<PAGE>
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 May 1, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number 00019774
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United Retail Group, Inc.
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(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 845-0880
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- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
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
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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
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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 May 1, 1999, 13,100,588 shares of the registrant's common stock,
$.001 par value per share, were outstanding.
<PAGE>
Item 1. FINANCIAL STATEMENTS
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
May 1, January 30, May 2,
1999 1999 1998
----------- ---------- ----------
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 46,818 $ 45,894 $ 31,221
Accounts receivable 2,870 513 1,625
Inventory 50,824 45,564 48,326
Prepaid rents 3,971 3,946 4,007
Other prepaid expenses 2,950 2,429 2,757
-------- -------- --------
Total current assets 107,433 98,346 87,936
Property and equipment, net 52,234 48,017 47,221
Deferred charges and other intangible assets,
net of accumulated amortization of $2,218, $2,130
and $1,878 6,925 6,746 6,964
Deferred income taxes 736 1,120 971
Other assets 483 363 375
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Total assets $167,811 $154,592 $143,467
======== ======== ========
LIABILITIES
Current liabilities:
Current portion of distribution center financing $ 1,159 $ 1,136 $ 1,072
Accounts payable, trade 17,537 14,208 17,182
Accrued expenses 27,598 22,659 20,808
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Total current liabilities 46,294 38,003 39,062
Distribution center financing 8,874 9,172 10,033
Other long-term liabilities 6,161 6,270 6,749
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Total liabilities 61,329 53,445 55,844
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STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized
1,000,000; none issued
Common stock, $.001 par value; authorized
30,000,000; issued 13,773,900, 13,762,900,
13,759,100; outstanding 13,100,588,
13,089,588, 13,085,388 14 14 14
Additional paid-in capital 77,534 77,458 77,345
Retained earnings 30,593 25,334 11,924
Treasury stock (673,312, 673,312, 673,712
shares) at cost (1,659) (1,659) (1,660)
-------- -------- --------
Total stockholders' equity 106,482 101,147 87,623
-------- -------- --------
Total liabilities and stockholders' equity $167,811 $154,592 $143,467
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the
Consolidated Financial Statements.
<PAGE>
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended
---------------------------
May 1, May 2,
1999 1998
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Net sales $96,693 $94,943
Cost of goods sold, including
buying and occupancy costs 69,719 67,823
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Gross profit 26,974 27,120
General, administrative and
store operating expenses 19,007 19,907
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Operating income 7,967 7,213
Interest income, net (347) (140)
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Income before income taxes 8,314 7,353
Provision for income taxes 3,055 2,783
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Net income $5,259 $4,570
=========== ===========
Net income per share
Basic $0.40 $0.35
=========== ===========
Diluted $0.38 $0.34
=========== ===========
Weighted average number of
shares outstanding
Basic 13,093,291 12,957,041
Common stock equivalents
(stock options) 690,077 537,045
----------- -----------
Diluted 13,783,368 13,494,086
=========== ===========
The accompanying notes are an integral part of the
Consolidated Financial Statements.
<PAGE>
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------
May 1, May 2,
1999 1998
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<S> <C> <C>
Cash Flows From Operating Activities:
Net income $5,259 $4,570
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation and amortization of property and equipment 1,591 1,907
Amortization of deferred charges and other
intangible assets 88 88
Loss on disposal of assets 171 17
Deferred compensation 78 -
Benefit from deferred income taxes 384 1,714
Deferred lease assumption revenue amortization (106) (126)
Changes in operating assets and liabilities:
Accounts receivable (2,357) (1,054)
Income taxes 2,617 619
Inventory (5,260) (10,323)
Accounts payable and accrued expenses 4,619 5,972
Prepaid expenses (546) (158)
Other assets and liabilities (496) 3
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Net Cash Provided from Operating Activities 6,042 3,229
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Investing Activities:
Capital expenditures (5,979) (914)
Deferred payment for property and equipment 1,138 30
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Net Cash Used for Investing Activities (4,841) (884)
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Financing Activities:
Repayments of long-term debt (275) (255)
Issuance of loans to officers (41) (1,993)
Exercise of stock options 39 2
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Net Cash Used in Financing Activities (277) (2,246)
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Net increase in cash and cash equivalents 924 99
Cash and cash equivalents, beginning of period 45,894 31,122
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Cash and cash equivalents, end of period $46,818 $31,221
======= =======
</TABLE>
The accompanying notes are an integral part of the
Consolidated Financial Statements.
<PAGE>
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 balances and transactions have been eliminated.
The consolidated financial statements as of and for the thirteen weeks
ended May 1, 1999 and May 2, 1998 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 1998 Annual
Report and 1998 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.
2. Net Income 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.
Options to purchase approximately 60,000 shares of common stock at
prices ranging from $10.12 to $26.75 per share were outstanding as of May 1,
1999 but were not included in the computation of diluted net income per share
because the exercise prices were greater than the average market price of the
common shares.
<PAGE>
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, which was
extended in March 1999 to August 15, 2001, provides a revolving line of credit
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 an account that has
been pledged to the lenders.
At May 1, 1999, the combined availability of the Companies was $18.8
million, no balance was in the pledged account, the aggregate outstanding amount
of letters of credit arranged by CIT was $20.5 million and no loan had been
drawn down. The Company's cash on hand was unrestricted.
