<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to _____________________
Commission file number 00019774
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United Retail Group, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51 0303670
- ------------------------------ -------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
365 West Passaic Street, Rochelle Park, NJ 07662
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 845-0880
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
<PAGE> 2
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "1934 Act") during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
YES X NO
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the 1934 Act
subsequent to the distribution of securities under a plan confirmed by a court.
YES NO
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
As of October 31, 1998, 13,089,588 shares of the registrant's common
stock, $.001 par value per share, were outstanding.
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31, NOVEMBER 1,
1998 1998 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 30,720 $ 31,122 $ 14,758
Accounts receivable 1,434 571 1,634
Inventory 54,171 38,003 49,659
Prepaid rents 4,010 3,999 4,299
Other prepaid expenses 3,307 2,607 3,456
--------- --------- ---------
Total current assets 93,642 76,302 73,806
Property and equipment, net 47,272 48,231 49,993
Deferred charges and other intangible assets,
net of accumulated amortization of $2,041, $1,784
and $1,690 6,826 7,058 7,160
Deferred income taxes 1,383 2,685 --
Other assets 363 451 252
--------- --------- ---------
Total assets $ 149,486 $ 134,727 $ 131,211
========= ========= =========
LIABILITIES
Current liabilities:
Current portion of distribution center financing $ 1,115 $ 1,052 $ 1,031
Accounts payable, trade 14,099 12,596 18,505
Accrued expenses 20,058 17,400 13,904
Income taxes payable 789 1,379 912
--------- --------- ---------
Total current liabilities 36,061 32,427 34,352
Distribution center financing 9,464 10,308 10,579
Other long-term liabilities 6,573 6,948 7,271
--------- --------- ---------
Total liabilities 52,098 49,683 52,202
--------- --------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized
1,000,000; none issued
Common stock, $.001 par value; authorized 14 13 13
30,000,000; issued (13,762,900, 12,680,375
and 12,680,375); outstanding (13,089,588,
12,190,375, and 12,190,375)
Additional paid-in capital 77,420 78,259 78,259
Retained earnings 21,613 7,354 1,319
Treasury stock (673,312, 490,000, and 490,000)
shares at cost (1,659) (582) (582)
--------- --------- ---------
Total stockholders' equity 97,388 85,044 79,009
--------- --------- ---------
Total liabilities and stockholders' equity $ 149,486 $ 134,727 $ 131,211
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
<PAGE> 4
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
------------------------------- -------------------------------
OCTOBER 31, NOVEMBER 1, OCTOBER 31, NOVEMBER 1,
1998 1997 1998 1997
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales $ 85,174 $ 82,258 $ 282,292 $ 262,356
Cost of goods sold, including
buying and occupancy costs 62,859 63,318 204,101 204,861
------------ ------------ ------------ ------------
Gross profit 22,315 18,940 78,191 57,495
General, administrative and
store operating expenses 18,884 18,833 59,738 58,313
------------ ------------ ------------ ------------
Operating income (loss) 3,431 107 18,453 (818)
Non-operating income -- -- 3,113 --
Interest (income) expense, net (388) 53 (883) 166
------------ ------------ ------------ ------------
Income (loss) before income taxes 3,819 54 22,449 (984)
Provision for income taxes 1,368 20 8,190 220
------------ ------------ ------------ ------------
Net income (loss) $ 2,451 $ 34 $ 14,259 $( 1,204)
============ ============ ============ ============
Net income (loss) per share
Basic $ 0.19 $ 0.00 $ 1.09 $( 0.10)
Diluted $ 0.18 $ 0.00 $ 1.04 $( 0.10)
------------ ------------ ------------ ------------
Weighted average number of
shares outstanding
Basic 13,089,076 12,190,375 13,044,368 12,190,375
Common stock equivalents
(stock options) 654,244 717,637 676,481 --
------------ ------------ ------------ ------------
Diluted 13,743,320 12,908,012 13,720,849 12,190,375
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
<PAGE> 5
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
-------------------------
OCTOBER 31, NOVEMBER 1,
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 14,259 $ (1,204)
Adjustments to reconcile net income (loss) to net cash
provided from (used in) operating activities:
Depreciation and amortization of property and equipment 5,438 6,579
Amortization of deferred charges and other
intangible assets 266 198
(Gain) loss on disposal of assets (56) 185
Gain on sale of investments (3,113) (43)
Compensation expense 138 --
Benefit from deferred income taxes 1,302 --
Deferred lease assumption revenue amortization (536) (389)
Changes in operating assets and liabilities:
Accounts receivable (863) (337)
Income taxes (590) 1,141
Inventory (16,168) (8,881)
Accounts payable and accrued expenses 4,495 2,546
Prepaid expenses (711) (614)
Other assets and liabilities (333) (436)
-------- --------
Net Cash Provided From (Used In) Operating Activities 3,528 (1,255)
-------- --------
INVESTING ACTIVITIES:
Capital expenditures (4,643) (1,941)
Deferred payment for property and equipment 202 191
Proceeds from sale of investment and lease 3,345 --
-------- --------
Net Cash Used For Investing Activities (1,096) (1,750)
-------- --------
FINANCING ACTIVITIES:
Repayments of long-term debt (781) (723)
Issuance of loans to officers (2,073) --
Debt issuance costs -- (284)
Exercise of stock options 20 506
-------- --------
Net Cash Used In Financing Activities (2,834) (501)
-------- --------
Net decrease in cash and cash equivalents (402) (3,506)
Cash and cash equivalents, beginning of period 31,122 18,264
-------- --------
Cash and cash equivalents, end of period $ 30,720 $ 14,758
======== ========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
<PAGE> 6
UNITED RETAIL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of United Retail
Group, Inc. and its subsidiaries (the "Company"). All significant intercompany
accounts and transactions have been eliminated.
The consolidated financial statements as of and for the thirteen and
thirty-nine weeks ended October 31, 1998 and November 1, 1997 are unaudited and
are presented pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, the consolidated financial statements should
be read in conjunction with the financial statement disclosures contained in the
Company's 1997 Annual Report and 1997 Form 10-K. In the opinion of management,
the accompanying consolidated financial statements reflect all adjustments
necessary (which are of a normal recurring nature) to present fairly the
financial position and results of operations and cash flows for the interim
periods, but are not necessarily indicative of the results of operations for a
full fiscal year.
Certain prior year balances have been reclassified to conform with the
fiscal 1998 presentation.
2. NET INCOME (LOSS) PER SHARE
At the end of fiscal 1997, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 128 "Earnings Per Share". Basic per share
data has been computed based on the weighted average number of shares of common
stock outstanding. Diluted per share data has been computed on the basic plus
the dilution of stock options. Shares issuable upon the exercise of stock
options have not been included in the diluted earnings per share computation for
the thirty-nine weeks ended November 1, 1997 because the effect would be
anti-dilutive.
For the thirteen and thirty-nine weeks ended October 31, 1998, the net
income per share would have been $0.19 and $0.94 basic, and $0.18 and $0.90
diluted, respectively, if the non-operating income, net of taxes, was excluded
(see Note 7).
<PAGE> 7
3. FINANCING ARRANGEMENTS
In 1994, the Company executed a fifteen-year $8.0 million loan bearing
interest at 8.64%. Interest and principal are payable in equal monthly
installments beginning May 1, 1994. The loan is collateralized by a mortgage on
the national distribution center owned by the Company in Troy, Ohio.
In 1993, the Company executed a ten-year $7.0 million note bearing interest
at 7.3%. Interest and principal are payable in equal monthly installments
beginning November 1993. The note is collateralized by the material handling
equipment in the distribution center.
The Company and United Retail Incorporated, its subsidiary, (collectively,
the "Companies") are parties to a Financing Agreement, dated August 15, 1997, as
amended September 15, 1997 (the "Financing Agreement"), with The CIT
Group/Business Credit, Inc.("CIT"). The Financing Agreement provides a revolving
line of credit for a term of three years in the aggregate amount of $40 million
for the Companies, subject to availability of credit according to a borrowing
base computation. The line of credit may be used on a revolving basis by either
of the Companies to support trade letters of credit and standby letters of
credit and to finance loans.
The Companies are required to maintain unused at all times combined
availability of at least $5 million. Except for the maintenance of a minimum
availability of $5 million and a limit on capital expenditures, the Financing
Agreement does not contain any financial covenants.
In the event a loan is made to one of the Companies, interest is payable
monthly based on a 360-day year at the prime rate or at two percent plus the
LIBOR rate on a per annum basis, at the borrower's option.
The line of credit is secured by a security interest in inventory and
proceeds and by the balance on deposit from time to time in a bank account that
has been pledged to the lenders.
At October 31, 1998, the combined availability of the Companies was $20.3
million, no balance was in the pledged account, the aggregate outstanding amount
of letters of credit arranged by CIT was $18.8 million and no loan had been
drawn down. The Company's cash on hand was unrestricted.
<PAGE> 8
4. INCOME TAXES
The provision for income taxes consists of (dollars in thousands):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
-------------------------- ---------------------------
October 31, November 1, October 31, November 1,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Currently payable:
Federal $ 1,457 $ 2 $ 6,502 130
State 122 18 386 90
------- ------- ------- -------
1,579 20 6,888 220
------- ------- ------- -------
Deferred:
Federal (174) 0 1,071 0
State (37) 0 231 0
------- ------- ------- -------
(211) 0 1,302 0
------- ------- ------- -------
$ 1,368 $ 20 $ 8,190 $ 220
======= ======= ======= =======
</TABLE>
Reconciliation of the provision for income taxes from the U.S. Federal
statutory rate to the Company's effective rate is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Thirteen Weeks Ended
---------------------------------------------
October 31, 1998 November 1, 1997
-------------------- ------------------
<S> <C> <C> <C> <C>
Tax at Federal rate $ 1,337 35.0% $ 18 34.0%
State income taxes, net of 55 1.4% 18 32.4%
federal benefit
Goodwill amortization 18 0.5% 17 32.3%
Other (42) (1.1)% 6 11.5%
Change in valuation allowance 0 0.0% (39) (72.7)%
------- ---- ------- -----
$ 1,368 35.8% $ 20 37.5%
======= ==== ======= =====
</TABLE>
<TABLE>
<CAPTION>
Thirty-nine Weeks Ended
-------------------------------------------------------
October 31, 1998 November 1, 1997
------------------------ ------------------------
<S> <C> <C> <C> <C>
Tax at Federal rate $ 7,857 35.0% $ (335) (34.0)%
State income taxes, net of 401 1.8% 90 9.1%
federal benefit
Goodwill amortization 54 0.2% 52 5.3%
Other (122) (0.5)% 17 1.8%
Change in valuation allowance 0 0.0% 396 40.2%
------- ---- ------- -----
$ 8,190 36.5% $ 220 22.4%
======= ==== ======= =====
</TABLE>
<PAGE> 9
The net deferred tax asset reflects the tax impact of temporary
differences. The components of the net deferred tax asset as of October 31, 1998
are as follows (dollars in thousands):
<TABLE>
<S> <C>
Assets:
Inventory $ 184
Accruals and reserves 2,180
Credit carryforwards 1,479
------
3,843
Liabilities:
Depreciation 2,446
Compensation 14
------
2,460
------
Net deferred tax asset $1,383
======
</TABLE>
Future realization of the tax benefits attributable to these existing
deductible temporary differences ultimately depends on the existence of
sufficient taxable income within the carryforward period available under the tax
law at the time of the tax deduction. Based on management's assessment, it is
more likely than not that the net deferred tax asset will be realized through
future taxable earnings.
As of October 31, 1998, the Company has pre-acquisition net operating loss
carryforwards, aggregating approximately $0.5 million, available to reduce
future taxable income in certain states, expiring through 2004.
The Company's federal income tax returns for fiscal 1994, fiscal 1995 and
fiscal 1996 are being audited by the Internal Revenue Service. Management
believes that the results of the audits will not have a material adverse effect
on the Company's financial condition or results of operations.
5. ADVANCES TO OFFICERS
Advances were made on February 13, 1998 in the amount of $1.6 million to
Raphael Benaroya, the Company's Chairman of the Board, President and Chief
Executive Officer, and $0.2 million to George R. Remeta, the Company's Vice
Chairman and Chief Financial Officer. The purpose of the advances was to finance
payment of income taxes incurred in connection with their exercise of stock
options. Interest is payable annually in cash at the prime rate. The advances
have a term of four years subject to acceleration under certain circumstances
and to a call by the Company after two years with respect to half of the
principal amount. Payment of the advances is secured by a pledge of the shares
of the Company's Common Stock issued upon the option exercises in the amount of
777,925 shares issued to Mr. Benaroya and 116,888 shares issued to Mr. Remeta.
Each advance is a full recourse obligation of the borrower.
<PAGE> 10
6. SUPPLEMENTAL CASH FLOW INFORMATION
Net cash flow from operating activities includes cash payments for interest
and income taxes as follows (dollars in thousands):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
---------------------------- ---------------------------
October 31, November 1, October 31, November 1,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash interest:
Interest expense
(income), net per
statements of operations $ (388) $ 53 $ (883) $ 166
Less: Non-cash
interest expense 3 13 20 31
------- ------- ------- -------
Net cash interest,
including interest income
of $608, $258,
$1,662 and $695 $ (391) $ 40 $ (903) $ 135
======= ======= ======= =======
Income tax payments $ 5,548 $ 243 $ 7,478 $ 313
======= ======= ======= =======
</TABLE>
Financing activities include the non-cash exercise of 1,076,955 stock
options, with the exercise price paid by reducing the number of shares of common
stock issued in lieu of cash payment.
7. OTHER INCOME
In May 1998, the Company realized a capital gain of $3.1 million on the
sale of its minority interest in a privately held apparel design and
manufacturing firm for cash. The gain is reported as non-operating income.
8. CONTINGENCY FOOTNOTE
The Company is involved in legal actions and claims arising in the ordinary
course of business. Management believes (based on advice of legal counsel) that
such litigation and claims will not have a material effect on the Company's
financial condition or results of operations.
<PAGE> 11
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIRD QUARTER FISCAL 1998 VERSUS THIRD QUARTER FISCAL 1997
Net sales for the third quarter of Fiscal 1998 increased 3.5% from the
third quarter of Fiscal 1997, to $85.2 million from $82.3 million, principally
from an increase in average price. Average stores open decreased 8.1% from 554
to 509 as underperforming stores were closed. Comparable store sales for the
third quarter of Fiscal 1998 increased 9.2%. There is no assurance that
comparable store sales will continue to increase.
Gross profit increased by $3.4 million to $22.3 million in the third
quarter of Fiscal 1998 from $18.9 million in the third quarter of Fiscal 1997,
increasing as a percentage of net sales to 26.2% from 23.0%. The increase in
gross profit as a percentage of net sales was primarily attributable to a
decrease in buying and occupancy costs as a percentage of net sales and an
increase in the merchandise margin rate.
General, administrative and store operating expenses were $18.9 million in
the third quarter of Fiscal 1998 compared to $18.8 million in the third quarter
of Fiscal 1997, principally as a result of increases in bonus compensation and
computer software expenses, partially offset by premiums received by the Company
from a bank on proprietary credit card purchases of Company merchandise (see,
"-Proprietary Credit Card"). As a percentage of net sales, general,
administrative and store operating expenses decreased to 22.2% from 22.9%.
During the third quarter of Fiscal 1998, the Company had operating income
of $3.4 million (4.0% of sales) compared to operating income of $0.1 million in
the third quarter of Fiscal 1997.
Net interest income was $0.4 million in the third quarter of Fiscal 1998
compared to net interest expense of $53,000 in the third quarter of Fiscal 1997,
primarily from interest earned on a higher level of cash and cash equivalents.
The Company had a provision for income taxes of $1.4 million in the third
quarter of Fiscal 1998 and of $20,000 in the third quarter of Fiscal 1997.
The Company had net income of $2.5 million for the third quarter of Fiscal
1998 compared with net income of $34,000 in the third quarter of Fiscal 1997.
There is no assurance that the Company will continue to be profitable.
<PAGE> 12
NINE MONTHS FISCAL 1998 VERSUS NINE MONTHS FISCAL 1997
Net sales for the nine months of Fiscal 1998 increased 7.6% from the nine
months of Fiscal 1997, to $282.3 million from $262.4 million, principally from
an increase in average price. Average stores open decreased 7.9% from 560 to 516
as underperforming stores were closed. Comparable store sales for the nine
months of Fiscal 1998 increased 13.3%.
Gross profit increased by $20.7 million to $78.2 million in the nine
months of Fiscal 1998 from $57.5 million in the nine months of Fiscal 1997,
increasing as a percentage of net sales to 27.7% from 21.9%. The increase in
gross profit as a percentage of net sales was primarily attributable to a
decrease in buying and occupancy costs as a percentage of net sales and an
increase in the merchandise margin rate.
General, administrative and store operating expenses increased 2.4% to
$59.7 million in the nine months of Fiscal 1998 compared to $58.3 million in the
nine months of Fiscal 1997, principally as a result of increases in bonus
compensation and computer software expenses, partially offset by premiums
received by the Company from a bank on proprietary credit card purchases of
Company merchandise. As a percentage of net sales, general, administrative and
store operating expenses decreased to 21.2% from 22.2%.
During the nine months of Fiscal 1998, the Company had operating income of
$18.5 million (6.5% of sales), which excludes the capital gain referred to
below, compared to an operating loss of $0.8 million in the nine months of
Fiscal 1997.
Net interest income was $0.9 million in the nine months of Fiscal 1998
compared to net interest expense of $0.2 million in the nine months of Fiscal
1997, primarily from interest earned on a higher level of cash and cash
equivalents.
The Company had a provision for income taxes of $8.2 million in the nine
months of Fiscal 1998 and of $0.2 million in the nine months of Fiscal 1997.
The Company had net income of $14.3 million for the nine months of Fiscal
1998 compared with a net loss of $1.2 million for the nine months of Fiscal
1997. Net income for the nine months of Fiscal 1998 included a capital gain on
the sale of the Company's minority interest in a privately held apparel design
and manufacturing firm of $3.1 million ($2.0 million after tax).
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operating activities in the nine months of Fiscal
1998 was $3.5 million.
In May 1998, the Company sold its minority equity interest in a privately
held apparel design and manufacturing firm for $3.1 million cash.
The Company's cash on hand was $30.7 million at October 31, 1998, $14.8
million at November 1, 1997 and $31.1 million at January 31, 1998.
Inventory increased to $54.2 million at October 31, 1998 from $49.7
million at November 1, 1997 and $38.0 million at January 31, 1998. The Company's
inventory levels peak in early May and November/December. During Fiscal 1997,
the highest inventory level was $52.1 million.
Import purchases are made in U.S. dollars and are generally financed by
trade letters of credit. Import purchases constituted approximately 48% of total
purchases in Fiscal 1997.
Short-term trade credit represents a significant source of financing for
domestic merchandise purchases. Trade credit arises from the willingness of the
Company's domestic vendors to grant extended payment terms for inventory
purchases and is generally financed either by the vendor or a third-party
factor.
United Retail Group, Inc. and United Retail Incorporated, its subsidiary
(collectively, the "Companies"), are parties to a Financing Agreement, dated
August 15, 1997, as amended September 15, 1997 (the "Financing Agreement"), with
The CIT Group/Business Credit, Inc. ("CIT"). The Financing Agreement provides a
revolving line of credit for a term of three years in the aggregate amount of
$40 million for the Companies, subject to availability of credit as described in
the following paragraphs. The line of credit may be used on a revolving basis by
either of the Companies to support trade letters of credit and standby letters
of credit and to finance loans. As of October 31, 1998, trade letters of credit
for the account of the Company and supported by CIT were outstanding in the
amount of $16.8 million. (A standby letter of credit supported by CIT was also
outstanding for $2.0 million as collateral for obligations in the ordinary
course of business under general liability insurance policies.)
Subject to the following paragraph, the availability of credit (within the
aggregate $40 million line of credit) to either of the Companies at any time is
the excess of its borrowing base over the sum of (x) the aggregate outstanding
amount of its letters of credit and its revolving loans, if any, and (y) at
CIT's option, the sum of (i) unpaid sales taxes, and (ii) up to $500,000 in
total liabilities of the Companies under permitted encumbrances (as defined in
the Financing Agreement). The borrowing base, as to either of the Companies, is
the sum of (x) a percentage of the book value of its eligible inventory (both on
hand and unfilled purchase orders financed with letters of credit), ranging from
60% to 65% depending on the season, and (y) the balance in an account in its
name that has been pledged to the lenders (a "Pledged Account"). (At October 31,
1998, the combined availability of the Companies was $20.3 million; no balance
was in a Pledged Account; no loan had been drawn down; and the Company's cash on
hand was unrestricted.)
The provisions of the preceding paragraph to the contrary notwithstanding,
the Companies are required to maintain unused at all times combined availability
of at least $5 million. Except for the maintenance of a minimum availability of
$5 million and a limit on capital expenditures, the Financing Agreement does not
contain any financial covenants.
In the event a revolving loan is made to one of the Companies, interest is
payable monthly based on a 360-day year at the prime rate or at two percent plus
the LIBOR rate on a per annum basis, at the borrower's option.
<PAGE> 14
The line of credit is secured by a security interest in inventory and
proceeds and by the balance from time to time in the Pledged Account.
The Financing Agreement also includes certain restrictive covenants that
impose limitations (subject to certain exceptions) on the Companies with respect
to, among other things, making certain investments, declaring or paying
dividends, acquiring Common Stock or preferred stock of the Company, making
loans, engaging in certain transactions with affiliates, or consolidating,
merging or making acquisitions outside the ordinary course of business.
