<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
[ ] Confidential, For Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[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)
___________________________________________________________________
(Name of Person(s) Filing Proxy Statement if Other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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 (Set forth the amount on which the
filing fee is calculated and state how it was
determined.)...........................................................
4) Proposed maximum aggregate value of
transaction:...........................................................
5) Total fee
paid:..................................................................
[ ] Fee paid previously with preliminary materials.
[ ] 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:____________________________________________________________
<PAGE> 2
April 29, 1997
Dear Stockholder:
I wish to extend a cordial invitation to the fifth 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 27, 1997.
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 1996 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 27, 1997
The fifth 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 27, 1997, at 11 o'clock in the morning, for the
following purposes:
- electing nine directors;
- 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 14, 1997 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 29, 1997 Secretary
<PAGE> 4
UNITED RETAIL GROUP, INC.
365 WEST PASSAIC STREET
ROCHELLE PARK, NEW JERSEY 07662
PROXY STATEMENT
DATED APRIL 29, 1997
ANNUAL MEETING OF STOCKHOLDERS
MAY 27, 1997
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 27, 1997, 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. 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 the proxy
card and the admittance card 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 14, 1997, 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 29, 1997.
<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 1998 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 49, has been the Company's Chairman of the
Board, President and Chief Executive Officer since before 1992. Mr. Benaroya is
a director of Russ Berrie and Company, Inc.
Mr. George R. Remeta, age 47, has been the Chief Financial Officer,
Secretary and a Director of the Company since before 1992. In 1993, Mr. Remeta
was named Vice Chairman of the Company.
Mr. Joseph A. Alutto, age 56, 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 before 1992. Mr. Alutto is a director of Comptek Research, Inc.
Mr. Russell Berrie, age 64, 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 63, 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 1992. Mr. Ciechanover is a director of PEC .
Mr. Ilan Kaufthal, age 49, a Director of the Company since December
1992, has been a Managing Director of Schroder Wertheim & Co. Incorporated, an
investment banking firm, since before 1992. Mr. Kaufthal is a director of
Cambrex Corporation, Rexene Corporation and Russ Berrie and Company, Inc.
Mr. Vincent P. Langone, age 54, 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 1992 to 1995. In 1996, his principal occupation was Chairman of the
Board of L&S Associates, Inc., a management consulting firm. He has been
President and Chief Executive Officer of Interbuild International, Inc., a
venture capital firm, since January 1997.
2
<PAGE> 6
Ms. Christina A. Mohr, age 41, a Director of the Company since February
1994, has been a Managing Director at Salomon Bros., Inc. since February 1997.
She was a Managing Director at Lazard Freres & Co. LLC from January 1997 to
before 1992. Both are investment banking firms. Ms. Mohr is a director of
Loehmanns, Inc.
Richard W. Rubenstein, Esq., age 52, 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 1992.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
The Company's Board of Directors held four meetings in Fiscal 1996.
During Fiscal 1996, all of the Directors except Mr. Berrie 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 1996. The Compensation Committee
held four meetings in Fiscal 1996.
The Audit Committee of the Board reviews and confirms the selection of
the Company's independent public accountants, oversees special audits and
reviews and makes recommendations to the Board regarding transactions between
United Retail Incorporated, a subsidiary of the Company, and affiliates of The
Limited and of Raphael Benaroya, the Chairman of the Board, President and Chief
Executive Officer of the Company. See, "Certain Transactions." Its members
during Fiscal 1996 were Ms. Mohr, as Chair of the Committee, and Messrs. Alutto
and Kaufthal, who continue to constitute the Audit Committee. The Audit
Committee held three meetings in Fiscal 1996.
The Nominating Committee of the Board nominates suitable persons for
election as Directors of the Company. Its members during Fiscal 1996 were Mr.
Benaroya, as Chair 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 1996. The Board's nominees for election as Directors at the
fifth Annual Meeting of Stockholders were selected unanimously by all the
members of the Nominating Committee at a meeting held in February 1997.
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 1996
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
Compensation Committee of the Board.
