trust shall have funds on hand
available therefor at such time; (ii) the Redemption Price (as defined in the
Trust Agreement) with respect to any Capital Securities

                                       -2-
<PAGE>
called for redemption by the Issuer Trust, to the extent the Issuer Trust shall
have funds on hand available therefor at such time; and (iii) upon a voluntary
or involuntary termination, winding-up or liquidation of the Issuer Trust,
unless Debentures are distributed to the Holders, the lesser of (a) the
Liquidation Distribution (as defined in the Trust Agreement) with respect to the
Capital Securities, to the extent that the Issuer Trust shall have funds on hand
available therefor at such time, and (b) the amount of assets of the Issuer
Trust remaining available for distribution to Holders on liquidation of the
Issuer.

         "Guarantee Trustee" means Wilmington Trust Company, solely in its
capacity as Guarantee Trustee and not in its individual capacity, until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Guarantee Agreement, and thereafter means each
such Successor Guarantee Trustee.

         "Guarantor" has the meaning specified in the preamble to of this
Guarantee Agreement.

         "Holder" means any Holder (as defined in the Trust Agreement) of any
Capital Securities; provided, however, that in determining whether the holders
of the requisite percentage of Capital Securities have given any request,
notice, consent or waiver hereunder, "Holder" shall not include the Guarantor,
the Guarantee Trustee, or any Affiliate of the Guarantor or the Guarantee
Trustee.

         "Indenture" means the Junior Subordinated Indenture, dated as of March
20, 1997, between Fifth Third Bancorp and Wilmington Trust Company, as trustee,
as the same may be modified, amended or supplemented from time to time.

         "Issuer Trust" has the meaning specified in the preamble to of this
Guarantee Agreement.

         "List of Holders" has the meaning specified in Section 2.2(a).

         "Majority in Liquidation Amount of the Capital Securities" means,
except as provided by the Trust Indenture Act, Capital Securities representing
more than 50% of the aggregate Liquidation Amount (as defined in the Trust
Agreement) of all Capital Securities then Outstanding (as defined in the Trust
Agreement).

         "Officers' Certificate" means a certificate signed by the Chairman or a
Vice Chairman of the Board of Directors of the Guarantor or the President or a
Vice President of the Guarantor, and by the Treasurer, an Assistant Treasurer,
the Secretary or an Assistant Secretary of the Guarantor, and delivered to the
Guarantee Trustee. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Guarantee Agreement
shall include:

         (a) a statement by each officer signing the Officers' Certificate that
such officer has read the covenant or condition and the definitions relating
thereto;

         (b) a brief statement of the nature and scope of the examination or
investigation undertaken by such officer in rendering the Officers' Certificate;

                                      -3-
<PAGE>
         (c) a statement that such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and

         (d) a statement as to whether, in the opinion of such officer, such
condition or covenant has been complied with.

         "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint-stock company, company,
limited liability company, trust, business trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.

         "Responsible Officer" means, with respect to the Guarantee Trustee, any
Senior Vice President, any Vice President, any Assistant Vice President, the
Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, any
Trust Officer or Assistant Trust Officer or any other officer of Corporate Trust
Administration of the Guarantee Trustee and also means, with respect to a
particular matter, any other officer to whom such matter is referred because of
that officer's knowledge of and familiarity with the particular subject.

         "Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.

         "Trust Agreement" means the Amended and Restated Trust Agreement of the
Issuer Trust referred to in the recitals to this Guarantee Agreement, as
modified, amended or supplemented from time to time.

         "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this Guarantee Agreement was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after such
date, "Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.

         "Vice President," when used with respect to the Guarantor or the
Guarantee Trustee, means any duly appointed vice president, whether or not
designated by a number or a word or words added before or after the title "vice
president."

                                   ARTICLE II

                               TRUST INDENTURE ACT

         SECTION 2.1. Trust Indenture Act; Application.

         (a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.

                                      -4-
<PAGE>
         (b) If and to the extent that any provision of this Guarantee Agreement
limits, qualifies or conflicts with the duties imposed by Section 310 to 317,
inclusive, of the Trust Indenture Act through operation of Section 318(c)
thereof, such imposed duties shall control. If any provision of this Guarantee
Agreement modifies or excludes any provision of the Trust Indenture Act which
may be so modified or excluded, the latter provision shall be deemed to apply to
this Guarantee Agreement as so modified or to be excluded, as the case may be.

         SECTION 2.2. List of Holders.

         (a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) semiannually, on or before June 30 and December 31 of each
year, a list, in such form as the Guarantee Trustee may reasonably require, of
the names and addresses of the Holders (a "List of Holders") as of a date not
more than 15 days prior to the delivery thereof, and (b) at such other times as
the Guarantee Trustee may request in writing, within 30 days after the receipt
by the Guarantor of any such request, a List of Holders as of a date not more
than 15 days prior to the time such list is furnished, in each case to the
extent such information is in the possession or control of the Guarantor and has
not otherwise been received by the Guarantee Trustee in its capacity as such.
The Guarantee Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.

         (b) The Guarantee Trustee shall comply with the requirements of Section
311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.

         SECTION 2.3. Reports by the Guarantee Trustee.

         Not later than January 31 of each year, commencing January 31, 1998,
the Guarantee Trustee shall provide to the Holders such reports as are required
by Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.

         SECTION 2.4. Periodic Reports to the Guarantee Trustee.

         The Guarantor shall provide to the Guarantee Trustee, the Securities
and Exchange Commission and the Holders such documents, reports and information,
if any, as required by Section 314 of the Trust Indenture Act and the compliance
certificate required by Section 314 of the Trust Indenture Act, in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.

         SECTION 2.5. Evidence of Compliance with Conditions Precedent.

