EMPLOYMENT AGREEMENT

Exhibit 10.1

EXECUTION COPY

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“ Agreement ”) is dated as of September 19, 2007, and made and entered into by and between The Wet Seal, Inc., a Delaware corporation (the “ Company ”), and Steven H. Benrubi (“ Executive ”).

W I T N E S S E T H:

WHEREAS , the Company desires to employ Executive as Executive Vice President and Chief Financial Officer of the Company, and Executive desires to be so employed.

Accordingly, in consideration of the premises and the respective covenants and agreements of the Parties set forth below, and intending to be legally bound hereby, the Parties agree as follows:

The Company hereby employs Executive and Executive hereby accepts employment upon the terms and conditions set forth below.

The term of this Agreement shall begin on September 21, 2007 (the “ Effective Date ”) and end on the third anniversary of the Effective Date (the “ Term ”). The Term may be sooner terminated by either party in accordance with the provisions of Section 5.

3.1 Base Compensation . For the services to be rendered by Executive under this Agreement, Executive shall be entitled to receive commencing as of the Effective Date, salary at the annual rate of Three Hundred Thousand Dollars ($300,000) (“ Base Compensation ”) payable in twenty-six (26) substantially equal installments per year.

3.2 Annual Bonus Compensation; 2007 Bonus Compensation . (a) Provided that Executive is employed as of the end of each of the Company’s respective bonus periods, Executive shall be eligible to receive annual bonus compensation targeted at fifty percent (50%) of Base Compensation. The maximum annual bonus compensation opportunity shall be provided in the Company’s incentive plan. Subject to the achievement of performance objectives determined by the Compensation Committee of the Board of Directors of the Company (the “ Committee ”), forty percent (40%) of this annual bonus compensation will be based on the Spring operating income results for the Company as a whole and the remaining sixty percent (60%) will be based on the Fall operating income results for the Company as a whole. In order to earn a Spring bonus for each applicable fiscal year of the Company ending during the Term, Executive must be employed on the last day of the second quarter of such fiscal year and in order to earn a Fall bonus for each applicable fiscal year of the Company ending during the Term, Executive must be employed on the last day of the fourth quarter of that fiscal year. Any Fall bonus under this provision shall be paid no later than the 15 ^th day of the third month following the end of the fiscal year for which it is earned and any Spring bonus earned hereunder shall be paid in the third quarter of such fiscal year. Prior to the commencement of any bonus period, the Company reserves the right to change the operating metric(s) for purposes of measuring the bonus earned.

1

(b) For purposes of the Fall bonus for fiscal year 2007, such bonus will be calculated based upon (i) Executive’s base compensation as Vice President and Controller, at a rate of 30% of such base compensation for the period of August 1, 2007 through September 20, 2007, and (ii) Executive’s Base Compensation for the period thereafter at a rate of 50% of such Base Compensation.

3.3 Options . Pursuant to and subject to the terms of The Wet Seal Inc. 2005 Stock Incentive Plan, as amended and/or restated from time to time (the “ Plan ”), on the Effective Date, Executive shall be awarded an option to purchase 60,000 shares of Class A common stock of the Company (“ Common Stock ”) in accordance with the stock option agreement attached hereto as Exhibit B (the “ Stock Option Agreement ”).

3.4 Restricted Shares . Pursuant to and subject to the terms of the Plan, on the Effective Date, Executive shall be awarded a restricted stock award consisting of 90,000 restricted shares of Common Stock in accordance with the restricted stock award agreement attached hereto as Exhibit C (the “ Restricted Stock Award Agreement ”).

3.5 Benefits . Executive shall be entitled to participate in all pension and welfare benefit, medical, dental, vision, life insurance, disability and any other benefit or insurance plans established by the Company and made available to other executives at his level, in accordance with the terms of such plans as they may be in effect from time to time.

3.6 Vacation . During the Term, Executive shall be entitled to three (3) weeks of paid vacation per year to be used and accrued in accordance with the Company’s policy, as it may be established from time to time.

3.7 Expense Reimbursement . Executive shall be reimbursed for reasonable business expenses actually incurred, in accordance with the Company’s expense reimbursement policy, as it may be in effect during the Term.

