<PAGE>

                                                                    EXHIBIT 99.1


                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

                              1999 STOCK AWARD PLAN

                    (As Amended and Restated March 27, 2003,

           and as Further Amended on May 21, 2003 and March 24, 2004)

    (Composite Plan Document Reflecting Stock Splits Through September 2003)

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                                TABLE OF CONTENTS

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I.       THE PLAN.......................................................................................1

         1.1      Purpose...............................................................................1

         1.2      Administration........................................................................1

         1.3      Participation.........................................................................2

         1.4      Stock Subject to the Plan.............................................................3

         1.5      Grant of Awards.......................................................................3

         1.6      Exercise of Awards....................................................................4

         1.7      No Transferability; Limited Exception to Transfer Restrictions........................4

II.      OPTIONS........................................................................................5

         2.1      Grants................................................................................5

         2.2      Option Price..........................................................................5

         2.3      Option Period.........................................................................5

         2.4      Exercise of Options...................................................................6

         2.5      Limitations on Grant of Incentive Stock Options.......................................6

         2.6      Non-Employee Director Awards..........................................................6

         2.7      Options and Rights in Substitution for Stock Options Granted by Other Corporations....8

         2.8      Adjustments, No Repricing Without Prior Shareholder Approval..........................8

III.     STOCK APPRECIATION RIGHTS......................................................................8

         3.1      Grants................................................................................8

         3.2      Exercise of Stock Appreciation Rights.................................................9

         3.3      Payment...............................................................................9

IV.      RESTRICTED STOCK AWARDS.......................................................................10

         4.1      Grants...............................................................................10

         4.2      Restrictions.........................................................................10

         4.3      Return to the Corporation............................................................11

V.       PERFORMANCE SHARE AWARDS......................................................................11

         5.1      Grants...............................................................................11

         5.2      Special Performance-Based Share Awards...............................................11

         5.3      Deferred Payments....................................................................13
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                                TABLE OF CONTENTS
                                  (CONTINUED)

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VI.      OTHER PROVISIONS..............................................................................13

         6.1      Rights of Eligible Employees, Participants and Beneficiaries.........................13

         6.2      Adjustments Upon Changes in Capitalization...........................................13

         6.3      Termination of Employment............................................................14

         6.4      Acceleration of Awards...............................................................16

         6.5      Government Regulations...............................................................16

         6.6      Tax Withholding......................................................................16

         6.7      Amendment, Termination and Suspension................................................17

         6.8      Privileges of Stock Ownership; Nondistributive Intent................................18

         6.9      Effective Date of the Plan...........................................................18

         6.10     Term of the Plan.....................................................................18

         6.11     Governing Law........................................................................18

         6.12     Plan Construction....................................................................18

         6.13     Captions.............................................................................19

         6.14     Non-Exclusivity of Plan..............................................................19

         6.15     No Corporate Action Restriction......................................................19

         6.16     Other Company Benefit and Compensation Program.......................................19

VII.     DEFINITIONS...................................................................................20

         7.1      Definitions..........................................................................20
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                                      -ii-

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                       PACIFIC SUNWEAR OF CALIFORNIA, INC.
                              1999 STOCK AWARD PLAN

                    (As Amended and Restated March 27, 2003,

           and as Further Amended on May 21, 2003 and March 24, 2004)

    (Composite Plan Document Reflecting Stock Splits Through September 2003)


I.       THE PLAN.

         1.1      Purpose.

         The purpose of this Plan is to promote the success of the Company by
providing an additional means to attract, motivate, retain and reward key
personnel through the grant of Options and other Awards that provide added long
term incentives for high levels of performance and for significant efforts to
improve the financial performance of the Company. The purpose of this Plan is
also to attract, motivate and retain experienced and knowledgeable independent
directors through the Option grants provided under Section 2.6.

         1.2      Administration.

                  (a) This Plan shall be administered and all Awards (other than
those under Section 2.6) shall be authorized by the Committee. Action of the
Committee with respect to the administration of this Plan shall be taken
pursuant to a majority vote or the unanimous written consent of its members. In
the event action by the Committee is taken by written consent, the action shall
be deemed to have been taken at the time specified in the consent or, if none is
specified, at the time of the last signature. The Committee may delegate
administrative functions to individuals who are officers or employees of the
Company.

                  (b) Subject to the express provisions of this Plan, the
Committee shall have the authority:

                  (i) to grant Awards to Eligible Employees, determine the price
         at which securities will be offered or awarded and the amount of
         securities to be offered or awarded to any of such persons, and
         determine the other specific terms and conditions of such Awards
         consistent with the express limits of this Plan, and establish the
         installments (if any) in which such Awards shall become exercisable or
         shall vest, or determine that no delayed exercisability or vesting is
         required, and establish the events of termination or reversion of such
         Awards;

                  (ii) to approve the forms of Award Agreements (which need not
         be identical either as to type of award or among Participants);

                  (iii) to construe and interpret this Plan and any agreements
         defining the rights and obligations of the Company and Participants
         under this Plan,


<PAGE>

         further define the terms used in this Plan, and prescribe, amend and
         rescind rules and regulations relating to the administration of this
         Plan;

                  (iv) to cancel, modify, or waive the Corporation's rights with
         respect to, or modify, discontinue, suspend, or terminate any or all
         outstanding Awards held by Eligible Employees, subject to any required
         consent under Section 6.7;

                  (v) to accelerate or extend the exercisability or extend the
         term of any or all such outstanding Awards within the maximum ten-year
         term of Awards; and

                  (vi) to make all other determinations and take such other
         action as contemplated by this Plan or as may be necessary or advisable
         for the administration of this Plan and the effectuation of its
         purposes.

Notwithstanding the foregoing, the provisions of Section 2.6 relating to
Non-Employee Director Options shall be automatic and, to the maximum extent
possible, self-effectuating.

                  (c) Any action taken by, or inaction of, the Corporation, any
Subsidiary, the Board or the Committee relating or pursuant to this Plan and
within its authority hereunder or under applicable law shall be within the
absolute discretion of that entity or body and shall be conclusive and binding
upon all persons. Neither the Board nor any Committee, nor any member thereof or
person acting at the direction thereof, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection
with this Plan (or any Award made under this Plan), and all such persons shall
be entitled to indemnification and reimbursement by the Company in respect of
any claim, loss, damage or expense (including, without limitation, attorneys'
fees) arising or resulting therefrom to the fullest extent permitted by law
and/or under any directors and officers liability insurance coverage that may be
in effect from time to time.

                  (d) Subject to the requirements of Section 7.1, the Board, at
any time it so desires, may increase or decrease the number of members of the
Committee, may remove from membership on the Committee all or any portion of its
members, and may appoint such person or persons as it desires to fill any
vacancy existing on the Committee, whether caused by removal, resignation or
otherwise.

                  (e) In making any determination or in taking or not taking any
action under this Plan, the Committee or the Board, as the case may be, may
obtain and may rely upon the advice of experts, including professional advisors
to the Company. No director, officer or agent of the Company shall be liable for
any such action or determination taken or made or omitted in good faith.

         1.3      Participation.

         Awards may be granted only to Eligible Employees. An Eligible Employee
who has been granted an Award may, if otherwise eligible, be granted additional
Awards if the Committee shall so determine. Except as provided in Section 2.6
below, members of the Board who are not officers or employees of the Company
shall not be eligible to receive Awards.


