Exhibit 10.21
AMENDMENT TO EMPLOYMENT AGREEMENT AND RESTRICTED STOCK UNIT AGREEMENT
     This Agreement (the “Amendment”) modifies certain terms and conditions of
(i) the Employment Agreement between Pacific Sunwear of California, Inc. (the
“Company”) and Sally Frame Kasaks (the "Executive”) previously entered into as
of May 22, 2007 (the “Employment Agreement”) and (ii) the Restricted Stock Unit
Award Agreement between the Company and the Executive previously entered into as
of May 24, 2007 (the “Restricted Stock Unit Agreement”). The purpose of this
Amendment is to make certain conforming changes to establish documentary
compliance with Section 409A of the Internal Revenue Code of 1986 and its
accompanying regulations (“Section 409A”), and to permit ongoing operational
compliance with Section 409A. This Amendment also makes certain additional
changes related to the Section 409A changes and related to the Settlement and
Release Agreement entered into in December 2008, by and between AnnTaylor Stores
Corporation (“AnnTaylor”), the Company and the Executive (the “Settlement
Agreement”).
     Notwithstanding anything else to the contrary in the Employment Agreement
or Restricted Stock Unit Agreement, as applicable, the provisions of this
Amendment shall apply effective as of December 31, 2008 and shall supersede and
replace any conflicting or different terms currently contained in the Employment
Agreement or Restricted Stock Unit Agreement, as applicable. Capitalized terms
used in this Amendment without definition shall have the same meanings as in the
Employment Agreement or Restricted Stock Unit Agreement, as applicable.

A.   EMPLOYMENT AGREEMENT.

1. Timing of Annual Bonus Payment.
     Any Annual Bonus that becomes payable pursuant to Section 3(b) of the
Employment Agreement shall be paid in the same calendar year in which the fiscal
year for which the Annual Bonus is earned ends.
2. Timing of Expense Reimbursements.
     To the extent that any expense reimbursements pursuant to Section 4(c),
4(d) or 30 of the Employment Agreement are taxable to the Executive, any
reimbursement payment due to the Executive pursuant to any such provision shall
be paid to the Executive in accordance with the Company’s usual expense policies
and in all events on or before the last day of the Executive’s taxable year
following the taxable year in which the related expense was incurred. The
Executive will provide the Company with timely documentation of her reimbursable
expenses to facilitate the Company’s obligation to make such reimbursement
payment no later than such deadline. The reimbursements pursuant to
Section 4(c), 4(d) and 30 of the Employment Agreement are not subject to
liquidation or exchange for another benefit and the amount of such
reimbursements that the Executive receives in one taxable year shall not affect
the amount of reimbursements that the Executive receives in any other taxable
year.

 

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3. Improper Terminations for Cause.
     For the avoidance of doubt, an improper termination of the Executive by the
Company for Cause pursuant to Section 6 of the Employment Agreement shall be
treated as a termination of the Executive by the Company without Cause. The last
paragraph of Section 6(a) shall be deleted.
4. Separation from Service.
     For purposes of the cash severance benefit payable pursuant to Section 6(b)
of the Employment Agreement upon a Termination of the Executive’s employment by
the Company without Cause or by the Executive for Good Reason, payment of such
benefit shall, subject to Section 29(c) of the Employment Agreement (as amended
by this Amendment), commence in the month in which the Executive has a
“separation from service” within the meaning of Section 409A (including
§1.409A-1(h)), and shall continue for the full period specified in
Section 6(b)(ii) of the Employment Agreement.
5. Good Reason Definition.
     In order for the Executive to terminate her employment for Good Reason, she
must comply with the following procedural requirements: (i) the termination for
Good Reason must occur within a limited period of time not to exceed two years
following the initial existence of the events claimed to constitute Good Reason,
(ii) the Executive must provide written notice to the Company within ninety
(90) days after the initial existence of the events claimed to constitute Good
Reason and (iii) the Company must be provided with a period of thirty (30) days
after the Company’s receipt of such written notice to remedy the events claimed
to constitute Good Reason without being required to pay the benefits pursuant to
Section 6(b) of the Employment Agreement.
6. Severance Benefits Offsets.
     In the event the Company adopts a change in control severance plan, the
Employment Agreement entitles the Executive to participate in such plan and
receive the greater of the cash severance benefits provided under the Employment
Agreement or any such change in control severance plan (with the cash severance
benefits otherwise payable subject to offset to avoid a duplication of benefits
(i.e., cash severance benefits are payable under either the Employment Agreement
or change in control severance plan, but not both)). If the Executive becomes
entitled to cash severance benefits under any such change in control severance
plan because the cash severance benefits thereunder in the circumstances are
greater than under the Employment Agreement, then, to the extent of the amount
of the cash severance benefits that would otherwise be payable under the
Employment Agreement in the circumstances, the severance benefits payable under
any such change in control severance plan shall be paid at the same time and in
the same form as provided under Section 6(b) of the Employment Agreement as
amended by this Amendment. Any cash severance benefits payable in the
circumstances under any such change in control severance plan having a value in
excess of the cash severance benefits that would otherwise be payable under the
Employment Agreement shall be paid in the time and form specified in any such
change in control severance plan. Notwithstanding the preceding two sentences,
if the Executive becomes entitled to cash severance benefits under any such
change in control severance plan, the full amount of the cash severance benefits
shall be paid in the time and form specified in any such change in control
severance plan if the Executive has a