<PAGE>
4. Income Taxes
The provision for income taxes consists of (dollars in thousands):
Thirteen Weeks Ended
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May 1, May 2,
1999 1998
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Currently payable:
Federal $2,552 $1,012
State 119 56
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2,671 1,068
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Deferred:
Federal 316 1,411
State 68 304
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384 1,715
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$3,055 $2,783
====== ======
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):
Thirteen Weeks Ended
---------------------------------------------
May 1, 1999 May 2, 1998
----------- -----------
Tax at Federal rate $ 2,910 35.0% $ 2,573 35.0%
State income taxes, net of
federal benefit 122 1.4% 234 3.2%
Goodwill amortization 18 0.2% 18 0.2%
Other 5 0.1% (42) (0.6%)
-------- ---- -------- ----
$ 3,055 36.7% $ 2,783 37.8%
======== ==== ======== ====
<PAGE>
The net deferred tax asset reflects the tax impact of temporary
differences. The components of the net deferred tax asset as of May 1, 1999 are
as follows (dollars in thousands):
Assets:
Inventory $ 218
Accruals and reserves 2,705
Compensation 339
------
3,262
------
Liabilities:
Depreciation 2,526
------
2,526
------
Net deferred tax asset $ 736
=======
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 or available carrybacks.
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
Raphael Benaroya, the Chairman of the Board, President and Chief Executive
Officer of the Company, and George R. Remeta, the Vice Chairman and Chief
Financial Officer of the Company, borrowed money from the Company to finance
taxes arising from their exercises of employee stock options on February 13,
1998. (The advances had previously been authorized by the Compensation
Committee.) In Fiscal 1998, advances were made of approximately $1.6 million to
Mr. Benaroya and $0.2 million to Mr. Remeta. In Fiscal 1999, an additional
advance of approximately $0.1 million was made to Mr. Benaroya. Interest is
payable annually at the prime rate. Accrued interest at February 13, 1999 has
been paid in full in the respective amounts of approximately $137,000 for Mr.
Benaroya and $21,000 for Mr. Remeta. The largest amounts outstanding were
approximately $1.7 million from Mr. Benaroya and $0.2 million from Mr. Remeta,
respectively, which remain outstanding. The advances mature on February 13, 2002
subject to acceleration under certain circumstances and to a call by the Company
on February 13, 2000 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 respective amounts 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>
6. Supplemental Cash Flow Information
Net cash flow from operating activities includes cash payments for
interest and income taxes as follows (dollars in thousands):
Thirteen Weeks Ended
-----------------------
May 1, May 2,
1999 1998
---- ----
Cash interest:
Interest income, net
per statements of operations ($347) ($140)
Less: Non-cash
interest expense 20 11
----- -----
Net cash interest income
including interest
income of $587 and $438 ($367) ($151)
----- -----
Net income tax
payments $ 54 $449
===== =====
Financing activities for the thirteen weeks ended May 2, 1998 include the
non-cash exercise of 1,076,955 stock options, with the exercise price paid by
exchanging common stock held equal to the cash payment due.
7. 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 adverse effect
on the Company's financial position or results of operations.
8. Subsequent Event
In May 1999, at the annual meeting of stockholder's of the Company, the
stockholders approved the adoption of the 1999 Stock Option Plan, including a
stock option reserve of 400,000 shares of common stock.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
First Quarter Fiscal 1999 Versus First Quarter Fiscal 1998
Net sales for the first quarter of Fiscal 1999 increased 1.8% from the
first quarter of Fiscal 1998, to $96.7 million from $94.9 million, from an
increase in the unit volume. Average stores open decreased 3.8% from 522 to 502
as underperforming stores were closed selectively. Comparable store sales for
the quarter increased 4.6%. There is no assurance that sales and comparable
store sales will continue to increase.
Gross profit was $27.0 million in the first quarter of Fiscal 1999
compared with $27.1 million in the first quarter of Fiscal 1998, decreasing as a
percentage of net sales to 27.9% from 28.6%. The decrease in gross profit as a
percentage of net sales was primarily attributable to a decrease in the
merchandise margin rate partially offset by a decrease in buying and occupancy
costs as a percentage of net sales.
General, administrative and store operating expenses were $19.0 million
in the first quarter of Fiscal 1999 compared to $19.9 million in the first
quarter of Fiscal 1998, decreasing principally as a result of reduced insurance
expense. As a percentage of net sales, general, administrative and store
operating expenses decreased to 19.7% from 21.0%.
During the first quarter of Fiscal 1999, the Company had operating
income of $8.0 million (8.3% of sales) compared to operating income of $7.2
million in the first quarter of Fiscal 1998.
Net interest income was $0.3 million in the first quarter of Fiscal
1999 and $0.1 million in the first quarter of Fiscal 1998, primarily from
interest earned on a higher level of cash and cash equivalents.
The Company had a provision for income taxes of $3.1 million in the
first quarter of Fiscal 1999 and $2.8 million in the first quarter of Fiscal
1998. The effective rate changed to 36.7% in the first quarter of Fiscal 1999
from 37.8% in the first quarter of Fiscal 1998.
The Company had net income of $5.3 million for the first quarter of
Fiscal 1999 and $4.6 million for the first quarter of Fiscal 1998.
<PAGE>
Liquidity and Capital Resources
Net cash provided from operating activities in the first quarter of
Fiscal 1999 was $6.0 million.
The Company's cash on hand increased to $46.8 million at May 1, 1999
from $45.9 million at January 30, 1999 and $31.2 million at May 2, 1998.
Inventory increased to $50.8 million at May 1, 1999 from $48.3 million
at May 2, 1998 and $45.6 million at January 30, 1999. The Company's inventory
levels peak in early May and November/December. During Fiscal 1998, the highest
inventory level was $54.2 million.
Import purchases are made in U.S. dollars, are generally financed by
trade letters of credit and generally constitute approximately half of total
purchases.
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 (the "Financing Agreement"), with
The CIT Group/Business Credit, Inc. ("CIT"). The Financing Agreement provides a
revolving line of credit for a term ending August 15, 2001 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 May 1, 1999, trade
letters of credit for the account of the Company and supported by CIT were
outstanding in the amount of $18.0 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 May 1,
1999, the combined availability of the Companies was $18.8 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.
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.
<PAGE>
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."
Stores
The Company leased 502 retail stores at May 1, 1999, of which 299
stores were located in strip shopping centers, 180 stores were located in malls
and 23 stores were located in downtown shopping districts. Total retail square
footage was 2.0 million square feet at May 1, 1999 compared to 2.1 million
square feet a year earlier.