         The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with such conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer of the Guarantor pursuant to Section 314(c)(1) may be given
in the form of an Officers' Certificate.

         SECTION 2.6. Events of Default; Waiver.

                                      -5-
<PAGE>
         The Holders of at least a Majority in Liquidation Amount of the Capital
Securities may, by vote, on behalf of the Holders of all the Capital Securities,
waive any past default or Event of Default and its consequences. Upon such
waiver, any such default or Event of Default shall cease to exist, and any
default or Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Guarantee Agreement, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.

         SECTION 2.7. Event of Default; Notice.

         (a) The Guarantee Trustee shall, within 90 days after the occurrence of
an Event of Default, transmit by mail, first class postage prepaid, to the
Holders, notice of any such Event of Default known to the Guarantee Trustee,
unless such Event of Default has been cured before the giving of such notice,
provided that, except in the case of a default in the payment of a Guarantee
Payment, the Guarantee Trustee shall be protected in withholding such notice if
and so long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Guarantee Trustee in
good faith determines that the withholding of such notice is in the interests of
the Holders.

         (b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written
notice, or a Responsible Officer charged with the administration of this
Guarantee Agreement shall have obtained actual knowledge, of such Event of
Default.

         SECTION 2.8. Conflicting Interests.

         The Trust Agreement and the Indenture shall be deemed to be
specifically described in this Guarantee Agreement for the purposes of clause
(i) of the first proviso contained in Section 310(b) of the Trust Indenture Act.

                                   ARTICLE III

               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

         SECTION 3.1. Powers and Duties of the Guarantee Trustee.

         (a) This Guarantee Agreement shall be held by the Guarantee Trustee for
the benefit of the Holders, and the Guarantee Trustee shall not transfer this
Guarantee Agreement to any Person except to a Successor Guarantee Trustee on
acceptance by such Successor Guarantee Trustee of its appointment to act as
Guarantee Trustee hereunder. The right, title and interest of the Guarantee
Trustee, as such, hereunder shall automatically vest in any Successor Guarantee
Trustee, upon acceptance by such Successor Guarantee Trustee of its appointment
hereunder, and such vesting of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Guarantee Trustee.

         (b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the
Holders.

                                      -6-
<PAGE>
         (c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. The Guarantee Trustee shall
exercise such of the rights and powers vested in it by this Guarantee Agreement,
and use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.

         (d) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act or its own wilful misconduct, except that:

                  (i) Prior to the occurrence of any Event of Default and after
         the curing or waiving of all such Events of Default that may have
         occurred:

                           (A) the duties and obligations of the Guarantee
                  Trustee shall be determined solely by the express provisions
                  of this Guarantee Agreement (including pursuant to Section
                  2.1), and the Guarantee Trustee shall not be liable except for
                  the performance of such duties and obligations as are
                  specifically set forth in this Guarantee Agreement; and

                           (B) in the absence of bad faith on the part of the
                  Guarantee Trustee, the Guarantee Trustee may conclusively
                  rely, as to the truth of the statements and the correctness of
                  the opinions expressed therein, upon any certificates or
                  opinions furnished to the Guarantee Trustee and conforming to
                  the requirements of this Guarantee Agreement; but in the case
                  of any such certificates or opinions that by any provision
                  hereof or of the Trust Indenture Act are specifically required
                  to be furnished to the Guarantee Trustee, the Guarantee
                  Trustee shall be under a duty to examine the same to determine
                  whether or not they conform to the requirements of this
                  Guarantee Agreement.

                  (ii) The Guarantee Trustee shall not be liable for any error
         of judgment made in good faith by a Responsible Officer of the
         Guarantee Trustee, unless it shall be proved that the Guarantee Trustee
         was negligent in ascertaining the pertinent facts upon which such
         judgment was made.

                  (iii) The Guarantee Trustee shall not be liable with respect
         to any action taken or omitted to be taken by it in good faith in
         accordance with the direction of the Holders of not less than a
         Majority in Liquidation Amount of the Capital Securities relating to
         the time, method and place of conducting any proceeding for any remedy
         available to the Guarantee Trustee, or exercising any trust or power
         conferred upon the Guarantee Trustee under this Guarantee Agreement.

                  (iv) No provision of this Guarantee Agreement shall require
         the Guarantee Trustee to expend or risk its own funds or otherwise
         incur personal financial liability in the performance of any of its
         duties or in the exercise of any of its rights or powers, if the
         Guarantee Trustee shall have reasonable grounds for believing that the
         repayment of such funds or liability is not

                                      -7-
<PAGE>
         reasonably assured to it under the terms of this Guarantee Agreement or
         adequate indemnity against such risk or liability is not reasonably
         assured to it.

         SECTION 3.2. Certain Rights of Guarantee Trustee.

         (a) Subject to the provisions of Section 3.1:

                  (i) The Guarantee Trustee may rely and shall be fully
         protected in acting or refraining from acting upon any resolution,
         certificate, statement, instrument, opinion, report, notice, request,
         direction, consent, order, bond, debenture, note, other evidence of
         indebtedness or other paper or document reasonably believed by it to be
         genuine and to have been signed, sent or presented by the proper party
         or parties.

                  (ii) Any direction or act of the Guarantor contemplated by
         this Guarantee Agreement shall be sufficiently evidenced by an
         Officers' Certificate unless otherwise prescribed herein.

                  (iii) Whenever, in the administration of this Guarantee
         Agreement, the Guarantee Trustee shall deem it desirable that a matter
         be proved or established before taking, suffering or omitting to take
         any action hereunder, the Guarantee Trustee (unless other evidence is
         herein specifically prescribed) may, in the absence of bad faith on its
         part, request and rely upon an Officers' Certificate which, upon
         receipt of such request from the Guarantee Trustee, shall be promptly
         delivered by the Guarantor.

