Document:

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                                                                  Exhibit 10.16

                            PAYLESS SHOESOURCE, INC.

                           DEFERRED COMPENSATION PLAN

                          FOR NON-MANAGEMENT DIRECTORS

                             EFFECTIVE JULY 17, 1997

                             Amended March 16, 2000

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                            PAYLESS SHOESOURCE, INC.
                           DEFERRED COMPENSATION PLAN
                          FOR NON-MANAGEMENT DIRECTORS

SECTION 1. PURPOSE.

     The purpose of this Plan is to provide an opportunity for Non-Management
Directors of Payless ShoeSource, Inc. to defer all or a portion of their Initial
Grant and Annual Retainer(s) under the Restricted Stock Plan, as well as cash
compensation for service on the Board.

SECTION 2. DEFINITIONS.

     (a) Annual Retainer means the annual grant of restricted Stock under the
Restricted Stock Plan for Non-Management Directors of Payless ShoeSource, Inc.
and any annual award of cash compensation payable for service on the Board.

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

     (c) Fiscal Year means the fiscal year of Payless as established from time
to time.

     (d) Initial Grant means the initial grant of restricted Stock to an
eligible Non- Management Director under the Restricted Stock Plan and any
initial award of cash compensation payable for service on the Board.

     (e) Non-Management Director means a member of the Board who is not, at the
time an election to defer is made, an officer of Payless.

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

     (g) Participant means a Non-Management Director who has elected to
participate in the Plan.

     (h) Plan means the Deferred Compensation Plan for Non-Management Directors
of Payless, as described herein.

     (i) Restricted Stock Plan means the Restricted Stock Plan for
Non-Management Directors of Payless ShoeSource, Inc., all of the relevant terms
of which are incorporated herein.

     (j) Stock means the common stock of Payless, as hereinafter defined.

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

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

SECTION 3. METHODS OF PAYMENT.

     (a) Except as hereinafter provided, prior to the effective date of an
individual first becoming an eligible Non-Management Director and as of the
first day of each calendar year thereafter while such individual remains an
eligible Non-Management Director, each Participant shall be afforded the
opportunity to make an election to have either of the following alternative
methods of payment applied to all or any portion of the Initial Grant and/or the
Annual Retainer under the Restricted Stock Plan and of any additional cash
compensation which such Participant shall be entitled to receive as awarded at
the annual shareowners' meeting during said calendar year.

          (i) Alternative (i): Payment of the Initial Grant and of the Annual
Retainer in the form of restricted Stock pursuant to the terms of the Restricted
Stock Plan and payment in cash of any additional compensation that is payable
initially or annually as of the date of the annual shareowners' meeting.

          (ii) Alternative (ii): Payment of any cash compensation at a deferred
date or dates either in a lump sum or in annual installments, as may be elected
by the Participant, such deferred cash payment when made to include interest, as
hereinafter provided, from the first day of May next following the date of the
annual shareowners' meeting as of which the compensation was awarded to the date
of payment.

          (iii) Alternative (iii): Payment of the amount of the Initial Grant
and of the Annual Retainer, otherwise payable in the form of restricted Stock,
at a deferred date or dates either in a lump sum or in annual installments, as
may be elected by the Participant, such deferred payment in the form of Stock to
be made for Stock Units 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 Initial Grant
or Annual Retainer, as applicable, for such year. The Participant shall make an
irrevocable 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 for which such Alternative was
elected by the Participant, or, if a Participant is newly elected or appointed
to the Board, prior to the first meeting following such election or appointment.