A total of 303 stores are operated by the Company under trade names
that predate the AVENUE(R) trade name now used on new stores and remodeled
stores. Approximately 300 of these stores are scheduled to be converted to the
AVENUE(R) trade name in Fiscal 1999.
In Fiscal 1999, the Company intends to pay the costs of opening new
stores, remodeling certain existing stores and changing the signage on
approximately 300 stores from its cash on hand.
The two 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".
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 proprietary
credit cards 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 to another bank (the "Credit Card Bank") to authorize purchases by
customers using the Company's proprietary credit cards. 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.
Generally, computer programs and embedded technology often will
mishandle data that includes a year after 1999 (referred to below as "Year 2000
risks").
The mainframe operating systems used by the Company's vendor have been
represented by the vendor to be Year 2000 compliant in all material respects.
<PAGE>
The Company's management information systems department (the "MIS
Department") has renovated substantially all of the Company's applications
software, systems software and hardware (collectively referred to below as
"Systems") to accommodate dates after 1999.
Integrated Year 2000 testing of substantially all the Systems that are
essential to the Company's management information systems ("Essential Systems")
and the mainframe operating systems was completed successfully. (There is no
assurance, however, that the integrated testing revealed all Year 2000 risks.)
The few untested Essential Systems are scheduled to be renovated and tested
separately during the second quarter of Fiscal 1999. (The renovation, validation
and testing of the Essential Systems are referred to below as the "Year 2000
Project.")
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.
The Letter of Credit Provider has advised the Company that its trade
letter of credit system and telecommunications interfaces are Year 2000
complaint in all material respects. There is no assurance, however, that such
system and interfaces will function properly after 1999.
The Credit Card Bank has advised the Company that its credit card
transaction processing system has been renovated, and certified to be Year 2000
compliant in all material respects. 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 renovating them to make them Year 2000
compliant in all material respects by June 30, 1999. There is no assurance,
however, that these processing systems and telecommunications interfaces will
function properly after 1999 or that any malfunctions that occur will not have a
material adverse effect on the Company's sales.
The Company will replace its voicemail system in 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 $0.8 million from February 3, 1996 to May 1,
1999, of which $0.1 million is estimated to have been expensed in the first
quarter of Fiscal 1999. The cost of special purchases for the Year 2000 Project
was approximately $0.6 million, substantially all of which was incurred in
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 Fiscal 1999 are not material
in relation to the Company's general, administrative and store operating
expenses in Fiscal 1998. However, there is no assurance that unexpected
additional costs will not be incurred.
<PAGE>
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.
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.
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 maintenance 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.
<PAGE>
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 such a material adverse
effect, 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 in Fiscal 1999 and Fiscal
2000.
Certain of the 18 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>
PART II - OTHER INFORMATION
Item 2. Changes in Securities.
(c) Seven stock options to purchase 3,000 shares each of the Company's
common stock were issued on May 26, 1999 without registration under the
Securities Act of 1933 (the "Securities Act"). The options were formula options
granted pursuant to the 1999 Stock Option Plan exercisable at $15.125 per share.
The grantees were non-employee directors of the Company.
The options become exercisable in five equal annual installments
commencing one year after the date of grant.
The above grants were exempt from the registration provisions of the
Securities Act under Section 4(2) thereof because all the grantees are directors
of the issuer. Nevertheless, the Company intends to file a registration
statement with respect to the options before they become exercisable.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The seventh Annual Meeting of Stockholders (the "Meeting") was held
on May 26, 1999.
(c) The Meeting elected directors for terms ending at the eight Annual
Meeting of Stockholders, by the following vote:
Name For Withhold Authority to Vote
---- --- --------------------------
Joseph A. Alutto 11,039,347 17,017
Raphael Benaroya 11,040,947 15,417
Russell Berrie 10,571,904 484,460
Joseph Ciechanover 10,569,064 487,300
Michael Goldstein 11,042,347 14,017
Ilan Kaufthal 11,042,347 14,017
Vincent P. Langone 11,040,147 16,217
George R. Remeta 11,041,447 14,917
Richard W. Rubenstein 11,042,347 14,017
(d) The adoption of the 1999 Stock Option Plan (the "1999 Plan") was
approved at the Meeting by a vote of 10,273,621 for, 776,822 against and 5,921
abstain. The 1999 Plan is incorporated herein by reference to the appendix to
the Company's proxy statement on Schedule 14A for its 1999 Annual Meeting of
Stockholders.
<PAGE>
Item 6. Exhibits
The following exhibits are filed herewith:
Number Description
------ -----------
4.1 Amended By-Laws of the Corporation
27 Financial Data schedule
The following exhibits to the Corporation's Annual Report on Form 10-K
for the year ended January 30, 1999 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Amendment, dated March 29, 1999, to Financing
Agreement among the Corporation, United Retail
Incorporated and The CIT Group/Business Credit,
Inc. ("CIT")
10.2 Financial Statements of Retirement Savings Plan for
year ended December 31, 1998
13 Sections of 1998 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
21 Subsidiaries of the Corporation
The 1999 Stock Option Plan set forth as the Appendix to the
Corporation's proxy statement on Schedule 14A for its 1999 annual meeting of
stockholders is incorporated herein by reference.*
The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended October 31, 1998 are incorporated herein by reference:
Number in Filing 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.
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
<PAGE>
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
---------------- -----------
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
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 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)
<PAGE>
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
The following exhibit to the Corporation's Annual Report on Form 10-K
for the year ended January 28, 1995 is incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1* Incentive Compensation Program Summary
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
- --------------------
*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 May 1, 1999.