 

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“separation from service” (within the meaning of Section 409A, including
§1.409A-1(h)) within two years following a “change in the ownership,” a “change
in the effective control” or a “change in the ownership of a substantial portion
of the assets” of the Company (within the meaning of Section 409A) and a
different time and form of payment for the cash severance benefits payable under
the Employment Agreement is permitted by §1.409A-3(c).
7. Section 280G Gross-Up Payment Reduction and Payment Timing.
     In the event a reduction in the amount of Company Payments pursuant to
Section 10(b)(ii) of the Employment Agreement is triggered in connection with a
change of ownership or effective control, the Executive shall not be permitted
to give written notice or otherwise direct the order in which Company Payments
are reduced. In all cases, Company Payments will be reduced in the order
specified in Section 10(b)(ii) of the Employment Agreement. For purposes of
determining whether a Gross-Up Payment is required under Section 10(b) of the
Employment Agreement and, if so, the amount of any such Gross-Up Payment, the
Executive shall be deemed to pay U.S. federal income taxes and state and local
income taxes at the Executive’s actual applicable tax rates for the calendar
year in which the Company Payments are to be made, and any reduction in U.S.
federal income taxes which could be obtained from deduction of such state and
local income taxes shall similarly be calculated using the Executive’s actual
applicable tax rates for the calendar year in which the Company Payments are to
be made. Any Gross-Up Payment becoming payable pursuant to Section 10(b) of the
Employment Agreement shall be made by the end of the Executive’s taxable year
next following the Executive’s taxable year in which the Executive remits the
related taxes.
8. Six-Month Delay for Specified Employees.
     Section 29(c) of the Employment Agreement (the Six Month Delay for
“Specified Employees” Section) is replaced it its entirety by the following
language from this Amendment. Notwithstanding any provision to the contrary in
the Employment Agreement, if the Executive is a “specified employee” (within the
meaning of Section 409A) at the time of the Executive’s “separation from
service” (within the meaning of Section 409A, including §1.409A-1(h)) and any
amount that would be paid to the Executive under the Employment Agreement or
otherwise during the six-month period following the Executive’s separation from
service constitutes a deferral of compensation (within the meaning of
Section 409A) that is required to be delayed in order to comply with
Section 409A, such amount shall not be paid to the Executive until the earlier
of (i) six months after the date of the Executive’s separation from service, and
(ii) the date of the Executive’s death (the “Delay Period”). Upon the expiration
of the Delay Period, all payments and benefits delayed pursuant to the preceding
sentence (whether they would have otherwise been payable in a single lump sum or
in installments in the absence of such delay) shall be paid or reimbursed to the
Executive in a lump sum within thirty (30) days following the expiration of the
Delay Period, and any remaining payments and benefits due under the Employment
Agreement or otherwise shall be paid or provided in accordance with the normal
payment dates specified for such payments and benefits. For purposes of this
section, each separate installment of any continued Base Salary severance
payments the Executive may become entitled to pursuant to Section 6(b) of the
Employment Agreement is intended to constitute a separate payment for purposes
of Section 409A, including §1.409A-2(b)(2).

 

