<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
UNITED RETAIL GROUP, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
UNITED RETAIL GROUP, INC.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:.......
2) Aggregate number of securities to which transaction applies:..........
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*..................................
4) Proposed maximum aggregate value of transaction:......................
*Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------
2) Form, Schedule or Registration Statement No.:
-------------------------
3) Filing Party:
---------------------------------------------------------
4) Date Filed:
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<PAGE> 2
April 26, 1996
Dear Stockholder:
I wish to extend a cordial invitation to the fourth Annual Meeting of the
stockholders of United Retail Group, Inc., which will be held at the Sheraton
Crossroads Hotel in Mahwah, New Jersey, at 11 o'clock on Tuesday morning, May
28, 1996.
Formal notice of the Annual Meeting and the Proxy Statement are contained
on the following pages. I urge that you read the Proxy Statement and then cast
your vote on the accompanying proxy. The Annual Report of the Company for 1995
is enclosed. Also enclosed is an admittance card to be presented to the usher,
the back of which contains directions to the meeting place.
Please be sure to mark, date, sign and return the proxy promptly, so that
your shares will be represented at the meeting.
I look forward to greeting you at the meeting and reporting on the
Company's business and outlook.
Sincerely yours,
Raphael Benaroya
Chairman
<PAGE> 3
- --------------------------------------------------------------------------------
IMPORTANT: To ensure the presence of a quorum at the meeting, it is important
that your stock be represented, whether or not you plan to attend. Please mark,
date and sign the accompanying proxy and return it promptly in the enclosed
postpaid envelope. This proxy is solicited by the Board of Directors of the
Company.
- --------------------------------------------------------------------------------
UNITED RETAIL GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 1996
The fourth Annual Meeting of the stockholders of United Retail Group,
Inc. will be held at the Sheraton Crossroads Hotel, Route 17 North, Mahwah, New
Jersey, on Tuesday, May 28, 1996, at 11 o'clock in the morning, for the
following purposes:
- electing nine directors;
- approving the 1996 Stock Option Plan, which authorizes the
issuance of up to 440,000 shares of Common Stock, equivalent to
3.6% of the outstanding shares; and
- transacting any and all other business that may properly come
before the meeting.
A list of stockholders may be examined during business hours at the
Sheraton Crossroads during the 10 days preceding the date of the Annual Meeting
of Stockholders.
The Board of Directors has fixed April 10, 1996 as the record date for
the determination of stockholders entitled to vote at this meeting and only
stockholders of record on that date shall be entitled so to vote.
By Order of the Board of Directors,
George R. Remeta
April 26, 1996 Secretary
<PAGE> 4
UNITED RETAIL GROUP, INC.
365 WEST PASSAIC STREET
ROCHELLE PARK, NEW JERSEY 07662
PROXY STATEMENT
DATED APRIL 26, 1996
ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 1996
The accompanying proxy is solicited by the Board of Directors of United
Retail Group, Inc. (the "Company") to be voted at the Annual Meeting of
Stockholders to be held May 28, 1996, and any adjournments thereof. When the
proxy is properly executed and returned, the shares it represents will be voted
at the meeting as directed. If no specification is indicated, the shares will be
voted "for" election of the nominees named in this Proxy Statement and "for" the
approval of the 1996 Stock Option Plan (see page 20 for a summary of the terms
of the Plan, which provides for awards of options to purchase up to 440,000
shares of Common Stock, equivalent to 3.6% of the outstanding shares). Any
stockholder giving a proxy, however, has the power to revoke it prior to its
exercise by notice of revocation to the Company in writing or by execution of a
subsequent proxy (provided that such action must be taken in sufficient time to
permit the necessary examination and tabulation of the subsequent proxy or
revocation before the vote is taken) or by voting in person at the Annual
Meeting. If a stockholder wishes to give a proxy to someone other than the
individuals named as proxies in the proxy card, he or she may cross out the
names appearing in the enclosed proxy card, insert the name of some other
person, initial the insertion, sign and date the proxy card and give it to that
person for use at the meeting.
The shares entitled to vote at the meeting consist of shares of Common
Stock of the Company, with each share entitling the holder of record to one
vote. At the close of business on April 10, 1996, the record date for the Annual
Meeting, there were outstanding 12,190,375 shares of Common Stock. This Proxy
Statement and the accompanying form of proxy are first being sent to
stockholders on or about April 26, 1996.
<PAGE> 5
ELECTION OF DIRECTORS
NOMINEES
Nine nominees for the Board of Directors of the Company will be elected
at the Annual Meeting of Stockholders for a term expiring at the Annual Meeting
of Stockholders in 1997 or until their successors are elected and qualified. In
the event any of the nominees shall be unable to serve as a Director, it is
intended that the proxies will be voted for the election of a person nominated
by the Board of Directors in substitution. The Company has no reason to believe
that any nominee for the Board of Directors will be unable to serve as a
Director if elected.
Stockholders of record on the record date wishing to nominate persons for
election as Directors may do so by delivering or mailing to the Secretary of the
Company, not less than 14 days prior to the Annual Meeting of Stockholders, a
notice setting forth (a) the name, age, business address and, if known,
residence address of each nominee proposed in such notice, (b) the principal
occupation or employment of each such nominee and (c) the number of shares of
Common Stock of the Company beneficially owned by each such nominee. No person
may be elected as a Director unless he or she has been nominated by a
stockholder in the manner just described or by the Board of Directors.
The nine nominees receiving the highest number of votes will be elected
Directors. Proxies that withhold authority to vote will be counted only for
quorum purposes. Broker non-votes will not be counted for any purpose.
BUSINESS EXPERIENCE
The nominees proposed by the Board of Directors are listed below.
Mr. Raphael Benaroya, age 48, has been the Company's Chairman of the
Board, President and Chief Executive Officer since before 1991. Mr. Benaroya is
a director of Russ Berrie and Company, Inc.
Mr. George R. Remeta, age 46, has been the Chief Financial Officer,
Secretary and a Director of the Company since before 1991. In 1993, Mr. Remeta
was named Vice Chairman of the Company.
Mr. Joseph A. Alutto, age 55, a Director of the Company since December
1992, has been the Dean of the Max M. Fisher School of Business at Ohio State
University since March 1991. Mr. Alutto is a director of Comptek Research, Inc.
Mr. Russell Berrie, age 63, a Director of the Company since December
1992, founded Russ Berrie and Company, Inc., an international gift manufacturer,
in 1963 and has since then been its Chairman of the Board and Chief Executive
Officer.
Mr. Joseph Ciechanover, age 62, a Director of the Company since May 1995,
has been Chairman of the Board of El Al Israel Airlines Ltd. since February
1995. He was President of PEC Israel Economic Corporation ("PEC"), a holding
company with interests in various industries, principally in Israel, from
December 1994 to before 1991. Mr. Ciechanover is a director of PEC .
Mr. Ilan Kaufthal, age 48, a Director of the Company since December 1992,
has been a Managing Director of Schroder Wertheim & Co. Incorporated, an
investment banking firm, since before 1991. Mr. Kaufthal is a director of
Cambrex Corporation, Rexene Corporation and Russ Berrie and Company, Inc.
Mr. Vincent P. Langone, age 53, a Director of the Company since February
1994, was the Chairman of the Board, President and Chief Executive Officer of
Formica Corporation, a manufacturer of Formica(R)brand laminate, from before
1991 to 1995. He is currently Chairman of the Board of L&S Associates, Inc., a
management consulting firm. Mr. Langone is a director of United Jersey Bank.
2
<PAGE> 6
Ms. Christina A. Mohr, age 40, a Director of the Company since February
1994, has been a Managing Director at Lazard Freres & Co. LLC, an investment
banking firm, since before 1991. Ms. Mohr is a director of Loehmanns Holdings,
Inc.
Richard W. Rubenstein, Esq., age 51, a Director of the Company since
December 1991, has been a partner at Squire, Sanders & Dempsey, a law firm,
since May 1994 and was previously a partner at Schwartz, Kelm, Warren &
Rubenstein, a law firm, since before 1991.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
The Company's Board of Directors held four meetings in Fiscal 1995.
During Fiscal 1995, all of the Directors attended 75% or more of the total
number of meetings of the Board and of committees of the Board on which they
served.
Subject to approval by the Board, standing committees of Directors take
action in their respective areas of responsibility.
The Compensation Committee of the Board recommends executive
compensation. See, "Compensation Committee Report" regarding the Directors who
served on the Compensation Committee in Fiscal 1995. The Compensation Committee
held five meetings in Fiscal 1995.
The Audit Committee of the Board reviews and confirms the selection of
the Company's independent public accountants and oversees internal audits. The
Directors who served on the Audit Committee were Mr. Kaufthal, as Chair of the
Committee, and Mr. Langone and Ms. Mohr from February 1995 through May 1995 and
Ms. Mohr, as Chair of the Committee, and Messrs. Alutto and Kaufthal after May
1995. The Audit Committee held three meetings in Fiscal 1995.
The Nominating Committee of the Board nominates suitable persons for
election as Directors of the Company. Its members during Fiscal 1995 were Mr.
Benaroya, the Chairman of the Committee, and Messrs. Berrie and Rubenstein, who
continue to constitute the Nominating Committee. Stockholders of record are
permitted to nominate persons for election (see "ELECTION OF DIRECTORS-Nominees"
above); therefore, no formal procedures exist for stockholders to make nominee
recommendations to the Nominating Committee. The Nominating Committee held one
meeting in Fiscal 1995. The Board's nominees for election as Directors at the
fourth Annual Meeting of Stockholders were selected unanimously by the
Nominating Committee at a meeting held in February 1996, which was attended by
Messrs. Benaroya and Rubenstein.
DIRECTOR COMPENSATION
Each Director who is not employed by the Company receives $3,000 for each
Board meeting that he or she attends. In addition, a non-management Director
receives $1,000 for each additional day on which he or she attends a committee
meeting.
Each Public Director (see, "Security Ownership of Management -
Stockholders' Agreement") annually receives an award under the Company's
Restated 1990 Stock Option Plan of nonqualified options to purchase 3,000 shares
of Common Stock exercisable at the then current market price for a term of 10
years. Each option becomes exercisable as to 600 shares on completion of each
full year of service as a Director after the date of grant, provided, however,
that each option becomes fully exercisable in the event that the Company enters
into certain transactions, including certain mergers or the sale of all or
substantially all of the Company's assets, and becomes fully exercisable upon
the retirement of a Public Director from the Board in the discretion of the
Stock Option Committee of the Board.
3
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 31, 1996, certain information
with respect to the beneficial ownership of shares of Common Stock of the Chief
Executive Officer of the Company, the four most highly compensated executive
officers of the Company and its subsidiaries in fiscal 1995 other than the Chief
Executive Officer, each Director, and all Officers and Directors as a group, and
their percentage ownership. See, "-Stockholders' Agreement" for a description of
voting arrangements to which the shares held by Messrs. Benaroya, Remeta and
Wilkinson and Ms. Demaio are subject. Otherwise, except as noted below, each of
the persons listed has sole investment and voting power with respect to the
shares indicated. All information was determined in accordance with Rule 13d-3
under the Exchange Act based on information furnished by the persons listed.
