Document:

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                                                                   EXHIBIT 10.18

                              EMPLOYMENT AGREEMENT

        This Employment Agreement (this "AGREEMENT") is made as of April 1,
2005, between Thomas Kennedy ("EXECUTIVE") and Pacific Sunwear of California,
Inc. (the "COMPANY").

                                     RECITAL

        The Company desires to establish its right to the services of Executive
in the capacities described below, on the terms and conditions hereinafter set
forth, and Executive is willing to accept such employment on such terms and
conditions.

                                    AGREEMENT

        The parties agree as follows:

1. DUTIES

        (a) The Company does hereby continue to engage and employ Executive as
Division President, Pacsun Division. Executive does hereby accept and agree to
such engagement and employment. Executive shall serve the Company in such
position in conformity with the provisions of this Agreement, directives of the
Board of Directors of the Company (the "Board"), and the corporate policies of
the Company as they presently exist, and as such policies may be amended,
modified, changed, or adopted from time to time. Executive shall have duties and
authority consistent with Executive's position of Division President, Pacsun
Division, as applicable.

        (b) Throughout his employment, Executive shall devote his time, energy,
and skills to the performance of his duties for the Company, vacations and other
leave authorized under this Agreement excepted.

        (c) Executive hereby represents to the Company that the execution and
delivery of this Agreement by Executive and the Company and the performance by
Executive of Executive's duties hereunder shall not constitute a breach of, or
otherwise contravene, the terms of any other employment or other agreement or
policy to which Executive is a party or otherwise bound.

2. TERM

        The term of this Agreement (the "Term") shall commence on April 1, 2005,
and shall be for an initial term of two years, through March 31, 2007; provided,
however, the Company may, at its sole discretion, extend the agreement for an
additional one-year period, such period to commence April 1, 2007 and terminate
on March 31, 2008. Such notice of an intent to extend the agreement for the
additional one-year period must

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be given no later than ninety (90) days prior to the expiration of the initial
two-year period. In the event the Company elects to extend the agreement for
that one-year period, the agreement shall then automatically renew for
additional one-year periods unless terminated by either party, on written
notice, delivered by no later than six months prior to the expiration of any
one-year term. In no event shall the agreement continue for an aggregate period
longer than seven years from April 1, 2005.

3. COMPENSATION

        (a) BASE SALARY. From April 1, 2005, through March 31, 2006, Executive's
base salary shall be at a rate of $575,000 annually, paid in accordance with
regular payroll practices, but not less than monthly. Commencing in or around
April 2006, Executive will be eligible for an annual performance and salary
review, with any corresponding increase to be determined by the Compensation
Committee of the Company, who will consider such increase in good faith and with
consideration for the performance of Executive and the Company during the
just-concluded fiscal year.

        (b) BONUS. Commencing with fiscal 2005, and commensurate with
Executive's position as Division President, PacSun Division, Executive's target
bonus will be 50% of base salary, with a maximum of 100% of base salary if the
Company reaches its established stretch target, subject to the then-current
provisions of the bonus plan. Such bonus shall be based upon the Company's
achievement of financial performance criteria to be established each fiscal year
by the Company. The bonus payment, if any, shall be made in or around April of
each year of the Term, commencing in 2006. Executive must be employed on the
date the bonus is paid in order to be eligible for any part of the bonus,
excluding the last year of this Agreement, or the end of the current term if not
renewed. In such case, in the event the Agreement is not terminated for cause
during any current term, Executive may collect the aforementioned bonus upon
remaining an employee through March 31 of the year in which the bonus is to be
paid.

        (c) EQUITY COMPENSATION. The Compensation Committee of the Board of
Directors has approved a grant to Executive of 100,000 shares of nonqualified
stock options at fair market value as of March 1, 2005. All such options shall
be granted under and subject to the Company's Stock Option Plan and will have a
four (4) year vesting period, with one-fourth becoming vested on the first
anniversary of the respective grant date and subsequent pro rata monthly vesting
occurring thereafter consistent with a four-year vesting schedule; provided,
however, with accounting rules changed to require the expensing of stock
options, the Compensation Committee may provide a modified program using other
instruments, such alternative instruments to be valued at substantially the same
value as the initial grants of stock options, calculated as of the dates of the
intended stock option grants.