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9. AnnTaylor Settlement Agreement.
     Before giving effect to the Settlement Agreement, the Executive generally
was to receive a supplemental retirement benefit from AnnTaylor payable each
year for the remainder of the Executive’s life (with survivor benefits for the
Executive’s spouse) pursuant to the Executive’s prior employment agreement with
AnnTaylor dated February 1, 1994 (the “AnnTaylor Agreement”). AnnTaylor has or
will pay the Executive Eight Hundred and Ten Thousand Dollars ($810,000.00),
subject to any applicable withholding obligations, pursuant to the Settlement
Agreement (such payment, the “Settlement Payment”). For purposes of implementing
Section 4(e) of the Employment Agreement, the Settlement Payment is in complete
satisfaction of any and all supplemental retirement benefit payments that the
Executive may have otherwise been entitled to (from AnnTaylor, the Company, or
otherwise) through and including February 2013 (including, without limitation,
any payments that may have heretofore otherwise been due to the Executive) and
is in partial settlement of the Executive’s supplemental retirement benefit
payment for March 2013. The Company will make a supplemental retirement benefit
payment to the Executive of $10,279.66 in March 2013, and in April 2013 will
commence making a monthly supplemental retirement benefit payment to the
Executive of $12,476.87 (with survivor benefits for the Executive’s spouse),
subject in each case to the same terms and conditions for each such month as had
the benefit been payable by AnnTaylor had the Settlement Agreement not been
entered into and had the Executive not commenced employment with the Company.
Each such payment will be subject to the Company’s withholding obligations with
respect thereto, offset for annual primary social security retirement benefits,
and such continuing monthly payments are subject to the lump sum payment
provision of the Employment Agreement in the event of a change in ownership or
effective control of the Company (within the meaning of Section 409A).

B.   RESTRICTED STOCK UNIT AGREEMENT.

1. Timing of Payment of Restricted Stock Units in Connection with Certain
Terminations.
     The Restricted Stock Unit Agreement provides that in the event that the
Executive’s employment is terminated by the Company without Cause (as defined in
the Employment Agreement) or by the Executive for Good Reason (as defined in the
Employment Agreement), the Restricted Stock Units, to the extent then
outstanding and unvested, shall become fully vested as of the date of the
termination of the Executive’s employment. If the Executive’s termination of
employment is a “separation from service” (within the meaning of Section 409A,
including §1.409A-1(h)), any Restricted Stock Units becoming vested in
connection with such a termination without Cause or for Good Reason shall be
paid as soon as administratively practical following the termination date (and
in any event within seventy-five (75) days following the termination date);
otherwise any Restricted Stock Units becoming vested shall be paid as soon as
administratively practical (and in any event within seventy-five (75) days)
following the earlier of (i) the Executive’s “separation from service” and
(ii) any other applicable payment event otherwise provided for in the Restricted
Stock Unit Agreement.

 

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2. Timing of Payment of Restricted Stock Units in Connection with a Change in
Control.
     In the event that the vesting of the Restricted Stock Units is accelerated
pursuant to Section 7 of the Plan, any Restricted Stocks Units becoming vested
shall become payable as follows. If in connection with the transaction a
successor corporation refuses to assume the Plan and the then-outstanding awards
under the Plan (including the Restricted Stock Units) and then-outstanding
awards (including Restricted Stock Units) are terminated in connection with such
a transaction, the Restricted Stock Units shall terminate and become payable as
soon as administratively practical (and in any event within seventy-five
(75) days) following the transaction, but only if (i) the transaction
constitutes a “change in the ownership,” a “change in the effective control” or
a “change in the ownership of a substantial portion of the assets” of the
Company within the meaning of Section 409A, (ii) the Plan, and any other plans
or awards that immediately after the transaction are required to be aggregated
with the Restricted Stock Units under Section 409A (including §1.409A-1(c)(2)),
are terminated with respect to each participant within the 30 days before or
12 months following the transaction and (iii) the other requirements of
Section 409A (including §1.409A-3(j)(4)(ix)(B) are satisfied. Any restricted
stock units that do not become payable in connection with such a transaction
pursuant to the preceding sentence shall be paid as soon as administratively
practical (and in any event within seventy-five (75) days) following the earlier
of (i) the Executive’s “separation from service” and (ii) any other applicable
payment event otherwise provided for in the Restricted Stock Unit Agreement.
3. Timing of Payment of Dividend Equivalent Rights Distributions.
     Any dividend equivalent rights distributions becoming payable pursuant to
Section 5(b) of the Restricted Stock Unit Agreement shall be paid in the same
calendar year as the related ordinary cash dividend is paid to holders of the
Company’s Common Stock.
4. Six-Month Delay for Specified Employees.
     For the avoidance of doubt, the Restricted Stock Units shall be subject to
the “six month delay” provisions of Section 29(c) of the Employment Agreement
(as such provisions are amended by this Amendment).

 

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     IN WITNESS WHEREOF, the Company and Executive have executed this Amendment
effective as of December 31, 2008.

            THE COMPANY:
Pacific Sunwear of California, Inc.
      By:   /s/ Michael L. Henry         Name:   Michael L. Henry        
Title:   Senior Vice President, Chief Financial Officer        EXECUTIVE:
Sally Frame Kasaks
      /s/ Sally Frame Kasaks