The Company believes that its cash on hand, the availability of credit
under the Financing Agreement and cash flows from operating activities will be
adequate to meet anticipated working capital needs, including seasonal financing
needs, for the next 12 months. This paragraph constitutes forward-looking
information under the 1995 Private Securities Litigation Reform Act (the "Reform
Act") and is subject to the uncertainties and other risk factors referred to
under the caption "Future Results."
PROPRIETARY CREDIT CARD
Purchases of Company merchandise made by customers with the Company's
proprietary credit cards were paid for daily at a discount by a bank through
November 30, 1997. Commencing December 1, 1997, however, the bank has paid a
premium, instead of taking a discount, on proprietary credit card purchases.
During the nine months of Fiscal 1998, premiums paid to the Company by the bank
had a material favorable effect on the Company's general, administrative and
store operating expenses.
The Credit Plan Agreement between the Companies and the bank (the "Credit
Agreement") provides for the issuance of the Company's proprietary credit cards
by the bank and contains financial covenants that require that the Company's (i)
consolidated tangible net worth not be less than the sum of $32 million plus for
each complete fiscal year ended after February 1, 1992 for which net income has
been positive, 50% of net income, and (ii) consolidated fixed charges ratio for
the four preceding fiscal quarters combined not be less than 1.0:1.0.
The Companies terminated the Credit Agreement effective January 30, 1999
and entered into a contract with another bank (the "Credit Card Bank") to issue
the Company's proprietary credit cards after January 30, 1999 and to purchase
from the first bank the accounts receivable from credit card customers. There
is no assurance that in Fiscal 1999 discounts will not be taken by the Credit
Card Bank on proprietary credit card purchases and other charges will not be
incurred by the Company. Any such discounts and charges would have a material
adverse effect on the Company's general, administrative and store operating
expenses in Fiscal 1999.
STORES
The Company leased 510 retail stores at October 31, 1998, of which 302
stores were located in strip shopping centers, 184 stores were located in malls
and 24 stores were located in downtown shopping districts. Total retail square
footage was 2.0 million square feet at October 31, 1998 compared to 2.2 million
square feet a year earlier.
The Company intends to pay the costs of opening new stores and remodeling
existing stores from its cash on hand at the time. New stores and newly
remodeled stores will use the Avenue trade name. This paragraph constitutes
forward-looking information under the Reform Act, which is subject to the
uncertainties and other risk factors referred to under the caption "Future
Results".
<PAGE> 15
TAX MATTERS
The Company's federal income tax returns for Fiscal 1994, Fiscal 1995 and
Fiscal 1996 are being audited by the Internal Revenue Service. Management
believes that the results of the audit will not have a material adverse effect
on the Company's financial condition or results of operations.
RENOVATING COMPUTERIZED SYSTEMS AND REPLACING EMBEDDED TECHNOLOGY
The Company operates a nationwide chain of specialty apparel retail
stores, imports a significant portion of its inventory, and makes a proprietary
credit card available to its customers. The Company's operations are heavily
dependent on date sensitive computerized systems and embedded technology,
including (i) its management information systems, (ii) the technology, including
microcontrollers, embedded in equipment at the Company's national distribution
center, (iii) the system for issuing and processing a trade letter of credit
for each of the Company's purchase orders used by the bank (the "Letter of
Credit Provider") that finances the Company's purchases of inventory abroad and
(iv) links that will be established to the Credit Card Bank to authorize
purchases by customers using the Company's proprietary credit card after Fiscal
1998 (see, "-Proprietary Credit Card"). The Company's headquarters uses a date
sensitive voicemail system. The Company's headquarters and stores are leased
and are generally affected by date sensitive embedded technology used to
control heating and ventilation and lighting.
Computer programs and embedded technology, including the programs and
technology on which the Company's operations depend, often will mishandle data
that includes a year after 1999 (referred to below as "Year 2000 risks").
The Company's management information systems department (the "MIS
Department") is renovating and validating the Company's applications software,
systems software and hardware (collectively referred to below as "Systems")
to accommodate dates after 1999. (Systems that are essential to the Company's
management information systems are referred to below as "Essential Systems.")
The MIS Department identified 272 projects to analyze and, if necessary,
renovate and validate Systems to ensure that they are Year 2000 compliant.
After being validated, Systems are implemented as part of each project. 226
projects have been completed in all material respects and 20 projects are
underway. The mainframe operating systems used by the Company's vendor were
replaced and the new mainframe systems have been represented by the vendor to
be Year 2000 compliant in all material respects. (Year 2000 remediation of the
Essential Systems in all material respects and replacement by the Company's
vendor of its mainframe operating systems are collectively referred to below as
the Company's "Year 2000 Project.") By late Fiscal 1998, integrated testing of
the Essential Systems and the mainframe operating systems is scheduled to be
completed in all material respects. There is no assurance, however, that
integrated testing will not reveal the need for further modifications.
The Company has obtained representations from the manufacturers of the
equipment that performs essential functions at the national distribution center
to the effect that the equipment is Year 2000 compliant in all material
respects. There is no assurance, however, that all the essential equipment at
the national distribution center will function properly after 1999 or that any
malfunctions that occur will not have a material adverse effect on the Company's
logistics operations.
<PAGE> 16
The Letter of Credit Provider has advised the Company that its trade
letter of credit system and telecommunications interfaces have been renovated
and validated in all material respects to a level commensurate with the risk of
non-performance and will be tested in 1999. The Credit Card Bank has advised the
Company that its credit card transaction processing system has been renovated
and validated in all material respects to a level commensurate with its risk of
non-performance and will be tested in late 1998. The Credit Card Bank also
stated that it has assessed its telecommunications interfaces for point of sale
credit authorizations and is in the process of modifying them to make them Year
2000 compliant by June 30, 1999. There is no assurance, however, that the
scheduled tests of these banking systems and telecommunications interfaces will
be successful, that the systems and interfaces will function properly after 1999
or that any malfunctions that occur will not have a material adverse effect on
the Company's purchases and sales of merchandise.
The Company will replace its voicemail system early in Fiscal 1999 with
one that is guaranteed to be Year 2000 compliant by the manufacturer.
The Company believes that in most cases the embedded technology used in
energy management systems to control heating and ventilation and lighting at its
headquarters and its stores can quickly be bypassed manually in the event of a
malfunction because of an inability to accommodate dates after 1999. There is no
assurance, however, that any malfunctions that occur will not have a material
adverse effect on the Company's operations.
The Company does not have a project tracking system for the time that its
associates spend on the Year 2000 Project. The Company's internal costs for the
Year 2000 Project are principally the related payroll costs for the MIS
Department, estimated to have been $0.6 million from February 3, 1996 to October
31, 1998, of which $0.3 million is estimated to have been accrued in the nine
months of Fiscal 1998. The cost of special purchases for the Year 2000 Project
accrued through October 31, 1998 was approximately $0.5 million, substantially
all of which was accrued in the nine months of Fiscal 1998. Amounts equal to
the internal and external costs of the Year 2000 Project, however, probably
would have been spent on other software development projects, if the Year 2000
Project had not been necessary. Other software development projects deferred
because of the Year 2000 Project probably would have improved the Company's
operational efficiency but management does not believe that any of the deferred
operational improvements would have been material to its operations.
Budgeted MIS Department payroll costs and special purchases for the Year
2000 Project, including a voicemail system, in the fourth quarter of Fiscal 1998
and in Fiscal 1999, respectively, are not material in relation to the Company's
general, administrative and store operating expenses in the comparable previous
three-month and twelve-month periods. However, there is no assurance that
unexpected additional costs will not be incurred.
The inability of computerized systems and embedded technology in general
to accommodate dates after 1999 may cause disruptions in the United States and
abroad in the telecommunications, banking, credit card, transportation,
utilities and apparel manufacturing industries and in government services. If
such disruptions occur, they could have a material adverse effect on the entire
specialty apparel retail industry, including the Company. The Company has not
assessed industry-wide Year 2000 risks that are not unique to the Company's
operations. The Company's contingency plan for Year 2000 risks that might affect
the entire industry is to have multiple, geographically diverse vendors of each
major category of goods, to the extent feasible. The Company will address
industry-wide Year 2000 risks on an ad hoc basis as problems arise, principally
by shifting purchase orders to vendors that are less troubled by Year 2000
problems than their competitors. There is no assurance, however, that any
vendors will be Year 2000 compliant.
The Company intends to renovate and validate its Essential Systems to make
them Year 2000 compliant in all material respects and intends to ensure that the
heating and ventilation and lighting at its headquarters will be Year 2000
compliant. There is no commercially viable alternative course of action, so the
Company will not develop contingency plans for prolonged failure of its
Essential Systems and lengthy constructive eviction from its headquarters. Such
Systems failure and constructive eviction would have a material adverse effect
on the Company's results of operations, net cash provided from operating
activities and financial condition.
The Company's contingency plan for Year 2000 risks at its national
distribution center is to replace as quickly as possible any essential equipment
that malfunctions because of inability to accommodate dates after 1999. There is
no assurance, however, that Year 2000 compliant replacement equipment will be
available.
<PAGE> 17
The Company's contingency plan with respect to the unavailability of a
trade letter of credit for each of the Company's purchase orders is to deliver
blanket trade letters of credit to the Company's major foreign vendors, by
courier, if necessary. (A blanket trade letter of credit would finance all
Company purchase orders to be given to the vendor.)
The Company's contingency plan with respect to downtime in proprietary
credit card operations by the Credit Card Bank is to continue credit sales on
the Company's own account with its own Systems until the Credit Card Bank
resumes operations or is replaced by another bank. While other banks would be
available to replace the Credit Card Bank, there is no assurance that any bank
will be Year 2000 compliant.
The Company has contingency plans with respect to heating and ventilation
and lighting controls in its stores that have malfunctioned because of an
inability to accommodate dates after 1999. For stores located in strip shopping
centers, the Company will arrange as quickly as possible for local maintenance
contractors to bypass manually any controls that have malfunctioned. There is
no assurance, however, that local contractors will have time available to
bypass controls that have malfunctioned. For stores located in malls and
downtown shopping districts, the Company will promptly notify landlords of
systems that have malfunctioned and request immediate restoration of service.
There is no assurance, however, that landlords will be able to restore service.
In the case of any unheated stores that have lights, the Company will also ask
store managers to keep the stores open if weather conditions permit.
There is no assurance that the Company's contingency plans will diminish
the possible adverse consequences of Year 2000 risks.
The Company believes that a reasonably likely worst case scenario
resulting from Year 2000 risks that are unique to its operations would be a
decline in net sales for the fourth quarter of Fiscal 1999 having a material
adverse effect on the Company's results of operations and net cash provided
from operating activities for that quarter but not on the Company's financial
condition (see, "-Liquidity"). While management does not believe that such risks
will have a material adverse effect on the Company's operations in Fiscal 2000,
there is no assurance that such risks will not have a material adverse effect
on the Company's operations and financial condition in Fiscal 2000 regardless
of the Company's remediation efforts and contingency plans. Further, there is
no assurance that Year 2000 risks that affect the entire specialty apparel
retail industry, and not just the Company, will not have a material adverse
effect on the Company's operations and financial condition in Fiscal 1999 and
Fiscal 2000.
Certain of the 15 preceding paragraphs contain forward-looking information
under the Reform Act, which is subject to the uncertainties and other risk
factors referred to under the caption "Future Results."
FUTURE RESULTS
Future results could differ materially from those currently anticipated by
the Company due to unforeseeable problems that might arise and possible (i)
miscalculation of fashion trends, (ii) shifting shopping patterns, both within
the specialty store sector and in other channels of distribution, (iii) extreme
or unseasonable weather conditions, (iv) disruptions in the telecommunications,
banking, credit card, transportation, utilities and apparel manufacturing
industries in the United States and abroad caused by the inability of their
computerized systems and embedded technology to accommodate dates after 1999,
(v) economic downturns, weakness in overall consumer demand, and variations in
the demand for women's fashion apparel, (vi) imposition by vendors, or their
third-party factors, of more onerous payment terms for domestic merchandise
purchases, (vii) acceleration in the rate of business failures and inventory
liquidations in the specialty store sector of the women's apparel industry, and
(viii) disruptions in the sourcing of merchandise abroad, including (a)
political instability and economic distress in South Asia, (b) China's claims to
sovereignty over Taiwan, (c) North Korea's claims to sovereignty over South
Korea, (d) exchange rate fluctuations, (e) trade sanctions or restrictions, (f)
changes in quota and duty regulations, (g) delays in shipping, (h) increased
costs of transportation or (i) disruptions in government services in the United
States and abroad caused by the inability of computerized systems and embedded
technology to accommodate dates after 1999, including delays in the issuance by
the United States Customs Service of clearances on imported merchandise.
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS
The following exhibits are filed herewith:
Number Description
------ -----------
10.1* Employment Agreement, dated November 20, 1998, between
the Corporation and Raphael Benaroya
10.2* Employment Agreement, dated November 20, 1998, between
the Corporation and George R. Remeta
10.3* Employment Agreement, dated November 20, 1998, between
the Corporation and Kenneth P. Carroll
10.4* Employment Agreement, dated March 26, 1998, between the
Corporation and Carrie Cline-Tunick and amendment
thereto.
27 Financial Data Schedule
The following exhibits to the Corporation's Quarterly Report on Form 10-Q
for the period ended May 2, 1998 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1* 1998 Stock Option Agreement, dated May 21, 1998,
between the Corporation and Raphael Benaroya
10.2* 1998 Stock Option Agreement, dated May 21, 1998,
between the Corporation and George R. Remeta
The following exhibits to the Corporation's Annual Report on Form 10-K for
the year ended January 31, 1998 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
4.1 Amended By-Laws of the Corporation
10.1 Restated Stockholders' Agreement, dated December 23,
1992, between the Corporation and certain of its
stockholders and Amendment No. 1, Amendment No. 2 and
Amendment No. 3 thereto
10.2 Private Label Credit Program Agreement, dated January
27, 1998, between the Corporation, United Retail
Incorporated and World Financial Network National Bank
(Confidential portions have been deleted and filed
separately with the Secretary of the Commission)
10.4* Restated 1990 Stock Option Plan as of March 6, 1998
10.5* Restated 1990 Stock Option Plan as of May 28, 1996
10.6* Restated 1996 Stock Option Plan as of March 6, 1998
10.7* Restated 1989 Performance Option Plan as of May 6,
1998
13 Sections of 1997 Annual Report to Stockholders
(including opinion of Independent Public Accountants)
that are incorporated by reference in response to the
items of the Annual Report on Form 10-K
<PAGE> 19
The following exhibit to the Corporation's Quarterly Report on Form 10-Q
for the period ended November 1, 1997 is incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Amendment, dated September 15, 1997, to Financing
Agreement among the Corporation, United Retail
Incorporated and The CIT Group/Business Credit, Inc.
("CIT")
The following exhibits to the Corporation's Quarterly Report on Form 10-Q
for the period ended August 2, 1997 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Financing Agreement, dated August 15, 1997, among the
Corporation, United Retail Incorporated and CIT
10.2* Amendment No. 1 to Restated Supplemental Retirement
Savings Plan
The following exhibit to the Corporation's Quarterly Report on Form 10-Q
for the period ended November 2, 1996 is incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1* Restated Supplemental Retirement Savings Plan
The following exhibit to the Corporation's Quarterly Report on Form 10-Q
for the period ended May 4, 1996 is incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.3 Amended and Restated Term Sheet Agreement for Hosiery,
dated as of December 29, 1995, between The Avenue, Inc.
and American Licensing Group, Inc. (Confidential
portions have been deleted and filed separately with
the Secretary of the Commission)
The following exhibits to the Corporation's Amended Current Report on Form
8-KA, dated May 22, 1995, are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Amended and Restated Gloria Vanderbilt Intimate Apparel
Sublicense Agreement, dated May 22, 1995, between
United Retail Incorporated and American Licensing Group
Limited Partnership ("ALGLP")
10.2 Gloria Vanderbilt Sleepwear Sublicense Agreement, dated
May 22, 1995, between United Retail Incorporated and
ALGLP
<PAGE> 20
The following exhibits to the Corporation's Annual Report on Form 10-K for
the year ended January 28, 1995 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1* Incentive Compensation Program Summary
21 Subsidiaries of the Corporation
The following exhibits to the Corporation's amended Annual Report on Form
10-KA for the year ended January 29, 1994 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.3 Amendment, dated December 6, 1993, to Credit Agreement
between the Corporation and Citibank
10.4 Term Sheet Agreement, dated as of May 4, 1993, with
respect to Amended and Restated Gloria Vanderbilt
Hosiery Sublicense Agreement
The following exhibits to the Corporation's Registration Statement on
Form S-1 (Registration No. 33-44499), as amended, are incorporated herein by
reference:
Number in Filing Description
---------------- -----------
3.1 Amended and Restated Certificate of Incorporation
of Registrant
4.1 Specimen Certificate for Common Stock of
Registrant
10.2.1 Software License Agreement, dated as of April 30,
1989, between The Limited Stores, Inc. and Sizes
Unlimited, Inc. (now known as United Retail
Incorporated)
10.2.2 Amendment to Software License Agreement, dated
December 10, 1991
10.7 Amended and Restated Gloria Vanderbilt Hosiery
Sublicense Agreement, dated as of April 30, 1989,
between American Licensing Group, Inc. (Licensee)
and Sizes Unlimited, Inc. (Sublicensee)
10.12 Amended and Restated Master Affiliate Sublease
Agreement, dated as of July 17, 1989, among Lane
Bryant, Inc., Lerner Stores, Inc. (Landlord) and
Sizes Unlimited, Inc. (Tenant) and Amendment
thereto, dated July 17, 1989
10.33* 1991 Stock Option Agreement, dated November 1, 1991,
between the Corporation and Raphael Benaroya
10.34* 1991 Stock Option Agreement, dated November 1,
1991, between the Corporation and George R. Remeta
10.38 Management Services Agreement, dated August 26,
1989, between American Licensing Group, Inc. and
ALGLP
10.39 First Refusal Agreement, dated as of August 31,
1989, between the Corporation and ALGLP
10.43 Credit Plan Agreement, dated June 3, 1992, among
the Corporation, Sizes Unlimited, Inc. and
Citibank
-------------
*A compensatory plan for the benefit of the Corporation's management
or a management contract.
(b) No Current Reports on Form 8-K were filed by the Corporation during
the fiscal quarter ended October 31, 1998.
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
(Registrant) UNITED RETAIL GROUP, INC.
-------------------------------------------------------------------
By: /S/ GEORGE R. REMETA
------------------------------------------------------
George R. Remeta, Vice Chairman of the Board and Chief
Financial Officer - Authorized Signatory
By: /S/ JON GROSSMAN
------------------------------------------------------
Jon Grossman, Vice President - Finance and Chief
Accounting Officer
Date: November 25, 1998
<PAGE> 22
EXHIBIT INDEX
The following exhibits are filed herewith:
Number Description
------ -----------
10.1* Employment Agreement, dated November 20, 1998, between
the Corporation and Raphael Benaroya
10.2* Employment Agreement, dated November 20, 1998, between
the Corporation and George R. Remeta
10.3* Employment Agreement, dated November 20, 1998, between
the Corporation and Kenneth P. Carroll
10.4* Employment Agreement, dated March 26, 1998, between the
Corporation and Carrie Cline-Tunick and amendment
thereto.
27 Financial Data Schedule
The following exhibits to the Corporation's Quarterly Report on Form 10-Q
for the period ended May 2, 1998 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1* 1998 Stock Option Agreement, dated May 21, 1998,
between the Corporation and Raphael Benaroya
10.2* 1998 Stock Option Agreement, dated May 21, 1998,
between the Corporation and George R. Remeta
The following exhibits to the Corporation's Annual Report on Form 10-K for
the year ended January 31, 1998 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
4.1 Amended By-Laws of the Corporation
10.1 Restated Stockholders' Agreement, dated December 23,
1992, between the Corporation and certain of its
stockholders and Amendment No. 1, Amendment No. 2 and
Amendment No. 3 thereto
10.2 Private Label Credit Program Agreement, dated January
27, 1998, between the Corporation, United Retail
Incorporated and World Financial Network National Bank
(Confidential portions have been deleted and filed
separately with the Secretary of the Commission)
10.4* Restated 1990 Stock Option Plan as of March 6, 1998
10.5* Restated 1990 Stock Option Plan as of May 28, 1996
10.6* Restated 1996 Stock Option Plan as of March 6, 1998
10.7* Restated 1989 Performance Option Plan as of May 6,
1998
13 Sections of 1997 Annual Report to Stockholders
(including opinion of Independent Public Accountants)
that are incorporated by reference in response to the
items of the Annual Report on Form 10-K
<PAGE> 23
The following exhibit to the Corporation's Quarterly Report on Form 10-Q
for the period ended November 1, 1997 is incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Amendment, dated September 15, 1997, to Financing
Agreement among the Corporation, United Retail
Incorporated and The CIT Group/Business Credit, Inc.
