Exhibit 10.5

Execution Copy

GUARANTY

GUARANTY (this “Guaranty”), dated as of December 7, 2011, by PACIFIC SUNWEAR
STORES CORP., a California corporation (the “Guarantor”) in favor of PS HOLDINGS
AGENCY CORP., as administrative agent and collateral agent (in such capacities,
the “Agent”), for its own benefit and the benefit of the other Credit Parties
(as defined in the Credit Agreement referred to below) and the Credit Parties.

W I T N E S S E T H

WHEREAS, reference is made to that certain Credit Agreement, dated as of
December 7, 2011 (as amended, modified, supplemented or restated hereafter, the
“Credit Agreement”), by and among, among others, (i) Pacific Sunwear of
California, Inc. (the “Borrower”), (ii) the Guarantor, (iii) the Agent, and
(iv) the Lenders party thereto (the “Lenders”). Capitalized terms used herein
and not defined herein shall have the meanings assigned to such terms in the
Credit Agreement.

WHEREAS, the Lenders have agreed to make Loans to the Borrower pursuant to, and
upon the terms and subject to the conditions specified in, the Credit Agreement.

WHEREAS, the Guarantor is a wholly owned Subsidiary of the Borrower, and
acknowledges that it will receive direct and indirect benefits from the
availability of the credit facility provided for in the Credit Agreement and
from the making of the Loans by the Lenders thereunder.

WHEREAS, the obligations of the Lenders to make Loans are conditioned upon,
among other things, the execution and delivery by the Guarantor of a guaranty in
the form hereof. As consideration therefor, and in order to induce the Lenders
to make Loans, the Guarantor is willing to execute this Guaranty.

Accordingly, the Guarantor hereby agrees as follows:

SECTION 1. Guaranty. The Guarantor irrevocably and unconditionally guaranties,
as a primary obligor and not merely as a surety, the due and punctual payment
when due (whether at the stated maturity, by required prepayment, by
acceleration or otherwise) and performance by the Borrower of all Obligations
(collectively, the “Guaranteed Obligations”), including all such Guaranteed
Obligations which shall become due but for the operation of the Debtor Relief
Laws. The Guarantor further agrees that the Guaranteed Obligations may be
extended or renewed, in whole or in part, without notice to or further assent
from it, and that it will remain bound upon this Guaranty notwithstanding any
extension or renewal of any Guaranteed Obligation.

SECTION 2. Guaranteed Obligations Not Affected. To the fullest extent permitted
by applicable Law, the Guarantor waives presentment to, demand of payment from,
and protest to, any Loan Party of any of the Guaranteed Obligations, and also
waives notice of acceptance of this Guaranty, notice of protest for nonpayment
and all other notices of any kind. To the fullest extent permitted by applicable
Law, the obligations of the Guarantor hereunder shall not be affected by (a) the
failure of the Agent or any other Credit Party to assert any claim or demand or
to enforce or exercise any right or remedy against any Loan Party under the
provisions of the Credit Agreement, any other Loan Document or otherwise or
against any other party with respect to any of the Guaranteed Obligations,
(b) any rescission, waiver, amendment or modification of, or any release from,
any of the terms or provisions of this Guaranty, any other Loan Document or any
other agreement, with respect to any Loan Party or with respect to the

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Guaranteed Obligations, (c) the failure to perfect any security interest in, or
the release of, any of the Collateral held by or on behalf of the Agent or any
other Credit Party, or (d) the lack of legal existence of any Loan Party or
legal obligation to discharge any of the Guaranteed Obligations by any Loan
Party for any reason whatsoever, including, without limitation, in any
insolvency, bankruptcy or reorganization of any Loan Party.

SECTION 3. Security. The Guarantor hereby acknowledges and agrees that the Agent
and each of the other Credit Parties may (a) take and hold security for the
payment of this Guaranty and the Guaranteed Obligations and exchange, enforce,
waive and release any such security, (b) apply such security and direct the
order or manner of sale thereof as they in their sole discretion may determine,
and (c) release or substitute any one or more endorsees, the Borrower, other
guarantors or other obligors, in each case without affecting or impairing in any
way the liability of the Guarantor hereunder.

