EMPLOYMENT AGREEMENT

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EXHIBIT 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (this "Agreement") is made as of May 22, 2007,

between Sally Frame Kasaks ("Executive") and Pacific Sunwear of California, Inc.

(the "Company").

RECITALS

A. The Company desires that Executive be employed by the Company to

carry out the duties and responsibilities described below, all on the terms and

conditions hereinafter set forth, effective as of June 4, 2007 (the "Effective

Date"), and Executive is willing to accept such employment on such terms and

conditions.

B. This Agreement shall govern the employment relationship between

Executive and the Company from and after the Effective Date and supersedes and

negates all previous agreements and understandings with respect to such

relationship.

AGREEMENT

The parties agree as follows:

1. DUTIES

(a) The Company does hereby hire, engage, and employ Executive as its

Chief Executive Officer for the Term (as defined in Section 2). Executive does

hereby accept and agree to such hiring, engagement, and employment. Executive

shall serve the Company in such position in conformity with the provisions of

this Agreement and the general direction of the Board of Directors of the

Company (the "Board"). Executive shall have duties and authority consistent with

Executive's position as Chief Executive Officer. Subject to her election to the

Board from time to time, Executive shall continue to serve on the Board as its

Chairperson during her employment hereunder; provided, however, that the Board

may appoint an independent non-executive Chairperson if the Board determines in

good faith (after consultation with Executive) such appointment is required by

law or reasonably necessary for corporate governance purposes. Executive shall

not receive additional compensation for such Board service.

(b) Throughout her employment, Executive shall devote her time, energy,

and skill to the performance of her duties for the Company, vacations and other

leave authorized under this Agreement excepted. During her employment hereunder,

and except for her service on the board of directors of The Children's Place,

Inc. ("TCPI") (on which Executive may continue to serve so long as such service

does not materially interfere with Executive's performance of her duties for the

Company), Executive shall not serve on the board of any other publicly traded

company without first receiving the written consent of the Board. In the event

that Executive ceases to serve on the board of directors of TCPI, the Board

shall not unreasonably withhold its consent to Executive serving on another

board of a public company that does not compete with the Company. The foregoing

notwithstanding, Executive shall be permitted to continue to serve on the board

of directors of Crane and Company, to engage in charitable, civic, educational,

professional, industry and community affairs, to serve on the boards of

directors of non-profit

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organizations, and to manage Executive's passive personal investments, provided

that such activities do not materially interfere with the performance of

Executive's duties hereunder.

(c) Executive hereby represents to the Company that she has forwarded to

the Company a copy of her prior agreement with Ann Taylor Stores Corporation

dated February 1, 1994 (the "Ann Taylor Agreement"). Executive here represents

to the Company that, other than the Ann Taylor Agreement, she is not subject to

any employment, confidentiality, trade secret or similar agreement which

reasonably could interfere with the performance of her duties for the Company.

2. TERM

The term of employment under this Agreement (the "Term") shall commence

on the Effective Date and shall terminate on the last day of the fiscal year

ending on or about January 31, 2010 (the "Termination Date"). Notwithstanding

the foregoing, the Term is subject to earlier termination as provided below in

this Agreement.

3. COMPENSATION

(a) Base Salary. Executive's base salary as increased from time to time

(the "Base Salary") shall be paid in accordance with the Company's regular

payroll practices in effect from time to time, but not less frequently than in

monthly installments. Executive's Base Salary shall initially be at an

annualized rate of One Million Two Hundred Fifty Thousand Dollars ($1,250,000).

Executive will be eligible for an annual performance and salary review (with the

first such review to occur following the conclusion of the Company's fiscal year

ending on or about January 31, 2008), with any corresponding increase in

Executive's Base Salary to be determined by the Compensation Committee of the

Board (the "Compensation Committee"), which will consider such increase in good

faith and with consideration of the performance of Executive and the Company

during the just-concluded fiscal year. In no event, however, shall Executive's

Base Salary be reduced from its then-current level at any time.