     (b) Consistent with the provisions of Sections 2 and 3 of Part II of the
Restricted Stock Plan, except in the event of death or disability as described
therein, all or any portion of an Initial Grant or of an Annual Retainer under
the Restricted Stock Plan

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which is deferred hereunder shall not vest and shall be forfeited in the event
the Participant shall cease to be a member of the Board within six months
following the date of such grant and deferral, and a deferred Initial Grant only
shall vest and cease to be forfeitable one-fifth for each Year of Service (as
defined in the Restricted Stock Plan) and a deferred Annual Retainer under the
Restricted Stock Plan only shall vest and cease to be forfeitable one-half on
the first November 1 following the annual shareowner's meeting as of which such
Annual Retainer is granted and deferred and the remaining one-half of such
Annual Retainer shall vest as of the first May 1 following the end of the
calendar year in which such grant was made. The cash portion, if any, of an
Annual Retainer shall vest, provided the Participant's membership on the Board
has not ceased, as of the earlier of one-fifth on the date of each regularly
scheduled Board meeting following the shareowners' meeting at which such cash
compensation was awarded, or in full as of the May 1 following the date of such
annual shareowners' meeting. Notwithstanding any provision of this Section 3(b)
to the contrary, in the event of a Participant's death or disability as defined
in the Restricted Stock Plan, all outstanding Initial Grants and Annual
Retainers shall be deemed to be fully vested and nonforfeitable. Vesting of any
pro rata Annual Retainer deferred shall occur in the same manner as described in
Section 2 of Part II of the Restricted Stock Plan and vesting may be accelerated
by action of the Committee under the terms of the Restricted Stock Plan.

     (c) Except as provided in Section 12 and Section 13, in no event shall
payments under Alternatives (ii) or (iii) commence prior to the earlier of (I)
the first day of May following the end of the calendar year during which the
Participant's service as a director of Payless terminates; or (ii) the
occurrence of a severe financial hardship. Upon the written request of the
Participant (or if applicable, the beneficiary or distributee) the payment
schedule elected by the Participant under Alternatives (ii) or (iii) above may
be revised by the Board, 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 Board may revise
the payment schedule that the Participant had previously established only to the
extent that the Board considers necessary to eliminate or lessen the severe
financial hardship.

     (d) In the case of a Participant who elects to have all or any part of his
Initial Grant and/or Annual Retainer, as applicable, 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 with
respect to such Initial Grant and/or Annual Retainer 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 Initial Grant or Annual
Retainer compensation, as applicable, as is to be so applied to Alternative
(iii) by the average of the high and low trading prices of the Stock on the New
York Stock Exchange as of the date of Payless' annual shareowners' meeting (or,
it applicable, the date the Participant

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first joins the Board) or, if the New York Stock Exchange is not open on such
date, the first preceding day it was open; 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 the "Year" had the Stock Units standing in his Stock Unit
Account from time to time during the Year been shares of Stock by the average of
the high and low trading prices of the Stock on the New York Stock Exchange as
of the date of Payless' annual shareowners' meeting (or, if applicable, the date
the Participant first joins the Board) or, if the New York Stock Exchange is not
open on such date, the first preceding day it was open (for purposes of these
subparagraphs (ii) and (iii), the "Year" is the twelve month period preceding
each annual shareowners' meeting); plus

          (iii) the number of shares of Stock, disregarding fractions, which
would have been received by the Participant as stock dividends during the 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 Stock.

Any allocation of Stock Units to a Participant's Stock Unit Account required to
be made pursuant to this paragraph (d) shall be made as of the date of Payless'
annual shareowners' meeting (or, if applicable, the date the Participant first
joins the Board) as of which such Stock Units were determined. The aggregate
value of the fraction or fractions remaining after making the applicable
calculations referred to in subparagraphs (d)(i), (d)(ii) and (d)(iii) of this
Section 3 shall be converted into Stock Units, to be accumulated in the
Participant's Stock Unit Account until paid or distributed.

     (e) Notwithstanding the provisions of Section 3(d) to the contrary, in the
event of a recapitalization of Payless pursuant to which the outstanding shares
of 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 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.

     (f) Interest to be paid under Alternative (ii) shall be credited annually
as of the first day of May next following the date of Payless' annual
shareowners' meeting each year and shall be at a rate 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 May 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 Board 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.

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     In no event shall the aggregate number of Stock Units allocated under this
Plan, when added to the total number of shares of Restricted Stock granted under
the Restricted Stock Plan, exceed 300,000 shares of Stock, as adjusted hereunder
or under the Restricted Stock Plan.