                                       2
<PAGE>

         1.4      Stock Subject to the Plan.

                  (a) Subject to Section 6.2, the stock to be offered under this
Plan shall be shares of the Corporation's authorized but unissued Common Stock.
The aggregate amount of Common Stock that may be issued or transferred pursuant
to Awards (including Incentive Stock Options and Options under Section 2.6)
granted under this Plan shall not exceed 10,950,000 shares. In no event shall
more than 1,350,000 shares of Common Stock be available for Awards issued (or
reissued) under this Plan as time-based Restricted Stock for nominal or no
consideration other than the par value thereof. This limit on Restricted Stock
does not apply to shares issued principally for past services, in respect of
compensation earned but deferred, or as Performance-Based Awards under Section
5.2. The aggregate number of shares of Common Stock subject to Options and Stock
Appreciation Rights that may be granted to any employee in any calendar year may
not exceed 1,350,000. The aggregate number of shares of Common Stock subject to
all Awards (including Options, Stock Appreciation Rights, and Performance-Based
Awards (other than Cash-Based Awards)) that may be granted to any employee in
any calendar year may not exceed 1,350,000. The Board may amend the Option grant
levels contemplated by Section 2.6 from time to time; provided that no more than
1,500,000 shares of Common Stock shall be issued or delivered pursuant to the
exercise of Options granted to Non-Employee Directors pursuant to Section 2.6.
Each of the foregoing share limits is subject to adjustment as set forth in
Section 6.2.

                  (b) No Award may be granted under this Plan unless, on the
date of grant, the sum of (i) the maximum number of shares issuable at any time
pursuant to such Award, plus (ii) the number of shares that have previously been
issued pursuant to Awards granted under this Plan, other than reacquired shares
available for reissue consistent with any applicable legal limitations, plus
(iii) the maximum number of shares that may be issued at any time after such
date of grant pursuant to Awards that are outstanding on such date, does not
exceed the share limit set forth in Section 1.4(a). Shares that are subject to
or underlie Awards which expire or for any reason are cancelled or terminated,
are forfeited, fail to vest, or for any other reason are not paid or delivered
under this Plan, as well as reacquired shares, shall again, except to the extent
prohibited by law, be available for subsequent Awards under the Plan.

         1.5      Grant of Awards.

         Subject to the express provisions of this Plan, the Committee shall
determine from the class of Eligible Employees those individuals to whom Awards
under this Plan shall be granted, the number of shares of Common Stock subject
to each Award, the price (if any) to be paid for the shares or the Award and, in
the case of performance share awards, in addition to matters addressed in
Section 1.2(b), the specific objectives, goals and performance criteria (such as
an increase in sales, market value, earnings or book value over a base period,
the years of service before vesting, the relevant job classification or level of
responsibility or other factors) that further define the terms of the
performance share award. Each Award shall be evidenced by an Award Agreement
signed by the Corporation and, if required by the Committee, by the Participant.
The Award Agreement shall set forth the material terms and conditions of the
Award established by the Committee consistent with the specific provisions of
this Plan. The grant of an Award is made on the Award Date.


                                       3
<PAGE>

         1.6      Exercise of Awards.

         An Option or Stock Appreciation Right shall be deemed to be exercised
when the Secretary of the Corporation receives written notice of such exercise
from the Participant, together with payment of the purchase price made in
accordance with Section 2.2(a), except to the extent payment may be permitted to
be made following delivery of written notice of exercise in accordance with
Section 2.2(b). Notwithstanding any other provision of this Plan, the Committee
may impose, by rule and in Award Agreements, such conditions upon the exercise
of Awards (including, without limitation, conditions limiting the time of
exercise to specified periods) as may be required to satisfy applicable
regulatory requirements.

         1.7      No Transferability; Limited Exception to Transfer
Restrictions.

                  (a) Limit On Exercise and Transfer. Unless otherwise expressly
provided in (or pursuant to) this Section 1.7, by applicable law and by the
Award Agreement, as the same may be amended, (i) all Awards are non-transferable
and shall not be subject in any manner to sale, transfer, anticipation,
alienation, assignment, pledge, encumbrance or charge; Awards shall be exercised
only by the Participant; and (ii) amounts payable or shares issuable pursuant to
an Award shall be delivered only to (or for the account of) the Participant.

                  (b) Exceptions. The Committee may permit Awards to be
exercised by and paid to certain persons or entities related to the Participant,
including but not limited to members of the Participant's immediate family,
charitable institutions, or trusts or other entities whose beneficiaries or
beneficial owners are members of the Participant's immediate family and/or
charitable institutions, pursuant to such conditions and procedures as the
Committee may establish. Any permitted transfer shall be subject to the
condition that the Committee receive evidence satisfactory to it that the
transfer is being made for estate and/or tax planning purposes on a gratuitous
or donative basis and without consideration (other than nominal consideration).
Notwithstanding the foregoing or Section 1.7(c), Incentive Stock Options and
Restricted Stock Awards shall be subject to any and all additional transfer
restrictions under the Code.

                  (c) Further Exceptions to Limits On Transfer. The exercise and
transfer restrictions in Section 1.7(a) shall not apply to:

                  (i) transfers to the Corporation,

                  (ii) the designation of a beneficiary to receive benefits in
         the event of the Participant's death or, if the Participant has died,
         transfers to or exercise by the Participant's beneficiary, or, in the
         absence of a validly designated beneficiary, transfers by will or the
         laws of descent and distribution,

                  (iii) transfers pursuant to a QDRO order if approved or
         ratified by the Committee,

                  (iv) if the Participant has suffered a disability, permitted
         transfers or exercises on behalf of the Participant by his or her legal
         representative, or


                                       4
<PAGE>

                  (v) the authorization by the Committee of "cashless exercise"
         procedures with third parties who provide financing for the purpose of
         (or who otherwise facilitate) the exercise of Awards consistent with
         applicable laws and the express authorization of the Committee.

II.      OPTIONS.

         2.1      Grants.

         One or more Options may be granted to any Eligible Employee. Each
Option so granted shall be designated by the Committee in the applicable Award
Agreement as either a Nonqualified Stock Option or an Incentive Stock Option.

         2.2      Option Price.

                  (a) The purchase price per share of Common Stock covered by
each Option shall be determined by the Committee, but shall not be less than
100% (110% in the case of an Incentive Stock Option grant to a Participant who
owns more than 10% of the total combined voting power of all classes of stock of
the Corporation or a Subsidiary) of the Fair Market Value of the Common Stock on
the date the Option is granted. The purchase price of any shares purchased shall
be paid in full at the time of each purchase in one or a combination of the
following methods: (i) in cash or by check payable to the order of the
Corporation, (ii) if authorized by the Committee or specified in the Option
being exercised, by a promissory note made by the Participant in favor of the
Corporation, upon the terms and conditions determined by the Committee, and
secured by the Common Stock issuable upon exercise in compliance with applicable
law (including, without limitation, state corporate law and federal margin
requirements), or (iii) if authorized by the Committee or specified in the
Option being exercised, by shares of Common Stock of the Corporation already
owned by the Participant; provided, however, that the Committee may in its
absolute discretion limit the Participant's ability to exercise an Award by
means other than cash or check, and provided further that any shares delivered
which were initially acquired upon exercise of a stock option must have been
owned by the Participant at least six months as of the date of delivery. Shares
of Common Stock used to satisfy the exercise price of an Option shall be valued
at their Fair Market Value on the date of exercise.

                  (b) In addition to the payment methods described in subsection
(a), the Option may provide that the Option can be exercised and payment made by
delivering a properly executed exercise notice together with irrevocable
instructions to a bank or broker to promptly deliver to the Corporation the
amount of sale or loan proceeds necessary to pay the exercise price and, unless
otherwise allowed by the Committee, any applicable tax withholding under Section
6.6. The Company shall not be obligated to deliver certificates for the shares
unless and until it receives full payment of the exercise price therefor.

         2.3      Option Period.

         Each Option and all rights or obligations thereunder shall expire on
such date as shall be determined by the Committee, but not later than 10 years
after the Award Date, and shall be subject to earlier termination as hereinafter
provided.


