Exhibit 10.1

                                                       PERSONAL AND CONFIDENTIAL

                            PAYLESS SHOESOURCE, INC.
                              3231 EAST 6TH AVENUE
                                  P.O. BOX 1189
                            TOPEKA, KANSAS 66601-1189
                                 (785) 233-5171
                                EXECUTIVE OFFICES


Jay A. Lentz, PhD.
Senior Vice President
   Human Resources

                                                   May 26, 2005


Steven J. Douglass
3231 SE Sixth Avenue
Topeka, Kansas 66607

Dear Steven:

              In connection with the CEO succession plan, you and Payless
ShoeSource, Inc. (the "Company") mutually agree that the last day of your
employment will be the day immediately preceding the date on which your
successor commences employment with the Company (your "Separation Date"). The
Company expects that the new CEO will commence employment on or before August 1,
2005. For the avoidance of doubt, until your Separation Date you will continue
to have the position, authority, duties and responsibilities contemplated by
Paragraph 1 of your Employment Agreement dated October 1, 2003 (your "Employment
Agreement").

              Upon your separation on the Separation Date, the Company agrees
that you will be treated for all purposes as having your employment terminated
during the Contract Term by you for Good Reason and the Company will honor all
of its obligations under your Employment Agreement.

              Unless the Company waives this requirement, your separation from
the Company will constitute your resignation from (1) any director, officer or
employee position you then have with the Company, its subsidiaries and its
affiliates and (2) all fiduciary positions (including as trustee) you hold with
respect to any pension plans or trusts established by the Company, its
subsidiaries and its affiliates. The Company and you agree that this letter will
serve as your written notice of resignation in this circumstance.

                                                     Very truly yours,

                                                     /s/ Jay Lentz


Accepted and agreed to as of the 26th day of May, 2005:


/s/ Steven J. Douglass
-----------------------------------------
          Steven J. Douglass