SECTION 5. DISTRIBUTION FROM THE STOCK UNIT ACCOUNT.

     (a) Distribution from a Participant's Stock Unit Account shall be made in
accordance with elections made by the Participant and the determinations made by
the Board, 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 Participant has determined that a distribution is to be made in
a lump sum in Stock, the number of shares of 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 Stock to be
distributed on a particular annual installment distribution date, the Board
shall make its calculations as if that annual installment and all subsequent
annual installments were in fact to be made in shares of Stock, as follows: the
number of shares of 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 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 Stock distributed to a Participant. Any fractional Stock Unit
shall not be distributed in Stock, but shall be distributed in cash based on the
average of the high and low trading prices of the Stock on the New York Stock
Exchange as of the date of distribution or, if the New York Stock Exchange is
not open on such date, the first preceding day it was open.

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 the
Participant pursuant to such Alternatives, shall be distributed to such
beneficiary as the Participant shall have designated in writing delivered to the
Board, or, in the absence of such designation, shall be distributable to the
Participant's personal representative. Such distribution shall be made at such
date or dates, either in a lump sum or in annual installments as elected by the
Participant prior to the beginning of the calendar year for which such
Alternative was elected, as determined by the Board and provided further that in
the event of a severe financial hardship, the Board may revise its determination
in accordance with Section 3(c).

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SECTION 7. PARTICIPANT'S RIGHT UNSECURED; INVESTMENTS.

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

SECTION 8. ADMINISTRATION OF THE PLAN.

     (a) The Plan shall be administered by the Board. 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 in (i) the maximum number of
shares or Stock Units deliverable or allocable in respect of any Fiscal Year
under the plan or (ii) the provisions of subparagraphs (d)(i) and (d)(ii) of
Section 3 of this Plan relating to the method of determining the number of Stock
Units allocable to a Participant.

     (b) The Board 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 Board may
determine and shall designate:

          (i) the Alternative or Alternatives elected by the Participant
pursuant to Section 3(a);

          (ii) the Participant's determination of the time or times when payment
of such compensation will be made to the Participant pursuant to Section 3(a);

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

          (iv) the Board's determination of the time or times when payment of
such compensation will be made after the Participant's death pursuant to Section
6.

     (c) The Board shall be authorized to interpret and construe the Plan; to
make, amend and rescind rules and regulations relating to the Plan; and to make
all determinations and take all actions necessary or advisable for the Plan's
administration, consistent with the terms of the Plan.

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.

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

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

SECTION 11. WITHHOLDING.

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

SECTION 12. DISCRETIONARY PAYMENT.

     (a) Notwithstanding any other provision in any other Section of the Plan to
be contrary, the Board 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 Board determines that such action is in the best interests of
Payless, the Participants and their beneficiaries.

     (b) In the event that the Board 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 Board so as to reflect fairly
and equitably appropriate interest and dividends since the preceding May 1 and
so as to reflect fairly and equitably such other facts and circumstances as the
Board 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);

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          (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 Payless 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 Board 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 (ii) 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 Payless or as soon thereafter as practicable, but in no
event later than five days after the Change in Control of Payless. The amounts
of cash credited to each Participant's accounts prior to determining the amount
of cash to be paid from these accounts shall be determined by the Board so as to
reflect fairly and equitably appropriate interest and any dividends since the
preceding allocation date and so as to reflect fairly and equitably such other
facts and circumstances as the Board deems appropriate, including, without
limitation, recent price of the stock. For purposes of payments under this
Section 13, the value of a Stock Unit shall be computed as the greater of (a)
the closing price of shares of 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 Stock is highest) or (b) the highest per
share price for shares of 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

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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 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; or

          (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

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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.