("CIT")
The following exhibits to the Corporation's Quarterly Report on Form 10-Q
for the period ended August 2, 1997 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Financing Agreement, dated August 15, 1997, among the
Corporation, United Retail Incorporated and CIT
10.2* Amendment No. 1 to Restated Supplemental Retirement
Savings Plan
The following exhibit to the Corporation's Quarterly Report on Form 10-Q
for the period ended November 2, 1996 is incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1* Restated Supplemental Retirement Savings Plan
The following exhibit to the Corporation's Quarterly Report on Form 10-Q
for the period ended May 4, 1996 is incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.3 Amended and Restated Term Sheet Agreement for Hosiery,
dated as of December 29, 1995, between The Avenue, Inc.
and American Licensing Group, Inc. (Confidential
portions have been deleted and filed separately with
the Secretary of the Commission)
The following exhibits to the Corporation's Amended Current Report on Form
8-KA, dated May 22, 1995, are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Amended and Restated Gloria Vanderbilt Intimate Apparel
Sublicense Agreement, dated May 22, 1995, between
United Retail Incorporated and American Licensing Group
Limited Partnership ("ALGLP")
10.2 Gloria Vanderbilt Sleepwear Sublicense Agreement, dated
May 22, 1995, between United Retail Incorporated and
ALGLP
<PAGE> 24
The following exhibits to the Corporation's Annual Report on Form 10-K for
the year ended January 28, 1995 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1* Incentive Compensation Program Summary
21 Subsidiaries of the Corporation
The following exhibits to the Corporation's amended Annual Report on Form
10-KA for the year ended January 29, 1994 are incorporated herein by reference:
Number in Filing Description
------ --------- -----------
10.3 Amendment, dated December 6, 1993, to Credit
Agreement between the Corporation and Citibank
10.4 Term Sheet Agreement, dated as of May 4, 1993, with
respect to Amended and Restated Gloria Vanderbilt
Hosiery Sublicense Agreement
The following exhibits to the Corporation's Registration Statement on
Form S-1 (Registration No. 33-44499), as amended, are incorporated herein by
reference:
Number in Filing Description
---------------- -----------
3.1 Amended and Restated Certificate of Incorporation
of Registrant
4.1 Specimen Certificate for Common Stock of
Registrant
10.2.1 Software License Agreement, dated as of April 30,
1989, between The Limited Stores, Inc. and Sizes
Unlimited, Inc. (now known as United Retail
Incorporated)
10.2.2 Amendment to Software License Agreement, dated
December 10, 1991
10.7 Amended and Restated Gloria Vanderbilt Hosiery
Sublicense Agreement, dated as of April 30, 1989,
between American Licensing Group, Inc. (Licensee)
and Sizes Unlimited, Inc. (Sublicensee)
10.12 Amended and Restated Master Affiliate Sublease
Agreement, dated as of July 17, 1989, among Lane
Bryant, Inc., Lerner Stores, Inc. (Landlord) and
Sizes Unlimited, Inc. (Tenant) and Amendment
thereto, dated July 17, 1989
10.33* 1991 Stock Option Agreement, dated November 1, 1991,
between the Corporation and Raphael Benaroya
10.34* 1991 Stock Option Agreement, dated November 1,
1991, between the Corporation and George R. Remeta
10.38 Management Services Agreement, dated August 26,
1989, between American Licensing Group, Inc. and
ALGLP
10.39 First Refusal Agreement, dated as of August 31,
1989, between the Corporation and ALGLP
10.43 Credit Plan Agreement, dated June 3, 1992, among
the Corporation, Sizes Unlimited, Inc. and
Citibank
-------------
*A compensatory plan for the benefit of the Corporation's management
or a management contract.
<PAGE> 1
Exhibit No. 10.1
EMPLOYMENT AGREEMENT
Agreement made as of the 20th day of November, 1998, between UNITED
RETAIL GROUP, INC., a Delaware corporation, with principal offices at 365 West
Passaic Street, Rochelle Park, New Jersey 07662-6563 (the "Company"), and
RAPHAEL BENAROYA, residing at 179 Lincoln Street, Englewood, New Jersey 07631
(the "Executive").
WHEREAS, the Executive has been employed by the Company as its
Chairman of the Board, President and Chief Executive Officer;
WHEREAS, the Company desires to continue the services of the
Executive, and the Executive desires to continue to provide such services to the
Company, on the terms set forth in this Agreement;
WHEREAS, the provisions of this Agreement were recommended by the
Compensation Committee of the Company's Board of Directors on November 9, 1998;
and
WHEREAS, this Agreement was reviewed by special counsel to the Company
and approved by the Company's Board of Directors on November 20, 1998.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. DEFINITIONS.
(a) Affiliated Companies shall mean, with respect to the Company, any
corporation, limited partnership, general partnership,
association, joint-stock company, joint venture, trust, bank,
trust company, land trust, business trust, fund or any organized
group of persons, whether or not a legal entity, that is directly
or indirectly controlled by the Company.
(b) Base Salary shall have the meaning set forth in Section 4(a).
(c) Board of Directors shall mean the Board of Directors of the
Company.
(d) Business of the Company shall mean the operation of a retail store
chain which markets and sells apparel for women principally in
sizes 14 and larger and any other future business in which the
Company and its subsidiaries and Affiliated Companies engage that
produces more than 10% of the Company's consolidated sales.
<PAGE> 2
(e) By-laws shall mean the Restated By-laws of the Company as
currently in force.
(f) Cause shall mean the occurrence of one or more of the
following events:
(i) a judgment of conviction against the Executive or
a plea of guilty has been entered for any felony which is both
based on his personal actions (excluding liability imputed to
him by reason of his position as an executive of the Company)
and involves common law fraud, embezzlement, willful
dishonesty or moral turpitude (the entry of a judgment or plea
being the only event or circumstance sufficient to constitute
Cause under this subparagraph (i)), provided, however, that
any felony an essential element of which is predicated on the
operation of a vehicle shall be deemed not to involve moral
turpitude;
(ii) (A) the Executive has willfully and continuously
failed to perform his duties to the Company in any material
respect, or (B) the Executive has failed in any material
respect to follow specific directions of the Board of
Directors in the performance of his duties;
(iii) the Executive has demonstrated willful
misconduct in the performance of his duties to the Company in
any material respect and material economic harm to the Company
has resulted; or
(iv) there has been a breach in any material respect
of any of the provisions of Section 11;
provided, however, that the judgment of conviction or a plea
of guilty referred to in subparagraph (i), the failure of
performance referred to in subparagraph (ii), the misconduct
referred to in subparagraph (iii), and the breach referred to
in subparagraph (iv) shall constitute Cause for a maximum of
only 90 days after the judgment of conviction or plea of
guilty was entered, the failure of performance commenced, the
material economic harm resulted, or the breach first took
place, as the case may be.
(g) Change of Control shall mean (i) the acquisition after the
date first set forth above by any person (defined for the
purposes of this paragraph to mean any person within the
meaning of Section 13(d) of the Securities Exchange Act of
1934 ("Exchange Act")), other than the Company, the Executive
or an employee benefit plan created by the Board of Directors
for the benefit of the Company's 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 30% or more of the
voting power in the election of Directors at the next meeting
of the holders of voting
2
<PAGE> 3
securities to be held for such purpose of all of the voting
securities issued by the Company; (ii) 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 (iii)
the merger or consolidation of the Company with, or transfer
of substantially all of the assets of the Company to, another
person; provided, however that any such acquisition, election,
merger, consolidation or transfer that is approved in advance
in writing by the Executive shall not constitute a Change of
Control.
(h) CPI shall have the meaning set forth in Section 4(a).
(i) Cure Period shall have the meaning set forth in Section 14(c).
(j) Group Benefits shall have the meaning set forth in Section
6(a).
(k) Individual Disability Policy shall have the meaning set forth
in Section 6(c).
(l) Individual Life Policy shall have the meaning set forth in
Section 6(b).
(m) Options shall mean employee stock options under a benefit plan
or arrangement between the Company and the Executive,
including those which may be granted during the Term of
Employment, held by the Executive or his assigns or donees.
(n) Performance Bonus shall have the meaning set forth in Section
4(b).
(o) Permanent Disability shall mean the inability of the Executive
to perform his duties and responsibilities to the Company by
reason of a physical or mental disability or infirmity (i) for
a continuous period of four months or (ii) at such earlier
time as the Executive submits medical evidence satisfactory to
the Company that the Executive has a physical or mental
disability or infirmity that will likely prevent him from
substantially performing his duties and responsibilities for
four months or longer (the date of such Permanent Disability
shall be on the last day of such four-month period or the day
on which the Executive submits such evidence, as the case may
be).
(p) Protected Information shall mean trade secrets, confidential
or proprietary information, and all other knowledge, know-how,
information, documents or materials, owned or developed by the
Company, or otherwise in the possession of the Company,
whether in tangible or intangible form, pertaining to the
Business of the Company, the confidentiality of which the
Company takes reasonable measures to protect, including, but
not limited to, the Company's research and development, store
operating results, identities and habits of customers and
prospective
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customers, suppliers, business relationships, products
(including prices, costs, sales or content), processes,
techniques, machinery, contracts, financial information or
measures, business methods, future business plans, data bases,
computer programs, designs, models, operating procedures,
knowledge of the organization, and other information owned,
developed or possessed by the Company; provided, however, that
Protected Information shall not include information that shall
become generally known to the public or the trade without
violation of Section 11.
(q) Resignation Compensation shall have the meaning set forth in
Section 14(d).
(r) Severance Pay shall have the meaning set forth in Section
14(c).
(s) Successor shall have the meaning set forth in Section 20.
(t) Tax shall mean all taxes on income, which shall be assumed to
be at a rate equal to the sum of the highest marginal rates,
including any applicable surcharges, of federal income tax,
state income tax, local income tax, Medicare payroll tax and
any similar income or payroll tax for a married citizen filing
a joint return from the county of the Executive's residence,
as now in effect or as amended from time to time.
(u) Term of Employment shall mean the period of time commencing on
the date first set forth above and ending on August 3, 2003 or
such later date as may be mutually agreed upon by the Board of
Directors and the Executive.
(v) Termination Without Cause shall have the meaning set forth in
Section 14(c).
(w) Unauthorized shall mean: (i) in contravention of the Company's
policies or procedures; (ii) otherwise inconsistent with the
Company's measures to protect its interests in its Protected
Information; or (iii) in contravention of any duty existing
under law or contract.
2. TERM; AND LOCATION.
(a) The Company hereby employs the Executive, and the Executive
hereby accepts such employment, in the capacities and upon the
terms and conditions hereinafter set forth, during the Term of
Employment.
(b) In no event shall the Executive's office be relocated without
his prior consent.
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3. DUTIES.
(a) During the Term of Employment, the Executive shall serve as
the President and Chief Executive Officer of the Company. In
such capacity, the Executive shall perform such duties and
shall have such responsibilities as are set forth in the
By-laws and such additional duties and responsibilities,
commensurate with his position and title, as may be determined
and assigned to the Executive from time to time by the Board
of Directors. Notwithstanding the above, the Executive shall
not be required to perform any duties and responsibilities
which would be likely to result in a non-compliance with or
violation of any applicable law or regulation. The Executive
shall report solely and directly to the Board of Directors;
all other officers and other employees of the Company shall
report directly to the Executive or the Executive's designees.
No other employee of the Company or any subsidiary shall have
authority and responsibilities that are generally equal to or
greater than those of the Executive.
(b) The Executive accepts such employment and hereby agrees to
serve the Company faithfully, industriously and to the best of
his ability in such capacities, with undivided loyalty,
devoting substantially all of his business time, attention,
knowledge, energy and skills to such employment as President
and Chief Executive Officer of the Company except during
vacation not to exceed three weeks in any year. The Executive
may engage in the following additional activities:
(i) continuing through a controlled corporation,
Raphael Benaroya, Inc., to manage American Licensing
Group Limited Partnership, subject to the
restrictions contained in Section 11(h);
(ii) serving as a director of not more than four
business corporations in addition to Raphael
Benaroya, Inc. that do not engage in the Business of
the Company;
(iii) overseeing personal and family investments in a
manner in which the Executive does not actively
operate portfolio companies in the ordinary course of
business; and
(iv) engaging in local, national and international
charitable, relief, human rights, civic, religious,
military and related activities on behalf of private
organizations and governmental agencies;
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provided, however, that the Executive's duties and
responsibilities as President and Chief Executive Officer of
the Company shall take precedence over his other activities
except for not more than 45 consecutive days of military
service in the event he is called to active duty in the armed
forces of the United States or any other country.
4. COMPENSATION. As compensation to the Executive for performance of
the services required hereunder and as consideration for his execution and
delivery of this Agreement, the Company shall pay him (subject to Sections 7 and
14), and the Executive agrees to accept, the following salary and other
compensation:
(a) A base salary, payable in accordance with the regular
executive payroll practices of the Company, at a rate of
$550,000 per annum during the period ending on January 31,
1999 and thereafter at such higher rate as may be determined
by the Compensation Committee of the Board of Directors, but
in any event base salary shall increase as of February 1, 1999
by a percentage at least equal to the increase, if any, in the
Consumer Price Index for All Urban Consumers for New York and
Northern New Jersey published by the Bureau of Labor
Statistics of the Department of Labor ("CPI") during the
four-year period ending on January 31, 1999 and shall increase
as of each anniversary of February 1, 1999 by a percentage at
least equal to the increase, if any, in the CPI since the
previous January 31st (as increased from time to time, the
"Base Salary").
(b) The Executive shall continue to be eligible to receive, and
the Company shall continue to pay, a semi-annual cash
incentive compensation payment ("Performance Bonus") based on
the Company's consolidated operating income for the six-month
periods ending January 31st and July 31st, respectively, with
a semi-annual award ranging from zero to 120% of Base Salary
for the six-month period in accordance with past practice,
provided, however, that the Performance Bonus shall be earned
and fully vested in the Executive as of January 31st or July
31st, as the case may be, whether or not the Executive shall
remain in the Company's employ after the Performance Bonus
shall have vested and provided, further, that the Performance
Bonus shall be paid to the Executive as soon as practicable
after the consolidated operating income for the period in
question shall be determined.
(c) If the federal excise tax pursuant to Section 280G of the Code
or any successor provision on "golden parachute" payments
applies to any acceleration of the vesting of Options during
the Term of Employment, the Company shall immediately pay the
Executive (w) an amount equal to the excise tax incurred plus
(x) an amount equal to the Tax with respect to the payment
made pursuant to clause (w) of this sentence, plus (y) an
amount equal to the federal excise tax on "golden parachute"
payments with respect to the payment, if any, made pursuant to
clause (x) of this sentence plus (z) an amount equal to the
Tax with respect to the payment made pursuant to clause (y) of
this sentence.
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5. EXPENSES. The Executive will continue to be required to incur
reasonable and necessary travel, business entertainment and other business
expenses. The Company agrees to reimburse the Executive for all reasonable and
necessary travel, business entertainment and other business expenses incurred or
expended by the Executive incident to the performance of the Executive's duties
hereunder, upon submission by the Executive to the Company of vouchers or
expense statements satisfactorily evidencing such expenses.
6. EXECUTIVE BENEFITS.
(a) The Company shall provide the Executive with benefits ("Group
Benefits"), taken as a whole, that are at least equal to those
provided by the Company to the other senior executives of the
Company, including, without limitation, enhanced group
disability insurance benefits at the level insured on the date
first set forth above (or, if the group disability insurance
can not be continued in force, the Company shall provide other
disability benefits equivalent to the benefits under the group
policy).
(b) In addition to Group Benefits, the Company shall maintain in
force the existing term life insurance policy on the Executive
or a similar policy issued by an insurance company with an
equal or higher rating (the "Individual Life Policy") in an
amount of $3 million at the Company's expense. The Executive
shall have the right to select and change the beneficiary(ies)
of such life insurance policy.
(c) The Company shall reimburse the Executive in the amount of
$20,000 per annum with respect to the premium on the existing
special supplemental long-term disability insurance policy
covering the Executive (the "Individual Disability Policy")
and the federal and state income taxes on such premium amount.
(d) Group Benefits and the Individual Life Policy shall be
provided while the Executive is employed by the Company under
this Agreement and thereafter as provided pursuant to the
terms of this Agreement.
(e) The Executive will cooperate with the Company in maintaining
key man life insurance up to $4 million during the Term of
Employment.
(f) All Options shall be fully vested and immediately exercisable
after either Termination Without Cause or a Change of Control,
anything in any stock option agreement between the Company and
the Executive to the contrary notwithstanding. In the event of
Termination Without Cause, Options shall be exercisable for
the lesser of 90 days thereafter or the remainder of the term
of the
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Option. In the event of Change of Control, Options shall be
exercisable until the earlier of 90 days after the termination
of the Executive's employment hereunder (including
resignation) or the expiration of the term of the Option.
7. PERMANENT DISABILITY; DEATH.
(a) In the event of the Permanent Disability of the Executive
during the Term of Employment, the Board of Directors shall,
upon written notice to the Executive, have the right to
terminate the Executive's employment hereunder by reason of
Permanent Disability.
(b) In the event of the death of the Executive during the Term of
Employment, this Agreement shall automatically terminate.
8. BENEFITS UPON DEATH OR DISABILITY. In the event of the
Executive's death or a termination of the Executive's employment by the Company
due to Permanent Disability, the Executive, his executor or his heirs at law, as
the case may be, shall be entitled to:
(a) any Base Salary accrued or any Performance Bonus vested but
not yet paid;
(b) a pro rata Performance Bonus for the season in which death or
Permanent Disability occurs determined and payable on the
basis of the number of days worked during the season and the
bonus percentage established for the season;
(c) any accrued vacation pay;
(d) reimbursement for expenses incurred but not yet paid prior to
such death or Permanent Disability;
(e) in the case of death, the proceeds of the Individual Life
Policy and other compensation and benefits as may be provided
in accordance with the terms and provisions of the Group
Benefits or of this Agreement;
(f) in the case of Permanent Disability, for five years following
the date of Permanent Disability, first, COBRA health
insurance benefits for the Executive and his dependents at the
Company's expense until the COBRA benefits expire and
thereafter, for the remainder of such five-year period,
equivalent reimbursement of healthcare expenses directly by
the Company; and
(g) in the case of Permanent Disability, six monthly payments
after the date of Permanent Disability, each equal to
one-twelfth of the Base Salary in effect on the date of
Permanent Disability, offset by any payments in accordance
with the terms and provisions of the Group Benefits, the
Individual Disability Policy or Supplementary Social Security
Benefits.
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The provisions of this Section 8 shall survive the termination of the
Executive's employment hereunder.
9. REPRESENTATION, WARRANTY AND COVENANT OF EXECUTIVE. The
Executive represents, warrants and covenants to the Company that he is not and
will not become a party to any agreement, contract or understanding, whether
employment or otherwise, which would in any way restrict or prohibit him from
undertaking or performing his employment in accordance with the terms and
conditions of this Agreement.
10. REPRESENTATION, WARRANTY AND COVENANT OF THE COMPANY. The
Company represents and warrants that this Agreement constitutes a valid and
legally binding obligation of the Company enforceable in accordance with the
terms herein set forth, except to the extent that the enforceability of this
Agreement may be affected by bankruptcy, insolvency, reorganization, moratorium,
or similar laws or equitable principles affecting creditors' rights generally.
The Company covenants that it shall give notice promptly to the Executive of the
occurrence of Change of Control pursuant to Section 21.
11. RESTRICTIVE COVENANTS AND CONFIDENTIALITY.
(a) The Executive agrees that he shall not:
(i) solicit, raid, entice, encourage or induce any
person, firm or corporation that at any time within
one year prior to the termination of this Agreement
shall have been an exclusive supplier to the Company,
or any of its subsidiaries or Affiliated Companies,
to become a supplier to any other person, firm or
corporation that derives more than 10% of its sales,
directly or indirectly, from a business the same as
the Business of the Company and the Executive shall
not approach any such person, firm or corporation for
such purpose or authorize or knowingly approve the
taking of such actions by any other person, firm or
corporation or assist any such person, firm or
corporation in taking such action; or
(ii) solicit, raid, entice, encourage or induce any person
who at any time within one year prior to the
termination of this Agreement shall have been an
employee of the Company, or any of its subsidiaries
or Affiliated Companies, to become employed by any
person, firm or corporation, and the Executive shall
not approach any such employee for such purpose or
authorize or knowingly approve the taking of such
actions by any other person, firm or corporation or
assist any such person, firm or corporation in taking
such action.
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(b) During the Term of Employment and thereafter, the Executive
will not use, disclose or divulge, furnish or make accessible
to anyone, directly or indirectly, any Protected Information
in any Unauthorized manner or for any Unauthorized purpose,
provided, however, that in the event that the Executive is
required to disclose any Protected Information by court order
or decree or in compliance with the rules and regulations of a
governmental agency or in compliance with law, the Executive
will provide the Company with prompt notice of such required
disclosure so that the Company may seek an appropriate
protective order and/or waive the Executive's compliance with
the provisions of this Section 11 and provided, further, that
if, in the absence of a protective order or the receipt of a
waiver hereunder, the Executive is advised by his counsel that
such disclosure is necessary to comply with such court order,
decree, rules, regulation or law, he may disclose such
information without liability hereunder.
(c) The Executive agrees that all processes, techniques, know-how,
inventions, plans, products, and devices developed, made or
invented by the Executive, alone or with others in connection
with the Executive's employment hereunder, during the Term of
Employment, shall become and be the sole property of the
Company unless released in writing by the Company.
(d) The Executive agrees that the Executive shall not, directly or
indirectly, within any area in the United States or elsewhere
where the Company or any of its subsidiaries or Affiliated
Companies is transacting business during the Term of
Employment, engage or participate or make any financial
investments in or become employed by, or act as an attorney,
agent or principal of, or render advisory or other services to
or for any person, firm or corporation, or in connection with
any business activity (other than that of the Company and its
subsidiaries or Affiliated Companies), that derives more than
10% of its sales, directly or indirectly, from a business the
same as the Business of the Company. Nothing herein contained,
however, shall restrict the Executive from overseeing personal
and family investments, including any investments in not more
than 3% of the voting securities in any company whose stock is
listed on a national securities exchange or actively traded in
the over-the-counter market, so long as in connection with
such investments the Executive does not actively operate any
such business or enterprise that derives more than 10% of its
sales, directly or indirectly, from a business the same as the
Business of the Company.