                  (iv) The Guarantee Trustee may consult with legal counsel, and
         the written advice or opinion of such legal counsel with respect to
         legal matters shall be full and complete authorization and protection
         in respect of any action taken, suffered or omitted to be taken by it
         hereunder in good faith and in accordance with such advice or opinion.
         Such legal counsel may be legal counsel to the Guarantor or any of its
         Affiliates and may be one of its employees. The Guarantee Trustee shall
         have the right at any time to seek instructions concerning the
         administration of this Guarantee Agreement from any court of competent
         jurisdiction.

                  (v) The Guarantee Trustee shall be under no obligation to
         exercise any of the rights or powers vested in it by this Guarantee
         Agreement at the request or direction of any Holder unless such Holder
         shall have provided to the Guarantee Trustee such adequate security and
         indemnity as would satisfy a reasonable person in the position of the
         Guarantee Trustee against the costs, expenses (including attorneys'
         fees and expenses) and liabilities that might be incurred by it in
         complying with such request or direction, including such reasonable
         advances as may be requested by the Guarantee Trustee; provided that
         nothing contained in this Section 3.2(a)(v) shall be taken to relieve
         the Guarantee Trustee, upon the occurrence of an Event of Default, of
         its obligation to exercise the rights and powers vested in it by this
         Guarantee Agreement.

                  (vi) The Guarantee Trustee shall not be bound to make any
         investigation into the facts or matters stated in any resolution,
         certificate, statement, instrument, opinion, report, notice, request,
         direction, consent, order, bond, debenture, note, other evidence of
         indebtedness or other paper or document, but the Guarantee Trustee, in
         its discretion, may make such further inquiry or investigation into
         such facts or matters as it may see fit.

                                      -8-
<PAGE>
                  (vii) The Guarantee Trustee may execute any of the trusts or
         powers hereunder or perform any duties hereunder either directly or by
         or through its agents or attorneys, and the Guarantee Trustee shall not
         be responsible for any misconduct or negligence on the part of any such
         agent or attorney appointed by it with due care hereunder.

                  (viii) Whenever in the administration of this Guarantee
         Agreement the Guarantee Trustee shall deem it desirable to receive
         instructions with respect to enforcing any remedy or right or taking
         any other action hereunder, the Guarantee Trustee (A) may request
         instructions from the Holders, (B) may refrain from enforcing such
         remedy or right or taking such other action until such instructions are
         received, and (C) shall be protected in acting in accordance with such
         instructions.

         (b) No provision of this Guarantee Agreement shall be deemed to impose
any duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.

         SECTION 3.3. Compensation; Indemnity; Fees.

         The Guarantor agrees:

                  (a) to pay to the Guarantee Trustee from time to time such
         reasonable compensation for all services rendered by it hereunder as
         may be agreed by the Guarantor and the Guarantee Trustee from time to
         time (which compensation shall not be limited by any provision of law
         in regard to the compensation of a trustee of an express trust);

                  (b) except as otherwise expressly provided herein, to
         reimburse the Guarantee Trustee upon request for all reasonable
         expenses, disbursements and advances incurred or made by the Guarantee
         Trustee in accordance with any provision of this Guarantee Agreement
         (including the reasonable compensation and the expenses and
         disbursements of its agents and counsel), except any such expense,
         disbursement or advance as may be attributable to its negligence or bad
         faith; and

                  (c) to indemnify the Guarantee Trustee for, and to hold it
         harmless against, any loss, liability or expense incurred without
         negligence, wilful misconduct or bad faith on the part of the Guarantee
         Trustee, arising out of or in connection with the acceptance or
         administration of this Guarantee Agreement, including the costs and
         expenses of defending itself against any claim or liability in
         connection with the exercise or performance of any of its powers or
         duties hereunder.

The Guarantee Trustee will not claim or exact any lien or charge on any
Guarantee Payments as a result of any amount due to it under this Guarantee
Agreement.

                                      -9-
<PAGE>
                                   ARTICLE IV

                                GUARANTEE TRUSTEE

         SECTION 4.1. Guarantee Trustee; Eligibility.

         (a) There shall at all times be a Guarantee Trustee which shall:

                  (i) not be an Affiliate of the Guarantor; and

                  (ii) be a Person that is eligible pursuant to the Trust
         Indenture Act to act as such and has a combined capital and surplus of
         at least $50,000,000, and shall be a corporation meeting the
         requirements of Section 310(a) of the Trust Indenture Act. If such
         corporation publishes reports of condition at least annually, pursuant
         to law or to the requirements of its supervising or examining
         authority, then, for the purposes of this Section 4.1 and to the extent
         permitted by the Trust Indenture Act, the combined capital and surplus
         of such corporation shall be deemed to be its combined capital and
         surplus as set forth in its most recent report of condition so
         published.

         (b) If at any time the Guarantee Trustee shall cease to be eligible to
so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in
the manner and with the effect set out in Section 4.2.

         (c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.

         SECTION 4.2. Appointment, Removal and Resignation of the Guarantee
Trustee.

         (a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed
or removed without cause at any time by the Guarantor.

         (b) The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and delivered to
the Guarantor.

         (c) The Guarantee Trustee appointed hereunder shall hold office until a
Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.

         (d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court of
competent

                                      -10-
<PAGE>
jurisdiction for appointment of a Successor Guarantee Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a Successor Guarantee Trustee.

                                    ARTICLE V

                                    GUARANTEE

         SECTION 5.1. Guarantee.

         The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by or on behalf of the Issuer Trust), as and when due, regardless of any
defense, right of set-off or counterclaim that the Issuer Trust may have or
assert, except the defense of payment. The Guarantor's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts by
the Guarantor to the Holders or by causing the Issuer Trust to pay such amounts
to the Holders.