3
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 31, 1997, 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 1996 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
and Remeta 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) .......................... 2,725,933 20.3%
Mr. George R. Remeta(2) .......................... 473,625 3.8%
Kenneth P. Carroll, Esq.(3) ...................... 25,968 *
Ms. Ellen Demaio(4) .............................. 41,000 *
Mr. Alan R. Jones(5) ............................. 28,000 *
Mr. Joseph A. Alutto(6)(7) ....................... 8,850 *
Mr. Russell Berrie(6) ............................ 32,600 *
Mr. Joseph Ciechanover(8) ........................ 1,800 *
Mr. Ilan Kaufthal(6)(9) .......................... 52,600 *
Mr. Vincent P. Langone(10) ....................... 26,600 *
Ms. Christina A. Mohr(11) ........................ -0- -0-
Richard W. Rubenstein, Esq. ...................... 200 *
All Officers and Directors as a group ............ 3,554,384 25.8%
(21 persons)(12)
</TABLE>
- ----------
(1) Includes 1,225,933 shares which may be acquired within 60 days by the
exercise of stock options.
(2) Includes 248,625 shares which may be acquired within 60 days by the
exercise of stock options.
(3) Includes 13,000 shares which may be acquired within 60 days by the exercise
of stock options.
(4) Includes 16,000 shares which may be acquired within 60 days by the exercise
of stock options.
(5) Includes 8,000 shares which may be acquired within 60 days by the exercise
of stock options.
(6) Includes 7,600 shares which may be acquired within 60 days by the exercise
of stock options.
(7) The outstanding shares are held jointly with his wife.
(8) Consists of 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 owned beneficially are held jointly with
his wife.
(10) Includes 3,600 shares which may be acquired within 60 days by the exercise
of stock options and includes 400 shares held by a partnership, as to which
he disclaims beneficial ownership.
(11) Excludes shares held by Salomon Bros., Inc., of which Ms. Mohr is a
managing director, and as to which she disclaims beneficial ownership.
(12) Includes 1,578,758 shares which may be acquired within 60 days by the
exercise of stock options.
* Less than half of one percent.
4
<PAGE> 8
STOCKHOLDERS' AGREEMENT
At February 10, 1997, 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 and February 1, 1997. The Restated Stockholders'
Agreement, as amended, 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) Mr. 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.
Both Management Directors abstain from votes involving the personal
interests of either Management Director. LDA Directors abstain from votes
involving the interests of The Limited and its affiliates.
The voting arrangement under the Restated Stockholders' Agreement
described above expires on July 17, 1999.
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)
1996 $550,000 -0- -0- $ 53,000
1995 $551,000 -0- 150,000 $ 62,000
1994 $500,000 -0- -0- $ 68,000
Mr. George R. Remeta,
Vice Chairman of the
Board-Chief Financial
Officer, Secretary and
Director(6)
1996 $349,000 -0- -0- $ 29,000
1995 $321,000 -0- 60,000 $ 25,000
1994 $280,000 -0- -0- $ 25,000
Kenneth P. Carroll, Esq.,
Senior Vice President
-General Counsel(7)
1996 $209,000 -0- 65,000 $ 16,000
1995 $198,000 -0- -0- $ 14,000
1994 $180,000 -0- 55,000(10) $ 13,000
Ms. Ellen Demaio,
Senior Vice President
-General Merchandising
Manager of United
Retail Incorporated(8)
1996 $200,000 -0- 30,000 $ 16,000
1995 $201,000 -0- 20,000(10) $ 16,000
1994 $165,000 $26,000 10,000(10) $ 12,000
Mr. Alan R. Jones,
Vice President
-Real Estate of United
Retail Incorporated(9)
1996 $194,000 $10,000 40,000 $ 2,000
1995 $183,000 $14,000 10,000(10) -0-
1994 $ 28,000 -0- 20,000(10) -0-
</TABLE>
- ----------
Footnotes on following pages.
6
<PAGE> 10
(1) The amounts shown are rounded and 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) The amounts shown are rounded and include payments as a bonus in a
subsequent year for services rendered in the year indicated.
(3) The Company had no long-term compensation plan other than the Restated 1990
Stock Option Plan (the "Option Plan"), which provided for 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. See "Report of
Compensation Committee - Ten Year Option Repricing." 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) The amounts shown are rounded and consist 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 and Remeta, premiums on individual term life
insurance policies. In Fiscal 1996, the respective amounts of $11,290 and
$2,310 were paid as life insurance premiums for Mr. Benaroya and Mr.