4.1 Position . Executive shall serve as Executive Vice President and Chief Financial Officer of the Company and report to the Chief Executive Officer of the Company (“ CEO ”). Executive shall perform duties consistent with his title and position and any other reasonable duties determined by the CEO. If requested by the Board of Directors of the Company (the “ Board ”), Executive shall serve as an officer and/or director of any of the Company’s affiliates or subsidiaries for no additional consideration.

4.2 Duties; Devotion of Time and Effort . Executive shall use Executive’s good faith best efforts and judgment (a) in performing Executive’s duties required hereunder and (b) to act in the best interests of the Company. Executive shall devote such time, attention and energies to the business of the Company as are reasonably necessary to satisfy Executive’s required responsibilities and duties hereunder. Executive shall perform the duties assigned to him to the best of Executive’s ability and in the best interests of the Company.

2

4.3 Compliance with Policies . Executive shall observe all Company’s policies and all reasonable rules and regulations adopted by the Company in connection with the conduct of its business, and shall render services in a competent, conscientious and professional manner and as instructed by the Company in all matters.

4.4 Officer of the Company . Executive’s position is considered a 16(b) position. Executive will be an “officer” of this Company and accountable for fiscal and fiduciary responsibilities associated with such.

5.1 Due to Death or Disability . If Executive dies during the Term, Executive’s employment shall terminate as of the date of his death. The Company may terminate Executive due to “Disability” at any time following the Effective Date, as defined below, upon written notice to Executive. For purposes of this Agreement, the term “ Disability ” shall mean a physical or mental incapacity as a result of which Executive becomes unable to continue the proper performance of Executive’s duties hereunder for six (6) consecutive calendar months or for shorter periods aggregating one hundred eighty (180) business days in any twelve (12) month period, or, if this provision is inconsistent with any applicable law, for such period or periods as permitted by law.

5.2 By the Company Without “Cause” . The Company may terminate Executive’s employment without “Cause” (as hereinafter defined) at any time following the Effective Date, upon written notice to Executive, subject to compliance by the Company with the provisions of Section 5.6 hereof.

5.3 By the Company for Cause . The Company may terminate Executive’s employment for “Cause” at any time. For purposes of this Agreement, the term “ Cause ” shall mean:

(a) Executive’s conviction of, or plea of nolo contendere to, a felony or any crime or involving the Company;

(b) Executive’s commission of any act of theft, embezzlement or misappropriation against the Company;

(c) The gross neglect, malfeasance or nonfeasance of Executive in the performance of the services contemplated hereunder, when such conduct causes or has the likelihood of causing material economic harm to the Company;

(d) A material breach of this Agreement by Executive;

(e) Any willful misconduct or unethical behavior related to Executive’s duties hereunder or insubordination by Executive;

(f) The sexual, or other harassment by Executive of any employee, independent contractor or customer of the Company; and/or

(g) Executive’s use of illegal drugs or abuse of alcohol or legally prescribed drugs.

3

5.4 By Executive For Good Reason . Executive may terminate his employment for Good Reason as defined below. In the event Executive seeks to terminate his employment for Good Reason, Executive shall provide thirty (30) days written notice to the Company setting forth Executive’s intention to terminate his employment with the Company. The Company shall have the opportunity to cure the “Good Reason” within thirty (30) days of the Company’s receipt of the written notice from Executive. For purposes of this Agreement, “ Good Reason ” shall mean relocating Executive’s place of work, or the executive offices of the Company, to a location more than fifty (50) miles from the site of the Company’s offices as of the date of this Agreement.

5.5 By Executive Without Good Reason . Executive may voluntarily terminate his employment without Good Reason at any time following the Effective Date upon sixty (60) days written notice to the Company.

5.6 Termination Payment .

(a) Amount .

