EXHIBIT 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”), is entered into as of
April 29, 2005, by and among The Wet Seal, Inc., a Delaware corporation (the
“Company”) and the buyers listed on the Schedule of Buyers attached hereto as
Exhibit A (each, a “Buyer” and, collectively, the “Buyers”).

 

THE PARTIES TO THIS AGREEMENT enter into this agreement on the basis of the
following facts, intentions and understanding:

 

A. The Company and the Buyers entered into that certain Securities Purchase
Agreement, dated as of April 29, 2005 (the “Securities Purchase Agreement”),
and, upon the terms and subject to the conditions of the Securities Purchase
Agreement, the Company has agreed to issue and sell to the Buyers an aggregate
of (i) Twenty-Four Thousand Six Hundred (24,600) shares of the Company’s Series
C Convertible Preferred Stock, $0.01 par value (the “Preferred Shares”), issued
pursuant to the Company’s Certificate of Designations, Preferences and Rights of
Series C Convertible Preferred Stock (the “Certificate of Designations”) related
thereto, which shall be convertible into shares of Class A Common Stock of the
Company (as converted, collectively, the “Conversion Shares”), $0.10 par value
per share (the “Common Stock”), and (ii) Warrants (as the same may be amended,
modified or supplemented from time to time in accordance with the terms thereof,
the “Warrants”) to purchase in the aggregate up to seven million five hundred
thousand (7,500,000) shares of Common Stock (as exercised, collectively, the
“Warrant Shares”).

 

B. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights to the
Buyers under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
“1933 Act”), and applicable state securities laws.

 

NOW, THEREFORE, in consideration of the promises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the Buyers
hereby agree as follows:

 

Section 1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:

 

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

 

“Commission” means the Securities and Exchange Commission.

 

“Investor” means each Buyer and any transferee or assignee thereof to

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whom a Buyer assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9 of this
Agreement, and any subsequent transferee or assignee thereof to whom a
transferee or assignee assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with Section 9 of
this Agreement.

 

“Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization or
association and governmental or any department or agency thereof.

 

“register,” “registered,” and “registration” means a registration effected by
preparing and filing one or more Registration Statements (as defined below) in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous or delayed
basis (“Rule 415”), and the declaration or ordering of effectiveness of such
Registration Statements by the Commission.

 

“Registrable Securities” means (i) the Conversion Shares issued or issuable upon
conversion of the Preferred Shares, (ii) the Warrant Shares issued or issuable
upon exercise of the Warrants, (iii) any shares of capital stock issued or
issuable with respect to securities referenced in the preceding clause, as a
result of any stock split, stock dividend, recapitalization, exchange or similar
event or otherwise, without regard to any limitations on conversions of the
Preferred Shares or exercise of the Warrants, (iv) any shares of capital stock
of any entity issued in respect of the capital stock referenced in the
immediately preceding clauses as a result of a merger, consolidation, sale of
assets, sale or exchange of capital stock or other similar transaction;
provided, that any Registrable Securities that have been sold pursuant to a
Registration Statement or Rule 144 promulgated under the 1933 Act shall no
longer be Registrable Securities.

 

“Registration Statement” means a registration statement or registration
statements of the Company filed under the 1933 Act and covering all of the
Registrable Securities.

 

Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.

 

Section 2. Registration.

 

(a) Mandatory Registration. The Company shall use its best efforts to prepare
and, as soon as practicable but in no event later than 30 calendar days after
the Closing Date (as defined in the Securities Purchase Agreement) “(the “Filing
Deadline”), file with the Commission a Registration Statement on Form S-3
covering the resale of all of the Registrable Securities. In the event that Form
S-3 is unavailable for such a registration, the Company shall use such other
form as is available for such a registration, subject to the provisions of
Section 2(d) of this Agreement. The Registration Statement prepared pursuant
hereto shall register the Registrable Securities for resale, including at least
130% of the number of shares of Common Stock issuable upon conversion of the

 

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Preferred Shares and exercise of the Warrants by the Investors from time to time
in accordance with the methods of distribution elected by such Investors or such
other amount as required by Section 4(e) of the Securities Purchase Agreement.
The Registration Statement shall contain (except if otherwise directed by the
holders of at least a majority of the Registrable Securities) the “Selling
Securityholders” and “Plan of Distribution” sections in substantially the form
attached hereto as Exhibit B. The Company shall use reasonable efforts to have
the Registration Statement declared effective by the Commission as soon as
practicable, but not later than 90 calendar days (or in the event the Commission
reviews the Registration Statement and requires the Company to make
modifications thereto, 120 calendar days) after the Closing Date (the
“Effectiveness Deadline”).

 

(b) Allocation of Conversion Shares and Warrant Shares. The initial number of
Conversion Shares and Warrant Shares included in any Registration Statement and
each increase in the number thereof included therein shall be allocated pro rata
among the Investors based on the number of Registrable Securities held by each
Investor at the time the Registration Statement covering such initial number of
Registrable Securities or increase thereof is declared effective by the
Commission. In the event that an Investor sells or otherwise transfers any of
such Investor’s Registrable Securities, each transferee shall be allocated the
portion of the then remaining number of the applicable Registrable Securities
included in such Registration Statement allocable to the transferor. Other than
the securities covered by the Existing RRA (as defined in the Securities
Purchase Agreement), which the Holders hereby consent to be included in this
Registration Statement, in no event shall the Company include any securities
other than Registrable Securities on any Registration Statement without the
prior written consent of the Investors holding at least a majority in interest
of the applicable Registrable Securities, determined as if all of the Preferred
Shares held by Investors then outstanding had been converted into Conversion
Shares and all Warrants then outstanding had been exercised for Warrant Shares
without regard to any limitations on conversion of the Preferred Shares or
exercise of the Warrants (the “Required Holders”). To the extent that the
registration statement required pursuant to the terms of the Existing RRA (the
“Existing RRA Registration Statement”) is filed, but not declared effective,
prior to the Registration Statement required hereunder, the Holders hereby
consent to the inclusion of the Registrable Securities hereunder in the Existing
RRA Registration Statement.

 

(c) Legal Counsel. Subject to Section 5 of this Agreement, the Required Holders
in interest of the Registrable Securities shall have the right to select one
legal counsel to review and comment upon any registration pursuant to this
Agreement (the “Legal Counsel”), which the Investors agree shall be Schulte Roth
& Zabel LLP or such other counsel as thereafter designated in writing by the
Required Holders. Schulte Roth & Zabel LLP, or any other counsel designated in
writing by the Required Holders, shall not represent any Investor that sends
such counsel written notice that such Investor does not wish such counsel to
represent it in connection with the matters discussed in this Section 2(c). The
Investors, other than any Investor that delivers the notice discussed in the
preceding sentence, hereby waive any conflict of interest or potential conflict
of interest that may arise as a result of the representation of such Investors
by Schulte Roth & Zabel LLP in connection with the subject matter of this
Agreement. This provision will not prohibit any other counsel to an Investor
from reviewing and commenting on any registration filed pursuant to this
Agreement at no cost to the Company.