<PAGE>
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: June 9, 1999
<PAGE>
EXHIBIT INDEX
The following exhibits are filed herewith:
Number Description
------ -----------
4.1 Amended By-Laws of the Corporation
27 Financial Data schedule
The following exhibits to the Corporation's Annual Report on Form 10-K
for the year ended January 30, 1999 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Amendment, dated March 29, 1999, to Financing
Agreement among the Corporation, United Retail
Incorporated and The CIT Group/Business Credit,
Inc. ("CIT")
10.2 Financial Statements of Retirement Savings Plan for
year ended December 31, 1998
13 Sections of 1998 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
21 Subsidiaries of the Corporation
The 1999 Stock Option Plan set forth as the Appendix to the
Corporation's proxy statement on Schedule 14A for its 1999 annual meeting of
stockholders is incorporated herein by reference.*
The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended October 31, 1998 are incorporated herein by reference:
Number in Filing 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.
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
<PAGE>
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
---------------- -----------
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
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 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)
<PAGE>
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
The following exhibit to the Corporation's Annual Report on Form 10-K
for the year ended January 28, 1995 is incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1* Incentive Compensation Program Summary
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
- --------------------
*A compensatory plan for the benefit of the Corporation's management or
a management contract.
<PAGE>
RESTATED
BY-LAWS
OF
UNITED RETAIL GROUP, INC.
-------------------------
(a Delaware Corporation)
(as amended July 18, 1999)
---------
ARTICLE I
---------
STOCKHOLDERS
------------
1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the
corporation shall be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman or Vice-Chairman of the board of directors,
if any, or by the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
corporation certifying the number of shares owned by him in the corporation. Any
and all signatures on any such certificate may be facsimiles. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
The corporation may issue a new certificate of stock in place of
any certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the board of directors may require the owner of any lost, stolen,
or destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The corporation may, but shall
not be required to, issue fractions of a share. If the corporation does not
issue fractions of a share, it shall (1) arrange for the disposition of
fractional interests by those entitled thereto, (2) pay in cash the fair value
<PAGE>
of fractions of a share as of the time when those entitled to receive such
fractions are determined, or (3) issue scrip or warrants in registered or bearer
form which shall entitle the holder to receive a certificate for a full share
upon the surrender of such scrip or warrants aggregating a full share. A
certificate for a fractional share shall, but script or warrants shall not
unless otherwise provided therein, entitle the holder to exercise voting rights,
to receive dividends thereon, and to participate in any of the assets of the
corporation in the event of liquidation, in each case to the extent of such
fraction. The board of directors may cause scrip or warrants to be issued
subject to the conditions that they shall become void if not exchanged for
certificates representing full shares before a specified date, or subject to the
conditions that the shares for which scrip or warrants are exchangeable may be
sold by the corporation and the proceeds thereof distributed to the holders of
scrip or warrants, or subject to any other conditions which the board of
directors may impose.
3. STOCK TRANSFER. Upon compliance with provisions restricting
the transfer or registration of transfer of shares of stock, if any, transfers
of shares of stock of the corporation shall be made only by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares of stock properly endorsed and the payment of all
taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in writing
without a meeting (if authorized by the provisions of the certificate of
incorporation or a certificate filed under Section 151(g) of the General
Corporation Law), or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the directors may fix, in advance a record date which
shall not be more than 60 days nor less then 10 days before the date of such
meeting, nor more than 60 days prior to any other action. If no record date is
fixed, the record date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given or, if notice is waived, at the
2
<PAGE>
close of business on the day next preceding the day on which the meeting is
held; the record date for determining stockholders entitled to express consent
to corporate action in writing without a meeting (if authorized by the
provisions of the certificate of incorporation or a certificate filed under
Section 151(g) of the General Corporation Law), when no prior action by the
board of directors is necessary, shall be the day on which the first written
consent is expressed; and the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date of the adjourned meeting.
5. MEANING OF CERTAIN TERMS. As used herein in respect of the
right to participate or vote thereat or to consent or dissent in writing in lieu
of a meeting (if authorized by the provisions of the certificate of
incorporation or a certificate filed under Section 151(g) of the General
Corporation Law), as the case may be, the term "share" or "shares" or "share of
stock" or "shares of stock" or "stockholder" or "stockholders" refers to an
outstanding share or shares of stock and to a holder or holders of record of
outstanding shares of stock when the corporation has only one class of shares of
stock outstanding; and said reference is also intended to include any
outstanding share or shares of stock and any holder or holders of record of
outstanding shares of stock of any class upon which or upon whom the certificate
of incorporation or a certificate filed under Section 151(g) of the General
Corporation Law confers the right to vote on matters presented to the
stockholders where there are two or more classes or series of shares of stock or
upon which or upon whom the General Corporation Law confers such rights
notwithstanding that the certificate of incorporation or a certificate filed
under Section 151(g) of the General Corporation Law may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder. As used herein in respect of the right to notice
of a meeting of stockholders or a waiver thereof the terms "share" or "shares'
or "share of stock" or "shares of stock" or "stockholder" or "stockholders"
refers to any outstanding share or shares of stock or holder or holders of
record of outstanding shares of stock, regardless of whether such stock or
holder of stock possesses the right to vote.
3
<PAGE>
6. STOCKHOLDER MEETINGS.
- TIME OF ANNUAL MEETINGS. The annual meeting shall be held on
the date and at the time fixed, from time to time, by vote of the directors,
provided, that each successive annual meeting shall be held on a date within 13
months after the date of the preceding annual meeting.
- CALL OF SPECIAL MEETINGS. Special meetings may be called by
the Chairman of the board of directors, by at least five directors or by any
officer instructed by at least five directors to call the meeting.