(b) Annual Bonus. For each fiscal year of the Company that ends during

the Term, Executive will be eligible to participate in and receive a bonus under

the Company's annual bonus plan (the "Annual Bonus"). Executive's target Annual

Bonus will be 100% of Base Salary with a maximum Annual Bonus of 200% of Base

Salary if the Company reaches its established stretch target for the applicable

fiscal year; provided, however, that Executive's Annual Bonus with respect to

the fiscal year ending on or about January 31, 2008 shall not be less than Five

Hundred Thousand Dollars ($500,000). The Annual Bonus amount shall be determined

by the Company's Compensation Committee based upon the Company's achievement of

financial performance criteria to be established each fiscal year by the

Compensation Committee. The Annual Bonus payment, if any, shall be made in or

around April of the fiscal year following the fiscal year for which the bonus is

earned, provided that in all events (except as provided in Sections 5(b), 6(b)

and Section 7, or upon termination on or after the Termination Date) Executive

must be employed by the Company through the date on which the bonus is paid in

order to be eligible to receive any payment of the bonus.

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(c) Sign-on Bonus. In consideration for Executive's entering into this

Agreement, Executive shall be entitled to a bonus payment in the amount of Four

Hundred Thousand Dollars ($400,000), such payment to be made in cash in a lump

sum within ten (10) business days following the Effective Date.

(d) Equity Compensation. The Compensation Committee has approved the

grant to Executive of the following awards under the Company's 2005 Performance

Incentive Plan (the "Plan"):

(1) An award of stock appreciation rights ("SARs") with

respect to 250,000 shares of the Company's common stock,

such award to be effective as of May 24, 2007 (the

"Grant Date"). The per share base price of such SARs to

be the closing market price of a share of the Company's

common stock on the Grant Date. The expiration date of

such SARs will be the day before the seventh anniversary

of the Grant Date (subject to earlier termination as

provided in the applicable award agreement). Such SARs

will vest and become exercisable in three substantially

equal installments on January 31, 2008, January 31,

2009, and January 31, 2010, in each case subject to

Executive's employment by the Company through that date,

and such award will be evidenced by a stock appreciation

rights agreement in the form attached hereto as Exhibit

A and be subject to such other terms as are provided

therein and in the Plan. Notwithstanding the foregoing,

(x) upon Executive's termination of employment by the

Company without Cause or by Executive for Good Reason,

the SARs granted to Executive pursuant to this Section

3(d), to the extent unvested as of the date of such

termination, shall become fully vested on the date of

such termination, and shall remain exercisable for a

period of two years following the date of such

termination (subject, however, to earlier termination on

the original expiration date of the SAR grant or as

provided in Section 7.4 of the Plan); and (y) if

Executive continues to be employed by or provide

services to the Company through the Termination Date,

the SARs granted to Executive pursuant to this Section

3(d), to the extent outstanding and vested as of the

date of termination of Executive's employment or

services for any reason (other than a termination by the

Company for Cause), shall remain exercisable for a

period of two years following the date of such

termination (subject, however, to earlier termination on

the original expiration date of the SAR grant or as

provided in Section 7.4 of the Plan); and

(2) An award of 100,000 restricted stock units ("RSUs")

effective as of the Grant Date, such RSUs to vest on

January 31, 2010, subject (except as provided in Section

6(b)) to Executive's employment by the Company through

that date, and to be paid, no later than seventy five

(75) days after the vesting date, in an equal number of

shares of the Company's common stock. Notwithstanding

the foregoing, upon Executive's termination of

employment by the Company without Cause or by Executive

for Good Reason, the RSUs granted to Executive pursuant

to this Section 3(d), to

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the extent unvested as of the date of such termination,

shall become fully vested on the date of such

termination, and be paid, subject to Section 29(c)

hereof, as soon as practicable after the vesting date,

in an equal number of shares of the Company's common

stock. Such award will be evidenced by a restricted

stock unit award agreement in the form attached hereto

as Exhibit B and be subject to such other terms as are

provided therein and in the Plan.

