EXHIBIT 10.9

 

FORM OF SERIES B ADDITIONAL INVESTMENT RIGHT WARRANT

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

 

THE WET SEAL, INC.

 

SERIES B ADDITIONAL INVESTMENT RIGHT WARRANT

 

Series B Additional Investment Right Warrant –No.:                     

Principal Amount of Additional Notes:                     

Date of Issuance:         , 2005 (“Issuance Date”)

 

The Wet Seal, Inc., a Delaware corporation (the “Company”), hereby certifies
that, for value received, the receipt and sufficiency of which are hereby
acknowledged, [S.A.C. CAPITAL ASSOCIATES, LLC][OTHER BUYERS], the registered
holder hereof or its permitted assigns (the “Holder”), is entitled, subject to
the terms set forth below to purchase from the Company, at the Exercise Price
(as defined below) then in effect, at any time or times on or after the date
hereof, but not after 11:59 P.M., New York Time, on the Expiration Date (as
defined below), up to a total of $              1, in principal amount of
Additional Series B Notes (as defined in the Securities Purchase Agreement (as
defined below)). Except as otherwise defined herein, capitalized terms in this
Additional Investment Right Warrant shall have the meanings set forth in Section
12 or in that certain Securities Purchase Agreement, dated as of November 9,
2004, by and among the Company and the buyers referred to therein, including the
Holder (the “Securities Purchase Agreement”). This Series B Additional
Investment Right Warrant (including all Series B Additional Investment Right
Warrants issued in exchange, transfer or replacement hereof, each an “AIR” and
collectively, the “AIRs”) is one of the Additional Investment Right Warrants (as
defined in the Securities Purchase Agreement) issued pursuant to Section 1 of
the Securities Purchase Agreement.

 

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

1 Insert an amount up to the amount set forth opposite such Buyer's name in
column 5 of the Schedule of Buyers set forth in the Securities Purchase
Agreement.

 

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

1. EXERCISE OF AIR.

 

(a) Mechanics of Exercise. Subject to the terms and conditions hereof, this AIR
may be exercised by the Holder hereof in amounts equal to at least 10% of the
Principal Amount of Additional Notes set forth in the heading hereto (or the
entire remaining, unexercised portion of this AIR if less) on any day beginning
after the date hereof and ending on and including the date which is _____ 2 (the
“Expiration Date”), in whole or in part, by (i) delivery of a written notice, in
the form attached hereto as Exhibit A (the “Exercise Notice”), of such Holder’s
election to exercise this AIR and (ii) payment to the Company of an amount equal
to $1.00 for each $1.00 of principal amount of Additional Series B Notes as to
which this AIR is being exercised (the “Exercise Price”) in cash or wire
transfer of immediately available funds. The date the Exercise Notice and the
Exercise Price are delivered to the Company (as determined in accordance with
the notice provisions hereof) is an “Exercise Date.” The Holder of this AIR
shall not be required to deliver the original AIR in order to effect an exercise
hereunder. Execution and delivery of the Exercise Notice with respect to less
than all of the Additional Series B Notes shall have the same effect as
cancellation of the original AIR and issuance of a new AIR evidencing the right
to purchase the remaining principal amount of Additional Series B Notes. On or
before the first Business Day following the Exercise Date, the Company shall
transmit by facsimile an acknowledgment of confirmation of receipt of the
Exercise Notice and the Exercise Price to the Holder hereof. On or before the
third Business Day following the Exercise Date, the Company shall issue and
deliver to the address as specified in the Exercise Notice an Additional Series
B Note, for the account of such Buyer as such Buyer shall instruct, in the
principal amount as to which the Holder of this AIR is entitled pursuant to such
exercise. On the Exercise Date, the Holder of this AIR shall be deemed for all
corporate purposes to have become the Holder of record of the Additional Series
B Note with respect to which this AIR has been exercised, irrespective of the
date of delivery of such Additional Note. Upon surrender of this AIR to the
Company following one or more partial exercises, the Company shall as soon as
practicable and in no event later than three Business Days after receipt of the
AIR and at its own expense, issue a new AIR (in accordance with Section 4(d))
representing the right to purchase the principal amount of Additional Series B
Notes purchasable immediately prior to such exercise under this AIR, less the
principal amount of Additional Series B Notes with respect to which this AIR is
exercised. The Company shall pay any and all taxes which may be payable with
respect to the issuance and delivery of Additional Series B Notes upon exercise
of this AIR.