<TABLE>
<CAPTION>
Name of Beneficial Amount of Percent of
Owner or Beneficial Outstanding
Identity of Group Ownership Shares
------------------ ---------- -----------
<S> <C> <C>
Mr. Raphael Benaroya(1) .............................. 2,692,795 20.1%
Mr. George R. Remeta(2) .............................. 465,625 3.7%
Mr. Charles R. Wilkinson(3) .......................... 54,412 *
Ms. Ellen Demaio(4) .................................. 41,000 *
Kenneth P. Carroll, Esq.(5) .......................... 28,392 *
Mr. Joseph A. Alutto(6) (7) .......................... 5,050 *
Mr. Russell Berrie (6) ............................... 29,800 *
Mr. Joseph Ciechanover(8) ............................ 600 -0-
Mr. Ilan Kaufthal(6) (9) ............................. 29,800 *
Mr. Vincent P. Langone(10) ........................... 6,400 *
Ms. Christina A. Mohr(11) ............................ -0- -0-
Richard W. Rubenstein, Esq ........................... 200 *
All Officers and Directors as a group ................ 3,502,095 25.4%
(20 persons) (12)
</TABLE>
- -------------------
(1) Includes 1,192,795 shares which may be acquired within 60 days by the
exercise of stock options.
(2) Includes 240,625 shares which may be acquired within 60 days by the
exercise of stock options.
(3) Includes 40,000 shares which may be acquired within 60 days by the
exercise of stock options. Excludes 250 shares held by his wife, as to
which he disclaims beneficial ownership.
(4) Includes 16,000 shares which may be acquired within 60 days by the
exercise of stock options.
(5) Includes 19,000 shares which may be acquired within 60 days by the
exercise of stock options.
(6) Includes 4,800 shares which may be acquired within 60 days by the
exercise of stock options.
(7) Includes 250 shares held by his wife.
(8) Includes 600 shares which may be acquired within 60 days by the exercise
of stock options.
(9) Excludes shares held by Schroder Wertheim & Co. Incorporated, of which
Mr. Kaufthal is a Managing Director, and as to which he disclaims
beneficial ownership. The outstanding shares are held jointly with his
wife.
(10) Includes 1,800 shares which may be acquired within 60 days by the
exercise of stock options. Excludes 400 shares held by a partnership, as
to which he disclaims beneficial ownership.
(11) Excludes shares held by Lazard Freres & Co. LLC, of which Ms. Mohr is a
managing director, and as to which she disclaims beneficial ownership.
(12) Includes 1,571,720 shares which may be acquired within 60 days by the
exercise of stock options.
* Less than one percent.
4
<PAGE> 8
STOCKHOLDERS' AGREEMENT
At March 31, 1996, a total of approximately 36% of the outstanding Common
Stock was held by Limited Direct Associates, L.P. ("LDA"), an affiliate of The
Limited, Raphael Benaroya, the Chairman of the Board, President and Chief
Executive Officer of the Company, certain other officers of the Company and
certain former associates of the Company who, together with the Company, are
parties to the Restated Stockholders' Agreement, dated December 23, 1992, which
was amended as of June 1, 1993 (the "Amendment to the Restated Stockholders'
Agreement"). The Amendment to the Restated Stockholders' Agreement provides,
among other things, that the parties shall take such action, including the
voting of shares of Common Stock, as may be necessary to cause the Board of
Directors to be elected in the following manner:
(a) the Board of Directors shall consist of nine members, of whom two are
persons ("Management Directors") nominated by the Chairman of the Board,
two are persons ("LDA Directors") nominated by LDA and five are persons
("Public Directors") who are not affiliates of (i) Mr. Benaroya, (ii)
certain executives of the Company or (iii) Benaroya's or such executives'
Permitted Transferees under the Restated Stockholders' Agreement
(collectively, "Management Investors") or (iv) LDA, named by the
Nominating Committee and approved by the Board of Directors;
(b) if the holdings of the Management Investors increase to at least
3,010,000 shares of Common Stock (including at least 500,000 additional
shares acquired by Mr. Benaroya), the Chairman of the Board shall be
entitled to nominate one additional Management Director, for a total
Board membership of 10, for so long as he and his family continue to hold
at least 500,000 shares of Common Stock, he remains Chairman of the Board
and the Management Investors continue to hold at least 2,010,000 shares,
provided, however, that in the event the number of shares held by the
Chairman (and his family) and the Management Investors fall below 500,000
shares and 2,010,000 shares, respectively, the Chairman shall thereafter
nominate two persons, rather than three persons, for election as
Directors;
(c) in the event of Mr. Benaroya's termination as Chairman of the Board
under any circumstances, (i) he shall be entitled to nominate one
Director so long as he and his family continue to hold at least 100,000
shares of Common Stock, (ii) one other person, who would otherwise have
been nominated by him as a Director, shall be named instead by the
Nominating Committee and approved by the Board of Directors and (iii) if
the Board then has 10 members, the Board membership shall be decreased to
nine;
(d) the right of LDA to nominate shall be reduced to one Director (but
the membership of the Board shall not decrease) if its holding of shares
of Common Stock falls below 500,000 shares but remains above 100,000
shares and one person, who would otherwise have been nominated by it as a
Director, shall be named instead by the Nominating Committee and approved
by the Board of Directors; and
(e) the rights of Mr. Benaroya and LDA to nominate Directors shall expire
if their stockholdings fall below 100,000 shares of Common Stock, and, in
the case of Mr. Benaroya, he no longer serves as Chairman of the Board;
in which case the Director who would otherwise be nominated by such party
shall be named instead by the Nominating Committee and approved by the
Board of Directors.
The voting arrangement under the Restated Stockholders' Agreement
described above expires on March 17, 1997.
The current Management Directors are Messrs. Benaroya and Remeta; and the
current LDA Directors are Ms. Mohr and Mr. Rubenstein.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation awarded to,
earned by or paid to the Company's Chief Executive Officer and each of the other
four most highly compensated executive officers of the Company and its
subsidiaries in the fiscal year indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
Name and Annual Compensation(1) Securities Underlying Options(3) All Other
Principal Positions Year Salary Bonus(2) (numbers of shares) Compensation(4)
- ------------------- ---- ------ -------- ------------------- ---------------
<S> <C> <C> <C> <C> <C>
Mr. Raphael Benaroya,
Chairman of the Board,
President and Chief
Executive Officer(5)
1995 $551,000 -0- 150,000 $61,998
1994 $500,000 -0- -0- $68,467
1993 $500,000 $163,500 150,000 $86,717
Mr. George R. Remeta,
Vice Chairman of the
Board-Chief Financial
Officer, Secretary and
Director(6)
1995 $321,000 -0- 60,000 $25,492
1994 $280,000 -0- -0- $24,904
1993 $280,000 $ 76,300 60,000 $37,263
Mr. Charles R. Wilkinson,
Executive Vice President
-Organizational
Development of United
Retail Incorporated(7)
1995 $205,000 -0- -0- $18,208
1994 $190,000 -0- 10,000 $17,567
1993 $190,000 -0- 20,000 $21,528
Ms. Ellen Demaio,
Senior Vice President
-Merchandise of United
Retail Incorporated(8)
1995 $201,000 -0- 20,000 $15,734
1994 $165,000 $ 25,500 10,000 $12,216
1993 $150,000 -0- -0- $10,500
Kenneth P. Carroll, Esq.,
Senior Vice President
-General Counsel(9)
1995 $198,000 -0- -0- $14,375
1994 $180,000 -0- 55,000 $13,485
1993 $180,000 -0- 20,000 $15,374
</TABLE>
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Footnotes on following pages.
6
<PAGE> 10
(1) The amounts shown do not include premiums for supplemental disability
insurance, perquisites and other personal benefits, if any, the value of
all of which for each named officer did not exceed the lesser of $50,000
or 10% of the aggregate salary and bonus compensation for such officer.
The amounts of compensation that determined the makeup of the list of
officers excluded non-recurring payments that were a part of the
compensation package of newly hired officers.
(2) Includes amounts paid as a bonus in a subsequent year for services
rendered in the year indicated.
(3) The Company has no long-term compensation plan other than the Restated
1990 Stock Option Plan (the "Option Plan"), which grants options to
purchase shares of Common Stock. The options listed in the table include
replacement options issued in exchange for surrender of an equal number
of previously issued options with higher exercise prices. The exercise
price of each option listed in the table was at or above the current
market price per share of Common Stock on the date of grant.
(4) Consists of contributions by the Company to the Retirement Savings Plan
and Supplemental Retirement Savings Plan based on the salary and bonus
received in the year indicated and, in the case of Messrs. Benaroya,
Remeta and Wilkinson, premiums on individual term life insurance policies
in the respective amounts of $19,900, $2,090 and $3,330.
(5) In 1995, Mr. Benaroya surrendered outstanding options to purchase 150,000
shares in exchange for replacement options to purchase an equal number of
shares at a lower exercise price. Therefore, there was no net gain in the
number of options outstanding as a result of the 1995 grant. In 1993, the
following options exercisable at a price of $15 were granted pursuant to
the Option Plan: (a) incentive stock option to purchase 26,000 shares for
a term of five years with four year vesting; (b) nonqualified stock
option to purchase 24,000 shares for a term of 10 years with five year
vesting; (c) nonqualified stock option to purchase 50,000 shares for a
term of 10 years with five year vesting, to be exercisable only if the
closing price of Common Stock on the NASDAQ National Market ("Closing
Price") exceeds $20 for a continuous period of 90 calendar days (a
"Measuring Period"); and (d) nonqualified stock option to purchase 50,000
shares for a term of 10 years with five year vesting, to be exercisable
only if the Closing Price exceeds $25 for a Measuring Period. During
Fiscal 1995, the above options were surrendered in exchange for the
following options under the Option Plan: (e) incentive stock option
granted on February 22, 1995 to purchase 23,528 shares at a price of
$9.35 for a term of five years with four year vesting; (f) nonqualified
stock option granted on February 22, 1995 to purchase 26,472 shares at a
price of $8.50 for a term of 10 years with five year vesting; and (g)
nonqualified stock option granted on August 17, 1995 to purchase 100,000
shares at a price of $8.50 for a term of 10 years with five year vesting.
Vesting of the options is subject to acceleration in accordance with the
provisions of the Option Plan.
(6) In 1995, Mr. Remeta surrendered outstanding options to purchase 60,000
shares in exchange for replacement options to purchase an equal number of
shares at a lower exercise price. Therefore, there was no net gain in the
number of options outstanding as a result of the 1995 grant. In 1993, the
following options were granted pursuant to the Option Plan: (a) incentive
stock option to purchase 20,000 shares; (b) incentive stock option to
purchase 13,000 shares, to be exercisable only if the Closing Price
exceeds $20 for a Measuring Period; (c) nonqualified stock option to
purchase 7,000 shares, to be exercisable only if the Closing Price
exceeds $20 for a Measuring Period; and (d) nonqualified stock option to
purchase 20,000 shares, to be exercisable only if the Closing Price
exceeds $25 for a Measuring Period. The options were exercisable at a
price of $15 for a term of 10 years with five year vesting. During Fiscal
1995, the above options were surrendered in exchange for the following
options under the Option Plan: (e) nonqualified stock option granted on
February 22, 1995 to purchase 20,000 shares; and (f) incentive stock
option granted on August 17, 1995 to purchase 40,000 shares. The
replacement options are exercisable at a price of $8.50 for a term of 10
years with five year vesting. Vesting of the options is subject to
acceleration in accordance with the provisions of the Option Plan.
- ----------------------
Footnotes continued on following page.
7
<PAGE> 11
- ----------------------
(7) In 1994, Mr. Wilkinson surrendered outstanding options to purchase 10,000
shares in exchange for replacement options to purchase an equal number of
shares at a lower exercise price. The incentive stock options granted in
1993 are exercisable for a term of 10 years at an exercise price of
$14.25 as to 10,000 shares and an exercise price of $16.50 as to 10,000
shares. The options granted in 1993 vest in equal annual installments
over five years, provided, however, that they are fully exercisable in
the event Mr. Wilkinson's employment is terminated by the Company. The
option exercisable at $16.50 was surrendered and repriced in 1994 and is
now an incentive stock option exercisable at a price of $10.00 for a term
of 10 years with 5 year vesting, subject to acceleration in accordance
with the provisions of the Option Plan. United Retail Incorporated is the
Company's operating subsidiary.