(i) In the event that Executive’s employment is terminated pursuant to Sections 5.1 through 5.5, Executive shall continue to render services to the Company pursuant to this Agreement until the date of termination (“ Termination Date ”) and shall continue to receive compensation and payment for any unreimbursed expenses incurred, accrued but unpaid Base Compensation and other accrued employee benefits as provided in this Agreement, through the Termination Date. In the event Executive’s employment is terminated without “Cause” pursuant to Section 5.2, or Executive terminates his employment for “Good Reason” pursuant to Section 5.4, in each case within the first three years of the Effective Date, and subject to subpart (c) below, Executive shall receive severance pay in an amount equal to one times Executive’s Base Compensation, in equal bimonthly installments paid over a period of twelve (12) months (the “ Severance Period ”) with the first installment to be paid on the later of the Company’s first regular pay date after the Termination Date or the tenth (10th) day after Executive’s execution of the release described in Section 5.6(c) below. Each installment of the severance pay shall be deemed a separate payment for the purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”). Notwithstanding the foregoing, if all or any portion of the severance payments due under this Section 5.6(a) are determined to be “nonqualified deferred compensation” subject to Section 409A of the Code, and the Company determines that Executive is a “specified employee” as defined in Section 409A(a)(2)(B)(i) of the Code and the regulations and other guidance issued thereunder, then such severance payments (or portion thereof) shall commence no earlier than the first day of the seventh month following the month in which Executive’s termination of employment occurs (with the first such payment being a lump sum equal to the aggregate severance payments Executive would have received during such six-month period if no such payment delay had been imposed).

4

(ii) If Executive is terminated (x) without Cause on or after the third anniversary of the Effective Date or (y) for Cause, then Executive shall not receive any severance payments.

(iii) Except as provided in this Section 5.6, Executive shall not be entitled to any other payments in connection with his employment and/or the termination thereof, and shall have no further right to receive compensation or other consideration from the Company or have any other remedy whatsoever against the Company, as a result of the termination of this Agreement or the termination of Executive. In no way does severance payment include any unearned, ineligible bonus compensation.

(b) Benefits . RESERVED.

(c) Release . Notwithstanding any other provision of this Agreement to the contrary, Executive acknowledges and agrees that any and all severance payments to which Executive is entitled under this Section 5.6 are conditional upon, and subject to, Executive first executing a valid waiver and release of all claims that Executive may have against the Company, its subsidiaries and affiliates (and their respective officers and directors) in a form substantially similar to that attached hereto as Exhibit A , subject to changes as maybe warranted to be made to such release to preserve the intent thereof for changes in applicable laws; provided , that, if Executive fails to execute (or revokes) such waiver and release of all claims within 30 days following the Termination Date, the Company shall have no obligation to provide the payments contemplated under this Section 5.6.

Executive acknowledges that by virtue of Executive’s position as Executive Vice President and Chief Financial Officer of the Company, and Executive’s employment hereunder, he will have advantageous familiarity with and knowledge about the Company and will be instrumental in establishing and maintaining goodwill between the Company and its customers, which goodwill is the property of the Company. Therefore, Executive agrees as follows:

(a) During the Term, Executive will not engage (either directly or indirectly, as shareholder, partner, officer, director, consultant, employee or otherwise) in any enterprise, nor perform any services of any kind whatsoever for or provide any financial assistance to any enterprise, in the retail clothing business other than through the Company or its subsidiaries and their successors.

(b) During the Term, and for a period of one (1) year following the end of the Term, Executive will not, either for himself or for any other person or entity, directly or indirectly (i) solicit, induce, recruit or encourage any of the Company’s employees to terminate their relationship with the Company, and/or (ii) attempt to solicit, induce, recruit or encourage any of the Company’s employees to terminate their relationship with the Company; provided , however , that this restriction shall apply for one (1) year following the termination of Executive’s employment, in the event Executive’s employment is terminated prior to the end of the Term pursuant to, and in accordance with, Sections 5.1 through 5.5.