(e) The Executive shall be bound by the provisions of Section
11(a) and (d), and shall perform his obligations pursuant to
Section 11(a) and (d), during the Term of Employment and for
18 months thereafter, provided, however, that in the event of
Termination Without Cause or resignation by the Executive in
accordance with Section 14(d), the Executive shall be bound by
the provisions of Section 11(a) and (d), and shall perform his
obligations pursuant to Section 11(a) and (d), only in the
event that the Company shall pay his Severance Pay in
accordance with the provisions of Section 14(c) no later than
the 15th day after the termination of the
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Executive's employment under this Agreement or his Resignation
Compensation in accordance with the provisions of Section
14(d) no later than the 15th day after the effective date of
the Executive's resignation, as the case may be. For purposes
of the proviso in the preceding sentence only, payment of
Severance Pay or Resignation Compensation within the time
specified above in an amount at least equal to the amount
determined in advance to be due and owing to the Executive by
a firm of independent public accountants of nationally
recognized standing shall satisfy the condition of said
proviso, and cause the Executive to be bound by the provisions
of Section 11(a) and (d) and shall obligate the Executive to
perform his obligations pursuant to Section 11(a) and (d) even
if such amount is less than the amount actually due and owing.
(f) The provisions of this Section 11 shall survive the
termination of the Executive's employment hereunder,
irrespective of the reason therefor.
(g) The Executive acknowledges that the services to be rendered by
the Executive are of a special, unique and extraordinary
character and, in connection with such services, the Executive
will have access to confidential information vital to the
Company's and its subsidiaries and Affiliated Companies'
businesses. By reason of this, the Executive consents and
agrees that if the Executive violates any of the provisions of
this Section 11, the Company and its subsidiaries and
Affiliated Companies would sustain irreparable harm, and
therefore, in addition to any other remedies which the Company
may have under this Agreement or otherwise, the Company shall
be entitled to an injunction from any court of competent
jurisdiction restraining the Executive from committing or
continuing any such violation of this Section 11. The
Executive acknowledges that damages at law would not be an
adequate remedy for violation of this Section 11, and the
Executive therefore agrees that the provisions of this Section
11 may be specifically enforced against the Executive in any
court of competent jurisdiction. Nothing herein shall be
construed as prohibiting the Company from pursuing any other
remedies available to the Company for such breach or
threatened breach, including the recovery of damages from the
Executive.
(h) The provision of paragraphs (a), (b) and (d) of this Section
11 shall not apply to or restrict the activities of the
Executive as the chief executive officer, a director and a
principal stockholder of Raphael Benaroya, Inc., which is the
sole general partner of American Licensing Group Limited
Partnership ("ALG"), for so long as, and only for so long as,
Raphael Benaroya, Inc. and ALG do not engage in the Business
of the Company. The Executive's duties and responsibilities as
President and Chief Executive Officer of the Company shall at
all times take precedence over his activities on behalf of
ALG.
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12. DEDUCTIONS AND WITHHOLDING. The Executive agrees that the
Company shall withhold from any and all compensation required to be paid to the
Executive pursuant to this Agreement all Federal, state, local and/or other
taxes which the Company determines are required to be withheld in accordance
with applicable statues and/or regulations from time to time in effect.
13. MUTUAL NON-DISPARAGEMENT. Neither the Executive nor the
Company will make or authorize any public statement disparaging the other in its
or his business interests and affairs. Notwithstanding the foregoing, neither
party shall be (i) required to make any statement which it or he believes to be
false or inaccurate, or (ii) restricted in connection with any litigation,
arbitration or similar proceeding or with respect to its response to any legal
process. The provisions of this Section shall survive the termination of the
Executive's employment hereunder, irrespective of the reason therefor.
14. TERMINATION.
(a) Subject to Section 7(a), the Company shall terminate the
Executive's employment under this Agreement prior to the
expiration of the Term of Employment only if the Board of
Directors of the Company removes the Executive from office by
the affirmative vote of a majority of the directors of the
Company who have not disqualified themselves because of a
potential conflict of interest, at a meeting at which the
Executive is accorded an opportunity to speak. In such case,
this Agreement shall terminate and the Executive shall be
removed from office effective when such vote is taken by the
Board or on such later date as may be specified by the Board.
(b) For purposes of this Agreement, removal of the Executive from
office in accordance with subparagraph (a) shall be deemed to
be for "Cause" as defined in Section 1(f) only if the Company
delivers to the Executive within a reasonable time before the
removal of the Executive from office a notice of termination
for Cause specifying in reasonable detail the conviction or
plea, material failure, misconduct and economic harm or breach
by the Executive that is the basis for termination and the
Executive shall have failed prior to his removal to correct
the stated failure, misconduct and economic harm or breach in
all material respects.
(c) Subject to Section 7(a), in the event:
(i) the Company terminates the Executive's employment
under this Agreement pursuant to Section 14(a)
without Cause,
(ii) the Company terminates the Executive's employment
under this Agreement for Cause by reason of a
conviction that is later reversed on appeal and fails
to reinstate him with full back pay,
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(iii) (A) the Company breaches any of the covenants and
agreements set forth in Sections 3(a), 4(a), (b) or
(c), 5, 6(c) or (d), 14(a) or 15 (a) or (c), in any
material respect, and (B) the Executive tenders to
the Company a letter of resignation specifying such
breach in reasonable detail and demanding Severance
Pay, or
(iv) a person other than the Executive is elected Chairman
or Cochairman of the Board of the Company and the
Executive tenders to the Company a letter of
resignation specifying such election and demanding
Severance Pay,
(any termination or resignation under the circumstances
referred to in Section 14(c)(i) through (iv) above being
referred to as "Termination Without Cause" whether or not
Cause shall exist) the Company shall pay the Executive within
15 days following the termination of the Executive's
employment under this Agreement, an amount equal to three
times the sum of (A) the annual Base Salary at the rate
payable immediately prior to termination plus (B) the
aggregate Performance Bonus with respect to the two
consecutive most recently completed six-month seasons
immediately prior to termination, plus (c) $20,000. If the
federal excise tax pursuant to Section 280G of the Code or any
successor provision on "golden parachute" payments applies to
the payment made pursuant to the preceding sentence, to any
acceleration of vesting of Options or to any other benefit or
distribution to the Executive from the Company, the Company
shall immediately pay the Executive an amount equal to the
excise tax incurred plus (x) an amount equal to the Tax with
respect to the amount of the excise tax, plus (y) an amount
equal to the federal excise tax on "golden parachute" payments
with respect to the payment, if any, made pursuant to clause
(x) of this sentence plus (z) an amount equal to the Tax with
respect to the payment made pursuant to clause (y) of this
sentence (collectively with the payment made pursuant to the
preceding sentence, "Severance Pay"). No demand or other
notice from the Executive with respect to Severance Pay shall
be necessary in connection with Section 14(c) (i) above.
Anything in this Section 14(c) to the contrary
notwithstanding, the Executive shall not be entitled to
Severance Pay, and the Company shall have no obligation to pay
Severance Pay, if:
(x) within 15 days after the delivery of a letter of
resignation (the "Cure Period"), the Company shall cure the
Company's breach specified in the letter of resignation in all
material respects (or shall begin in good faith to cure a
breach of a nature that requires more than 15 days to cure in
all material respects) and shall deliver to the Executive a
notice to that effect;
(y) the Board of Directors shall approve a resolution during
the Cure Period requesting the Executive to withdraw his
letter of resignation; and
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(z) the Company shall deliver to the Executive during the Cure
Period a certified copy of the Board resolution referred to in
clause (y) hereof and a written offer to reinstate the
Executive with full back pay and uninterrupted Group Benefits
and other benefits under this Agreement, including eligibility
for a Performance Bonus.
(d) In the event (A) a Change of Control occurs on a day at the
beginning of which the Executive is an employee of the
Company, and (B) the Executive within 10 business days after
first receiving notice from the Company of the Change of
Control tenders a letter of resignation to the Company
specifying such Change of Control (whether or not the
Executive shall be an employee of the Company during the
period between the end of the day preceding Change of Control
and the tender of such letter) and demanding Resignation
Compensation, the Company shall pay the Executive immediately
upon the resignation of the Executive under this Section
14(d), an amount equal to three times the sum of (A) the
annual Base Salary at the rate payable immediately prior to
resignation, plus (B) $20,000. If the federal excise tax
pursuant to Section 280G of the Code or any successor
provision on "golden parachute" payments applies to the
payment made pursuant to the preceding sentence, or to any
other benefit or distribution to the Executive from the
Company, the Company shall immediately pay the Executive an
amount equal to the excise tax incurred plus (x) an amount
equal to the Tax with respect to the amount of the excise tax,
plus (y) an amount equal to the federal excise tax on "golden
parachute" payments with respect to the payment, if any, made
pursuant to clause (x) of this sentence plus (z) an amount
equal to the Tax with respect to the payment made pursuant to
clause (y) of this sentence (collectively with the payment
made pursuant to the preceding sentence, "Resignation
Compensation"). Notice of Change of Control shall be given to
the Executive by the Company pursuant to Section 21, provided,
however, that the Executive, in his discretion, may accept as
notice filing with the SEC of reports setting forth facts
that, taken together, constitute Change of Control.
(e) In the event of Termination Without Cause or resignation by
the Executive in accordance with Section 14(d):
(i) the Executive shall be under no obligation to seek
other employment and there shall be no offset against
any amounts due the Executive under this Agreement on
account of any remuneration attributable to any
subsequent employment that the Executive may obtain
(Severance Pay or Resignation Compensation is in the
nature of liquidated damages and not in the nature of
a penalty); and
(ii) the Executive shall be entitled to the following
benefits and additional payments:
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(A) any Base Salary accrued or Performance Bonus
vested but not yet paid;
(B) a pro rata Performance Bonus for the season in
which employment is terminated determined and payable on the
basis of the number of days worked during the season and the
bonus percentage established for the season;
(C) any accrued vacation pay;
(D) reimbursement for expenses incurred, but not paid
prior to such termination of employment; and
(E) (w) continuation at the Company's expense through
the remainder of the Term of Employment of the Individual Life
Policy, (x) COBRA health insurance benefits for the Executive
and his dependents at the Company's expense until the COBRA
benefits expire and thereafter, through the remainder, if any,
of the Term of Employment equivalent reimbursement of
healthcare expenses directly by the Company, (y) conversion at
the Company's expense through the remainder of the Term of
Employment of the group life insurance coverage on the
Executive's life and (z) payment to the Executive on April
15th of each year of an amount equal to the Tax with respect
to the payments made to the Executive pursuant to clauses (x)
and (y) of this sentence in the preceding calendar year.
(f) If the Company terminates the Executive's employment hereunder
for Cause (except as provided in Section 14(c)(ii)), or in the
event the Executive resigns (except as provided in Section
14(c)(iii) or (iv) or 14(d)), the Executive shall be entitled
to:
(i) any Base Salary accrued and any Performance Bonus
vested but not paid;
(ii) any accrued vacation pay;
(iii) reimbursement for expenses incurred, but not yet paid
prior to such termination of employment; and
(iv) any other compensation and benefits that accrued
prior to termination of employment as may be provided
in accordance with the terms and provisions of the
Group Benefits.
(g) In the event the Company removes the Executive from office,
and terminates the Executive's employment under this
Agreement, or in the event the Executive resigns, the
Executive shall continue to have the obligations provided for
in Section 11 hereof. The provisions of this Section 14 shall
survive the
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termination of the Executive's employment hereunder,
irrespective of the reason therefor.
(h) The Executive shall accept the payments referred to in this
Section 14 in full discharge and release of the Company of and
from any further payment obligations under this Agreement
except obligations under Sections 15 and 16.
15. INDEMNIFICATION.
(a) The Company shall indemnify the Executive as provided in the
By-laws.
(b) In the event of payment of indemnities under this Agreement,
the Company shall be subrogated to the extent of such payment
to all of the rights of recovery of the Executive.
(c) The Company shall use reasonable efforts to obtain a
directors' and officers' liability policy covering the
Executive at the level insured on the date first set forth
above and to maintain the policy during the Term of Employment
and for three years thereafter.
(d) The provisions of this Section 15 shall survive the
termination of the Executive's employment hereunder.
16. ENFORCEMENT; INTEREST.
If any amount owing to the Executive under this Agreement is
not paid by the Company, or on its behalf, within 15 days after a written
demand, claim or request for payment has been delivered or sent to the Company,
the Executive may at any time thereafter bring suit against the Company to
recover the unpaid amount and interest thereon and, if successful in whole or in
part, the Executive shall be entitled to be paid also the expenses of
prosecuting such suit, including reasonable attorneys' fees. Interest shall be
payable from the date any amount is first due and payable to the Executive at a
rate equal to the highest rate payable on any of the Company's indebtedness
after the date of this Agreement but in no event at a rate higher than the
maximum rate then permitted by law.
17. ENTIRE AGREEMENT.
This Agreement, the By-laws, the stock option agreements
between the Company and the Executive and the provisions of the Group Benefits
embody the entire agreement of the parties with respect to the Executive's
employment and shall be interpreted in accordance with the past practice of the
parties. This Agreement may not be changed or terminated orally but only by an
agreement in writing signed by the parties hereto. This Agreement cancels and
supersedes any and all prior agreements and understandings between the parties
hereto respecting the employment of the Executive by the Company and/or its
subsidiaries or any Affiliated Company and the payment of severance pay.
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18. WAIVER.
The waiver by the Company of a breach of any provision of this
Agreement by the Executive shall not operate or be construed as a waiver of any
subsequent breach by him. The waiver by the Executive of a breach of any
provision of this Agreement by the Company shall not operate or be construed as
a waiver of any subsequent breach by the Company.
19. GOVERNING LAW.
This Agreement shall be subject to, and governed by, the laws
of the State of New Jersey.
20. ASSIGNABILITY.
The obligations of the Executive may not be delegated and,
except as to the designation of beneficiaries of insurance and similar benefits,
the Executive may not, without the Company's written consent thereto, assign,
transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any interest herein. Any such attempted delegation or disposition
shall be null and void ab initio and without effect. This Agreement and all of
the Company's rights and obligations hereunder may be assigned or transferred by
the Company to, and shall be binding upon and inure to the benefit of, any
subsidiary of the Company or any Successor to the Company, but any such
assignment shall not relieve the assigning party of any of its obligations
hereunder. (The term "Successor" shall mean, with respect to the Company or any
of its subsidiaries, any corporation or other business entity which, by merger,
consolidation, purchase of the assets, or otherwise, acquires all or
substantially all of the assets of the Company or such subsidiary.)
21. NOTICES.
All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, to the other party
hereto at his or its address as set forth at the beginning of this Agreement
and, in the case of the Company, addressed to the attention of its Secretary. A
copy of each notice, request, demand, and other communication to the Company
hereunder shall be sent by first class mail to Richard W. Rubenstein, Esq.,
Squire, Sanders & Dempsey, Huntington Center, 41 South High Street, 13th Floor,
Columbus, Ohio 43215. Either party may change the address to which notices,
requests, demands and other communications hereunder shall be sent by sending
written notice of such change of address to the other party.
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22. SEVERABILITY.
If any provision of this Agreement as applied to either party
or to any circumstances shall be adjudged by a court of competent jurisdiction
to be void or unenforceable, the same shall in no way affect any other provision
of this Agreement or the validity or enforceability of this Agreement.
23. SECTION HEADINGS.
The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
24. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
which shall, collectively and separately, constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement in Rochelle Park, New Jersey, in duplicate originals on November 20,
1998.
UNITED RETAIL GROUP, INC.
By:/s/GEORGE R. REMETA
Name: George R. Remeta
Title: Vice Chairman
/s/RAPHAEL BENAROYA
Raphael Benaroya
empagRB.sam
KPC:JM 11/98
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<PAGE> 1
Exhibit No. 10.2
EMPLOYMENT AGREEMENT
Agreement made as of the 20th day of November, 1998, between UNITED
RETAIL GROUP, INC., a Delaware corporation, with principal offices at 365 West
Passaic Street, Rochelle Park, New Jersey 07662-6563 (the "Company"), and GEORGE
R. REMETA, residing at 25 Lee Way, Oakland, New Jersey 07436 (the "Executive").
WHEREAS, the Executive has been employed by the Company as its Vice
Chairman, Secretary and Chief Financial Officer;
WHEREAS, the Company desires to continue the services of the Executive,
and the Executive desires to continue to provide such services to the Company,
on the terms set forth in this Agreement;
WHEREAS, the provisions of this Agreement were recommended by the
Compensation Committee of the Company's Board of Directors on November 9, 1998;
and
WHEREAS, this Agreement was reviewed by special counsel to the Company
and approved by the Company's Board of Directors on November 20, 1998.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS.
(a) Affiliated Companies shall mean, with respect to the Company, any
corporation, limited partnership, general partnership,
association, joint-stock company, joint venture, trust, bank,
trust company, land trust, business trust, fund or any organized
group of persons, whether or not a legal entity, that is directly
or indirectly controlled by the Company.
(b) Base Salary shall have the meaning set forth in Section 4(a).
(c) Board of Directors shall mean the Board of Directors of the
Company.
(d) Business of the Company shall mean the operation of a retail store
chain which markets and sells apparel for women principally in
sizes 14 and larger and any other future business in which the
Company and its subsidiaries and Affiliated Companies engage that
produces more than 10% of the Company's consolidated sales.
<PAGE> 2
(e) By-laws shall mean the Restated By-laws of the Company as
currently in force.
(f) Cause shall mean the occurrence of one or more of the following
events:
(i) a judgment of conviction against the Executive or a
plea of guilty has been entered for any felony which is both based
on his personal actions (excluding liability imputed to him by
reason of his position as an executive of the Company) and
involves common law fraud, embezzlement, willful dishonesty or
moral turpitude (the entry of a judgment or plea being the only
event or circumstance sufficient to constitute Cause under this
subparagraph (i)), provided, however, that any felony an essential
element of which is predicated on the operation of a vehicle shall
be deemed not to involve moral turpitude;
(ii) (A) the Executive has willfully and continuously
failed to perform his duties to the Company in any material
respect, or (B) the Executive has failed in any material respect
to follow specific directions of the Board of Directors or the
Chief Executive Officer in the performance of his duties;
(iii) the Executive has demonstrated willful misconduct in
the performance of his duties to the Company in any material
respect and material economic harm to the Company has resulted; or
(iv) there has been a breach in any material respect of any
of the provisions of Section 11;
provided, however, that the judgment of conviction or plea of
guilty referred to in subparagraph (i), the failure of performance
referred to in subparagraph (ii), the misconduct referred to in
subparagraph (iii), and the breach referred to in subparagraph
(iv) shall constitute Cause for a maximum of only 90 days after
the judgment of conviction or plea of guilty was entered, the
failure of performance commenced, the material economic harm
resulted, or the breach first took place, as the case may be.
(g) Change of Control shall mean resignation or removal (including
failure to reelect) for any reason of the Chief Executive Officer
of the Company, within 90 days after either (i) the acquisition
after the date first set forth above by any person (defined for
the purposes of this paragraph to mean any person within the
meaning of Section 13(d) of the Securities Exchange Act of 1934
("Exchange Act")), other than the Company, the resigned or removed
Chief Executive Officer, the Executive or an employee benefit plan
created by the Board of Directors for the benefit of the Company's
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
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acquisition, such person is the beneficial owner of securities
issued by the Company having 30% 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, (ii) 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 (iii) the merger or consolidation of
the Company with, or transfer of substantially all of the assets
of the Company to, another person; provided, however that any such
acquisition, election, merger, consolidation or transfer that is
approved in advance in writing by the Executive shall not be a
predicate for a Change of Control.
(h) CPI shall have the meaning set forth in Section 4(a).
(i) Cure Period shall have the meaning set forth in Section 14(b).
(j) Group Benefits shall have the meaning set forth in Section 6(a).
(k) Individual Disability Policy shall have the meaning set forth in
Section 6(c).
(l) Individual Life Policy shall have the meaning set forth in Section
6(b).
(m) Options shall mean employee stock options under a benefit plan or
arrangement between the Company and the Executive, including those
which may be granted during the Term of Employment, held by the
Executive or his assigns or donees.
(n) Performance Bonus shall have the meaning set forth in Section
4(b).
(o) Permanent Disability shall mean the inability of the Executive to
perform his duties and responsibilities to the Company by reason
of a physical or mental disability or infirmity (i) for a
continuous period of four months or (ii) at such earlier time as
the Executive submits medical evidence satisfactory to the Company
that the Executive has a physical or mental disability or
infirmity that will likely prevent him from substantially
performing his duties and responsibilities for four months or
longer (the date of such Permanent Disability shall be on the last
day of such four-month period or the day on which the Executive
submits such evidence, as the case may be).
(p) Protected Information shall mean trade secrets, confidential or
proprietary information, and all other knowledge, know-how,
information, documents or materials, owned or developed by the
Company, or otherwise in the possession of the Company, whether in
tangible or intangible form, pertaining to the Business of the
Company, the confidentiality of which the Company takes reasonable
measures to protect, including, but not limited to, the Company's
research and development,
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store operating results, identities and habits of customers and
prospective customers, suppliers, business relationships, products
(including prices, costs, sales or content), processes,
techniques, machinery, contracts, financial information or
measures, business methods, future business plans, data bases,
computer programs, designs, models, operating procedures,
knowledge of the organization, and other information owned,
developed or possessed by the Company; provided, however, that
Protected Information shall not include information that shall
become generally known to the public or the trade without
violation of Section 11.
(q) Resignation Compensation shall have the meaning set forth in
Section 14(c).
(r) Severance Pay shall have the meaning set forth in Section 14(b).
(s) Successor shall have the meaning set forth in Section 20.
(t) Tax shall mean all taxes on income, which shall be assumed to be
at a rate equal to the sum of the highest marginal rates,
including any applicable surcharges, of federal income tax, state
income tax, local income tax, Medicare payroll tax and any similar
income or payroll tax for a married citizen filing a joint return
from the county of the Executive's residence, as now in effect or
as amended from time to time.