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                                                                  Exhibit 10.18

               THE STOCK APPRECIATION AND PHANTOM STOCK UNIT PLAN
                                       OF
                  PAYLESS SHOESOURCE, INC. AND ITS SUBSIDIARIES
                                       FOR
                   PAYLESS SHOESOURCE INTERNATIONAL EMPLOYEES
                             Amended March 16, 2000

PART I. GENERAL

          1. PURPOSE. The purpose of the Plan is to aid Payless ShoeSource, Inc.
and its subsidiaries in attracting, retaining, motivating and rewarding certain
management employees.

          2. DEFINITIONS. Whenever used herein, the following terms shall have
the meanings set forth below:

               (a) "Agreement" means the agreement between the Company or any
     International Subsidiary and a Participant evidencing the award of Stock
     Appreciation Units or Phantom Stock Units and containing the terms and
     conditions, not inconsistent with the Plan, that are applicable to such
     Units.

               (b) "Award" means an award of Units under the Plan.

               (c) "Exercise Price" means, with respect to a Stock Appreciation
     Unit, the Fair Market Value of a share of Stock on the date the Stock
     Appreciation Unit is granted.

               (d) "Board" means the Board of Directors of Payless ShoeSource,
     Inc., a Delaware corporation.

               (e) "Committee" means a committee designated by the Board which
     shall consist of not less than 2 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.

               (f) "Company" means Payless ShoeSource, Inc., a Delaware
     corporation.

               (g) "Disability" means a total and permanent disability which
     enables the Participant to be eligible for and to receive disability
     benefits under (i) the Social Security Act of the United States of America
     or (ii) under any comparable governmental arrangements in the country in
     which the Participant resides.

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               (h) "Fair Market Value" of a share of Stock means the average of
     the high and low price of the Stock on the New York Stock Exchange on the
     date in question, or if no sales occurred on such day, on the last
     preceding day on which Stock was traded.

               (i) "International Subsidiary" means any Subsidiary primarily
     engaged in business outside of the United States of America.

               (j) "Participant" means an individual to whom an Award for Stock
     Appreciation Units or a Phantom Stock Units is made under the Plan.

               (k) "Phantom Stock Unit" means a non-transferrable,
     non-assignable right described in Part II of the Plan awarded by the
     Company or any Subsidiary and approved by the Committee under or pursuant
     to the Plan which provides for the payment of an amount in cash in
     accordance with such terms and conditions, not inconsistent with the Plan,
     that are applicable to such Unit.

               (l) "Plan" means The Stock Appreciation and Phantom Stock Unit
     Plan of Payless ShoeSource, Inc. and Its Subsidiaries For Payless
     ShoeSource International Employees.

               (m) "Retirement" means "retirement" as that word is defined in
     any retirement plan sponsored by an International Subsidiary which is
     applicable to the Participant or, if there is no such plan, as defined in
     the Company's Profit Sharing Plan.

               (n) "Subsidiary" means any company owned, directly or indirectly
     by the Company or any subsidiary thereof.

               (o) "Stock" means common stock of the Company.

               (p) "Stock Appreciation Unit" means a non-transferrable, non-
     assignable right described in Part II of the Plan awarded by the Company or
     any Subsidiary and approved by the Committee under or pursuant to the Plan
     which provides for the payment of an amount in cash in accordance with such
     terms and conditions, not inconsistent with the Plan, that are applicable
     to such Unit and whose Exercise Price is the Fair Market Value of a share
     of Stock on the date of the Award.

               (q) "Unit" means a Stock Appreciation Unit or a Phantom Stock
     Unit. Each Phantom Stock Unit shall represent the right to receive 100% of
     the value of a share of Stock on the day the Unit vests. Each Stock
     Appreciation Unit shall represent the right to receive the difference, if
     positive, between the Fair Market Value of a share of stock on the date the
     Unit is exercised and the

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     Exercise Price of the Unit. Units are not shares of stock and do not
     entitle Participants to receive Stock or exercise any rights incident to
     ownership of Stock, except that the Committee may provide in an agreement
     that holders of Phantom Stock Units will receive dividend equivalents if
     any cash dividends are paid on its Stock by the Company.