         SECTION 5.2. Waiver of Notice and Demand.

         The Guarantor hereby waives notice of acceptance of this Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, the Issuer Trust or any other Person before proceeding
against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice
of redemption and all other notices and demands.

         SECTION 5.3. Obligations Not Affected.

         The obligations, covenants, agreements and duties of the Guarantor
under this Guarantee Agreement shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:

                  (a) the release or waiver, by operation of law or otherwise,
         of the performance or observance by the Issuer Trust of any express or
         implied agreement, covenant, term or condition relating to the Capital
         Securities to be performed or observed by the Issuer Trust;

                  (b) the extension of time for the payment by the Issuer Trust
         of all or any portion of the Distributions (other than an extension of
         time for payment of Distributions that results from the extension of
         any interest payment period on the Debentures as provided in the
         Indenture), Redemption Price, Liquidation Distribution or any other
         sums payable under the terms of the Capital Securities or the extension
         of time for the performance of any other obligation under, arising out
         of, or in connection with, the Capital Securities;

                  (c) any failure, omission, delay or lack of diligence on the
         part of the Holders to enforce, assert or exercise any right,
         privilege, power or remedy conferred on the Holders pursuant to the
         terms of the Capital Securities, or any action on the part of the
         Issuer Trust granting indulgence or extension of any kind;

                                      -11-
<PAGE>
                  (d) the voluntary or involuntary liquidation, dissolution,
         receivership, insolvency, bankruptcy, assignment for the benefit of
         creditors, reorganization, arrangement, composition or readjustment of
         debt of, or other similar proceedings affecting, the Issuer Trust or
         any of the assets of the Issuer Trust;

                  (e) any invalidity of, or defect or deficiency in, the Capital
         Securities;

                  (f) the settlement or compromise of any obligation guaranteed
         hereby or hereby incurred; or

                  (g) any other circumstance whatsoever that might otherwise
         constitute a legal or equitable discharge or defense of a guarantor
         (other than payment of the underlying obligation), it being the intent
         of this Section 5.3 that the obligations of the Guarantor hereunder
         shall be absolute and unconditional under any and all circumstances.

There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the foregoing.

         SECTION 5.4. Rights of Holders.

         The Guarantor expressly acknowledges that: (i) this Guarantee Agreement
will be deposited with the Guarantee Trustee to be held for the benefit of the
Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee
Agreement on behalf of the Holders; (iii) the Holders of a Majority in
Liquidation Amount of the Capital Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust
or power conferred upon the Guarantee Trustee under this Guarantee Agreement;
and (iv) any Holder may institute a legal proceeding directly against the
Guarantor to enforce its rights under this Guarantee Agreement without first
instituting a legal proceeding against the Guarantee Trustee, the Issuer Trust
or any other Person.

         SECTION 5.5. Guarantee of Payment.

         This Guarantee Agreement creates a guarantee of payment and not of
collection. This Guarantee Agreement will not be discharged except by payment of
the Guarantee Payments in full (without duplication of amounts theretofore paid
by the Issuer Trust) or upon the distribution of Debentures to Holders as
provided in the Trust Agreement.

         SECTION 5.6. Subrogation.

         The Guarantor shall be subrogated to all rights (if any) of the Holders
against the Issuer Trust in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement; provided, however, that the Guarantor
shall not (except to the extent required by mandatory provisions of law) be
entitled to enforce or exercise any rights which it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Guarantee Agreement, if, at the time of any such
payment, any amounts are due and unpaid under this Guarantee Agreement. If any

                                      -12-
<PAGE>
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.

         SECTION 5.7. Independent Obligations.

         The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer Trust with respect to the Capital
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 5.3 hereof.

                                   ARTICLE VI

                           COVENANTS AND SUBORDINATION

         SECTION 6.1. Subordination.

         The obligations of the Guarantor under this Guarantee Agreement will
constitute unsecured obligations of the Guarantor and will rank subordinate and
junior in right of payment to all Senior Indebtedness (as defined in the
Indenture) of the Guarantor to the extent and in the manner set forth in the
Indenture with respect to the Debentures, and the provisions of Article XIII of
the Indenture will apply, mutatis mutandis, to the obligations of the Guarantor
hereunder. The obligations of the Guarantor hereunder do not constitute Senior
Indebtedness (as defined in the Indenture) of the Guarantor.

         SECTION 6.2. Pari Passu Guarantees.

         The obligations of the Guarantor under this Guarantee Agreement shall
rank pari passu with the obligations of the Guarantor under (i) any similar
guarantee agreements issued by the Guarantor on behalf of the holders of
preferred or capital securities issued by any Issuer Trust (as defined in the
Indenture), (ii) the Indenture and the Securities (as defined therein) issued
thereunder; (iii) the Expense Agreement (as defined in the Trust Agreement) and
any similar expense agreements entered into by the Guarantor in connection with
the offering of Capital Securities (as defined in the Indenture) by any Issuer
Trust (as defined in the Indenture), and (iv) any other security, guarantee or
other agreement or obligation that is expressly stated to rank pari passu with
the obligations of the Guarantor under this Guarantee Agreement or with any
obligation that ranks pari passu with the obligations of the Guarantor under
this Guarantee Agreement.

                                   ARTICLE VII

                                   TERMINATION

         SECTION 7.1. Termination.

                                      -13-
<PAGE>
         This Guarantee Agreement shall terminate and be of no further force and
effect upon (i) full payment of the Redemption Price (as defined in the Trust
Agreement) of all Capital Securities, (ii) the distribution of Debentures to the
Holders in exchange for all of the Capital Securities or (iii) full payment of
the amounts payable in accordance with Article IX of the Trust Agreement upon
liquidation of the Issuer Trust. Notwithstanding the foregoing, this Guarantee
Agreement will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder is required to repay any sums paid with respect to
Capital Securities or this Guarantee Agreement.