                                       5
<PAGE>

         2.4      Exercise of Options.

         Except as otherwise provided in Section 6.3 and 6.4, an Option may
become exercisable, in whole or in part, on the date or dates specified in the
Award Agreement and thereafter shall remain exercisable until the expiration or
earlier termination of the Option. No Option shall be exercisable for at least
six months after the Award Date, except in the case of death or Total
Disability. The Committee may, at any time after grant of the Option and from
time to time, increase the number of shares exercisable at any time so long as
the total number of shares subject to the Option is not increased. No Option
shall be exercisable except in respect of whole shares, and fractional share
interests shall be disregarded. Not less than 10 shares of Common Stock may be
purchased at one time unless the number purchased is the total number at the
time available for purchase under the terms of the Option.

         2.5      Limitations on Grant of Incentive Stock Options.

                  (a) To the extent that the aggregate fair market value of
stock with respect to which incentive stock options first become exercisable by
a Participant in any calendar year exceeds $100,000, taking into account both
Common Stock subject to Incentive Stock Options under this Plan and stock
subject to incentive stock options under all other plans of the Company, such
options shall be treated as nonqualified stock options. For purposes of
determining whether the $100,000 limit is exceeded, the fair market value of
stock subject to options shall be determined as of the date the options are
awarded. In reducing the number of options treated as incentive stock options to
meet the $100,000 limit, the most recently granted options shall be reduced
first. To the extent a reduction of simultaneously granted options is necessary
to meet the $100,000 limit, the Corporation may, in the manner and to the extent
permitted by law, designate which shares of Common Stock are to be treated as
shares acquired pursuant to the exercise of an Incentive Stock Option.

                  (b) There shall be imposed in any Award Agreement relating to
Incentive Stock Options such terms and conditions as are required in order that
the Option be an "incentive stock option" as that term is defined in Section 422
of the Code.

                  (c) No Incentive Stock Option may be granted to any person
who, at the time the Incentive Stock Option is granted, owns shares of
outstanding Common Stock possessing more than 10% of the total combined voting
power of all classes of stock of the Corporation or a Subsidiary, unless the
exercise price of such Option is at least 110% of the Fair Market Value of the
stock subject to the Option and such Option by its terms is not exercisable
after the expiration of five years from the date such Option is granted.

         2.6      Non-Employee Director Awards.

                  (a) Participation. Awards under this Section 2.6 shall be made
only to Non-Employee Directors.

                  (b) Option Grants. Effective on the day after the
Corporation's 1999 annual meeting, as and when any person who is not then an
officer or employee of the Company shall become a director of the Corporation,
there shall be granted automatically


                                       6
<PAGE>

(without any action by the Board or the Committee) a Nonqualified Stock Option
(the grant or award date of which shall be the date such person takes office) to
such person to purchase 9,000 shares of Common Stock.

                  (c) Subsequent Annual Options. In each calendar year during
the term of the Plan, commencing with the 2000 annual meeting, there shall be
granted automatically (without any action by the Committee or the Board) a
Nonqualified Stock Option to purchase 9,000 shares of Common Stock to each
Non-Employee Director who is re-elected as a director of the Corporation or who
continues as a director (the grant or award date of which shall be the date of
the annual meeting of shareholders in each such year).

                  (d) Option Price. The purchase price per share of the Common
Stock covered by each Option granted pursuant to this Section 2.6 shall be one
hundred percent of the Fair Market Value of the Common Stock on the Award Date.
The purchase price of any shares purchased shall be paid in full at the time of
each purchase in cash or by check or in shares of Common Stock valued at their
Fair Market Value on the business day next preceding the date of exercise of the
Option, or partly in such shares and partly in cash.

                  (e) Option Period. Each Option granted under this Section 2.6
on or after May 21, 2003, and all rights or obligations thereunder, shall expire
on the tenth anniversary of the Award Date and shall be subject to earlier
termination as provided below. The expiration date of each Option granted under
this Section 2.6 prior to May 21, 2003 shall be determined under the version of
this Plan as in effect on the Award Date of such Option.

                  (f) Exercise of Options. Except as otherwise provided in
Sections 2.6(g) and 2.6(h), each Option granted under this Section 2.6 on or
after March 24, 2004 shall become exercisable (i) as to one-third of the covered
shares on the earlier of (A) the first anniversary of the Award Date, or (B) the
day immediately preceding the first regularly scheduled Annual Meeting of
shareholders first occurring after the Award Date; and (ii) as to an additional
1/36th of the covered shares in each of the 24 months thereafter (using the
Award Date as the date of monthly vesting). Each Option granted under this
Section 2.6 prior to March 24, 2004 shall vest as provided in the version of
this Section 2.6(f) in effect on the Award Date of such Option.

                  (g) Termination of Directorship. If a Non-Employee Director
Participant's services as a member of the Board terminate, each Option granted
pursuant to Section 2.6(b) or (c) hereof held by such Non-Employee Director
Participant which is not then exercisable shall terminate; provided, however,
that if a Non-Employee Director Participant's services as a member of the Board
terminate by reason of death or Total Disability, the Committee may, in its
discretion, consider to be exercisable a greater portion of any such Option than
would otherwise be exercisable, upon such terms as the Committee shall
determine. If a Non-Employee Director Participant's services as a member of the
Board terminate by reason of death or Total Disability, any portion of any such
Option which is then exercisable may be exercised for one year after the date of
such termination or the balance of such Option's term, whichever period is
shorter. If a Non-Employee Director Participant's services as a member of the
Board terminate for


                                       7
<PAGE>

any other reason, any portion of any such Option which is then exercisable may
be exercised for three months after the date of such termination or the balance
of such Option's term, whichever period is shorter.

                  (h) Acceleration Upon an Event. Immediately prior to the
occurrence of an Event, in order to protect the holders of Options granted under
this Section 2.6, each Option granted under Section 2.6(b) or (c) hereof shall
become exercisable in full.

                  (i) Adjustments. The specific numbers of shares stated in the
foregoing provisions of Section 2.6(b) and (c) hereof and the consideration
payable for such shares shall be subject to adjustment in certain events as
provided in Section 6.2 of this Plan; provided, however, that the specific
number of shares stated in Section 2.6(b) and in Section 2.6(c) shall not be
adjusted, unless such adjustment is approved by the Board, in connection with a
split or reverse split of the Common Stock.

         2.7      Options and Rights in Substitution for Stock Options Granted
by Other Corporations.

         Options and Stock Appreciation Rights may be granted to Eligible
Employees under this Plan in substitution for employee stock options granted by
other entities to persons who are or who will become Eligible Employees in
respect of the Company, in connection with a distribution, merger or
reorganization by or with the granting entity or an affiliated entity, or the
acquisition by the Company, directly or indirectly, of all or a substantial part
of the stock or assets of the other entity.

         2.8      Adjustments, No Repricing Without Prior Shareholder Approval.

         Subject to Section 1.4 and Section 6.7 and the specific limitations on
Awards contained in this Plan, the Committee from time to time may authorize,
generally or in specific cases only, for the benefit of any Eligible Employee
any adjustment in the exercise or repurchase price (except as set forth below),
vesting schedule, the number of shares subject to, the restrictions upon or the
term of, an Award granted under this Article by cancellation of an outstanding
Award and a subsequent regranting of an Award, by amendment, by substitution of
an outstanding Award, by waiver or by other legally valid means. Such amendment
or other action may result among other changes in an exercise or purchase price
which is higher or lower than the exercise or purchase price of the original or
prior Award (except as set forth below), provide for a greater or lesser number
of shares subject to the Award, or provide for a longer or shorter vesting or
exercise period. Notwithstanding the foregoing, in no case shall the per share
exercise price of any Option or related Stock Appreciation Right be reduced (by
amendment, substitution, cancellation and regrant or other means) without
stockholder approval to a price less than the Fair Market Value of a share of
Common Stock on the related Award Date.