During the Term, Executive shall be eligible to participate in, and

receive additional grants commensurate with her position under, the Company's

equity compensation plans. The parties anticipate that Executive will receive

additional equity-based awards in future years; provided, however, that the

amount, timing, and other terms of any future grant shall be determined by the

Board (or the Compensation Committee) in its good-faith discretion. Without

limiting the generality of the foregoing, the parties anticipate that future

annual award grants would be at lower levels than the foregoing grants being

made in connection with this Agreement and that nothing in this Section 3(d)

constitutes a commitment by the Company to make any future grants of RSUs to

Executive.

4. BENEFITS

(a) Health, Welfare And Pension. During the Term, Executive shall be

entitled to participate, on no less favorable terms than those generally

applicable to other senior executives of the Company, 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. Without limiting the

generality of the foregoing, during the Term, the Company shall provide term

life insurance for Executive in a face amount of $2,000,000, subject to all

necessary medical information and qualifying tests as are required by the

insurance provider in order to secure such coverage.

(b) Vacation And Other Leave. During the Term, Executive shall receive

five (5) weeks paid vacation per year. 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 the Term, the Company shall, pursuant

to the Company's expense reimbursement policies, promptly reimburse Executive

for reasonable expenses incurred in connection with the performance of her

duties for the Company.

(d) Automobile Allowance. During the Term, Executive shall be paid a car

allowance in the gross amount of $12,000 per year, paid on a bi-weekly basis. In

addition, the Company shall reimburse Executive for costs associated with gas,

auto repairs, auto maintenance and auto insurance.

(e) Ann Taylor Annuity Offset. The parties acknowledge that Executive is

currently receiving a supplemental retirement benefit, in the amount of One

Hundred Forty-Nine

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Thousand, Seven Hundred Twenty-Two and 44/100 Dollars ($149,722.44) payable each

year for the remainder of her life (with survivor benefits for her spouse), in

connection with her previous employment with Ann Taylor Stores Corporation ("Ann

Taylor"), as provided in the Ann Taylor Agreement. Executive had requested a

consent from Ann Taylor to her employment by the Company pursuant to the

procedures for Ann Taylor not to unreasonably withhold consent to certain

employment by Executive and not to have such employment cause ceasing of payment

of the benefit from Ann Taylor, although neither Executive nor the Company

acknowledge that any such consent was or is necessary. To the extent that Ann

Taylor ceases to pay all or any portion of the supplemental retirement benefit

to Executive (and/or her spouse) as a result of Executive's employment with the

Company, the Company agrees to pay Executive (or her beneficiaries) the amount

of such benefit (or, in the event such benefit is reduced, the amount of such

reduction) on substantially the same schedule and terms as the benefit would

have otherwise been paid by Ann Taylor (subject to the Company's withholding

obligations with respect to such payment), plus a lump-sum amount payable prior

to the end of calendar year 2007 in an amount equal to the FICA taxes Executive

has to pay on the amount payable to her by the Company under this Section 4(e)

as a replacement for the amount forfeited to Ann Taylor, fully grossed up so

that Executive has no after-tax cost therefor. The Company shall have such right

against Ann Taylor as Executive has and Executive shall have no obligation to

pursue any action against Ann Taylor (but shall cooperate with the Company in

any action it pursues). Notwithstanding the foregoing, if an event that

constitutes a change in ownership or effective control of the Company (within

the meaning of Section 409A of the Code and regulations and other guidance of

the Internal Revenue Service promulgated thereunder) occurs, a lump sum shall be

paid to Executive or her spouse, as the case may be, equal to the actuarial

equivalent (using such factors as would be used by the PBGC to value such

amounts) within thirty (30) days thereafter.

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 her customary duties pursuant to this

Agreement, even with a reasonable accommodation, and the continuation of such

disabled condition for a period of one hundred eighty (180) continuous days, or

for not less than two hundred ten (210) days during any continuous twenty-four

(24) month period.

