Document:

Third Amendment to Amended and Restated Credit Agreement

 EXHIBIT 10.6 
  
 THIRD AMENDMENT TO 
 AMENDED AND RESTATED CREDIT AGREEMENT 
  
 This Third Amendment to Amended and Restated Credit Agreement (this “Third Amendment”) is made as of the 29th day of April, 2005 by and among 
  
 THE WET SEAL, INC., a Delaware corporation, having its principal place of business at 26972 Burbank, Foothill Ranch, California 92610, as Lead Borrower for the Borrowers, being: 
  
 said WET SEAL, INC., 
  
 WET SEAL CATALOG, INC., a Delaware corporation, having its principal place
of business at 26972 Burbank, Foothill Ranch, California 92610; and 
  
 THE WET SEAL RETAIL, INC., a Delaware corporation, having its principal place of business at 26972 Burbank, Foothill Ranch, California 92610; and 
  
 WET SEAL GC, INC., a Virginia corporation, having its principal place of business at 26972 Burbank, Foothill Ranch, California 92610, as Facility
Guarantor; and 
  
 the REVOLVING CREDIT LENDERS party hereto; and

  
 BACK BAY CAPITAL FUNDING LLC, as Term Lender, a Delaware
limited liability company with offices at 40 Broad Street, Boston, Massachusetts 02109; and 
  
 FLEET RETAIL GROUP, INC., as Administrative Agent and Collateral Agent for the Lenders, a Delaware corporation, having its principal place of business at 40 Broad Street, Boston, Massachusetts 02109; and 

 
 FLEET NATIONAL BANK, as Issuing Bank, a national banking association
having a place of business at 100 Federal Street, Boston, Massachusetts 02110; 
  
 in consideration of the mutual covenants herein contained and benefits to be derived herefrom. 
  
 WITNESSETH 
  
 WHEREAS, the Lead Borrower, the Borrowers, the Lenders, the Administrative Agent and Collateral Agent, the Term Lender and the Issuing Bank entered into an Amended and Restated Credit Agreement dated as of September
22, 2004, as amended by a First Amendment to Amended and Restated Credit Agreement dated November 9, 2004, an Amended and Restated First Amendment to Amended and Restated Credit Agreement dated as of December 13, 2004 and a Second Amendment to
Amended and Restated Credit Agreement dated as of January 14, 2005 (as amended, modified, supplemented, restated or otherwise modified and in effect from time to time, the “Credit Agreement”); and 

 WHEREAS, the parties desire to amend the terms and conditions of the Credit Amendment as set forth
herein. 
  
 NOW THEREFORE, it is hereby agreed as follows:

  

	1.	Definitions. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement. 

  

	2.	Amendment to Article I. The definition of “Borrowing Base” contained in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read
as follows: 

  
 “Borrowing Base”
means, at any time of calculation, an amount equal to 
  
 (a) the Credit Card Advance Rate multiplied by the face amount of Eligible Credit Card Receivables; plus 
  
 (b) the Appraisal Percentage of the Appraised Value of Eligible Inventory, net of Inventory Reserves; plus 
  
 (c) 100% of all Eligible Cash and Cash Equivalents,
provided that Eligible Cash and Cash Equivalents included in the Borrowing Base may not be withdrawn from the respective account, thereby reducing the Borrowing Base, unless and until the Lead Borrower furnishes the Administrative Agent with
(i) notice of such intended withdrawal and (ii) a Borrowing Base Certificate as of the date of such proposed withdrawal reflecting that, after giving effect to such withdrawal, no Overadvance will result; minus 
  
 (d) the then amount of all Availability Reserves.

  

	3.	Amendment to Article I. The definition of “Minimum Required Excess Availability” contained in Section 1.01 of the Credit Agreement is hereby amended and restated in
its entirety to read as follows: 

  
 “Minimum Required Excess Availability” means Excess Availability at all times of not less than the lesser of (i) fifteen percent (15%) of the greater of the Borrowing Base or the Term Loan Borrowing Base, at any time of
calculation, or (ii) $5,000,000. 
  

	4.	Amendment to Article I. The definition of “Restricted Payment” contained in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to
read as follows: 

  
 “Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any shares of any class of capital stock of any Loan Party or any Subsidiary of any Loan Party,
or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such shares of capital stock of any
Loan Party or any such Subsidiary or any option, warrant or other right to acquire any such shares of capital stock of any Loan Party or any such 

 Subsidiary. Without limiting the foregoing, “Restricted Payments” with respect to any Person
shall also include all payments made by such Person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans and all proceeds of a dissolution or liquidation of such Person payable to the
shareholders of such Person; provided, however, that “Restricted Payments” with respect to any Person shall not include any Equity Fees. 
  

	5.	Amendment to Article I. The provisions of Article I of the Credit Agreement are hereby amended by the addition of the following definitions in alphabetical order in Section
1.01: 

  
 “Equity Fees” means,
collectively, (a) any Registration Delay Payments (as such term is defined in the 2005 Registration Rights Agreement) required to be paid pursuant to Section 2(f) of the 2005 Registration Rights Agreement, plus (b) any amounts required to be paid as
a result of any failure by the Lead Borrower to timely issue and deliver or register the shares of Common Stock on the Lead Borrower’s share register or to credit a holder’s balance account with The Depository Trust Company, to which any
holder is entitled upon such holder’s exercise of any 2005 Warrant pursuant to Section 1(c) of each 2005 Warrant, plus (c) any amounts required to be paid as a result of any failure by the Lead Borrower to credit a holder’s balance account
with The Depository Trust Company or to issue and deliver a certificate to a holder for the number of Common Shares to which such holder is entitled upon the conversion of Preferred Shares, or to issue and deliver a new Preferred Stock Certificate
representing the number of Preferred Shares to which a holder is entitled, pursuant to Section 2(d)(v) of the 2005 Certificate of Designations, all such fees set forth in clauses (a), (b) and (c) herein in an amount not to exceed $250,000 in the
aggregate in any calendar year. 
  
