EXHIBIT 10.2

Notice of Grant of Stock
Appreciation Rights and
Terms and Conditions of
Stock Appreciation Rights

Pacific Sunwear of California, Inc.
ID: 95-3759463
3450 East Miraloma Ave
Anaheim, CA 92806-2101

 

             
Grantee:
  [Name]   Award Number:   [_______]
 
  [Address]   Plan:   2005
 
  [Address]   ID:   [__________]

 
Effective [                    ] (the “Award Date”), you (the “Grantee”) have
been granted an award of [___]1 stock appreciation rights (the “Award”) by
Pacific Sunwear of California, Inc. (the “Corporation”) at a base price of
$[___]1 per stock appreciation right (the “Base Price”).
[The Award will become vested as to 25% of the total number of stock
appreciation rights (“SARs”) subject to the Award on the first anniversary of
the Award Date. The remaining 75% of the total number of SARs subject to the
Award shall become vested in 36 substantially equal monthly installments, with
the first installment vesting on the last day of the month following the month
in which the first anniversary of the Award Date occurs and an additional
installment vesting on the last day of each of the 35 months thereafter.1, 2 ]
The Award will expire on [                    ] (the “Expiration Date”).1, 2

 
By your signature and the Corporation’s signature below, you and the Corporation
agree that the Award is granted under and governed by the terms and conditions
of the Company’s 2005 Performance Incentive Plan (the “Plan”) and the Terms and
Conditions of Stock Appreciation Rights Award (the “Terms”), both of which are
attached and incorporated herein by this reference. This Notice of Grant of
Stock Appreciation Rights, together with the Terms, are referred to as your
“Award Agreement.” The Award has been granted to you in addition to, and not in
lieu of, any other form of compensation otherwise payable or to be paid to you.
Capitalized terms are defined in the Plan if not defined herein or in the Terms.
You acknowledge receipt of a copy of the Terms, the Plan and the Prospectus for
the Plan.
 

     
 
   
Pacific Sunwear of California, Inc.
  Date
 
   
 
   
[NAME]
  Date

 

1   Subject to adjustment under Section 7.1 of the Plan.   2   Subject to early
termination under Section 5 of the Terms and Section 7.4 of the Plan.

 

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PACIFIC SUNWEAR OF CALIFORNIA, INC.
2005 PERFORMANCE INCENTIVE PLAN
TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS AWARD
1. General.
     These Terms and Conditions of Stock Appreciation Rights Award (these
“Terms”) apply to a particular award (“Award”) of stock appreciation rights
(“SARs”) if incorporated by reference in the Notice of Grant of Stock
Appreciation Rights (“Grant Notice”) corresponding to that particular Award. The
recipient of the Award identified in the Grant Notice is referred to as the
“Grantee.” The per-SAR base price of the Award as set forth in the Grant Notice
is referred to as the “Base Price.” The effective date of grant of the Award as
set forth in the Grant Notice is referred to as the “Award Date.” The Award was
granted under and subject to the Pacific Sunwear of California, Inc. 2005
Performance Incentive Plan (the “Plan”). Capitalized terms are defined in the
Plan if not defined herein. The Award has been granted to the Grantee in
addition to, and not in lieu of, any other form of compensation otherwise
payable or to be paid to the Grantee. The Grant Notice and these Terms are
collectively referred to as the “Award Agreement” applicable to the Award.
2. Vesting; Limits on Exercise.
     The Award shall vest and become exercisable in percentage installments of
the aggregate number of SARs subject to the Award as set forth on the Grant
Notice. The SARs may be exercised only to the extent the SARs are vested and
exercisable.

  •   Cumulative Exercisability. To the extent that the SARs are vested and
exercisable, the Grantee has the right to exercise the SARs (to the extent not
previously exercised), and such right shall continue, until the expiration or
earlier termination of the SARs.     •   No Fractional SARs. Fractional SARs
shall be disregarded, but may be cumulated.     •   Minimum Exercise. No fewer
than 100 SARs (subject to adjustment under Section 7.1 of the Plan) may be
exercised at any one time, unless the number exercised is the total number at
the time exercisable under the Award.