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4. BENEFITS

        (a) HEALTH, WELFARE AND PENSION. During Executive's employment,
        Executive shall be entitled to participate, on the same terms and at the
        same level as other executives, in all health and welfare benefit plans
        and programs and all retirement, deferred compensation and similar plans
        and programs generally available to other executives or employees of the
        Company as in effect from time to time, subject to any legally required
        restrictions specified in such plans and programs.

        (b) VACATION AND OTHER LEAVE. Executive shall receive four (4) weeks
        paid vacation per year, increasing to five (5) weeks paid vacation on
        the completion of five (5) years of employment from Executive's date of
        hire. Such vacation shall be scheduled and taken in accordance with the
        Company's standard vacation policies applicable to Company executives.
        Executive shall also be entitled to all other holiday and leave pay
        generally available to other executives of the Company.

        (c) EXPENSE REIMBURSEMENTS. During Executive's employment, the Company
        shall, pursuant to the Company's expense reimbursement policies,
        promptly reimburse Executive for reasonable expenses incurred in
        connection with performance of his duties for the Company.

        (d) AUTOMOBILE ALLOWANCE. During Executive's employment, Executive shall
        be paid a car allowance in the gross amount of $9,000 per year, paid on
        a bi-weekly basis.

5. DEATH OR DISABILITY

        (a) DEFINITION OF PERMANENTLY DISABLED AND PERMANENT DISABILITY. For
purposes of this Agreement, the terms "DISABLED" or "DISABILITY" shall mean
Executive's inability, because of physical or mental illness or injury, to
perform the essential functions of his customary duties pursuant to this
Agreement, even with a reasonable accommodation, and the continuation of such
disabled condition for a period of one hundred twenty (120) continuous days, or
for not less than two hundred ten (210) days during any continuous twenty-four
(24) month period, or as otherwise required by law.

        (b) TERMINATION DUE TO DEATH OR DISABILITY. If Executive dies,
Executive's employment shall automatically cease and terminate as of the date of
Executive's death. If Executive becomes Disabled during his employment, the
Company may terminate Executive's employment upon thirty (30) days notice to

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Executive. In the event of the termination of employment hereunder due to
Executive's death or Disability, Executive or his estate shall be entitled to
receive:

                (i)     a lump sum cash payment, payable on the termination of
                        Executive's employment, equal to the sum of (x) any
                        accrued but unpaid base salary as of the date of
                        Executive's termination of employment hereunder and (y)
                        any earned but unpaid annual incentive compensation in
                        respect of the most recently completed fiscal year
                        preceding Executive's termination of employment
                        hereunder (the "EARNED/UNPAID ANNUAL BONUS")
                        (collectively "ACCRUED OBLIGATIONS"); and

                (ii)    such employee benefits, if any, as to which Executive
                        may be entitled under the employee benefit plans and
                        arrangements of the Company through the date of
                        termination.

6. TERMINATION BY THE COMPANY

        (a) TERMINATION FOR CAUSE. The Company may, by providing written notice
to Executive, terminate the Period of Employment and Executive's employment
hereunder for Cause at any time. The term "CAUSE" for purpose of this Agreement
shall mean:

                (i)     Executive's conviction of or entrance of a plea of
                        guilty or nolo contendere to a felony; or

                (ii)    fraudulent conduct by Executive in connection with the
                        business affairs of the Company; or

                (iii)   theft, embezzlement, or other criminal misappropriation
                        of funds by Executive from the Company; or

                (iv)    Executive's bad faith refusal to (a) perform the duties
                        of Division President, PacSun division, as the case may
                        be, or (b) follow the lawful orders of the Board of
                        Directors; or

                (v)     Executive's willful misconduct, which has, or would if
                        generally known, materially adversely affect the good
                        will, business, or reputation of the Company; or

                (vi)    Executive's material breach of this Agreement, provided
                        the Company has notified Executive of such material
                        breach and has provided a thirty (30)-day period to cure
                        such breach.

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        If Executive's employment is terminated for Cause, the termination shall
take effect on the effective date of written notice of such termination to
Executive.