               3. ADMINISTRATION. The Plan shall be administered by the
Committee. Subject to all the applicable provisions of the Plan, including,
without limitation, Section 4 of Part I of the Plan, the Committee is authorized
to approve Awards of Units in accordance with the Plan, to construe and
interpret the Plan, to prescribe, amend, and rescind rules and regulations
relating to the Plan, and to make all determinations and take all actions
necessary or advisable for the Plan's administration. The Committee shall act by
vote or written consent of a majority of its members. Whenever the Plan
authorizes or requires the Committee to take any action, make any determination
or decision, or form any opinion, then any such action, determination, decision
or opinion by or of the Committee shall be in the absolute discretion of the
Committee.

               4. PARTICIPANTS. The individuals who are eligible to receive
Awards for Units hereunder shall be limited to management employees of any
Subsidiary who, on the date of the award of Units under the Plan, are not
citizens of the United States of America and who are employed and reside out of
the boundaries of the United States of America.

               From time to time the Committee shall in its sole discretion, but
subject to all of the provisions of the Plan, determine which eligible employees
will receive Awards of Units under the Plan and the size, terms and conditions
of the Unit or Units to be awarded to each Participant. In any year, the
Committee may approve the award to any eligible employee of Units subject to
differing terms and conditions. Neither the Committee's decision to approve the
award of a Unit to that employee in any other year or to any other employee in
any other year, nor the Committee's decision with respect to the size, terms and
conditions of the Award(s) to be made to an employee in any year, require the
Committee to approve the award of the Unit(s) of the same size or with the same
terms and conditions to such employee in any other year or to any other employee
in any year. The Committee shall not be precluded from approving the award of a
Unit to any eligible employee solely because such employee may previously have
received an Award under the Plan.

               5. EMPLOYMENT. In the absence of any specific agreement to the
contrary, no Award of Units to a Participant under the Plan shall affect any
right of the Participant's employer to terminate the Participant's employment at
any time.

                                        3

<PAGE>   4

PART II. UNITS

               1. UNITS. The Committee may from time to time in its discretion
approve the award of Units to employees who are eligible to receive an Award in
accordance with Section 4 of Part I of the Plan. An Award shall be evidenced by
an Agreement which shall contain such terms and conditions (which may include
vesting provisions and other restrictions not inconsistent with the Plan as the
Committee shall determine); provided, however, that an Award shall satisfy the
requirements set forth in Part II of the Plan.

               2. GRANT. An Award may be granted by the Committee and shall be
effective upon the date approved by the Committee.

               3. EXERCISE AND VESTING. Stock Appreciation Unit Awards may be
exercised by the Participant only at such time or times, and only upon such
terms and conditions, as shall be set forth in the Agreement relating to such
Stock Appreciation Unit Award. A Phantom Stock Unit Award will vest on the date
or dates as are set forth in the Agreement respecting such Phantom Stock Unit
Award.

               4. AMOUNT OF PAYMENT. Upon the exercise of a Stock Appreciation
Unit Award, a Participant shall be entitled to receive the excess of the Fair
Market Value of a share of Stock over the Exercise Price of a Unit with respect
to each Unit exercised. Upon vesting of a Phantom Stock Unit, a participant
shall be entitled to receive an amount for such Unit equal to the Fair Market
Value of a share of Stock on the date the Unit vests.

               5. FORM OF PAYMENT. Any amount which becomes payable upon
exercise or vesting of an Award under the Plan shall be paid entirely in cash.
The Committee may determine that amounts shall be payable in United States
dollars or in local currency, converted on such basis and at such conversion
rate as the Committee shall deem reasonable.

               6. TERMINATION.

                    (a) GENERAL. A Stock Appreciation Unit Award shall terminate
     as of the earlier of (i) the date of exercise of Award, to the extent that
     it is exercised, or (ii) the expiration date specified in the Agreement
     with respect to such Award. If an unexercised Stock Appreciation Unit Award
     is otherwise exercisable on the date that it expires, and if the Fair
     Market Value of Stock with respect to which it was granted, determined as
     of the date of such expiration, exceeds the Exercise Price of the Units
     (under such Award as set forth in the Stock Appreciation Unit Agreement),
     then the Award shall automatically be deemed to have been exercised as of
     the date of such expiration.