(8) Ms. Demaio was promoted from Vice President-Merchandise in February 1995.
The stock option granted in 1994 is exercisable at a price of $8.75.
Stock options granted to Ms. Demaio totalling 38,000 shares have the
benefit of an arrangement in which the Company will pay Ms. Demaio the
difference if $34.28 exceeds the market price per share at the time of
exercise. The payment is conditioned, among other things, on the
Company's achieving annual net sales of $1 billion and operating income
of at least 7% of net sales. The stock option granted in 1995 is
exercisable at a price of $8.50. The above stock options are incentive
stock options with a term of 10 years and five year vesting, subject to
acceleration in accordance with the provisions of the Option Plan. United
Retail Incorporated is the Company's operating subsidiary.
(9) Mr. Carroll was promoted from Vice President-General Counsel in March
1996. In 1994, he surrendered all his outstanding options (to purchase
40,000 shares) in exchange for replacement options to purchase an equal
number of shares at a lower exercise price. The replacement options are
incentive stock options exercisable at a price of $10.00. Additional
options granted in 1994 were a nonqualified stock option to purchase
3,600 shares and an incentive stock option to purchase 11,400 shares, in
each case at an exercise price of $8.75. The incentive stock option
granted in 1993 was exercisable at a price of $18.50. All the foregoing
options provide for a term of 10 years with five year vesting. Vesting of
options is subject to acceleration in accordance with the provisions of
the Option Plan.
8
<PAGE> 12
EMPLOYMENT AGREEMENTS
The Company has Restated Employment Agreements with Messrs. Benaroya and
Remeta entered into on July 14, 1989 and restated as of November 1, 1991. The
Company also has an Employment Agreement with Mr. Carroll entered into on March
1, 1996. The Agreements expire on May 20, 1999. Under the Agreements, annual
base salaries are adjusted for inflation and may be increased further by the
Compensation Committee of the Board of Directors. Mr. Carroll's base salary is
$210,000. See, "Summary Compensation Table" regarding Messrs. Benaroya and
Remeta. The Agreements also provide for the award of bonuses with respect to
each spring season and each fall season based on meeting or exceeding seasonal
earnings targets. The contractual earnings targets are established by the
Compensation Committee of the Board and for Fiscal 1996 are the operating income
targets generally applicable under the Company's incentive program for officers.
The potential bonus ranges from nothing to a specified percentage of the
officer's base salary at the time of the incentive compensation award. The
potential bonus ranges up to 120% of base salary at the time of the incentive
compensation award for Mr. Benaroya, up to 100% for Mr. Remeta and up to 80% for
Mr. Carroll.
If the Company terminates employment without cause (as defined in the
pertinent Agreement) before the end of the contractual term, the Company must
pay the officer, in addition to accrued salary and benefits earned to the date
of termination, (a) severance pay for three years after the termination, plus a
tax gross-up which reimburses him for any federal excise taxes ("Federal Excise
Taxes") owed to the extent that Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), applies to the payment, and (b) a pro-rata bonus
for the year of termination. The annual severance pay is $500,000 for Mr.
Benaroya, $250,000 for Mr. Remeta and $210,000 for Mr. Carroll. The officers are
expressly under no obligation to seek other employment during the severance
period, and there would be no offset against any amounts due to them on account
of any subsequent employment. The Agreements also contain covenants not to
compete with the Company during employment or while severance pay is being
received and not to disclose the Company's confidential information at any time
during or after employment.
RETIREMENT SAVINGS PLAN
The Company has a profit-sharing plan qualified under the Code, the
Retirement Savings Plan (the "RSP"), in which all employees who have completed
one year of service are eligible to participate. Each participant is entitled to
direct that a contribution of 1%, 2% or 3% of his compensation be made under the
RSP as a basic contribution that reduces his compensation under the Code. For
each participant who makes a basic contribution, the Company makes a matching
cash contribution equal to one-half of the basic contribution or such greater or
lesser amount as the Company may determine in its sole discretion, provided,
however, that in no event shall the matching contribution for a participant
exceed certain maximum limits imposed by governmental regulations applicable to
qualified plans. All contributions made by the Company are for the exclusive
benefit of participants and vest 100% after seven years of service with the
Company and in lesser percentages after six, five, four and three years of
service with the Company.
The Company has a nonqualified supplemental retirement plan (the "SRSP").
Under the SRSP the Company makes cash contributions to a separate trust fund
equal to the amount of contributions that it otherwise would have made pursuant
to the terms of the RSP but which were disallowed by governmental regulations
limiting contributions to qualified plans. The Company also makes cash
retirement contributions to the trust fund under the SRSP equal to 6% of each
participant's compensation, provided, however, that the Company may contribute a
greater or lesser amount in its sole discretion and provided, further, that
retirement contributions to the SRSP are limited to officers, regardless of
their earnings, and employees who earn $100,000 per annum or more and who in
either case were employed by the Company before January 1, 1993.
The Benefits Committee of the Board of Directors oversees the RSP and
SRSP.
9
<PAGE> 13
The following table sets forth information with respect to the grant of
stock options in Fiscal 1995 to the Company's Chief Executive Officer and the
four other most highly compensated executive officers of the Company and its
subsidiaries:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of % of Total
Securities Options
Name Underlying Granted to Potential Realizable Value at
- ---- Option Employees in Exercise Expiration Assumed Annual Rates of Stock
Granted Fiscal Year Price Date Appreciation for Option Term
------- ----------- ----- ---- ----------------------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Mr. Raphael Benaroya(1) 23,528(2) 7.3% $9.35 2/21/00 $ 35,292 $ 102,112
26,472(3) 8.2% $8.50 2/22/05 $141,625 $ 358,696
100,000(3) 31.1% $8.50 8/17/05 $331,000 $1,030,000
Mr. George R. Remeta(1) 20,000(3) 6.2% $8.50 2/22/05 $107,000 $ 271,000
40,000(4) 12.4% $8.50 8/16/05 $132,400 $ 412,000
Mr. Charles R. Wilkinson -0-
Ms. Ellen Demaio 20,000(4) 6.2% $8.50 2/21/05 $107,000 $ 271,000
Kenneth P. Carroll, Esq -0-
---------- ---- -------- ----------
Total for group of five officers 230,000(5) 71.5% $854,317 $2,444,808
========== ==== ======== ==========
</TABLE>
- ------------------
(1) Received replacement options issued in exchange for surrender of an equal
number of previously issued options with higher exercise prices
("repriced options").
(2) Incentive stock option with four year vesting.
(3) Nonqualified stock option with five year vesting.
(4) Incentive stock option with five year vesting.
(5) The net increase in the number of underlying securities was 20,000 shares
after giving effect to the related surrender of repriced options to
purchase 210,000 shares. Messrs. Benaroya and Remeta surrendered repriced
options to purchase a number of shares equal to the shares underlying the
replacement options listed in the table above.
The assumed rates of growth in the table above were selected for
illustration purposes only and are not intended to forecast future stock prices.
The closing price of Common Stock on the trading day before each of the option
grants was $8.50 or less.
10
<PAGE> 14
The following table sets forth information with respect to option
exercises and total options held by the Company's Chief Executive Officer and
the four other most highly compensated executive officers of the Company.
AGGREGATED OPTION EXERCISES IN FISCAL 1995 AND FISCAL 1995 YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options At In-The-Money Options At
Fiscal 1995 Year End Fiscal 1995 Year End(1)
Shares
Acquired
On Value
Name Exercise Realized Exercisable Non-Exercisable Exercisable Non-Exercisable
- ---- -------- -------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Raphael Benaroya -0- -0- 1,187,500 150,000 $2,695,313 -0-
Mr. George R. Remeta -0- -0- 240,625 60,000 $ 404,297 -0-
Mr.Charles R. Wilkinson -0- -0- 38,000 30,000 -0- -0-
Ms. Ellen Demaio -0- -0- 12,000 26,000 -0- -0-
Kenneth P. Carroll, Esq -0- -0- 11,000 44,000 -0- -0-
</TABLE>
- -----------
(1) Fair market value of the Common Stock at Fiscal 1995 year end was $3.875 per
share.
11
<PAGE> 15
REPORT OF COMPENSATION COMMITTEE
MEMBERSHIP; AUTHORITY
The Compensation Committee of the Board of Directors of the Company has
been composed of Richard W. Rubenstein, as Chairman, Ilan Kaufthal and Vincent
Langone since May 1995. Mr. Langone replaced Raphael Benaroya, the Company's
Chairman of the Board, President and Chief Executive Officer, as part of a
rotation of committee assignments in May 1995. Mr. Benaroya was Chairman of the
Compensation Committee until May 1995 but he abstained on votes that affected
his compensation.
In February 1995, subject to approval by the Board of Directors, the
Compensation Committee determined the cash compensation of each officer whose
combined base salary and potential cash bonus could have exceeded $150,000 per
annum. Option grants were made pursuant to the Company's Restated 1990 Stock
Option Plan (the "Option Plan") by the members of the Compensation Committee
other than Mr. Benaroya.
Insurance, retirement savings plans and other benefits were overseen by
the Benefits Committee but were taken into account by the Compensation
Committee. The Audit Committee reviewed transactions between the Company and its
subsidiaries and their officers and their affiliates. See, "Certain
Transactions" and "Compensation Committee Interlocks and Insider Participation."
POLICIES
The principal objective of the Company's Fiscal 1995 executive
compensation program was to motivate officers to maximize the Company's
operating income and thereby to increase stockholder returns. The program was
intended to be competitive and equitable. The components of the executive
compensation program for Fiscal 1995 were:
- base salary with a modest percentage increase in excess of
the inflation rate awarded after two years at the same base salary and a
larger increase in the case of promotion
- cash bonus awards if certain operating income targets had
been achieved
- Company retirement savings contributions generally equal to
6% of combined base salary and cash bonus, if any
- matching retirement savings contributions by the Company
with a maximum of 1.5% of combined base salary and cash bonus if the
officer contributed 3% or more
- stock options exercisable at or above fair market value on
the date of grant.
Except for base salaries, all the components of the executive
compensation program were affected by the Company's operating results. In this
way, the economic interests of the officers were aligned with those of the
stockholders.
CEO COMPENSATION
In Fiscal 1995, Mr. Benaroya's base salary was $551,000 compared to
$500,000 per annum in Fiscal 1994 and Fiscal 1993. Between his previous raise in
May 1992 and February 1995, the pertinent consumer price index rose
approximately 8%. The Compensation Committee considers Mr. Benaroya's raise to
have been within the general guideline for officers set forth above. The
business judgment on the amount of Mr. Benaroya's raise was subjective in nature
and unrelated to quantifiable measures of performance. The operating income
targets for the bonus awards program (which the Company deems to be proprietary
and confidential) were not met in Fiscal 1995. As a result, neither Mr. Benaroya
nor the other officers received awards under the bonus program with respect to
Fiscal 1995. (Certain officers hired in Fiscal 1994, however, received
non-recurring payments in Fiscal 1995 as part of the compensation packages they
received in connection with their hiring and as special achievement awards
outside the bonus program formula.)
12
<PAGE> 16
TEN-YEAR OPTION REPRICING
<TABLE>
<CAPTION>
Number of Length of Original
Shares Option Term
Underlying Market Price of Exercise Price New Remaining at
Options Stock at Time of at Time of Exercise Date of
Name Date Repriced(#) Repricing($) Repricing($) Price ($) Repricing
---- ---- ----------- ---------------- -------------- --------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Raphael Benaroya(1) 08/17/95 100,000 7.25 15.00 8.50 8 yrs. 1 mo.