        In the event of the termination of Executive's employment hereunder due
to a termination by the Company for Cause, then Executive shall be entitled to
receive: (i) payment of Accrued Obligations on the effective date of Executive's
termination; and (ii) such employee benefits, if any, as to which Executive may
be entitled under the employee benefit plans and arrangements of the Company
through the date of termination.

        If the Company attempts to terminate Executive's employment pursuant to
this Section 6(a) and it is ultimately determined that the Company lacked Cause,
the provisions of Section 6(b) ("Termination by the Company-Termination Without
Cause") shall apply and Executive shall be entitled to receive the payments
called for by Section 6(b) ("Termination by the Company-Termination Without
Cause").

        (b) TERMINATION WITHOUT CAUSE. The Company may, with or without reason,
        terminate Executive's employment hereunder without Cause at any time, by
        providing Executive thirty (30) days written notice of such termination.
        In the event of the termination of Executive's employment hereunder due
        to a termination by the Company without Cause (other than due to
        Executive's death or Disability), then Executive shall be entitled to:

                (i)payment of Accrued Obligations on the effective date of
                Executive's termination;

                (ii)such employee benefits, if any, as to which Executive may be
                entitled under the employee benefit plans and arrangements of
                the Company, through the date of termination;

                (iii)continued payment of Executive's base salary in the
                Company's normal payroll cycle as follows. In the event the
                Company terminates Executive's employment without Cause during
                the initial two-year Term , Executive shall receive salary
                continuation for the greater of (x) twelve (12) months or (y)
                the remainder of the initial two-year Term. In the event the
                Company terminates Executive's employment at any time during any
                one-year extension or renewal Term, Executive shall receive
                salary continuation for a period of twelve months; and

                (iv) a "PRO RATA PORTION OF THE BONUS," meaning an amount equal
                to any bonus to which Executive would have been entitled had
                Executive remained an employee for the balance of the fiscal
                year in which his employment terminated multiplied by a
                fraction, the numerator of which is the number of days from
                February 1 to the date of Executive's

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                termination, and the denominator of which is 365. Such Pro Rata
                Portion of the Bonus, if any, shall be paid to Executive in a
                single payment within 75 days of the end of the Company's fiscal
                year

                (v) For the period set forth in paragraph 6b(iii), above,
                Executive will also continue to receive car allowance and the
                Company shall either pay for or reimburse Executive for COBRA
                medical coverage, life insurance and AD&D insurance, each in the
                same amount provided to Executive as of the date of termination.

        If Executive's employment is terminated without Cause, the termination
shall take effect on the effective date of written notice of such termination to
Executive.

7. EXECUTIVE TERMINATION FOR "GOOD REASON"

Executive may terminate this Agreement for "Good Reason" upon written notice to
the Company. For purposes of this Section 5.(c), "Good Reason" includes the
following:

        (i) a material diminution in the duties or authority of his position,
without Executive's prior written consent; or

        (ii) a reduction in Executive's Base Salary, or Bonus potential (other
than as agreed to by Executive); or

        (iii) the Company's material breach of this Agreement that is not cured
within thirty (30) days of Executive's written notice to the Company of such
breach. In the event that Executive terminates his employment for Good Reason,
the Executive shall be entitled to all of the same payments and benefits that
Executive would be entitled to if his employment is terminated by the Company
without Cause as set forth in section 6(b) (i) through 6(b) (v).

8. EXPIRATION OF TERM

In the event the Company does not exercise the extension option, and Executive's
employment has not otherwise been terminated pursuant to this Agreement, the
Agreement will expire and Executive's employment shall terminate effective March
31, 2007. In such event, Executive shall be entitled to receive: (i) payment of
accrued obligations on the date of termination; and (ii) such employee benefits,
if any, as to which Executive may be entitled under the employee benefit plans
and arrangements of the Company. In the event the Company exercises its
extension option, and Executive's employment has not otherwise been terminated
pursuant to this Agreement, Executive's

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employment shall terminate effective March 31, 2008, unless neither party seeks
to terminate the agreement as stipulated in Section 2, in which case Executive's
employment shall terminate effective March 31 of any subsequent year in which
either party seeks to terminate the agreement as stipulated in Section 2. In
such event, Executive shall be entitled to receive (i) payment of accrued
obligations on the date of termination; and (ii) such employee benefits, if any,
as to which Executive may be entitled under the employee benefit plans and
arrangements of the Company. In no event will the contract continue beyond March
31, 2012.