5

7.1 Executive specifically agrees that Executive will not at any time, whether during or subsequent to the Term, in any fashion, form or manner, except in furtherance of Executive’s duties at the Company or with the specific written consent of the Company, either directly or indirectly use or divulge, disclose or communicate to any Person in, any manner whatsoever, any confidential information of any kind, nature or description concerning any matters affecting or relating to the business of the Company (the “ Proprietary Information ”), including (i) all information, formulae, compilations, software programs (including object codes and source codes), devices, methods, techniques, drawings, plans, experimental and research work, inventions, patterns, processes and know-how, whether or not patentable, and whether or not at a commercial stage related to the Company or any subsidiary thereof (ii) buying habits or practices of any of its customers, (iii) the Company’s marketing methods and related data, (iv) the Company’s costs of materials, (v) the prices it obtains or has obtained or at which it sells or has sold its products or services, (vi) lists or other written records used in the Company’s business, (vii) compensation paid to employees and other terms of employment or (viii) any other confidential information of, about or concerning the business of the Company, its manner of operation, or other confidential data of any kind, nature or description (excluding any information that is or becomes publicly known or available for use through no fault of Executive or as directed by Court order). The Parties hereto stipulate that as between them, Proprietary Information constitutes trade secrets that derive independent economic value, actual or potential, from not being generally known to the public or to other Persons who can obtain economic value from its disclosure or use and that Proprietary Information is the subject of efforts which are reasonable under the circumstances to maintain its secrecy and of which this Section 7.1. is an example, and that any breach of this Section 7.1 shall be a material breach of this Agreement. All Proprietary Information shall be and remain the Company’s sole property.

7.2 Executive agrees to keep confidential and not to use or divulge except in furtherance of Executive’s duties at the Company any confidential or proprietary information of any customer of the Company to which Executive may obtain access during the Term. Executive acknowledges and agrees that a breach of this Section 7.2 shall be a material breach of this Agreement.

8.1 Executive agrees to disclose promptly to the Company any and all concepts, designs, inventions, discoveries and improvements related to the Company’s business (collectively, “ Inventions ”) that Executive may conceive, discover or make from the beginning of Executive’s employment with Company until the termination thereof; whether such is made solely or jointly with others, whether or not patentable, of which the conception or making involves the use of the Company’s time, facilities, equipment or personnel.

8.2 Executive agrees to assign, and does hereby assign, to the Company (or its nominee) Executive’s right, title and interest in and to any and all Inventions that Executive may conceive, discover or make, either solely or jointly with others, patentable or unpatentable, from the beginning of Executive’s employment with the Company until the termination thereof.

8.3 Executive agrees to sign at the request of the Company any instrument necessary for the filing and prosecution of patent applications in the United States and elsewhere, including divisional, continuation, revival, renewal or reissue applications, covering any

6

Inventions and all instruments necessary to vest title to such Inventions in the Company (or its nominee). Executive further agrees to cooperate and assist the Company in preparing, filing and prosecuting any and all such patent applications and in pursuing or defending any litigation upon inventions covered hereby. The Company shall bear all expenses involved in the prosecution of such patent applications it desires to have filed. Executive agrees to sign at the request of the Company any and all instruments necessary to vest title in the Company (or its nominee) to any specific patent application prepared by the Company and covering Inventions which Executive has agreed to assign to the Company (or its nominee) pursuant to Section 8.2 above.

8.4 The provisions of Sections 8.2 and 8.3 do not apply to any invention which qualifies fully under the provisions of Section 2870 of the California Labor Code, which provides in substance that provisions in an employment agreement providing that an employee shall assign or offer to assign rights in an invention to his employer do not apply to an invention for which no equipment, supplies, facilities, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, except for those inventions that either (a) relate, at the time of conception or reduction to practice of the invention: (i) to the business of the employer or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) result from any work performed by the employee for the employer.

The Company shall also have a perpetual, royalty-free, non-exclusive right to use in its business, and to make, use, license and sell products, processes and/or services derived from any inventions, discoveries, designs, improvements, concepts, ideas, works of authorship, whether patentable or not, including processes, methods, formulae, techniques or know-how related thereto, that are not within the scope of “Inventions” as defined above, but which are conceived or made by Executive during regular working hours or with the use of the facilities, materials or personnel of the Company.

Executive acknowledges that any violation of any provision of Sections 6 through 9 and Sections 12 through 13 hereof by Executive will cause irreparable damage to the Company, that such damages will be incapable of precise measurement and that, as a result, the Company will not have an adequate remedy at law to redress the harm which such violations will cause. Therefore, in the event of any violation or threatened violation of any provision of Sections 6 through 9 and Sections 12 through 13 by Executive, in addition to any other rights at law or in equity, Executive agrees that the Company will be entitled to seek injunctive relief including, but not limited to, temporary and/or permanent restraining orders to restrain any violation or threatened violation of such Sections by Executive.