(b) Termination Due To Death Or Disability. If Executive dies during the

Term, Executive's employment shall automatically cease and terminate as of the

date of Executive's death. If Executive becomes Disabled during the Term, the

Company may terminate Executive's employment upon thirty (30) days notice to

Executive. In the event of the termination of employment hereunder due to

Executive's death or Disability, Executive or her 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 accrued but unused vacation time in accordance with

Company policy;

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(ii) a payment equal to any earned but unpaid Annual Bonus in

respect of the most recently completed fiscal year

preceding Executive's termination of employment

hereunder payable at the same time bonuses are paid for

such completed fiscal year to other senior executives of

the Company, but in no event later than 75 days

following the end of such completed fiscal year.

(iii) a "Pro Rata Portion of the Bonus," meaning an amount

equal to any Annual Bonus to which Executive would have

been entitled had Executive remained an employee for the

balance of the Company's fiscal year in which her

employment terminated multiplied by a fraction, the

numerator of which is the number of days from February 1

of such fiscal year through the date of Executive's

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 at the same time bonuses

are paid for the fiscal year of termination to other

senior executives of the Company, but within the first

75 days following the end of such fiscal year.

(iv) such employee benefits, if any, to which Executive may

be entitled under the employee benefit plans and

arrangements of the Company; and

(v) continued payment of any benefit being provided to

Executive pursuant to Section 4(e); and

(vi) reimbursement of any expenses incurred by Executive

during the Term that are reimburseable by the Company in

accordance with Section 4(c) (the amounts described in

clauses 5(b)(i) through (vi) are collectively referred

to herein as the "Accrued Obligations").

6. TERMINATION BY THE COMPANY

(a) Termination For Cause. The Company may, by providing written notice

to Executive, terminate the Term 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 (other than good

faith expense account disputes or de minimis amounts);

or

(iv) Executive's bad faith refusal to (A) perform the duties

of Chief Executive Officer, or (B) follow the lawful

orders of the Board; or

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(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.

Any determination of Cause by the Company will be made by a resolution

approved by a majority of the members of the Board, provided that no such

determination may be made until Executive has been given written notice

detailing the specific Cause event and a period of thirty (30) days following

receipt of such notice to cure such event (if susceptible to cure), and, if such

event is not curable or is not cured, a reasonable opportunity to appear before

the full Board with legal counsel to discuss the specific circumstances alleged

to constitute a Cause event. Subject to Executive's right to cure and/or appear

before the Board, if Executive's employment is terminated for Cause, the

termination shall take effect on the effective date of such termination as

specified in the written notice of such termination delivered 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 payment of the Accrued Obligations (excluding the Pro Rata Portion of

the Bonus and any obligation to Executive pursuant to Section 4(e)) and the

Company shall have no further obligation to Executive pursuant to this

Agreement.

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. Such

notice shall specify the effective date of the termination of Executive's

employment. 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;

(ii) subject to the provisions of Section 29(c), continued

payment of Executive's Base Salary, in the Company's

normal payroll cycle for the greater of (x) twelve (12)

months and (y) the remainder of the Term;

(iii) with respect to the SARs and RSUs granted to Executive

by the Company pursuant to Section 3(d) hereof, the

accelerated vesting and, in the case of the SARs,

post-termination exercise period as provided therein and

as set forth in the applicable award agreements; and

(iv) (A) with respect to any SARs that may be granted

hereafter to Executive by the Company, to the extent any

such SARs are outstanding and

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unvested as of the date of Executive's termination, full

acceleration of vesting of such SARs and a period of two

years in which to exercise such SARs following

Executive's termination (subject to earlier termination

on the expiration date of such SARs or in connection

with certain corporate transactions as provided in the

applicable award agreement or in the equity compensation

plan under which the SARs are awarded); and (B) with

respect to any RSUs that may be granted hereafter to

Executive by the Company, to the extent any such RSUs

are outstanding and unvested as of the date of

Executive's termination, prorated vesting of such

outstanding and unvested RSUs (or, in the case of an RSU

grant that vests in more than one installment, prorated

vesting of the outstanding and unvested RSUs scheduled

to vest on the next scheduled vesting date following the

date of Executive's termination) based on the total

number of days Executive is employed by the Company

during the