 

(b) Company’s Failure to Timely Deliver Additional Notes. If the Company shall
fail for any reason or for no reason to issue or cause to be issued to the
Holder within three (3) Business Days of the Exercise Date, Additional Notes,
the Company shall pay as additional damages in cash to such Holder on each day
after such third Business Day that the issuance of such Additional Notes is not
timely effected an amount equal to 1.5% of the principal amount of the
Additional Notes into which this AIR is exercisable.

 

(c) Absolute and Unconditional Obligation. The Company’s obligations to issue
and deliver Additional Notes in accordance with the terms hereof are absolute
and unconditional, irrespective of any action or inaction by the Holder to
enforce the same, the recovery of any judgment against any Person or any action
to enforce the same, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the

 

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

2 Insert for Series B Additional Investment Right Warrants three years from
Issuance Date.

 

- 2 -

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

Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person. Nothing herein shall
limit the Holder’s right to pursue any other remedies available to it hereunder,
at law or in equity, including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to
timely deliver Additional Notes upon exercise of the AIR as required pursuant to
the terms hereof.

 

(d) Forced Exercise By Company.

 

(i) Notwithstanding the foregoing, if at any time from and after the
             3 and prior to the thirty-six month anniversary of the Issuance
Date, the Conditions to Forced Exercise (as defined below) shall have been
satisfied on each day during the period commencing on the Forced Exercise Notice
Date and ending on the Forced Exercise Date (each, as defined below), the
Company shall have the right to require the Holder to exercise all or a portion
of this AIR as designated in the Forced Exercise Notice (as defined below) into
Series B Additional Notes in accordance with Section 1(a) hereof at the Forced
Exercise Price (as defined below) as of the Forced Exercise Date (as defined
below) (a “Forced Exercise”). The Company may exercise its right to require
exercise under this Section 1(d) by delivering within not more than two (2)
Trading Days following the end of the applicable Measuring Period (as defined
below) a written notice thereof by facsimile and overnight courier to all, but
not less than all, of the holders of AIRs and the Transfer Agent (the “Forced
Exercise Notice” and the date all of the holders received such notice by
facsimile is referred to as the “Forced Exercise Notice Date”). The Forced
Exercise Notice shall be irrevocable. The Company shall make a public
announcement with respect to the Forced Exercise Notice on the Forced Exercise
Notice Date. The Forced Exercise Notice shall state (i) the Business Day
selected for the Forced Exercise, which Business Day shall be at least twenty
(20) Business Days but not more than forty (40) Business Days following the
Forced Exercise Notice Date (the “Forced Exercise Date”), and (ii) the amount of
Additional Series B Notes for which such Forced Exercise shall be applicable.
Upon a Forced Exercise, the Holder shall be deemed to have delivered an Exercise
Notice pursuant to Section 1(a) and the Holder shall be deemed to have delivered
the Exercise Delivery Documents as provided in Section 1(a) on the Forced
Exercise Notice Date.

 

(ii) If the Company elects to cause a Forced Exercise of any portion of this AIR
pursuant to Section 1(d)(i), then it must simultaneously take the same action in
the same proportion with respect to the other Series B Additional Investment
Rights Warrants which provide for the Company’s right to a Forced Exercise. If
the Company has elected a Forced Exercise, the mechanics of exercise set forth
in Section 1(a) shall apply, to the extent applicable, as if the Company had
received from the Holder on the Forced Exercise Date the Exercise Delivery
Documents.

 

(iii) For purposes of this Section 1(d), the following definitions shall apply:

 

(A) “Conditions to Forced Exercise” means that each of the following conditions
have been met: (i) on each day during the period beginning three (3)

 

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

3 Insert for Series B Additional Investment Right Warrants twelve months from
Issuance Date.

 