9. NON-COMPETITION.

        Executive acknowledges and recognizes the highly competitive nature of
the businesses of the Company and its affiliates and accordingly agrees as
follows: During his employment, Executive will not, directly or indirectly, (i)
engage in any business for Executive's own account that competes with the
business of the Company or its affiliates (including, without limitation,
businesses which the Company or its affiliates have specific plans to conduct in
the future and as to which Executive is aware of such planning), (ii) enter the
employ of, or render any services to, any person engaged in any business that
competes with the business of the Company or its affiliates, (iii) acquire a
financial interest in any person engaged in any business that competes with the
business of the Company or its affiliates, directly or indirectly, as an
individual, partner, shareholder, officer, director, principal, agent, trustee
or consultant, or (iv) interfere with business relationships (whether formed
before or after the date of this Agreement) between the Company or any of its
affiliates and customers, suppliers, partners, members or investors of the
Company or its affiliates. Without limiting the generality of the foregoing,
Executive agrees that any designer, manufacturer, wholesaler or retailer which
designs, manufactures, markets or sells specialty apparel, clothing or
accessories to the age groups between eleven (11) and thirty-five (35) and where
such designer, manufacturer, wholesaler or retailer operates within seventy-five
(75) miles of any location of the Company or any subsidiary or affiliate, would
be "in competition with the business of the Company" or its subsidiaries or
affiliates. Notwithstanding anything to the contrary in this Agreement,
Executive may, directly or indirectly, own, solely as an investment, securities
of any person engaged in the business of the Company or its affiliates which are
publicly traded on a national or regional stock exchange or on an
over-the-counter market if Executive (i) is not a controlling person of, or a
member of a group which controls, such person and (ii) does not, directly or
indirectly, own five percent (5%) or more of any class of securities of such
person.

10. ANTISOLICITATION.

        Executive promises and agrees that during his employment, and for a
period of one year thereafter, he will not influence or attempt to influence
customers, vendors, or business partners of the Company or any of its present or
future subsidiaries or

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affiliates, either directly or indirectly, to divert their business to any
individual, partnership, firm, corporation or other entity then in competition
with the business of the Company, or any subsidiary or affiliate of the Company.

11. SOLICITING EMPLOYEES.

        Executive promises and agrees that during his employment, and for a
period of one year thereafter, he will not directly or indirectly solicit any of
the Company employees to work for any business, individual, partnership, firm,
corporation, or other entity then in competition with the business of the
Company or any subsidiary or affiliate of the Company.

12. CONFIDENTIALITY.

        Executive will not at any time (whether during or after his employment
with the Company), unless compelled by lawful process, disclose or use for his
own benefit or purposes or the benefit or purposes of any other person, firm,
partnership, joint venture, association, corporation or other business
organization, entity or enterprise other than the Company and any of its
subsidiaries or affiliates, any trade secrets, or other confidential data or
information relating to customers, design programs, costs, marketing, sales
activities, promotion, credit and financial data, financing methods, or plans of
the Company or of any subsidiary or affiliate of the Company; provided that the
foregoing shall not apply to information which is not unique to the Company or
which is generally known to the industry or the public other than as a result of
Executive's breach of this covenant. Executive agrees that upon termination of
his employment with the Company for any reason, or upon the request of the
Company, he will return to the Company immediately all memoranda, books, papers,
plans, information, letters and other data, and all copies thereof or therefrom,
in any way relating to the business of the Company and its affiliates. Executive
further agrees that he will not retain or use for his account at any time any
trade names, trademark or other proprietary business designation used or owned
in connection with the business of the Company or its affiliates. Nothing
contained herein is intended to supplant but is in addition to the Company's
Code of Ethical Standards and Business Practices, as acknowledged by separate
signed acknowledgement by Executive.

13. INJUNCTIVE RELIEF.

        It is expressly agreed that the Company will or would suffer irreparable
injury if Executive were to breach any of sections 9 through 12 above and that
the Company would by reason of such conduct be entitled, in addition to any
other remedies, to injunctive relief. Executive consents and stipulates to the
entry of such injunctive relief prohibiting Executive from engaging in conduct
which violates such section or sections, as applicable.