Remeta, respectively.
(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. The following
replacement options were issued under the Option Plan: (i) 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; (ii) 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 (iii)
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 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. The following
replacement options were issued under the Option Plan: (i) nonqualified
stock option to purchase 20,000 shares; and (ii) incentive stock option 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
Footnotes to Summary Compensation Table.
- ----------
(7) Mr. Carroll was promoted from Vice President-General Counsel in March 1996.
In 1996, he surrendered outstanding options to purchase 55,000 shares in
exchange for replacement options to purchase an equal number of shares at a
lower exercise price. The replacement options issued in 1996 are incentive
stock options exercisable at a price of $5.125. Additional options granted
in 1996 are incentive stock options to purchase 10,000 shares at an
exercise price of $4.125. 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) Ms. Demaio was promoted from Vice President-Merchandise in February 1995.
In 1996, she surrendered outstanding options to purchase 30,000 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 1996 grant. All the stock options
held by 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 options issued in 1996 are incentive stock options exercisable
at a price of $5.125 with a term of 10 years and five year vesting. Vesting
of options is subject to acceleration in accordance with the provisions of
the Option Plan. United Retail Incorporated is the Company's operating
subsidiary.
(9) In 1996, Mr. Jones surrendered outstanding options to purchase 30,000
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 $5.125. Additional options granted
in 1996 are incentive stock options to purchase 10,000 shares at an
exercise price of $4.125. 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.
(10) These options were surrendered in Fiscal 1996 in exchange for replacement
options to purchase an equal number of shares at a lower exercise price.
The exercise prices of the surrendered options are set forth in the table
under the caption "Report of Compensation Committee - 10 Year Option
Repricing." All the surrendered options provided for a term of 10 years
with five year vesting.
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. See, "Summary Compensation
Table" and "Report of Compensation Committee." 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 1997 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 employees who
earn $100,000 per annum or more and who were employed by the Company before
1993. Messrs. Benaroya, Remeta and Carroll and Ms. Demaio are the beneficiaries
of retirement contributions under the SRSP.
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 1996 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
Underlying Granted to Potential Realizable Value at
Option Employees in Exercise Expiration Assumed Annual Rates of Stock
Name Granted Fiscal Year Price Date Appreciation for Option Term
---- ------- ----------- ----- ---- ----------------------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Mr. Raphael Benaroya -0-
Mr. George R. Remeta -0-
Kenneth P. Carroll, Esq. 55,000(1) 10.5% $5.125 05/01/06 $ 177,100 $ 449,350
10,000 1.9% $4.125 02/27/06 $ 25,900 $ 65,700
Ms. Ellen Demaio 30,000(1) 5.7% $5.125 05/01/06 $ 96,600 $ 245,100
Mr. Alan R. Jones 30,000(1) 5.7% $5.125 05/01/06 $ 96,600 $ 245,100
10,000 1.9% $4.125 02/27/06 $ 25,900 $ 65,700
--------- ---- --------- ----------
Total for group of five officers 135,000(2) 25.7% $ 422,100 $1,070,950
========= ==== ========= ==========
</TABLE>
- ----------
(1) Replacement options issued in exchange for surrender of an equal number
of previously issued options with higher exercise prices ("repriced
options").
(2) The net increase in the number of underlying securities was 20,000
shares, or 0.2% of outstanding shares, after giving effect to the
related surrender of repriced options to purchase 115,000 shares. Mr.
Carroll, Ms. Demaio and Mr. Jones 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 equal to the exercise price of the options granted. The options are
incentive stock options under the Option Plan with five year vesting.
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 1996 AND FISCAL 1996 YEAR END
OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options At In-The-Money Options At
Fiscal 1996 Year End Fiscal 1996 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- 1,212,795 124,705 $1,992,188 -0-
Mr. George R. Remeta -0- -0- 248,625 52,000 $ 298,828 -0-
Kenneth P. Carroll, Esq. -0- -0- -0- 65,000 -0- -0-
Ms. Ellen Demaio -0- -0- 8,000 30,000 -0- -0-
Mr. Alan R. Jones -0- -0- -0- 40,000 -0- -0-
</TABLE>
- ----------
(1) Fair market value of the Common Stock at Fiscal 1996 year end was $3.125
per share.