- PLACE. Annual meetings and special meetings shall be held at
such place, within or without the State of Delaware, as the board of directors
may, from time to time, fix. Whenever the board of directors shall fail to fix
such place, the meeting shall be held at the headquarters office of the
corporation.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings
shall be given, stating the place, date, and hour of the meeting and stating the
place within the city or other municipality or community at which the list of
stockholders (whether or not entitled to vote at the meeting) and warrant
holders of the corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state clearly the purpose or purposes for
which the meeting is to be called. The notice of any meeting shall also include,
or be accompanied by, any additional statements, information, or documents
prescribed by the General Corporation Law. Except as otherwise provided by the
General Corporation Law, a copy of the notice of any meeting shall be given,
personally or by mail, not less than 10 days nor more than 60 days before the
date of the meeting, unless the lapse of the prescribed period of time shall
have been waived, and directed to each stockholder and warrant holder, whether
or not such stockholder is entitled to vote at a meeting of stockholders, at his
record address or at such other address which he may have furnished by request
in writing to the Secretary of the corporation. Notice by mail shall be deemed
to be given when deposited, with postage thereon prepaid, in the United States
4
<PAGE>
mail. If a meeting is adjourned to another time, not more than 30 days hence,
and/or to another place, and if an announcement of the adjourned time and/or
place is made at the meeting, it shall not be necessary to give notice of the
adjourned meeting unless the board of directors, after adjournment, fixes a new
record date for the adjourned meeting. Notice need not be given to any
stockholder or warrant holder who submits a written waiver of notice signed by
him before or after the time stated therein. Attendance of a stockholder or
warrant holder at a meeting of stockholders shall constitute a waiver of notice
of such meeting, except when the stockholder attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any annual or special meeting
of the stockholders need be specified in any written waiver of notice.
- STOCKHOLDER LIST. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least 10 days before every
meeting of stockholders, a complete list of the stockholders, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for period of at least 10 days prior to the
meeting, either at a place within the city or other municipality or community
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting: the Chairman of the board, if any, the Vice-Chairman of the
board, if any, the President, or the Executive Vice-Presidents in order of
seniority, or, if none of the foregoing is in office and present and acting, by
a chairman to be chosen by the stockholders. The Secretary of the corporation,
or in his absence, an Assistant Secretary, shall act as secretary of every
meeting, but if neither the Secretary nor an Assistant Secretary is present the
Chairman of the meeting shall appoint a secretary of the meeting.
5
<PAGE>
- NOMINATIONS. Nominations for the election of directors may be
made by the board of directors or by any stockholder entitled to vote for the
election of directors. Such nominations, if not made by the board of directors,
shall be made by notice in writing, delivered or mailed by United States mail,
postage prepaid, to the Secretary of the corporation not less than 14 days nor
more than 50 days prior to any meeting of the stockholders called for the
election of directors; provided, however, that if less than 21 days' notice of
the meeting is given to stockholders, such written notice shall be delivered or
mailed to the Secretary of the corporation not later than the close of the
seventh day following the day on which notice of the meeting was mailed to
stockholders. Each such notice shall set forth (i) the name, age, business
address and, if known, residence address of each nominee proposed in such
notice, (ii) the principal occupation or employment of each such nominee, and
(iii) the number of shares of stock of the corporation beneficially owned by
each such nominee. Notice of nominations which are proposed by the board of
directors shall be given on behalf of the Board by the Chairman of the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provided for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but
need not, appoint one or more inspectors of election to act at the meeting or
any adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
6
<PAGE>
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by him
or them and execute a certificate of any fact found by him or them.
- QUORUM. The holders of shares representing a majority of votes
of the outstanding shares shall constitute a quorum at a meeting of stockholders
for the transaction of any business. The stockholders present may adjourn to a
later time despite the absence of quorum.
- VOTING. Each share of stock shall entitle the holder thereof
to such number of votes as set forth in the certificate of incorporation or a
certificate filed under Section 151(g) of the General Corporation Law. In the
election of directors, a plurality of the votes cast shall elect. Any other
action shall be authorized by a majority of the votes cast except where the
General Corporation Law prescribes a different percentage of votes and/or a
different exercise of voting power, and except as may be otherwise prescribed by
the provisions of the certificate of incorporation or a certificate filed under
Section 151(g) of the General Corporation Law or these By-laws. In the election
of directors, and for any other action, voting need not be by ballot.
7. STOCKHOLDER ACTION WITHOUT MEETINGS. If, and only if,
authorized by the provisions of the certificate of incorporation or a
certificate filed under Section 151(g) of the General Corporation Law, any
action required by the General Corporation Law to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting of stockholders, including any action with respect to the
7
<PAGE>
election or removal of directors, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing (whether or not such stockholder is entitled to
vote at a meeting of stockholders).
ARTICLE II
----------
DIRECTORS
---------
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by or under the direction of the board of directors
of the corporation. The board of directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a
stockholder, or a citizen or resident of the United States or the State of
Delaware. The number of directors constituting the whole board shall be nine.
3. ELECTION AND TERM.
(a) RESIGNATION. Any director may resign at any time
upon written notice to the corporation.
(b) TERM. Directors who are elected at an annual
meeting of stockholders, and directors who are elected in the interim to fill
vacancies and newly created directorships, shall hold office until the next
annual meeting of stockholders or until their successors are elected and
qualified or until their earlier resignation or removal.
(c) VACANCIES. In the interim between annual meetings
of stockholders or of special meetings of stockholders called for the election
of directors and/or for the filling of any vacancies in that connection, newly
created directorships and any vacancies in the board of directors may be filled
by the vote of a majority of all the remaining directors then in office although
less than a quorum, or by the sole remaining director.
8
<PAGE>
4. MEETINGS.
(a) TIME. Meetings shall be held at such time as the
board of directors or person calling the meeting shall fix, except that the
first meeting of a newly elected board of directors shall be held as soon after
its election as the directors may conveniently assemble. Regular meetings for
the following year shall be scheduled at the first meeting of a newly elected
board of directors.
(b) PLACE. Meetings shall be held at such place within
or without the State of Delaware as shall be fixed by the board or person
calling the meeting.
(c) CALL. No call shall be required for regular
meetings for which the time and place have been fixed. Special meetings may be
called by or at the direction of the Chairman of the board, if any, the
Vice-Chairman of the board, if any, or the President, or by at least one-third
of the directors in office or by any officer instructed by at least one-third of
the directors in office to call the meeting.