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14. ASSIGNMENT

        This Agreement is personal in its nature and neither of the parties
hereto shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder; provided, however, that, in
the event of a merger, consolidation, or transfer or sale of all or
substantially all of the assets of the Company with or to any other
individual(s) or entity, this Agreement shall, subject to the provisions hereof,
be binding upon and inure to the benefit of such successor and such successor
shall discharge and perform all the promises, covenants, duties, and obligations
of the Company hereunder.

15. GOVERNING LAW

        This Agreement and the legal relations hereby created between the
parties hereto shall be governed by and construed under and in accordance with
the internal laws of the State of California, without regard to conflicts of
laws principles thereof.

16. ENTIRE AGREEMENT

        This Agreement embodies the entire agreement of the parties hereto
respecting the matters within its scope. This Agreement supersedes all prior
agreements of the parties hereto on the subject matter hereof. Any prior
negotiations, correspondence, agreements, proposals, or understandings relating
to the subject matter hereof shall he deemed to be merged into this Agreement
and to the extent inconsistent herewith, such negotiations, correspondence,
agreements, proposals, or understandings shall be deemed to be of no force or
effect. There are no representations, warranties, or agreements, whether express
or implied, or oral or written, with respect to the subject matter hereof,
except as set forth herein.

17. MODIFICATIONS

        This Agreement shall not be modified by any oral agreement, either
express or implied, and all modifications hereof shall be in writing and signed
by the parties hereto.

18. WAIVER

        Failure to insist upon strict compliance with any of the terms,
covenants, or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition, nor shall any waiver or relinquishment of, or failure to
insist upon strict compliance with, any right or power hereunder at any one or
more times be deemed a waiver or relinquishment of such right or power at any
other time or times.

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19. NUMBER AND GENDER

        Where the context requires, the singular shall include the plural, the
plural shall include the singular, and any gender shall include all other
genders.

20. SECTION HEADINGS

        The section headings in this Agreement are for the purpose of
convenience only and shall not limit or otherwise affect any of the terms
hereof.

21. ARBITRATION

        Any controversy arising out of or relating to this Agreement, its
enforcement or interpretation, or because of an alleged breach, default, or
misrepresentation in connection with any of its provisions, or any other
controversy arising out of Executive's employment, including, but not limited
to, any state or federal statutory claims, shall be submitted to arbitration in
Orange County, California, before a sole arbitrator selected from Judicial
Arbitration and Mediation Services, Inc., Orange County, California, or its
successor ("JAMS"), or if JAMS is no longer able to supply the arbitrator, such
arbitrator shall be selected from the American Arbitration Association, or by a
mutally acceptable agency accepting such services and shall be conducted in
accordance with the provisions of California Code of Civil Procedure ss.ss. 1280
et seq. as the exclusive forum for the resolution of such dispute. Pursuant to
California Code of Civil Procedure ss. 1281.8, provisional injunctive relief
may, but need not, be sought by either party to this Agreement in a court of law
while arbitration proceedings are pending, and any provisional injunctive relief
granted by such court shall remain effective until the matter is finally
determined by the Arbitrator. Final resolution of any dispute through
arbitration may include any remedy or relief which the Arbitrator deems just and
equitable, including any and all remedies provided by applicable state or
federal statutes. At the conclusion of the arbitration, the Arbitrator shall
issue a written decision that sets forth the essential findings and conclusions
upon which the Arbitrator's award or decision is based. Any award or relief
granted by the Arbitrator hereunder shall be final and binding on the parties
hereto and may be enforced by any court of competent jurisdiction. The parties
acknowledge and agree that they are hereby waiving any rights to trial by jury
in any action, proceeding or counterclaim brought by either of the parties
against the other in connection with any matter whatsoever arising out of or in
any way connected with this Agreement or Executive's employment. The parties
agree that Company shall be responsible for payment of the forum costs of any
arbitration hereunder, including the Arbitrator's fee. Executive and Company
further agree that in any proceeding to enforce the terms of this Agreement, the
prevailing party shall be entitled to its or his reasonable attorneys' fees and
costs (other than forum costs associated with the arbitration) incurred by it or
him in connection with resolution of the dispute in addition to any other relief
granted.