3. Continuance of Employment/Service Required; No Employment/Service Commitment.
     The vesting schedule requires continued employment or service through each
applicable vesting date as a condition to the vesting of the applicable
installment of the Award and the rights and benefits under this Award Agreement.
Employment or service for only a portion of the vesting period, even if a
substantial portion, will not entitle the Grantee to any proportionate vesting
or avoid or mitigate a termination of rights and benefits upon or following a
termination of employment or services as provided in Section 5 below or under
the Plan.
     Nothing contained in this Award Agreement or the Plan constitutes a
continued employment or service commitment by the Corporation or any of its
Subsidiaries, affects the

 

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Grantee’s status, if he or she is an employee, as an employee at will who is
subject to termination without cause, confers upon the Grantee any right to
remain employed by or in service to the Corporation or any Subsidiary,
interferes in any way with the right of the Corporation or any Subsidiary at any
time to terminate such employment or service, or affects the right of the
Corporation or any Subsidiary to increase or decrease the Grantee’s other
compensation.
4. Exercise and Payment of SARs.
       4.1 Method of Exercise. The SARs shall be exercisable by the delivery to
the Secretary of the Corporation (or such other person as the Administrator may
require pursuant to such administrative exercise procedures as the Administrator
may implement from time to time) of a written notice stating the number of SARs
to be exercised pursuant to the Award or by the completion of such other
administrative exercise procedures as the Administrator may require from time to
time.
       4.2 Payment of SARs.
     (A) Amount. Upon the exercise of the SARs and the attendant surrender of an
exercisable portion of the Award, the Grantee will be entitled to receive
payment of an amount (subject to the tax withholding provisions of Section 4.3)
determined by multiplying:

  •   the difference (but not less than zero) obtained by subtracting the Base
Price of the SARs being exercised from the per-share fair market value
(determined in accordance with the applicable provisions of the Plan) of the
Common Stock of the Corporation as of the date of exercise (the “Exercise
Date”), by     •   the number of SARs being exercised.

     (B) Form of Payment. The amount determined under Section 4.2(A) will be
paid to the Grantee on or as soon as administratively practicable after the
Exercise Date by delivery to the Grantee of a number of shares of Common Stock
(either by delivering one or more certificates for such shares or by entering
such shares in book entry form, as determined by the Corporation in its
discretion) equal to (i) the amount of the payment determined under
Section 4.2(A), divided by (ii) the fair market value of a share of Common Stock
as of the Exercise Date. The Corporation’s obligation to deliver shares of
Common Stock or otherwise make payment with respect to the SARs is subject to
the condition precedent that the Grantee or other person entitled under the Plan
to receive any shares with respect to the SARs deliver to the Corporation any
representations or other documents or assurances required pursuant to
Section 8.1 of the Plan. The Grantee shall have no further rights with respect
to any SARs that are paid or that terminate pursuant to Section 5.
     (C) SARs Not Funded. SARs payable under this Award Agreement will be paid
from the general assets of the Corporation, and no special or separate reserve,
fund or deposit will be made to assure payment of the SARs. Neither this Award
Agreement nor any action taken pursuant to the provisions of this Award
Agreement will create, or

 