(d) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice
shall be required for regular meetings for which the time and place have been
fixed. Written notice of the time, place and purpose shall be given for special
meetings at least 72 hours in advance. Written notice shall be sent to each
director by United States mail postage prepaid, overnight delivery service,
telecopier transmission or e-mail and shall be effective upon receipt. Notice
shall be sent to the respective addresses designated in writing by the
respective directors or, in the absence of such designation, to the last known
addresses. Notice need not be given to any director or to any member of a
committee of directors who submits a written waiver of notice signed by him
before or after the time for the meeting stated therein. Attendance of any such
person at a meeting shall constitute a waiver of notice of such meeting, except
when he attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the directors need be specified in
any written waiver of notice, provided, however, that a waiver of notice shall
be effective only with respect to the purpose stated in the notice of the
meeting.
9
<PAGE>
(e) QUORUM AND ACTION. A majority of the whole board
shall constitute a quorum. A majority of the directors present, whether or not a
quorum is present, may adjourn to another time and place. Except as herein
otherwise provided, and except as otherwise provided by the General Corporation
Law, the vote of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the board of directors. The quorum and
voting provisions herein stated shall not be construed as conflicting with any
provisions of the General Corporation Law, the certificate of incorporation and
these By-laws which govern a meeting of directors held to fill vacancies and
newly created directorships in the board of directors or action of disinterested
directors.
(f) INTEREST. A director of the corporation, in the
exercise of his fiduciary duty to the corporation, shall disqualify himself from
a vote of the board of directors with respect to a transaction in which a
potential conflict of interest exists between the director and the corporation.
A director shall disqualify himself from any vote of the board of directors with
respect to transactions including, but not limited to, the following:
(i) hiring the director as an employee of the
corporation;
(ii) approving an employment agreement of a
director as an employee of the corporation;
(iii) increasing the compensation of a
director in his capacity as an employee of the corporation;
(iv) terminating the employment of a director
as an employee of the corporation, whether or not such employment is pursuant to
an employment agreement;
(v) making a loan to a director by the
corporation;
(vi) prepaying or extending or modifying the
terms of any promissory note or other indebtedness of the Corporation to a
director;
(vii) entering into, amending, modifying,
waiving or terminating any contract between the corporation and a director (a
"Related Party Agreement");
(viii) establishing the terms and provisions
of a Related Party Agreement; or
(ix) entering into, or establishing the terms
and provisions of, any contract replacing or superseding a Related Party
Agreement.
10
<PAGE>
(g) HIGHER VOTE FOR CERTAIN ACTIONS BY THE BOARD OF
DIRECTORS.
The affirmative vote of a majority of the directors in
office who have not disqualified themselves because of a potential conflict of
interest shall be required to approve the adoption of a resolution (i) removing
either the Chairman of the board or the President of the corporation from
office, (ii) proposing an amendment to or a repeal of any provision of, or the
adoption of any new provision of, the certificate of incorporation of the
corporation, of any certificate filed under Section 151(g) of the General
Corporation Law, or of these By-laws or (iii) proposing the filing of any
certificate under Section 151(g) of the General Corporation Law.
(h) CHAIRMAN OF THE MEETING. The Chairman of the board
of directors, if any and if present and acting, shall preside at all meetings.
Otherwise, the Vice-Chairman of the board of directors, if any and if present
and acting, or the President, if present and acting, or any other director
chosen by the board of directors, shall preside.
5. COMMITTEES.
(a) MEMBERSHIP. The board of directors by majority vote
of the whole board shall designate the following standing committees: a
nominating committee, a compensation committee, a benefits committee, a finance
committee and an audit committee, and may designate additional standing
committees. The director presiding at any meeting of the board of directors may
name two or more directors as an ad hoc committee to render advice on matters
not within the powers and authority of any standing committee.
(b) QUORUM. The majority of the authorized number of
directors that comprises a standing committee shall constitute a quorum of that
committee. No alternate members of committees shall be designated.
(c) AUTHORITY. To the extent provided in the resolution
of the board of directors establishing such committee, a standing committee
shall have and may exercise the powers and authority of the board of directors
in the management of the business and affairs of the corporation and may
authorize the seal of the corporation to be affixed to all papers which may
require it; provided, however, no committee may (i) exercise the powers and
authority of the board of directors in contravention of Section 141 of the
General Corporation Law, (ii) take any action which requires higher than usual
vote (as provided in Article II, Section 4(g) of these By-laws) of the board of
directors or (iii) repeal or amend any resolution adopted by the board of
directors. Ad hoc committees shall be advisory and shall not exercise the powers
and authority of the board of directors.
11
<PAGE>
(d) VOTE. Each committee shall act by vote of a
majority of a quorum of the Directors that comprise that committee.
(e) MEETINGS.
(i) Meetings of standing committees shall be
held at such time as the committee or person calling the meeting shall fix.
(ii) Meetings of standing committees shall be
held at such place within or without the State of Delaware as shall be fixed by
the committee or person calling the meeting.
(iii) Committee meetings may be called by or
at the direction of any committee member or by any officer instructed by any
committee member.
(iv) Written notice of the time, place and
purpose shall be given for committee meetings at least 72 hours in advance to
each committee member with a copy to the Secretary. Written notice shall be sent
to each committee member by United States mail postage prepaid, overnight
delivery service, telecopier transmission or e-mail and shall be effective upon
receipt. Notice shall be sent to the respective addresses designated in writing
by the respective committee members or, in the absence of such designation, to
the last known addresses. Notice need not be given to any committee member who
submits a written waiver of notice signed by him before or after the time for
the meeting stated therein. Attendance of any such person at a meeting shall
constitute a waiver of notice of such meeting, except when he attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
meeting of a committee need be specified in any written waiver of notice,
provided, however, that a waiver of notice shall be effective only with respect
to the purpose stated in the notice of the meeting.