III.     STOCK APPRECIATION RIGHTS.

         3.1      Grants.

         In its discretion, the Committee may grant Stock Appreciation Rights
concurrently with the grant of Options. A Stock Appreciation Right shall extend
to all or a portion of the shares covered by the related Option. A Stock
Appreciation Right shall


                                       8
<PAGE>

entitle the Participant who holds the related Option, upon exercise of the Stock
Appreciation Right and surrender of the related Option, or portion thereof, to
the extent the Stock Appreciation Right and related Option each were previously
unexercised, to receive payment of an amount determined pursuant to Section 3.3.
Any Stock Appreciation Right granted in connection with an Incentive Stock
Option shall contain such terms as may be required to comply with the provisions
of Section 422 of the Code and the regulations promulgated thereunder. In its
discretion, the Committee may also grant Stock Appreciation Rights independently
of any Option subject to such conditions as the Committee may in its absolute
discretion provide.

         3.2      Exercise of Stock Appreciation Rights.

                  (a) A Stock Appreciation Right granted concurrently with an
Option shall be exercisable only at such time or times, and to the extent, that
the related Option shall be exercisable and only when the Fair Market Value of
the stock subject to the related Option exceeds the exercise price of the
related Option.

                  (b) In the event that a Stock Appreciation Right granted
concurrently with an Option is exercised, the number of shares of Common Stock
subject to the related Option shall be charged against the maximum amount of
Common Stock that may be issued or transferred pursuant to Awards under this
Plan. The number of shares subject to the Stock Appreciation Right and the
related Option of the Participant shall also be reduced by such number of
shares.

                  (c) If a Stock Appreciation Right granted concurrently with an
Option extends to less than all the shares covered by the related Option and if
a portion of the related Option is thereafter exercised, the number of shares
subject to the unexercised Stock Appreciation Right shall be reduced only if and
to the extent that the remaining number of shares covered by such related Option
is less than the remaining number of shares subject to such Stock Appreciation
Right.

                  (d) A Stock Appreciation Right granted independently of any
Option shall be exercisable pursuant to the terms of the Award Agreement but in
no event earlier than six months after the Award Date, except in the case of
death or Total Disability.

         3.3      Payment.

                  (a) Upon exercise of a Stock Appreciation Right and surrender
of an exercisable portion of the related Option, the Participant shall be
entitled to receive payment of an amount determined by multiplying

                  (i) the difference obtained by subtracting the exercise price
         per share of Common Stock under the related Option from the Fair Market
         Value of a share of Common Stock on the date of exercise of the Stock
         Appreciation Right, by

                  (ii) the number of shares with respect to which the Stock
         Appreciation Right shall have been exercised.

                  (b) The Committee, in its sole discretion, may settle the
amount determined under paragraph (a) above solely in cash, solely in shares of
Common Stock


                                       9
<PAGE>

(valued at Fair Market Value on the date of exercise of the Stock Appreciation
Right), or partly in such shares and partly in cash, provided that the Committee
shall have determined that such exercise and payment are consistent with
applicable law. In any event, cash shall be paid in lieu of fractional shares.
Absent a determination to the contrary, all Stock Appreciation Rights shall be
settled in cash as soon as practicable after exercise. The exercise price for
the Stock Appreciation Right shall be the exercise price of the related Option.
Notwithstanding the foregoing, the Committee may, in the Award Agreement,
determine the maximum amount of cash or stock or a combination thereof which may
be delivered upon exercise of a Stock Appreciation Right.

                  (c) Upon exercise of a Stock Appreciation Right granted
independently of any Option, the Participant shall be entitled to receive
payment of an amount based on a percentage, specified in the Award Agreement, of
the difference obtained by subtracting the Fair Market Value per share of Common
Stock on the Award Date from the Fair Market Value per share of Common Stock on
the date of exercise of the Stock Appreciation Right. Such amount shall be paid
as described in paragraph (b) above.

IV.      RESTRICTED STOCK AWARDS.

         4.1      Grants.

         Subject to Section 1.4, the Committee may, in its discretion, grant one
or more Restricted Stock Awards to any Eligible Employee. Each Restricted Stock
Award agreement shall specify the number of shares of Common Stock to be issued
to the Participant, the date of such issuance, the price, if any, to be paid for
such shares by the Participant and the restrictions imposed on such shares,
which restrictions shall not terminate earlier than six months after the Award
Date. Stock certificates evidencing shares of Restricted Stock pending the lapse
of the restrictions shall bear a legend making appropriate reference to the
restrictions imposed hereunder and shall be held by the Corporation or by a
third party designated by the Committee until the restrictions on such shares
shall have lapsed and the shares shall have vested in accordance with the
provisions of the Award. Upon issuance of the Restricted Stock Award, the
Participant may be required to provide such further assurance and documents as
the Committee may require to enforce the restrictions.

         4.2      Restrictions.

                  (a) Shares of Common Stock included in Restricted Stock Awards
may not be sold, assigned, transferred, pledged or otherwise disposed of or
encumbered, either voluntarily or involuntarily, until such shares have vested.

                  (b) Unless otherwise provided in the applicable Award
Agreement, Participants receiving Restricted Stock shall be entitled to dividend
and voting rights for the shares issued even though they are not vested,
provided that such rights shall terminate immediately as to any forfeited
Restricted Stock.

                  (c) In the event that the Participant shall have paid cash in
connection with the Restricted Stock Award, the Award Agreement shall specify
whether and to


                                       10
<PAGE>

what extent such cash shall be returned upon a forfeiture (with or without an
earnings factor).

         4.3      Return to the Corporation.

         Unless the Committee otherwise expressly provides, shares of Restricted
Stock that remain subject to restrictions at the time of termination of
employment or are subject to other conditions to vesting that have not been
satisfied by the time specified in the applicable Award Agreement shall not vest
and shall be returned to the Corporation in such manner and on such terms as the
Committee shall therein provide.

V.       PERFORMANCE SHARE AWARDS.

         5.1      Grants.

         The Committee may, in its discretion, grant Performance Share Awards to
Eligible Employees based upon such factors as the Committee shall determine. A
Performance Share Award agreement shall specify the number of shares of Common
Stock subject to the Performance Share Award, the price, if any, to be paid for
such shares by the Participant and the conditions upon which issuance to the
Participant shall be based, which issuance shall not be earlier than six months
after the Award Date.

         5.2      Special Performance-Based Share Awards.

         Without limiting the generality of the foregoing, and in addition to
Options and Stock Appreciation Rights granted under other provisions of this
Plan which are intended to satisfy the exception for "qualified
performance-based compensation" under Section 162(m) of the Code (with such
Awards hereinafter referred to as a "Qualifying Option" or "Qualifying Stock
Appreciation Right," respectively), other performance-based awards within the
meaning of Section 162(m) of the Code ("Performance-Based Awards"), whether in
the form of restricted stock, performance stock, phantom stock, Cash-Based
Awards or other rights, the grant, vesting, exercisability or payment of which
depends on the degree of achievement of the Performance Goals relative to
pre-established targeted levels for the Corporation on a consolidated, segment,
subsidiary, division or unit basis, may be granted under this Plan. Any
Qualifying Option or Qualifying Stock Appreciation Right shall be subject to the
requirements of Section 5.3(a), (c) and (f) below in order for such Award to
satisfy the requirements for "qualified performance-based compensation" within
the meaning of Section 162(m) of the Code.

                  (a) Eligible Class. The eligible class of persons for
Performance-Based Awards under this Section shall be the key employees
(including officers) of the Company.

                  (b) Performance Goal Alternatives. The specific performance
goals for Performance-Based Awards granted under this Section (other than
Qualifying Options and Qualifying Stock Appreciation Rights) shall be, on an
absolute or relative basis, one or more of the Performance Goals, as selected by
the Committee in its sole discretion. The Committee shall establish in the
applicable Award Agreement the specific performance target(s) relative to the
Performance Goal(s) which must be attained before the compensation under the
Performance-Based Award becomes payable. The specific


                                       11
<PAGE>

targets shall be determined within the time period permitted under Section
162(m) of the Code (and any regulations issued thereunder) so that such targets
are considered to be pre-established and so that the attainment of such targets
is substantially uncertain at the time of their establishment. The applicable
performance measurement period may not be less than one nor more than 10 years.