                                  ARTICLE VIII

                                  MISCELLANEOUS

         SECTION 8.1. Successors and Assigns.

         All guarantees and agreements contained in this Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Capital
Securities then outstanding. Except in connection with a consolidation, merger
or sale involving the Guarantor that is permitted under Article VIII of the
Indenture and pursuant to which the successor or assignee agrees in writing to
perform the Guarantor's obligations hereunder, the Guarantor shall not assign
its obligations hereunder, and any purported assignment other than in accordance
with this provision shall be void.

         SECTION 8.2. Amendments.

         Except with respect to any changes that do not adversely affect the
rights of the Holders in any material respect (in which case no consent of the
Holders will be required), this Guarantee Agreement may only be amended with the
prior approval of the Holders of not less than a Majority in Liquidation Amount
of the Capital Securities. The provisions of Article VI of the Trust Agreement
concerning meetings of the Holders shall apply to the giving of such approval.

         SECTION 8.3. Notices.

         Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:

         (a) if given to the Guarantor, to the address or telecopy number set
forth below or such other address or telecopy number as the Guarantor may give
notice to the Guarantee Trustee and the Holders:

                  Fifth Third Bancorp
                  Fifth Third Center
                  38 Fountain Square Plaza
                  Cincinnati, Ohio 45263
                  Attention: Secretary
                  Telecopy No.: (513) 744-6757

                                      -14-
<PAGE>
         (b) if given to the Guarantee Trustee, at the address or telecopy
number set forth below or such other address or telecopy number as the Guarantee
Trustee may give notice to the Guarantor and the Holders:

                  Wilmington Trust Company
                  Rodney Square North
                  1100 N. Market Street
                  Wilmington, Delaware 19890
                  Attention: Corporate Trust Administration
                  Telecopy No.: (302) 651-8882

         with a copy to:

                  Fifth Third Capital Trust VI
                  c/o Fifth Third Bancorp
                  Fifth Third Center
                  38 Fountain Square Plaza
                  Cincinnati, Ohio 45263
                  Attention: Secretary
                  Telecopy No.: (513) 744-6757

         (c) if given to any Holder, at the address set forth on the books and
records of the Issuer Trust.

         All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.

         SECTION 8.4. Benefit.

         This Guarantee Agreement is solely for the benefit of the Holders and
is not separately transferable from the Capital Securities.

         SECTION 8.5. Governing Law.

         THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

         SECTION 8.6. Counterparts.

         This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.

                                      -15-
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have executed this Guarantee
Agreement as of the day and year first above written.

                                      FIFTH THIRD BANCORP

                                      By:
                                          --------------------------------------
                                        Name:
                                        Title:

                                      WILMINGTON TRUST COMPANY,
                                        as Guarantee Trustee

                                      By:
                                          --------------------------------------
                                        Name:
                                        Title:<PAGE>
                                                                   EXHIBIT 10.26

                              SEPARATION AGREEMENT

                                       AND

                                 GENERAL RELEASE

This is a Separation Agreement and General Release ("Separation Agreement") by
and between Ken C. Hicks ("Employee") and Payless ShoeSource, Inc., its
subsidiaries, affiliates, successors, and assigns, and its agents and
representatives (collectively "PSS"). Employee is currently employed as
President under that certain Employment Agreement between PSS and Employee dated
as of May 29, 2001, (hereinafter the "Employment Agreement").

PSS wishes Employee's active employment to terminate February 2, 2002. In
consideration of the payments and mutual promises contained in this Separation
Agreement, PSS and Employee agree as follows:

1.       Except as provided below, Employee will receive special salary
         continuation payments, at Employee's current rate, on normal pay dates,
         through February 2, 2003.

2.       Employee's employment with PSS shall terminate, Employee's salary
         continuation payments shall cease, and the term of the Employment
         Agreement is hereby amended to terminate, all effective as of the close
         of business February 2, 2003, or on such earlier date as Employee
         commences full-time employment with an employer other than PSS. The
         employer-employee relationship shall cease on such date, for all
         purposes, including without limitation for purposes of all compensation
         plans, all employee benefit plans, any retirement and supplemental
         retirement plans, and all fringe benefit arrangements provided by PSS.
         All payments and participation in all plans shall cease on such date,
         including but not limited to the Medical Plan (except as provided by
         COBRA), Life Insurance Plan, Long-Term Disability Plan, Profit Sharing
         Plan, Deferred Compensation Plan, Deferred Compensation 401(k) Mirror
         Plan, 1996 Stock Incentive Plan (and any such plan for all subsequent
         years), Executive Incentive Compensation Plan (EICP) for fiscal year
         2002 and all subsequent years, car allowance, and any other plan,
         program, practice, or payment. The above notwithstanding, vacation
         accrual shall cease as of February 2, 2002.

3.       PSS agrees to pay Employee the following (Employee has been provided
         with a document entitled "Transition Package," which contains estimates
         of certain bonus payments based on Incentive plan targets and stock
         option valuations based upon certain stock value assumptions. These are
         estimates only, and PSS does not represent that these amounts will be
         paid, and the actual amounts paid may be less than those stated):

         (1)      If Employee begins other employment prior to February 2, 2003,
                  payments under this Separation Agreement shall cease,
                  Employee's employment will terminate, and Employee will be
                  paid a lump sum (less legally required withholding for
                  applicable taxes) representing the equivalent of salary
                  payments from the date payments cease under this Separation
                  Agreement through May 31, 2004. If

<PAGE>

                  Employee has not commenced other employment prior to February
                  2, 2003, then on or about February 2, 2003, Employee will be
                  paid the lump sum amount of Eight Hundred Fifty Thousand and
                  00/100 dollars ($850,000.00), less required withholding
                  representing the equivalent of salary payments (less required
                  withholding) from February 2, 2003 through May 31, 2004. Any
                  lump sum paid hereunder will not be subject to repayment or
                  reduction under Paragraph 5(d)(vi) of the Employment Agreement
                  provided Employee meets Employee's obligations under Paragraph
                  3 of the Employment Agreement as modified by Paragraph 5(ii)
                  below. Upon termination of payments under this Separation
                  Agreement, medical insurance conversion will be available as
                  provided in the applicable plan.