 “2005 Certificate of
Designations” means that certain Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock dated as of April 29, 2005. 
  
 “2005 Registration Rights Agreement” means that certain Registration Rights Agreement dated as of April 29,
2005 by and between the Lead Borrower and the Buyers listed therein. 
  
 “2005 Securities Purchase Agreement” means that certain Securities Purchase Agreement dated as of April 29, 2005 entered into by and among the Lead Borrower and the Buyers (as defined in the 2005 Securities Purchase
Agreement). 
  
 “2005 Transaction Documents”
means the 2005 Securities Purchase Agreement, the 2005 Registration Rights Agreement, the 2005 Certificate of Designations and the 2005 Warrants. 
  
 “2005 Warrants” means the Form of Series E Warrants substantially in the form attached as Exhibit B to the 2005 Securities Purchase
Agreement. 
  

	6.	Amendment to Article I. The following definitions contained in Section 1.01 of the Credit Agreement are hereby deleted in their entirety: 

  

	 	(a)	“Cost” 

  

	 	(b)	“Inventory Advance Rate” 

	7.	Amendment to Article II. Section 2.11(b) of the Credit Agreement is hereby amended and restated in its entirety as follows: 

  
 (b) If any portion of the Term Loan is paid prior to
September 22, 2006 for any reason (whether following acceleration, or otherwise), the Borrowers shall pay the Term Lender, contemporaneously with such prepayment, the “Term Loan Early Termination Fee” (so referred to herein), calculated as
follows: 
  
 (i) During the period ending
eighteen (18) months after the Closing Date, the Term Loan Early Termination Fee shall be in the amount equal to the greater of (A) (i) the aggregate Yield Revenue accruing (or which would have accrued) on the Term Loan during the first eighteen
(18) months after the Closing Date, minus (ii) the aggregate Yield Revenue actually received by the Term Lender prior to the date of payment; or (B) an amount equal to one percent (1%) of the principal balance of the Term Loan which is so paid prior
to the Maturity Date. 
  
 (ii) Commencing
eighteen (18) months after the Closing Date, through and including September 22, 2006, the Term Loan Early Termination Fee shall be in the amount equal to one percent (1%) of the principal balance of the Term Loan which is so paid prior to the
Maturity Date. 
  
 All parties to this Agreement agree and
acknowledge that the Term Lender will have suffered damages on account of the early termination of this Agreement and that, in view of the difficulty in ascertaining the amount of such damages, the Term Loan Early Termination Fee constitutes
reasonable compensation and liquidated damages to compensate the Term Lender on account thereof. Notwithstanding the foregoing, in the event that (A) the Borrowers refinance the Term Loan with a credit facility provided by the Term Lender (which
refinance shall be in the sole discretion of the Term Lender) or in which the Term Lender is a lender as of the closing of such new credit facility, or (B) any portion of the Term Loan is paid on or after September 22, 2006 for any reason, the Term
Loan Early Termination Fee shall not be payable. 
  

	8.	Amendment to Article II. Section 2.14 of the Credit Agreement is hereby amended and restated in its entirety to read as follows 

  
 2.14 Early Termination Fee. In the event that the
Termination Date occurs, for any reason, prior to the Maturity Date, the Borrowers shall pay to the Administrative Agent, for the ratable benefit of the Revolving Credit Lenders, a fee (the “Early Termination Fee”) in respect of
amounts which are or become payable by reason thereof equal to the following: (i) one percent (1%) of the Loan Ceiling in effect on the Closing Date if the Termination Date shall occur at any time on or before May 26, 2005, less any Early
Termination Fee paid in accordance with Section 2.16, below; and (ii) one-half percent (.5%) of the Loan Ceiling in effect on the Closing Date if the Termination Date shall occur at any time on or after May 26, 2005, less any Early Termination Fee
paid in accordance with Section 2.16, below. All parties to this Agreement agree and acknowledge that the Revolving Credit Lenders will have suffered damages on account 

 of the early termination of this Agreement and that, in view of the difficulty in ascertaining the amount
of such damages, the Early Termination Fee constitutes reasonable compensation and liquidated damages to compensate the Revolving Credit Lenders on account thereof. Notwithstanding the foregoing, in the event that the Borrowers refinance the
Revolving Loan Credit Extensions with a credit facility provided by Fleet or any of its Affiliates, or the Revolving Loan Credit Extensions are refinanced with another institution and Fleet retains a portion of the Revolving Loan Credit Extensions,
the Early Termination Fee shall not be payable. 
  