(u) Term of Employment shall mean the period of time commencing on the
date first set forth above and ending on August 3, 2003 or such
later date as may be mutually agreed upon by the Company and the
Executive.
(v) Termination Without Cause shall have the meaning set forth in
Section 14(b).
(w) Unauthorized shall mean: (i) in contravention of the Company's
policies or procedures; (ii) otherwise inconsistent with the
Company's measures to protect its interests in its Protected
Information; or (iii) in contravention of any duty existing under
law or contract.
2. TERM.
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, in the capacities and upon the terms and conditions
hereinafter set forth, during the Term of Employment.
3. DUTIES.
(a) During the Term of Employment, the Executive shall serve as the
Secretary and Chief Financial Officer of the Company. In such
capacity, the Executive shall supervise the preparation of the
Company's financial statements and budgets, shall attend all
meetings of the Board of Directors and shall perform such other
duties
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<PAGE> 5
as may be determined and assigned to the Executive from time to
time by the Board of Directors and the Chief Executive Officer.
Notwithstanding the above, the Executive shall not be required to
perform any duties and responsibilities which would be likely to
result in a non-compliance with or violation of any applicable law
or regulation. The Executive shall report solely and directly to
the Chief Executive Officer.
(b) The Executive accepts such employment and hereby agrees to serve
the Company faithfully, industriously and to the best of his
ability in such capacities, with undivided loyalty, devoting
substantially all of his professional time, attention, knowledge,
energy and skills to such employment except during vacation not to
exceed three weeks in any year. The Executive may oversee personal
and family investments in a manner in which the Executive does not
actively operate portfolio companies in the ordinary course of
business.
4. COMPENSATION. As compensation to the Executive for performance of
the services required hereunder and as consideration for his execution and
delivery of this Agreement, the Company shall pay him (subject to Sections 7 and
14), and the Executive agrees to accept, the following salary and other
compensation:
(a) A base salary, payable in accordance with the regular executive
payroll practices of the Company, at a rate of $380,000 per annum
during the period ending on January 31, 1999 and thereafter at
such higher rate as may be determined by the Compensation
Committee of the Board of Directors, but in any event base salary
shall increase as of February 1, 1999 by a percentage at least
equal to the increase, if any, in the Consumer Price Index for All
Urban Consumers for New York and Northern New Jersey published by
the Bureau of Labor Statistics of the Department of Labor ("CPI")
since January 31, 1998 and shall increase as of each anniversary
of February 1, 1999 by a percentage at least equal to the
increase, if any, in the CPI since the previous January 31st (as
increased from time to time, the "Base Salary").
(b) The Executive shall continue to be eligible to receive, and the
Company shall continue to pay, a semi-annual cash incentive
compensation payment ("Performance Bonus") based on the Company's
consolidated operating income for the six-month periods ending
January 31st and July 31st, respectively, with a semi-annual award
ranging from zero to 100% of Base Salary for the six-month period
in accordance with past practice, provided, however, that the
Performance Bonus shall be earned and fully vested in the
Executive as of January 31st or July 31st, as the case may be,
whether or not the Executive shall remain in the Company's employ
after the Performance Bonus shall have vested and provided,
further, that the Performance Bonus shall be paid to the Executive
as soon as practicable after the consolidated operating income for
the period in question shall be determined.
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(c) If the federal excise tax pursuant to Section 280G of the Code or
any successor provision on "golden parachute" payments applies to
any acceleration of the vesting of Options during the Term of
Employment, the Company shall immediately pay the Executive (w) an
amount equal to the excise tax incurred plus (x) an amount equal
to the Tax with respect to the payment made pursuant to clause (w)
of this sentence, plus (y) an amount equal to the federal excise
tax on "golden parachute" payments with respect to the payment, if
any, made pursuant to clause (x) of this sentence plus (z) an
amount equal to the Tax with respect to the payment made pursuant
to clause (y) of this sentence.
5. EXPENSES. The Executive will continue to be required to incur
reasonable and necessary travel, business entertainment and other business
expenses. The Company agrees to reimburse the Executive for all reasonable and
necessary travel, business entertainment and other business expenses incurred or
expended by the Executive incident to the performance of the Executive's duties
hereunder, upon submission by the Executive to the Company of vouchers or
expense statements satisfactorily evidencing such expenses.
6. EXECUTIVE BENEFITS.
(a) The Company shall provide the Executive with benefits ("Group
Benefits"), taken as a whole, that are at least equal to those
provided by the Company to the other senior executives of the
Company, including, without limitation, enhanced group disability
insurance benefits at the level insured on the date first set
forth above (or, if the group disability insurance can not be
continued in force, the Company shall provide other disability
benefits equivalent to the benefits under the group policy).
(b) In addition to Group Benefits, the Company shall maintain in force
the existing term life insurance policy on the Executive or a
similar policy issued by an insurance company with an equal or
higher rating (the "Individual Life Policy") in the same amount at
the Company's expense. The Executive shall have the right to
select and change the beneficiary(ies) of such life insurance
policy.
(c) The Company shall reimburse the Executive in the amount of $4,000
per annum with respect to the premium on the existing special
supplemental long-term disability insurance policy covering the
Executive (the "Individual Disability Policy") and the federal and
state income taxes on such premium amount.
(d) Group Benefits and the Individual Life Policy shall be provided
while the Executive is employed by the Company under this
Agreement and thereafter as provided pursuant to the terms of this
Agreement.
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(e) All Options shall be fully vested and immediately exercisable
after either Termination Without Cause or a Change of Control,
anything in any stock option agreement between the Company and the
Executive to the contrary notwithstanding. In the event of
Termination Without Cause, Options shall be exercisable for the
lesser of 90 days thereafter or the remainder of the term of the
Option. In the event of Change of Control, Options shall be
exercisable until the earlier of 90 days after the termination of
the Executive's employment hereunder (including resignation) or
the expiration of the term of the Option.
7. PERMANENT DISABILITY; DEATH.
(a) In the event of the Permanent Disability of the Executive during
the Term of Employment, the Company shall, upon written notice to
the Executive, have the right to terminate the Executive's
employment hereunder by reason of Permanent Disability.
(b) In the event of the death of the Executive during the Term of
Employment, this Agreement shall automatically terminate.
8. BENEFITS UPON DEATH OR DISABILITY. In the event of the Executive's
death or a termination of the Executive's employment by the Company due to
Permanent Disability, the Executive, his executor or his heirs at law, as the
case may be, shall be entitled to:
(a) any Base Salary accrued or any Performance Bonus vested but not
yet paid;
(b) a pro rata Performance Bonus for the season in which death or
Permanent Disability occurs determined and payable on the basis of
the number of days worked during the season and the bonus
percentage established for the season;
(c) any accrued vacation pay;
(d) reimbursement for expenses incurred but not yet paid prior to such
death or Permanent Disability;
(e) in the case of death, the proceeds of the Individual Life Policy
and any other compensation and benefits as may be provided in
accordance with the terms and provisions of the Group Benefits or
of this Agreement;
(f) in the case of Permanent Disability, for five years following the
date of Permanent Disability, first, COBRA health insurance
benefits for the Executive and his dependents at the Company's
expense until the COBRA benefits expire and thereafter, for the
remainder of such five-year period, equivalent reimbursement of
healthcare expenses directly by the Company; and
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<PAGE> 8
(g) in the case of Permanent Disability, six monthly payments after
the date of Permanent Disability, each equal to one-twelfth of the
Base Salary in effect on the date of Permanent Disability, offset
by any payments in accordance with the terms and provisions of the
Group Benefits, the Individual Disability Policy or Supplemental
Social Security benefits.
The provisions of this Section 8 shall survive the termination of the
Executive's employment hereunder.
9. REPRESENTATION, WARRANTY AND COVENANT OF EXECUTIVE. The Executive
represents, warrants and covenants to the Company that he is not and will not
become a party to any agreement, contract or understanding, whether employment
or otherwise, which would in any way restrict or prohibit him from undertaking
or performing his employment in accordance with the terms and conditions of this
Agreement.
10. REPRESENTATION, WARRANTY AND COVENANT OF THE COMPANY. The Company
represents and warrants that this Agreement constitutes a valid and legally
binding obligation of the Company enforceable in accordance with the terms
herein set forth, except to the extent that the enforceability of this Agreement
may be affected by bankruptcy, insolvency, reorganization, moratorium, or
similar laws or equitable principles affecting creditors' rights generally. The
Company covenants that it shall give notice promptly to the Executive of the
occurrence of Change of Control pursuant to Section 21.
11. RESTRICTIVE COVENANTS AND CONFIDENTIALITY.
(a) The Executive agrees that he shall not:
(i) solicit, raid, entice, encourage or induce any person, firm
or corporation that at any time within one year prior to
the termination of this Agreement shall have been an
exclusive supplier to the Company, or any of its
subsidiaries or Affiliated Companies, to become a supplier
to any other person, firm or corporation that derives more
than 10% of its sales, directly or indirectly, from a
business the same as the Business of the Company and the
Executive shall not approach any such person, firm or
corporation for such purpose or authorize or knowingly
approve the taking of such actions by any other person,
firm or corporation or assist any such person, firm or
corporation in taking such action; or
(ii) solicit, raid, entice, encourage or induce any person who
at any time within one year prior to the termination of
this Agreement shall have been an employee of the Company,
or any of its subsidiaries or Affiliated Companies, to
become employed by any person, firm or corporation, and
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<PAGE> 9
the Executive shall not approach any such employee for such
purpose or authorize or knowingly approve the taking of
such actions by any other person, firm or corporation or
assist any such person, firm or corporation in taking such
action.
(b) During the Term of Employment and thereafter, the Executive will
not use, disclose or divulge, furnish or make accessible to
anyone, directly or indirectly, any Protected Information in any
Unauthorized manner or for any Unauthorized purpose, provided,
however, that in the event that the Executive is required to
disclose any Protected Information by court order or decree or in
compliance with the rules and regulations of a governmental agency
or in compliance with law, the Executive will provide the Company
with prompt notice of such required disclosure so that the Company
may seek an appropriate protective order and/or waive the
Executive's compliance with the provisions of this Section 11 and
provided, further, that if, in the absence of a protective order
or the receipt of a waiver hereunder, the Executive is advised by
his counsel that such disclosure is necessary to comply with such
court order, decree, rules, regulation or law, he may disclose
such information without liability hereunder.
(c) The Executive agrees that all processes, techniques, know-how,
inventions, plans, products, and devices developed, made or
invented by the Executive, alone or with others in connection with
the Executive's employment hereunder, during the Term of
Employment, shall become and be the sole property of the Company
unless released in writing by the Company.
(d) The Executive agrees that the Executive shall not, directly or
indirectly, within any area in the United States or elsewhere
where the Company or any of its subsidiaries or Affiliated
Companies is transacting business during the Term of Employment,
engage or participate or make any financial investments in or
become employed by, or act as an attorney, agent or principal of,
or render advisory or other services to or for any person, firm or
corporation, or in connection with any business activity (other
than that of the Company and its subsidiaries or Affiliated
Companies), that derives more than 10% of its sales, directly or
indirectly, from a business the same as the Business of the
Company. Nothing herein contained, however, shall restrict the
Executive from overseeing personal and family investments,
including any investments in not more than 3% of the voting
securities in any company whose stock is listed on a national
securities exchange or actively traded in the over-the-counter
market, so long as in connection with such investments the
Executive does not actively operate any such business or
enterprise that derives more than 10% of its sales, directly or
indirectly, from a business the same as the Business of the
Company.
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(e) The Executive shall be bound by the provisions of Section 11(a)
and (d), and shall perform his obligations pursuant to Section
11(a) and (d), during the Term of Employment and for 18 months
thereafter, provided, however, that in the event of Termination
Without Cause or resignation by the Executive in accordance with
Section 14(c), the Executive shall be bound by the provisions of
Section 11(a) and (d), and shall perform his obligations pursuant
to Section 11(a) and (d), only in the event that the Company shall
pay his Severance Pay in accordance with the provisions of Section
14(b) no later than the 15th day after the termination of the
Executive's employment under this Agreement or his Resignation
Compensation in accordance with the provisions of Section 14(c) no
later than the 15th day after the effective date of the
Executive's resignation, as the case may be. For purposes of the
proviso in the preceding sentence only, payment of Severance Pay
or Resignation Compensation within the time specified above in an
amount at least equal to the amount determined in advance to be
due and owing to the Executive by a firm of independent public
accountants of nationally recognized standing shall satisfy the
condition of said proviso, and cause the Executive to be bound by
the provisions of Section 11(a) and (d) and shall obligate the
Executive to perform his obligations pursuant to Section 11(a) and
(d) even if such amount is less than the amount actually due and
owing.
(f) The provisions of this Section 11 shall survive the termination of
the Executive's employment hereunder, irrespective of the reason
therefor.
(g) The Executive acknowledges that the services to be rendered by the
Executive are of a special, unique and extraordinary character
and, in connection with such services, the Executive will have
access to confidential information vital to the Company's and its
subsidiaries and Affiliated Companies' businesses. By reason of
this, the Executive consents and agrees that if the Executive
violates any of the provisions of this Section 11, the Company and
its subsidiaries and Affiliated Companies would sustain
irreparable harm, and therefore, in addition to any other remedies
which the Company may have under this Agreement or otherwise, the
Company shall be entitled to an injunction from any court of
competent jurisdiction restraining the Executive from committing
or continuing any such violation of this Section 11. The Executive
acknowledges that damages at law would not be an adequate remedy
for violation of this Section 11, and the Executive therefore
agrees that the provisions of this Section 11 may be specifically
enforced against the Executive in any court of competent
jurisdiction. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to the Company
for such breach or threatened breach, including the recovery of
damages from the Executive.
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12. DEDUCTIONS AND WITHHOLDING. The Executive agrees that the Company
shall withhold from any and all compensation required to be paid to the
Executive pursuant to this Agreement all Federal, state, local and/or other
taxes which the Company determines are required to be withheld in accordance
with applicable statues and/or regulations from time to time in effect.
13. MUTUAL NON-DISPARAGEMENT. Neither the Executive nor the Company
will make or authorize any public statement disparaging the other in its or his
business interests and affairs. Notwithstanding the foregoing, neither party
shall be (i) required to make any statement which it or he believes to be false
or inaccurate, or (ii) restricted in connection with any litigation, arbitration
or similar proceeding or with respect to its response to any legal process. The
provisions of this Section shall survive the termination of the Executive's
employment hereunder, irrespective of the reason therefor.
14. TERMINATION.
(a) For purposes of this Agreement, removal of the Executive from
office shall be deemed to be for "Cause" as defined in Section
1(f) only if the Company delivers to the Executive within a
reasonable time before the removal of the Executive from office a
notice of termination for Cause specifying in reasonable detail
the conviction or plea, material failure, misconduct and economic
harm or breach by the Executive that is the basis for termination
and the Executive shall have failed prior to his removal to
correct the stated failure, misconduct and economic harm or breach
in all material respects.
(b) Subject to Section 7(a), in the event:
(i) the Company terminates the Executive's employment under
this Agreement without Cause,
(ii) the Company terminates the Executive's employment under
this Agreement for Cause by reason of a conviction that is
later reversed on appeal and fails to reinstate him with
full back pay, or
(iii) (A) the Company breaches any of the covenants and
agreements set forth in Sections 3(a), 4, 5, 6(c) or (d),
or 15(a) or (c), in any material respect, and (B) the
Executive tenders to the Company a letter of resignation
specifying such breach in reasonable detail and demanding
Severance Pay,
(any termination or resignation under the circumstances referred
to in Section 14(b)(i) through (iii) above being referred to as
"Termination Without Cause" whether or not Cause shall exist) the
Company shall pay the Executive within 15 days following the
termination of the Executive's employment under this
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Agreement, an amount equal to three times the sum of (A) the
annual Base Salary at the rate payable immediately prior to
termination plus (B) the aggregate Performance Bonus with respect
to the two consecutive most recently completed six-month seasons
immediately prior to termination, plus (C) $4,000. If the federal
excise tax pursuant to Section 280G of the Internal Revenue Code
(the "Code") or any successor provision on "golden parachute"
payments applies to the payment made pursuant to the preceding
sentence, to any acceleration of vesting of Options or to any
other benefit or distribution to the Executive from the Company,
the Company shall immediately pay the Executive an amount equal to
the excise tax incurred plus (x) an amount equal to the Tax with
respect to the amount of the excise tax, plus (y) an amount equal
to the federal excise tax on "golden parachute" payments with
respect to the payment, if any, made pursuant to clause (x) of
this sentence plus (z) an amount equal to the Tax with respect to
the payment made pursuant to clause (y) of this sentence
(collectively with the payment made pursuant to the preceding
sentence, "Severance Pay"). No demand or other notice from the
Executive with respect to Severance Pay shall be necessary in
connection with Section 14(b) (i) above. Anything in this Section
14(b) to the contrary notwithstanding, the Executive shall not be
entitled to Severance Pay, and the Company shall have no
obligation to pay Severance Pay, if:
(x) within 15 days after the delivery of a letter of resignation
to the Company (the "Cure Period") pursuant to Section 14(b)(iii)
the Company shall cure the Company's breach specified in the
letter of resignation in all material respects (or shall begin in
good faith to cure a breach of a nature that requires more than 15
days to cure in all material respects) and shall deliver to the
Executive a notice to that effect;
(y) during the Cure Period the Chief Executive Officer shall
request in writing that the Executive withdraw his letter of
resignation pursuant to Section 14(b)(iii); and
(z) the Company shall deliver to the Executive during the Cure
Period a written offer to reinstate the Executive with full back
pay and uninterrupted Group Benefits and other benefits under this
Agreement, including eligibility for a Performance Bonus.
(c) In the event (A) a Change of Control occurs on a day at the
beginning of which the Executive is an employee of the Company,
and (B) the Executive within 10 business days after first
receiving notice from the Company of the Change of Control tenders
a letter of resignation to the Company specifying such Change of
Control (whether or not the Executive shall be an employee of the
Company during the period between the end of the day preceding
Change of Control and the
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tender of such letter) and demanding Resignation Compensation, the
Company shall pay the Executive immediately upon the resignation
of the Executive under this Section 14(c), an amount equal to
three times the sum of (A) the annual Base Salary at the rate
payable immediately prior to resignation, plus (B) $4,000. If the
federal excise tax pursuant to Section 280G of the Code or any
successor provision on "golden parachute" payments applies to the
payment made pursuant to the preceding sentence or to any other
benefit or distribution to the Executive from the Company, the
Company shall immediately pay the Executive an amount equal to the
excise tax incurred plus (x) an amount equal to the Tax with
respect to the amount of the excise tax, plus (y) an amount equal
to the federal excise tax on "golden parachute" payments with
respect to the payment, if any, made pursuant to clause (x) of
this sentence plus (z) an amount equal to the Tax with respect to
the payment made pursuant to clause (y) of this sentence
(collectively with the payment made pursuant to the preceding
sentence, "Resignation Compensation"). Notice of Change of
Control shall be given to the Executive by the Company pursuant
to Section 21, provided, however, that the Executive, in his
discretion, may accept as notice filing with the SEC of reports
setting forth facts that, taken together, constitute Change
of Control.
(d) In the event of Termination Without Cause or resignation by the
Executive in accordance with Section 14(c):
(i) the Executive shall be under no obligation to seek other
employment and there shall be no offset against any amounts
due the Executive under this Agreement on account of any
remuneration attributable to any subsequent employment that
the Executive may obtain (Severance Pay or Resignation
Compensation is in the nature of liquidated damages and not
in the nature of a penalty); and
(ii) the Executive shall be entitled to the following benefits
and additional payments:
(A) any Base Salary accrued or Performance Bonus vested but
not yet paid;
(B) a pro rata Performance Bonus for the season in which
employment is terminated determined and payable on the basis of
the number of days worked during the season and the bonus
percentage established for the season;
(C) any accrued vacation pay;
(D) reimbursement for expenses incurred, but not paid prior
to such termination of employment; and
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(E) (w) continuation at the Company's expense through the
remainder of the Term of Employment of the Individual Life Policy,
(x) COBRA health insurance benefits for the Executive and his
dependents at the Company's expense until the COBRA benefits
expire and thereafter, through the remainder, if any, of the Term
of Employment equivalent reimbursement of healthcare expenses
directly by the Company, (y) conversion at the Company's expense
through the remainder of the Term of Employment of the group life
insurance coverage on the Executive's life and (z) payment to the
Executive on April 15th of each year of an amount equal to the Tax
with respect to the payments made to the Executive pursuant to
clauses (x) and (y) of this sentence in the preceding calendar
year.
(e) If the Company terminates the Executive's employment hereunder for
Cause (except as provided in Section 14(b)(ii)), or in the event
the Executive resigns (except as provided in Section 14(b)(iii) or
14(c)), the Executive shall be entitled to:
(i) any Base Salary accrued and any Performance Bonus vested
but not paid;
(ii) any accrued vacation pay;
(iii) reimbursement for expenses incurred, but not yet paid prior
to such termination of employment; and
(iv) any other compensation and benefits that accrued prior to
termination of employment as may be provided in accordance
with the terms and provisions of the Group Benefits.
(f) In the event the Company removes the Executive from office, and
terminates the Executive's employment under this Agreement, or in
the event the Executive resigns, the Executive shall continue to
have the obligations provided for in Section 11 hereof. The
provisions of this Section 14 shall survive the termination of the
Executive's employment hereunder, irrespective of the reason
therefor.
(g) The Executive shall accept the payments referred to in this
Section 14 in full discharge and release of the Company of and
from any further payment obligations under this Agreement except
obligations under Sections 15 and 16.
15. INDEMNIFICATION.
(a) The Company shall indemnify the Executive as provided in the
By-laws.