 

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(d) Ineligibility for Form S-3. If Form S-3 is not available for the
registration of the resale of the Registrable Securities hereunder or the
Company is not permitted by the 1933 Act or the Commission to use Form S-3, then
the Company shall (i) register the resale of the Registrable Securities on
another appropriate form reasonably acceptable to the Required Holders and (ii)
undertake to register the Registrable Securities on Form S-3 as soon as such
form is available; provided, however, that the Company shall maintain the
effectiveness of the Registration Statement then in effect until such time as a
Registration Statement on Form S-3 covering all of the Registrable Securities
has been declared effective by the Commission or, if earlier, until the end of
the Registration Period (as defined in Section 3(a).

 

(e) Sufficient Number of Shares Registered. In the event the number of shares
registered under a Registration Statement filed pursuant to Section 2(a) of this
Agreement is insufficient to cover all of the Conversion Shares and Warrant
Shares or all of an Investor’s allocated portion of the Conversion Shares and
Warrant Shares pursuant to Section 2(b) of this Agreement, the Company shall
amend the Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover at least
one hundred thirty percent (130%) of the number of such Conversion Shares and
Warrant Shares as of the trading day immediately preceding the date of the
filing of such amendment and/or new Registration Statement, in each case, as
soon as practicable, but in no event later than fifteen (15) days after the
necessity therefor arises. The Company shall use its reasonable efforts to cause
such amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof. The calculation of the number of
shares sufficient to cover all of the Conversion Shares and Warrant Shares shall
be made without regard to any limitations on the conversion of the Preferred
Shares or the exercise of the Warrants, and such calculation shall assume that
all of the Preferred Shares and all of the Warrants are then exercisable for,
shares of Common Stock at the then prevailing Conversion Rate (as defined in the
Certificate of Designations) or Warrant Exercise Price (as defined in the
Warrants), as applicable.

 

(f) Effect of Failure to File and Obtain and Maintain Effectiveness of
Registration Statement. Subject to any elections made pursuant to Section 4(b),
if (i) a Registration Statement covering all the Registrable Securities is not
filed with the Commission on or before the Filing Deadline or is not declared
effective by the Commission on or before the Effectiveness Deadline, (ii) a
Registration Statement covering all of the Registrable Securities required to be
covered thereby, as described in Section 2(e) of this Agreement, is not filed
with the Commission on or before the deadline described in Section 2(e) of this
Agreement or is not declared effective by the Commission on or before the
deadline described in Section 2(e) of this Agreement, (iii) on any day after
such Registration Statement has been declared effective by the Commission, sales
of all of the Registrable Securities required to be included on such
Registration Statement cannot be made as a matter of law (other than during an
Allowable Grace Period (as defined in Section 3(n) of this Agreement) pursuant
to such

 

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Registration Statement (including, without limitation, because of a failure to
keep such Registration Statement effective, to disclose such information as is
necessary for sales to be made pursuant to such Registration Statement or to
register a sufficient number of shares of Common Stock but excluding failures
caused solely by a breach of the applicable Investor’s obligations hereunder),
or (iv) a Grace Period (as defined in Section 3(n) of this Agreement) exceeds
the length of an Allowable Grace Period (each of the items described in clauses
(i), (ii), (iii) and (iv) above shall be referred to as a “Registration Delay”),
then, as partial relief for the damages to any holder by reason of any such
delay in or reduction of its ability to sell the underlying shares of Common
Stock (which remedy shall not be exclusive of any other remedies available at
law or in equity) the Company shall pay on the occurrence of each Registration
Delay and every thirtieth day (pro rated for periods totaling less than thirty
days) thereafter until such Registration Delay is cured, (1) to each holder of
the Preferred Shares an amount in cash equal to the product of (i) the initial
principal amount paid for the Preferred Shares held by such holder or the
related Conversion Shares multiplied by (ii) two percent (2%) and (2) to each
holder of the Warrants or Warrant Shares an amount in cash equal to the product
of (i) the Exercise Price for such Warrant or the related Warrant Shares
multiplied by (ii) two percent (2%). The payments to which a holder shall be
entitled pursuant to this Section 2(f) are referred to herein as “Registration
Delay Payments.” The Registration Delay Payments shall be paid in cash on the
earlier of (A) the last day of the calendar month during which such Registration
Delay Payments are incurred and (B) the third Business Day after the event or
failure giving rise to the Registration Delay Payments is cured. In the event
the Company fails to make Registration Delay Payments in a timely manner, such
Registration Delay Payments shall bear interest at the rate of one and
two-tenths percent (1.2%) per month (prorated for partial months) until paid in
full; provided that, so long as the Senior Credit Facility (as defined in the
Securities Purchase Agreement) remains outstanding, each of the Buyers hereby
acknowledges, covenants and agrees that such Buyer will not demand or accept,
and the Company will not be obligated to make, any payment (each a “Delay Fee”)
(whether in whole or in part) required to be made pursuant to this Section 2(f),
Section 2(d)(v) of the Company’s Certificate of Designations (regarding the
Company’s obligation to make payments in the event of its failure to timely
convert the Preferred Shares) and Section 1(c) of the Warrants (regarding the
Company’s obligation to make payments in the event of its failure to timely
deliver securities upon exercise of the Warrants), which would, in the aggregate
of all of the aforementioned payments made to all Buyers, exceed $250,000 in the
aggregate in any calendar year (the “Delay Fee Cap”). Each Buyer agrees that, so
long as the Senior Credit Facility (as defined in the Securities Purchase
Agreement) is outstanding, (i) such Buyer does not have any rights to, and shall
not accept or demand any, Delay Fees in excess of its pro rata share of the
Delay Fee Cap and (ii) to the extent any amounts are received with respect to
the Delay Fees by such Buyer from the Company in excess of such Buyer’s pro rata
share of the Delay Fee Cap, such Buyer shall promptly forward an amount equal to
such excess in immediately available funds to the Administrative Agent (as
defined in the Senior Credit Facility) at such account as the Administrative
Agent shall designate from time to time.