                                        4

<PAGE>   5

                    (b) TERMINATION OF EMPLOYMENT. If a Participant ceases to be
     an employee of the Company or of a Subsidiary, for any reason other than
     such Participant's Disability, Retirement or Death, then any Award not
     theretofore exercised or vested, as applicable, shall immediately be
     terminated and may not thereafter be exercised, and no payment shall be
     made hereunder pursuant to such Award. Each Agreement shall provide that
     the Committee may terminate any Award prior to the date on which the Unit
     is exercised or vested, as applicable, if the Participant engages during
     the life of the Award in employment or activities contrary, in the opinion
     of the Committee, to the best interests of the Company or of any
     Subsidiary.

                    (c) DISABILITY. If a Participant ceases to be an employee of
     the Company or of a Subsidiary by reason of such Participant's Disability,
     then the Participant's rights under the Award after the date of such
     Disability shall be determined by the provisions of the Agreement
     applicable to such Award.

                    (d) DEATH. If a Participant ceases to be an employee of the
     Company or of a Subsidiary by reason of the Participant's death, the
     participant's rights under the Award shall be determined by the provisions
     of the Agreement applicable to such Award.

                    (e) RETIREMENT. If a Participant ceases to be an employee of
     the Company or of a Subsidiary by reason of the Participant's Retirement,
     any unvested Phantom Stock Units shall expire. The right to exercise all or
     any portion of any Award of Stock Appreciation Units shall be determined by
     the provisions of the Agreement applicable to such Award.

               7. NON-ASSIGNABILITY. An Award shall not be transferable (other
than by will or the laws of descent and distribution) and, during the
Participant's lifetime, shall be exercisable by, and payable to, only the
Participant.

               8. RESTRICTIONS. Awards shall be subject to the condition that if
at any time the Company shall determine in its discretion that the registration
of the Plan with any regulatory authority, the satisfaction of withholding tax
or other withholding liabilities under the law of any applicable jurisdiction or
the consent or approval of any regulatory body is necessary or desirable as a
condition of, or in connection with, the exercise or vesting of such Award,
then, in any such event, such exercise or vesting shall not be effective unless
such registrations withholding, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.

               9. REPRICING PROHIBITED. There shall be no grant of a Stock
Appreciation Unit in exchange for a Participant's agreement to cancellation of a
Stock Appreciation Unit with a higher Exercise Price that was previously granted
to such Participant.

                                        5

<PAGE>   6

PART III. CANCELLATION AND RESCISSION

               1. COMPETITION; CONFIDENTIAL INFORMATION.

                    (a) Unless a Stock Appreciation Right Agreement (any such
     agreement being referred to herein as an "Agreement") specifies otherwise,
     the Committee may

                    (1) cancel at any time any unexercised Stock Appreciation
                    Unit; or

                    (2) rescind any exercise of a Stock Appreciation Unit

          if the Participant is not in compliance with all other applicable
          provisions of the Agreement or the Plan or if, prior to any such
          exercise or within six months after such exercise, the Participant

                    (i) engages in a Competing Business, as such term is defined
                    in the Agreement; or

                    (ii) solicits for employment, hires or offers employment to,
                    or discloses information to or otherwise aids or assists any
                    other person or entity other than the Company in soliciting
                    for employment, hiring or offering employment to, any
                    employee of the Company; or

                    (iii) takes any action which is intended to harm the Company
                    or its reputation, which the Company reasonably concludes
                    could harm the Company or its reputation or which the
                    Company reasonably concludes could lead to unwanted or
                    unfavorable publicity to the Company; or

                    (iv) discloses to anyone outside the Company, or uses in
                    other than the Company's business, any "confidential
                    information," as such term is defined in the Agreement.

                    (b) Upon exercise of Stock Appreciation Unit, the
     Participant shall certify on a form acceptable to the Committee that the
     Participant is in compliance with the terms and conditions of the Agreement
     and the Plan.