11
<PAGE> 15
REPORT OF COMPENSATION COMMITTEE
MEMBERSHIP; AUTHORITY
The Compensation Committee of the Board of Directors of the Company is
composed of Richard W. Rubenstein, as Chairman, Ilan Kaufthal and Vincent
Langone.
In February 1996, subject to approval by the Board of Directors, the
Compensation Committee determined the cash compensation of each officer of the
Company or its subsidiaries whose combined base salary and potential cash bonus
could have exceeded $150,000 per annum. During Fiscal 1996, option grants were
made from time to time by the Compensation Committee pursuant to the Company's
Restated 1990 Stock Option Plan (the "Option Plan") and its 1996 Stock Option
Plan.
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."
POLICIES
The principal objective of the Company's Fiscal 1996 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 principal components of the
executive compensation program for Fiscal 1996 were:
- base salary with merit increases for certain officers in the
4% to 9% range
- 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, for the benefit of
certain officers
- 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 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.
The operating income targets for the bonus awards program (which the
Company deems to be proprietary and confidential) were not met in Fiscal 1996.
As a result, the officers received no awards under the bonus program with
respect to Fiscal 1996. (Certain recently hired officers, however, received
non-recurring payments in Fiscal 1996 of up to $20,000 each as part of the
compensation package in connection with hiring or as a special achievement award
outside the bonus program formula.)
CEO COMPENSATION
In Fiscal 1995 and Fiscal 1996, Mr. Benaroya's base salary was
approximately $551,000 per annum. He waived the annual cost of living increase
with respect to Fiscal 1996 that he was entitled to receive under his Restated
Employment Agreement.
OPTION REPRICING
In Fiscal 1996, the Compensation Committee authorized the repricing of
certain stock options under the Option Plan excluding options held by Raphael
Benaroya, the Chairman of the Board, President and Chief Executive Officer of
the Company, and George R. Remeta, the Vice Chairman and Chief Financial Officer
of the Company. The repricing permitted optionholders to surrender outstanding
options ("repriced options") in exchange for an equal number of options granted
under the Option Plan at a lower exercise price equal to the then current market
price. The replacement options had new five year vesting schedules pursuant to
which the options become exercisable in equal installments commencing one year
after the date of grant.
It was the Compensation Committee's view that the repriced options,
with an exercise price far above the market price of the underlying shares of
Common Stock at the time, were not serving the purposes of the Company's
executive compensation program. The Compensation Committee considered it to be
in the interests of the Company's stockholders to grant new options that had the
potential to be in the money sooner than the options that they replaced and to
provide economic gains and performance incentives to the optionholders that much
earlier.
12
<PAGE> 16
TEN YEAR OPTION REPRICING
<TABLE>
<CAPTION>
Number of
Shares Length of Original
Underlying Market Price of Exercise Price New Option Term
Date Options Stock at Time at Time of Exercise Remaining at
Name; Position of Repricing Repriced(#) of Repricing($) Repricing($) Price($) Date of 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.
Kenneth P. Carroll(3) 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.
05/02/96 40,000 5.125 10.00 5.125 8 yrs. 1 mo.
05/02/96 3,600 5.125 8.75 5.125 8 yrs. 3 mos.
05/02/96 11,400 5.125 8.75 5.125 8 yrs. 3 mos.
Ellen Demaio(4) 05/02/96 10,000 5.125 8.75 5.125 8 yrs. 1 mo.
05/02/96 20,000 5.125 8.50 5.125 8 yrs. 10 mos.
Julie L. Daly 05/20/94 5,000* 8.75 15.00 10.00 4 yrs. 10 mos.
Vice President-Strategic 05/02/96 5,000 5.125 10.00 5.125 8 yrs. 1 mo.
Planning 05/02/96 5,000 5.125 8.50 5.125 8 yrs. 10 mos.
Kent Frauenberger 05/20/94 5,000* 8.75 18.50 10.00 6 yrs. 0 mos.
Vice President-Logistics 05/02/96 5,000 5.125 10.00 5.125 8 yrs. 1 mo.
05/02/96 3,000 5.125 10.00 5.125 7 yrs. 10 mos.