 

Section 3. Related Obligations. At such time as the Company is obligated to file
a Registration Statement with the Commission pursuant to Section 2(a),

 

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2(d) or 2(e) of this Agreement, the Company will use reasonable efforts to
effect the registration of all of the Registrable Securities in accordance with
the intended method of disposition thereof and, pursuant thereto, the Company
shall have the following obligations:

 

(a) The Company shall promptly prepare and file with the Commission a
Registration Statement with respect to all of the Registrable Securities (but in
no event later than the applicable Filing Deadline) and use reasonable efforts
to cause such Registration Statement relating to all of the Registrable
Securities required to be covered thereby to become effective as soon as
practicable after such filing (but in no event later than the applicable
Effectiveness Deadline). The Company shall submit to the SEC, within two (2)
Business Days after the Company learns that no review of a particular
Registration Statement will be made by the staff of the SEC or that the staff
has no further comments on a particular Registration Statement, as the case may
be, a request for acceleration of effectiveness of such Registration Statement
to a time and date not later than 48 hours after the submission of such request.
The Company shall, subject to the terms of this Agreement, keep each
Registration Statement effective pursuant to Rule 415 at all times during the
period from the date it is initially declared effective until the earliest of
(i) the second anniversary of the date such Registration Statement is filed,
(ii) the date as of which all of the Investors (other than any Investors who are
“affiliates” of the Company as such term is used in Rule 144(k) promulgated
under the 1933 Act) may sell all of the Registrable Securities without
restriction pursuant to Rule 144(k) (or the successor rule thereto) promulgated
under the 1933 Act or (iii) the date on which all of the Investors shall have
sold all of the Registrable Securities (the “Registration Period”), which
Registration Statement, as of its filing and effective dates and each day
thereafter (including all amendments or supplements thereto, as of their
respective filing and effective dates and each day thereafter), shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, not
misleading, and the prospectus contained in such Registration Statement, as of
its filing date and each day thereafter (including all amendments and
supplements thereto, as of their respective filing dates and each day
thereafter), shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated thereon, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.

 

(b) Subject to Section 3(n) of this Agreement, the Company shall prepare and
file with the Commission such amendments (including post-effective amendments)
and supplements to the Registration Statement and the prospectus used in
connection with such Registration Statement, which prospectus is to be filed
pursuant to Rule 424 (or any successor rule thereto) promulgated under the 1933
Act, as may be necessary to keep such Registration Statement effective at all
times during the Registration Period, and, during such period, comply with the
provisions of the 1933 Act. In the case of amendments and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the Company filing a
report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the
Securities Exchange Act of 1934, as amended, and the rules and regulations

 

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thereunder, or any similar successor statute (the “1934 Act”), the Company shall
have incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the Commission on
the same day on which the 1934 Act report is filed which created the requirement
for the Company to amend or supplement such Registration Statement and
prospectus.

 

(c) The Company shall permit Legal Counsel, or if no Legal Counsel shall have
been chosen by the Investors, the Investors, to review and provide written
comment upon each Registration Statement, prospectus and all amendments and
supplements thereto at least three (3) Business Days prior to their filing with
the Commission. The Company shall furnish to the Investors and Legal Counsel,
without charge, (i) promptly after receipt of such correspondence, copies of all
correspondence from the Commission or the staff of the Commission to the Company
or its representatives relating to each Registration Statement, prospectus and
all amendments and supplements thereto, (ii) promptly after the same is prepared
and filed with the Commission, one (1) copy of each Registration Statement,
prospectus and all amendments and supplements thereto, including all exhibits
and financial statements related thereto, and (iii) promptly upon the
effectiveness of each Registration Statement and each amendment and supplement
thereto, one (1) copy of the prospectus included in each such Registration
Statement and all amendments and supplements thereto. The Company agrees that it
will, and it will cause its counsel to, consider in good faith any comments or
objections from Legal Counsel, or if no Legal Counsel shall have been selected,
the Investors, as to the form or content of each Registration Statement,
prospectus and all amendments or supplements thereto or any request for
acceleration of the effectiveness of each Registration Statement, prospectus and
all amendments or supplements thereto.

 

(d) [Intentionally omitted].

 

(e) Subject to Section 3(n) of this Agreement, and excluding any Registrable
Shares held by Investors electing to exclude their Registrable Shares from the
Registration Statement under Section 4(b), the Company shall use reasonable
efforts to (i) promptly register and qualify, unless an exemption from
registration and qualification applies, the resale of the Registrable Securities
under such other securities or “blue sky” laws of all applicable jurisdictions
in the United States as any holder of Registrable Shares reasonably requests in
writing, (ii) promptly prepare and file in those jurisdictions, such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) promptly take such other actions as may be
reasonably necessary to maintain such registrations and qualifications in effect
at all times during the Registration Period, and (iv) promptly take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to file a general
consent to service of process in any such jurisdiction, except in such
jurisdictions where the Company is subject to service of process. The Company
shall promptly notify each Investor who holds Registrable Securities and Legal
Counsel of the receipt by the Company of any notification with respect to the
suspension

 

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of the registration or qualification of any of the Registrable Securities for
sale under the securities or “blue sky” laws of any jurisdiction in the United
States or its receipt of notice of the initiation or threatening of any
proceeding for such purpose.

 

(f) Notwithstanding anything to the contrary set forth herein, as promptly as
practicable after becoming aware of such event, the Company shall notify each
Investor and Legal Counsel in writing of the happening of any event as a result
of which (i) the Registration Statement or any amendment or supplement thereto,
as then in effect, includes an untrue statement of a material fact or omission
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) the prospectus related to such
Registration Statement or any amendment or supplement thereto includes an untrue
statement of a material fact or omission to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and, subject to
Section 3(n) of this Agreement, promptly prepare a supplement or amendment to
such Registration Statement and prospectus to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to
each Investor and Legal Counsel as such Investor or Legal Counsel may reasonably
request. The Company shall also promptly notify each Investor and Legal Counsel
in writing (i) when a prospectus and each prospectus supplement or amendment
thereto has been filed, and when a Registration Statement and each amendment
(including post-effective amendments) and supplement thereto has been declared
effective by the Commission (notification of such effectiveness shall be
delivered to each Investor and Legal Counsel by facsimile on the same day of
such effectiveness and by overnight mail), (ii) of any request by the Commission
for amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company’s reasonable determination that
an amendment (including any post-effective amendment) or supplement to a
Registration Statement or prospectus would be appropriate (subject to Section
3(n) hereof).

 

(g) Subject to Section 3(n) of this Agreement, the Company shall use reasonable
efforts to (i) prevent the issuance of any stop order or other suspension of
effectiveness of a Registration Statement, or the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction,
(ii) if such an order or suspension is issued, obtain the withdrawal of such
order or suspension at the earliest practicable moment and notify each holder of
Registrable Securities and Legal Counsel of the issuance of such order and the
resolution thereof or its receipt of notice of the initiation or threat of any
proceeding for such purpose.

 

(h) The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with United States federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, prospectus
or any amendment or supplement thereto, (iii) the release of such information is
ordered pursuant to a subpoena or other final, non-appealable order from a court
or governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public

 

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other than by disclosure in violation of this Agreement or any other agreement.
The Company agrees that it shall, upon learning that disclosure of such
information concerning an Investor is sought in or by a court or governmental
body of competent jurisdiction or through other means, unless ordered or
requested by the Commission or other governmental authority not to do so, give
prompt written notice to such Investor and allow such Investor, at the
Investor’s expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.