It is the desire and intent of the parties that the provisions of Section 6 through 9 and Section 15 hereof shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any portion of Sections 6 through 9 and Section 15 shall be adjudicated to be invalid or unenforceable, such provision shall be deemed amended either to conform to such restrictions as the court or arbitrator may allow, or to delete therefrom or reform the portion thus adjudicated to

7

be invalid and unenforceable, such deletion or reformation to apply only with respect to the operation of such Section in the particular jurisdiction in which such adjudication is made. It is expressly agreed that any court or arbitrator shall have the authority to modify any provision of Sections 6 through 9 and Section 15 if necessary to render it enforceable, in such manner as to preserve as much as possible the parties’ original intentions, as expressed therein, with respect to the scope thereof.

Executive agrees that any work prepared for the Company that is eligible for copyright protection under any U.S. or foreign law shall be a work made for hire and ownership of all copyrights (including all renewals and extensions therein) shall vest in the Company. In the event any such work is deemed not to be a work made for hire for any reason, Executive hereby irrevocably grants, transfers and assigns all right, title and interest in such work and all copyrights in such work and all renewals and extensions thereof to the Company, and agrees to provide all assistance reasonably requested by the Company in the establishment, preservation and enforcement of its copyright in such work, such assistance to be provided at the Company’s expense but without any additional compensation to Executive. Executive agrees to and does hereby irrevocably waive all moral rights with respect to the work developed or produced hereunder, including any and all rights of identification of authorship and any and all rights of approval, restriction or limitation on use or subsequent modifications.

Upon termination of his employment, Executive will return immediately to the Company all of the Company’s property in Executive’s possession or control, including, but not limited to, phone cards, credit cards, reports, Proprietary Information, software, keys, files, data, customer lists, equipment, and all other tangible and intangible property belonging to the Company or relating to Executive’s employment with the Company.

14.1 Assignment; Binding Effect . Neither the Company nor Executive may assign, delegate or otherwise transfer this Agreement or any of their respective rights or obligations hereunder without the prior written consent of the other party, except that the Company may assign this Agreement to its successors (through acquisition, merger, reorganization or otherwise), and affiliate, parent or subsidiary corporations. Any attempted prohibited assignment or delegation shall be void. This Agreement shall be binding upon and inure to the benefit of any permitted successors or assigns of the Parties and the heirs, executors, administrators and/or personal representatives of Executive.

14.2 Notices . All notices, requests, demands and other communications that are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy, electronic or digital transmission method with electronic confirmation of receipt; the day after it is sent, if sent for next-day delivery to a domestic address by recognized overnight delivery service (e.g., FedEx); and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to:

If to the Company

Vice President, Human Resources

The Wet Seal, Inc.

26972 Burbank

Foothill Ranch, CA 92610

Facsimile No.: (949) 699 4722

8

If to Executive, to such address as shall most currently appear in the records of the Company.

14.3 Entire Agreement . This Agreement, the Stock Option Agreement, the Release and the Restricted Stock Award Agreement, as amended from time to time, constitute the entire agreement of the Parties, and supersedes all prior agreements.

14.4 Withholding . All payments hereunder shall be subject to any required withholding of federal, state and local taxes pursuant to any applicable law or regulation.

14.5 Amendments; Waivers . This Agreement may be amended or modified, and any of the terms and covenants may be waived, only by a written instrument executed by the Parties hereto, or, in the case of a waiver, by the party waiving compliance. Any waiver by any party in any one or more instances of any term or covenant contained in this Agreement shall neither be deemed to be nor construed as a further or continuing waiver of any such term or covenant of this Agreement.

14.6 Severability . The paragraphs and provisions of this Agreement are severable. If any paragraph or provision is found to be unenforceable, the remaining paragraphs and provisions will remain in full force and effect.

14.7 Governing Law . This Agreement shall be construed, performed and enforced in accordance with, and governed by the laws of the State of California without giving effect to its principles of conflict of laws.

14.8 Counterparts . This Agreement may be executed in one or more counterparts and delivered by facsimile, each of which shall. be deemed an original,