                    (c) The Company shall immediately notify the Participant in
     writing of any cancellation of any unexercised Stock Appreciation Unit.
     Following receipt of such notice, the Participant shall have no further
     rights with respect to such Stock Appreciation Unit.

                                        6

<PAGE>   7

               (d) The Company shall notify the Participant in writing of any
     rescission of an exercise of a Stock Appreciation Unit within one year
     after the activity referred to in Part III, Section 1(a). Within ten days
     after receiving such a notice from the Company, the Participant shall pay
     to the Company the excess of the Fair Market Value of the Stock on the date
     of exercise of a Stock Appreciation Unit over the Exercise Price for the
     Unit.

               2. AGREEMENT BY PARTICIPANT REGARDING DEDUCTION. The Participant
shall agree and consent to a deduction from any amounts the Company or a
Subsidiary owes to the Participant from time to time (including amounts owed as
wages or other compensation, fringe benefits, or vacation pay, as well as any
other amounts owed to the Participant by the Company or a subsidiary), to the
extent of the amounts the Participant owes the Company under this Article III.
Whether or not the Company elects to make any set-off in whole or in part, if
the Company does not recover by means of set-off the full amount owed by the
Participant, calculated as set forth in this Article III, then the Participant
agrees to pay immediately the unpaid balance to the Company.

PART IV. MISCELLANEOUS

               1. EFFECTIVE DATE. The Plan shall become effective on May 14,
1997.

               2. DURATION OF PLAN. The Plan shall remain in effect until it is
terminated by the Company.

               3. WITHHOLDING. The Company or any Subsidiary shall have the
right to deduct from the amount of any payment arising from the exercise or
vesting of an Award any taxes required by applicable law to be withheld from
such amount.

               4. UNFUNDED PLAN. The Plan shall be unfunded. Neither the Company
nor any Subsidiary nor the Committee shall be required to segregate any assets
that may at any time be represented by Awards under the Plan. Neither the
Company nor the Committee shall be deemed to be a trustee of any amounts to be
paid under the Plan. Any liability of the Company to any Participant with
respect to an Award shall be based solely upon any contractual obligations
created by the Plan or an Agreement, and no such obligation shall be deemed to
be secured by any pledge or any encumbrance on any property of the Company or of
any Subsidiary.

               5. CHANGES IN CAPITAL STRUCTURE. In the event that there is any
change in the capital structure of the Company, through merger, consolidation,
reorganization, recapitalization, spinoff 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, the number and/or the Exercise Price of the Units
shall be proportionately adjusted by the Board as it deems equitable, in its
absolute discretion, to prevent dilution or enlargement of the Participant's
Award. The issuance of Stock for consideration and

                                        7

<PAGE>   8

the issuance of Stock rights shall not be considered a change in the Company's
capital structure. No adjustment provided for in this section will result in
fractional Units.

               6. AMENDMENT OR TERMINATION. The Board may, by resolution, amend
or terminate the Plan at any time; provided, however, that the Board may not,
without the consent of the holder of the Unit, alter or impair any Award
previously granted under the Plan except as authorized herein.

Notwithstanding the foregoing, the Board may, by resolution, amend the Plan in
any way that it deems necessary or appropriate in order to make income with
respect to the Plan deductible for United States Federal income tax purposes
under Section 162(m) of the Code without regard to the foregoing proviso and any
such amendment shall be effective as of such date as is necessary to make such
income under the Plan so deductible.

               7. CHANGE OF CONTROL. If while unexercised awards remain
outstanding under the Plan:

                    (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 7, 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 7(c)(A), 7(c)(B) and 7(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

                                        8

<PAGE>   9

approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or

                    (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.

then from and after the date of the first of the foregoing events to occur, all
outstanding Stock Appreciation Unit Awards held by active employees on such date
shall be exercised in full, whether or not otherwise exercisable, and all
outstanding Phantom Stock Unit Awards held by active employees on such date
shall vest in full, and shall be deemed fully payable.

                                        9

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