05/02/96 5,000 5.125 8.50 5.125 8 yrs. 10 mos.
Jon Grossman 05/02/96 5,000 5.125 15.00 5.125 5 yrs. 10 mos.
Vice President-Finance 05/02/96 5,000 5.125 8.50 5.125 8 yrs. 10 mos.
Alan R. Jones(5) 05/02/96 20,000 5.125 7.75 5.125 8 yrs. 7 mos.
05/02/96 10,000 5.125 7.25 5.125 9 yrs. 4 mos.
Bradley Orloff 05/20/94 5,000* 8.75 18.50 10.00 6 yrs. 0 mos.
Vice President-Marketing 05/02/96 5,000 5.125 10.00 5.125 8 yrs. 1 mo.
Robert Portante 05/02/96 10,000 5.125 8.25 5.125 8 yrs. 7 mos.
Vice President - MIS
Fredric E. Stern 05/20/94 10,000* 8.75 18.50 10.00 9 yrs. 0 mos.
Vice President-Controller 05/02/96 10,000 5.125 10.00 5.125 8 yrs. 1 mo.
Debra L. Berit(6) 07/09/93 10,000* 14.00 22.00 18.50 6 yrs. 2 mos.
05/20/94 10,000 8.75 18.50 10.00 5 yrs. 4 mos.
William J. Commer(6) 07/09/93 10,000 14.00 21.50 18.50 6 yrs. 2 mos.
Mori Mackenzie(6) 05/20/94 5,000 8.75 17.00 10.00 5 yrs. 0 mos.
John Trombley(6) 05/02/96 10,000 5.125 8.25 5.125 8 yrs. 3 mos.
Charles R. Wilkinson(6) 05/20/94 10,000 8.75 16.50 10.00 9 yrs. 1 mo.
</TABLE>
- ----------
*This option was surrendered in exchange for a subsequently issued option
referred to on the Ten Year Option Repricing table.
Footnotes continued on the following page.
13
<PAGE> 17
Footnotes to Ten Year Option Repricing table.
1995 REPRICING
(1) 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. 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
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) 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. 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
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.
1996 REPRICING
(3) Mr. Carroll is the Senior Vice President - General Counsel of the
Company.
(4) Ms. Demaio is the Senior Vice President - General Merchandising
Manager of United Retail Incorporated.
(5) Mr. Jones is the Vice President - Real Estate of United Retail
Incorporated.
(6) A former officer of United Retail Incorporated whose options were
cancelled after resignation from employment.
The replacement options held by Mr. Carroll, Ms. Demaio, Ms. Daly, and
Messrs. Frauenberger, Grossman, Jones, Orloff, Portante and Stern are incentive
stock options with a term expiring on May 1, 2006. These optionholders
surrendered outstanding options 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. The replacement options vest in five
equal annual installments commencing May 2, 1997. Vesting of options is subject
to acceleration in accordance with the provisions of the Option Plan.
--------------------
Respectfully submitted,
Dated: March 31, 1997 COMPENSATION COMMITTEE
ILAN KAUFTHAL
VINCENT P. LANGONE
RICHARD W. RUBENSTEIN
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.
Raphael Benaroya, the Chairman of the Board, President and Chief
Executive Officer of the Company, 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.
STOCKHOLDER RETURN GRAPH
The following graph shows the change at February 1, 1997 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 1/97
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
UNITED RETAIL GROUP, INC. 100 150 59 50 24 20
S & P 500 100 109 123 124 172 217
S & P RTL STRS (SPCLTY APP) 100 92 78 63 75 95
</TABLE>
15
<PAGE> 19
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. 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, 1996.
<TABLE>
<CAPTION>
Amount and Percent of
Name and Address Nature of Beneficial Outstanding
of Beneficial Owner Ownership Shares
------------------- --------- ------
<S> <C> <C>
Mr. Raphael Benaroya................................................. 2,725,933(1) 20.3%
365 West Passaic Street
Rochelle Park, New Jersey 07662
Limited Direct Associates, L.P....................................... 2,600,000(2) 21.3%
Three Limited Parkway
Columbus, Ohio 43216
Goldman, Sachs & Co.................................................. 1,029,873(3) 8.4%
85 Broad Street
New York, New York 10004
Rockefeller & Co., Inc............................................... 935,600(4) 7.7%
30 Rockefeller Plaza
New York, New York 10112
Lindner Growth Fund.................................................. 880,600(5) 7.2%
c/o Ryback Management Corporation
7711 Carondelet Avenue
Saint Louis, Missouri 63105
Cumberland Associates................................................ 640,000(6) 5.3%
1114 Avenue of the Americas
New York, New York 10036
</TABLE>
- ----------
(1) As of March 31, 1997. Includes 1,225,933 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. Except for provisions of
the Restated Stockholders' Agreement, Mr. Benaroya has the sole right to
vote and dispose of these shares.