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be construed to create, a trust of any kind or a fiduciary relationship between
the Corporation and Grantee (or any other person). To the extent that Grantee
(or any permitted transferee) acquires a right to receive payment pursuant to
any SAR hereunder, such right will be no greater than the right of any unsecured
general creditor of the Corporation.
     4.3 Tax Withholding. Upon payment of any SAR, the Corporation (or the
Subsidiary last employing the Grantee) shall have the right at its option to
(a) require the Grantee to pay or provide for payment in cash of the amount of
any taxes that the Corporation or the Subsidiary may be required to withhold
with respect to such payment and/or distribution, or (b) deduct from any amount
payable to the Grantee the amount of any taxes which the Corporation or the
Subsidiary may be required to withhold with respect to such payment and/or
distribution. In any case where a tax is required to be withheld in connection
with the delivery of shares of Common Stock under this Award Agreement, the
Administrator may, in its sole discretion, direct the Corporation or the
Subsidiary to reduce the number of shares to be delivered by (or otherwise
reacquire) the appropriate number of whole shares, valued at their then fair
market value (with the “fair market value” of such shares determined in
accordance with the applicable provisions of the Plan), to satisfy such
withholding obligation at the minimum applicable withholding rates.
5. Early Termination of Award.
     5.1 Expiration Date. Subject to earlier termination as provided below in
this Section 5, the Award will terminate on the seventh (7th) anniversary of the
Award Date.
     5.2 Possible Termination of Award upon Change in Control. The Award is
subject to termination in connection with a Change in Control Event or certain
similar reorganization events as provided in Section 7.4 of the Plan.
     5.3 Termination of Award upon a Termination of Grantee’s Employment or
Services. Subject to earlier termination of the Award pursuant to Section 5.1 or
Section 5.2 above, if the Grantee ceases to be employed by or ceases to provide
services to the Corporation or a Subsidiary, the following rules shall apply
(the last day that the Grantee is employed by or provides services to the
Corporation or a Subsidiary is referred to as the Grantee’s “Severance Date”):

  •   other than as expressly provided below in this Section 5.3, (a) the
Grantee will have until the date that is 3 months after his or her Severance
Date to exercise the Award (or portion thereof) to the extent that it was vested
on the Severance Date, (b) the Award, to the extent not vested on the Severance
Date, shall terminate on the Severance Date, and (c) the Award, to the extent
exercisable for the 3-month period following the Severance Date and not
exercised during such period, shall terminate at the close of business on the
last day of the 3-month period;     •   if the termination of the Grantee’s
employment or services is the result of the Grantee’s Retirement (as defined
below), death or Total Disability (as defined below), (a) the Grantee (or his
beneficiary or personal representative, as the case may be) will have until the
date that is 12 months after the Grantee’s Severance Date to

 

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      exercise the Award, (b) the Award, to the extent not vested on the
Severance Date, shall terminate on the Severance Date, and (c) the Award, to the
extent exercisable for the 12-month period following the Severance Date and not
exercised during such period, shall terminate at the close of business on the
last day of the 12-month period;

  •   if the Grantee’s employment or services are terminated by the Corporation
or a Subsidiary for Cause (as defined below), the Award (whether vested or not)
shall terminate on the Severance Date.

     For purposes of the Award, “Retirement” means retirement from employment by
or providing services to the Corporation or any Subsidiary after age 65 and, in
the case of employees, in accordance with the retirement policies of the
Corporation then in effect, and “Total Disability” means a “permanent and total
disability” (within the meaning of Section 22(e)(3) of the Code or as otherwise
determined by the Administrator).
     For purposes of the Award, “Cause” means that the Grantee:

  (1)   has been negligent in the discharge of his or her duties to the
Corporation or any of its Subsidiaries, has refused to perform stated or
assigned duties or is incompetent in or (other than by reason of a disability or
analogous condition) incapable of performing those duties;     (2)   has been
dishonest or committed or engaged in an act of theft, embezzlement or fraud, a
breach of confidentiality, an unauthorized disclosure or use of inside
information, customer lists, trade secrets or other confidential information;
has breached a fiduciary duty, or willfully and materially violated any other
duty, law, rule, regulation or policy of the Corporation, any of its
Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries; or
has been convicted of a felony or misdemeanor (other than minor traffic
violations or similar offenses);     (3)   has materially breached any of the
provisions of any agreement with the Corporation, any of its Subsidiaries or any
affiliate of the Corporation or any of its Subsidiaries; or     (4)   has
engaged in unfair competition with, or otherwise acted intentionally in a manner
injurious to the reputation, business or assets of, the Corporation, any of its
Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries; has
improperly induced a vendor or customer to break or terminate any contract with
the Corporation, any of its Subsidiaries or any affiliate of the Corporation or
any of its Subsidiaries; or has induced a principal for whom the Corporation,
any of its Subsidiaries or any affiliate of the Corporation or any of its
Subsidiaries acts as agent to terminate such agency relationship.