(v) One committee member may adjourn a meeting
to another time and place. The quorum and voting provisions herein stated shall
not be construed as conflicting with any provisions of the General Corporation
Law, the certificate of incorporation and these By-Laws which govern action of
disinterested directors.
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<PAGE>
(vi) A committee member, in the exercise of
his fiduciary duty to the corporation, shall disqualify himself from a vote of a
committee with respect to a transaction in which a potential conflict of
interest exists between the committee member and the corporation.
(f) REPORTS. The chairman of each committee shall make
a report on its activities at each meeting of the board of directors.
6. WRITTEN ACTION. Any action required or permitted to be taken
at any meeting of the board of directors or any committee thereof may be taken
without a meeting if all members of the board of directors or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board of directors or committee.
7. ELECTRONIC COMMUNICATION. Any member or members of the board
of directors or of any committee may participate in a meeting of the board of
directors, or any such committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
8. REMOVAL. Subject to the rights of the holders of shares of
any class or series of preferred stock, any director or the entire board of
directors may be removed as provided in the certificate of incorporation and any
certificate filed under Section 151(g) of the General Corporation Law.
ARTICLE III
-----------
OFFICERS
--------
The officers of the corporation shall consist of a Chairman of
the Board, a President, a Secretary, and, if deemed necessary, expedient or
desirable by the board of directors, a Vice-Chairman of the Board, Executive
Vice-Presidents, Senior Vice-Presidents, one or more other Vice-Presidents, one
or more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers with such titles as the resolution of the board of directors choosing
them shall designate. Except as may otherwise be provided in the resolution of
the board of directors choosing him, no officer other than the Chairman or
Vice-Chairman of the Board, if any, need be a director. Any number of offices
may be held by the same person.
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Unless otherwise provided in the resolution choosing him, each
officer shall be chosen for a term which shall continue until the meeting of the
board of directors following the next annual meeting of stockholders and until
his successor shall have been chosen and qualified. Any officer may be removed,
with or without cause, by such vote of the directors as may be prescribed in the
by-laws. Any vacancy in any office may be filled by the board of directors.
The Chairman of the Board shall be the Chief Executive Officer
of the corporation and shall have general supervision over the property,
business and affairs of the corporation and over its several officers, subject,
however, to the control of the board of directors. He shall, if present, preside
at all meetings of the stockholders and of the board of directors and of all
committees of which he is a member. He may sign, with the Secretary, Treasurer
or any other proper officer of the corporation thereunto authorized by the board
of directors, certificates for shares in the corporation. He may sign, execute
and deliver in the name of the corporation, or authorize other employees to
sign, execute and deliver, all deeds, mortgages, bonds, leases, contracts, or
other instruments either when specially authorized by the board of directors or
when required or deemed necessary or advisable by him in the ordinary conduct of
the corporation's normal business, except in cases where the signing and
execution thereof shall be required by law or otherwise to be signed or executed
by some other officer or agent, and he may cause the seal of the corporation, if
any, to be affixed to any instrument requiring the same.
The Secretary or Assistant Secretary of the corporation shall
record all of the proceedings of all meetings and the actions in writing of
stockholders, directors and committees of directors, and shall exercise such
additional authority and perform such additional duties as the board of
directors shall assign to him.
All other officers of the corporation shall perform such duties
in the management and operation of the corporation as are assigned to them by
the Chairman of the board of directors or by the board of directors.
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<PAGE>
ARTICLE IV
----------
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
------------------------------------------------------------
1. INDEMNIFICATION RESPECTING THIRD PARTY CLAIMS. The
corporation, to the full extent permitted and in the manner required by the laws
of the State of Delaware as in effect at the time of the adoption of this
Article or as such laws may be amended from time to time, shall indemnify any
person who was or is made a party to or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (including any
appeal thereof), whether civil, criminal, administrative or investigative in
nature (other than an action by or in the right of the corporation), by reason
of the fact that such person is or was a director, officer, employee or agent of
the corporation, or, if at a time when he was a director, officer employee or
agent of the corporation, is or was serving at the request of, or to represent
the interests of, the corporation as a director, officer, partner, fiduciary,
employee or agent (a "Subsidiary Officer") of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise (an "Affiliated
Entity"), against expenses (including attorneys' fees and disbursements), costs,
judgments, fines, penalties and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding had no
reasonable cause to believe his or her conduct was unlawful; provided, however,
that the corporation shall not be obligated to indemnify against any amount paid
in settlement unless the corporation has consented to such settlement, which
consent shall not be unreasonably withheld. The termination of any action, suit
or proceeding by judgment, order, settlement or conviction or upon a plea of
nolo contendere or its equivalent shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, that such
person had reasonable cause to believe that his or her conduct was unlawful.
Notwithstanding anything to the contrary in the foregoing provisions of this
paragraph, a person shall not be entitled, as a matter of right, to
indemnification pursuant to this paragraph against costs or expenses incurred in
15
<PAGE>
connection with any action, suit or proceeding commenced by such person against
any person who is or was a director, officer, fiduciary, employee or agent of
the corporation or a Subsidiary Officer of any Affiliated Entity, but such
indemnification may be provided by the corporation in a specific case as
permitted by Section 6 of this Article.
2. INDEMNIFICATION RESPECTING DERIVATIVE CLAIMS. The
corporation, to the full extent permitted, and in the manner required, by the
laws of the State of Delaware as in effect at the time of the adoption of this
Article or as such laws may be amended from time to time, shall indemnify any
person who was or is made a party to or is threatened to be made a party to any
threatened, pending or completed action or suit (including any appeal thereof)
brought in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or, if at a time when he was a director, officer,
employee or agent of the corporation, is or was serving at the request of, or to
represent the interests of, the corporation as a Subsidiary Officer of an
Affiliated Entity against expenses (including attorneys' fees and disbursements)
and costs actually and reasonably incurred by such person in connection with
such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless, and except to the extent that, the Court of
Chancery of the State of Delaware or the court in which such judgment was
rendered shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses and costs as the
Court of Chancery of the State of Delaware or such other court shall deem
proper. Notwithstanding anything to the contrary in the foregoing provisions of
this paragraph, a person shall not be entitled, as a matter of right, to
indemnification pursuant to this paragraph against costs and expenses incurred
in connection with any action or suit in the right of the corporation commenced
by such person, but such indemnification may be provided by the corporation in
any specific case as permitted by Section 6 of this Article.