02/22/95 26,472 8.50 15.00 8.50 3 yrs. 7 mos.
02/22/95 23,528 8.50 15.00 9.35 8 yrs. 7 mos.
George R. Remeta(2) 08/17/95 40,000 7.25 15.00 8.50 8 yrs. 1 mo.
02/22/95 20,000 8.50 15.00 8.50 8 yrs. 7 mos.
Charles R. Wilkinson(3) 05/20/94 10,000 8.75 16.50 10.00 9 yrs. 1 mos.
Kenneth P. Carroll(4) 05/20/94 20,000 8.75 18.50 10.00 9 yrs. 0 mos.
05/20/94 20,000 8.75 16.50 10.00 4 yrs. 10 mos.
Debra L. Berit(5) 05/20/94 10,000 8.75 18.50 10.00 5 yrs. 4 mos.
07/09/93 10,000 14.00 22.00 18.50 6 yrs. 2 mos.
William J. Commer(5) 07/09/93 10,000 14.00 21.50 18.50 6 yrs. 2 mos.
Julie L. Daly(6) 05/20/94 5,000 8.75 15.00 10.00 4 yrs. 10 mos.
Kent Frauenberger(7) 05/20/94 5,000 8.75 18.50 10.00 6 yrs. 0 mos.
Mori Mackenzie(5) 05/20/94 5,000 8.75 17.00 10.00 5 yrs. 0 mos.
Bradley Orloff(8) 05/20/94 5,000 8.75 18.50 10.00 6 yrs. 0 mos.
Fredric E. Stern(9) 05/20/94 10,000 8.75 18.50 10.00 9 yrs. 0 mos.
</TABLE>
- ---------------
(1) In 1995, Mr. Benaroya surrendered outstanding options to purchase 150,000
shares in exchange for replacement options to purchase an equal number of
shares at a lower exercise price. Therefore, there was no net gain in the
number of options outstanding as a result of the 1995 grant. The
replacement options under the Option Plan were: (i) incentive stock
option to purchase 23,528 shares for a term of five years with four year
vesting; (ii) nonqualified stock option to purchase 26,472 shares for a
term of 10 years with five year vesting; and (iii) nonqualified stock
option to purchase 100,000 shares for a term of 10 years with five year
vesting. Vesting of the options is subject to acceleration in accordance
with the provisions of the Option Plan. Mr. Benaroya is the Chairman of
the Board, President and Chief Executive Officer of the Company.
(2) In 1995, Mr. Remeta surrendered outstanding options to purchase 60,000
shares in exchange for replacement options to purchase an equal number of
shares at a lower exercise price. Therefore, there was no net gain in the
number of options outstanding as a result of the 1995 grant. The
replacement options under the Option Plan were: (i) nonqualified stock
option to purchase 20,000 shares; and (ii) incentive stock option to
purchase 40,000 shares, in each case exercisable for a term of 10 years
with five year vesting. Vesting of the options is subject to acceleration
in accordance with the provisions of the Option Plan. Mr. Remeta is the
Vice Chairman and Chief Financial Officer of the Company.
- ---------------
Footnotes continued on following page.
13
<PAGE> 17
(3) Executive Vice President - Organizational Development of United Retail
Incorporated.
(4) Senior Vice President - General Counsel of the Company.
(5) Former officer - option was cancelled after separation.
(6) Vice President - Planning and Distribution of United Retail Incorporated.
(7) Vice President - Logistics of United Retail Logistics Operations
Incorporated.
(8) Vice President - Marketing of United Retail Incorporated.
(9) Vice President - Controller of United Retail Incorporated.
The replacement stock options held by Messrs. Wilkinson and Carroll, Ms.
Daly, and Messrs. Frauenberger, Orloff, and Stern are incentive stock options
with a term expiring on May 19, 2004. The replacement options vest in five equal
annual installments commencing May 20, 1995, subject to acceleration in
accordance with the provisions of the Option Plan.
--------------------
In Fiscal 1995, the Compensation Committee authorized the repricing of
the stock options under the Option Plan held by Raphael Benaroya, the Chairman
of the Board, President and Chief Executive Officer of the Company, and George
R. Remeta, the Vice Chairman and Chief Financial Officer of the Company. The
repricing permitted Messrs. Benaroya and Remeta to surrender outstanding options
("repriced options") in exchange for an equal number of options granted under
the Option Plan at a lower exercise price equal to or higher than the then
current market price. The replacement options had new vesting schedules pursuant
to which the options became exercisable in installments commencing at least one
year after the date of grant and generally extending beyond the May 1999
expiration of the Restated Employment Agreements between the Company and Messrs.
Benaroya and Remeta, respectively.
It was the Compensation Committee's view that the repriced options, with
an exercise price far above the market price of the underlying shares of Common
Stock at the time, were not serving the purposes of the Company's executive
compensation program. The Compensation Committee considered it to be in the
interests of the Company's stockholders to grant the Chief Executive Officer and
the Chief Financial Officer options that would be in the money sooner than the
options that they replaced and would provide economic gains and performance
incentives to the optionholders that much earlier.
In addition, it was agreed that Messrs. Benaroya and Remeta would not be
granted options under the Company's proposed 1996 Stock Option Plan if their
outstanding options were repriced. They would otherwise have been likely to
receive option grants under the 1996 Stock Option Plan, so the repricing was in
lieu of a probable increase in the total number of options granted to Messrs.
Benaroya and Remeta.
Mr. Benaroya did not participate in preparing the sections of this Report
captioned "CEO Compensation" and "Ten-Year Option Repricing."
Respectfully submitted,
Dated: March 31, 1996 COMPENSATION COMMITTEE
Raphael Benaroya, Chairman through
May 1995
Ilan Kaufthal
Vincent P. Langone
Richard W. Rubenstein, Chairman after
May 1995
14
<PAGE> 18
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of the Company has
been composed of Richard W. Rubenstein, as Chairman, Ilan Kaufthal and Vincent
Langone since May 1995. Mr. Langone replaced Raphael Benaroya, the Company's
Chairman of the Board, President and Chief Executive Officer, as part of a
rotation of committee assignments in May 1995. Mr. Benaroya was Chairman of the
Compensation Committee until May 1995 but he abstained on votes that affected
his compensation.
In February 1995, subject to approval by the Board of Directors, the
Compensation Committee determined the cash compensation of each officer whose
combined base salary and potential cash bonus could have exceeded $150,000 per
annum. Option grants were made pursuant to the Option Plan by the members of the
Compensation Committee other than Mr. Benaroya.
Mr. Benaroya is a member of the Compensation Committee of the Board of
Directors of Russ Berrie and Company, Inc. Russell Berrie is the Chairman of the
Board and Chief Executive Officer of Russ Berrie and Company, Inc. and is a
Director of the Company.
Oldco, Inc. ("Oldco"), which is a subsidiary of The Limited, granted to
United Retail Incorporated, a subsidiary of the Company, pursuant to agreements
dated as of April 30, 1989, as amended (the "Sublicensing Agreements"),
non-exclusive trademark sublicenses to manufacture and sell accessories with a
national brand name. During Fiscal 1995, United Retail Incorporated made
payments of approximately $273,000 under the Sublicensing Agreements. Subject to
certain limitations, each of the sublicenses is renewable annually by United
Retail Incorporated if the corresponding license is in effect. Management
believes that the terms of the Sublicensing Agreements are not more favorable to
Oldco than the terms that would be available in an arm's length transaction
between unaffiliated parties.
American Licensing Group, L.P. ("ALGLP") provides management and
administrative services to Oldco under a management services agreement between
ALGLP and Oldco dated as of August 26, 1989 (the "Management Services
Agreement") for a base fee and a share of the net profits of Oldco, provided
that the amount of profit-sharing payable shall not exceed $150,000 per annum.
During Fiscal 1995, total fees by Oldco to ALGLP were approximately $114,000.
The partners of ALGLP are an affiliate of The Limited, which owns a 20% limited
partnership interest, and RB, Inc., an affiliate of Raphael Benaroya, the
Chairman of the Board, President and Chief Executive Officer of the Company,
which owns an 80% partnership interest. Mr. Benaroya has advised the Company
that he believes the arrangements made to have ALGLP provide management and
administrative services to Oldco, including the execution and delivery of the
Management Services Agreement, were not more favorable to ALGLP than the
arrangements that would have been available to Oldco in a transaction with a
service provider unaffiliated with Mr. Benaroya.
ALGLP granted to United Retail Incorporated non-exclusive trademark
sublicenses to manufacture and sell foundations and sleepwear with a national
brand name pursuant to agreements dated as of March 11, 1994, as amended, and
dated as of March 17, 1995, respectively. During Fiscal 1995, United Retail
Incorporated made royalty payments to ALGLP of approximately $172,000.
ALGLP subleases a two-room suite of offices from United Retail
Incorporated, which also provides certain office services and supplies to ALGLP
at estimated cost. During Fiscal 1995, ALGLP paid approximately $6,000 rent and
reimbursed United Retail Incorporated approximately $28,000 for office services
and supplies. At February 3, 1996, the account receivable from ALGLP was
approximately $5,000, which has been paid in full.
Management believes that the terms of the business arrangements between
United Retail Incorporated and ALGLP are not more favorable to ALGLP than the
arrangements that would be available in arm's length transactions between
unaffiliated parties.
15
<PAGE> 19
The Company is required to bear the expenses of registering shares of
Common Stock under the Securities Act as follows. Raphael Benaroya, the Chairman
of the Board, President and Chief Executive Officer of the Company, and the
Company are among the parties to the Amendment to the Restated Stockholders'
Agreement. Pursuant to the Amendment to the Restated Stockholders' Agreement,
Limited Direct Associates, L.P. ("LDA"), an affiliate of The Limited, has the
right ("Demand Registration Right") on two occasions to require the Company to
prepare and file a registration statement under the Securities Act with respect
to not more than 2,500,000 shares of Common Stock. Mr. Benaroya has a similar
Demand Registration Right exercisable on one occasion with respect to an
offering of not more than 2,687,500 shares of Common Stock. Further, under the
terms of the Amendment to the Restated Stockholders' Agreement, in the event
that the Company proposes to register any of its securities under the Securities
Act for its own account (subject to certain exceptions), or pursuant to the
exercise of a Demand Registration Right, the other parties to the Amendment to
the Restated Stockholders' Agreement, including George R. Remeta, the Vice
Chairman and Chief Financial Officer of the Company, Charles R. Wilkinson, the
Executive Vice President Organizational Development of United Retail
Incorporated, Ellen Demaio, the Senior Vice President-Merchandise of United
Retail Incorporated, and certain other stockholders are entitled to include
shares in such registration, subject to the right of the underwriters of any
such offering to limit the number of shares included in such registration. In
addition to the Demand Registrations provided in the Amendment to the Restated
Stockholders' Agreement, the Company has granted immediately exercisable Demand
Registration Rights requiring the Company to prepare and file registration
statements under the Securities Act with respect to all shares of Common Stock
issuable upon the exercise of employee stock options held by all employees, and
therefore including Mr. Benaroya, Mr. Remeta, Mr. Wilkinson, Mr. Carroll, Ms.
Demaio, and the other executive officers.
16
<PAGE> 20
STOCKHOLDER RETURN GRAPH
The following graph shows the change at February 3, 1996 in the value of
$100 invested in Common Stock of the Company on March 11, 1992 at $16 per share
compared with the changes since February 29, 1992 in the Standard & Poor's 500
Composite Stock Index and the Standard & Poor's Retail Specialty Apparel Stock
Index. Both indices include companies that sell products other than or in
addition to women 's apparel.