	9.	Amendment to Article V. Section 5.01(f) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 

  
 (f) weekly, on Wednesday of each week, a certificate in the
form of Exhibit E (a “Borrowing Base Certificate”) showing the Borrowing Base and Term Loan Borrowing Base as of the close of business on the immediately preceding Saturday, which Borrowing Base Certificate shall reflect,
among other things, the roll forward of the Inventory from the prior week as of the close of business on the immediately preceding Saturday and the prior week’s Eligible Cash and Cash Equivalents as of the close of business on the immediately
preceding Saturday, each Borrowing Base Certificate to be certified as complete and correct on behalf of the Borrowers by a Financial Officer of the Lead Borrower; provided that the Agents will update the Borrowers’ Eligible Cash and
Cash Equivalents on a daily basis for purposes of determining, in the Agents’ reasonable discretion, the amount of Loans and Letters of Credit available to be borrowed each day by the Borrowers; provided further that, at the
written request of the Agents or the Term Lender at any time, the Lead Borrower will furnish the Agents and the Term Lender with a daily Borrowing Base Certificate which includes, among other things, the roll forward of the Inventory from the prior
day and the prior day’s Eligible Cash and Cash Equivalents; 
  

	10.	Amendment to Article V. The provisions of Article V of the Credit Agreement are hereby amended by addition of the following subsection at the end of Section 5.02:

  
 (j) the occurrence of (i) any
delay in complying with any Filing Deadline (as defined in the Registration Rights Agreement (as defined in the Securities Purchase Agreement) and as defined in the 2005 Registration Rights Agreement), or Effectiveness Deadline (as defined in the
Registration Rights Agreement (as defined in the Securities Purchase Agreement) and as defined in the 2005 Registration Rights Agreement) or (ii) any Conversion Failure (as defined in the Notes (as defined in the Securities Purchase Agreement)) or
any failure to deliver Class A Common Stock upon conversion or exercise, as applicable, within the time periods provided for in the respective Securities (as defined in the 2005 Securities Purchase Agreement). 
  
 (k) The filing of the Registration Statement with the
Securities Exchange Commission pursuant to Section 2(a), 2(d) and 2(e) of the 2005 Registration Rights Agreement. 

	11.	Amendment to Article VI. Section 6.06(c) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 

  
 (c) Notwithstanding anything to the contrary contained in
this Agreement, the Loan Parties may pay any principal of and/or interest or other amounts owing on the SAC Loan under the SAC Credit Agreement by (i) either issuing to the SAC Lenders equity interests, or instruments convertible into or
exchangeable or exercisable for such equity interests, in the Loan Parties in lieu of any such payment in cash, or (ii) through the proceeds from an issuance of equity interests, or instruments convertible into or exchangeable or exercisable for
such equity interests; provided, however that any such equity interests (other than the Class A Common Stock of the Lead Borrower), or instrument convertible into or exchangeable or exercisable for such equity interests, shall have no rights for the
receipt of any cash payments (other than the right to cash payments made to all holders of the Class A Common Stock of the Lead Borrower, which cash payments are subject to restrictions on payment contained in this Agreement and in respect of Equity
Fees, to the extent permitted to be paid pursuant to the terms of this Agreement) of any kind prior to the termination of this Agreement unless, prior to the making of any such cash payment, the Loan Parties have satisfied the provisions of
subsections (B) and (C) of Section 6.01(i). 
  

	12.	Amendment to Article VII. Section 7.01(d) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 

  
 (d) the Loan Parties shall fail to observe or perform any
covenant, condition or agreement contained in Sections 2.22, 5.01(f), 5.02(j), 5.07 (with respect to insurance covering the Collateral), 5.09, or 5.12, or in Article VI; 
  

	13.	Amendment to Article VII. The provisions of Article VII of the Credit Agreement are hereby amended by addition of the following subsection at the end of Section 7.01:

  
 (t) the breach by the Lead
Borrower of any covenant or other term or condition of any of the 2005 Transaction Documents, subject to any applicable grace periods set forth therein. 
  

	14.	Amendment to Exhibit E. Exhibit E to the Credit Agreement is hereby amended and restated in its entirety in the form of Exhibit E attached hereto.

  

	15.	Amendment to Schedules. All of the Schedules to the Credit Agreement are hereby amended and restated in their entirety in the forms of the respective Schedules attached
hereto. 

  

	16.	Closing of Purchase under 2005 Securities Purchase Agreement. The closing of the purchases contemplated by Section 1(a) of the 2005 Securities Purchase Agreement (the
“Closing”) is subject to satisfaction of the following: 

  
 (a) The Lead Borrower and the Buyers (as defined in the 2005 Securities Purchase Agreement) shall establish an arrangement with respect to
the deposit and payment of the purchase price contemplated by Section 1(a) of the 2005 Securities Purchase Agreement satisfactory in all respects to the Administrative Agent and the Term Lender in their reasonable discretion. 

 (b) The Lead Borrower shall have delivered to the Administrative Agent and the Term
Lender a funds flow memorandum, in form satisfactory to the Administrative Agent and the Term Lender no less than two (2) Business Days prior to the Closing. 
  

(c) The SAC Lenders shall have delivered to the Administrative Agent a payoff letter with respect to the SAC Loan satisfactory in all
respects to the Administrative Agent and the Term Lender in their reasonable discretion. 
  

	17.	Conditions to Effectiveness. This Third Amendment shall not be effective until each of the following conditions precedent have been fulfilled to the satisfaction of the
Administrative Agent, the Term Lender and the Revolving Credit Lender: 

  
 (a) This Third Amendment shall have been duly executed and delivered by the Borrowers, the Facility Guarantor, the Administrative Agent,
the Term Lender and the Revolving Credit Lender. The Administrative Agent shall have received a fully executed copy hereof and of each other document required hereunder. 
  