16
<PAGE>
3. DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION. Any
indemnification under Section 1 or 2 of this Article (unless ordered by a court)
shall be made by the corporation only as authorized in the specific case upon a
determination that indemnification is proper under the circumstances because
such person has met the applicable standard of conduct set forth in Section 1 or
2 of this Article. Such determination shall be made (i) by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding in respect of which indemnification is
sought or by majority vote of the members of a committee of the board of
directors composed of at least three members each of whom is not a party to such
action, suit or proceeding, or (ii) if such a quorum is not obtainable and/or
such a committee is not established or obtainable, or, even if obtainable, if a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the stockholders. In the event a request for
indemnification is made by any person referred to in Section 1 or Section 2, the
corporation shall cause such determination to be made not later than 60 days
after such request is made.
4. RIGHT TO INDEMNIFICATION UPON SUCCESSFUL DEFENSE AND
FOR SERVICE AS A WITNESS.
(a) Notwithstanding the other provisions of this
Article, to the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 1 or 2 of this Article, or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees and disbursements) and costs
actually and reasonably incurred by such person in connection therewith.
(b) To the extent any person who is or was a director
or officer of the corporation has served or prepared to serve as a witness in
any action, suit or proceeding (whether civil, criminal, administrative or
investigative in nature) or in any investigation by the corporation or the board
of directors thereof or a committee thereof or by any securities exchange on
which securities of the corporation are or were listed by reason of his services
as a director or officer of the corporation or as a Subsidiary Officer of any
Affiliated Entity (other than in a suit commenced by such person), the
corporation shall indemnify such person against expenses (including attorneys'
fees and disbursements) and costs actually and reasonably incurred by such
17
<PAGE>
person in connection therewith within 30 days after receipt by the corporation
from such person of a statement requesting such indemnification, averring such
service and reasonably evidencing such expenses and costs. The corporation may
indemnify any employee or agent of the corporation to the same extent it may
indemnify any director or officer of the corporation pursuant to the foregoing
sentence of this paragraph.
5. ADVANCE OF EXPENSES. Expenses and costs incurred by any
person referred to in Section 1 or Section 2 of this Article in defending a
civil, criminal, administrative or investigative action, suit or proceeding
shall be paid by the corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such person to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the corporation as authorized by
this Article.
6. INDEMNIFICATION NOT EXCLUSIVE. The provision of
indemnification to or the advancement of expenses and costs to any person under
this Article, or the entitlement of any person to indemnification or advancement
of expenses and costs under this Article, shall not limit or restrict in any way
the power of the corporation to indemnify or advance expenses and costs to such
person in any other way permitted by law or be deemed exclusive of, or
invalidate, any right to which any person seeking indemnification or advancement
of expenses and costs may be entitled under any law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's capacity as an officer, director, employee or agent of the corporation
and as to action in any other capacity while holding any such position.
7. ACCRUAL OF CLAIMS; SUCCESSOR. The indemnification provided or
permitted under this Article shall apply in respect of any expense, cost,
judgment, fine, penalty or amount paid in settlement, whether or not the claim
or cause of action in respect thereof accrued or arose before or after the
effective date of this Article. The right of any person who is or was a
director, officer, employee or agent of the corporation to indemnification under
this Article shall continue after he shall have ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
distributees, executors, administrators and other legal representatives of such
person.
18
<PAGE>
8. CORPORATE OBLIGATIONS; SUCCESSORS. This Article shall be
deemed to create a binding obligation on the part of the corporation to its
current and former officers and directors and their heirs, distributees,
executors, administrators and other legal representatives, and such persons in
acting in such capacities shall be entitled to rely on the provisions of this
Article, without giving notice thereof to the corporation.
9. INSURANCE. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of, or to
represent the interests of, the corporation as a Subsidiary Officer of any
Affiliated Entity, against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the corporation would have the power to indemnify
such person against such liability under the provisions of this Article or
applicable law.
10. DEFINITIONS OF CERTAIN TERMS.
(a) For purposes of this Article, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its corporate existence had continued, would
have been permitted under applicable law to indemnify its directors, officers,
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request, or to represent the interests of, such constituent corporation as a
director, officer, employee or agent of any Affiliated Enterprise shall stand in
the same position under the provisions of this Article with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if this separate existence had continued.
(b) For purposes of this Article, references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; references to "serving at the request of the corporation" shall
include any service as a director, officer, fiduciary, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, fiduciary, employee or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and a person who acted in good faith and in
a manner such person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the corporation" as
referred to in this Article.
19
<PAGE>
ARTICLE V
---------
CORPORATE SEAL
--------------
The corporate seal shall be in such form as the board of
directors shall prescribe.
ARTICLE VI
----------
FISCAL YEAR
-----------
The fiscal year of the corporation shall begin on the Sunday
which follows the Saturday which is closest to January 31st in any calendar year
and shall end on the Saturday closest to January 31st in the following calendar
year, or shall be for such other period as the board of directors from time to
time may designate.
ARTICLE VII
-----------
CONTROL OVER BY-LAWS
--------------------
Subject to the provisions of the certificate of incorporation,
any certificate filed under Section 151(g) of the General Corporation Law and
Article II, Section 4 of these By-laws, and the provisions of the General
Corporation Law, the power to amend, alter or repeal these By-laws and to adopt
new By-laws may be exercised by the board of directors.
By Laws July 1999
20
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
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<PERIOD-END> MAY-01-1999
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0
0
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</TABLE>