<TABLE>
<CAPTION>
3/92 1/93 1/94 1/95 1/96
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
UNITED RETAIL GROUP, INC 100 150 59 50 24
S & P 500 100 109 123 124 172
S & P RTL STRS (SPCLTY APP) 100 92 78 63 75
</TABLE>
17
<PAGE> 21
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of shares of Common Stock of the Company by persons who
were known by the Company to be the beneficial owners of more than 5% of the
outstanding shares. Except as noted below, each of the persons listed has sole
investment and voting power with respect to the shares indicated. All
information was determined in accordance with Rule 13d-3 under the Exchange Act
based on information in filings by the persons listed with the Securities and
Exchange Commission. Except as noted below, all information is as of December
31, 1995.
<TABLE>
<CAPTION>
Amount of Percent of
Name and Address Beneficial Outstanding
of Beneficial Owner Ownership Shares
------------------- ---------- -----------
<S> <C> <C>
Mr. Raphael Benaroya(1)............................. 2,692,795 20.1%
365 West Passaic Street
Rochelle Park, New Jersey 07662
Limited Direct Associates, L.P.(2) ................. 2,600,000 21.3%
Three Limited Parkway
Columbus, Ohio 43216
Mr. Julian H. Robertson, Jr. (3) ................. 1,390,300 11.4%
101 Park Avenue
New York, New York 10178
Rockefeller & Co., Inc.............................. 982,200 8.1%
30 Rockefeller Plaza
New York, New York 10112
Goldman, Sachs & Co................................. 918,177 7.5%
85 Broad Street
New York, New York 10004
</TABLE>
- ----------------
(1) As of March 31, 1996. Includes 1,192,795 shares which may be acquired
within 60 days by the exercise of stock options. See "Security Ownership
of Management - Stockholders' Agreement" for a description of voting
arrangements to which these shares are subject.
(2) As of February 3, 1996. Limited Direct Associates, L.P. is an affiliate
of The Limited. See "Security Ownership of Management - Stockholders'
Agreement" for a description of voting arrangements to which these shares
are subject.
(3) As of February 3, 1996. Comprising 1,308,900 shares held by Tiger
Management Corporation and 81,400 shares held by Panther Management
Company L.P.
18
<PAGE> 22
SECTION 16(B) FILINGS
Officers, directors and principal stockholders of the Company are
required to file with the Securities and Exchange Commission Statements of
Changes in Beneficial Ownership with respect to the Company's Common Stock,
designated as Form 4's. The Form 4's are required to be filed, with certain
exceptions, if a reporting person acquires or disposes of beneficial ownership
of the Company's Common Stock. Form 4's are due by the tenth of the month
beginning after the reportable transaction occurs. Transactions not required to
be included on a Form 4 are reported after the end of the fiscal year on Annual
Statements of Changes In Beneficial Ownership, designated as Form 5's. Former
officers , directors and principal stockholders are also required to file for up
to six months.
The following information is based on the dates copies of Form 4's and
Form 5's were received by the Company from reporting persons with respect to
transactions in Fiscal 1995.
Charles R. Wilkinson, the Executive Vice President - Organizational
Development of United Retail Incorporated, was late in filing Form 4's on two
occasions with respect to Fiscal 1995 transactions. One form was late by two
business days and reported the sale of 34,500 shares; the other form was late by
three business days and reported the sale of 5,000 shares and the purchase of 27
shares.
A former officer of the Company, Trudy Sullivan, after having been
separated did not provide the Company with a copy of a Form 5 relating to the
cancellation of her employee stock options.
CERTAIN TRANSACTIONS
Before July 1989, the Company was an indirect, wholly-owned subsidiary of
The Limited, which has retained an interest in the Company. See "Security
Ownership of Principal Stockholders." Seven of The Avenue(R) stores are
subleased from subsidiaries of The Limited pursuant to an Amended and Restated
Master Affiliate Sublease Agreement, dated as of July 17, 1989, which allows
United Retail Incorporated to sublease the stores until the current principal
leases expire at various dates from 1996 to 2001. Generally, the rent payable by
the Company under each sublease is either 10% of net sales or the pro-rata
portion of the rent under the principal lease allocable to the subleased space.
United Retail Incorporated was charged $1.2 million as its share of the rent in
Fiscal 1995. Management believes that the terms of the Restated Master Affiliate
Sublease Agreement are not more favorable to The Limited and its subsidiaries
than the terms that would have been available in an arm's length transaction
between unaffiliated parties.
See "Compensation Committee Interlocks and Insider Participation" for
information regarding certain transactions between certain subsidiaries of the
Company and affiliates of The Limited and of Mr. Benaroya.
Charles R. Wilkinson, the Executive Vice President - Organizational
Development of United Retail Incorporated, borrowed $180,000 from United Retail
Incorporated in Fiscal 1994 to pay personal and investment expenses. The loan
bears interest at the prime rate plus one percentage point, payable
semi-annually The principal amount was the highest amount outstanding since the
loan was made and was the amount outstanding on March 31, 1996. Mr. Wilkinson's
loan is due on demand with recourse and is secured by a second mortgage on Mr.
Wilkinson's residence. (The value of the residence as collateral is subject to
the local residential real estate market and there is no assurance that the
market value at the time demand is made for payment will equal the total of the
amounts owing under the senior mortgage held by a third party and under the
junior mortgage held by the Company.)
Alan R. Jones, the Vice President - Real Estate of United Retail
Incorporated, borrowed approximately $75,000 from United Retail Incorporated in
August 1995 to pay investment expenses. The loan is an unsecured loan payable in
February 1999 subject to acceleration under certain circumstances. The loan
bears interest at the prime rate plus one percentage point, payable
semi-annually. The principal amount was the highest amount outstanding since the
loan was made and was the amount outstanding on March 31, 1996.
19
<PAGE> 23
Mitchell Kosh, the former Vice President - Human Resources of United
Retail Incorporated, borrowed approximately $75,000 from United Retail
Incorporated in August 1995 to pay investment expenses. The loan was paid in
full in Fiscal 1996 and bore interest at the prime rate plus one percentage
point. The principal amount was the highest amount outstanding during the term
of the loan.
PROPOSAL TO APPROVE ADOPTION OF 1996 STOCK OPTION PLAN
INTRODUCTION
On November 17, 1995, the Board of Directors of the Company adopted the
1996 Stock Option Plan (the "Plan"), subject to stockholder approval. The
following is a fair summary of the terms of the Plan, which is nevertheless
qualified in its entirety by reference to the complete text of the plan attached
to this Proxy Statement as Exhibit A. The Restated 1990 Stock Option Plan as
currently in effect is referred to as the "Existing Plan."
PURPOSE OF THE PLAN
The purpose of the Plan is to attract and retain the best available
directors and executive and key management associates for the Company and its
subsidiaries and to encourage the highest level of performance by them, thereby
enhancing the value of the Company for the benefit of its stockholders. The Plan
is also intended to motivate directors and executive and key management
associates to contribute to the Company's future growth and profitability and to
reward their performance in a manner that provides them with a means to increase
their holdings of the Common Stock of the Company and aligns their interests
with the interests of the stockholders of the Company.
NUMBER OF SHARES AVAILABLE FOR OPTION GRANTS; OUTSTANDING OPTIONS
The Plan provides for awards of options to purchase up to 440,000 shares
of Common Stock, equivalent to 3.6% of the outstanding shares, during the term
of the Plan. Awards are subject to adjustment in certain circumstances as
hereinafter described. At March 31, 1996, the Existing Plan had 25,625 shares of
Common Stock available to be optioned. If the adoption of the 1996 Stock Option
Plan is not approved by the stockholders, the Existing Plan shall remain in
effect. If the adoption of the 1996 Stock Option Plan is approved, no further
option grants will be made under the Existing Plan except in exchange for the
surrender and cancellation of an equal number of outstanding options issued
under the Existing Plan. At March 31, 1996, there were 2,163,125 options
outstanding, equivalent to 17.7% of the outstanding shares of Common Stock. Of
the total options outstanding, 644,500 options, equivalent to 5.3% of
outstanding shares, were issued after the Company's initial public offering in
March 1992.
See, "Aggregated Option Exercises in Fiscal 1995 and Fiscal 1995 Year End
Option Values" for information with respect to total options held by the
Company's Chief Executive Officer and the four other most highly compensated
executive officers of the Company and its subsidiaries; Mr. Carroll was granted
an option in March 1996 to purchase 10,000 shares. As of March 31, 1996, the
other associates of the Company held options to purchase a total of 306,000
shares; the Public Directors a total of 42,000 shares; and a former Director of
the Company a total of 6,000 shares.
ELIGIBILITY AND PARTICIPATION; ADMINISTRATION
Eligibility to participate in the Plan is limited to full-time associates
of the Company and its subsidiaries who are not Directors and to Public
Directors (see, "Security Ownership of Management - Stockholders' Agreement").
Approximately 1,500 full-time associates of the Company and its subsidiaries are
within the class eligible to participate in the Plan. The Company anticipates
that approximately 100 eligible associates will participate in the Plan. (Unless
otherwise indicated, references herein to optionees includes eligible associates
and Public Directors.) Participation in the Plan by associates is at the
discretion of the Committee and shall be based upon the associate's present and
potential contributions to the success of the Company and its subsidiaries and
such other factors as
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<PAGE> 24
the Committee deems relevant. Each Public Director will receive an annual award
of an option to purchase 3,000 shares.
The Compensation Committee of the Board of Directors (the "Committee")
will administer the Plan. The Committee has the full power in its discretion to
grant awards under the Plan, to determine the terms thereof, to interpret the
provisions of the Plan and to take such action as it deems necessary or
advisable for the administration of the Plan.
TYPE OF AWARDS UNDER THE PLAN
The Plan provides that the Committee may grant awards to eligible
associates of (i) incentive stock options ("ISO's"), and (ii) nonqualified stock
options ("NSO's"). All awards to Public Directors will be NSO's.
EXERCISE PRICE
The exercise price of Options held by associates is determined by the
Committee at the time of grant. The option price per share of Options held by
associates will not be less than 100% of the fair market value of the Common
Stock on the date of such grant ("Fair Market Value"). All Options to Public
Directors will be exercisable at Fair Market Value. The last reported sale price
of the Common Stock on the National Association of Securities Dealers, Inc.
National Market System was 5 1/4 per share on April 8, 1996.
VESTING
For Options held by associates, the Committee will determine at the time
of grant the terms under which Options shall vest and become exercisable.
Options granted to Public Directors will vest 20% annually commencing on the
completion of the first full year after the date of grant.
SPECIAL LIMITATIONS ON ISO'S
The Internal Revenue Code (the "Code") and regulations thereunder
provide that the total Fair Market Value of shares subject to ISO's that are
exercisable for the first time by an eligible associate in a given calendar year
shall not exceed $100,000. ISO's may not be granted more than ten years after
the date of adoption of the Plan by the Board of Directors.
EXERCISE OF OPTIONS
An Option may be exercised by written notice to the Company stating the
number of shares of Common Stock with respect to which the Option is being
exercised and tendering payment therefor. Shares of Common Stock already held by
the optionholder (valued at the fair market value on the date of exercise) may
be tendered in payment of the exercise price.
NONTRANSFERABILITY OF OPTIONS
Options are not transferable except by will, applicable laws of descent
and distribution or qualified domestic relations orders (as defined in the
Code).
EXPIRATION OF OPTIONS
Options will expire at such time as the Committee determines; provided,
however, that an NSO may not be exercised more than ten years and one day from
the date of grant and an ISO may not be exercised more than ten years from the
date of grant.