(b) In the event of payment of indemnities under this Agreement, the
Company shall be subrogated to the extent of such payment to all
of the rights of recovery of the Executive.
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(c) The Company shall use reasonable efforts to obtain a directors'
and officers' liability insurance policy covering the Executive at
the level insured on the date first set forth above and to
maintain the policy during the Term of Employment and for three
years thereafter.
(d) The provisions of this Section 15 shall survive the termination of
the Executive's employment hereunder.
16. ENFORCEMENT; INTEREST.
If any amount owing to the Executive under this Agreement is
not paid by the Company, or on its behalf, within 15 days after a written
demand, claim or request for payment has been delivered or sent to the Company,
the Executive may at any time thereafter bring suit against the Company to
recover the unpaid amount and interest thereon and, if successful in whole or in
part, the Executive shall be entitled to be paid also the expenses of
prosecuting such suit, including reasonable attorneys' fees. Interest shall be
payable from the date any amount is first due and payable to the Executive at a
rate equal to the highest rate payable on any of the Company's indebtedness
after the date of this Agreement but in no event at a rate higher than the
maximum rate then permitted by law.
17. ENTIRE AGREEMENT.
This Agreement, the By-laws, the stock option agreements
between the Company and the Executive and the provisions of the Group Benefits
embody the entire agreement of the parties with respect to the Executive's
employment and shall be interpreted in accordance with the past practice of the
parties. This Agreement may not be changed or terminated orally but only by an
agreement in writing signed by the parties hereto. This Agreement cancels and
supersedes any and all prior agreements and understandings between the parties
hereto respecting the employment of the Executive by the Company and/or its
subsidiaries or any Affiliated Company and the payment of severance pay.
18. WAIVER.
The waiver by the Company of a breach of any provision of this
Agreement by the Executive shall not operate or be construed as a waiver of any
subsequent breach by him. The waiver by the Executive of a breach of any
provision of this Agreement by the Company shall not operate or be construed as
a waiver of any subsequent breach by the Company.
19. GOVERNING LAW.
This Agreement shall be subject to, and governed by, the laws
of the State of New Jersey.
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20. ASSIGNABILITY.
The obligations of the Executive may not be delegated and,
except as to the designation of beneficiaries of insurance and similar benefits,
the Executive may not, without the Company's written consent thereto, assign,
transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any interest herein. Any such attempted delegation or disposition
shall be null and void ab initio and without effect. This Agreement and all of
the Company's rights and obligations hereunder may be assigned or transferred by
the Company to, and shall be binding upon and inure to the benefit of, any
subsidiary of the Company or any Successor to the Company, but any such
assignment shall not relieve the assigning party of any of its obligations
hereunder. (The term "Successor" shall mean, with respect to the Company or any
of its subsidiaries, any corporation or other business entity which, by merger,
consolidation, purchase of the assets, or otherwise, acquires all or
substantially all of the assets of the Company or such subsidiary.)
21. NOTICES.
All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, to the other party
hereto at his or its address as set forth at the beginning of this Agreement
and, in the case of the Company, addressed to the attention of its General
Counsel. Either party may change the address to which notices, requests, demands
and other communications hereunder shall be sent by sending written notice of
such change of address to the other party.
22. SEVERABILITY.
If any provision of this Agreement as applied to either party
or to any circumstances shall be adjudged by a court of competent jurisdiction
to be void or unenforceable, the same shall in no way affect any other provision
of this Agreement or the validity or enforceability of this Agreement.
23. SECTION HEADINGS.
The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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24. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, which
shall, collectively and separately, constitute one agreement as of the date
first set forth above.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
in Rochelle Park, New Jersey, in duplicate originals on November 20, 1998.
UNITED RETAIL GROUP, INC.
By:/s/RAPHAEL BENAROYA
Name: Raphael Benaroya
Title: Chairman of the Board
/s/GEORGE R. REMETA
George R. Remeta
empagGRR.sam
KPC:JW 11/98
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<PAGE> 1
Exhibit No. 10.3
EMPLOYMENT AGREEMENT
Agreement made as of the 20th day of November, 1998, between UNITED RETAIL
GROUP, INC., a Delaware corporation, with principal offices at 365 West Passaic
Street, Rochelle Park, New Jersey 07662-6563 (the "Company), and KENNETH P.
CARROLL, residing at 140 Prospect Avenue, Apartment 11J, Hackensack, New Jersey
07601 (the "Executive").
WHEREAS, the Executive is an attorney admitted to practice before the
courts of the State of New York and the United States District Court for the
Southern District of New York;
WHEREAS, the Executive has been employed by the Company as its Senior Vice
President - General Counsel to provide, among other things, advice on the laws
of the State of New York and the federal laws of the United States and to
supervise the representation before courts and legislative and administrative
bodies of the Company and its subsidiaries;
WHEREAS, the Company desires to continue the professional services of the
Executive, and the Executive desires to continue to provide such services to the
Company, on the terms set forth in this Agreement;
WHEREAS, the provisions of this Agreement were recommended by the
Compensation Committee of the Company's Board of Directors on November 9, 1998;
and
WHEREAS, this Agreement was reviewed by special counsel retained by the
Compensation Committee of the Board of Directors of the Company and approved by
the Company's Board of Directors on November 20, 1998.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS.
(a) Affiliated Companies shall mean, with respect to the Company, any
corporation, limited partnership, general partnership, association,
joint-stock company, joint venture, trust, bank, trust company, land
trust, business trust, fund or any organized group of persons,
whether or not a legal entity, that is directly or indirectly
controlled by the Company.
(b) Base Salary shall have the meaning set forth in Section 4(a).
<PAGE> 2
(c) Board of Directors shall mean the Board of Directors of the Company.
(d) Business of the Company shall mean the operation of a retail store
chain which markets and sells apparel for women principally in sizes
14 and larger and any other future business in which the Company and
its subsidiaries and Affiliated Companies engage that produces more
than 10% of the Company's consolidated sales.
(e) By-laws shall mean the Restated By-laws of the Company as currently
in force.
(f) Cause shall mean the occurrence of one or more of the following
events:
(i) a judgment of conviction against the Executive or a plea
of guilty has been entered for any felony which is both based on his
personal actions (excluding liability imputed to him by reason of
his position as an executive of the Company) and involves common law
fraud, embezzlement, willful dishonesty or moral turpitude (the
entry of a judgment or plea being the only event or circumstance
sufficient to constitute Cause under this subparagraph (i)),
provided, however, that any felony an essential element of which is
predicated on the operation of a vehicle shall be deemed not to
involve moral turpitude;
(ii) the Executive has been disbarred by the New York Supreme
Court or permanently barred from practice before the Securities and
Exchange Commission ("SEC");
(iii) (A) the Executive has willfully and continuously failed
to perform his duties to the Company in any material respect, or (B)
the Executive has failed in any material respect to follow specific
directions of the Board of Directors or the Chief Executive Officer
in the performance of his duties;
(iv) the Executive has demonstrated willful misconduct in the
performance of his duties to the Company in any material respect and
material economic harm to the Company has resulted; or
(v) there has been a breach in any material respect of any
of the provisions of Section 11;
provided, however, that the judgment of conviction or plea of guilty
referred to in subparagraph (i), the disbarment referred to in
subparagraph (ii), the failure of performance referred to in
subparagraph (iii), the misconduct referred to in subparagraph (iv),
and the breach referred to in subparagraph (v) shall constitute
Cause for a maximum of only 90 days after the judgment of
conviction, plea of guilty or disbarment was entered, the failure of
performance commenced, the material economic harm resulted, or the
breach first took place, as the case may be.
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(g) Change of Control shall mean resignation or removal (including
failure to reelect) for any reason of the Chief Executive Officer of
the Company, within 90 days after either (i) the acquisition after
the date first set forth above by any person (defined for the
purposes of this paragraph to mean any person within the meaning of
Section 13(d) of the Securities Exchange Act of 1934 ("Exchange
Act")), other than the Company, the resigned or removed Chief
Executive Officer, the Executive or an employee benefit plan created
by the Board of Directors for the benefit of the Company's
Associates, either directly or indirectly, of the beneficial
ownership (determined under Rule 13d-3 of the Regulations
promulgated by the 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 30% 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, (ii) 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 (iii) the merger or consolidation of the Company with, or
transfer of substantially all of the assets of the Company to,
another person; provided, however that any such acquisition,
election, merger, consolidation or transfer that is approved in
advance in writing by the Executive shall not be a predicate for a
Change of Control.
(h) CPI shall have the meaning set forth in Section 4(a).
(i) Cure Period shall have the meaning set forth in Section 14(b).
(j) Group Benefits shall have the meaning set forth in Section 6(a).
(k) Options shall mean employee stock options under a benefit plan or
arrangement between the Company and the Executive, including those
which may be granted during the Term of Employment, held by the
Executive or his assigns or donees.
(l) Performance Bonus shall have the meaning set forth in Section 4(b).
(m) Permanent Disability shall mean the inability of the Executive to
perform his duties and responsibilities to the Company by reason of
a physical or mental disability or infirmity (i) for a continuous
period of four months or (ii) at such earlier time as the Executive
submits medical evidence satisfactory to the Company that the
Executive has a physical or mental disability or infirmity that will
likely
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prevent him from substantially performing his duties and
responsibilities for four months or longer (the date of such
Permanent Disability shall be on the last day of such four-month
period or the day on which the Executive submits such evidence, as
the case may be).
(n) Protected Information shall mean trade secrets, confidential or
proprietary information, and all other knowledge, know-how,
information, documents or materials, owned or developed by the
Company, or otherwise in the possession of the Company, whether in
tangible or intangible form, pertaining to the Business of the
Company, the confidentiality of which the Company takes reasonable
measures to protect, including, but not limited to, the Company's
research and development, store operating results, identities and
habits of customers and prospective customers, suppliers, business
relationships, products (including prices, costs, sales or content),
processes, techniques, machinery, contracts, financial information
or measures, business methods, future business plans, data bases,
computer programs, designs, models, operating procedures, knowledge
of the organization, and other information owned, developed or
possessed by the Company; provided, however, that Protected
Information shall not include information that shall become
generally known to the public or the trade without violation of
Section 11.
(o) Resignation Compensation shall have the meaning set forth in Section
14(c).
(p) Severance Pay shall have the meaning set forth in Section 14(b).
(q) Successor shall have the meaning set forth in Section 20.
(r) Tax shall mean all taxes on income, which shall be assumed to be at
a rate equal to the sum of the highest marginal rates, including any
applicable surcharges, of federal income tax, state income tax,
local income tax, Medicare payroll tax and any similar income or
payroll tax for a married citizen filing a joint return from the
county of the Executive's residence, as now in effect or as amended
from time to time.
(s) Term of Employment shall mean the period of time commencing on the
date first set forth above and ending on August 3, 2003 or such
later date as may be mutually agreed upon by the Board of Directors
and the Executive.
(t) Termination Without Cause shall have the meaning set forth in
Section 14(b).
(u) Unauthorized shall mean: (i) in contravention of the Company's
policies or procedures; (ii) otherwise inconsistent with the
Company's measures to protect its interests in its Protected
Information; or (iii) in contravention of any duty existing under
law or contract.
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2. TERM.
The Company hereby employs the Executive, and the Executive hereby accepts
such employment, in the capacities and upon the terms and conditions hereinafter
set forth, during the Term of Employment.
3. DUTIES.
(a) During the Term of Employment, the Executive shall serve as the
Senior Vice President - General Counsel of the Company. The
Executive shall also occupy a similar position in the Company's
subsidiaries other than The Avenue, Inc. and United Retail
International, Ltd. In such capacity, the Executive shall (i)
provide advice on the laws of the State of New York and the federal
laws of the United States, (ii) supervise the representation before
courts and legislative and administrative bodies of the Company and
its subsidiaries, (iii) engage and approve the fees of all attorneys
who represent or advise the Company or a subsidiary of the Company,
(iv) approve the form of all material contracts entered into by the
Company or one of its subsidiaries, (v) comment on drafts of all
documents to be filed by the Company with the SEC, and (vi) perform
such other professional duties as may be determined and assigned to
the Executive from time to time by the Board of Directors and the
Chief Executive Officer. Notwithstanding the above, the Executive
shall not be required to perform any duties and responsibilities
which would be likely to result in a non-compliance with or
violation of any applicable law or regulation or canon of legal
ethics. The Executive shall report solely and directly to the Chief
Executive Officer.
(b) The Executive accepts such employment and hereby agrees to serve the
Company faithfully, industriously and to the best of his ability in
such capacities, with undivided loyalty, devoting substantially all
of his professional time, attention, knowledge, energy and skills to
such employment except during vacation not to exceed three weeks in
any year. The Executive may oversee personal and family investments
in a manner in which the Executive does not actively operate
portfolio companies in the ordinary course of business.
4. COMPENSATION. As compensation to the Executive for performance of
the services required hereunder and as consideration for his execution and
delivery of this Agreement, the Company shall pay him (subject to Sections 7 and
14), and the Executive agrees to accept, the following salary and other
compensation:
(a) A base salary, payable in accordance with the regular executive
payroll practices of the Company, at a rate of $220,000 per annum
during the period ending on January 31, 1999 and thereafter at such
higher rate as may be determined by the
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Compensation Committee of the Board of Directors, but in any event
base salary shall increase as of February 1, 1999 by a percentage at
least equal to the increase, if any, in the Consumer Price Index for
All Urban Consumers for New York and Northern New Jersey published
by the Bureau of Labor Statistics of the Department of Labor ("CPI")
since January 31, 1998 and shall increase as of each anniversary of
February 1, 1999 by a percentage at least equal to the increase, if
any, in the CPI since the previous January 31st (as increased from
time to time, the "Base Salary").
(b) The Executive shall continue to be eligible to receive, and the
Company shall continue to pay, a semi-annual cash incentive
compensation payment ("Performance Bonus") based on the Company's
consolidated operating income for the six-month periods ending
January 31st and July 31st, respectively, with a semi-annual award
ranging from zero to 80% of Base Salary for the six-month period in
accordance with past practice, provided, however, that the
Performance Bonus shall be earned and fully vested in the Executive
as of January 31st or July 31st, as the case may be, whether or not
the Executive shall remain in the Company's employ after the
Performance Bonus shall have vested and provided, further, that the
Performance Bonus shall be paid to the Executive as soon as
practicable after the consolidated operating income for the period
in question shall be determined.
(c) If the federal excise tax pursuant to Section 280G of the Code or
any successor provision on "golden parachute" payments applies to
any acceleration of the vesting of Options during the Term of
Employment, the Company shall immediately pay the Executive (w) an
amount equal to the excise tax incurred plus (x) an amount equal to
the Tax with respect to the payment made pursuant to clause (w) of
this sentence, plus (y) an amount equal to the federal excise tax on
"golden parachute" payments with respect to the payment, if any,
made pursuant to clause (x) of this sentence plus (z) an amount
equal to the Tax with respect to the payment made pursuant to clause
(y) of this sentence.
5. EXPENSES. The Executive will continue to be required to incur
reasonable and necessary travel, business entertainment and other business
expenses. The Company agrees to reimburse the Executive for all reasonable and
necessary travel, business entertainment and other business expenses incurred or
expended by the Executive incident to the performance of the Executive's duties
hereunder, upon submission by the Executive to the Company of vouchers or
expense statements satisfactorily evidencing such expenses.
6. EXECUTIVE BENEFITS.
(a) The Company shall provide the Executive with benefits ("Group
Benefits"), taken as a whole, that are at least equal to those
provided by the Company to the other senior executives of the
Company, including, without limitation, enhanced disability
insurance benefits at the level insured on the date first set forth
above
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(or, if the group disability insurance can not be continued in
force, the Company shall provide other disability benefits
equivalent to the benefits under the group policy).
(b) Group Benefits shall be provided while the Executive is employed by
the Company under this Agreement and thereafter as provided pursuant
to the terms of this Agreement.
(c) All Options shall be fully vested and immediately exercisable after
either Termination Without Cause or a Change of Control, anything in
any stock option agreement between the Company and the Executive to
the contrary notwithstanding. In the event of Termination Without
Cause, Options shall be exercisable for the lesser of 90 days
thereafter or the remainder of the term of the Option. In the event
of Change of Control, Options shall be exercisable until the earlier
of 90 days after the termination of the Executive's employment
hereunder (including resignation) or the expiration of the term of
the Option.
7. PERMANENT DISABILITY; DEATH.
(a) In the event of the Permanent Disability of the Executive during the
Term of Employment, the Company shall, upon written notice to the
Executive, have the right to terminate the Executive's employment
hereunder by reason of Permanent Disability.
(b) In the event of the death of the Executive during the Term of
Employment, this Agreement shall automatically terminate.
8. BENEFITS UPON DEATH OR DISABILITY. In the event of the Executive's
death or a termination of the Executive's employment by the Company due to
Permanent Disability, the Executive, his executor or his heirs at law, as the
case may be, shall be entitled to:
(a) any Base Salary accrued or any Performance Bonus vested but not yet
paid;
(b) a pro rata Performance Bonus for the season in which death or
Permanent Disability occurs determined and payable on the basis of
the number of days worked during the season and the bonus percentage
established for the season;
(c) any accrued vacation pay;
(d) reimbursement for expenses incurred but not yet paid prior to such
death or Permanent Disability;
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(e) any other compensation and benefits as may be provided in accordance
with the terms and provisions of the Group Benefits or of this
Agreement; and
(f) in the case of Permanent Disability, for five years following the
date of Permanent Disability, first, COBRA health insurance benefits
for the Executive and his dependents at the Company's expense until
the COBRA benefits expire and thereafter, for the remainder of such
five-year period, equivalent reimbursement of healthcare expenses
directly by the Company.
The provisions of this Section 8 shall survive the termination of the
Executive's employment hereunder.
9. REPRESENTATION, WARRANTY AND COVENANT OF EXECUTIVE. The Executive
represents, warrants and covenants to the Company that he is not and will not
become a party to any agreement, contract or understanding, whether employment
or otherwise, which would in any way restrict or prohibit him from undertaking
or performing his employment in accordance with the terms and conditions of this
Agreement.
10. REPRESENTATION, WARRANTY AND COVENANT OF THE COMPANY. The Company
represents and warrants that this Agreement constitutes a valid and legally
binding obligation of the Company enforceable in accordance with the terms
herein set forth, except to the extent that the enforceability of this Agreement
may be affected by bankruptcy, insolvency, reorganization, moratorium, or
similar laws or equitable principles affecting creditors' rights generally. The
Company covenants that it shall give notice promptly to the Executive of the
occurrence of Change of Control pursuant to Section 21.
11. RESTRICTIVE COVENANTS AND CONFIDENTIALITY.
(a) The Executive agrees that he shall not:
(i) solicit, raid, entice, encourage or induce any person, firm or
corporation that at any time within one year prior to the
termination of this Agreement shall have been an exclusive
supplier to the Company, or any of its subsidiaries or
Affiliated Companies, to become a supplier to any other
person, firm or corporation that derives more than 10% of its
sales, directly or indirectly, from a business the same as the
Business of the Company and the Executive shall not approach
any such person, firm or corporation for such purpose or
authorize or knowingly approve the taking of such actions by
any other person, firm or corporation or assist any such
person, firm or corporation in taking such action; or
(ii) solicit, raid, entice, encourage or induce any person who at
any time within one year prior to the termination of this
Agreement shall have been an employee of the Company, or any
of its subsidiaries or Affiliated Companies, to become
employed by any person, firm or corporation, and
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the Executive shall not approach any such employee for such
purpose or authorize or knowingly approve the taking of such
actions by any other person, firm or corporation or assist any
such person, firm or corporation in taking such action.
(b) During the Term of Employment and thereafter, the Executive will not
use, disclose or divulge, furnish or make accessible to anyone,
directly or indirectly, any Protected Information in any
Unauthorized manner or for any Unauthorized purpose, provided,
however, that in the event that the Executive is required to
disclose any Protected Information by court order or decree or in
compliance with the rules and regulations of a governmental agency
or in compliance with law, the Executive will provide the Company
with prompt notice of such required disclosure so that the Company
may seek an appropriate protective order and/or waive the
Executive's compliance with the provisions of this Section 11 and
provided, further, that if, in the absence of a protective order or
the receipt of a waiver hereunder, the Executive is advised by his
counsel that such disclosure is necessary to comply with such court
order, decree, rules, regulation or law, he may disclose such
information without liability hereunder.
(c) The Executive agrees that all processes, techniques, know-how,
inventions, plans, products, and devices developed, made or invented
by the Executive, alone or with others in connection with the
Executive's employment hereunder, during the Term of Employment,
shall become and be the sole property of the Company unless released
in writing by the Company.
(d) The Executive agrees that the Executive shall not, directly or
indirectly, within any area in the United States or elsewhere where
the Company or any of its subsidiaries or Affiliated Companies is
transacting business during the Term of Employment, engage or
participate or make any financial investments in or become employed
by, or act as an attorney, agent or principal of, or render advisory
or other services to or for any person, firm or corporation, or in
connection with any business activity (other than that of the
Company and its subsidiaries or Affiliated Companies), that derives
more than 10% of its sales, directly or indirectly, from a business
the same as the Business of the Company. Nothing herein contained,
however, shall restrict the Executive from overseeing personal and
family investments, including any investments in not more than 3% of
the voting securities in any company whose stock is listed on a
national securities exchange or actively traded in the
over-the-counter market, so long as in connection with such
investments the Executive does not actively operate any such
business or enterprise that derives more than 10% of its sales,
directly or indirectly, from a business the same as the Business of
the Company. The
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Executive further agrees that the Executive shall not act as trial
counsel for any party in a lawsuit against the Company or any of its
subsidiaries or Affiliated Companies, provided, however, that the
Executive shall be permitted to appear pro se.