 

(i) The Company shall use reasonable efforts to cause all the Conversion Shares
and Warrant Shares to be listed on each securities exchange on which securities
of the same class or series issued by the Company are then listed, if any, if
the listing of such Conversion Shares and Warrant Shares is then permitted under
the rules of such exchange. The Company shall pay all fees and expenses in
connection with satisfying its obligation under this Section 3(i).

 

(j) In connection with any sale or transfer of Registrable Securities pursuant
to a Registration Statement, the Company shall cooperate with the Investors who
hold Registrable Securities being offered and, to the extent applicable,
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Investors may reasonably
request and, registered in such names as the Investors may request.

 

(k) If requested by an Investor, the Company shall (i) as soon as practicable,
incorporate in each prospectus supplement or post-effective amendment to the
Registration Statement such information as an Investor provides in writing and
reasonably requests to be included therein relating to the sale and distribution
of the Registrable Securities, and (ii) as soon as practicable, make all
required filings of such prospectus supplement or post-effective amendment after
being notified of the matters to be incorporated in such prospectus supplement
or post-effective amendment.

 

(l) The Company shall comply with all applicable rules and regulations of the
Commission in connection with any registration hereunder.

 

(m) Within two (2) Business Days after a Registration Statement is ordered
effective by the Commission the Company will so notify the transfer agent for
the Registrable Securities and the Investors whose Registrable Securities are
included in the Registration Statement.

 

(n) Notwithstanding anything to the contrary herein, at any time after a
Registration Statement has been declared effective by the Commission, the
Company may delay the disclosure of material non-public information concerning
the Company if the disclosure of such information at the time is not, in the
good faith judgment of the Board of Directors of the Company relying upon the
opinion of counsel, in the best interests of the Company (a “Grace Period”);
provided, however, that the Company shall promptly (i) notify the Investors in
writing of the existence of material non-public

 

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information giving rise to a Grace Period (provided that the Company shall not
disclose the content of such material non-public information to the Investors)
and the date on which the Grace Period will begin, and (ii) notify the Investors
in writing of the date on which the Grace Period ends; provided further, that no
single Grace Period shall exceed fifteen (15) consecutive days, and during any
three hundred sixty-five (365) day period, the aggregate of all of the Grace
Periods shall not exceed an aggregate of thirty (30) days and the first day of
any Grace Period must be at least five (5) trading days after the last day of
any prior Grace Period (each Grace Period complying with this provision being an
“Allowable Grace Period”). For purposes of determining the length of a Grace
Period, the Grace Period shall be deemed to begin on and include the date the
Investors receive the notice referred to in clause (i) above and shall end on
and include the later of the date the Investors receive the notice referred to
in clause (ii) above and the date referred to in such notice; provided, however,
that no Grace Period shall be longer than an Allowable Grace Period. The
provisions of Section 3(g) of this Agreement shall not be applicable during the
period of any Allowable Grace Period. Upon expiration of the Grace Period, the
Company shall again be bound by the first sentence of Section 3(f) of this
Agreement.

 

(o) If reasonably requested in writing in connection with any disposition of
Registrable Securities pursuant to a Registration Statement, make reasonably
available for inspection during normal business hours by a representative for
the Investors of such Registrable Securities and any broker-dealers, attorneys
and accountants retained by such Investors, all relevant financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the appropriate executive officers, directors and
designated employees of the Company and its subsidiaries to make reasonably
available for inspection during normal business hours all relevant information
reasonably requested by such representative for the Investors or any such
broker-dealers, attorneys or accountants in connection with such disposition, in
each case as is customary for similar “due diligence” examinations; provided,
however, that any information that is designated by the Company, in good faith,
as confidential at the time of delivery of such information shall be kept
confidential by such Persons, unless disclosure thereof is made in connection
with a court, administrative or regulatory proceeding or required by law, or
such information has become available to the public generally through the
Company or through a third party without an accompanying obligation of
confidentiality.

 

(p) The Company shall make generally available to its security holders as soon
as practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with, and in the
manner provided by, the provisions of Rule 158 under the 1933 Act) covering a
twelve-month period beginning not later than the first day of the Company’s
fiscal quarter next following the effective date of a Registration Statement.

 

Section 4. Obligations of The Investors.

 

(a) At least three (3) Business Days prior to the first anticipated filing date
of a Registration Statement, the Company shall notify each Investor in writing
of the information the Company requires from each such Investor if such Investor
elects to have

 

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any of such Investor’s Registrable Securities included in such Registration
Statement. It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the effectiveness of the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. Each
Investor shall promptly notify the Company of any material change with respect
to such information previously provided to the Company by such Investor.

 

(b) Each Investor agrees to cooperate with the Company as reasonably requested
by the Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor’s election to exclude all of such Investor’s Registrable
Securities from such Registration Statement, in which case, such Investor does
not need to cooperate with the Company until it notifies the Company of its
desire to include one or more shares of the Registrable Securities in such
Registration Statement.

 

(c) Each Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3(g) or 3(n) of this
Agreement or the first sentence of Section 3(f) of this Agreement, such Investor
will immediately discontinue disposition of Registrable Securities pursuant to
any Registration Statements covering such Registrable Securities until such
Investor’s receipt of the copies of the amended or supplemented prospectus
contemplated by Section 3(g) of this Agreement or the first sentence of Section
3(f) of this Agreement or receipt of notice that no amendment or supplement is
required and, if so directed by the Company, such Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies of the prospectus covering such
Registrable Securities current at the time of receipt of such notice (other than
a single file copy, which such Investor may keep) in such Investor’s possession.

 

Section 5. Expenses of Registration. All expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3 of this Agreement, including,
without limitation, all registration, listing and qualifications fees, printers
and accounting fees, transfer agent fees and fees and disbursements of counsel
for the Company, shall be paid by the Company. The Company shall pay all of the
Investors’ reasonable costs (including reasonable fees and disbursements of
Legal Counsel) incurred in connection with the registration, filing or
qualification pursuant to this Agreement, up to an aggregate amount of $15,000.