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TERMINATION OF OPTIONS
Options may be exercised within 90 days after the termination of an
associate's employment or Director's term (other than by death or total
disability). Upon the death of an associate or Public Director while employed by
the Company or its subsidiaries or during a Director's term (or upon death
within 90 days after termination of employment or Director's term), Options
shall remain exercisable for one year following termination. Upon total
disability of an associate or Public Director while employed by the Company or
its subsidiaries or during a Director's term, Options shall remain exercisable
for one year following termination. In no case, however, shall an option be
exercisable later than the end of the term specified in the grant.
LAPSED AWARDS
Shares of Common Stock attributable to unexercised Options that expire
or are terminated, surrendered or cancelled may become available for subsequent
award under the Plan at the Committee's discretion.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
The number and class of shares available under the Plan may be adjusted
by the Committee to prevent dilution or enlargement of rights in the event of
various changes in the capitalization of the Company.
AMENDMENT AND TERMINATION
The Board of Directors may suspend, amend, modify or terminate the Plan;
provided, however, that the Company's stockholders shall be required to approve
any amendment that would (i) materially increase the aggregate number of shares
issuable under the Plan, (ii) materially increase the benefits accruing to
optionees under the Plan, or (iii) materially modify the requirements for
eligibility to participate in the Plan.
Options granted prior to a termination of the Plan shall continue in
accordance with their terms following such termination. No amendment, suspension
or termination of the Plan shall adversely affect rights previously granted to
an optionee without his or her consent.
ACCOUNTING TREATMENT
No compensation expense accrues in connection with the vesting of
options granted under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
There will be no Federal income tax consequences to the optionee or the
Company upon the grant of either an ISO or an NSO under the Plan. Upon exercise
of an NSO, an optionee will recognize ordinary income in an amount equal to (i)
the fair market value, on the date of exercise, of the acquired shares of Common
Stock, less (ii) the exercise price of the NSO. The Company will be entitled to
a tax deduction in the same amount.
Upon the exercise of an ISO, an optionee recognizes no immediate taxable
income. Income recognition is deferred until the optionee sells the shares of
Common Stock. If the Option is exercised no later than three months after the
termination of the optionee's employment, and the optionee does not dispose of
the shares acquired pursuant to the exercise of the Option within two years from
the date the Option was granted and within one year after the exercise of the
Option, the gain on the sale will be treated as long term capital gain. Certain
of these holding periods and employment requirements are liberalized in the
event of an optionee's death or disability while employed by the Company. The
Company is not entitled to any tax deduction, except that if the Common Stock is
not held for the full term of the holding period outlined above, the gain on the
sale of such Common Stock, being the lesser of (i) the fair market value of the
Common Stock on the date of exercise minus the exercise price, or (ii) the
amount realized on disposition minus the exercise price, will be taxed to the
optionee as ordinary
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<PAGE> 26
income and the Company will be entitled to a deduction in the same amount. The
excess of the fair market value of the Common Stock acquired upon exercise of an
ISO over the exercise price constitutes a tax preference item for purposes of
computing the "alternative minimum tax" under the Code.
TAX PAYMENT LOAN GUARANTY
The Committee will have authority, at the time of grant of an NSO or on
the exercise by the optionee of an Option which is not taxed as an ISO, to
authorize an unconditional guaranty of payment by the Company of a full recourse
loan on terms acceptable to the Committee obtained by the optionee who exercised
the Option from a commercial bank or a registered broker-dealer for the
exclusive purpose of paying personal income or excise taxes incurred as a result
of such exercise. Loan guaranties will be issued if the Committee, in its sole
discretion, determines them to be appropriate and in the best interests of the
Company to assist in the payment of income and excise taxes incurred on exercise
of an Option.
TAX WITHHOLDING
The Committee may either require payment or retain shares of Common
Stock otherwise issuable under the Plan, in order to satisfy applicable
withholding tax requirements.
APPROVAL OF PLAN
Approval of the adoption of the Plan requires the affirmative vote of a
majority of the votes cast at the Annual Meeting of Stockholders. FOR votes will
be counted in favor of approval of the Plan. AGAINST votes will be counted as
opposing approval of the Plan. ABSTAIN votes will not be counted for or against
approval, but will be counted for quorum purposes. Broker non-votes will not be
counted for any purpose.
It is the intention of the persons named in the accompanying form of
proxy to vote FOR the proposal unless a contrary choice is indicated by the
stockholder executing the proxy.
INDEPENDENT PUBLIC ACCOUNTANTS
During Fiscal 1995, Coopers & Lybrand LLP served as the Company's
independent public accountants and in that capacity rendered an opinion on the
Company's consolidated financial statements as of and for the year ended
February 3, 1996. The Company has selected Coopers & Lybrand LLP as its
independent public accountants for the current fiscal year.
Representatives of Coopers & Lybrand LLP are expected to be present at
the Annual Meeting. They will be available to respond to appropriate questions
and may make a statement if they so desire.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before
the Annual Meeting of Stockholders. However, if other matters should come before
the meeting, it is the intention of each of the persons named in the proxy to
vote in accordance with his judgment on such matters.
STOCKHOLDER PROPOSALS
Any proposals of stockholders that are intended to be presented at the
1997 Annual Meeting of Stockholders, but which are not received by the Secretary
of the Company at the principal executive offices of the Company on or before
December 23, 1996 may be omitted by the Company from the proxy statement and
form of proxy relating to that meeting.
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<PAGE> 27
EXPENSES OF SOLICITATION
The expenses of preparing, assembling, printing and mailing
the proxy and the material used in solicitation of proxies will be paid by the
Company. In addition to the use of the mails, solicitation may be made by
associates of the Company by telephone, mailgram, facsimile and personal
interview. The Company does not expect to pay any compensation for the
solicitation of proxies.
By Order of the Board of Directors,
Raphael Benaroya
Chairman of the Board
96proxy
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<PAGE> 28
Exhibit A
UNITED RETAIL GROUP, INC.
1996 STOCK OPTION PLAN
WHEREAS, United Retail Group, Inc., a Delaware corporation (the "Company"),
desires to attract and retain the best available directors, executives, and key
management associates for itself and its direct and indirect subsidiaries, to
provide long range inducements for them to remain associated with the Company
and its direct and indirect subsidiaries, to provide the highest level of
performance by such directors, executives and associates, and to acquire a
permanent stake in the Company with the interest and outlook of owners; and
WHEREAS, the Board of Directors of the Company determined that these objectives
would be promoted by granting certain directors, executives and associates
Options to acquire Shares of the Company;
NOW, THEREFORE, the Company hereby approves and adopts the United Retail Group,
Inc. 1996 Stock Option Plan on the following terms and conditions:
SECTION 1. DEFINITIONS. The following terms have the following meanings when
used in this Plan, in both singular and plural forms:
"ASSOCIATE" means any full-time associate of an Employer.
"CHANGE IN CONTROL" means (a) the acquisition after the Effective Date by any
person (defined for the purposes of this Section to mean any person within the
meaning of Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange
Act")), other than the Company, the Chief Executive Officer of the Company, or
an employee benefit plan created by the Board of Directors of the Company for
the benefit of its Associates, either directly or indirectly, of the beneficial
ownership (determined under Rule 13d-3 of the Regulations promulgated by the
Securities and Exchange Commission ("SEC") under Section 13(d) of the Exchange
Act) of any securities issued by the Company if, after such acquisition, such
person is the beneficial owner of securities issued by the Company having 20% or
more of the voting power in the election of Directors at the next meeting of the
holders of voting securities to be held for such purpose of all of the voting
securities issued by the Company, if such person acquired such beneficial
ownership without the prior consent of the Board of Directors of the Company;
(b) the election of a majority of the Directors, elected at any meeting of the
holders of voting securities of the Company, who were not nominated for such
election by the Board of Directors or a duly constituted committee of the Board
of Directors; or (c) the merger or consolidation with or transfer of
substantially all of the assets of the Company to another person if the Board of
Directors does not adopt a resolution, before the Company enters into any
agreement for such merger, consolidation or transfer, determining that it is not
a Change in Control.
"CODE" means the Internal Revenue Code of 1986, as now in effect or hereafter
amended and as now or hereafter interpreted, construed and applied by
regulations, rulings and cases.
<PAGE> 29
"COMMITTEE" means (a) the members of the Compensation Committee of the Board of
Directors of the Company who are disinterested persons within the meaning of SEC
Rule 16b-3(c)(2)(i), who, if they are fewer than all the members, shall
constitute an ad hoc committee of the Board of Directors, or (b) if the
Compensation Committee has fewer than two members who are disinterested persons
within the meaning of SEC Rule 16b-3(c)(2)(i), such other committee of the Board
of Directors of the Company having at least two members who are such
disinterested persons as may be designated from time to time by the Board of
Directors of the Company, provided however, that if any such Committee is not
composed exclusively of such disinterested persons, the Committee will consist
only of those members who are such disinterested persons.
"COMPANY" means United Retail Group, Inc., a Delaware corporation.
"DATE OF GRANT" means (a) in the case of a formula grant to a Director under
Section 2, the date of the annual meeting of stockholders of the Company to
which the grant relates, (b) in the case of a discretionary Committee grant
under Section 3, generally, the date action is taken by the Committee to grant
an Option, or (c) in the case of a discretionary Committee grant under Section 3
where the grant is being made to an Associate being hired by the Employer, in
the sole discretion of the Committee, the Associate's date of hire rather than
the date on which the Committee subsequently or previously approves the grant of
an Option to him or her; provided, however, that the Date of Grant for purposes
of determining whether or not an Option is an Incentive Option will be the later
of the date of such action or the date of hire.
"DIRECTOR" means a duly elected and acting member of the Board of Directors of
the Company.
"DISABILITY" means a disability as defined under the Company's long-term
disability benefits plan in effect on the Effective Date.
"EFFECTIVE DATE" means the date on which the Plan is approved by vote of the
stockholders of the Company.
"EMPLOYER" means the Company and any corporation which is a subsidiary
corporation of the Company, as defined in Section 424(f) of the Code.
"HOLDER" means the person who is, at the time of reference, entitled to exercise
an Option.
"INCENTIVE OPTION" means an Option which meets the requirements of Section 422
of the Code.
"NONINCENTIVE OPTION" means any Option which is not an Incentive Option.
"NOTICE OF EXERCISE" means a notice of exercise of any Option in a form
determined by the Committee.
"OPTION" means any right to purchase Shares granted under the Plan.
"OPTION AGREEMENT" means a written agreement between the Company and an Optionee
setting forth the terms of an Option.
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"OPTIONEE" means an Associate or Director to whom an unexercised Option has been
granted under the Plan.
"OPTION PRICE" means the price per Share at which an Option is exercisable.
"PLAN" means this United Retail Group, Inc. 1996 Stock Option Plan.
"PUBLIC DIRECTOR" means a Director who is neither an Associate nor a Director
proposed for nomination by Limited Direct Associates, L.P. (pursuant to the
Restated Stockholders' Agreement dated December 23, 1992 among the Company and
certain of its stockholders or any similar arrangement that may replace such
Agreement).
"RETIREMENT" means the Termination of an Associate after the Associate's 65th
birthday.
"SHARES" means shares of Common Stock, with par value equal to $.001 per share,
of the Company.
"TAX PAYMENT LOAN GUARANTY" shall mean a guaranty of payment made by the Company
in the amount and under the circumstances described in Section 5.
"TERMINATION" means the termination of the Optionee's relationship with the
Company including termination of the Optionee's employment and status as
Director. An Optionee who is absent from employment or other relationship with
the Company for a reason or purpose and for a period of time approved by the
Committee, in its sole discretion, shall not for the period of such absence be
deemed, solely because of such absence, to have suffered a Termination, unless
and until the Committee otherwise determines.
"TERMINATION DATE" means the date 10 years after the date the Plan is approved
by the vote of the stockholders of the Company.