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22. SEVERABILITY

        In the event that a court of competent jurisdiction determines that any
portion of this Agreement is in violation of any statute or public policy, then
only the portions of this Agreement which violate such statute or public policy
shall be stricken, and all portions of this Agreement which do not violate any
statute or public policy shall continue in full force and effect. Furthermore,
any court order striking any portion of this Agreement shall modify the stricken
terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.

23. NOTICES

        All notices under this Agreement shall be in writing and shall be either
personally delivered or mailed postage prepaid, by certified mail, return
receipt requested:

        (a)    if to the Company:

               Pacific Sunwear of California, Inc.
               Attention: Abby Areinoff, VP, HR
               3450 East Miraloma Avenue
               Anaheim, California 92806

        (b)    if to Executive:

               Thomas Kennedy

               ------------------------------

               -------------------------------

Notice shall be effective when personally delivered, or five (5) business days
after being so mailed.

24. COUNTERPARTS

        This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same instrument.

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25. WITHHOLDING TAXES

        The Company may withhold from any amounts payable under this Agreement
such federal, state and local taxes as may be required to be withheld pursuant
to any applicable law or regulation.

        IN WITNESS WHEREOF, the Company and Executive have executed this
Employment Agreement as of the date first above written.

                                            THE COMPANY:
                                            PACIFIC SUNWEAR OF CALIFORNIA, INC.

                                            By:
                                                   ---------------------------

                                            Name:
                                                   ---------------------------

                                            Title:
                                                   ---------------------------

                                            EXECUTIVE:
                                            THOMAS KENNEDY

                                            ----------------------------------

                                       12Exhibit 10.20

 

EXHIBIT 10.20

LEASE TERMINATION AGREEMENT

     THIS LEASE TERMINATION AGREEMENT (“Agreement”) is dated for reference purpose only as of
the 15th day of June, 2004, by and between PACIFIC SUNWEAR OF CALIFORNIA, INC., a California
corporation (“Lessee”), and LBA INDUSTRIAL FUND-CANYON, INC., a Delaware corporation (“Lessor”),
for the premises comprised of approximately 176,299 square feet of the building located at 5200
East La Palma Avenue, Anaheim, California (the “Premises”).

     1.      Lessee, as lessee, and Bank of America National Trust and Savings Association (“B of A”),
as lessor, entered into that certain Standard Industrial/Commercial Multi-Tenant Lease – Modified
Net dated September 30, 1997 for the Premises described above (the “Lease”). The Realty Associates
Fund IV, L.P. (“Realty Associates”) thereafter succeeded to B of A’s interest as lessor under the
Lease. Lessor has since succeeded to Realty Associates’ interest under the Lease. The term of the
Lease is scheduled to expire February 5, 2008. However, Lessee now desires to terminate the Lease
and Lessor desires to accept such termination of the Lease and Lessee’s surrender of all rights
under the Lease and possession of the Premises upon the terms and conditions provided herein.

     2.      Subject to the terms and conditions set forth below, in consideration of the mutual
promises contained herein, the Lease shall be terminated and Lessee shall surrender all rights
under the Lease and possession of the Premises effective as of 11:59 p.m. on the earlier of (i)
June 15, 2004 or (ii) the date that Lessor and Control Air Conditioning Corporation consummate a
new lease for the Premises (the “Replacement Lease”) (whichever occurs first is referred to herein
as the “Termination Date”). Lessee hereby agrees to leave the Premises in its AS-IS condition,
including leaving any existing furniture in place, and Lessor agrees to accept the Premises in its
AS-IS condition and confirms that Lessee shall have no further obligation with respect to the
condition of the Premises. Lessee represents and warrants to Lessor that it owns all of existing
furniture free and clear of liens, encumbrances and claims by any third parties and effective on
the Termination Date hereby conveys all of its right, title and interest in any such furniture to
Lessor.