                  (c) Maximum Performance-Based Award. Notwithstanding any other
provision of the Plan to the contrary, the maximum number of shares of Common
Stock which may be delivered pursuant to awards that are granted as
Performance-Based Awards under this Section 5.2 to any Participant in any
calendar year (plus the number of shares of Common Stock subject to Options and
Stock Appreciation Rights granted to that Participant in that calendar year)
shall not exceed 1,350,000 shares, either individually or in the aggregate,
subject to adjustment as provided in Section 6.2. Awards that are cancelled
during the year shall be counted against this limit to the extent required by
Section 162(m) of the Code. In addition, the aggregate amount of compensation
that may be paid to any Participant in respect of any Cash-Based Awards that are
granted to that Participant during any calendar year as Performance-Based Awards
shall not exceed $3,500,000.

                  (d) Committee Certification. Before any Performance-Based
Award under this Section 5.2 (other than Qualifying Options or Qualifying Stock
Appreciation Rights) is paid, the Committee must certify in writing that the
Performance Goal(s) and any other material terms of the Performance-Based Award
were satisfied; provided, however, that a Performance-Based Award may be paid
without regard to the satisfaction of the applicable Performance Goal in the
event of a change in control event in accordance with Section 162(m) of the Code
and Section 6.2.

                  (e) Terms and Conditions of Awards. The Committee will have
the discretion to determine the restrictions or other limitations of the
individual awards granted under this Section 5.2 including the authority to
reduce awards, payouts or vesting or to pay no awards, in its sole discretion,
if the Committee preserves such authority at the time of grant by language to
this effect in its authorizing resolutions or otherwise.

                  (f) Adjustments for Changes in Capitalization and other
Material Changes. In the event of a change in corporate capitalization, such as
a stock split or stock dividend, or a corporate transaction, such as a merger,
consolidation, spinoff, reorganization or similar event, or any partial or
complete liquidation of the Company, or any similar event consistent with
regulations issued under Section 162(m) of the Code including, without
limitation, any material change in accounting policies or practices affecting
the Company and/or the Performance Goals or targets, then the Committee shall
make adjustments to the Performance Goals and targets relating to outstanding
Performance-Based Awards to the extent such adjustments are made to reflect the
occurrence of such an event; provided, however, that adjustments described in
this subsection may be made only to the extent that the occurrence of an event
described herein was unforeseen at the time the targets for a Performance-Based
Award were established by the Committee.


                                       12
<PAGE>

         5.3      Deferred Payments.

         The Committee may authorize for the benefit of any Eligible Employee
the deferral of any payment of cash or shares that may become due or of cash
otherwise payable under this Plan, and provide for accredited benefits thereon
based upon such deferment, at the election or at the request of such
Participant, subject to the other terms of this Plan. Such deferral shall be
subject to such further conditions, restrictions or requirements as the
Committee may impose, subject to any then vested rights of Participants.

VI.      OTHER PROVISIONS.

         6.1      Rights of Eligible Employees, Participants and Beneficiaries.

                  (a) Status as an Eligible Employee shall not be construed as a
commitment that any Award will be made under this Plan to any Eligible Employee
generally.

                  (b) Nothing contained in this Plan (or in Award Agreements or
in any other documents related to this Plan or to Awards) shall confer upon any
Eligible Employee or Participant any right to continue in the service or employ
of the Company or constitute any contract or agreement of service or employment,
or interfere in any way with the right of the Company to reduce such person's
compensation or other benefits or to terminate the services or employment of
such Eligible Employee or Participant, with or without cause, but nothing
contained in this Plan or any document related thereto shall affect any other
contractual right of any Eligible Employee or Participant.

                  (c) Awards payable under this Plan shall be payable in shares
or from the general assets of the Corporation, and no special or separate
reserve, fund or deposit shall be made to assure payment of any such Awards. No
Participant, Beneficiary or other person shall have any right, title or interest
in any fund or in any specific asset (including shares of Common Stock) of the
Company by reason of any Award granted hereunder. Neither the provisions of this
Plan (or of any documents related hereto), nor the creation or adoption of this
Plan, nor any action taken pursuant to the provisions of this Plan shall create,
or be construed to create, a trust of any kind or a fiduciary relationship
between the Company and any Participant, Beneficiary or other person. To the
extent that a Participant, Beneficiary or other person acquires a right to
receive an Award hereunder, such right shall be no greater than the right of any
unsecured general creditor of the Corporation.

         6.2      Adjustments Upon Changes in Capitalization.

                  (a) If the outstanding shares of Common Stock are changed into
or exchanged for cash or a different number or kind of shares or securities of
the Corporation or of another issuer, or if additional shares or new or
different securities are distributed with respect to the outstanding shares of
the Common Stock, through a reorganization or merger to which the Corporation is
a party, or through a combination, consolidation, recapitalization,
reclassification, stock split, stock dividend, reverse stock split, stock
consolidation or other capital change or adjustment, an appropriate adjustment
shall be made in the number and kind of shares or other consideration that is
subject to or


                                       13
<PAGE>

may be delivered under this Plan and pursuant to outstanding Awards. A
corresponding adjustment to the consideration payable with respect to Awards
granted prior to any such change and to the price, if any, paid in connection
with Restricted Stock Awards or Performance Share Awards or Performance-Based
Awards shall also be made. Any such adjustment, however, shall be made without
change in the total payment, if any, applicable to the portion of the Award not
exercised but with a corresponding adjustment in the price for each share.
Corresponding adjustments shall be made with respect to Stock Appreciation
Rights based upon the adjustments made to the Options to which they are related
or, in the case of Stock Appreciation Rights granted independently of any
Option, based upon the adjustments made to Common Stock.

                  (b) Upon the dissolution or liquidation of the Corporation, or
upon a reorganization, merger or consolidation of the Corporation with one or
more corporations as a result of which the Corporation is not the surviving
corporation, the Plan and outstanding Awards shall terminate. Notwithstanding
the foregoing, the Committee may provide in writing in connection with, or in
contemplation of, any such transaction for any or all of the following
alternatives (separately or in combinations): (i) for the assumption by the
successor corporation of the Awards theretofore granted or the substitution by
such corporation for such Awards of awards covering the stock of the successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices; (ii) for the continuance of this
Plan by such successor corporation in which event this Plan and the Awards shall
continue in the manner and under the terms so provided; or (iii) for the payment
in cash or shares of Common Stock in lieu of and in complete satisfaction of
such Awards.

                  (c) In adjusting Awards to reflect the changes described in
this Section 6.2, or in determining that no such adjustment is necessary, the
Committee may rely upon the advice of independent counsel and accountants of the
Company, and the determination of the Committee shall be conclusive. No
fractional shares of stock shall be issued under this Plan on account of any
such adjustment.

                  (d) In any of such events, the Committee may take such action
prior to such event to the extent that the Committee deems the action necessary
to permit the Participant to realize the benefits intended to be conveyed with
respect to the underlying shares in the same manner as is or will be available
to shareholders generally.

         6.3      Termination of Employment.

                  (a) If the Participant's service to or employment by the
Company terminates for any reason other than Retirement, death or Total
Disability, the Participant shall have, subject to earlier termination pursuant
to or as contemplated by Section 2.3, three months or such shorter period as is
provided in the Award Agreements from the date of termination of services or
employment to exercise any Option to the extent it shall have become exercisable
on the date of termination of employment, and any Option not exercisable on that
date shall terminate. Notwithstanding the preceding sentence, in the event the
Participant is discharged for cause as determined by the Committee in its sole
discretion, all Options shall lapse immediately upon such termination of
services or employment.