 (b) An amendment to the Intercreditor Agreement in form and substance reasonably satisfactory to the
Administrative Agent and the Term Lender shall have been executed and delivered by SAC and the Loan Parties. 
  
 (c) An amendment to the SAC Loan Documents in form and substance reasonably satisfactory to the Administrative Agent and the Term Lender
shall have been executed and delivered by SAC, the Loan Parties and the SAC Lenders. 
  
 (d) An amendment to the Subordination Agreement in form and substance reasonably satisfactory to the Administrative Agent and the Term
Lender shall have been executed and delivered by all parties to the Subordination Agreement. 
  
 (e) A Subordination Agreement in form and substance reasonably satisfactory to the Administrative Agent and the Term Lender shall have
been executed and delivered by the Borrower and each of the Buyers under the 2005 Securities Purchase Agreement. 
  
 (f) No Default or Event of Default shall have occurred and be continuing, both before and immediately after giving effect to the execution
of this Third Amendment. 
  
 (g) The Borrowers
shall have paid to the Administrative Agent, for the account of the Revolving Credit Lenders, an amendment fee in the aggregate amount of $50,000.00. 
  
 (h) The Borrowers and the Facility Guarantor shall have provided such additional instruments and documents to the Administrative Agent as
the Administrative Agent and its counsel may have reasonably requested. 

	18.	Miscellaneous. 

  
 (a) Except as provided herein, all terms and conditions of the Credit Agreement and the other Loan Documents remain in full force and
effect. The Loan Parties hereby ratify, confirm, and reaffirm all of the representations, warranties and covenants therein contained. 
  
 (b) The Loan Parties hereby acknowledge and agree that they have no offsets, defenses, claims, or counterclaims against the Agents or any
Lender, or any of their respective officers, directors, employees, attorneys, representatives, predecessors, successors, or assigns with respect to the Loan Documents, the Obligations, or otherwise, and that if the Loan Parties now have, or ever did
have, any offsets, defenses, claims, or counterclaims against the Agents or any Lender, or any of their respective officers, directors, employees, attorneys, representatives, predecessors, successors, or assigns, whether known or unknown, at law or
in equity, all of them are hereby expressly WAIVED, and the Loan Parties hereby RELEASE the Agents and each Lender, and each of their respective officers, directors, employees, attorneys, representatives, predecessors, successors, and
assigns from any liability therefor. 
  
 (c) The
Borrowers shall pay all reasonable out-of-pocket costs and expenses incurred by the Administrative Agent and the Term Lender in connection with this Third Amendment, including, without limitation, all reasonable attorneys’ fees. 
  
 (d) This Third Amendment may be executed in several
counterparts and by each party on a separate counterpart, each of which when so executed and delivered, shall be an original, and all of which together shall constitute one instrument. 
  
 (e) This Third Amendment expresses the entire understanding of the parties with respect to the matters set
forth herein and supersedes all prior discussions or negotiations hereon. 
  
 (f) By executing this Third Amendment, the undersigned Facility Guarantor hereby consents to the Third Amendment to Amended and Restated Credit Agreement and acknowledges that its Guarantee remains in full force and
effect. 
  
 [SIGNATURE PAGES FOLLOW] 

 IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be executed and their seals to
be hereto affixed as the date first above written. 
  

			
	THE WET SEAL, INC.
		
	By:	 	 /s/ Douglas C. Felderman

	Name:	 	Douglas C. Felderman
	Title:	 	EVP + CFO
	
	THE WET SEAL RETAIL, INC.
		
	By:	 	 /s/ Douglas C. Felderman

	Name:	 	Douglas C. Felderman
	Title:	 	Secretary + Treasurer
	
	THE WET CATALOG, INC.
		
	By:	 	 /s/ Douglas C. Felderman

	Name:	 	Douglas C. Felderman
	Title:	 	Secretary + Treasurer
	
	THE WET SEAL GC, INC.
		
	By:	 	 /s/ Douglas C. Felderman

	Name:	 	Douglas C. Felderman
	Title:	 	Secretary + Treasurer

			
	FLEET RETAIL GROUP, INC.,
	As Administrative Agent, Collateral Agent, as Swingline Lender and as Revolving Credit Lender
		
	By:	 	 /s/ Daniel T. Platt

	Name:	 	Daniel T. Platt
	Title:	 	Director
	
	BACK BAY CAPITAL FUNDING, LLC, as Term Lender
		
	By:	 	 /s/ Kristen M. O’Connor

	Name:	 	Kristen M. O’Connor
	Title:	 	Managing Director
	
	FLEET NATIONAL BANK,
	as Issuing Bank
		
	By:	 	 /s/ Daniel T. Platt

	Name:	 	Daniel T. Platt
	Title:	 	DirectorSecond Amendment and Waiver to Credit Agreement

 EXHIBIT 10.7 
  
 SECOND AMENDMENT AND WAIVER TO CREDIT AGREEMENT 
  
 This Second Amendment and Waiver to Credit Agreement (this “Second Amendment”) is made as of the
29th day of April, 2005 by and among: 
  
 THE WET SEAL, INC., a Delaware corporation, having its principal place of business at 26972 Burbank, Foothill Ranch,
California 92610, as Lead Borrower for the Borrowers, being: 
  
 said WET SEAL, INC., 
  
 WET SEAL CATALOG, INC., a
Delaware corporation, having its principal place of business at 26972 Burbank, Foothill Ranch, California 92610; and 
  