         (2)      PSS will also pay Employee on or about April 15, 2002, both
                  the annual and the long-term portion of Employee's fiscal 1999
                  - 2001 bonus, less required withholding.

         (3)      PSS will also pay Employee on or about April 15, 2003, a
                  prorated share of the long-term portion of the fiscal 2000 -
                  2002 bonus, less required withholding.

         (4)      PSS will also pay Employee on or about April 15, 2004, a
                  prorated share of the long-term portion of the fiscal 2001 -
                  2003 bonus, less required withholding.

         (5)      Employee will receive payment at termination for all unused
                  vacation granted as of February 2, 2002.

         (6)      All deferred compensation, if any, will be paid to Employee
                  according to the "Plan(s)" and election distribution schedule.

         (7)      The Employee's Payless Profit Sharing account will be paid out
                  according to the "Plan" and Employee will have the election to
                  roll over the account balances into another IRA/401(k) type
                  investment as long as Employee directs Payless ShoeSource to
                  transfer the funds directly to another investment vehicle
                  legally qualified to receive rollover distributions.

         (8)      The payments and other considerations set forth in Paragraphs
                  3(a), (b), (c), (d) and (e) above represent full satisfaction
                  of all payments and other consideration due Employee under
                  Employee's Employment Agreement and also includes additional
                  consideration in settlement of all claims which Employee may
                  have with respect to, arising out of or resulting from the
                  Employment Agreement, Employee's employment thereunder and the
                  termination thereof, and all potential claims listed in
                  Paragraph 10 below. Such payments are not made pursuant to any
                  employee welfare benefit plan as defined by the Employee
                  Retirement Income Security Act of 1974.

                                       2
<PAGE>

         (9)      PSS's obligations to pay the amounts referred to in this
                  Paragraph 3 are hereby expressly made subject to Employee's
                  compliance with Employee's obligations hereunder, including,
                  without limitation, the terms of Paragraphs 5, 11 and 12.

         (10)     PSS agrees that it will respond to inquiries concerning
                  Employee's former employment only by confirming Employee's
                  employment status, period of employment and titles, except as
                  may otherwise be consented to by Employee. Employee agrees to
                  direct all inquiries concerning Employee's employment with PSS
                  to Bill Rainey and/or Steven Douglass.

         (11)     At any time during the November 19 - December 3, 2001, window
                  period provided pursuant to PSS "Trading in Securities"
                  policy, and at any time after February 28, 2002, and on or
                  prior to the date of termination of payments to Employee under
                  this Separation Agreement, Employee will have the right to (i)
                  exercise all previously vested stock options which have not
                  heretofore been exercised, and (ii) receive all shares of
                  restricted stock granted to Employee in which Employee has
                  vested.

         (12)     PSS and Employee agree to honor the terms of the
                  Indemnification Agreement between PSS and Employee pursuant to
                  the terms of that agreement and PSS agrees specifically to
                  provide Employee with such indemnification with respect to the
                  lawsuits entitled Home Shopping Network, Inc. v. Ken Hicks and
                  Payless ShoeSource, Inc. and Ken C. Hicks and Payless
                  ShoeSource, Inc. v. Home Shopping Network, Inc. PSS and
                  Employee further agree that any rights Employee may have under
                  the Change of Control Agreement dated March 22, 2000, are
                  hereby extinguished. PSS represents to Employee that
                  termination of Employee's employment has not been effected in
                  contemplation of any contingency contained in that Change of
                  Control Agreement.

         (13)     PSS will provide outplacement services for Employee to be
                  coordinated by PSS Human Resources Department. Employee must
                  commence utilizing the outplacement services no later than
                  thirty (30) days following February 2, 2002, or the right to
                  such services shall cease.

         (14)     Employee will be paid an additional lump sum payment equal to
                  the difference between the closing price of a share of PSS
                  stock on February 1, 2002, and $53.25 multiplied by 65,000
                  (less legally required withholding for applicable taxes),
                  provided that such payment shall in no case exceed $195,000.

4.       Federal, state, and local taxes shall be withheld by PSS from the
         payments hereunder which are required by law, as determined in PSS'
         sole discretion, in accordance with the W-4 filed by Employee. Employee
         agrees to pay any and all taxes found to be owed from payments made
         pursuant to this Separation Agreement and to hold PSS harmless from

                                       3
<PAGE>
         any claims, assessments, demands, penalties and interest owed, or found
         to be owed, including reasonable attorney fees, as a result of any
         payment made pursuant to this Separation Agreement.

5.       Payless hereby releases Employee from all of Employee's obligations
         under the Employment Agreement (including any amendments to said
         agreement), except for

         (i)      Employee's post-termination obligations under Paragraph 6 of
                  the Employment Agreement, which obligations shall remain in
                  full force and effect;

         (ii)     Employee's post-termination obligations under Paragraph 3 of
                  the Employment Agreement, which obligations shall remain in
                  full force and effect until February 2, 2003, rather than May
                  31, 2004, as provided in the Employment Agreement; and

         (iii)    Employee's post-termination obligations under Paragraph 9 of
                  the Employment Agreement.