(e) The Executive shall be bound by the provisions of Section 11(a) and
(d), and shall perform his obligations pursuant to Section 11(a) and
(d), during the Term of Employment and for 18 months thereafter,
provided, however, that in the event of Termination Without Cause or
resignation by the Executive in accordance with Section 14(c) the
Executive shall be bound by the provisions of Section 11(a) and (d),
and shall perform his obligations pursuant to Section 11(a) and (d),
only in the event that the Company shall pay his Severance Pay in
accordance with the provisions of Section 14(b) no later than the
15th day after the termination of the Executive's employment under
this Agreement or his Resignation Compensation in accordance with
the provisions of Section 14(c) no later than the 15th day after the
effective date of the Executive's resignation, as the case may be.
For purposes of the proviso in the preceding sentence only, payment
of Severance Pay or Resignation Compensation within the time
specified above in an amount at least equal to the amount determined
in advance to be due and owing to the Executive by a firm of
independent public accountants of nationally recognized standing
shall satisfy the condition of said proviso, and cause the Executive
to be bound by the provisions of Section 11(a) and (d) and shall
obligate the Executive to perform his obligations pursuant to
Section 11(a) and (d) even if such amount is less than the amount
actually due and owing.
(f) The provisions of this Section 11 shall survive the termination of
the Executive's employment hereunder, irrespective of the reason
therefor.
(g) The Executive acknowledges that the services to be rendered by the
Executive are of a special, unique and extraordinary character and,
in connection with such services, the Executive will have access to
confidential information vital to the Company's and its subsidiaries
and Affiliated Companies' businesses. By reason of this, the
Executive consents and agrees that if the Executive violates any of
the provisions of this Section 11, the Company and its subsidiaries
and Affiliated Companies would sustain irreparable harm, and
therefore, in addition to any other remedies which the Company may
have under this Agreement or otherwise, the Company shall be
entitled to an injunction from any court of competent jurisdiction
restraining the Executive from committing or continuing any such
violation of this Section 11. The Executive acknowledges that
damages at law would not be an adequate remedy for violation of this
Section 11, and the Executive therefore agrees that the provisions
of this Section 11 may be specifically enforced against the
Executive in any court of competent jurisdiction. Nothing herein
shall be construed as prohibiting the Company from pursuing any
other remedies available to the Company for such breach or
threatened breach, including the recovery of damages from the
Executive.
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12. DEDUCTIONS AND WITHHOLDING. The Executive agrees that the Company
shall withhold from any and all compensation required to be paid to the
Executive pursuant to this Agreement all Federal, state, local and/or other
taxes which the Company determines are required to be withheld in accordance
with applicable statues and/or regulations from time to time in effect.
13. MUTUAL NON-DISPARAGEMENT. Neither the Executive nor the Company will
make or authorize any public statement disparaging the other in its or his
business interests and affairs. Notwithstanding the foregoing, neither party
shall be (i) required to make any statement which it or he believes to be false
or inaccurate, or (ii) restricted in connection with any litigation, arbitration
or similar proceeding or with respect to its response to any legal process. The
provisions of this Section shall survive the termination of the Executive's
employment hereunder, irrespective of the reason therefor.
14. TERMINATION.
(a) For purposes of this Agreement, removal of the Executive from office
shall be deemed to be for "Cause" as defined in Section 1(f) only if
the Company delivers to the Executive within a reasonable time
before the removal of the Executive from office a notice of
termination for Cause specifying in reasonable detail the
conviction, plea or disbarment, material failure, misconduct and
economic harm or breach by the Executive that is the basis for
termination and the Executive shall have failed prior to his removal
to correct the stated failure, misconduct and economic harm or
breach in all material respects.
(b) Subject to Section 7(a), in the event:
(i) the Company terminates the Executive's employment under this
Agreement without Cause,
(ii) the Company terminates the Executive 's employment under this
Agreement for Cause by reason of a conviction or disbarment
that is later reversed on appeal and fails to reinstate him
with full back pay, or
(iii) (A) the Company breaches any of the covenants and agreements
set forth in Sections 3(a), 4, 5, 6, or 15 (a) or (c), in any
material respect, and (B) the Executive tenders to the Company
a letter of resignation specifying such breach in reasonable
detail and demanding Severance Pay,
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(any termination or resignation under the circumstances
referred to in Section 14(b)(i) through (iii) above being
referred to as "Termination Without Cause" whether or not
Cause shall exist) the Company shall pay the Executive within
15 days following the termination of the Executive's
employment under this Agreement, an amount equal to three
times the sum of (A) the annual Base Salary at the rate
payable immediately prior to termination plus (B) the
aggregate Performance Bonus with respect to the two
consecutive most recently completed six-month seasons
immediately prior to termination. If the federal excise tax
pursuant to Section 280G of the Internal Revenue Code (the
"Code") or any successor provision on "golden parachute"
payments applies to the payment made pursuant to the preceding
sentence, to any acceleration of vesting of Options or to any
other benefit or distribution to the Executive from the
Company, the Company shall immediately pay the Executive an
amount equal to the excise tax incurred plus (x) an amount
equal to the Tax with respect to the amount of the excise tax,
plus (y) an amount equal to the federal excise tax on "golden
parachute" payments with respect to the payment, if any, made
pursuant to clause (x) of this sentence plus (z) an amount
equal to the Tax with respect to the payment made pursuant to
clause (y) of this sentence (collectively with the payment
made pursuant to the preceding sentence, "Severance Pay"). No
demand or other notice from the Executive with respect to
Severance Pay shall be necessary in connection with Section
14(b) (i) above. Anything in this Section 14(b) to the
contrary notwithstanding, the Executive shall not be entitled
to Severance Pay, and the Company shall have no obligation to
pay Severance Pay, if:
(x) within 15 days after the delivery of a letter of
resignation to the Company (the "Cure Period") pursuant to
Section 14(b)(iii) the Company shall cure the Company's breach
specified in the letter of resignation in all material
respects (or shall begin in good faith to cure a breach of a
nature that requires more than 15 days to cure in all material
respects) and shall deliver to the Executive a notice to that
effect;
(y) during the Cure Period the Chief Executive Officer shall
request in writing that the Executive withdraw his letter of
resignation pursuant to Section 14(b)(iii); and
(z) the Company shall deliver to the Executive during the Cure
Period a written offer to reinstate the Executive with full
back pay and uninterrupted Group Benefits and other benefits
under this Agreement, including eligibility for a Performance
Bonus.
(c) In the event (A) a Change of Control occurs on a day at the
beginning of which the Executive is an employee of the
Company, and (B) the Executive within 10 business days after
first receiving notice from the Company of the Change of
Control tenders a letter of resignation to the Company
specifying such Change of
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Control (whether or not the Executive shall be an employee of the
Company during the period between the end of the day preceding
Change of Control and the tender of such letter) and demanding
Resignation Compensation, the Company shall pay the Executive
immediately upon the resignation of the Executive under this Section
14(c), an amount equal to three times the annual Base Salary at the
rate payable immediately prior to resignation. If the federal excise
tax pursuant to Section 280G of the Code or any successor provision
on "golden parachute" payments applies to the payment made pursuant
to the preceding sentence or to any other benefit or distribution to
the Executive from the Company, the Company shall immediately pay
the Executive an amount equal to the excise tax incurred plus (x) an
amount equal to the Tax with respect to the amount of the excise
tax, plus (y) an amount equal to the federal excise tax on "golden
parachute" payments with respect to the payment, if any, made
pursuant to clause (x) of this sentence plus (z) an amount equal to
the Tax with respect to the payment made pursuant to clause (y) of
this sentence (collectively with the payment made pursuant to the
preceding sentence, "Resignation Compensation"). Notice of Change of
Control shall be given to the Executive by the Company pursuant to
Section 21, provided, however, that the Executive, in his
discretion, may accept as notice filing with the SEC of reports
setting forth facts that, taken together, constitute Change of
Control.
(d) In the event of Termination Without Cause or resignation by the
Executive in accordance with Section 14(c):
(i) the Executive shall be under no obligation to seek other
employment and there shall be no offset against any amounts
due the Executive under this Agreement on account of any
remuneration attributable to any subsequent employment that
the Executive may obtain (Severance Pay or Resignation
Compensation is in the nature of liquidated damages and not in
the nature of a penalty); and
(ii) the Executive shall be entitled to the following benefits and
additional payments:
(A) any Base Salary accrued or Performance Bonus vested but
not yet paid;
(B) a pro rata Performance Bonus for the season in which
employment is terminated determined and payable on the basis of the
number of days worked during the season and the bonus percentage
established for the season;
(C) any accrued vacation pay;
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(D) reimbursement for expenses incurred, but not paid prior to
such termination of employment; and
(E) (x) COBRA health insurance benefits for the Executive and
his dependents at the Company's expense until the COBRA benefits
expire and thereafter, through the remainder, if any, of the Term of
Employment equivalent reimbursement of healthcare expenses directly
by the Company, (y) conversion at the Company's expense through the
remainder of the Term of Employment of the group life insurance
coverage on the Executive's life and (z) payment to the Executive on
April 15th of each year of an amount equal to the Tax with respect
to the payments made to the Executive pursuant to clauses (x) and
(y) of this sentence in the preceding calendar year.
(e) If the Company terminates the Executive's employment hereunder for
Cause (except as provided in Section 14(b)(ii)), or in the event the
Executive resigns (except as provided in Section 14(b)(iii) or
14(c)), the Executive shall be entitled to:
(i) any Base Salary accrued and any Performance Bonus vested but
not paid;
(ii) any accrued vacation pay;
(iii) reimbursement for expenses incurred, but not yet paid prior to
such termination of employment; and
(iv) any other compensation and benefits that accrued prior to
termination of employment as may be provided in accordance
with the terms and provisions of the Group Benefits.
(f) In the event the Company removes the Executive from office, and
terminates the Executive's employment under this Agreement, or in
the event the Executive resigns, the Executive shall continue to
have the obligations provided for in Section 11 hereof. The
provisions of this Section 14 shall survive the termination of the
Executive's employment hereunder, irrespective of the reason
therefor.
(g) The Executive shall accept the payments referred to in this Section
14 in full discharge and release of the Company of and from any
further payment obligations under this Agreement except obligations
under Sections 15 and 16.
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15. INDEMNIFICATION.
(a) The Company shall indemnify the Executive as provided in the
By-laws.
(b) In the event of payment of indemnities under this Agreement, the
Company shall be subrogated to the extent of such payment to all of
the rights of recovery of the Executive.
(c) The Company shall use reasonable efforts to obtain a directors' and
officers' liability insurance policy covering the Executive at the
level insured on the date first set forth above and to maintain the
policy during the Term of Employment and for three years thereafter.
(d) The provisions of this Section 15 shall survive the termination of
the Executive's employment hereunder.
16. ENFORCEMENT; INTEREST.
If any amount owing to the Executive under this Agreement is not
paid by the Company, or on its behalf, within 15 days after a written demand,
claim or request for payment has been delivered or sent to the Company, the
Executive may at any time thereafter bring suit against the Company to recover
the unpaid amount and interest thereon and, if successful in whole or in part,
the Executive shall be entitled to be paid also the expenses of prosecuting such
suit, including reasonable attorneys' fees. Interest shall be payable from the
date any amount is first due and payable to the Executive at a rate equal to the
highest rate payable on any of the Company's indebtedness after the date of this
Agreement but in no event at a rate higher than the maximum rate then permitted
by law.
17. ENTIRE AGREEMENT.
This Agreement, the By-laws, the stock option agreements between the
Company and the Executive and the provisions of the Group Benefits embody the
entire agreement of the parties with respect to the Executive's employment and
shall be interpreted in accordance with the past practice of the parties. This
Agreement may not be changed or terminated orally but only by an agreement in
writing signed by the parties hereto. This Agreement cancels and supersedes any
and all prior agreements and understandings between the parties hereto
respecting the employment of the Executive by the Company and/or its
subsidiaries or any Affiliated Company and the payment of severance pay.
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18. WAIVER.
The waiver by the Company of a breach of any provision of this
Agreement by the Executive shall not operate or be construed as a waiver of any
subsequent breach by him. The waiver by the Executive of a breach of any
provision of this Agreement by the Company shall not operate or be construed as
a waiver of any subsequent breach by the Company.
19. GOVERNING LAW.
This Agreement shall be subject to, and governed by, the laws of the
State of New Jersey.
20. ASSIGNABILITY.
The obligations of the Executive may not be delegated and, except as
to the designation of beneficiaries of insurance and similar benefits, the
Executive may not, without the Company's written consent thereto, assign,
transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any interest herein. Any such attempted delegation or disposition
shall be null and void ab initio and without effect. This Agreement and all of
the Company's rights and obligations hereunder may be assigned or transferred by
the Company to, and shall be binding upon and inure to the benefit of, any
subsidiary of the Company or any Successor to the Company, but any such
assignment shall not relieve the assigning party of any of its obligations
hereunder. (The term "Successor" shall mean, with respect to the Company or any
of its subsidiaries, any corporation or other business entity which, by merger,
consolidation, purchase of the assets, or otherwise, acquires all or
substantially all of the assets of the Company or such subsidiary.)
21. NOTICES.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be delivered personally or sent by registered or
certified mail, return receipt requested, to the other party hereto at his or
its address as set forth at the beginning of this Agreement and, in the case of
the Company, addressed to the attention of its Secretary. Either party may
change the address to which notices, requests, demands and other communications
hereunder shall be sent by sending written notice of such change of address to
the other party.
22. SEVERABILITY.
If any provision of this Agreement as applied to either party or to
any circumstances shall be adjudged by a court of competent jurisdiction to be
void or unenforceable, the same shall in no way affect any other provision of
this Agreement or the validity or enforceability of this Agreement.
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23. SECTION HEADINGS.
The section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
24. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, which
shall, collectively and separately, constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
in Rochelle Park, New Jersey, in duplicate originals on November 20, 1998.
UNITED RETAIL GROUP, INC.
By: /s/ RAPHAEL BENAROYA
------------------------
Name: Raphael Benaroya
Title: Chairman of the Board
/s/ KENNETH P. CARROLL
----------------------------
Kenneth P. Carroll
empagkpc.sam
KPC:JW 11/98
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<PAGE> 1
Exhibit No. 10.4
EMPLOYMENT AGREEMENT
Agreement made as of the 26th day of March, 1998, between UNITED RETAIL
Incorporated, a Delaware corporation, with principal offices at 365 West Passaic
Street, Rochelle Park, New Jersey 07662-6563 (the "Company") and CARRIE
CLINE-TUNICK, residing at 209 Park Avenue, Teaneck, New Jersey 07666 (the
"Executive")
WHEREAS, the Executive has been employed by the Company as its Vice
President - Product Design and Development; and
WHEREAS, the Company desires to continue the services of the Executive,
and the Executive desires to continue to provide such services to the Company,
on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Definitions.
(a) Affiliated Companies shall mean, with respect to the Company, any
corporation, limited partnership, general partnership, association,
joint-stock company, joint venture, trust, bank, trust company, land
trust, business trust, fund or any organized group of persons,
whether or not a legal entity, that is directly or indirectly
controlled by the Company.
(b) Base Salary shall have the meaning set forth in Section 4(a).
(c) Board of Directors shall mean the Board of Directors of the Company.
(d) Business of the Company shall mean the operation of a retail store
chain which markets and sells apparel for women principally in sizes
14 and larger and any other future business in which the Company and
its subsidiaries and Affiliated Companies engage that produces more
than 10% of the Company's consolidated sales.
(e) By-laws shall mean the By-laws of the Company as currently in force.
<PAGE> 2
(f) Cause shall mean the occurrence of one or more of the following
events:
(i) a judgment of conviction is entered against the
Executive for any felony which is both based on her personal actions
(excluding liability imputed to her by reason of her position as an
executive of the Company) and involves common law fraud,
embezzlement, willful dishonesty or moral turpitude ( the entry of
judgment being the only event or circumstance sufficient to
constitute Cause under this subparagraph (i)), provided, however,
that any felony an essential element of which is predicated on the
operation of a vehicle shall be deemed not to involve moral
turpitude;
(ii) (A) The Executive has willfully and continuously failed
to perform her duties to the Company in any material respect, or (B)
the Executive has failed in any material respect to follow specific
directions of the Board of Directors or the Chief Executive Officer
in the performance of her duties;
(iii) the Executive has demonstrated willful misconduct in the
performance of her duties to the Company in any material respect and
material economic harm to the Company has resulted; or
(iv) there has been a breach in any material respect of any
of the provisions of Section 11;
provided, however, that the judgment of conviction referred to in
subparagraph (i), the failure of performance referred to in
subparagraph (ii), the misconduct referred to in subparagraph (iii),
and the breach referred to in subparagraph (iv) shall constitute
Cause for a maximum of only 90 days after the judgment of conviction
has been entered, the failure of performance commenced, the material
economic harm resulted, or the breach first took place, as the case
may be.
(g) Change of Control shall mean resignation or removal (including
failure to reelect) for any reason of the Chief Executive Officer of
the Company's stockholder, within 90 days after (i) the acquisition
after the date first set forth above by any person (defined for the
purposes of this paragraph to mean any person within the meaning of
Section 13(d) of the Securities Exchange Act of 1934 ("Exchange
Act")), other than the Company's stockholder, its resigned or
removed Chief Executive Officer, or an employee benefit plan created
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's stockholder if, after such acquisition, such
person is the beneficial owner of securities issued by the Company's
stockholder having 30% 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
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securities issued by the Company's stockholder; (ii) the election of
a majority of the Directors, elected at any meeting of the holders
of voting securities of the Company's stockholder, who were not
nominated for such election by its Board of Directors or a duly
constituted committee of its Board of Directors, or (iii) the merger
or consolidation of the Company's stockholder with, or transfer of
substantially all of the assets of the Company's stockholder to,
another person; provided, however, that any such acquisition,
election, merger, consolidation or transfer that is approved in
advance in writing by the Board of Directors or the Executive shall
not constitute a Change of Control.
(h) Group Benefits shall have the meaning set forth in Section 6(a).
(i) Permanent Disability shall mean the inability of the Executive to
perform her duties and responsibilities to the Company by reason of
a physical or mental disability or infirmity (i) for a continuous
period of four months or (ii) at such earlier time as the Executive
submits medical evidence satisfactory to the Company that the
Executive has a physical or mental disability or infirmity that will
likely prevent her from substantially performing her duties and
responsibilities for four months or longer (the date of such
Permanent Disability shall be on the last day of such four-month
period or the day on which the Executive submits such evidence, as
the case may be).
(j) Protected Information shall mean trade secrets, confidential or
proprietary information, and all other knowledge, know-how,
information, documents or materials, owned or developed by the
Company, or otherwise in the possession of the Company, whether in
tangible or intangible form, pertaining to the Business of the
Company, the confidentiality of which the Company takes reasonable
measures to protect, including, but not limited to, the Company's
research and development operations, identities and habits of
customers and prospective customers, suppliers, business
relationships, products (including prices, costs, sales or content),
processes, techniques, machinery, contracts, financial information
or measures, business methods, future business plans, data bases,
computer programs, designs, models, operating procedures, knowledge
of the organization, and other information owned, developed or
possessed by the Company; provided, however, that Protected
Information shall not include information that shall become
generally known to the public or the trade without violation of
Section 11.
(k) Seasonal Incentive Compensation shall have the meaning set forth in
Section 4(b).
(l) Severance Pay shall have the meaning set forth in Section 14(b)(iv).
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(m) Term of Employment shall mean the period of time commencing on the
date first set forth above and ending on the fifth anniversary
thereof or such later date as may be mutually agreed upon by the
Board of Directors and the Executive.
(n) Termination Without Cause shall have the meaning set forth in
Section 14(b)(iv).
(o) Unauthorized shall mean: (i) in contravention of the Company's
policies or procedures; (ii) otherwise inconsistent with the
Company's measures to protect its interests in its Protected
Information; or (iii) in contravention of any duty existing under
law or contract.
2. Term.
The Company hereby employs the Executive, and the Executive hereby accepts
such employment, in the capacities and upon the terms and conditions hereinafter
set forth, during the Term of Employment.
3. Duties.
(a) During the Term of Employment, the Executive shall serve as the Vice
President - Product Design and Development of the Company. In such
capacity, the Executive shall perform such duties as may be
determined and assigned to the Executive from time to time by the
Board of Directors and the Chief Executive Officer.
(b) The Executive accepts such employment and hereby agrees to serve the
Company faithfully, industriously and to the best of her ability in
such capacity, with undivided loyalty, devoting substantially all of
her professional time, attention, knowledge, energy and skills to
such employment except during vacation not to exceed three weeks in
any year. The Executive may oversee personal and family investments
in a manner in which the Executive does not actively operate
portfolio companies in the ordinary course of business.
4. Compensation. As compensation to the Executive for performance of
the services required hereunder and as consideration for her execution and
delivery of this Agreement, the Company shall pay her (subject to Sections 7, 8
and 14), and the Executive agrees to accept, the following salary and other
compensation:
(a) a base salary, payable in accordance with the regular executive
payroll practices of the Company, at a rate of $300,000 per annum
(as increased from time to time in the discretion of the Chief
Executive Officer, the "Base Salary");
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(b) the Executive shall continue to be eligible to receive, and the
Company shall continue to pay, a semi-annual cash incentive
compensation payment ("Seasonal Incentive Compensation") based on
consolidated operating income of the Company's stockholder in
accordance with past practice with a semi-annual award ranging from
zero to 40% of Base Salary for the six-month period, as described in
Schedule "A" attached hereto; and
(c) employee stock options referred to in certain Stock Option
Agreements between the Executive and the Company's stockholder.
5. Expenses. The Executive will continue to be required to incur
reasonable and necessary travel, business entertainment and other business
expenses. The Company agrees to reimburse the Executive for all reasonable and
necessary travel, business entertainment and other business expenses incurred or
expended by the Executive incident to the performance of the Executive's duties
hereunder, upon submission by the Executive to the Company of vouchers or
expense statements satisfactorily evidencing such expenses.