                                       14
<PAGE>

                  (b) If the Participant's service to or employment by the
Company terminates as a result of Retirement or Total Disability, the
Participant or Participant's Personal Representative, as the case may be, shall
have, subject to earlier termination pursuant to or as contemplated by Section
2.3, 12 months (or, in the case of Incentive Stock Options where the Participant
terminates as a result of Retirement, three months) or such shorter period as is
provided in the Award Agreements from the date of termination of services or
employment to exercise any Option to the extent it shall have become exercisable
by the date of termination of services or employment and any Option not
exercisable on that date shall terminate.

                  (c) If the Participant's service to or employment by the
Company terminates as a result of death while the Participant is rendering
services to the Company or is employed by the Company or during the 12 month
period (or, in the case of Incentive Stock Options where the Participant has
terminated as a result of Retirement, three month period) referred to in
subsection (b) above, the Participant's Option shall be exercisable by the
Participant's Beneficiary, subject to earlier termination pursuant to or as
contemplated by Section 2.3, during the 12 month period or such shorter period
as is provided in the Award Agreements following the Participant's death, as to
all or any part of the shares of Common Stock covered thereby to the extent
exercisable on the date of death (or earlier termination).

                  (d) Each Stock Appreciation Right granted concurrently with an
Option shall have the same termination provisions and exercisability periods as
the Option to which it relates. The termination provisions and exercisability
periods of any Stock Appreciation Right granted independently of an Option shall
be established in accordance with Section 3.2(d). The exercisability period of a
Stock Appreciation Right shall not exceed that provided in Section 2.3 or in the
related Award Agreement and the Stock Appreciation Right shall expire at the end
of such exercisability period.

                  (e) In the event of termination of services to or employment
with the Company for any reason, (i) shares of Common Stock subject to the
Participant's Restricted Stock Award shall be forfeited in accordance with the
provisions of the related Award Agreement to the extent such shares have not
become vested on that date; and (ii) shares of Common Stock subject to the
Participant's Performance Share Award or Performance-Based Award shall be
forfeited in accordance with the provisions of the related Award Agreement to
the extent such shares have not been issued or become issuable on that date.

                  (f) In the event of termination of services to or employment
with the Company for any reason, other than discharge for cause, the Committee
may, in its discretion, increase the portion of the Participant's Award
available to the Participant, or Participant's Beneficiary or Personal
Representative, as the case may be, upon such terms as the Committee shall
determine.

                  (g) If an entity ceases to be a Subsidiary, such action shall
be deemed for purposes of this Section 6.3 to be a termination of services or
employment of each consultant or employee of that entity who does not continue
as a consultant or as an employee of another entity within the Company.


                                       15
<PAGE>

                  (h) Upon forfeiture of a Restricted Stock Award pursuant to
this Section 6.3, the Participant, or his or her Beneficiary or Personal
Representative, as the case may be, shall transfer to the Corporation the
portion of the Restricted Stock Award not vested at the date of termination of
services or employment, without payment of any consideration by the Corporation
for such transfer unless the Participant paid a purchase price in which case
repayment, if any, of that price shall be governed by the Award Agreement.
Notwithstanding any such transfer to the Corporation, or failure, refusal or
neglect to transfer, by the Participant, or his or her Beneficiary or Personal
Representative, as the case may be, such nonvested portion of any Restricted
Stock Award shall be deemed transferred automatically to the Corporation on the
date of termination of services or employment. The Participant's original
acceptance of the Restricted Stock Award shall constitute his or her appointment
of the Corporation and each of its authorized representatives as
attorney(s)-in-fact to effect such transfer and to execute such documents as the
Corporation or such representatives deem necessary or advisable in connection
with such transfer.

         6.4      Acceleration of Awards.

         Unless prior to an Event the Board determines that, upon its
occurrence, there shall be no acceleration of Awards or determines those Awards
which shall be accelerated and the extent to which they shall be accelerated,
upon the occurrence of an Event (i) each Option and each related Stock
Appreciation Right shall become immediately exercisable to the full extent
theretofore not exercisable, (ii) Restricted Stock shall immediately vest free
of restrictions and (iii) the number of shares covered by each Performance Share
Award or Performance-Based Award shall be issued to the Participant; subject,
however, to compliance with applicable regulatory requirements, including
without limitation and Section 422 of the Code. For purposes of this section
only, the Board shall mean the Board as constituted immediately prior to the
Event.

         6.5      Government Regulations.

         This Plan, the granting of Awards under this Plan and the issuance or
transfer of shares of Common Stock (and/or the payment of money) pursuant
thereto are subject to all applicable federal and state laws, rules and
regulations and to such approvals by any regulatory or governmental agency
(including without limitation "no action" positions of the Commission) which
may, in the opinion of counsel for the Corporation, be necessary or advisable in
connection therewith. Without limiting the generality of the foregoing, no
Awards may be granted under this Plan, and no shares shall be issued by the
Corporation, nor cash payments made by the Corporation, pursuant to or in
connection with any such Award, unless and until, in each such case, all legal
requirements applicable to the issuance or payment have, in the opinion of
counsel to the Corporation, been complied with. In connection with any stock
issuance or transfer, the person acquiring the shares shall, if requested by the
Corporation, give assurances satisfactory to counsel to the Corporation in
respect of such matters as the Corporation may deem desirable to assure
compliance with all applicable legal requirements.

         6.6      Tax Withholding.

                  (a) Upon the disposition by a Participant or other person of
shares of Common Stock acquired pursuant to the exercise of an Incentive Stock
Option prior to


                                       16
<PAGE>

satisfaction of the holding period requirements of Section 422 of the Code, or
upon the exercise of a Nonqualified Stock Option, the exercise of a Stock
Appreciation Right, the vesting of a Restricted Stock Award or the payment of a
Performance Share Award or Performance-Based Award, the Company shall have the
right to (i) require such Participant or such other person to pay by cash or
check payable to the Company, the amount of any taxes which the Company may be
required to withhold with respect to such transactions or (ii) deduct from
amounts paid in cash the amount of any taxes which the Company may be required
to withhold with respect to such cash amounts. The above notwithstanding, in any
case where a tax is required to be withheld in connection with the issuance or
transfer of shares of Common Stock under this Plan, the Participant may elect,
pursuant to such rules as the Committee may establish, to have the Company
reduce the number of such shares issued or transferred by the appropriate number
of shares to accomplish such withholding; provided, the Committee may impose
such conditions on the payment of any withholding obligation as may be required
to satisfy applicable regulatory requirements.

                  (b) The Committee may, in its discretion, permit a loan from
the Company to a Participant in the amount of any taxes which the Company may be
required to withhold with respect to shares of Common Stock received pursuant to
a transaction described in subsection (a) above. Such a loan will be for a term,
at a rate of interest and pursuant to such other terms and rules as the
Committee may establish.

         6.7      Amendment, Termination and Suspension.

                  (a) The Board may, at any time, terminate or, from time to
time, amend, modify or suspend this Plan (or any part hereof). No Awards may be
granted during any suspension of this Plan or after termination of this Plan,
but the Committee shall retain jurisdiction as to Awards then outstanding in
accordance with the terms of this Plan.

                  (b) To the extent then required under Sections 162, 422 or 424
of the Code or any other applicable law, or deemed necessary or advisable by the
Board, any amendment to this Plan shall be subject to shareholder approval.

                  (c) Without limiting any other express authority of the
Committee under (but subject to) the express limits of this Plan, the Committee
by agreement or resolution may waive conditions of or limitations on Awards to
Participants that the Committee in the prior exercise of its discretion has
imposed, without the consent of a Participant, and may make other changes to the
terms and conditions of Awards that do not affect in any manner materially
adverse to the Participant, the Participant's rights and benefits under an
Award.