"VALUE" means (a) if the Shares are listed or admitted to trading on a national
securities exchange (including the National Market System of the National
Association of Securities Dealers Automated Quotation System ("NASDAQ")), the
closing price of Shares on the principal securities exchange on which the Shares
are listed or admitted to trading on the day prior to the date of determination,
or if no closing price can be determined for the date of determination, the most
recent date for which such price can reasonably be ascertained, or (b) if the
Shares are not listed or admitted to trading on a national securities exchange
but are publicly traded, the mean between the representative bid and asked
prices of the Shares in the over-the-counter market at the closing of the day
prior to the date of determination or the most recent such bid and asked prices
then available, as reported by NASDAQ or if the Shares are not then quoted by
NASDAQ as furnished by any market maker selected from time to time by the
Company for that purpose, or (c) if neither (a) nor (b) are applicable, the fair
market value on the applicable date as determined by the Committee in good faith
using factors the Committee deems to be relevant including but not limited to
any sale of Shares to an independent third party.
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<PAGE> 31
SECTION 2. FORMULA GRANTS TO DIRECTORS.
2.1. ELIGIBILITY AND FORMULA. Beginning on the Effective Date and until
the Termination Date, all Public Directors elected at each year's annual meeting
of the stockholders will automatically be granted an Option to purchase 3,000
Shares. All Options granted under this Section are intended to be formula awards
under SEC Rule 16b-3(c)(2)(ii) and will not be subject to any provision of the
Plan that gives the Committee discretion to change the terms of such Options to
the extent that such Committee discretion will cause the Options granted under
this Section to cease to be formula awards under SEC Rule 16b-3(c)(2)(ii).
2.2. TERMS. All Options granted to Directors under this Section 2 will be
on the following terms:
2.2.1. Each Option will be a Nonincentive Option.
2.2.2. Each Option will have an Option Price equal to the Value of a
Share as of the Date of Grant.
2.2.3. Each Option will become exercisable as to 20% of the Shares
subject to the Option on the completion of the first full year after the Date of
Grant and as to an additional 20% of such Shares on the completion of each full
year thereafter prior to Termination.
2.2.4. Notwithstanding Section 2.2.3 but subject to Section 4.6,
each Option will become immediately exercisable as to 100% of the Shares subject
to the Option upon (a) a Change in Control or (b) the Optionee's death or
Disability, provided, however, that the Committee within 90 days after the
Termination of an Optionee for a reason other than death or Disability may make
his Option(s)) immediately exercisable as to 100% of the Shares subject to the
Option.
2.2.5. Each Option will lapse on the earliest of (a) the date 10
years and one day after the Date of Grant, or (b) the date one year after the
Termination of the Optionee if the Termination is due to death or Disability or
if the Optionee dies within 90 days of Termination, or (c) the date 90 days
after Termination if the Termination is for any reason other than death or
Disability, provided, however, that the Committee within 90 days after the
Termination of an Optionee may defer the lapse of his Option (s) to the date 10
years and one day after the Date of the Grant.
SECTION 3. DISCRETIONARY GRANTS TO ASSOCIATES.
3.1. ELIGIBILITY AND DISCRETIONARY AWARDS. Subject to the limitations
contained in the Plan, the Committee may, at any time prior to the Termination
Date, grant Options to Associates whom the Committee determines to be executive
and key management Associates of the Employer. In determining the Associates to
whom Options may be granted and the terms and conditions of such grants, the
Committee may take into account the nature of the services rendered by such
Associates, their past, present and potential contributions to the success of
the Employer, and such other factors as the Committee deems relevant. In no
event, however, shall the Committee grant Options to any Associate who is also a
Director on the Date of the Grant.
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<PAGE> 32
3.2. TERMS OF ASSOCIATE OPTIONS.
3.2.1. Subject to the provisions of the Plan and applicable law, the
Committee will, in its sole discretion, determine the terms and conditions of
any Options granted to an Associate at the time of grant.
3.2.2. In the absence of any provision in the grant of an Option to
the contrary, the Option will have the following terms:
(a) The Options will be Incentive Options with respect to the
maximum number of Shares that may be Incentive Options and Nonincentive Options
with respect to all other Shares.
(b) Each Option will have an Option Price equal to the Value
of a Share as of the Date of Grant.
(c) Each Option will become exercisable as to 20% of the
Shares subject to the Option on completion of the first full year of employment
of the Optionee after the Date of Grant and as to an additional 20% of such
Shares on the completion of each full year of such employment thereafter until
Termination.
(d) Each Option will lapse on the earliest of (i) for an
Incentive Option, the date 10 years after the Date of Grant, and for a
Nonincentive Option, the date 10 years and one day after the Date of Grant, (ii)
the date one year after the Termination of the Optionee if the Termination is
due to death or Disability or if the Optionee dies within 90 days of the date of
Termination, or (iii) the date 90 days after Termination for any other reason.
3.2.3. Subject to Section 4.6, each Option granted under Section 3
will become immediately exercisable as to 100% of the Shares subject to the
Option upon (a) a Change in Control, or (b) the Optionee's death, Disability, or
Retirement.
SECTION 4. RESTRICTIONS ON ALL OPTIONS.
4.1. OPTION AGREEMENTS. Each grant of an Option must be reduced to
writing in an Option Agreement, in such form as the Committee determines, within
a reasonable period after the Date of Grant. Any action taken after the Date of
Grant may be reflected in an amendment to or restatement of such Option
Agreement.
4.2. CORPORATE MERGERS; ACQUISITIONS. The Committee may grant Options
having terms and provisions which vary from those specified in the Plan if such
Options are granted in substitution for, or in connection with the assumption
of, existing options granted by another corporation and assumed or otherwise
agreed to be provided for by the Company in connection with a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to which any Employer is a party.
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<PAGE> 33
4.3. STOCKHOLDER APPROVAL. The Plan is subject to approval of the
affirmative vote of the holders of a majority of the issued and outstanding
shares of the Company present or represented and entitled to vote at a meeting
of the stockholders duly called and held at which a quorum of at least a
majority of the issued and outstanding shares is present or represented.
4.4. RESTRICTIONS ON TERMS OF OPTIONS. Each Option shall be subject to
the following restrictions:
4.4.1. No Shares will be issued under the Plan unless and until all
applicable requirements imposed by federal and state securities laws and by any
stock exchanges or NASDAQ upon which the Shares may be listed have been fully
met.
4.4.2. No Option will have an Option Price less than 100% of the
Value of a Share as of the Date of Grant.
4.4.3. Each Option will lapse no later than the date 10 years and
one day after the Date of Grant.
4.4.4. Subject to Sections 2.2.4, 3.2.3 and 8, no more than 25% of
the Shares subject to each Option may become exercisable before completion of
the first full year of employment of the Optionee after the Date of Grant and no
more than an additional 25% of such Shares may become exercisable before the
completion of each full year of such employment thereafter until Termination.
4.5. MAXIMUM NUMBER. In no event shall the Committee grant Options to an
Associate to purchase a total of more than 60,000 Shares under the Plan,
including any Options that lapse or are surrendered for cancellation.
4.6. SIX MONTH RULE. Nothing in the Plan will permit an Option to be
exercisable within six months of the Date of Grant except in the case of the
Optionee's death.
SECTION 5. TAX PAYMENT LOAN GUARANTY. The Committee will have authority, at the
time of grant of a Nonincentive Option or on the exercise by the Optionee of an
Option which is not taxed as an Incentive Option, to authorize an unconditional
guaranty of payment by the Company of a full recourse loan on terms acceptable
to the Committee obtained by the Optionee who exercised the Option from a
commercial bank or a registered broker-dealer for the exclusive purpose of
paying personal income or excise taxes incurred as a result of such exercise.
Loan guaranties will be issued if the Committee, in its sole discretion,
determines them to be appropriate and in the best interests of the Employer to
assist in the payment of income and excise taxes incurred on exercise of such
Option.
SECTION 6. EXERCISE OF OPTIONS.
6.1. NOTICE OF EXERCISE. Options may be exercised only by delivery to the
Vice President- Human Resources or such other person designated by the Committee
of a Notice of Exercise and payment under Section 6.2 for the Shares. Except as
specifically provided, an Option shall be exercisable only by the Optionee
during the Optionee's lifetime.
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<PAGE> 34
6.2. DELIVERIES ON EXERCISE.
6.2.1. Any Notice of Exercise will be effective only if the Holder
pays to the Company the Option Price for the portion of any Option being
exercised and pays the Company an amount equal to any tax withholding required
to be made.
6.2.2. The Holder may, in his or her sole discretion, pay all or a
portion of the Option Price for the portion of an Option being exercised by
surrender and delivery of Shares already owned by the Holder for not less than
six months. Any such Shares delivered in full or partial payment of the Option
Price shall be valued at the Value as of the date of receipt of the Shares by
the Company.
6.2.3. The Committee may, in its sole discretion, permit all or a
portion of any amount required to be withheld for taxes to be paid by
surrendering and delivering Shares already owned by the Holder or by withholding
a portion of the Shares that otherwise would be issued to the Holder upon
exercise of the Option. Any such Shares surrendered or withheld will be valued
at the Value as of the date of receipt for surrendered Shares or as of the date
of exercise of the Option for withheld Shares. Any election to have Shares
withheld from the Shares that would otherwise be issued to the Holder upon
exercise must be made during or as of the period beginning on the third business
day following the date of release of quarterly or annual financial data of the
Company and ending on the twelfth business day following such date.
6.3. TIME AND MANNER RESTRICTIONS. The Committee has the right to limit
the time and manner of exercise of Options to comply with applicable law
including but not limited to federal securities laws.
6.4. DELIVERY OF SHARES. As soon as reasonably practicable following
exercise, a certificate representing the Shares purchased registered in the name
of the Holder will be delivered to the Holder.
SECTION 7. THE COMMITTEE.
7.1. POWERS OF COMMITTEE. The Committee will have the power to do the
following:
7.1.1 To grant Options on such terms not inconsistent with the Plan
as the Committee determines;
7.1.2. To maintain records relating to Optionees and Holders;
7.1.3. To prepare and furnish to Optionees and Holders all
information required by applicable law or the Plan;
7.1.4. To construe and apply the provisions of the Plan and to
correct defects and omissions therein;
7.1.5. To engage assistants and professional advisers;
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<PAGE> 35
7.1.6. To provide procedures for determination of claims under the
Plan;
7.1.7. To make any factual determinations necessary or useful under
the Plan; and
7.1.8. To adopt and revise rules, regulations and policies under the
Plan.
7.2. DELEGATION. The Committee may delegate to any one or more of its
number authority to sign any documents on its behalf or to perform ministerial
acts, but no person to whom such authority is delegated shall perform any act
involving the exercise of any discretion without first obtaining the concurrence
of a majority of the members of the Committee, even though he or she alone may
sign any document required by third parties. The Committee may designate a
secretary, who may be a member of the Committee. All third parties may rely on
any communication signed by the secretary, acting as such, as an official
communication from the Committee.
7.3. BINDING EFFECT OF ACTIONS. All actions taken by the Committee under
the Plan will be final and binding on all persons.
7.4. INDEMNIFICATION. No member of the Committee, nor any Associate to
whom ministerial duties have been delegated, shall be personally liable for any
action, interpretation or determination made with respect to the Plan or awards
made thereunder, and each member of the Committee shall be fully indemnified and
protected by the Company with respect to any liability he or she may incur with
respect to any such action, interpretation or determination, to the extent
permitted by applicable law and to the extent provided in the Company's
Certificate of Incorporation and By-laws, as amended from time to time.
SECTION 8. ACTIONS BY COMMITTEE AFTER GRANT.
8.1. GENERAL. The Committee may, subject to the consent of the Holder
under Section 9.2, where the action impairs or adversely alters the rights of
the Holder, at any time and from time to time after the Date of Grant of any
Option, modify the terms of any grant to terms which would have been permitted
for such grant on the Date of Grant.