     3.      As consideration for Lessor’s agreement to terminate the Lease early, Lessee shall pay to
Lessor an amount equal to Two Million Eight Hundred Thirty Three Thousand and No/100ths Dollars
($2,833,000.00) in cash or other immediately available funds (the “Termination Fee”) on the later
of (i) Termination Date or (ii) the date that Lessor and Lessee mutually execute this Agreement.
Notwithstanding the foregoing, Lessor and Lessee agree that Lessor shall have the right to retain
the security deposit currently being held by Lessor under the Lease in the amount of Ninety One
Thousand Eight Hundred and No/100ths Dollars ($91,800.00) plus unpaid interest equal to Eight
Hundred and Eighty-two and 69/100ths Dollars ($882.69) calculated in accordance with Paragraph 61
of the Lease Addendum (collectively, the “Security Deposit”) in satisfaction of Lessee’s obligation
to pay an equal amount of the Termination Fee, and Lessee hereby waives any and all of Lessee’s
right and interest in and to the Security Deposit for purposes thereof. In addition, Lessee may
credit against the amount of the Termination Fee a pro rata amount of the June 2004 Base Rent
payment (Seventy Eight Thousand Nine Hundred Twenty Nine and 6/100ths Dollars ($78,929.06)), the
June 2004 Common Area Operating Expenses (as defined in the Section 4.2 of the Lease) payment
(Seventeen Thousand Three Hundred Eighty Five and No/100ths Dollars ($17,385.00)) and the June 2004
Lease Improvement Allowance payment (Ten Thousand Five Hundred Seventy Two and 6/100ths Dollars
($10,572.06)), such pro rata amount to be determined based on the number of days between the
Termination Date and June 30, 2004 as compared to thirty (30).

     4.      Lessor hereby agrees that upon the Termination Date, subject to Lessee’s surrender of the
Premises in accordance with the terms of the Lease and this Agreement, including, without
limitation, payment by Lessee to Lessor of the Termination Fee (subject to the credits against such
amount as are set forth in Paragraph 3 hereof), the Lease will be deemed terminated, and, effective
upon the Termination Date and payment of the Termination Fee (subject to the credits against such
amount as are set forth in Paragraph 3 hereof) , Lessee on the one hand, and Lessor on the other
hand, for themselves and their successors and assigns, hereby remise, release and forever discharge
the other party, and their representatives, shareholders, trustees, officers, directors, partners,
affiliates, employees and agents and their respective successors and assigns, from any and all
claims, liabilities, losses, damages, acts,

 

 

demands, grievances, suits, actions, causes of action,
debts, liens, charges, accounts, contracts, agreements, promises, costs or expenses whatsoever, whether at law, or in equity
(individually, a “Claim” or collectively, “Claims”) of any nature whatsoever, known or unknown,
fixed or contingent which Lessee or Lessor or their successors and assigns may have from and after
the Termination Date, arising or accruing from or in any way growing out of, for, upon, or by
reason of, the Lease or any other matter, cause or thing whatsoever; provided, however, the
foregoing release shall not extend to the obligations of either party under this Agreement or to
any claims by third parties against Lessee and/or Lessor arising under the Lease and accruing
prior to the Termination Date.

     5.      Subject to the foregoing, effective as of the Termination Date, Lessor, on the one hand,
and Lessee on the other hand, expressly waive any and all rights conferred upon them by the
provisions of California Civil Code Section 1542 and the provisions of any other applicable laws
restricting the release of claims which the Lessor or Lessee does not know of or suspect to exist
at the time of executing this Agreement, and expressly consents that this Agreement shall be given
full force and effect according to each and all of its express terms and provisions. California
Civil Code Section 1542 provides:

     “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO
EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

     Lessor and Lessee hereby understand and acknowledge the significance and consequences of such
release and specific waiver of California Civil Code Section 1542 and each acknowledges having been
advised by independent legal counsel concerning the same.

     Lessor’s Initials:                               Lessee’s Initials:                     

     IN WITNESS WHEREOF, the parties have executed this Agreement.

	 	 	 	 	 	 	 
	LESSOR:	 	LESSEE:
	 
	 	 	 	 	 	 
	LBA INDUSTRIAL FUND-CANYON, INC.	 	PACIFIC SUNWEAR OF CALIFORNIA, INC.,
	a Delaware corporation	 	a California corporation
	 
	 	 	 	 	 	 
	By:
	 	 	 	By:	 	 
	 
	 	 	 	 
	 
	 	Phil Belling	 	 	 	Carl Womack
	 
	 	President	 	 	 	Sr. Vice President, Chief Financial Officer
	 
	 	 	 	 	 	 
	Date:
	 	 	 	Date:	 	 
	 
	 	 	 	 

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