                  (d) No amendment, suspension or termination of this Plan or
change of or affecting any outstanding Award shall, without written consent of
the Participant, affect in any manner materially adverse to the Participant any
rights or benefits of the Participant or obligations of the Company under any
Award granted under this Plan prior to the effective date of such change.
Changes contemplated by Section 6.2 shall not be deemed to constitute changes or
amendments for purposes of this Section 6.7.


                                       17
<PAGE>

         6.8      Privileges of Stock Ownership; Nondistributive Intent.

         A Participant shall not be entitled to the privilege of stock ownership
as to any shares of Common Stock not actually issued to him or her. Upon the
issuance and transfer of shares to the Participant, unless a registration
statement is in effect under the Securities Act and applicable state securities
law, relating to such issued and transferred Common Stock and there is available
for delivery a prospectus meeting the requirements of Section 10 of the
Securities Act, the Common Stock may be issued and transferred to the
Participant only if he or she represents and warrants in writing to the
Corporation that the shares are being acquired for investment and not with a
view to the resale or distribution thereof. No shares shall be issued and
transferred unless and until there shall have been full compliance with any then
applicable regulatory requirements (including those of exchanges upon which any
Common Stock of the Corporation may be listed).

         6.9      Effective Date of the Plan.

         This Plan shall be effective upon its approval by the Board (the
"Effective Date"), subject to approval by the shareholders of the Corporation
within twelve months from the date of such Board approval.

         6.10     Term of the Plan.

         Unless previously terminated by the Board, this Plan shall terminate at
the close of business on the day before the tenth anniversary of the Effective
Date, and no Awards shall be granted under it thereafter, but such termination
shall not affect any Award theretofore granted. Unless otherwise expressly
provided in this Plan or in an applicable Award Agreement, any Award granted
prior to the Plan's termination date may extend beyond such date, and all
authority of the Committee with respect to Awards hereunder, including the
authority to amend an Award, shall continue during any suspension of this Plan
and in respect of Awards outstanding on the termination date. No new
Performance-Based Award may be granted under Section 5.2 of the Plan after the
first annual shareholders meeting of the Corporation to occur in 2008, but such
termination shall not affect any Performance-Based Award theretofore granted.

         6.11     Governing Law.

         This Plan and the documents evidencing Awards and all other related
documents shall be governed by, and construed in accordance with, the laws of
the State of California. If any provision shall be held by a court of competent
jurisdiction to be invalid and unenforceable, the remaining provisions of this
Plan shall continue to be fully effective.

         6.12     Plan Construction.

                  (a) Rule 16b-3. It is the intent of the Corporation that the
Awards and transactions permitted by Awards generally satisfy and be interpreted
in a manner that, in the case of Participants who are or may be subject to
Section 16 of the Exchange Act, satisfies the applicable requirements of Rule
16b-3 promulgated thereunder so that such persons (unless they otherwise agree)
will be entitled to the benefits of Rule 16b-3 or


                                       18
<PAGE>

other exemptive rules under Section 16 of the Exchange Act in respect of those
transactions and will not be subjected to avoidable liability.

                  (b) Section 162(m). It is the further intent of the
Corporation that (to the extent the Corporation or Awards under this Plan may be
or become subject to limitations on deductibility under Section 162(m) of the
Code), Options or SARs granted with an exercise or base price not less than Fair
Market Value on the date of grant and Performance-Based Awards under Section 5.2
of this Plan that are granted to or held by a person subject to Section 162(m)
of the Code will qualify as performance-based compensation or otherwise be
exempt from deductibility limitations under Section 162(m) of the Code, to the
extent that the Committee authorizing the Award (or the payment thereof, as the
case may be) satisfies any applicable administrative requirements thereof.

         6.13     Captions.

         Captions and headings are given to the sections and subsections of this
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
this Plan or any provision thereof.

         6.14     Non-Exclusivity of Plan.

         Nothing in this Plan shall limit or be deemed to limit the authority of
the Board or the Committee to grant awards or authorize any other compensation,
with or without reference to the Common Stock, under any other plan or
authority.

         6.15     No Corporate Action Restriction.

         The existence of the Plan, the Award Agreements and the Awards granted
hereunder shall not limit, affect or restrict in any way the right or power of
the Board or the shareholders of the Corporation to make or authorize: (a) any
adjustment, recapitalization, reorganization or other change in the
Corporation's or any Subsidiary's capital structure or its business, (b) any
merger, amalgamation, consolidation or change in the ownership of the
Corporation or any subsidiary, (c) any issue of bonds, debentures, capital,
preferred or prior preference stock ahead of or affecting the Corporation's or
any Subsidiary's capital stock or the rights thereof, (d) any dissolution or
liquidation of the Corporation or any Subsidiary, (e) any sale or transfer of
all or any part of the Corporation or any Subsidiary's assets or business, or
(f) any other corporate act or proceeding by the Corporation or any Subsidiary.
No participant, beneficiary or any other person shall have any claim under any
Award or Award Agreement against any member of the Board or the Committee, or
the Corporation or any employees, officers or agents of the Corporation or any
Subsidiary, as a result of any such action.

         6.16     Other Company Benefit and Compensation Program.

         Payments and other benefits received by a Participant under an Award
made pursuant to this Plan shall not be deemed a part of a Participant's
compensation for purposes of the determination of benefits under any other
employee welfare or benefit plans or arrangements, if any, provided by the
Corporation or any Subsidiary, except


                                       19
<PAGE>

where the Committee or the Board expressly otherwise provides or authorizes in
writing. Awards under this Plan may be made in addition to, in combination with,
as alternatives to or in payment of grants, awards or commitments under any
other plans or arrangements of the Corporation or the Subsidiaries.

VII.     DEFINITIONS.

         7.1      Definitions.

                  (a) "Award" means an Option, which may be designated as a
Nonqualified Stock Option or an Incentive Stock Option, a Stock Appreciation
Right, a Restricted Stock Award, Performance Share Award or Performance-Based
Award, in each case granted under this Plan.

                  (b) "Award Agreement" means a written agreement setting forth
the terms of an Award.

                  (c) "Award Date" means the date upon which the Committee took
the action granting an Award or such later date as is prescribed by the
Committee or, in the case of Options granted under Section 2.6, the date
specified in such Section 2.6.

                  (d) "Beneficiary" means the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to receive the benefits
specified under this Plan in the event of a Participant's death, and shall mean
the Participant's executor or administrator if no other Beneficiary is
designated and able to act under the circumstances.

                  (e) "Board" means the Board of Directors of the Corporation.

                  (f) "Cash-Based Award" means an Award pursuant to Section 5.2
that, if paid, must be paid in cash and is not denominated in nor have a value
derived from the value of, nor an exercise or conversion privilege at a price
related to, shares of Common Stock.

                  (g) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.

                  (h) "Commission" means the Securities and Exchange Commission.

                  (i) "Committee" means the Board or a committee appointed by
the Board to administer this Plan, which committee shall be comprised only of
one or more directors or such greater number of directors as may be required
under applicable law. In respect of any decision with respect to an Award
intended to satisfy the requirements of Section 162(m) of the Code, the
Committee shall be composed of no less than two members, each of whom shall be
an "outside director" within the meaning of Section 162(m) of the Code. In
respect of any decision with respect to an Award intended to be exempt pursuant
to Rule 16b-3 promulgated by the Commission under the Exchange Act, the
Committee shall be composed of no less than two members, each of whom shall be a
"Non-Employee Director" within the meaning of Rule 16b-3(d)(1) under the
Exchange Act.


                                       20
<PAGE>

                  (j) "Common Stock" means the Common Stock of the Corporation.

                  (k) "Company" means the Corporation and its Subsidiaries,
collectively or individually, as the context may require.

                  (l) "Corporation" means Pacific Sunwear of California, Inc., a
California corporation, and its successors.

                  (m) "Eligible Employee" means an officer or key employee of
the Company and consultants to the Company whether or not such consultants are
employees.

