Exhibit 10.3
**AMENDMENT NO. 1**
**to**
**RIGHTS AGREEMENT**
          This AMENDMENT NO. 1 TO RIGHTS AGREEMENT (this “Amendment”) is dated as ofJune 18, 2004, between Pacific Sunwear of California, Inc., a Californiacorporation (the “Company”), and U.S. Stock Transfer Corporation, a Californiacorporation (the “Rights Agent”). Capitalized terms that are not definedherein shall have the meanings ascribed to them in the Agreement (as definedbelow).
          WHEREAS, the Company and the Rights Agent previously entered into thatcertain Rights Agreement dated as of December 16, 1998 (the “Agreement”);
          WHEREAS, Section 27 of the Agreement provides that, prior to theDistribution Date, the Company and the Rights Agent shall, if the Company sodirects, supplement or amend any provision of the Agreement without theapproval of any holders of certificates representing Common Shares and noDistribution Date, as of the date hereof, has occurred; and
          WHEREAS, the Company has determined that it is in the best interests ofthe shareholders of the Company to amend the terms of the Agreement as setforth herein;
          NOW, THEREFORE, the parties agree as follows:
          1. Section 1(h)(ii) of the Agreement is hereby amended and restated in itsentirety to read as follows:
          “(ii) any Person designated prior to the Distribution Date by the Boardof Directors of the Company as an Exempt Person, unless and until such Personshall thereafter become the Beneficial Owner of additional shares constituting1% or more of the Common Shares otherwise than in a transaction or series oftransactions approved prior to such transaction or transactions by the Board ofDirectors of the Company; or”
          2. The first sentence of Section 11(a)(ii) of the Agreement is herebyamended and restated in its entirety to read as follows:
          “Subject to Section 24 of this Agreement, in the event any Person becomesan Acquiring Person and the Distribution Date has occurred, each holder of aRight shall thereafter have a right to receive, upon exercise thereof at aprice equal to the then current Purchase Price multiplied by the number of oneone-hundredths of a Preferred Share for which a Right is then exercisable, inaccordance with the terms of this Agreement and in lieu of Preferred Shares,such number of Common Shares of the Company as shall equal the result obtainedby (x) multiplying the then current Purchase Price by the number of oneone-hundredths of a Preferred Share for which a Right is then exercisable anddividing that product by (y) 50% of the then current per share market price ofthe Company’s Common Shares (determined pursuant to Section 11(d) hereof) onthe date of the occurrence of such event.” In the event that any Person shallbecome an Acquiring Person, the Distribution Date has occurred and the Rightsare then outstanding, the
 

 

Company shall not take any action which would eliminate or diminish thebenefits intended to be afforded by the Rights.
          3. The first sentence of Section 13 of the Agreement is hereby amended andrestated in its entirety to read as follows:
          “In the event, directly or indirectly, at any time after a Person hasbecome an Acquiring Person and the Distribution Date has occurred, (a) theCompany shall consolidate with, or merge with and into, any other Person, (b)any Person shall consolidate with the Company, or merge with and into theCompany and the Company shall be the continuing or surviving corporation ofsuch merger and, in connection with such merger, all or part of the CommonShares shall be changed into or exchanged for stock or other securities of anyother Person (or the Company) or cash or any other property, or (c) the Companyshall sell or otherwise transfer (or one or more of its Subsidiaries shall sellor otherwise transfer), in one or more transactions, assets or earning poweraggregating 50% or more of the assets or earning power of the Company and itsSubsidiaries (taken as a whole) to any other Person other than the Company orone or more of its wholly-owned Subsidiaries, then, and in each such case,proper provision shall be made so that (i) each holder of a Right (except asotherwise provided herein) shall thereafter have the right to receive, upon theexercise thereof at a price equal to the then current Purchase Price multipliedby the number of one one-hundredths of a Preferred Share for which a Right isthen exercisable, in accordance with the terms of this Agreement and in lieu ofPreferred Shares, such number of Common Shares of such other Person (includingthe Company as successor thereto or as the surviving corporation) as shallequal the result obtained by (A) multiplying the then current Purchase Price bythe number of one one-hundredths of a Preferred Share for which a Right is thenexercisable and dividing that product by (B) 50% of the then current per sharemarket price of the Common Shares of such other Person (determined pursuant toSection 11(d) hereof) on the date of consummation of such consolidation,merger, sale or transfer; (ii) the issuer of such Common Shares shallthereafter be liable for, and shall assume, by virtue of such consolidation,merger, sale or transfer, all the obligations and duties of the Companypursuant to this Agreement; (iii) the term “Company” shall thereafter be deemedto refer to such issuer; and (iv) such issuer shall take such steps (including,but not limited to, the reservation of a sufficient number of its Common Sharesin accordance with Section 9 hereof) in connection with such consummation asmay be necessary to assure that the provisions hereof shall thereafter beapplicable, as nearly as reasonably may be, in relation to the Common Sharesthereafter deliverable upon the exercise of the Rights.”
          4. Section 31 is amended in its entirety to read as follows:
          “Section 31. Governing Law. This Agreement and each Right Certificateissued hereunder shall be deemed to be a contract made under the laws of thestate of California and for all purposes shall be governed by and construed inaccordance with the laws of such State applicable to contracts to be made andperformed within such State.”
          5. Except as expressly modified herein, the Agreement shall remain in fullforce and effect in accordance with its original terms.
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          6. This Amendment may be executed in one or more counterparts, each ofwhich shall be deemed an original, but all of which together shall constituteone and the same instrument.
*[Signatures on following page.]*
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     IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to RightsAgreement to be duly executed and delivered on the day and year first abovewritten.     PACIFIC SUNWEAR OF CALIFORNIA, INC.    ATTEST:      By: /s/ CARL W. WOMACKBy: /s/ GREG H. WEAVER     Carl W. Womack Greg H. Weaver Sr. Vice President, Chairman of the Board and Chief Financial Officer Chief Executive Officer and Secretary      ATTEST:U.S. STOCK TRANSFER CORPORATION    By: /s/ RICHARD BROWNBy: /s/ NEIL T. ROSSO     Richard Brown Neil T. Rosso Vice President Assistant Vice President