 

Section 6. Indemnification. In the event any Registrable Securities are included
in a Registration Statement under this Agreement:

 

(a) To the fullest extent permitted by law, the Company will, and hereby does,
indemnify, hold harmless and defend each Investor, the directors, officers,

 

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members, partners, employees, agents, representatives of, and each Person, if
any, who controls any Investor within the meaning of the 1933 Act or the 1934
Act (each, an “Indemnified Person”), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’
fees, amounts paid in settlement or expenses, joint or several, (collectively,
“Claims”) incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body or the Commission, whether pending or threatened, whether or not an
indemnified party is or may be a party thereto (“Indemnified Damages”), to which
any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any amendment (including
post-effective amendments) or supplement thereto or in any filing made in
connection with the qualification of the offering under the securities or other
“blue sky” laws of any jurisdiction in which the Registrable Securities are
offered (“Blue Sky Filing”), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue statement of
a material fact contained in any preliminary prospectus if authorized for use by
the Company prior to the effective date of such Registration Statement, or
contained in the final prospectus (as amended or supplemented, if any) or the
omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement, or (iv) any material violation
of this Agreement by the Company (the matters in the foregoing clauses (i)
through (iv) being, collectively, “Violations”). Subject to Section 6(c) of this
Agreement, the Company shall reimburse the Indemnified Persons, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim by an Indemnified Person arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person or its Legal
Counsel expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not be
available to the extent such Claim is based on a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the
Company, including a corrected prospectus, if such prospectus or corrected
prospectus was timely made available by the Company pursuant to Section 3(d) of
this Agreement; and (iii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld, conditioned or
delayed. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9 of this Agreement.

 

- 12 -

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(b) In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a) of this Agreement, the Company, each of its directors,
each of its officers who signs the Registration Statement, its agents and each
Person, if any, who controls the Company within the meaning of the 1933 Act or
the 1934 Act (each, an “Indemnified Party”), against any Claims or Indemnified
Damages to which any of them may become subject, under the 1933 Act, the 1934
Act or otherwise, insofar as such Claims or Indemnified Damages arise out of or
are based upon any Violation (including for purposes of this paragraph, a
material violation of this Agreement by the Investor), in each case to the
extent, and only to the extent, that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
or its Legal Counsel expressly for use in connection with such Registration
Statement and, subject to Section 6(c) of this Agreement, such Investor will
reimburse any legal or other expenses reasonably incurred by an Indemnified
Party in connection with investigating or defending any such Claim; provided,
however, that the indemnification agreement contained in this Section 6(b) and
the agreement with respect to contribution contained in Section 7 of this
Agreement shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld or delayed; provided, further, that
the Investor shall be liable under this Section 6(b) for only that amount of the
Claims and Indemnified Damages as does not exceed the net proceeds to such
Investors as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnification agreement shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9 of this Agreement. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.

 

(c) Promptly after an Indemnified Person or Indemnified Party under this Section
6 has knowledge of any Claim as to which such Indemnified Person or Indemnified
Party reasonably believes indemnity may be sought or promptly after such
Indemnified Person or Indemnified Party receives notice of the commencement of
any action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of such Claim, and
the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by

 

- 13 -

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such counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding; provided, further, that the
indemnifying party shall not be responsible for the reasonable fees and expense
of more than one (1) separate legal counsel for such Indemnified Person or
Indemnified Party. In the case of an Indemnified Person, the legal counsel
referred to in the immediately preceding sentence shall be selected by the
Required Holders. The Indemnified Party or Indemnified Person shall cooperate
fully with the indemnifying party in connection with any negotiation or defense
of any such action or Claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified Party
or Indemnified Person which relates to such action or Claim. The indemnifying
party shall keep the Indemnified Party or Indemnified Person fully apprised at
all times as to the status of the defense or any settlement negotiations with
respect thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its prior written consent;
provided, however, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall, without the prior
written consent of the Indemnified Party or Indemnified Person, consent to entry
of any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a full release from all
liability in respect to such Claim and action and proceeding. After
indemnification as provided for under this Agreement, the rights of the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party as provided in this Agreement
shall not relieve such indemnifying party of any liability to the Indemnified
Person or Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.

 

(d) No Person involved in the sale of Registrable Securities who is guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) in connection with such sale shall be entitled to indemnification from any
Person involved in such sale of Registrable Securities who is not guilty of
fraudulent misrepresentation.

 

(e) The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or Indemnified Damages are incurred.

 

(f) The indemnification agreements contained herein shall be in addition to (i)
any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.

 

Section 7. Contribution. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make

 

- 14 -

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the maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 of this Agreement to the fullest extent
permitted by law; provided, however, that:

 

(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6 of this Agreement, (ii) no Person involved in the sale of Registrable
Securities who is guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to
contribution from any Person involved in such sale of Registrable Securities who
is not guilty of fraudulent misrepresentation, and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities
pursuant to such Registration Statement. The provisions of this Section 7 shall
remain in full force and effect, regardless of the investigation made by or on
behalf of the beneficiaries of this Section 7 and shall survive the transfer of
Registrable Securities by the Investors pursuant to Section 9 of this Agreement.

 

Section 8. Reporting.

 

(a) Reports Under The 1934 Act. With a view to making available to the Investors
the benefits of Rule 144 promulgated under the 1933 Act or any other similar
rule or regulation of the Commission that may at any time permit the Investors
to sell securities of the Company to the public without registration (“Rule
144”), the Company shall use reasonable efforts to:

 

(1) make and keep public information available, as those terms are understood
and defined in Rule 144;

 

(2) file with the Commission in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act; and

 

(3) furnish to each Investor, so long as such Investor owns Registrable
Securities, promptly upon request, (A) a written statement by the Company, if
true, that it has complied with the applicable reporting requirements of Rule
144, the 1933 Act and the 1934 Act, (B) a copy of the most recent annual or
quarterly report of the Company and copies of such other reports and documents
so filed by the Company, and (C) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to Rule 144
without registration.

 

(b) Rule 144A Information. The Company shall, upon request of any Investor, make
available to such Investor the information required by Rule 144A(d)(4) (or any
successor rule) under the 1933 Act.

 

Section 9. Assignment of Registration Rights. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the

 

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Company thereto, subsequent Investors, subject to the condition that such
transfer shall have been conducted in accordance with all applicable federal and
state securities laws. The rights under this Agreement shall be automatically
assignable by the Investors to any transferee of all or any portion of such
Investor’s Registrable Securities if: (i) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such rights are being
transferred or assigned; (iii) immediately following such transfer or
assignment, the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence, the transferee or assignee agrees in writing
with the Company to be bound by all of the obligations of an Investor under this
Agreement; (v) such transfer shall have been made in accordance with the
applicable requirements of the Securities Purchase Agreement, the Certificate of
Designations and the Warrants; and (vi) such transfer shall have been conducted
in accordance with all applicable federal and state securities laws. The Company
hereby shall extend the benefits of this Agreement to any Investor and any such
Investor may specifically enforce the provisions of this Agreement as if an
original party hereto.

 

Section 10. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance of any provision of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Required
Holders. Any amendment or waiver affected in accordance with this Section 10
shall be binding upon each Investor and the Company. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Registrable Securities. No consideration shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of any of this
Agreement unless the same consideration also is offered to all of the parties to
this Agreement.

 

Section 11. Miscellaneous.

 

(a) A Person is deemed to be a holder of Registrable Securities whenever such
Person owns or is deemed to own of record such Registrable Securities. If the
Company receives conflicting instructions, notices or elections from two or more
Persons with respect to the same Registrable Securities, the Company shall act
upon the basis of instructions, notice or election received from such record
owner of such Registrable Securities.