     In all events the Award is subject to earlier termination as contemplated
by Section 5.1 and Section 5.2. The Administrator shall be the sole judge of
whether the Grantee continues to render employment or services for purposes of
this Award Agreement.

 

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6. Non-Transferability.
     The Award and any other rights of the Grantee under this Award Agreement or
the Plan are nontransferable and exercisable only by the Grantee, except as set
forth in Section 5.7 of the Plan.
7. Adjustments.
     The terms of the Award, including the number of SARs subject to the Award
and the Base Price, are subject to adjustment upon the occurrence of certain
events relating to the Corporation’s stock contemplated by Section 7.1 of the
Plan.
8. Notices.
     Any notice to be given under the terms of this Award Agreement shall be in
writing and addressed to the Corporation at its principal office to the
attention of the Secretary, and to the Grantee at the address last reflected on
the Corporation’s payroll records, or at such other address as either party may
hereafter designate in writing to the other. Any such notice shall be delivered
in person or shall be enclosed in a properly sealed envelope addressed as
aforesaid, registered or certified, and deposited (postage and registry or
certification fee prepaid) in a post office or branch post office regularly
maintained by the United States Government. Any such notice shall be given only
when received, but if the Grantee is no longer employed by the Corporation or a
Subsidiary, shall be deemed to have been duly given five business days after the
date mailed in accordance with the foregoing provisions of this Section 8.
9. Plan.
     The Award and all rights of the Grantee under this Award Agreement are
subject to the terms and conditions of the Plan, incorporated herein by this
reference. The Grantee agrees to be bound by the terms of the Plan and this
Award Agreement (including these Terms). The Grantee acknowledges having read
and understanding the Plan, the Prospectus for the Plan, and this Award
Agreement. Unless otherwise expressly provided in other sections of this Award
Agreement, provisions of the Plan that confer discretionary authority on the
Board or the Administrator do not and shall not be deemed to create any rights
in the Grantee unless such rights are expressly set forth herein or are
otherwise in the sole discretion of the Board or the Administrator so conferred
by appropriate action of the Board or the Administrator under the Plan after the
date hereof.
10. Entire Agreement.
     This Award Agreement (including these Terms) and the Plan together
constitute the entire agreement and supersede all prior understandings and
agreements, written or oral, of the parties hereto with respect to the subject
matter hereof. The Plan and this Award Agreement may be amended pursuant to
Section 8.6 of the Plan. Such amendment must be in writing and signed by the
Corporation. The Corporation may, however, unilaterally waive any provision
hereof in writing to the extent such waiver does not adversely affect the
interests of the Grantee hereunder, but no such waiver shall operate as or be
construed to be a subsequent waiver of the same provision or a waiver of any
other provision hereof.

 

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11. Governing Law.
     This Award Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of California without regard to conflict
of law principles thereunder.
12. Effect of this Agreement.
     Subject to the Corporation’s right to terminate the Award pursuant to
Section 7.4 of the Plan, this Award Agreement shall be assumed by, be binding
upon and inure to the benefit of any successor or successors to the Corporation.
13. Counterparts.
     This Award Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
14. Section Headings.
     The section headings of this Award Agreement are for convenience of
reference only and shall not be deemed to alter or affect any provision hereof.