(2) As of February 10, 1997. Limited Direct Associates, L.P. ("LDA") 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. Except for the provisions of the Restated
Stockholders' Agreement, LDA has the sole right to vote and dispose of
these shares.
(3) Goldman, Sachs & Co., a broker-dealer and investment adviser, has shared
voting power and shared dispositive power for these shares.
(4) Rockefeller & Co., Inc., an investment adviser, has the sole right to vote
and dispose of these shares.
(5) Ryback Management Corporation, an investment company adviser, has the sole
right to vote and dispose of these shares.
(6) As of December 12, 1996. Cumberland Associates has the sole right to vote
and dispose of 620,000 of these shares and shared voting power and
dispositive power for the remainder.
16
<PAGE> 20
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 included on
a Form 4, either pursuant to an exemption under the rules or through
inadvertence, 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 Form 4's 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 1996.
Charles R. Wilkinson, a former officer of United Retail Incorporated,
was late in filing on two occasions. A Form 4 was late by three business days
and reported one sale of 12,500 shares and nine purchases totaling 76 shares.
Also, one purchase of 450 shares was reported on Form 5 instead of Form 4.
Vincent Langone, a director of the Company, was five business days late
in filing a Form 4 for three purchases totalling 8,000 shares.
Kent Frauenberger, an officer of United Retail Incorporated, reported
one purchase of 1,274 shares on Form 5 instead of Form 4.
Filings by an officer or director are prepared by the office of the
Company's Senior Vice President - General Counsel from data supplied by the
office of the reporting person. The late filings referred to in the preceding
paragraphs were the result of clerical errors either in the transmission of data
to the General Counsel's office or in the preparation of forms by the General
Counsel's office.
17
<PAGE> 21
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."
Four of The Avenue(R) stores were subleased from subsidiaries of The
Limited for all or part of Fiscal 1996 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. Three of the principal leases
expired in 1996. Generally, the rent payable by the Company under each sublease
was 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 $0.4 million as its share of the rent in Fiscal 1996.
American Licensing Group, Inc., which is a subsidiary of The Limited,
granted to United Retail Incorporated pursuant to agreements dated as of April
30, 1989, as amended (the "Accessories Sublicensing Agreements"), non-exclusive
trademark sublicenses to manufacture and sell accessories with a national brand
name. During Fiscal 1996, United Retail Incorporated made payments (on a cash
rather than an accrual basis) to American Licensing Group, Inc. under the
Accessories Sublicensing Agreements of approximately $430,000. 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 Restated Master Affiliate
Sublease Agreement and the Accessories Sublicensing Agreements are not more
favorable to The Limited's affiliates than the terms that would be available in
arm's length transactions between unaffiliated parties.
American Licensing Group, L.P. ("ALGLP") provides management and
administrative services to American Licensing Group, Inc. under a management
services agreement between ALGLP and American Licensing Group, Inc. dated as of
August 26, 1989 (the "Management Services Agreement") for a base fee and a share
of the net profits of American Licensing Group, Inc., provided that the amount
of profit-sharing payable shall not exceed $150,000 per annum. During Fiscal
1996, total fees (on a cash rather than an accrual basis) by American Licensing
Group, Inc. to ALGLP were approximately $159,000. 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 American Licensing
Group, Inc., 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 American Licensing Group, Inc. in a transaction with a
service provider unaffiliated with Mr. Benaroya.