 

(b) Any notices, consents, waivers or other communications required or permitted
to be given under the terms of this Agreement must be in writing and will be
deemed to have been delivered: (i) upon receipt, when delivered personally; (ii)
upon receipt, when sent by facsimile (evidenced by mechanically or
electronically generated receipt by the sender’s facsimile machine); or (iii)
one (1) Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:

 

If to the Company:

 

The Wet Seal, Inc.

26972 Burbank

Foothill Ranch, California 92610

Telephone: (949) 699-3919

Facsimile: (949) 699-4825

Attention: Chief Financial Officer

 

- 16 -

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with a copy to:

 

Akin Gump Strauss Hauer & Feld LLP

590 Madison Avenue

New York, New York 10022

Telephone: (212) 872-1000

Facsimile: (212) 872-1002

Attention: Alan Siegel, Esq.

                 Ackneil M. Muldrow III, Esq.

 

If to Legal Counsel:

 

Schulte Roth & Zabel LLP

919 Third Avenue

New York, NY 10022

Telephone: (212) 756-2000

Facsimile: (212) 593-5955

Attention: Eleazer Klein, Esq.

 

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached hereto as Exhibit A, with copies to such Buyer’s representatives
as set forth on the Schedule of Buyers, or to such other address and/or
facsimile number and/or to the attention of such other Person as the recipient
party has specified by written notice given to each other party.

 

(c) Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.

 

(d) All questions concerning the construction, validity, enforcement and
interpretation of this Agreement 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

 

- 17 -

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application of the laws of any jurisdictions other than the State of New York.
Each party hereby irrevocably submits to the non-exclusive jurisdiction of the
state and federal courts sitting the City of New York, borough of Manhattan, for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.

 

(e) This Agreement, the Securities Purchase Agreement, the Certificate of
Designations, the Warrants and the other documents referenced herein and therein
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the Securities Purchase Agreement, the Certificate of
Designations and the Warrants supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.

 

(f) This Agreement shall become effective as of the Closing Date.

 

(g) Subject to the requirements of Section 9 of this Agreement, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.

 

(h) The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.

 

(i) This Agreement may be executed in identical counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other parties hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

 

(j) Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

 

- 18 -

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(k) All consents and other determinations required to be made by the Investors
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by the Required Holders.

 

(l) This Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person.

 

(m) The obligations of each Buyer under any Transaction Document are several and
not joint with the obligations of any other Buyer, and no Buyer shall be
responsible in any way for the performance of the obligations of any other Buyer
under any Transaction Document. Nothing contained herein or in any other
Transaction Document, and no action taken by any Buyer pursuant hereto or
thereto, shall be deemed to constitute the Buyers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Buyers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Each Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.

 

- 19 -

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IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be duly executed as of day and year first above written.

 

COMPANY THE WET SEAL, INC.

By:

 

/s/    DOUGLAS C. FELDERMAN

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

Name:

  Douglas C. Felderman

Title:

 

Executive Vice President &

Chief Financial Officer

 

[Signatures of Buyers on Following Page]

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

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

BUYERS

 

S.A.C. CAPITAL ASSOCIATES, LLC

By: S.A.C. Capital Advisors, LLC

By:

 

/s/    PETER NUSSBAUM

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

Name:

 

Peter Nussbaum

Title:

 

General Counsel

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

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

PRENTICE CAPITAL PARTNERS QP, LP

By:

  Prentice Capital GP, LLC,
its general partner

By:

 

/s/ Charles Phillips

   

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

Name:

  Charles Phillips

Title:

    PRENTICE CAPITAL PARTNERS, LP

By:

  Prentice Capital GP, LLC,
its general partner

By:

 

/s/ Charles Phillips

   

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

Name:

  Charles Phillips

Title:

    PRENTICE CAPITAL OFFSHORE, LTD

By:

  Prentice Capital Management, LP,
the Investment Manager

By:

 

/s/ Charles Phillips

   

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

Name:

  Charles Phillips

Title:

   

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

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

GMM CAPITAL, LLC

By:

 

/s/    ISAAC DABAH

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

Name:

 

Isaac Dabah

Title:

  Director

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

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

GOLDFARB CAPITAL PARTNERS LLC

By:

 

/s/    MORRIS GOLDFARB

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

Name:

  Morris Goldfarb

Title:

  Member

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

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

/s/    CHARLES PHILLIPS

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

Mr. Charles Phillips

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

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

UBS FINANCIAL SERVICES AS CUSTODIAN FBO CHARLES G. PHILLIPS ROLLOVER IRA

By:

 

/s/ Charles Phillips

   

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

Name:

  Charles Phillips

Title:

   

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

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

/s/    ELI WACHTEL

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

Mr. Eli Wachtel

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

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

WLSS CAPITAL PARTNERS, LLC

By:

 

/s/    WAYNE S. MILLER

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

Name:

  Wayne S. Miller

Title:

  Member

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

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

SMITHFIELD FIDUCIARY, LLC

By:

 

/s/    SCOTT M. WALLACE

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

Name:

  Scott M. Wallace

Title:

  Authorized Signatory

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

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

D.B. ZWIRN SPECIAL OPPORTUNITIES FUND, L.P.

By:

 

D.B. ZWIRN PARTNERS LLC,

its general partner

By:

 

/s/    DANIEL B. ZWIRN

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

Name:

  Daniel B. Zwirn

Title:

  Managing Member D.B. ZWIRN SPECIAL OPPORTUNITIES FUND, LTD.

By:

 

D.B. ZWIRN & CO., L.P.,

its trading Manager

By:

 

/s/    DANIEL B. ZWIRN

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

Name:

  Daniel B. Zwirn

Title:

  Managing Member

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

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

RIVERVIEW GROUP, LLC

By:

 

/s/    DAVE NOLAN

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

Name:

  Dave Nolan

Title:

  Executive Vice President

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

EXHIBIT A TO REGISTRATION RIGHTS AGREEMENT

SCHEDULE OF BUYERS

 

NAME OF BUYERS

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

   NUMBER OF
PREFERRED SHARES

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

   NUMBER OF
WARRANTS

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

S.A.C. Capital Associates, LLC

c/o S.A.C. Capital Advisors, LLC

72 Cummings Point Road

Stamford, Connecticut 06902

Attention: General Counsel

Facsimile: (203) 890-2393

Residence: Anguila

         

Prentice Capital Partners QP, LP

c/o Prentice Capital Management, LP

623 Fifth Avenue

32nd Floor

New York, NY 10022

Attention: Michael Zimmerman

Charles Phillips

Facsimile: 212-756-1464

         

Prentice Capital Offshore, Ltd

c/o Prentice Capital Management, LP

623 Fifth Avenue

32nd Floor

New York, NY 10022

Attention: Michael Zimmerman

Charles Phillips

Facsimile: 212-756-1464

         