6.       In the event of Employee's death before all amounts payable hereunder
         have been paid, the balance shall be paid to Employee's estate less any
         required withholding.

7.       Employee hereby expressly acknowledges having been advised to and given
         an opportunity to discuss all aspects of this Separation Agreement with
         an attorney before signing it and Employee further acknowledges that
         Employee has consulted with an attorney or, in the alternative, has
         freely and voluntarily elected not to consult with an attorney prior to
         signing this Separation Agreement.

8.       Employee understands that Employee has forty-five (45) days from
         November 17, 2001, to consider the meaning and effect of this
         Separation Agreement, and has elected to execute this Separation
         Agreement on the date indicated below. Employee agrees that any
         changes, whether material or not, to this Separation Agreement do not
         restart the running of the forty-five (45) day period.

9.       Employee acknowledges that Employee has been informed in writing of (i)
         the class, unit, or group of individuals eligible to receive separation
         payments, (ii) the eligibility factors for such payments and any time
         limits to elect such payments, and (iii) the job titles and ages of all
         individuals eligible to receive separation payments and of all
         individuals in the same organizational unit who are not eligible to
         receive such payments. Employee further acknowledges that this
         information is provided with this Separation Agreement as Attachment 1,
         and is incorporated herein by reference.

                                       4
<PAGE>

10.      Employee hereby fully releases and forever discharges PSS, its past or
         present parent, subsidiaries, affiliates, successors and assigns, and
         its or their respective officers, directors, shareholders, employees,
         agents, insurers, and representatives (collectively the "Released
         Parties"), from any and all claims, demands, liabilities or obligations
         (including attorney's fees), whether known or unknown, discovered or
         undiscovered, matured or unmatured, which have arisen between Employee
         and the Released Parties including, but not limited to, any claim of
         discrimination or any other claim arising out of Employee's employment
         with PSS, which have arisen up to the date of this Separation
         Agreement. Employee agrees not to sue or bring any action before any
         regulatory body or agency against any of the Released Parties with
         respect to such claims, demands, liabilities or obligations. Employee
         waives Employee's right to file any charge, complaint or other action,
         nor will Employee seek, claim entitlement to, or accept any relief or
         recovery from any charge, complaint or other action before any federal,
         sate or local administrative agency or court against the Released
         Parties. As part of this general release, Employee specifically waives
         any and all rights or claims which Employee might have under Title VII
         of the Civil Rights Act of 1964, as amended, the Civil Rights Act of
         1991, the Age Discrimination in Employment Act of 1967, as amended by
         the Older Worker's Benefit Protection Act of 1990, the Americans with
         Disabilities Act of 1990, the Family and Medical Leave Act of 1993, any
         and all state or local civil/human rights laws and any other similar
         laws, and any similar state, local or municipal statutes. For purposes
         of the Age Discrimination in Employment Act ("ADEA") only, this
         Separation Agreement does not affect the EEOC's right and
         responsibilities to enforce the ADEA, nor does this Separation
         Agreement prohibit Employee from filing a charge under the ADEA with
         the EEOC or participating in any investigation or proceeding conducted
         by the EEOC.

11.      Employee and PSS agree to treat the facts of this Separation Agreement
         in a confidential manner and will not disclose the terms herein to any
         third party and, specifically, the parties will not:

         (i)      orally, or in writing, make any public statements, the intent
                  of which is to bring Employee or PSS or its interests,
                  methods, officers, directors or employees into disrepute; and

         (ii)     disclose the fact of this Separation Agreement or any of its
                  terms to any person not a family member (including any friend,
                  acquaintance or current or potential business associate),
                  except (a) as required by law (upon advice of counsel
                  reflected in a written opinion of counsel which has been
                  provided to PSS in advance), (b) in Employee's income tax
                  returns, (c) to any financial planner, accountant or other
                  agent whose knowledge thereof is necessary in

                                       5
<PAGE>

                  order to prepare such income tax returns (and then only upon
                  such financial planner's, accountant's or other agent's
                  agreement to be bound by the terms of this Section), and (d)
                  to any attorney representing Employee concerning this
                  Separation Agreement.

12.      Employee acknowledges and agrees that the "Confidential Information"
         provisions of Paragraph 6 of the Employment Agreement continue to apply
         to Employee after Employee's resignation and that Employee has reviewed
         and reaffirms that obligation. Employee also acknowledges that Employee
         has signed copies of PSS's confidential information policy, which
         policy by its terms continues to apply to Employee after termination of
         employment, and agrees that such policy continues to apply to Employee
         after Employee's resignation.

13.      This Separation Agreement sets forth all of the agreements between PSS
         and Employee concerning Employee's employment and concerning Employee's
         resignation, and all prior agreements are hereby incorporated herein.
         This Separation Agreement may not be amended, except in writing signed
         by both of the parties hereto.

14.      Should Employee fail to meet the obligations undertaken by Employee
         pursuant to this Separation Agreement, PSS shall have no further
         obligations under this Separation Agreement, including but not limited
         to payment of the amounts set forth in Paragraph 3. In addition, PSS
         shall have the right to recover from Employee any and all monies paid
         and the full value of any benefits extended to Employee pursuant to
         this Separation Agreement and may take any legal action necessary to
         enforce this Separation Agreement and/or recover damages to PSS caused
         by Employee's breach of this Separation Agreement, including reasonable
         attorney fees, unless prohibited from doing so by local, state or
         federal law.

15.      This Separation Agreement shall be interpreted in accordance with the
         plain meaning of its terms and not strictly for or against any of the
         parties hereto. Kansas law shall govern the validity, effect, and
         interpretation of this Separation Agreement. This Separation Agreement
         is to be enforced at least in part in Shawnee County, Kansas, and venue
         for any action to enforce this Separation Agreement shall be in the
         Kansas District Court for Shawnee County, Kansas.