- 3 -

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

months prior to the applicable Forced Exercise Date (such period, the “Measuring
Period”), either (x) the Registration Statement filed pursuant to the
Registration Rights Agreement shall be effective and available for the resale of
all remaining Registrable Securities in accordance with the terms of the
Registration Rights Agreement and there shall not have been any Grace Periods
(each as defined in the Registration Rights Agreement) or (y) all shares of
Common Stock issuable upon conversion of the Series B Additional Notes shall be
eligible for sale under Rule 144(k); (ii) on each day during the Measuring
Period, the Class A Common Stock is designated for quotation on the Principal
Market and shall not have been suspended from trading on such exchange or market
(other than suspensions of not more than one (1) day and occurring prior to the
applicable date of determination due to business announcements by the Company)
nor shall delisting or suspension by such exchange or market been threatened or
pending either (A) in writing by such exchange or market or (B) by falling below
the minimum listing maintenance requirements of such exchange or market; (iii)
during the Measuring Period, the Company shall not have failed to timely make
any payments within five (5) Business Days of when such payment is due pursuant
to any Notes and any other Transaction Documents; (iv) during the Measuring
Period, there shall not have occurred either (A) the public announcement of a
pending, proposed or intended Fundamental Transaction (as defined in the Notes)
which has not been abandoned, terminated or consummated or (B) an Event of
Default under the Notes or an event that with the passage of time or giving of
notice would constitute an Event of Default under the SPA Securities; (v) the
Company shall have no knowledge of any fact that would cause any one of the
following: (vi) the Registration Statements required pursuant to the
Registration Rights Agreement not to be effective and available for the resale
of all remaining Registrable Securities in accordance with the terms of the
Registration Rights Agreement or (y) any shares of Class A Common Stock issuable
upon conversion of the SPA Securities not to be eligible for sale without
restriction pursuant to Rule 144(k) and any applicable state securities laws;
and (vii) the Company otherwise shall have been in material compliance with and
shall not have materially breached any provision, covenant, representation or
warranty of any Transaction Document.

 

2. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company
will not, by amendment of its Certificate of Incorporation or through any
Fundamental Transaction, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this AIR, and will at all times in good faith carry out all the provisions of
this AIR and take all action as may be required to protect the rights of the
Holder of this AIR.

 

3. REISSUANCE OF AIRS.

 

(a) Transfer of AIR. If this AIR is to be transferred, the Holder shall
surrender this AIR to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder of this AIR a new AIR (in accordance
with Section 3(d)), registered as the Holder of this AIR may request,
representing the right to purchase the principal amount of Additional Notes
being transferred by the Holder and, if less then the total number of Additional
Notes then underlying this AIR is being transferred, a new AIR (in accordance
with Section 3(d)) to the Holder of this AIR representing the right to purchase
the principal amount of Additional Notes not being transferred.

 

- 4 -

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

(b) Lost, Stolen or Mutilated AIR. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this AIR, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder of this AIR to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this AIR, the Company shall execute and deliver to the Holder a new AIR (in
accordance with Section 3(d)) representing the right to purchase the principal
amount of Additional Notes then underlying this AIR.

 

(c) AIR Exchangeable for Multiple AIRs. This AIR is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new
AIR or AIR (in accordance with Section 3(d)) representing in the aggregate the
right to purchase the principal amount of Additional Notes then underlying this
AIR, and each such new AIR will represent the right to purchase such principal
amount of such Additional Notes as is designated by the Holder of this AIR at
the time of such surrender.

 

(d) Issuance of New AIR. Whenever the Company is required to issue a new AIR
pursuant to the terms of this AIR, such new AIR (i) shall be of like tenor with
this AIR, (ii) shall represent, as indicated on the face of such new AIR, the
right to purchase the principal amount of Additional Notes then underlying this
AIR (or in the case of a new AIR being issued pursuant to Section 4(a) or
Section 4(c), the principal amount of Additional Notes designated by the Holder
of this AIR which, when added to the principal amount of Additional Notes
underlying the other new AIR issued in connection with such issuance, does not
exceed the principal amount of Additional Notes then underlying this AIR), (iii)
shall have an issuance date, as indicated on the face of such new AIR which is
the same as the Issuance Date, and (iv) shall have the same rights and
conditions as this AIR.

 

4. COVENANTS. Disclosure of Transactions and Other Material Information. On or
before 8:30 a.m., New York Time, on the second Business Day following each
Exercise Date, the Company shall file a Current Report on Form 8-K describing
the terms of the transactions contemplated by the exercise of this AIR in the
form required by the 1934 Act. On the Exercise Date, the Company shall inform
any exercising Holder whether or not the representations and warranties of the
Company set forth in the Securities Purchase Agreement are true and correct as
of such Exercise Date as though made at that time (except for representations
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all respects with the covenants, agreements
and conditions required by the Transaction Documents (as defined in the
Securities Purchase Agreement) to be performed, satisfied or complied with by
the Company at or prior to such Exercise Date.