Prentice Capital Management, LP

623 Fifth Avenue

32nd Floor

New York, NY 10022

Attention: Michael Zimmerman

Charles Phillips

Facsimile: 212-756-1464

         

GMM Capital, LLC

111 West 40th Street

20th Floor

New York, NY 10018

         

Goldfarb Capital Partners LLC

21 Fairway Drive

Mamaroneck, NY 10543

         

Mr. Charles Phillips

777 Park Avenue

New York, NY 10021

         

UBS Financial Services as Custodian FBO

Charles G. Phillips Rollover IRA

777 Park Avenue

New York, NY 10021

         

Mr. Eli Wachtel

7 Shaw Road

Scarsdale, NY 10583

         

WLSS Capital Partners, LLC

c/o Wayne Miller

1365 York Avenue

Apt. 26B

New York, NY 10021

         

Smithfield Fiduciary LLC

c/o Highbridge Capital Management, LLC

9 West 57th Street

27th Floor

New York, NY 10019

Attention: Ari J. Storch

                 Adam J. Chill

Facsimile: (212) 751-0755

Telephone: (212) 287-4720

Residence: Cayman Islands

         

D.B. Zwirn Special Opportunities Fund, L.P

c/o D.B. Zwirn & Co., L.P.

745 Fifth Avenue, 18th Floor

New York, New York 10151

Phone: (646) 720-9100

Fax: (646) 720-9000

Attention: Daniel B. Zwirn

                 Perry A. Gruss

Residence: Cayman Islands

         

D.B. Zwirn Special Opportunities Fund, Ltd.

c/o D.B. Zwirn & Co., L.P.

745 Fifth Avenue, 18th Floor

New York, New York 10151

Phone: (646) 720-9100

Fax: (646) 720-9000

Attention: Daniel B. Zwirn

                 Perry A. Gruss

Residence: Cayman Islands

         

Riverview Group, LLC

666 Fifth Avenue, 8th floor

New York, New York 10103

Attention: Daniel Cardella

Facsimile: (212) 977-1667

Telephone: (212) 841-4100

Residence: Delaware

         

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EXHIBIT B

 

SELLING SECURITYHOLDERS

 

The preferred shares and warrants were originally issued by us in transactions
exempt from the registration requirements of the 1933 Act to persons reasonably
believed to be “accredited investors” as defined in Regulation D under the 1933
Act. The shares of common stock being offered by the selling securityholders are
issuable upon conversion of the preferred shares and upon exercise of the
warrants. For additional information regarding the preferred shares and warrants
see “Private Placement of Preferred Shares and Warrants” above. We are
registering the shares of common stock underlying the preferred shares and
warrants in order to permit the selling securityholders to offer the shares of
common stock for resale from time to time. Except for the ownership of the
preferred shares, the warrants and the purchases of other securities from the
Company on January 14, 2005, the selling stockholders have not had any material
relationship with us within the past three years.

 

The table below lists the selling securityholders and other information
regarding the beneficial ownership of the shares of common stock by each of the
selling securityholders. The second column lists the number of shares of common
stock beneficially owned by each selling stockholder as of             , 2005,
assuming conversion of all of the preferred shares and exercise of all of the
warrants held by the selling securityholders on that date, without regard to any
limitations on conversion or exercise. The third column lists the shares of
common stock being offered pursuant to this prospectus by each of the selling
securityholders. The fourth column lists the number of shares that will be
beneficially owned by the selling securityholders assuming all of the shares
offered pursuant to this prospectus are sold and that shares beneficially owned
by them, as of             , 2005, but not offered hereby are not sold.

 

In accordance with the terms of registration rights agreements with the holders
of the preferred shares and the warrants, this prospectus generally covers the
resale of (i) 130% of the maximum number of shares of common stock issuable upon
conversion of the preferred shares (without taking into account any limitations
on the conversion of the preferred shares set forth in the certificate of
designations relating to the preferred shares) and (ii) 130% of the maximum
number of shares of common stock issuable upon exercise of the warrants (without
taking into account any limitations on the exercise of the warrants set forth in
the warrants), in each case as of the trading day immediately preceding the date
this registration statement was initially filed with the SEC. Because the
conversion price of the preferred shares and exercise price of the warrants may
be adjusted, the number of shares that will actually be issued may be more or
less than the number of shares being offered by this prospectus.

 

Under the terms of the certificate of designations relating to the preferred
shares and the warrants, a selling securityholder may not convert the preferred
shares or exercise the warrants, to the extent such conversion or exercise would
cause such selling securityholder, together with its affiliates, to beneficially
own a number of shares of common stock which would exceed 9.99% of our then
outstanding shares of common stock following such conversion or exercise,
excluding for purposes of such determination shares of common stock issuable
upon conversion of the preferred shares which have not been converted and upon
exercise of the warrants which have not been exercised. The numbers in the
second column do not reflect this limitation. The selling securityholders may
sell all, some or none of their shares in this offering. See “Plan of
Distribution.”

 

The inclusion of any securities in the following table does not constitute an
admission of beneficial ownership by the persons named below.

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Name of Selling Securityholder

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

   Shares of
Common Stock
Owned Before the
Offering

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

   Shares of
Common
Stock Offered
Hereby

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

   Shares of
Common Stock
Owned After the
Offering (1)

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

S.A.C. Capital Associates, LLC (2)

              

Prentice Capital Partners QP, LP

              

Prentice Capital Partners, LP

              

Prentice Capital Offshore, Ltd

              

GMM Capital, LLC

              

Goldfarb Capital Partners LLC

              

Mr. Charles Phillips

              

UBS Financial Services as Custodian FBO Charles G. Phillips Rollover IRA

              

Mr. Eli Wachtel

              

WLSS Capital Partners, LLC

              

Smithfield Fiduciary LLC (3)

              

D.B. Zwirn Special Opportunities Fund, L.P (4)

              

D.B. Zwirn Special Opportunities Fund, Ltd. (4)

              

Riverview Group, LLC (5)

              

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(1) Assumes that all of the shares offered hereby are sold and that shares owned
before the offering but not offered hereby are not sold.

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(2) Pursuant to investment agreements, each of S.A.C. Capital Advisors, LLC, a
Delaware limited liability company which we refer to in this prospectus as SAC
Capital Advisors, and S.A.C. Capital Management, LLC, a Delaware limited
liability company which we refer to in this prospectus as SAC Capital
Management, share all investment and voting power with respect to the securities
held by S.A.C. Capital Associates, LLC. Mr. Steven A. Cohen controls both SAC
Capital Advisors and SAC Capital Management. Each of SAC Capital Advisors, SAC
Capital Management and Mr. Cohen disclaim beneficial ownership of these
securities.