SECTION 4. Guaranty of Payment. The Guarantor further agrees that this Guaranty
constitutes a guaranty of payment and performance when due of all Guaranteed
Obligations and not of collection and, to the fullest extent permitted by
applicable Law, waives any right to require that any resort be had by the Agent
or any other Credit Party to any of the Collateral or other security held for
payment of the Guaranteed Obligations or to any balance of any deposit account
or credit on the books of the Agent or any other Credit Party in favor of any
Loan Party or any other Person or to any other guarantor of all or part of the
Guaranteed Obligations. Any payment required to be made by the Guarantor
hereunder may be required by the Agent or any other Credit Party on any number
of occasions and shall be payable to the Agent, for the benefit of the Agent and
the other Credit Parties, in the manner provided in the Credit Agreement.

SECTION 5. Indemnification. Without limiting any of its indemnification
obligations under the Credit Agreement or the other Loan Documents, and without
duplication of any indemnification provided for under the Credit Agreement or
the other Loan Documents, the Guarantor shall indemnify the Credit Parties and
each of their Subsidiaries and Affiliates, and each of their respective
stockholders, directors, officers, employees, agents, attorneys, and advisors
(each such Person being called an “Indemnitee”), against, and hold each
Indemnitee harmless from, any and all damages, actual out-of-pocket losses,
claims, actions, causes of action, settlement payments, obligations, liabilities
and related expenses, including the reasonable fees, charges and disbursements
of any counsel for any Indemnitee, incurred, suffered, sustained or required to
be paid by, or asserted against, any Indemnitee arising out of, in any way
connected with, or as a result of, (a) the execution or delivery of this
Guaranty, the Credit Agreement or any other Loan Document or any other agreement
or instrument contemplated hereby, the performance by the Guarantor of its
obligations thereunder, or the consummation of the transactions contemplated by
the Credit Agreement and the other Loan Documents or any other transactions
contemplated hereby or thereby, or (b) any actual or prospective claim,
litigation, investigation or proceeding relating to or arising from any of the
foregoing, whether based on contract, tort or any other theory and regardless of
whether any Indemnitee is a party thereto; provided, however, such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses (x) are determined by a court
of competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or willful misconduct of such Indemnitee or (y) result
from a claim brought by the Borrower or any other Loan Party against an
Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or
under any other Loan Document, if the Borrower or such Loan Party has obtained a
final and nonappealable judgment in its favor on such claim as determined by a
court of competent jurisdiction. In connection with any indemnified claim
hereunder, the Indemnitee shall be entitled to select its own counsel and the
Guarantor shall promptly pay the reasonable fees and expenses of such counsel.

 

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SECTION 6. No Discharge or Diminishment of Guaranty. The obligations of the
Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment in
full in cash of the Guaranteed Obligations), including any claim of waiver,
release, surrender, alteration or compromise of any of the Guaranteed
Obligations, and shall not be subject to any defense or set-off, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Guaranteed Obligations or otherwise. Without limiting
the generality of the foregoing, the Guaranteed Obligations of the Guarantor
hereunder shall not be discharged or impaired or otherwise affected by the
failure of the Agent or any other Credit Party to assert any claim or demand or
to enforce any remedy under this Guaranty, the Credit Agreement, any other Loan
Document or any other agreement, by any waiver or modification of any provision
of any thereof, by any default, failure or delay, willful or otherwise, in the
performance of the Guaranteed Obligations, or by any other act or omission that
may or might in any manner or to any extent vary the risk of the Guarantor or
that would otherwise operate as a discharge of the Guarantor as a matter of law
or equity (other than the indefeasible payment in full in cash of the Guaranteed
Obligations).

SECTION 7. Defenses of Loan Parties Waived. To the fullest extent permitted by
applicable Law, the Guarantor waives any defense based on or arising out of any
defense of any Loan Party or the unenforceability of the Guaranteed Obligations
or any part thereof from any cause, or the cessation from any cause of the
liability of any Loan Party, other than the indefeasible payment in full in cash
of the Guaranteed Obligations. The Guarantor hereby acknowledges that the Agent
and the other Credit Parties may, at their election, foreclose on any security
held by one or more of them by one or more judicial or nonjudicial sales, accept
an assignment of any such security in lieu of foreclosure, compromise or adjust
any part of the Guaranteed Obligations, make any other accommodation with any
Loan Party, or exercise any other right or remedy available to them against any
Loan Party, without affecting or impairing in any way the liability of the
Guarantor hereunder except to the extent that the Guaranteed Obligations have
been indefeasibly paid in full in cash. Pursuant to, and to the extent permitted
by, applicable Law, the Guarantor waives any defense arising out of any such
election and waives any benefit of and right to participate in any such
foreclosure action, even though such election operates, pursuant to applicable
Law, to impair or to extinguish any right of reimbursement or subrogation or
other right or remedy of the Guarantor against any Loan Party, as the case may
be, or any security. The Guarantor agrees that it shall not assert any claim in
competition with the Agent or any other Credit Party in respect of any payment
made hereunder in any bankruptcy, insolvency, reorganization, or any other
proceeding.

SECTION 8. Agreement to Pay; Subordination. In furtherance of the foregoing and
not in limitation of any other right that the Agent or any other Credit Party
has at law or in equity against the Guarantor by virtue hereof, upon the failure
of any Loan Party to pay any Guaranteed Obligation when and as the same shall
become due, whether at maturity, by acceleration, after notice of prepayment or
otherwise, the Guarantor hereby promises to and will forthwith pay, or cause to
be paid, to the Agent or such other Credit Party as designated thereby in cash
the amount of such unpaid Guaranteed Obligations. Upon payment by the Guarantor
of any sums to the Agent or any other Credit Party as provided above, all rights
of the Guarantor against any Loan Party arising as a result thereof by way of
right of subrogation, contribution, reimbursement, indemnity or otherwise shall
in all respects be subordinate and junior in right of payment to the prior
indefeasible payment in full in cash of all the Guaranteed Obligations. In
addition, any indebtedness of the Borrower or any other Loan Party now or
hereafter held by the Guarantor is hereby subordinated in right of payment to
the prior indefeasible payment in full in cash of all of the Guaranteed
Obligations. Notwithstanding the foregoing, prior to the occurrence of an Event
of Default, the Borrower or any other Loan Party may make payments to the
Guarantor on account of any such indebtedness to the extent permitted under the
Credit Agreement. After the occurrence and during the continuance of an Event of
Default, the Guarantor will not demand, sue for, or otherwise attempt to collect
any such indebtedness until the indefeasible payment in full in cash of the
Guaranteed Obligations.

 

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If any amount shall erroneously be paid to the Guarantor on account of (a) such
subrogation, contribution, reimbursement, indemnity or similar right or (b) any
such indebtedness of any Loan Party, such amount shall be held in trust for the
benefit of the Credit Parties and shall forthwith be paid to the Agent to be
credited against the payment of the Guaranteed Obligations, whether matured or
unmatured, in accordance with the terms of the Credit Agreement.

SECTION 9. Limitation on Guaranty of Guaranteed Obligations. In any action or
proceeding with respect to the Guarantor involving any state corporate law or
Debtor Relief Laws, if the obligations of the Guarantor under SECTION 1 hereof
would otherwise be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under said SECTION 1, then, notwithstanding any other provision
hereof to the contrary, the amount of such liability shall, without any further
action by the Guarantor, any Credit Party, the Agent or any other Person, be
automatically limited and reduced to the highest amount which is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.

SECTION 10. Information. The Guarantor assumes all responsibility for being and
keeping itself informed of each Loan Party’s financial condition and assets, and
of all other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks that the Guarantor
assumes and incurs hereunder, and agrees that none of the Agent or the other
Credit Parties will have any duty to advise the Guarantor of information known
to it or any of them regarding such circumstances or risks.

SECTION 11. Termination. This Guaranty (a) shall terminate when the principal of
and interest on each Loan and all fees and other Guaranteed Obligations shall
have been paid in full and (b) shall continue to be effective or be reinstated,
as the case may be, if at any time payment, or any part thereof, of any
Guaranteed Obligation is rescinded or must otherwise be restored by any Credit
Party or the Guarantor upon the bankruptcy or reorganization of any Loan Party
or otherwise.

SECTION 12. Costs of Enforcement. Without limiting any of its obligations under
the Credit Agreement or the other Loan Documents, and without duplication of any
fees or expenses provided for under the Credit Agreement or the other Loan
Documents, the Guarantor agrees to pay on demand all Credit Party Expenses in
connection with (a) the administration, negotiation, documentation or amendment
of this Guaranty, and (b) the Agent’s or any other Credit Party’s efforts to
collect and/or to enforce any of the Guaranteed Obligations of the Guarantor
hereunder and/or to enforce any of the rights, remedies, or powers of the Agent
or any other Credit Party against or in respect of the Guarantor (whether or not
suit is instituted by or against the Agent or any other Credit Party).

SECTION 13. Binding Effect; Several Agreement; Assignments. Whenever in this
Guaranty any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party, and all covenants,
promises and agreements by or on behalf of the Guarantor that are contained in
this Guaranty shall bind and inure to the benefit of the Guarantor and its
respective successors and assigns. This Guaranty shall be binding upon the
Guarantor and its respective successors and assigns, and shall inure to the
benefit of the Agent and the other Credit Parties, and their respective
successors and assigns, except that the Guarantor shall not have the right to
assign or transfer their rights or obligations hereunder or any interest herein
(and any such attempted assignment or transfer shall be void), except as
expressly permitted by this Guaranty or the Credit Agreement.

 

 

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SECTION 14. Waivers; Amendment.

(a) The rights, remedies, powers, privileges, and discretions of the Agent
hereunder and under applicable Law (herein, the “Agent’s Rights and Remedies”)
shall be cumulative and not exclusive of any rights or remedies which they would
otherwise have. No delay or omission by the Agent in exercising or enforcing any
of the Agent’s Rights and Remedies shall operate as, or constitute, a waiver
thereof. No waiver by the Agent of any Event of Default or of any default under
any other agreement shall operate as a waiver of any other default hereunder or
under any other agreement. No single or partial exercise of any of the Agent’s
Rights or Remedies, and no express or implied agreement or transaction of
whatever nature entered into between the Agent and any Person, at any time,
shall preclude the other or further exercise of the Agent’s Rights and Remedies.
No waiver by the Agent of any of the Agent’s Rights and Remedies on any one
occasion shall be deemed a waiver on any subsequent occasion, nor shall it be
deemed a continuing waiver. The Agent’s Rights and Remedies may be exercised at
such time or times and in such order of preference as the Agent may determine.
The Agent’s Rights and Remedies may be exercised without resort or regard to any
other source of satisfaction of the Guaranteed Obligations. No waiver of any
provisions of this Guaranty or any other Loan Document or consent to any
departure by the Guarantor therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on the Guarantor in any case shall entitle the
Guarantor to any other or further notice or demand in the same, similar or other
circumstances.

(b) Neither this Guaranty nor any provision hereof may be waived, amended or
modified except pursuant to a written agreement entered into between the Agent
and the Guarantor, subject to any consent required in accordance with
Section 10.01 of the Credit Agreement.

SECTION 15. Copies and Facsimiles. This instrument and all documents which have
been or may be hereinafter furnished by the Guarantor to the Agent may be
reproduced by the Agent by any photographic, microfilm, xerographic, digital
imaging, or other process. Any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such reproduction was made
in the regular course of business). Any facsimile or other electronic
transmission which bears proof of transmission shall be binding on the party
which or on whose behalf such transmission was initiated and likewise so
admissible in evidence as if the original of such facsimile or other electronic
transmission had been delivered to the party which or on whose behalf such
transmission was received.

SECTION 16. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF, BUT INCLUDING SECTION 5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW.

SECTION 17. Notices. All communications and notices hereunder shall (except as
otherwise expressly permitted herein) be in writing and given as provided in
Section 10.02 of the Credit Agreement, provided that communications and notices
to the Guarantor may be delivered to the Borrower on behalf of the Guarantor.

 

 

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SECTION 18. Survival of Agreement; Severability.

(a) All covenants, agreements, indemnities, representations and warranties made
by the Guarantor herein and in the certificates or other instruments delivered
in connection with or pursuant to this Guaranty, the Credit Agreement or any
other Loan Document shall be considered to have been relied upon by the Agent
and the other Credit Parties and shall survive the execution and delivery of
this Guaranty, the Credit Agreement and the other Loan Documents and the making
of any Loans by the Lenders, regardless of any investigation made by the Agent
or any other Credit Party or on their behalf and notwithstanding that the Agent
or other Credit Party may have had notice or knowledge of any Default or Event
of Default or incorrect representation or warranty at the time any credit is
extended, and shall continue in full force and effect until terminated as
provided in SECTION 11 hereof. The provisions of SECTION 5 and SECTION 12 hereof
shall survive and remain in full force and effect regardless of the repayment of
the Guaranteed Obligations or the termination of this Guaranty or any provision
hereof.

(b) Any provision of this Guaranty held to be invalid, illegal or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such invalidity, illegality or unenforceability without affecting the
validity, legality and enforceability of the remaining provisions hereof, and
the invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.

SECTION 19. Rules of Interpretation. The rules of interpretation specified in
Sections 1.02 through 1.05 of the Credit Agreement shall be applicable to this
Guaranty.

SECTION 20. Jurisdiction; Consent to Service of Process.

(a) The Guarantor agrees that any suit for the enforcement of this Guaranty or
any other Loan Document may be brought in the courts of the State of New York
sitting in New York County or any federal court sitting therein, as the Agent
may elect in its sole discretion, and consent to the non-exclusive jurisdiction
of such courts. The Guarantor hereby waives any objection which it may now or
hereafter have to the venue of any such suit or any such court or that such suit
is brought in an inconvenient forum and agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by Law.
Nothing in this Guaranty shall affect any right that the Agent or any other
Credit Party may otherwise have to bring any action or proceeding relating to
this Guaranty against the Guarantor or its properties in the courts of any
jurisdiction.

(b) The Guarantor agrees that any action commenced by the Guarantor asserting
any claim or counterclaim arising under or in connection with this Guaranty or
any other Loan Document shall be brought solely in a court of the State of New
York sitting in New York County or any federal court sitting therein, as the
Agent may elect in its sole discretion, and consent to the exclusive
jurisdiction of such courts with respect to any such action.

(c) The Guarantor irrevocably consents to service of process in the manner
provided for notices in SECTION 17. Nothing in this Guaranty or any other Loan
Document will affect the right of the Agent to serve process in any other manner
permitted by law.

SECTION 21. Waiver of Jury Trial. THE GUARANTOR HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
GUARANTY, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY) AND WAIVES THE RIGHT TO
ASSERT ANY SETOFF,

 

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COUNTERCLAIM OR CROSS-CLAIM IN RESPECT OF, AND ALL STATUTES OF LIMITATIONS WHICH
MAY BE RELEVANT TO, SUCH ACTION OR PROCEEDING; AND WAIVES DUE DILIGENCE, DEMAND,
PRESENTMENT AND PROTEST AND ANY NOTICES THEREOF AS WELL AS NOTICE OF NONPAYMENT.
THE GUARANTOR (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
CREDIT PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH CREDIT PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS,
AND (B) ACKNOWLEDGES THAT THE AGENT AND THE OTHER CREDIT PARTIES HAVE BEEN
INDUCED TO ENTER INTO THE LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS IN THIS SECTION 21.

[Signature Page to Follow]

 

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IN WITNESS WHEREOF, the Guarantor has duly executed this Guaranty as of the day
and year first above written.

 

GUARANTOR:

 

PACIFIC SUNWEAR STORES CORP. By:     Name:   Craig Gosselin Title:   President

[Signature Page to Guaranty]