CHANGE OF CONTROL AGREEMENT



         This AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT (this

"Agreement"), is restated as of the 1st day of October, 2003, (the "Restatement

Effective Date") by and between Payless ShoeSource, Inc., a Delaware corporation

(the "Company"), and Steven J. Douglass (the "Executive").



         WHEREAS, the Board of Directors of the Company (the "Board"), has

determined that it is in the best interests of the Company and its stockholders

to assure that the Company will have the continued dedication of the Executive,

notwithstanding the possibility, threat or occurrence of a Change of Control (as

defined herein). The Board believes it is imperative to diminish the inevitable

distraction of the Executive by virtue of the personal uncertainties and risks

created by a pending or threatened Change of Control and to encourage the

Executive's full attention and dedication to the current Company and in the

event of any threatened or pending Change of Control, and to provide the

Executive with compensation and benefits arrangements upon a Change of Control

that ensure that the compensation and benefits expectations of the Executive

will be satisfied and that are competitive with those of other corporations.

Therefore, in order to accomplish these objectives, the Board has caused the

Company to enter into this Agreement.



                 NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:



         SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the first

date on which a Change of Control occurs. Notwithstanding anything in this

Agreement to the contrary, if a Change of Control occurs and if the Executive's

employment with the Company is terminated without Cause or for Good Reason

within one year prior to the date on which the Change of Control occurs then

"Effective Date" means the date immediately prior to the date of such

termination of employment unless such termination did not occur at the request

of a third party that has taken steps reasonably calculated to effect a Change

of Control. Further, notwithstanding anything in this Agreement to the contrary,

if a Potential Change of Control occurs and if the Executive's employment with

the Company is terminated as provided in Section 5(e), then "Effective Date"

means the date immediately prior to the date of such termination of employment.



         (b)      "Change of Control Period" means the period commencing on the

Effective Date and ending on the third anniversary thereof.



         (c)      "affiliated company" means any company controlled by,

controlling or under common control with the Company.



         (d)      "Change of Control" means:



         (1)      The acquisition by 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") of beneficial ownership (within

the



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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 1(d), none of the

following shall constitute a Change of Control: (i) any acquisition directly

from the Company of 30% or less of Outstanding Company Common Stock or

Outstanding Company Voting Securities provided that at least a majority of the

members of the board of directors of the Company following such acquisition were

members of the Incumbent Board at the time of the Board's approval of such

acquisition, (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 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 Stock or the Outstanding Company Voting Securities, then such additional

acquisition shall constitute a Change of Control; or



         (2)      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



         (3)      Consummation of a reorganization, merger, consolidation or

sale or other disposition of all or substantially all of the assets of the

Company (a "Business Combination"), in each case, unless, immediately following

such Business Combination, (A) 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 (x) the corporation resulting from such

Business Combination, or (y) 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, is represented by

the Outstanding Company Common Stock and the Outstanding Company Voting

Securities (or, if applicable, is represented by shares into which Outstanding

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