8.2. ANTIDILUTION PROVISIONS. If, as a result of a stock split, stock
dividend, combination or exchange of shares, exchange for other securities,
reclassification, reorganization, redesignation, recapitalization or other such
change, the Shares are increased or decreased or changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or of another corporation; then:
8.2.1. The number and kind of shares of stock or other securities
into which each outstanding Share is changed or for which each such Share may be
exchanged, will automatically be substituted for each Share subject to an
unexercised Option and for each Share available for additional grants.
8.2.2. The Option Price will be increased or decreased
proportionately so that the aggregate Option Price for the securities subject to
the Option remains the same as immediately
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prior to such event and the ratio of the Option Price to the Value of the
securities subject to the Option is no more favorable to the Holder than the
ratio of the Option Price to the Value immediately before such event.
8.2.3. The Committee shall make such other adjustments to Options
and the provisions of the Plan and Option Agreements as may be appropriate and
equitable, and not confer on the Holder more favorable benefits than those of
the Holder before the event, which adjustments may provide for the elimination
of fractional shares or units.
8.3. MERGER OF THE COMPANY. If, directly or indirectly, (a) the Company
is a party to a merger or consolidation agreement with a corporation that is not
a subsidiary of the Company, (b) the Company is a party to an agreement to sell
substantially all of its assets to any person other than a subsidiary of the
Company, or (c) any person other than the Company or one of its subsidiaries has
publicly announced an offer to purchase more than 5% of the outstanding voting
securities of the Company, the Committee, in its sole discretion, may provide
that, for a period beginning on the later of the date six months after the Date
of Grant or 15 days before the closing of any such proposed transaction, and not
extending beyond the earlier of the date on which the Options would otherwise
lapse and the date of the closing of such proposed transaction, notwithstanding
the provisions of any Option Agreement, all Options granted under the Plan may
be exercised by the Holders in whole or in part during such period, and that
upon the closing of such proposed transaction, all Options under the Plan will
expire and be null and void. At least 15 days prior to the closing of such
proposed transaction, the Company must notify each Holder that the Option is
exercisable under this Section. If the agreement for such proposed transaction
is terminated, (a) all exercises under this Section of Options will be void ab
initio (from the outset), (b) the Company will refund the applicable Option
Price and withholding tax and the Holder will return any Shares issued, and (c)
the Option will be reinstated and exercisable thereafter on the terms of the
Options without regard to that application of this Section.
8.4. AUTHORITY TO ACCELERATE. Notwithstanding anything else in the Plan
to the contrary other than Section 4.6, the Committee may, at the time of grant
or at any time or from time to time thereafter, accelerate the time at which
Options become exercisable or waive any provisions of the Plan relating to the
manner of payment or procedures for the exercise of any Options. Any such
acceleration or waiver may be made effective (a) with respect to one or more or
all Optionees under the Plan, (b) with respect to some or all of the Shares
subject to an Option of any Optionee or (c) for a period of time ending at or
before the expiration date of any Option. If the waiver of any provisions
constitutes a new grant of an Option or the grant of an additional derivative
security for purposes of SEC Rule 16b-3, the date of the waiver will be deemed
to be a new Date of Grant for purposes of Section 4.5. If the waiver of any
provisions constitutes a new grant of an Option for purposes of Code Section
424, the Committee must determine if the Option retains its status as an
Incentive Option.
8.5. SURRENDERS. The Committee may permit the voluntary surrender of all
or a portion of any Option granted under the Plan. Upon surrender, the Options
surrendered will be canceled and the Shares or units previously subject to them
will be available for the grant of other Options.
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SECTION 9. AMENDMENT OF THE PLAN.
9.1. RIGHT TO AMEND, ETC. The Company may amend, suspend or terminate the
Plan at any time, provided that, unless first approved by the stockholders of
the Company, no amendment may be made in the Plan which:
9.1.1. Materially increases the benefits accruing to participants
under the Plan;
9.1.2. Materially increases the number of securities which may be
issued under the Plan; or
9.1.3. Materially modifies the requirements as to eligibility for
participation in the Plan.
9.2. IMPAIRMENT OF RIGHTS OF HOLDERS. No amendment to the Plan or the
terms of any grant hereunder shall be made so as to impair or adversely alter
the rights of any Holder without such Holder's consent. Actions by the Committee
under Section 8.2 or 8.3 do not constitute an amendment of the Plan or of any
grant.
SECTION 10. SHARES RESERVED; PREVIOUS PLANS. The maximum number of Shares which
may be issued under the Plan will be 440,000 Shares, subject to adjustment under
Section 8.2, and such number of Shares will be reserved for issuance under the
Plan. Each previous stock option plan of the Company is hereby amended so that
no additional options may be granted thereunder on or after the Effective Date
except in exchange for the surrender and cancellation of an equal number of
outstanding options issued thereunder, provided, however, all Options granted
under any previous stock option plan will remain in full effect. The Shares
issued on exercise of Options may be authorized and unissued Shares or Shares
held by the Company as treasury stock. If any Option under this Plan terminates,
expires, lapses or is canceled as to any Shares, new Options may thereafter be
granted for the purchase of such Shares.
SECTION 11. MISCELLANEOUS.
11.1 REGISTRATION. The Company shall (i) prepare and file with the SEC a
Registration Statement on Form S-8 and amendments to the Registration Statement
as may be necessary or advisable to permit the continued and uninterrupted
exercise of Options and the resale of Shares purchased pursuant to the exercise
of Options or as may be required by the SEC, (ii) execute such other documents,
and take such other actions, as may be necessary or advisable to cause the
Registration Statement, as the same may be amended, to comply with the
Securities Act of 1933 (the "Securities Act") and the Rules and Regulations
thereunder; and to become effective under the Securities Act and the Rules and
Regulations thereunder, and (iii) register and qualify all Shares purchased
pursuant to the exercise of Options for resale by the Holder in the State of New
Jersey and in each state adjacent to the State of New Jersey. The Registration
Statement for the resale of Shares purchased pursuant to the exercise of Options
shall be filed by the Company within five business days after the Secretary of
the Company receives a written request from a Holder to file a Registration
Statement. The Registration Statement shall not be withdrawn by the Company
until all the Options shall have lapsed, or until all Shares purchased upon the
exercise of Options shall have been resold, as the case may be.
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11.2. NO RIGHT TO EMPLOYMENT. Nothing in the Plan or in any Option or
Option Agreement will confer upon any Associate or Director any right to
continue in the employment or other relationship of any Employer or to be
entitled to any remuneration or benefits not set forth in the Plan or such
Option Agreement or interfere with or limit the right of any Employer to
terminate such Associate's employment or Director's relationship at any time.
11.3. SUCCESSORS AND ASSIGNS. The obligations of the Company under the
Plan will be binding upon any successor corporation or organization resulting
from the merger, consolidation or other reorganization of the Company, or upon
any successor corporation or organization succeeding to substantially all of the
assets and business of the Company.
11.4. RIGHTS AS STOCKHOLDER. No Holder will have any of the rights of a
stockholder of the Company with respect to the Shares issuable under the Plan
until certificates for such Shares have been issued.
11.5. EXPENSES. All expenses and costs in connection with administration
of the Plan will be borne by the Company.
11.6. SECTION 16. Any provision of this Plan will be deemed amended and
void to the extent it causes a violation under Section 16 of the Exchange Act
and the rules thereunder.
11.7. LIMITATION OF LIABILITY. The liability of the Company under this
Plan or in connection with any exercise of an Option is limited to the
obligations expressly set forth in the Plan and in any of the Option Agreements
and no term or provision of this Plan or any Option Agreement will be construed
to impose any further or additional duties, obligations or costs on the Employer
not expressly set forth in the Plan and the Option Agreement.
11.8. BENEFICIARIES AND ASSIGNMENT OF RIGHTS. No Option or other right
under the Plan may be assigned, pledged, hypothecated, given, or otherwise
transferred by the Holder, except that (a) an Optionee will be entitled to
designate a beneficiary of the Option upon the Optionee's death by delivering
such designation in writing to the Committee, (b) if no such designation is made
by the Optionee, the Option will be transferred upon the Optionee's death as
determined under the applicable laws of descent and distribution, and (c) an
Option shall be transferred in accordance with a qualified domestic relations
order (as defined in the Code). If an Optionee suffers a Disability and does not
have the capacity to exercise an Option, such Option will be exercisable by the
Optionee's guardian or attorney-in-fact during the Optionee's lifetime.
11.9. NOTICES. Notices required or permitted to be made under the Plan
will be sufficiently made if personally delivered or sent by first-class,
registered, or certified mail addressed (a) to the Holder at the Holder's
address as set forth in the books and records of the Employer, or (b) to the
Company or the Committee at the principal office of the Company to the attention
of the Vice President-Human Resources. Any party may change its address through
the method described above.
11.10. CAPTIONS. The captions and section numbers appearing in this Plan
are inserted only as a matter of convenience. They do not define, limit,
construe or describe the scope or intent of the provisions of the Plan.
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11.11. APPLICABLE LAW. The Plan will be governed by and interpreted,
construed, and applied in accordance with the laws of the State of New Jersey to
the extent that they apply.
11.12. SEVERABILITY. If any provisions of the Plan are held illegal or
invalid for any reason, such illegality or invalidity will not affect the
remaining parts of the Plan, and the Plan will be construed and enforced as if
the illegal or invalid provision had not been included.
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UNITED RETAIL GROUP, INC.
1996 ADMITTANCE CARD
If you plan to attend the Annual Meeting of Stockholders to be held on May 28,
1996 at 11:00 a.m., this form may be used as an admittance card. Please fill in
your name(s) and address and present it to the usher.
- ----------------------------------------- -----------------------------------
Name(s) (please print) Number of Shares Beneficially Owned
- -----------------------------------------
Street Address
- -----------------------------------------
City and State Zip Code
<PAGE> 41
UNITED RETAIL GROUP, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints RAPHAEL BENAROYA and GEORGE R. REMETA and each
of them, with power of substitution in each, proxies to represent the
undersigned and to vote, as noted below, all the common stock of UNITED RETAIL
GROUP, INC., which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Stockholders to be held on May 28, 1996 at
11:00 A.M., or any adjournments thereof.
1. ELECTION OF DIRECTORS
/ / FOR all Nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all
nominees listed below
Nominees: Joseph A. Alutto, Raphael Benaroya, Russell Berrie, Joseph
Ciechanover, Ilan Kaufthal, Vincent Langone, Christina A.
Mohr, George R. Remeta and Richard W. Rubenstein
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. APPROVAL OF ADOPTION OF 1996 STOCK OPTION PLAN
FOR / / AGAINST / / ABSTAIN / /
3. IN THEIR DISCRETION: (i) upon other matters as may properly come before the
meeting, (ii) AS TO THE ELECTION OF DIRECTORS AND THE APPROVAL OF ADOPTION OF
THE 1996 STOCK OPTION PLAN, IF THE APPROPRIATE BOX ABOVE IS NOT marked, (iii)
for the election of a substitute for any of the nominees listed above who
become(s) unable to serve, and (iv) on matters incidental to the conduct of the
meeting.
(Continued and to be signed on opposite side)
The shares represented hereby will be voted as instructed by the
undersigned. IF THE APPROPRIATE BOX IS NOT MARKED, THE PROXIES APPOINTED HEREBY
INTEND TO VOTE FOR ALL THE NOMINEES LISTED AND FOR APPROVAL OF ADOPTION OF THE
1996 STOCK OPTION PLAN.
Please specify your vote by marking the appropriate box and date and sign
your name below.
Dated , 1996
Signature
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