(3) Highbridge Capital Management, LLC (“Highbridge”), is the trading manager of
Smithfield Fiduciary LLC (“Smithfield”) and consequently has voting control and
investment discretion over the shares of Common Stock held by Smithfield. Glenn
Dubin and Henry Swieca control Highbridge. Each of Highbridge and Messrs. Dubin
and Swieca disclaims beneficial ownership of the shares held by Smithfield.

(4) D. B. Zwirn & Co., L.P. is the trading manager of each of Zwirn Special
Opportunities Fund, Ltd. and Zwirn Special Opportunities Fund, L.P. and
consequently has voting control and investment discretion over securities held
by each of these entities. Daniel B. Zwirn controls Zwirn Holdings, LLC, which
in turn is the managing member of, and thereby controls, DBZ GP, LLC, which in
turn is the general partner of, and thereby controls, D. B. Zwirn & Co., L.P.
Each of Daniel B. Zwirn, Zwirn Holdings, LLC, DBZ GP, LLC and D. B. Zwirn & Co.,
L.P. disclaims beneficial ownership of securities held by each of Zwirn Special
Opportunities Fund, Ltd. and Zwirn Special Opportunities Fund, L.P.

(5) The managing member of Riverview is Millennium Holding Group, L.P., a
Delaware limited partnership (“Millennium Holdings”). Millennium Management,
L.L.C., a Delaware limited liability company (“Millennium Management”), is the
general partner of Millennium Holdings and consequently may be deemed to have
voting control and investment discretion over securities owned by Millennium
Holdings and by Riverview. Israel A. Englander (“Mr. Englander”) is the managing
member of Millennium Management. As a result, Mr. Englander may be deemed to be
the beneficial owner of any shares deemed to be beneficially owned by Millennium
Management. The foregoing should not be construed in and of itself as an
admission by any of Millennium Holdings, Millennium Management or Mr. Englander
as to beneficial ownership of the shares owned by Riverview. Millennium
Partners, L.P., a Cayman Islands limited partnership (“Millennium Partners”), is
a limited partner of Millennium Holdings. As a limited partner, Millennium
Partners has no investment or voting control over Millennium Holdings or its
securities positions.

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PLAN OF DISTRIBUTION

 

We are registering the shares of common stock issuable upon conversion of the
preferred shares and upon exercise of warrants and to permit the resale of the
underlying shares of common stock by the holders from time to time after the
date of this prospectus. We will not receive any of the proceeds from the sale
by the selling securityholders of the securities. We will bear all fees and
expenses incident to our obligation to register the preferred shares, warrants
and shares of common stock.

 

The selling securityholders may sell all or a portion of the securities
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the securities
are sold through underwriters or broker-dealers, the selling securityholders
will be responsible for underwriting discounts or commissions or agent’s
commissions. The securities may be sold in one or more transactions at fixed
prices, at prevailing market prices at the time of the sale, at varying prices
determined at the time of sale, or at negotiated prices. These sales may be
effected in transactions, which may involve crosses or block transactions,

 

•   on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale;

 

•   in the over-the-counter market;

 

•   in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;

 

•   through the writing of options, whether such options are listed on an
options exchange or otherwise;

 

•   ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

 

•   block trades in which the broker-dealer will attempt to sell the securities
as agent but may position and resell a portion of the block as principal to
facilitate the transaction;

 

•   purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;

 

•   an exchange distribution in accordance with the rules of the applicable
exchange;

 

•   privately negotiated transactions;

 

•   short sales;

 

•   pursuant to Rule 144 under the Securities Act;

 

•   broker-dealers may agree with the selling securityholders to sell a
specified number of such securities at a stipulated price per security;

 

•   a combination of any such methods of sale; and

 

•   any other method permitted pursuant to applicable law.

 

If the selling securityholders effect such transactions by selling the preferred
shares, warrants, or shares of common stock to or through underwriters,
broker-dealers or

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agents, such underwriters, broker-dealers or agents may receive commissions in
the form of discounts, concessions or commissions from the selling
securityholders or commissions from purchasers of the preferred shares, warrants
or shares of common stock for whom they may act as agent or to whom they may
sell as principal (which discounts, concessions or commissions as to particular
underwriters, broker-dealers or agents may be in excess of those customary in
the types of transactions involved). In connection with sales of any securities
or otherwise, the selling securityholders may enter into hedging transactions
with broker-dealers, which may in turn engage in short sales of the securities
in the course of hedging in positions they assume. The selling securityholders
may also sell securities short and deliver securities covered by this prospectus
to close out short positions. The selling securityholders may also loan or
pledge securities to broker-dealers that in turn may sell such securities.

 

The selling securityholders may pledge or grant a security interest in some or
all of the preferred shares, warrants or shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell shares of common stock from time
to time pursuant to this prospectus or any amendment to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling securityholders to include
the pledgee, transferee or other successors in interest as selling
securityholders under this prospectus. The selling securityholders also may
transfer and donate the preferred shares, warrants or shares of common stock in
other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.

 

The selling securityholders and any broker-dealer participating in the
distribution of the shares of common stock may be deemed to be “underwriters”
within the meaning of the 1933 Act, and any commission paid, or any discounts or
concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the 1933 Act. At the time a particular offering
of the securities is made, a prospectus supplement, if required, will be
distributed which will set forth the aggregate amount of securities being
offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling securityholders and any discounts,
commissions or concessions allowed or reallowed or paid to broker-dealers.

 

Under the securities laws of some states, the securities may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
some states the preferred shares, warrants and shares of common stock may not be
sold unless such preferred shares, warrants or shares of common stock have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with.

 

The selling securityholders may choose not to sell any or may choose to sell
less than all of the shares of common stock registered pursuant to the shelf
registration statement, of which this prospectus forms a part.

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The selling securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the 1934 Act, which may limit the timing of
purchases and sales of any of the shares of common stock by the selling
securityholders and any other participating person. Regulation M may also
restrict the ability of any person engaged in the distribution of the shares of
common stock to engage in market-making activities with respect to the shares of
common stock. All of the foregoing may affect the marketability of the shares of
common stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.

 

We will pay all expenses of the registration of the preferred shares, warrants
and shares of common stock pursuant to the registration rights agreement,
estimated to be $[            ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or “blue sky” laws; provided, however, that a selling
securityholder will pay all underwriting discounts and selling commissions, if
any. We will indemnify the selling securityholders against liabilities,
including some liabilities under the 1933 Act, in accordance with the
registration rights agreements, or the selling securityholders will be entitled
to contribution. We may be indemnified by the selling securityholders against
civil liabilities, including liabilities under the 1933 Act, that may arise from
any written information furnished to us by the selling securityholder
specifically for use in this prospectus, in accordance with the related
registration rights agreements, or we may be entitled to contribution.

 

Once sold under the shelf registration statement, of which this prospectus forms
a part, the shares of common stock will be freely tradable in the hands of
persons other than our affiliates.