ALGLP granted to United Retail Incorporated pursuant to agreements
dated as of March 11, 1994, as amended, and March 17, 1995, respectively (the
"ALGLP Sublicensing Agreements"), non-exclusive trademark sublicenses to sell
foundations and sleepwear with a national brand name. During Fiscal 1996, United
Retail Incorporated made payments to ALGLP of approximately $544,000 (on a cash
rather than an accrual basis) under the ALGLP Sublicensing Agreements. 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 1996, ALGLP paid approximately $6,000 rent and reimbursed United
Retail Incorporated approximately $25,000 (on a cash rather than an accrual
basis) for office services and supplies. At February 1, 1997, the account
receivable from ALGLP was approximately $3,000.
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.
The father of Raphael Benaroya is employed by United Retail
Incorporated. His salary in Fiscal 1996 was approximately $63,000.
Management believes that the terms of employment of Mr. Benaroya's
father are not more favorable to him than the terms that would have been
available to him from an employer unaffiliated with Mr. Benaroya.
18
<PAGE> 22
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 Restated Stockholders' Agreement. Pursuant
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, 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 Restated Stockholders' Agreement,
including George R. Remeta, the Vice Chairman and Chief Financial Officer of the
Company, Ellen Demaio, the Senior Vice President-General Merchandising Manager
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 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 Messrs. Benaroya, Remeta, and Carroll, Ms. Demaio, Mr. Jones and the
other executive officers.
Alan R. Jones, the Vice President - Real Estate of United Retail
Incorporated, borrowed approximately $75,000 from the Company in Fiscal 1995 to
pay investment expenses. The loan was 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. After 1996, interest is payable in
kind, that is, interest is added to the principal amount. The principal amount
was the highest amount outstanding since the loan was made and was the amount
outstanding on March 31, 1997. In February 1997, the Company agreed to extend
the maturity of the loan to February 2001 and to forgive the loan, if Mr. Jones
remains in the Company's employ until the maturity date of the loan.
Mitchell Kosh borrowed approximately $75,000 from the Company in Fiscal
1995 to pay investment expenses. (He was an officer of United Retail
Incorporated at the time.) 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.
Charles R. Wilkinson borrowed $180,000 from the Company in Fiscal 1994
to pay personal and investment expenses. (He was an officer of United Retail
Incorporated at the time.) The loan bears interest at the prime rate plus one
percentage point, payable semi-annually. The principal amount was the highest
amount outstanding in Fiscal 1996. The amount outstanding on March 31, 1997 was
approximately $145,000. Mr. Wilkinson's loan is due on demand with recourse and
is secured by a second mortgage on Mr. Wilkinson's residence. In Fiscal 1996,
however, the Company agreed in connection with Mr. Wilkinson's resignation that
if demand for payment shall not be made by June 2000, the Company will forgive
the loan. The Company reviews the loan semi-annually and there is no assurance
that payment will be demanded.
19
<PAGE> 23
INDEPENDENT PUBLIC ACCOUNTANTS
During Fiscal 1996, 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 1, 1997. 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
1998 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 31, 1997 may be omitted by the Company from the proxy statement and
form of proxy relating to that meeting.
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
20
<PAGE> 24
DIRECTIONS TO
SHERATON CROSSROADS
HOTEL & TOWERS
CROSSROADS CORPORATE CENTER
ROUTE 17 NORTH
MAHWAH, NEW JERSEY 07495-0001
(201) 529-1660
FROM ROUTE 17 NORTH:
Exit Crossroads Corporate Centre / Sharp Plaza on the right (The exit is just
north of the Route 202 exit after the underpass)
FROM GARDEN STATE PARKWAY:
Exit 163 to Route 17 North for 12 miles (See "From Route 17 North" above)
FROM GEORGE WASHINGTON BRIDGE:
Route 4 West to Route 17 North for 15 miles (See "From Route 17 North" above)
FROM NEW JERSEY TURNPIKE :
Exit 18E to Route 80 West to Garden State Parkway North (See "From Garden State
Parkway" above)
<PAGE> 25
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 27, 1997 at
11:00 A.M., or any adjournments thereof.
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
/ / FOR all Nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
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. IN THEIR DISCRETION: (i) upon other matters as may properly come before the
meeting, (ii) AS TO THE ELECTION OF DIRECTORS, 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.
Please specify your vote by marking the appropriate box and date and
sign your name below.
Dated . . . . . . . . . . . . . . , 1997
Signature . . . . . . . . . . . . . . .