6. Executive Benefits.
(a) The Company shall provide the Executive with benefits (the "Group
Benefits"), taken as a whole, that are at least equal to those
provided by the Company to the other executives of the Company of
comparable rank.
(b) Group Benefits shall be provided while the Executive is employed by
the Company under this Agreement.
7. Permanent Disability; Death.
(a) In the event of the Permanent Disability of the Executive during the
Term of Employment, the Company shall, upon written notice to the
Executive, have the right to terminate the Executive's employment
hereunder.
(b) In the event of the death of the Executive during the Term of
Employment, this Agreement shall automatically terminate.
8. Benefits Upon Death or Disability. In the event of the Executive's
death or a termination of the Executive's employment by the Company due to
Permanent Disability, the Executive, her executor or her heirs at law, as the
case may be, shall be entitled to:
(a) any Base Salary earned but not yet paid and any Seasonal Incentive
Compensation accrued in accordance with the provisions of the
program as attached hereto but not yet paid;
(b) pro rata Seasonal Incentive Compensation for the season in which
death or Permanent Disability occurs determined and payable on the
basis of the number of
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days worked during the season and the operating income target
percentage established for the season;
(c) any accrued vacation pay;
(d) reimbursement for expenses incurred but not yet paid prior to such
death or Permanent Disability; and
(e) any other compensation and benefits as may be provided in accordance
with the terms and provisions of the Group Benefits.
The provisions of this Section 8 shall survive the termination of the
Executive's employment hereunder.
9. Representation, Warranty and Covenant of Executive. The Executive
represents, warrants and covenants to the Company that she is not and will not
become a party to any agreement, contract or understanding, whether employment
or otherwise, which would in any way restrict or prohibit her from undertaking
or performing her employment in accordance with the terms and conditions of this
Agreement.
10. Representation, Warranty and Covenant of the Company. The Company
represents and warrants that this Agreement constitutes a valid and legally
binding obligation of the Company enforceable in accordance with the terms
herein set forth, except to the extent that the enforceability of this Agreement
may be affected by bankruptcy, insolvency, reorganization, moratorium, or
similar laws or equitable principles affecting creditors' rights generally. The
Company covenants that it shall give notice promptly to the Executive of the
occurrence of Change of Control pursuant to Section 21.
11. Restrictive Covenants and Confidentiality.
(a) The Executive agrees that she shall not:
(i) solicit, raid, entice, encourage or induce any person, firm or
corporation that at any time within one year prior to the
termination of this Agreement shall have been a supplier to
the Company to become a supplier to any other person, firm or
corporation that derives more than 10% of its sales, directly
or indirectly, from a business the same as the Business of the
Company and the Executive shall not approach any such person,
firm or corporation for such purpose or authorize or knowingly
approve the taking of such actions by any other person, firm
or corporation or assist any such person, firm or corporation
in taking such action; or
(ii) solicit, raid, entice, encourage or induce any person who at
any time within one year prior to the termination of this
Agreement shall have been an employee of the Company to become
employed by any person, firm or
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corporation, and the Executive shall not approach any such
employee for such purpose or authorize or knowingly approve
the taking of such actions by any other person, firm or
corporation or assist any such person, firm or corporation in
taking such action.
(b) During the Term of Employment and thereafter, the Executive will not
use, disclose or divulge, furnish or make accessible to anyone,
directly or indirectly, any Protected Information in any
Unauthorized manner or for any Unauthorized purpose, provided,
however, that in the event that the Executive is required to
disclose any Protected Information by court order or decree or in
compliance with the rules and regulations of a governmental agency
or in compliance with law, the Executive will provide the Company
with prompt notice of such required disclosure so that the Company
may seek an appropriate protective order and/or waive the
Executive's compliance with the provisions of this Section 11 and
provided, further, that if, in the absence of a protective order or
the receipt of a waiver hereunder, the Executive is advised by her
counsel that such disclosure is necessary to comply with such court
order, decree, rules, regulation or law, she may disclose such
information without liability hereunder.
(c) The Executive agrees that all processes, techniques, know-how,
inventions, plans, products, and devices developed, made or invented
by the Executive, alone or with others in connection with the
Executive's employment hereunder, during the Term of Employment,
shall become and be the sole property of the Company unless released
in writing by the Company.
(d) The Executive agrees that the Executive shall not, directly or
indirectly, within any area in the United States or elsewhere where
the Company is transacting business during the Term of Employment,
engage or participate or make any financial investments in or become
employed by, or act as an agent or principal of, or render advisory
or other services to or for any person, firm or corporation, or in
connection with any business activity (other than that of the
Company), that derives more than 10% of its sales, directly or
indirectly, from a business the same as the Business of the Company.
(e) The Executive shall be bound by the provisions of Section 11(a) and
(d), and shall perform her obligations pursuant to Section 11(a) and
(d), during the Term of Employment and for 12 months thereafter,
provided, however, that in the event of Termination Without Cause
the Executive shall be bound by the provisions of Section 11(a) and
(d), and shall perform her obligations pursuant to Section 11(a) and
(d), for so long as, and only for so long as, the Company pays her
Severance Pay in accordance with the provisions of Section 14(b).
(f) The provisions of this Section 11 shall survive the termination of
the Executive's employment hereunder, irrespective of the reason
therefor.
7
<PAGE> 8
(g) The Executive acknowledges that the services to be rendered by the
Executive are of a special, unique and extraordinary character and,
in connection with such services, the Executive will have access to
confidential information vital to the Company's business. By reason
of this, the Executive consents and agrees that if the Executive
violates any of the provisions of this Section 11, the Company would
sustain irreparable harm and, and therefore, in addition to any
other remedies which the Company may have under this Agreement or
otherwise, the Company shall be entitled to an injunction from any
court of competent jurisdiction restraining the Executive from
committing or continuing any such violation of this Section 11. The
Executive acknowledges that damages at law would not be an adequate
remedy for violation of this Section 11, and the Executive therefore
agrees that the provisions of this Section 11 may be specifically
enforced against the Executive in any court of competent
jurisdiction. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to the Company
for such breach or threatened breach, including the recovery of
damages from the Executive.
12. Deductions and Withholding. The Executive agrees that the Company
shall withhold from any and all compensation required to be paid to the
Executive pursuant to this Agreement all Federal, state, local and/or other
taxes which the Company determines are required to be withheld in accordance
with applicable statues and/or regulations from time to time in effect.
13. Mutual Non-Disparagement. Neither the Executive nor the Company will
make or authorize any public statement disparaging the other in its or her
business interests and affairs. Notwithstanding the foregoing, neither party
shall be (i) required to make any statement which it or she believes to be false
or inaccurate, or (ii) restricted in connection with any litigation, arbitration
or similar proceeding or with respect to its response to any legal process. The
provisions of this Section shall survive the termination of the Executive's
employment hereunder, irrespective of the reason therefor.
14. Termination.
(a) For purposes of this Agreement, removal of the Executive from office
shall be deemed to be for "Cause" (i) as defined in Section 1(f)(i)
only if the Company delivers to the Executive within a reasonable
time after the removal of the Executive from office a notice of
termination for Cause specifying the conviction on which termination
is based and (ii) as defined in Section 1(f)(ii) through (iv) only
if (A) the Company shall have delivered to the Executive a
reasonable time prior to the removal of the Executive from office a
notice of termination for Cause specifying in reasonable detail the
material failure, misconduct and economic harm or breach by the
Executive that is the basis for termination and (B) the Executive
shall have failed prior to her removal to correct the stated
failure, misconduct and economic harm or breach in all material
respects.
8
<PAGE> 9
(b) Subject to Section 7(a) and 8, in the event:
(i) the Company terminates the Executive's employment under this
Agreement without Cause,
(ii) the Company terminates the Executive 's employment under this
Agreement for Cause either (y) by reason of a conviction that
is later reversed on appeal and fails to reinstate her with
full back pay or (z) during the period commencing with a
Change of Control and ending 10 business days after the
Company gives notice to the Executive of Change of Control,
(iii) (A) the Company breaches any of the covenants and agreements
set forth in Sections 4(a) - (b), 6(a) - (b), or 15 (a) or
(c), in any material respect, and (B) the Executive tenders to
the Chief Executive Officer a letter of resignation specifying
such breach in reasonable detail, or
(iv) (A) a Change of Control shall occur on a day at the beginning
of which the Executive is an employee of the Company, and (B)
the Executive within 10 business days after first receiving
notice of the Change of Control tenders a letter of
resignation specifying such Change of Control (whether or not
the Executive shall be an employee of the Company during the
period between the end of the day preceding Change of Control
and the tender of such letter), (termination of employment
under any circumstances referred to in Section 14(b)(i)
through (iv) being referred to as "Termination Without Cause"
whether or not Cause shall exist) the Company shall pay the
Executive in accordance with the regular executive payroll
practices of the Company severance pay in an amount equal to
her Base Pay during the 12-month period preceding her
termination in 52 equal weekly installments ("Severance Pay").
Anything in this Section 14(b) to the contrary
notwithstanding, the Executive shall not be entitled to
Severance Pay, and the Company shall have no obligation to pay
Severance Pay, if:
(x) within 30 days after the delivery of the letter of
resignation (the "Cure Period") pursuant to Section 14(b)(iii)
the Company shall cure the Company's breach specified in the
letter of resignation in all material respects (or shall begin
in good faith to cure a breach of a nature that requires more
than 30 days to cure in all material respects) and shall
deliver to the Executive a notice to that effect;
(y) during the Cure Period the Chief Executive Officer shall
request in writing that the Executive withdraw her letter of
resignation pursuant to Section 14(b)(iii); and
9
<PAGE> 10
(z) the Company shall deliver to the Executive during the Cure
Period a written offer to reinstate the Executive with full
back pay and uninterrupted Group Benefits and other benefits
under this Agreement.
Notice of Change of Control shall be given to the Executive pursuant
to Section 21, provided, however, that the Executive, in her
discretion, may accept as notice filing with the SEC of reports
setting forth facts that, taken together, constitute Change of
Control.
(c) In the event of Termination Without Cause:
(i) the Executive shall be under no obligation to seek other
employment and there shall be no offset against any amounts
due the Executive under this Agreement on account of any
remuneration attributable to any subsequent employment that
the Executive may obtain (any amounts due under Section 14(b)
are in the nature of severance payments, or liquidated
damages, or both, and are not in the nature of a penalty); and
(ii) the Executive shall be entitled to the following
additional payments:
(A) any Base Salary earned but not yet paid and any
Seasonal Incentive Compensation accrued in accordance with the
provisions of the program as attached hereto but not yet paid;
(B) pro rata Seasonal Incentive Compensation for the
season in which employment is terminated determined and
payable on the basis of the number of days worked during the
season and the operating income target percentage established
for the season;
(C) any accrued vacation pay; and
(D) reimbursement for expenses incurred, but not paid
prior to such termination of employment.
(d) If the Company terminates the Executive's employment hereunder for
Cause (except as provided in Section 14(b)(ii)), or in the event the
Executive resigns (except as provided in Section 14(b)(iii) or
(iv)), the Executive shall be entitled to:
(A) her Base Salary at the rate in effect at the time of such
termination through the date of termination of employment;
(B) any accrued vacation pay;
10
<PAGE> 11
(C) reimbursement for expenses incurred, but not yet paid
prior to such termination of employment; and
(D) any other compensation and benefits that accrued prior to
termination of employment as may be provided in accordance with the
terms and provisions of the Group Benefits.
(e) The provisions of Section 4(b) shall not restrict the Company's
unconditional right to terminate the Executive's employment
hereunder and the Company shall have no liability arising under
Section 4(b) for Termination Without Cause, whether or not
termination shall make the Executive ineligible to receive amounts
otherwise payable in accordance with Section 4(b).
(f) In the event the Company removes the Executive from office, and
terminates the Executive's employment under this Agreement, or in
the event the Executive resigns, the Executive shall continue to
have the obligations provided for in Section 11 hereof. The
provisions of this Section 14 shall survive the termination of the
Executive's employment hereunder, irrespective of the reason
therefor.
(g) The Executive shall accept the payments referred to in this Section
14 in full discharge and release of the Company of and from any
further payment obligations under this Agreement except obligations
under Sections 15 and 16.
15. Indemnification.
(a) The Company shall indemnify the Executive as provided in the
By-laws. The provisions of this paragraph shall survive the
termination of the Executive's employment hereunder.
(b) In the event of payment of indemnities under this Agreement, the
Company shall be subrogated to the extent of such payment to all of
the rights of recovery of the Executive.
(c) The Company shall use reasonable efforts to obtain and maintain a
directors' and officers' liability insurance policy covering the
Executive.
16. Enforcement.
If any amount owing to the Executive under this Agreement is not
paid by the Company, or on its behalf, within 15 days after a written claim or
request for payment has been received by the Company, the Executive may at any
time thereafter bring suit against the Company to recover the unpaid amount and,
if successful in whole or in part, the Executive shall be entitled to be paid
also the expenses of prosecuting such suit, including reasonable attorneys'
fees.
11
<PAGE> 12
17. Entire Agreement.
This Agreement, the Stock Option Agreements between the Executive
and the Company's stockholder and the By-laws embody the entire agreement of the
parties with respect to the Executive's employment and shall be interpreted in
accordance with the past practice of the parties. This Agreement cancels and
supersedes any and all prior agreements and understandings between the parties
hereto respecting the employment of the Executive by the Company. This Agreement
may not be changed or terminated orally but only by an agreement in writing
signed by the parties hereto.
18. Waiver.
The waiver by the Company of breach of any provision of this
Agreement by the Executive shall not operate or be construed as a waiver of any
subsequent breach by her. The waiver by the Executive of a breach of any
provision of this Agreement by the Company shall not operate or be construed as
a waiver of any subsequent breach by the Company.
19. Governing Law.
This Agreement shall be subject to, and governed by, the laws of the
State of New York.
20. Assignability.
The obligations of the Executive may not be delegated and, except as
to the designation of beneficiaries of insurance benefits, the Executive may
not, without the Company's written consent thereto, assign, transfer, convey,
pledge, encumber, hypothecate or otherwise dispose of this Agreement or any
interest herein. Any such attempted delegation or disposition shall be null and
void ab initio and without effect. This Agreement and all of the Company's
rights and obligations hereunder may be assigned or transferred by the Company
to, and shall be binding upon and inure to the benefit of, any successor to the
Company, but any such assignment shall not relieve the assigning party of any of
its obligations hereunder. The term "successor" shall mean, with respect to the
Company, any corporation or other business entity which, by merger,
consolidation, purchase of the assets, or otherwise, acquires all or
substantially all of the assets of the Company or such subsidiary.
21. Notices.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be delivered personally or sent by registered or
certified mail, return receipt requested, to the other party hereto at her or
its address as set forth at the beginning of this Agreement and, in the case of
the Company, addressed to the attention of its General Counsel. Either party may
change the address to which notices, requests, demands and other
12
<PAGE> 13
communications hereunder shall be sent by sending written notice of such change
of address to the other party.
22. Severability.
If any provision of this Agreement as applied to either party or to
any circumstances shall be adjudged by a court of competent jurisdiction to be
void or unenforceable, the same shall in no way affect any other provision of
this Agreement or the validity or enforceability of this Agreement.
23. Section Headings.
The section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
24. Counterparts.
This Agreement may be executed in one or more counterparts, which
shall, collectively and separately, constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
in multiple originals.
UNITED RETAIL INCORPORATED
By: /s/ KENNETH P. CARROLL
-------------------------
Name: Kenneth P. Carroll
Title: President
/s/ CARRIE CLINE-TUNICK
-------------------------
Carrie Cline-Tunick
empagCCT.sam
KPC:jw
3/20/98
13
<PAGE> 14
SCHEDULE "A"
TO
EMPLOYMENT AGREEMENT
WITH
CARRIE CLINE-TUNICK
The Seasonal Incentive Compensation Program provides the participant with
an opportunity each season to earn substantial extra cash remuneration based on
attainment of aggressive targets for consolidated operating income of the
Company's stockholder.
At the discretion of the CEO of the Company, each participant is assigned
an individual participation percentage based, among other things, on the
participant's responsibilities and seniority. Further, operating income targets
are established in advance and are converted to percentages ranging from 20% for
the lowest acceptable amount of operating income to 200% at and above the
highest goal.
The amount of an IC award is the product of seasonal base salary
multiplied by the participant's participation percentage multiplied by the
target percentage achieved. For example, an associate with a seasonal salary of
$60,000 ($120,000 per annum) and a participation percentage of 20% would receive
$2,400 if the 20% target is met and $14,400 if the 120% target is met. There is
no payout if the 20% target is missed.
In compliance with the law, IC awards are subject to withholding taxes and
deductions for contributions to the Retirement Savings Plan and the Supplemental
Retirement Savings Plan.
IC awards for a season vest on the Tuesday after the first meeting of the
Board of Directors in the next season. An associate must be in the Company's
employ on that date, and must return to work if on vacation or leave on that
date, in order to receive an IC payout.
14
<PAGE> 15
Exhibit No. 10.4
AMENDMENT
TO
EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement made as of the 23rd day of July,
1998, between UNITED RETAIL INCORPORATED, a Delaware corporation, with principal
offices at 365 West Passaic Street, Rochelle Park, New Jersey 07662-6563 (the
"Company"), and CARRIE CLINE-TUNICK, residing at 209 Park Avenue, Teaneck, New
Jersey 07666 (the "Executive").
WHEREAS, the Executive and the Company are parties to the Employment
Agreement, dated as of March 26, 1998 (the "Agreement");
WHEREAS, the Executive holds employee stock options ("Options") to
purchase a total of 50,000 shares of Common Stock, $.001 par value ("Shares"),
of United Retail Group, Inc. at an average exercise price of $5.725 per share
pursuant to Stock Option Agreements between United Retail Group, Inc. and the
Executive; and
WHEREAS, the Company wishes to provide additional compensation to the
Executive in the event an operating income target is achieved during the Term of
Employment (as defined in the Agreement) subject to the terms and conditions set
forth below.
NOW, THEREFORE, as additional compensation to the Executive for
performance of the services required under the Agreement, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Continuance in Force.
Except as expressly supplemented herein, the provisions of the Agreement
shall continue in full force and effect.
2. Bonus Compensation.
(a) The Options are intended to have an equity of at least $20 each as
of the Accrual Date (as hereinafter defined) but, as a result of stock market
conditions, may have less equity. (The equity of an Option shall be the excess
over the exercise price of the fair market value of the Shares issuable upon
exercise on the date on which the Option was exercised prior to the Accrual Date
or, if not exercised, on average during the 10 trading days immediately
preceding the Accrual Date; for example, Options to purchase 50,000 shares at an
aggregate exercise price of $286,250 would have $1 million equity at a fair
market value of $25.725 per Share.)
<PAGE> 16
(b) Subject to strict satisfaction of the following conditions:
(i) United Retail Group, Inc. shall have consolidated operating
income in any fiscal year in excess of $50 million, and
equivalent to more than 10% of consolidated net sales,
determined in accordance with generally accepted accounting
principles;
(ii) at all times prior to the date (the "Accrual Date") during the
Term of Employment and 10 trading days after United Retail
Group, Inc. publishes a press release containing the operating
income in excess of $50 million and of 10% of consolidated net
sales referred to in subparagraph (i) above, the Executive
shall have been employed by the Company and shall have been
either at work, on vacation or receiving temporary disability
benefits for a condition other than Permanent Disability
("Employed");
(iii) the Company and United Retail Group, Inc., singly or together,
shall not have made corporate acquisitions after the date of
this Agreement for total consideration in excess of $20
million; and
(iv) United Retail Group, Inc. shall not have merged or
consolidated with another corporation;
in the event that any of the Options shall have an equity of less than $20 each
as of the Accrual Date:
(A) the Executive shall be paid a cash bonus, which shall be the
Executive's exclusive remedy with respect to the Options
having less equity than the parties intended;
(B) the amount of the cash bonus shall be the remainder (the
"Bonus Amount") of $20 per Option minus the equity in each
Option, whether or not vested or outstanding at the time;
(C) the Bonus Amount shall be payable in three equal installments,
without interest, on the Accrual Date, the first anniversary
of the Accrual Date and the second anniversary of the Accrual
Date, provided, however, that the second and third
installments shall be payable only if at all times prior to
the anniversary date in question the Executive shall have been
Employed (there shall be no proration of the second or third
installment of the Bonus Amount in the event that the
Executive shall be Employed for only a portion of the year
preceding the date on which the installment would otherwise be
payable); and
2
<PAGE> 17
(D) each installment of the Bonus Amount shall be paid by the
Company by check to the order of the Executive or, if the
Executive shall have so elected in the calendar year preceding
the date on which the installment is paid, of the trustee
under the United Retail Group, Inc. Supplemental Retirement
Savings Plan for credit to the Executive's account.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment.
UNITED RETAIL INCORPORATED
By: /s/ KENNETH P. CARROLL
-------------------------
Name: Kenneth P. Carroll
Title: President
/s/ CARRIE CLINE-TUNICK
-------------------------
Carrie Cline-Tunick
empCCT.sam
KPC:jw
7/21/98
3
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> AUG-02-1998
<PERIOD-END> OCT-31-1998
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<SECURITIES> 0
<RECEIVABLES> 1,434
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<INVENTORY> 54,171
<CURRENT-ASSETS> 93,642
<PP&E> 109,845
<DEPRECIATION> 62,573
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<CURRENT-LIABILITIES> 36,061
<BONDS> 9,464
0
0
<COMMON> 14
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<TOTAL-LIABILITY-AND-EQUITY> 149,486
<SALES> 85,174
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