16.      Should any provision of this Separation Agreement be declared or be
         determined by any court of competent jurisdiction to be illegal,
         invalid, or unenforceable, the legality, validity, and enforceability
         of the remaining parts, terms or provisions shall not be affected
         thereby, and said illegal, unenforceable, or invalid part, term or
         provision shall be deemed not be part of this Separation Agreement.

                                       6
<PAGE>

17.      Employee agrees to close out Employee's business relationship with PSS
         in a professional and responsible manner, including contact with
         personnel both within and outside PSS, and acknowledges that failure to
         do so shall invalidate the payments specified above.

18.      Employee is eligible for re-hire by PSS. If Employee is offered and
         accepts employment with PSS prior to the end of Employee's Employment
         Agreement, any payments remaining to be paid under the Separation
         Agreement shall cease.

19.      This Separation Agreement shall be binding upon Employee and Employee's
         heirs, successors and assigns, and upon PSS and its successors and
         assigns.

20.      No payment hereunder shall be subject in any manner to anticipation,
         alienation, sale, transfer, assignment, pledge, encumbrance, levy or
         charge, and any attempt to so assign or otherwise encumber such payment
         shall be void. However, any valid garnishments, assignments or court
         ordered wage withholding orders received prior to payment of the
         amounts due pursuant to this Separation Agreement, will be executed by
         PSS as required by applicable law or procedure.

21.      Employee acknowledges that the right to receive payments hereunder is
         not secured by an particular assets of PSS, but is an unfunded
         obligation of PSS.

22.      The parties further hereby agree that this Separation Agreement shall
         not be construed as an admission by either party of any liability
         whatsoever, or as an admission of any violation of the rights of either
         party, violation of any order, law statute, duty, or contract,
         whatsoever against either party or any other person, or of any order,
         law statute, duty or contract on the part of PSS, its employees, or
         agents, or related companies or their employees or agents.

23.      Employee agrees to cooperate with and be readily available to PSS or
         its General Counsel, as PSS may reasonably request, to assist it in any
         matter, including litigation or potential litigation, over which
         Employee may have knowledge, information or expertise. Employee further
         agrees that Employee will not at any time discuss any matter concerning
         PSS with anyone adverse or potentially adverse to PSS on any matter
         including employment claims or customer claims, without the prior
         written consent of Counsel for PSS. However, if required by a
         governmental regulatory agency or self-regulatory agency to provide
         testimony or information regarding the Company, Employee will cooperate
         with said regulatory agency. If compelled to testify by a validly
         served subpoena or by regulatory authority, Employee will testify
         truthfully as to all matters concerning Employee's employment at PSS.
         If a regulatory agency or self-regulatory agency contacts Employee
         regarding the Company or if Employee receives a subpoena or other court
         or legal process relating in any way to the Company, or any present or
         former Company customer or employee, Employee immediately will give the
         General Counsel

                                       7
<PAGE>

         for the Company prior notice and shall be available to be interviewed
         concerning the subject of such contact.

24.      Employee understands that Employee may revoke this Separation Agreement
         at any time during a period of seven (7) days following the day
         Employee executes this Separation Agreement and said Separation
         Agreement shall not become effective or enforceable until the
         revocation period has expired. Any revocation within this period must
         be submitted, in writing to PSS and state: "I hereby revoke my
         acceptance of our Separation Agreement and General Release." Said
         revocation must be personally delivered to William J. Rainey, Senior
         Vice President, General Counsel, or Employer's designee, or mailed to
         Payless ShoeSource, Inc., P.O. Box 1189, Topeka, Kansas 66601, and
         postmarked within seven (7) days of the execution of this Separation
         Agreement.

/s/ Ken C. Hicks                                             December 13, 2001
------------------                                           -----------------
Ken C. Hicks                                                 Date

Payless ShoeSource, Inc.

By:  /s/ Steven Douglass                                     December 13, 2001
   ---------------------------------                         -----------------
                                                             Date

                                       8
<PAGE>

                                  ATTACHMENT 1

                     INFORMATION REGARDING JOB ELIMINATIONS

The decisional unit is all members of the Senior Management Committee. All
persons selected for termination by virtue of elimination of their positions in
the Senior Management Committee are selected for this program. The following is
a list of the age and job title of persons who were and were not selected for
termination.

                      PERSONS NOT SELECTED FOR TERMINATION

JOB TITLE                                                     AGE
---------                                                     ---

Chairman & Chief Executive Officer                             52

Executive Vice President - Operations                          46

Senior Vice President - Human Resources                        58

Senior Vice President - Financial Services & CFO               56

Senior Vice President - General Counsel                        55

Division Senior Vice President - Administration                46

Senior Vice President - Retail Operations                      43

Senior Vice President / GMM - Childrens'/Mens                  47

Senior Vice President - Merchandise Distribution / Planning    46

Senior Vice President - Marketing                              39

Senior Vice President / GMM - Parade                           46

Senior Vice President / GMM - Accessories                      48

Senior Vice President - Retail Operations Div. A               47

Senior Vice President - Retail Operations - International      47

                                       9
<PAGE>

                        PERSONS SELECTED FOR TERMINATION

JOB TITLE                                                     AGE
---------                                                     ---

President                                                      49

Senior Vice President / GMM - Women's                          46

Senior Vice President - Trend Merchandising                    48

Senior Vice President - IS & Logistics                         53

Senior Vice President - Corporate Development                  52

Senior Vice President - Managing Director PSSI                 48

Senior Vice President - Retail Operations Div. B               55

Senior Vice President - Retail Operations Div. K               63

Senior Vice President - Retail Operations Div. L               51

                                       10

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