 THE WET SEAL RETAIL, INC., a Delaware corporation, having its principal place of business at 26972 Burbank, Foothill Ranch, California 92610; and

  
 WET SEAL GC, INC., a Virginia corporation, having its
principal place of business at 26972 Burbank, Foothill Ranch, California 92610, as Facility Guarantor; and 
  
 the LENDERS party hereto; and 
  
 S.A.C. CAPITAL ASSOCIATES, LLC, a limited liability company organized under the laws of Anguilla, in its role as administrative agent (the
“Administrative Agent”) and in its role as collateral agent (the “Collateral Agent”, together with the Administrative Agent, the”Agents”) for the Lenders; 
  
 in consideration of the mutual covenants herein contained and benefits to be derived
herefrom. 
  
 WITNESSETH 
  
 WHEREAS, the Lead Borrower, the other Borrowers, the Lenders and the Agents
entered into a Credit Agreement dated as of November 9, 2004 (as amended by the First Amendment to Credit Agreement, dated as of January 14, 2005 and as the same may be further amended, restated or otherwise modified and in effect from time to time,
the “Credit Agreement”); and 
  
 WHEREAS, the
Lead Borrower desires to issue a new series of convertible preferred stock and a new series of warrants, pursuant to the terms of the Securities Purchase Documents (as hereinafter defined), and has requested that the Lenders and the Agents consent
to such issuance and to waive any Default or Event of Default under the Credit Agreement related thereto; and 
  
 WHEREAS, the Lenders and the Agents have agreed to consent to the issuance of the convertible preferred stock and the warrants pursuant to the terms of
the Securities Purchase Documents and to waive any Default or Event of Default under the Credit Agreement that might be deemed to occur as a result of such issuance; and 

 WHEREAS, the parties desire to amend certain of the terms and conditions of the Credit Agreement pursuant
to the terms and conditions set forth herein. 
  
 NOW THEREFORE,
it is hereby agreed as follows: 
  

	1.	Definitions. All capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit Agreement. 

  

	2.	Amendments to Article I. Section 1.01 of the Credit Agreement is hereby amended by: 

  

	 	a.	deleting the parenthetical in the definition of “Excess Availability” and substituting in lieu thereof “(as in effect on the Third Amendment to Working Capital Credit
Agreement Effective Date)”. 

  

	 	b.	deleting the definition of “Minimum Required Excess Availability” in its entirety and substituting in lieu thereof the following: 

  
 “Minimum Required Excess Availability”
means Excess Availability at all times of not less than the lesser of (i) fifteen percent (15%) of the greater of the Borrowing Base or the Term Loan Borrowing Base, at any time of calculation, or (ii) $5,000,000. 
  

	 	c.	deleting the definition of “Restricted Payment” in its entirety and substituting in lieu thereof the following: 

  
 “Restricted Payment” means any dividend or
other distribution (whether in cash, securities or other property) with respect to any shares of any class of capital stock of any Loan Party or any Subsidiary of any Loan Party, or any payment (whether in cash, securities or other property),
including any sinking fund or similar fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such shares of capital stock of any Loan Party or any such Subsidiary or any option,
warrant or other right to acquire any such shares of capital stock of any Loan Party or any such Subsidiary. Without limiting the foregoing, “Restricted Payments” with respect to any Person shall also include all payments made by such
Person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans and all proceeds of a dissolution or liquidation of such Person payable to the shareholders of such person; provided,
however, that “Restricted Payments” with respect to any Person shall not include any Equity Fees.” 
  

	 	d.	deleting the definition of “Working Capital Credit Agreement” in its entirety and substituting in lieu thereof the following: 

  
 “Working Capital Credit Agreement” means
the Amended and Restated Credit Agreement, dated as of September 22, 2004, as the same may be amended, replaced, renewed or refinanced from time to time in accordance with the terms thereof and Section 6.09 hereof. 
  

 2 

	 	e.	inserting the following new definitions in their appropriate alphabetical positions: 

  
 “Equity Fees” means, collectively, (a) any “Registration Delay Payments” (as such
term is defined in the 2005 Registration Rights Agreement) required to be paid pursuant to Section 2(f) of the 2005 Registration Rights Agreement, plus (b) any amounts required to be paid as a result of any failure by the Lead Borrower to timely
issue and deliver or register the shares of Common Stock on the Lead Borrower’s share register or to credit a holder’s balance account with The Depository Trust Company, to which any holder is entitled upon such holder’s exercise of
any 2005 Warrant pursuant to Section 1(c) of each 2005 Warrant, plus (c) any amounts required to be paid as a result of any failure by the Lead Borrower to credit a holder’s balance account with The Depository Trust Company or to issue and
deliver a certificate to a holder for the number of Common Shares to which such holder is entitled upon the conversion of Preferred Shares, or to issue and deliver a new Preferred Stock Certificate representing the number of Preferred Shares to
which a holder is entitled, pursuant to Section 2(d)(v) of the 2005 Certificate of Designations, all such fees set forth in clauses (a), (b) and (c) herein in an amount not to exceed $250,000 in the aggregate in any calendar year. 
  
 “Third Amendment to Working Capital Credit Agreement
Effective Date” means the date on which all conditions precedent to the Third Amendment to Working Capital Credit Agreement, dated as of April 29, 2005, among the Loan Parties, the Working Capital Administrative Agent and the Working
Capital Lenders, have been satisfied.” 
  
 “2005 Certificate of Designations” means that certain Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock dated as of April 29, 2005. 
  
 “2005 Registration Rights Agreement” means
that certain Registration Rights Agreement dated as of April 29, 2005 by and between the Lead Borrower and the Buyers (as defined in the 2005 Securities Purchase Agreement) listed therein. 
  
 “2005 Securities Purchase Agreement” means
that certain Securities Purchase Agreement dated as of April 29, 2005 entered into by and among the Lead Borrower and the Buyers (as defined in the 2005 Securities Purchase Agreement). 
  
 “2005 Transaction Documents” means the 2005 Securities Purchase Agreement, the 2005
Registration Rights Agreement, the 2005 Certificate of Designations and the 2005 Warrants. 
  
 “2005 Warrants” means the Form of Series E Warrants substantially in the form attached as Exhibit B to the 2005
Securities Purchase Agreement. 
  

 3 

	3.	Amendments to Article V. Article V of the Credit Agreement is hereby amended by: 

  

	 	a.	deleting subsection 5.01(f) in its entirety and substituting in lieu thereof the following: 

  
 “(f) weekly, on Wednesday of each week, (i) a Borrowing Base Certificate (as defined in the Working
Capital Credit Agreement) showing the Borrowing Base and Term Loan Borrowing Base as of the close of business on the immediately preceding Saturday, which Borrowing Base Certificate shall reflect, among other things, the roll forward of the
Inventory from the prior week as of the close of business on the immediately preceding Saturday and the prior week’s Eligible Cash and Cash Equivalents (as defined in the Working Capital Credit Agreement) as of the close of business on the
immediately preceding Saturday; provided that, if at any time the Working Capital Administrative Agent or the Term Lender (as defined in the Working Capital Credit Agreement) request a daily Borrowing Base Certificate from the Lead Borrower,
the Lead Borrower shall simultaneously furnish a copy of such Borrowing Base Certificate to the Agents; and (ii) if the Borrowing Base (as defined in the Working Capital Credit Agreement as in effect on the Third Amendment to Working Capital Credit
Agreement Effective Date), the Term Loan Borrowing Base (as defined in the Working Capital Credit Agreement as in effect on the Third Amendment to Working Capital Credit Agreement Effective Date) or any component definition thereof (as in effect on
the Third Amendment to Working Capital Credit Agreement Effective Date) shall be modified after the Third Amendment to Working Capital Credit Agreement Effective Date, an additional Borrowing Base Certificate (as in effect on the Third Amendment to
Working Capital Credit Agreement Effective Date) showing the Borrowing Base (as defined, together with any component definition used therein, in the Working Capital Credit Agreement as in effect on the Third Amendment to Working Capital Credit
Agreement Effective Date) and Term Loan Borrowing Base (as defined, together with any component definition used therein, in the Working Capital Credit Agreement as in effect on the Third Amendment to Working Capital Credit Agreement Effective Date)
as of the close of business on the immediately preceding Saturday, in each case of clauses (i) and (ii) above, each such Borrowing Base Certificate to be certified as complete and correct on behalf of the Borrowers by a Financial Officer of the Lead
Borrower;” 
  

	 	b.	deleting “and” at the end of subsection 5.02(i) and inserting the following new subsections (j) and (k) at the end of Section 5.02: 

  
 “(j) the occurrence of (i) any delay in complying with
any Filing Deadline (as defined in the Registration Rights Agreement (as defined in the Securities Purchase Agreement) and as defined in the 2005 Registration Rights Agreement, or Effectiveness Deadline (as defined in the Registration Rights
Agreement (as defined in the Securities Purchase Agreement) and as defined in the 2005 Registration Rights Agreement or (ii) any Conversion Failure (as defined in the Notes (as defined in the Securities Purchase Agreement)), or (iii) 
  

 4 

 any failure to deliver Class A Common Stock upon conversion or exercise, as applicable, within the time
periods provided for in the respective Securities (as defined in the 2005 Securities Purchase Agreement).” 
  
 “(k) The filing of the Registration Statement with the Securities Exchange Commission pursuant to Section 2(a), 2(d) and 2(e) of the
2005 Registration Rights Agreement.” 
  

	4.	Amendment to Article VII. Article VII of the Credit Agreement is hereby amended by: 

  

	 	a.	deleting subsection 7.01(d) in its entirety and substituting in lieu thereof the following: 

  
 “(d) the Loan Parties shall fail to observe or perform any covenant, condition or agreement contained
in Sections 2.22, 5.01(f), 5.02(j), 5.07 (with respect to insurance covering the Collateral), 5.09, or 5.12, or in Article VI;” 
  

	 	b.	inserting the following new subsection at the end of Section 7.01: 

  
 “(s) the breach by the Lead Borrower of any covenant or other term or condition of any of the 2005 Transaction Documents, subject to
any applicable grace periods set forth therein.” 
  

	5.	Waiver. The Lead Borrower has entered into (a) a Securities Purchase Agreement, dated as of April 29, 2005 (together with all other documents executed and delivered in
connection therewith, the “Securities Purchase Agreement”), attached hereto as Exhibit A, by and among the Lead Borrower and the investors listed on the Schedule of Buyers attached thereto (individually, a “Buyer”
and collectively, the “Buyers”) and (b) a Registration Rights Agreement, dated as of April 29, 2005 (together with all other documents executed and delivered in connection therewith, the “Registration Rights
Agreement”; and together with the Securities Purchase Agreement, the “Securities Purchase Documents”), attached hereto as Exhibit B, by and among the Lead Borrower and the Buyers. 

  
 Pursuant to the terms of the Securities Purchase Documents,
the Lead Borrower intends to issue (a) a new series of convertible preferred stock of the Lead Borrower designated as Series C Convertible Preferred Stock (the “Preferred Shares”), which Preferred Shares shall be convertible into
shares of the Class A Common Stock and (b) a new series of Series E Warrants (the “Warrants”) to acquire up to such number of shares of Class A Common Stock as set forth in the Schedule of Buyers to the Securities Purchase
Agreement. As a condition to this issuance (a) each Buyer shall exercise that amount of its outstanding Series A Warrants and Series B Warrants exercisable into such number of shares of Class A Common Stock as set forth on the Schedule of Closing
Exercise Shares to the Securities Purchase Agreement and (b) the Loan Parties shall enter into an appropriate amendment to each of the Credit Agreement, the Working Capital Credit Agreement and the Working Capital Intercreditor Agreement.

  

 5 

 In accordance with Section 9.02 of the Credit Agreement, each Lender and each Agent
hereby waives any Default or Event of Default under Section 6.06(a) of the Credit Agreement that might be deemed to occur as a result of the issuance of the Preferred Shares and Warrants pursuant to the terms of the Securities Purchase Documents.

  
 The waivers set forth in this Section 5 shall
be effective only in the specific instances and for the specific purposes set forth herein and do not allow for any other or further departure from the terms and conditions of the Credit Agreement or any other Loan Document, which terms and
conditions shall remain in full force and effect. 
  

	6.	Amendment to Schedules. All of the Schedules to the Credit Agreement are hereby amended and restated in their entirety in the forms of the respective Schedules attached
hereto. 

  

	7.	Closing of Purchase under Securities Purchase Agreement dated as of April 29, 2005. The closing of the purchases contemplated by Section 1(a) of the 2005 Securities Purchase
Agreement (the “Closing”) is subject to satisfaction of the following: 

  
 (a) The Lead Borrower and the Buyers (as defined in the 2005 Securities Purchase Agreement) shall establish an arrangement with respect to
the deposit and payment of the purchase price contemplated by Section 1(a) of the 2005 Securities Purchase Agreement satisfactory in all respects to the Administrative Agent and Lenders in their reasonable discretion. 
  
 (b) The Lead Borrower shall have delivered to the
Administrative Agent and the Lenders a funds flow memorandum, in form satisfactory to the Administrative Agent and the Lenders in their reasonable discretion, no less than two (2) Business Days prior to the Closing. 
  

	8.	Conditions to Effectiveness. This Second Amendment shall not be effective until each of the following conditions precedent have been fulfilled to the satisfaction of the
Administrative Agent: 

  

	 	a.	The Administrative Agent shall have received a fully executed copy of the following documents, together with each other document required thereby: 

  

	 	1.	This Second Amendment, duly executed and delivered by the Borrowers, the Facility Guarantor, the Agents and the Lenders; 

  

	 	2.	The Third Amendment to the Working Capital Credit Agreement, in form and substance reasonably satisfactory to the Administrative Agent, duly executed and delivered by the Borrowers,
the Facility Guarantor, the Working Capital Administrative Agent and the Working Capital Lenders; 

  

	 	3.	The Second Amendment to the Working Capital Intercreditor Agreement, in form and substance reasonably satisfactory to the Administrative Agent, duly executed by the Working Capital
Administrative Agent and the Administrative Agent; 

  

 6 

	 	4.	A Subordination Agreement, in form and substance reasonably satisfactory to the Administrative Agent and the Working Capital Administrative Agent, duly executed and delivered by the
Buyers under the 2005 Securities Purchase Agreement; and 

  

	 	5.	The Securities Purchase Documents, in substantially the forms attached hereto as Exhibits A and B, duly executed by the parties thereto. 

  

	 	b.	The Third Amendment to the Working Capital Credit Agreement shall have become effective in accordance with its terms. 

  

	 	c.	The Second Amendment to the Working Capital Intercreditor Agreement shall have become effective, in accordance with its terms. 

  

	 	d.	The issuance of the Preferred Shares and Warrants, pursuant to the terms of the Securities Purchase Documents, shall occur on or prior to May 3, 2005. 

  

	 	e.	No Default or Event of Default shall have occurred and be continuing both before and immediately after giving effect to the execution of this Second Amendment (other than as may be
waived herein) and all representations and warranties made in the Credit Agreement are true and correct as of the date hereof, except to the extent that they refer specifically to an earlier date, in which case they are true and correct as of such
earlier date. 

  

	 	f.	The Borrowers and the Facility Guarantor shall have provided such additional instruments and documents to the Administrative Agent as the Administrative Agent and its counsel may
reasonably request. 

  

	9.	Miscellaneous. 

  

	 	a.	Except as provided herein, all terms and conditions of the Credit Agreement and the other Loan Documents remain in full force and effect. The Loan Parties hereby ratify, confirm,
and reaffirm all of the representations, warranties and covenants therein contained. 

  

	 	b.	Each Loan Party confirms and agrees that this Amendment shall constitute a Loan Document under the Credit Agreement. Accordingly, it shall be an Event of Default under the Credit
Agreement if any representation or warranty made or deemed made by any Loan Party under or in connection with this Amendment shall have been incorrect in any material respect when made or deemed made or if any Loan Party fails to perform or comply
with any covenant or agreement contained herein. 

  

	 	c.	Each Loan Party hereby acknowledges and agrees that it has no offsets, defenses, claims, or counterclaims against the Agents or any Lender, or any of their respective officers,
directors, employees, attorneys, representatives, predecessors, successors, or assigns with respect to the Loan Documents, the Obligations, or otherwise, and that if such Loan Party now has, or ever did have, any offsets, 

 

 7 

 defenses, claims, or counterclaims against the Agents or any Lender, or any of their respective officers,
directors, employees, attorneys, representatives, predecessors, successors, or assigns, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED, and each Loan Party hereby RELEASES the Agents and each
Lender, and each of their respective officers, directors, employees, attorneys, representatives, predecessors, successors, and assigns from any liability therefor. 
  

	 	d.	This Second Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered, shall be an original, and
all of which together shall constitute one instrument. Delivery of an executed counterpart of this Second Amendment by facsimile or electronic mail shall be equally effective as delivery of an original executed counterpart. 

 

	 	e.	This Second Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. 

  

	 	f.	This Second Amendment shall be binding upon, and inure to the benefit of the successors and assigns of the parties hereto. 

  

	 	g.	This Second Amendment expresses the entire understanding of the parties with respect to the matters set forth herein and supersedes all prior discussions or negotiations hereon.
This Second Amendment may not be amended, modified or otherwise changed without the mutual agreement in writing of the parties hereto. 

  

	 	h.	Each of the Loan Parties hereto (on behalf of all Loan Parties) hereby (a) acknowledges and consents to this Second Amendment, (b) confirms and agrees that each Loan Document to
which it is a party is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects except that on and after the date of this Second Amendment all references in any such Loan Document to “the Credit
Agreement”, the “Agreement”, “thereto”, “thereof”, “thereunder” or words of like import referring to the Credit Agreement shall mean the Credit Agreement as amended by this Amendment, and (c) confirms and
agrees that to the extent that any such Loan Document purports to assign or pledge to any Agent for the ratable benefit of the Lenders, or to grant to any Agent for the ratable benefit of the Lenders a security interest in or Lien on, any collateral
as security for the obligations of any Loan Party from time to time existing in respect of the Credit Agreement (as amended hereby) and the Loan Documents, such pledge, assignment and/or grant of the security interest or Lien is hereby ratified and
confirmed in all respects. Nothing herein shall be deemed to entitle any Loan Party to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit
Agreement or any other Loan Document in similar or different circumstances. 

  

 8 

 IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be executed and their seals
to be hereto affixed as the date first above written. 
  

			
	THE WET SEAL, INC.
		
	By:	 	 /s/ Douglas C. Felderman

	Name:	 	Douglas C. Felderman
	Title:	 	EVP + CFO
	
	THE WET SEAL RETAIL, INC.
		
	By:	 	 /s/ Douglas C. Felderman

	Name:	 	Douglas C. Felderman
	Title:	 	Secretary + Treasurer
	
	THE WET CATALOG, INC.
		
	By:	 	 /s/ Douglas C. Felderman

	Name:	 	Douglas C. Felderman
	Title:	 	Secretary + Treasurer
	
	THE WET SEAL GC, INC.
		
	By:	 	 /s/ Douglas C. Felderman

	Name:	 	Douglas C. Felderman
	Title:	 	Secretary + Treasurer

  
  
  
  

			
	 S.A.C. CAPITAL ASSOCIATES, LLC,
 as
Administrative Agent, Collateral Agent,
 and a Lender

	
	By: S.A.C. Capital Advisors, LLC
		
	By:	 	 /s/ Peter Nussbaum

	Name:	 	Peter Nussbaum
	Title:	 	General Counsel

			
	GMM CAPITAL, LLC,
	as a Lender
		
	By:	 	 /s/ Isaac Dabah

	Name:	 	Isaac Dabah
	Title:	 	Director

			
	 GOLDFARB CAPITAL PARTNERS LLC,
 as a
Lender

		
	By:	 	 /s/ Morris Goldfarb

	Name:	 	Morris Goldfarb
	Title:	 	Member

	
	 /s/    CHARLES PHILLIPS

 Mr. Charles Phillips, as a Lender

			
	SMITHFIELD FIDUCIARY LLC,
	as a Lender
		
	By:	 	 /s/    SCOTT M. WALLACE

	Name:	 	Scott M. Wallace
	Title:	 	Authorized Signatory

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

	as a Lender
	
	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,

	as a Lender
	
	By: D.B. Zwirn & Co., L.P.,
	            its trading manager
		
	By:	 	 /s/ Daniel B. Zwirn

	Name:	 	Daniel B. Zwirn 
	Title:	 	Managing Member

			
	RIVERVIEW GROUP, LLC, as a Lender
	By: Millennium Holding Group, L.P.,
	By: Millennium Management, L.L.C.
		
	By:	 	 /s/ Dave Nolan

	Name:	 	Dave Nolan
	Title:	 	Executive Vice President

 Consented and Agreed: 
  

			
	Fleet Retail Group, Inc.,
	as Working Capital Administrative Agent
		
	By:	 	 /s/    DANIEL PLATT

	Name:	 	Daniel Platt
	Title:	 	Director

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