                  (n) "Event" means any of the following:

                      (i) Approval by the shareholders of the Corporation of the
              dissolution or liquidation of the Corporation;

                      (ii) Approval by the shareholders of the Corporation of an
              agreement to merge or consolidate, or otherwise reorganize, with
              or into one or more entities other than Subsidiaries, as a result
              of which less than 50% of the outstanding voting securities of the
              surviving or resulting entity are, or are to be, owned by former
              shareholders of the Corporation; or

                      (iii) Approval by the shareholders of the Corporation of
              the sale of substantially all of the Corporation's business assets
              to a person or entity which is not a Subsidiary.

                  (o) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.

                  (p) "Fair Market Value" means (i) if the stock is listed or
admitted to trade on a national securities exchange, the closing price of the
stock on the Composite Tape, as published in the Western Edition of The Wall
Street Journal, of the principal national securities exchange on which the stock
is so listed or admitted to trade, on such date, or, if there is no trading of
the stock on such date, then the closing price of the stock as quoted on such
Composite Tape on the next preceding date on which there was trading in such
shares; (ii) if the stock is not listed or admitted to trade on a national
securities exchange, the last price for the stock on such date, as furnished by
the National Association of Securities Dealers, Inc. ("NASD") through the NASDAQ
National Market Reporting System or a similar organization if the NASD is no
longer reporting such information; (iii) if the stock is not listed or admitted
to trade on a national securities exchange and is not reported on the National
Market Reporting System, the mean between the bid and asked price for the stock
on such date, as furnished by the NASD; or (iv) if the stock is not listed or
admitted to trade on a national securities exchange, is not reported on the
National Market Reporting System and if bid and asked prices for the stock are
not furnished by the NASD or a similar organization, the values established by
the Committee for purposes of the Plan.


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<PAGE>

                  (q) "Incentive Stock Option" means an option which is
designated as an incentive stock option within the meaning of Section 422 of the
Code, the award of which contains such provisions as are necessary to comply
with that section.

                  (r) "Non-Employee Director" means a member of the Board who is
not an officer or employee of the Company.

                  (s) "Non-Employee Director Participant" means a Non-Employee
Director who has been granted an Option under Section 2.6.

                  (t) "Nonqualified Stock Option" means an option which is
designated as a Nonqualified Stock Option and shall include any Option intended
as an Incentive Stock Option that fails to meet the applicable legal
requirements thereof.

                  (u) "Option" means an option to purchase Common Stock under
this Plan. An Option shall be designated by the Committee as a Nonqualified
Stock Option or an Incentive Stock Option.

                  (v) "Participant" means an Eligible Employee who has been
granted an Award and a Non-Employee Director who has received an Option under
Section 2.6.

                  (w) "Performance Goal" means any one or more of the criteria
set forth on Exhibit A hereto.

                  (x) "Performance-Based Awards" shall mean an Award of a right
to receive shares of Common Stock or other compensation (including cash) under
Section 5.2, the issuance or payment of which is contingent upon, among other
conditions, the attainment of performance objectives specified by the Committee.

                  (y) "Performance Share Award" means an award of shares of
Common Stock under Section 5.1, the issuance of which is contingent upon
attainment of performance objectives specified by the Committee.

                  (z) "Personal Representative" means the person or persons who,
upon the disability or incompetence of a Participant, shall have acquired on
behalf of the Participant by legal proceeding or otherwise the power to exercise
the rights and receive the benefits specified in this Plan.

                  (aa) "Plan" means the Pacific Sunwear of California, Inc. 1999
Stock Award Plan, as it may be amended from time to time.

                  (bb) "QDRO" shall mean an order requiring the transfer of an
Award or portion thereof pursuant to a state domestic relations law to the
spouse, former spouse, child or other dependent of a Participant. Such order
must be in a form substantially identical to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended.

                  (cc) "Restricted Stock" means those shares of Common Stock
issued pursuant to a Restricted Stock Award which are subject to the
restrictions set forth in the related Award Agreement.


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<PAGE>

                  (dd) "Restricted Stock Award" means an award of a fixed number
of shares of Common Stock to the Participant subject, however, to payment of
such consideration, if any, and such forfeiture provisions, as are set forth in
the Award Agreement.

                  (ee) "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 Company
then in effect.

                  (ff) "Securities Act" means the Securities Act of 1933, as
amended.

                  (gg) "Stock Appreciation Right" means a right to receive a
number of shares of Common Stock or an amount of cash, or a combination of
shares and cash, determined as provided in Section 3.3(a).

                  (hh) "Subsidiary" means any corporation or other entity a
majority or more of whose outstanding voting stock or voting power is
beneficially owned directly or indirectly by the Corporation.

                  (ii) "Total Disability" means a "permanent and total
disability" within the meaning of Section 22(e)(3) of the Code and, in the case
of Awards other than Incentive Stock Options, such other disabilities,
infirmities, afflictions or conditions as the Committee by rule may include.


                                       23
<PAGE>

                                    EXHIBIT A
                                PERFORMANCE GOALS


         The Performance Targets shall mean any one or a combination of the
following. Except as otherwise expressly provided below or the context otherwise
requires, financial and accounting terms herein are used as defined for purposes
of, and shall be determined and construed in accordance with, generally accepted
accounting principles, as from time to time in effect, as applied and reflected
in the consolidated financial statements of the Corporation, prepared in the
ordinary course of business.

         EBIT. "EBIT" means Net Income before interest expense and taxes.

         EBITDA. "EBITDA" means Net Income before interest expense, taxes,
depreciation and amortization.

         EPS. "EPS" means Net Income divided by the weighted average number of
common shares outstanding. Unless otherwise provided by the Committee in the
related Award Agreement, common shares outstanding shall be adjusted to include
the dilutive effect of stock options, restricted stock and other dilutive
financial instruments.

         EXPENSE REDUCTION. "Expense Reduction" means reduction in actual
expense or an improvement in the expense to Net Sales ratio compared to a target
or prior year actual expense to Sales ratio.

         DEBT TO EBITDA. "Debt to EBITDA" means the ratio of debt to EBITDA.

         INTEREST COVERAGE. "Interest Coverage" means the ratio of EBITDA to
interest expense.

         INVENTORY TURNS. "Inventory Turns" means the ratio of total cost of
goods sold on a historical basis to average net inventory.

         NET INCOME. "Net Income" means the difference between total Net Sales
and total costs and expenses, including income taxes.

         NET SALES. "Net Sales" means net sales.

         OPERATING CASH FLOW. "Operating Cash Flow" means the net cash provided
by operating activities less net cash used by operations and investing
activities as shown on the statement of cash flows.

         PRE-TAX MARGIN. "Pre-Tax Margin" means the ratio of earnings before
income taxes to Net Sales.

         RETURN ON ASSETS. "Return on Assets" means the ratio of Net Income to
total average assets including goodwill.

         RETURN ON CAPITAL. "Return on Capital" means the ratio of Net Income to
average total capital. Total capital includes working capital, and other long
term assets such as PP&E, goodwill and intangibles, and leased assets. Unless
otherwise provided by the


                                      A-1
<PAGE>

Committee in the related Award Agreement, cash, deferred tax assets and debt
shall not be included in capital for calculation purposes.

         RETURN ON EQUITY. "Return on Equity" means Net Income divided by
average total equity.

         STOCK PRICE APPRECIATION. "Stock Price Appreciation" means an increase,
or an average annualized increase, in the stock price or market value of the
Common Stock of the Corporation after the date of grant of an Award or above a
specified price.

         WORKING CAPITAL IMPROVEMENT. "Working Capital Improvement" means the
net change in current assets less current liabilities over the applicable period
or the reduction in the current ratio (current assets divided by current
liabilities), excluding changes in cash and cash equivalents, and current and
deferred income taxes.


                                      A-2