SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

Exhibit 10.1

SECOND AMENDMENT TO

AMENDED AND RESTATED CREDIT AGREEMENT

This Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”) is made as of the 14th day of January, 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, and as further amended by an Amended and Restated First Amendment to Amended and Restated Credit Agreement dated as of December 13, 2004 (as further amended and in effect, 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:

“Convertible Notes” means the Notes (whether “ Notes” (as defined in the Securities Purchase Agreement as in effect on December 13, 2004) or any convertible notes issued in replacement of the Notes in accordance with the terms of the Securities Purchase Agreement), made payable by the Lead Borrower, in an aggregate principal amount equal to $56,000,000 (plus capitalized expenses and interest and other amounts due thereon), issued pursuant to the Indenture.

(f) Daily, 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 day, which Borrowing Base Certificate shall reflect, among other things, the roll forward of the Inventory from the prior day and the prior day’s cash receipts, 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 however, based upon the most recently delivered Borrowing Base Certificate, if minimum Excess Availability is not less than the aggregate of (i) the then applicable Minimum Required Excess Availability, and (ii) $10,000,000, the roll forward of Inventory may be furnished on a weekly basis;

5.16. Funding of Convertible Notes. On or before January 14, 2005 the Lead Borrower shall have received at least $26,000,000 of net cash proceeds from the issuance of the Convertible Notes, and on or before January 18, 2005 the Lead Borrower shall have received at least an additional amount of $26,000,000 of net cash proceeds from the issuance of the Convertible Notes, totaling minimum net cash proceeds of $52,000,000.

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(i) Indebtedness owing to the SAC Agents and the SAC Lenders under the SAC Loan Documents (the “SAC Indebtedness”). Except as set forth below, the Borrowers shall not make any payments on the SAC Loan (other than the payment of counsel fees described in Section 9(c) of the Intercreditor Agreement, and the accrual of (A) payment in kind or capitalized interest, (B) capitalized expenses, and (C) all other amounts due thereon, which amounts are all to be capitalized) unless and until (i) all Obligations have been repaid in full in cash, except for those Letter of Credit Outstandings described in (ii), below, (ii) the Borrowers have deposited cash into the Cash Collateral Account in an amount equal to 103% of the Letter of Credit Outstandings at such time, and (iii) any obligations of the Swingline Lender, the Issuing Bank, or any Revolving Credit Lender to make any loans or to provide any financial accommodations pursuant to this Agreement have been terminated. Except for the amendments and modifications permitted in accordance with the terms of the Intercreditor Agreement, the Borrowers shall not hereafter effect or permit any amendments or modifications to any SAC Loan Documents without the prior written consent of the Administrative Agent and the Term Lender. Upon satisfaction of the following requirements, the Borrowers shall from time to time be permitted to repay Obligations under the SAC Credit Agreement, in increments of not less than $2,000,000.00, on the last Business Day of any month, commencing March 31, 2005:

(A) The Lead Borrower shall furnish the Administrative Agent (i) within 10 Business Days’ of receipt of written notice from SAC of SAC’s intent to terminate, pursuant to the terms of Section 2.17 of the SAC Credit Agreement, a copy of such notice of termination, or (ii) 10 Business Days’ notice of its desire to repay the SAC Loan.

(B) No Event of Default is then occurring; and

(C) After giving effect to the amount of the SAC Loan to be repaid and on a pro forma basis for the next 6 month period, based upon delivery by the Lead Borrower of a business plan reasonably satisfactory to the Administrative Agent and the Term Lender, in their reasonable discretion, the Borrower shall have minimum Excess Availability of not less than the aggregate of (i) the then applicable Minimum Required Excess Availability, and (ii) $10,000,000.

(j) Indebtedness owing to the holders of the Convertible Notes in an aggregate principal amount not to exceed $56,000,000 (plus capitalized expenses and interest and plus all Subordinated Debt Fees (as defined in the Subordination Agreement) and other amounts due thereon) in the aggregate under the Securities Purchase

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Documents. Except for the conversion of the Convertible Notes into shares of Class A Common Stock of the Lead Borrower in accordance with the terms of the Convertible Notes, the Borrowers shall not make any payments on the Convertible Notes or under the Securities Purchase Documents (other than the payment of Subordinated Debt Fees, and the accrual of (A) payment in kind or capitalized interest, (B) capitalized expenses, and (C) all other amounts due thereon, which amounts are all to be capitalized) unless and until (i) all Obligations have been repaid in full in cash, except for those Letter of Credit Outstandings described in (ii), below, (ii) the Borrowers have deposited cash into the Cash Collateral Account in an amount equal to 103% of the Letter of Credit Outstandings at such time, and (iii) any obligations of the Swingline Lender, the Issuing Bank, or any Revolving Credit Lender to make any loans or to provide any financial accommodations pursuant to this Agreement have been terminated. Except for the amendments and modifications permitted in accordance with the terms of the Subordination Agreement, the Borrowers shall not hereafter effect or permit any amendments or modifications to any of the Securities Purchase Documents without the prior written consent of the Administrative Agent and the Term Lender, which shall not be unreasonably withheld or delayed.

(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 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; provided, however that any such equity interest (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) of any kind prior to the termination of this Agreement unless, prior to the making of any such payment, the Loan Parties have satisfied the provisions of subsections (B) and (C) of Section 6.01(i).

(r) the occurrence of any Event of Default under the SAC Loan or SAC Loan Documents, whether or not SAC has exercised, or is permitted to exercise, any of its rights and remedies on account thereof.

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“Minimum Required Excess Availability” means Excess Availability at all times of not less than the greater 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) (A) $7,500,000, or (B) if the test for Excess Availability is being applied during the period from December 20 through January 20, Excess Availability shall not fall below $11,000,000 for three (3) consecutive days or more during such period.

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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.

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