 

5. NOTICES. Whenever notice is required to be given under this AIR, unless
otherwise provided herein, such notice shall be given in accordance with Section
9(f) of the Securities Purchase Agreement. The Company shall provide the Holder
of this AIR with prompt written notice of all actions taken pursuant to this
AIR, including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder of this AIR at least fifteen days prior to the
date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Stock, (B) with respect to any
grants, issues or sales of any Options (as defined in the Additional Notes),
Convertible Securities (as defined in the

 

- 5 -

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

Additional Notes) or rights to purchase stock, warrants, securities or other
property to Holders of Common Stock or (C) for determining rights to vote with
respect to any Fundamental Transaction, dissolution or liquidation, provided in
each case that such information shall be made known to the public prior to or in
conjunction with such notice being provided to such Holder.

 

6. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of
this AIR may be amended and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, only if the
Company has obtained the written consent of the Required Holders; provided that
no such action may increase the exercise price of any AIRs or decrease the
principal amount of Additional Notes obtainable upon exercise of any AIRs
without the written consent of the Holder of this AIR. No such amendment shall
be effective to the extent that it applies to less than all of the Holders of
the AIRs then outstanding.

 

7. GOVERNING LAW. This AIR shall be construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and
performance of this AIR shall be governed by, the internal laws of the State of
New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York.

 

8. CONSTRUCTION; HEADINGS. This AIR shall be deemed to be jointly drafted by the
Company and the Holder and shall not be construed against any person as the
drafter hereof. The headings of this AIR are for convenience of reference and
shall not form part of, or affect the interpretation of, this AIR.

 

9. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies
provided in this AIR shall be cumulative and in addition to all other remedies
available under this AIR, the Securities Purchase Agreement and the other
Transaction Documents (as defined in the Securities Purchase Agreement), at law
or in equity (including a decree of specific performance and/or other injunctive
relief), and nothing herein shall limit the right of the Holder of this AIR to
pursue actual damages for any failure by the Company to comply with the terms of
this AIR. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder of this AIR and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder of
this AIR shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.

 

10. TRANSFER. This AIR may be offered for sale, sold, transferred or assigned
without the consent of the Company.

 

- 6 -

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

11. CERTAIN DEFINITIONS. For purposes of this AIR, the following terms shall
have the following meanings:

 

(a) “Business Day” means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.

 

(b) “Common Stock” means (i) the Company’s common stock, par value $0.10 per
share, and (ii) any capital stock into which such Common Stock shall have been
changed or any capital stock resulting from a reclassification of such Common
Stock.

 

(c) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.

 

(d) “Registration Rights Agreement” means that certain registration rights
agreement dated as of the Closing Date (as defined in the Securities Purchase
Agreement) by and among the Company and the Purchasers.

 

[Signature Page Follows]

 

- 7 -

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

IN WITNESS WHEREOF, the Company has caused this AIR to be duly executed as of
the Issuance Date set out above.

 

THE WET SEAL, INC. By:        

Name:

   

Title:

 

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

 

EXHIBIT A

 

EXERCISE NOTICE

 

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

ADDITIONAL INVESTMENT RIGHT WARRANTY

 

THE WET SEAL, INC.

 

To: Wet Seal

 

The undersigned is the holder of Series B Additional Investment Right Warrant
No.              (the “AIR”) issued by The Wet Seal, Inc., a Delaware
corporation (the “Company”). Capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth in the AIR.

 

1. The AIR is currently exercisable to purchase a total of $            
principal amount of Additional Series B Notes.

 

2. The undersigned holder hereby exercises its right to purchase $            
principal amount of Additional Series B Notes pursuant to the AIR.

 

3. The holder shall pay the sum of $                                        
     to the Company in accordance with the terms of the AIR.

 

4. Pursuant to this exercise, the Company shall deliver to the holder
$             principal amount of Additional Series B Notes in accordance with
the terms of the AIR.

 

5. Following this exercise, the AIR shall be exercisable to purchase a total of
$             principal amount of Additional Series B Notes.

 

Please issue the Additional Series B Notes in the following name and to the
following address:

 

Issue to:

                  

 

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

Date:                                      ,               

Name of Registered Holder

 

By:

       

Name:

   

Title:

 

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

 

FORM OF ASSIGNMENT

 

[To be completed and signed only upon transfer of AIR]

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
                                                                  the right
represented by the within AIR to purchase $                 principal amount of
Additional Series B Notes of The Wet Seal, Inc. to which the within AIR relates
and appoints                                      attorney to transfer said
right on the books of The Wet Seal, Inc. with full power of substitution in the
premises.

 

Dated:                                     ,         

 

  (Signature must conform in all respects to name of holder as specified on the
face of the AIR)  

Address of Transferee

   

 

In the presence of: