<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
UNITED RETAIL GROUP, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
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April 23, 1999
Dear Stockholder:
I wish to extend a cordial invitation to the seventh Annual Meeting of
the stockholders of United Retail Group, Inc., which will be held at the
Marriott Glenpointe Hotel in Teaneck, New Jersey, at 11 o'clock on Wednesday
morning, May 26, 1999.
Formal notice of the Annual Meeting and the Proxy Statement are
contained on the following pages. I urge that you read the Proxy Statement and
then cast your vote on the accompanying proxy. The Annual Report of the Company
for 1998 is enclosed. Also enclosed is an admittance card to be presented to the
usher, the back of which contains directions to the meeting place.
Please be sure to mark, date, sign and return the proxy promptly, so
that your shares will be represented at the meeting.
I look forward to greeting you at the meeting and reporting on the
Company's business and outlook.
Sincerely yours,
/s/ Raphael Benaroya
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Raphael Benaroya
Chairman
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IMPORTANT: To ensure the presence of a quorum at the meeting, it is important
that your stock be represented, whether or not you plan to attend. Please mark,
date and sign the accompanying proxy and return it promptly in the enclosed
postpaid envelope. This proxy is solicited by the Board of Directors of the
Company.
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UNITED RETAIL GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 26, 1999
The seventh Annual Meeting of the stockholders of United Retail Group,
Inc. will be held at the Marriott Glenpointe Hotel, 100 Frank W. Burr Boulevard,
Teaneck, New Jersey, on Wednesday, May 26, 1999, at 11 o'clock in the morning,
for the following purposes:
o electing nine directors;
o approving the 1999 Stock Option Plan, which authorizes the issuance
of up to 400,000 shares of Common Stock, equivalent to 3.1% of the
outstanding shares, to full time associates and nonmanagement
Directors (Directors who are associates have declined to be eligible
to participate); and
o transacting any and all other business that may properly come before
the meeting.
A list of stockholders may be examined during business hours at the
Marriott Glenpointe during the 10 days preceding the date of the Annual Meeting
of Stockholders.
The Board of Directors has fixed April 16, 1999 as the record date for
the determination of stockholders entitled to vote at this meeting and only
stockholders of record on that date shall be entitled so to vote.
By Order of the Board of Directors,
/s/ George R. Remeta
-----------------------------------
George R. Remeta
April 23, 1999 Secretary
<PAGE>
UNITED RETAIL GROUP, INC.
-------------------------
365 West Passaic Street
Rochelle Park, New Jersey 07662
PROXY STATEMENT
Dated April 23, 1999
ANNUAL MEETING OF STOCKHOLDERS
MAY 26, 1999
The accompanying proxy is solicited by the Board of Directors of United Retail
Group, Inc. (the "Company") to be voted at the Annual Meeting of Stockholders to
be held May 26, 1999, and any adjournments thereof. When the proxy is properly
executed and returned, the shares it represents will be voted at the meeting as
directed. If no specification is indicated, the shares will be voted "for"
election of the nominees named in this Proxy Statement and "for" the approval of
the proposed 1999 Stock Option Plan (the "1999 Plan").
The proposed 1999 Plan provides for awards of options to purchase up to 400,000
shares of Common Stock, equivalent to 3.1% of the outstanding shares, to full
time associates and nonmanagement Directors. (The Directors who are associates
have declined to be eligible to participate.) See page 18 for a summary of the
terms of the proposed 1999 Plan.
Any stockholder giving a proxy, however, has the power to revoke it prior to its
exercise by notice of revocation to the Company in writing or by execution of a
subsequent proxy (provided that such action must be taken in sufficient time to
permit the necessary examination and tabulation of the subsequent proxy or
revocation before the vote is taken) or by voting in person at the Annual
Meeting. If a stockholder wishes to give a proxy to someone other than the
individuals named as proxies in the proxy card, he or she may cross out the
names appearing in the enclosed proxy card, insert the name of some other
person, initial the insertion, sign and date the proxy card and give it to that
person for use at the meeting.
The shares entitled to vote at the meeting consist of shares of Common Stock of
the Company, with each share entitling the holder of record to one vote. At the
close of business on April 16, 1999, the record date for the Annual Meeting,
there were outstanding 13,099,588 shares of Common Stock. This Proxy Statement
and the accompanying form of proxy are first being sent to stockholders on or
about April 23, 1999.
1
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ELECTION OF DIRECTORS
Nominees
Nine nominees for the Board of Directors of the Company will be elected at the
Annual Meeting of Stockholders for a term expiring at the Annual Meeting of
Stockholders in 2000 or until their successors are elected and qualified. In the
event any of the nominees shall be unable to serve as a Director, it is intended
that the proxies will be voted for the election of a person nominated by the
Board of Directors in substitution. The Company has no reason to believe that
any nominee for the Board of Directors will be unable to serve as a Director if
elected.
Stockholders of record on the record date wishing to nominate persons for
election as Directors may do so by delivering or mailing to the Secretary of the
Company, not less than 14 days prior to the Annual Meeting of Stockholders, a
notice setting forth (a) the name, age, business address and, if known,
residence address of each nominee proposed in such notice, (b) the principal
occupation or employment of each such nominee and (c) the number of shares of
Common Stock of the Company beneficially owned by each such nominee. No person
may be elected as a Director unless he or she has been nominated by a
stockholder in the manner just described or by the Board of Directors.
The nine nominees receiving the highest number of votes will be elected
Directors. Proxies that withhold authority to vote will be counted only for
quorum purposes. Broker non-votes will not be counted for any purpose.
Business and Professional Experience
The nominees proposed by the Board of Directors are listed below.
Mr. Raphael Benaroya, age 51, has been the Company's Chairman of the Board,
President and Chief Executive Officer since before 1994. Mr. Benaroya is a
director of Russ Berrie and Company, Inc.
Mr. George R. Remeta, age 49, has been the Vice Chairman of the Board, Chief
Financial Officer and Secretary of the Company since before 1994.
Mr. Joseph A. Alutto, age 58, a Director of the Company since December 1992, has
been the Dean of the Max M. Fisher School of Business at Ohio State University
since before 1994. Mr. Alutto is a director of Comptek Research, Inc.
Mr. Russell Berrie, age 66, a Director of the Company since December 1992,
founded Russ Berrie and Company, Inc., an international gift manufacturer, in
1963 and since then has been its Chairman of the Board and Chief Executive
Officer.
Mr. Joseph Ciechanover, age 65, a Director of the Company since May 1995, has
been Chairman of the Board of El Al Israel Airlines Ltd. since February 1995. He
was President of PEC Israel Economic Corporation ("PEC"), a holding company with
interests in various industries, principally in Israel, from December 1994 to
before 1994. Mr. Ciechanover is a director of PEC.
Mr. Michael Goldstein, age 57, has been Chairman of the Board of Toys "R" Us
since February 1998 and was Vice Chairman of the Board and Chief Executive
Officer of that company for four years previously. Mr. Goldstein is a director
of Houghton Mifflin Co.
Mr. Ilan Kaufthal, age 51, a Director of the Company since December 1992, is a
Vice Chairman of Schroder & Co. Incorporated, an investment banking firm, and
has been an executive there since before 1994. Mr. Kaufthal is a director of
Cambrex Corporation, ASI Solutions, Inc., Russ Berrie and Company, Inc. and
Pro.Team.Com, Inc.
2
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Mr. Vincent P. Langone, age 56, a Director of the Company since February 1994,
is the Chairman of the Board, President and Chief Executive Officer of Formica
Corporation, a manufacturer of Formica(R) brand laminate, and also served
in those positions from before 1994 to 1995. In 1997, he was President and Chief
Executive Officer of Interbuild International, Inc., a venture capital firm. In
1996, he was Chairman of the Board of L&S Associates, Inc., a management
consulting firm. Mr. Langone is a director of Summit Bank and Brand Scaffolding
Services, Inc.
Richard W. Rubenstein, Esq., age 54, a Director of the Company since December
1991, has been a partner at Squire, Sanders & Dempsey, a law firm, since May
1994 and was previously a partner at Schwartz, Kelm, Warren & Rubenstein, a law
firm, since before 1994. Mr. Rubenstein is a director of AmeriLink Corporation.
Information Concerning the Board of Directors and Certain Committees
The Company's Board of Directors held four meetings in Fiscal 1998. During
Fiscal 1998, all of the Directors attended 90% or more of the total number of
meetings of the Board and of committees of the Board on which they served except
Russell Berrie and Joseph Ciechanover, who attended less than 75%.
Subject to approval by the Board, standing committees of Directors take action
in their respective areas of responsibility.
The Compensation Committee of the Board recommends executive compensation. See,
"Compensation Committee Report" regarding the Directors who served on the
Compensation Committee in Fiscal 1998. The Compensation Committee held five
meetings in Fiscal 1998.
The Audit Committee of the Board reviews and confirms the selection of the
Company's independent public accountants and oversees internal audits. The Audit
Committee was composed of a former Director and Messrs. Alutto and Kaufthal
until the organizational meeting of the Board of Directors in May 1998, when the
membership was changed to Mr. Kaufthal, as Chairman of the Committee, and
Messrs. Langone and Rubenstein. The Audit Committee held three meetings in
Fiscal 1998.
The Nominating Committee of the Board nominates suitable persons for election as
Directors of the Company. Its members during Fiscal 1998 were Mr. Benaroya, as
Chairman of the Committee, and Messrs. Berrie and Rubenstein, who continue to
constitute the Nominating Committee. Stockholders of record are permitted to
nominate persons for election (see "ELECTION OF DIRECTORS-Nominees" above);
therefore, no formal procedures exist for stockholders to make nominee
recommendations to the Nominating Committee. The Nominating Committee held two
meetings in Fiscal 1998. The Board's nominees for election as Directors at the
seventh Annual Meeting of Stockholders were selected by the Nominating Committee
in Fiscal 1999.
Director Compensation
Each Director who is not employed by the Company receives $3,000 for each Board
meeting that he attends. In addition, a nonmanagement Director receives $1,000
for each additional day on which he attends a committee meeting.
3
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Each Director who is neither employed by the Company nor nominated by Limited
Direct Associates, L.P. (see, "Security Ownership of Management - Stockholders'
Agreement") annually receives an award under the Company's Restated 1996 Stock
Option Plan (the "1996 Plan" or the "Existing Plan")
of nonqualified options to purchase 3,000 shares of Common Stock exercisable at
the then current market price for a term of 10 years. Each option becomes
exercisable as to 600 shares on completion of each full year of service as a
Director after the date of grant, provided, however, that each option becomes
fully exercisable in the event that the Company enters into certain
transactions, including certain mergers or the sale of all or substantially all
of the Company's assets, and becomes fully exercisable upon retirement from the
Board in the discretion of the Compensation Committee of the Board.
Richard W. Rubenstein, Esq. has been nominated as a Director by Limited Direct
Associates, L.P. (see, "Security Ownership of Management -- Stockholders
Agreement") and has been ineligible to participate in the 1996 Plan. In Fiscal
1998, the Board of Directors granted Mr. Rubenstein nonqualified options for a
term of 10 years to purchase (i) 3,000 shares of Common Stock exercisable at the
market price on the date of grant, $11.50, with five year vesting, (ii) 6,000
shares exercisable at a price of $12.08 with four year vesting and (iii) 11,000
shares at a price of $12.08 vesting fully on November 21, 1998. These stock
option grants were made in recognition of Mr. Rubenstein's service on the
Board for seven years without having received any stock options.
The proposed 1999 Plan would provide each Director who is not employed by the
Company with an annual award of nonqualified options to purchase 3,000 shares of
Common Stock exercisable at the then current market price for a term of 10 years
with five year vesting. See, "Proposal to Approve Adoption of 1999 Stock
Option Plan."
4
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 31, 1999, certain information with
respect to the beneficial ownership of shares of Common Stock of the Chief
Executive Officer of the Company, the four most highly compensated executive
officers of the Company and its subsidiaries in Fiscal 1998 other than the Chief
Executive Officer, each Director, and all Officers and Directors as a group, and
their percentage ownership. See, "-Stockholders' Agreement" for a description of
voting arrangements to which the shares held by Messrs. Benaroya and Remeta are
subject. Otherwise, except as noted below, each of the persons listed has sole
investment and voting power with respect to the shares indicated. All
information was determined in accordance with Rule 13d-3 under the Exchange Act
based on information furnished by the persons listed.
Name of Beneficial Amount of Percent of
Owner or Beneficial Outstanding
Identity of Group Ownership Shares
----------------- --------- ------
Mr. Raphael Benaroya(1) .................... 2,572,643 19.1%
Mr. George R. Remeta(2) .................... 505,888 3.8%
Kenneth P. Carroll, Esq.(3) ................ 68,355 *
Ms. Ellen Demaio(4) ........................ 32,400 *
Ms. Carrie Cline-Tunick(5) ................. 14,000 *
Mr. Joseph A. Alutto(5) (6) ................ 15,250 *
Mr. Russell Berrie (5) ..................... 39,000 *
Mr. Joseph Ciechanover(7) .................. 6,000 *
Mr. Michael Goldstein ...................... -0- -0-
Mr. Ilan Kaufthal(5) (6) (8) ............... 79,000 *
Mr. Vincent P. Langone(9) .................. 32,000 *
Richard W. Rubenstein, Esq.(10) ............ 13,300 *
All Officers and Directors as a group ...... 3,568,212 25.6%
(21 persons) (11)
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(1) Includes 394,706 shares which may be acquired within 60 days by the
exercise of stock options. Excludes 90,000 shares held by a private
charitable foundation, as to which he disclaims beneficial ownership.
(2) Includes 164,000 shares which may be acquired within 60 days by the
exercise of stock options.
(3) Includes 53,000 shares which may be acquired within 60 days by the exercise
of stock options.
(4) Consists of 32,400 shares which may be acquired within 60 days by the
exercise of stock options.
(5) Includes 14,000 shares which may be acquired within 60 days by the exercise
of stock options.
(6) The outstanding shares are held jointly with his wife.
(7) Includes 4,200 shares which may be acquired within 60 days by the exercise
of stock options.
(8) Excludes shares held by Schroder & Co. Incorporated, of which Mr. Kaufthal
is a Vice Chairman, and as to which he disclaims beneficial ownership.
(9) Includes 9,000 shares which may be acquired within 60 days by the exercise
of stock options. Also includes 400 shares held by a partnership, as to
which he disclaims beneficial ownership.
(10) Includes 13,100 shares which may be acquired within 60 days by the exercise
of stock options.
(11) Includes 837,506 shares which may be acquired within 60 days by the
exercise of stock options and shares held jointly with the wives of certain
members of the group.
* Less than one percent.
5
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Stockholders' Agreement
At March 31, 1999, a total of 35.5% of the outstanding Common Stock was held by
Raphael Benaroya, the Chairman of the Board, President and Chief Executive
Officer of the Company, by Limited Direct Associates, L.P. ("LDA"), an affiliate
of The Limited, by certain other officers of the Company and by certain former
associates of the Company who, together with the Company, are parties to the
Restated Stockholders' Agreement, dated December 23, 1992, as amended as of June
1, 1993, February 1, 1997 and April 6, 1998 (as amended, the "Restated
Stockholders' Agreement"). The Restated Stockholders' Agreement provides, among
other things, that the parties shall take such action, including the voting of
shares of Common Stock, as may be necessary to cause the Board of Directors to
be elected in the following manner:
(a) the Board of Directors shall consist of nine members, of whom two are
persons ("Management Directors") nominated by the Chairman of the Board,
one is a person nominated by LDA and six are persons ("Public Directors")
who are not affiliates of (i) Mr. Benaroya, (ii) certain executives of the
Company or (iii) Mr. Benaroya's or such executives' Permitted Transferees
under the Restated Stockholders' Agreement (collectively, "Management
Investors") or (iv) LDA, named by the Nominating Committee and approved by
the Board of Directors;
(b) if the holdings of the Management Investors increase to at least
3,010,000 shares of Common Stock (including at least 500,000 additional
shares acquired by Mr. Benaroya), the Chairman of the Board shall be
entitled to nominate one additional Management Director, for a total Board
membership of 10, for so long as he and his family continue to hold at
least 500,000 shares of Common Stock, he remains Chairman of the Board and
the Management Investors continue to hold at least 2,010,000 shares,
provided, however, that in the event the number of shares held by the
Chairman (and his family) and the Management Investors fall below 500,000
shares and 2,010,000 shares, respectively, the Chairman shall thereafter
nominate two persons, rather than three persons, for election as
Directors;
(c) in the event of Mr. Benaroya's termination as Chairman of the Board
under any circumstances, (i) he shall be entitled to nominate one Director
so long as he and his family continue to hold at least 100,000 shares of
Common Stock, (ii) one other person, who would otherwise have been
nominated by him as a Director, shall be named instead by the Nominating
Committee and approved by the Board of Directors and (iii) if the Board
then has 10 members, the Board membership shall be decreased to nine; and
(d) the rights of Mr. Benaroya and LDA to nominate Directors shall expire
if their stockholdings fall below 100,000 shares of Common Stock, and, in
the case of Mr. Benaroya, he no longer serves as Chairman of the Board; in
which case the Director who would otherwise be nominated by such party
shall be named instead by the Nominating Committee and approved by the
Board of Directors.
Both Management Directors abstain from votes involving the personal interests of
either Management Director. The Director nominated by LDA abstains from votes
involving the interests of The Limited and its affiliates.
The voting arrangement under the Restated Stockholders' Agreement described
above will expire on July 17, 1999, at which time the Company's By-laws
are expected to be amended to eliminate provisions reflecting the voting
arrangement that will have expired.
The proposed Management Directors are Messrs. Benaroya and Remeta. Mr.
Rubenstein was nominated by LDA.
6
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EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation awarded to, earned by
or paid to the Company's Chief Executive Officer and each of the other four most
highly compensated executive officers of the Company and its subsidiaries in the
fiscal year indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
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Securities Underlying
Name and Annual Compensation(1) Options(3) All Other
Principal Positions Year Salary Bonus(2) (numbers of shares) Compensation(4)
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<S> <C> <C> <C> <C> <C>
Mr. Raphael Benaroya, 1998 $550,000 $660,000 200,000 $105,000
Chairman of the Board, 1997 $550,000 $330,000 -0- $ 82,000
President and Chief 1996 $550,000 -0- -0- $ 53,000
Executive Officer(5)
Mr. George R. Remeta, 1998 $376,000 $376,000 100,000 $ 58,000
Vice Chairman of the 1997 $350,000 $175,000 -0- $ 48,000
Board-Chief Financial 1996 $349,000 -0- -0- $ 29,000
Officer, Secretary and
Director(5)
Ms. Ellen Demaio, 1998 $250,000 $200,000 32,000 $ 32,000
Senior Vice President 1997 $200,000 $ 80,000 -0- $ 24,000
-Merchandise of United 1996 $200,000 -0- 30,000 $ 16,000
Retail Incorporated(6)
Ms. Carrie Cline-Tunick, 1998 $300,000 $120,000 40,000 -0-
Vice President-Product 1997 $300,000 $ 60,000 -0- -0-
Design and 1996 $225,000 $ 20,000 10,000 -0-
Development of United
Retail Incorporated(7)
Kenneth P. Carroll, Esq., 1998 $220,000 $176,000 50,000 $ 29,000
Senior Vice President 1997 $210,000 $ 84,000 10,000 $ 25,000
-General Counsel(8) 1996 $209,000 -0- 65,000 $ 16,000
</TABLE>
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Footnotes on following page.
7
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(1) The amounts shown are rounded and include deferred compensation but do not
include reimbursement of premiums for supplemental disability insurance,
perquisites and other personal benefits, if any, the value of all of which
for each named officer did not exceed the lesser of $50,000 or 10% of the
aggregate salary and bonus compensation for such officer.
(2) The amounts shown are rounded and include payments as a bonus in a
subsequent year for services rendered in the year indicated.
(3) The Company had no long-term compensation plan other than plans which
provided for options to purchase shares of Common Stock. The exercise price
of each option listed in the table was at the current market price per
share of Common Stock on the date of action by the Board of Directors or
the Compensation Committee, as the case may be. See, "Option Grants in Last
Fiscal Year" and "Report of Compensation Committee" regarding stockholder
action with respect to the options granted to Messrs. Benaroya and Remeta.
(4) The amounts shown are rounded and consist principally of contributions by
the Company to the Retirement Savings Plan and Supplemental Retirement
Savings Plan based on the salary and bonus received for the year indicated
and, in the case of Messrs. Benaroya and Remeta, reimbursement for premiums
they paid on individual term life insurance policies and income taxes on
such reimbursement. In Fiscal 1998, the respective amounts of approximately
$13,000 and $3,000 were reimbursed to Mr. Benaroya and Mr. Remeta with
respect to such premiums and taxes.
(5) In 1998, the stockholders approved nonqualified stock options exercisable
at a price of $6.3125 for a term of 10 years with five year vesting.
Vesting of options is subject to acceleration in accordance with the
provisions of the stock option agreements and the Employment Agreements
between the Company and Mr. Benaroya and Mr. Remeta, respectively.
(6) In 1996, Ms. Demaio surrendered outstanding options to purchase 30,000
shares in exchange for replacement options to purchase an equal number of
shares at a lower exercise price. All the stock options then held by Ms.
Demaio, totaling 38,000 shares, have the benefit of an arrangement in which
the Company will pay Ms. Demaio the difference if $34.28 exceeds the market
price per share at the time of exercise. The payment is conditioned, among
other things, on the Company's achieving annual net sales of $1 billion and
operating income of at least 7% of net sales. The options issued in 1996
are exercisable at a price of $5.125. The options granted in 1998 are
exercisable at a price of $5.875. All the foregoing options are incentive
stock options providing for a term of 10 years and five year vesting.
Vesting of options is subject to acceleration in accordance with the
provisions of the respective Plans. United Retail Incorporated is the
Company's operating subsidiary.
(7) Annual compensation for Fiscal 1996 included non-recurring payments that
were a part of Ms. Cline-Tunick's hiring package. The options granted in
1996 are exercisable at a price of $5.125. The options granted in 1998 are
exercisable at a price of $5.875. All of the foregoing options are
incentive stock options providing for a term of 10 years and five year
vesting. Vesting of options is subject to acceleration in accordance with
the provisions of the respective Plans.
(8) In 1996, Mr. Carroll surrendered outstanding options to purchase 55,000
shares in exchange for replacement options to purchase an equal number of
shares at a lower exercise price. The replacement options issued in 1996
are incentive stock options exercisable at a price of $5.125. Additional
options granted in 1996 are incentive stock options to purchase 10,000
shares at an exercise price of $4.125. The options granted in 1997 are
incentive stock options exercisable at a price of $3.125. The options
granted in 1998 are exercisable at a price of $5.875, of which options to
purchase 30,000 shares are nonqualified options with the remainder being
incentive stock options. All the foregoing options provide for a term of 10
years with five year vesting. Vesting of options is subject to acceleration
in accordance with the provisions of the respective Plans and the
Employment Agreement between the Company and Mr. Carroll.
8
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Employment Agreements
The Company has Employment Agreements with Messrs. Benaroya, Remeta and Carroll,
dated as of November 20, 1998 and with terms ending on August 3, 2003. Annual
base salaries are $550,000 for Mr. Benaroya, $380,000 for Mr. Remeta and
$220,000 for Mr. Carroll. Under the Agreements, annual base salaries are
adjusted for inflation and may be increased further by the Compensation
Committee of the Board of Directors. See, "Summary Compensation Table" and
"Report of Compensation Committee." The Agreements also provide for the award of
bonuses ("Incentive Compensation Bonuses") with respect to each Spring season
and each Fall season based on meeting or exceeding seasonal earnings targets.
The contractual earnings targets established by the Compensation Committee of
the Board for the Fall 1998 season and the Spring 1999 season were the same
operating income targets applicable under the Company's incentive program for
officers. The potential bonus ranges from nothing to a specified percentage of
the officer's base salary. The potential bonus ranges up to 120% of seasonal
base salary for Mr. Benaroya, up to 100% for Mr. Remeta and up to 80% for Mr.
Carroll.
If the Company terminates the employment of Mr. Benaroya, Mr. Remeta or Mr.
Carroll without cause (as defined in his Employment Agreement) before the end of
the contractual term, the Company must pay him, in addition to accrued salary
and benefits, (a) an amount equal to three times the sum of (i) then current
annual base salary, plus (ii) the amount of Incentive Compensation Bonuses with
respect to the two most recently completed seasons plus (iii) $20,000 in the
case of Mr. Benaroya and $4,000 in the case of Mr. Remeta, (b) a pro-rata
Incentive Compensation Bonus for the season in which termination occurs and (c)
a tax gross-up ("Excise Tax Gross-Up") which reimburses him for any federal
excise taxes owed to the extent that Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"), applies to the payments.
If Mr. Benaroya, Mr. Remeta or Mr. Carroll resigns his employment within 10
business days after first receiving notice of change of control (as defined in
his Employment Agreement) of the Company, the Company must pay him, in addition
to accrued salary and benefits, (a) an amount equal to three times the sum of
(i) the then current annual base salary plus (ii) $20,000 in the case of Mr.
Benaroya and $4,000 in the case of Mr. Remeta, (b) a pro-rata Incentive
Compensation Bonus for the season in which resignation occurs and (c) an Excise
Tax Gross-Up.
United Retail Incorporated has an Employment Agreement with Ms. Cline-Tunick,
dated as of March 26, 1998 and with a term ending on March 26, 2003. The
Agreement provides for annual base salary of $300,000 and an Incentive
Compensation Bonus up to 40% of seasonal base salary. If United Retail
Incorporated terminates her employment without cause (as defined in her
Employment Agreement) before the end of the contractual term, she is entitled,
in addition to accrued salary and benefits, to one year's base salary as
severance pay and a pro-rata Incentive Compensation Bonus for the season in
which termination occurs.
The Employment Agreements also contain covenants not to compete during
employment or afterwards for 18 months in the case of Messrs. Benaroya, Remeta
and Carroll and for 12 months in the case of Ms. Cline-Tunick. The officers are
expressly under no obligation to seek other employment during the noncompetition
period, and there would be no offset against any amounts due to them on account
of any subsequent permitted employment. The officers are also obligated not to
disclose confidential information at any time during or after employment.
Retirement Savings Plan
The Company has a profit-sharing plan qualified under the Code, the Retirement
Savings Plan (the "RSP"), in which all employees who have completed one year of
service are eligible to participate. Each participant is entitled to direct that
a contribution of 1%, 2% or 3% of his compensation be made under the RSP as a
basic contribution that reduces his compensation under the Code. For each
participant who makes a basic contribution, the Company makes a matching cash
contribution equal to one-half of the basic contribution or such greater or
lesser amount as the Company may determine in its sole discretion, provided,
9
<PAGE>
however, that in no event shall the matching contribution for a participant
exceed certain maximum limits imposed by governmental regulations applicable to
qualified plans. All contributions made by the Company are for the exclusive
benefit of participants and vest 100% after seven years of service with the
Company and in lesser percentages after six, five, four and three years of
service with the Company.
The Company has a nonqualified supplemental retirement plan (the "SRSP"). Under
the SRSP the Company makes cash contributions to a separate trust fund equal to
the amount of contributions that it otherwise would have made pursuant to the
terms of the RSP but which were disallowed by governmental regulations limiting
contributions to qualified plans. The Company also makes cash retirement
contributions to the trust fund under the SRSP equal to 6% of each participant's
compensation, provided, however, that the Company may contribute a greater or
lesser amount in its sole discretion and provided, further, that retirement
contributions to the SRSP are limited to employees who earn $100,000 per annum
or more and who were employed by the Company before 1993. Messrs. Benaroya,
Remeta and Carroll and Ms. Demaio are the beneficiaries of retirement
contributions under the SRSP.
The Benefits Committee of the Board of Directors oversees the RSP and SRSP.
The following table sets forth information with respect to the grant of stock
options in Fiscal 1998 to the Company's Chief Executive Officer and the four
other most highly compensated executive officers of the Company and its
subsidiaries:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total
Options
Number of Granted to Market
Securities Employees Price Potential Realizable Value at Assumed
Underlying in Fiscal Exercise Date of Expiration Annual Rates of Stock Appreciation
Name Option Year Price Grant Date for Option Term (1)
- ---- ---------- ----------- -------- ------- ---------- --------------------------------------
0% 5% 10%
---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Raphael Benaroya(2) 200,000(3) 34.9% $6.3125 $11.50 02/15/08 $1,038,000 $2,484,000 $4,704,000
George R. Remeta(2) 100,000(3) 17.4% $6.3125 $11.50 02/15/08 $519,000 $1,242,000 $2,352,000
Ellen Demaio 32,000(4) 5.6% $5.875 $5.875 02/12/08 -0- $118,080 $299,520
Carrie Cline-Tunick 40,000(4) 7.0% $5.875 $5.875 02/12/08 -0- $147,600 $374,400
Kenneth P. Carroll 30,000(3) 5.2% $5.875 $5.875 02/13/08 -0- $110,700 $280,800
20,000(4) 3.5% $5.875 $5.875 02/12/08 -0- $73,800 $187,200
</TABLE>
- ----------------
(1) The assumed rates of growth in the table above were selected for
illustration purposes only and are not intended to forecast future stock
prices.
(2) The closing price of Common Stock on the trading day before the option was
approved by the Board of Directors is equal to the exercise price of the
option subsequently granted by the stockholders.
(3) The option is a nonqualified stock option exercisable in five equal annual
installments commencing one year after the date of grant.
(4) The option is an incentive stock option exercisable in five equal annual
installments commencing one year after the date of grant.
10
<PAGE>
The following table sets forth information with respect to option exercises and
total options held by the Company's Chief Executive Officer and the four other
most highly compensated executive officers of the Company and its subsidiaries.
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND FISCAL 1998 YEAR END
OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options At In-The-Money Options At
Fiscal 1998 Year End Fiscal 1998 Year End(1)
Shares
Acquired
On Value
Name Exercise Realized Exercisable Non-Exercisable Exercisable Non-Exercisable
- ---- -------- -------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Raphael Benaroya 937,500 $4,570,313 341,750 258,430 $1,352,674 $802,327
George R. Remeta 140,625 $685,547 139,000 121,000 $549,813 $661,438
Ellen Demaio -0- -0- 20,000 50,000 $97,250 $216,625
Carrie Cline-Tunick -0- -0- 4,000 46,000 $19,250 $191,375
Kenneth P. Carroll -0- -0- 28,000 97,000 $142,750 $451,313
</TABLE>
- ----------------
(1) Fair market value of the Common Stock at Fiscal 1998 year end was $9.9375
per share.
<PAGE>
REPORT OF COMPENSATION COMMITTEE
--------------------------------
Membership; Authority
The Compensation Committee of the Board of Directors of the Company was composed
of Richard W. Rubenstein, as Chairman, Ilan Kaufthal and Vincent P. Langone
until the organizational meeting of the Board of Directors in May 1998, when the
membership was changed to Vincent P. Langone, as Chairman, Joseph A. Alutto and
Joseph Ciechanover.
In February 1998, subject to approval by the Board of Directors, the
Compensation Committee determined the cash compensation of each officer and
other manager of the Company or its subsidiaries whose combined base salary and
potential cash bonus could have exceeded $150,000 per annum. During Fiscal 1998,
option grants were made from time to time by the Compensation Committee pursuant
to the Restated 1996 Stock Option Plan.
Insurance, retirement savings plans and other benefits were overseen by the
Benefits Committee but were taken into account by the Compensation Committee.
The Audit Committee reviewed transactions between the Company and its
subsidiaries and their officers and their affiliates. See, "Certain
Transactions."
Policies
The principal objective of the Company's Fiscal 1998 executive compensation
program was to motivate officers and other senior managers to maximize the
Company's operating income and thereby to increase stockholder returns. The
program was intended to be competitive and thereby to encourage associates to
remain in the Company's employ. Finally, the program was designed to be
equitable. The principal components of the executive compensation program for
Fiscal 1998 were:
o base salary with merit increases for certain associates
o formula-based cash bonus awards for achieving a seasonal
(six-month) operating income target
o matching retirement savings contributions by the Company
with a maximum of 1.5% of combined base salary and cash
bonus
o stock options exercisable at fair market value on the date
action was taken by the Board of Directors or Compensation
Committee, as the case may be.
In addition, Company retirement savings contributions generally equal to 6% of
combined base salary and cash bonus were made for the benefit of certain
officers (see, "Executive Compensation - Retirement Savings Plan").
Except for base salaries, all the components of the executive compensation
program were affected by the Company's operating income. In this way, the
economic interests of the officers and other senior managers were aligned with
those of the stockholders.
The operating income targets (which the Company deems to be proprietary and
confidential) for the bonus awards program were met in both seasons of Fiscal
1998. Bonuses were paid in accordance with the program formula.
CEO Compensation
In Fiscal 1996, Fiscal 1997 and Fiscal 1998, the base salary of the Company's
Chairman of the Board, President and Chief Executive Officer, Raphael Benaroya,
was approximately $550,000 per annum, as he voluntarily declined to be
considered for a raise and voluntarily waived current payment of the annual cost
12
<PAGE>
of living increases that he was entitled to receive under his Employment
Agreement. Mr. Benaroya participated in the Company's bonus award program and
received bonus awards with respect to Fiscal 1998 in accordance with the program
formula, which applies to all program participants. See, "Executive
Compensation - Employment Agreements."
In February 1998, the Committee recommended that the Board of Directors approve
a stock option to Mr. Benaroya, subject to a stockholder vote, in recognition of
his success in returning the Company to profitability in Fiscal 1997. The stock
option was approved by the Board and granted by the stockholders. The option is
to purchase 200,000 shares of Company Common Stock at an exercise price of
$6.3125 (the fair market value on the date on which the Board of Directors
approved the grant) for a term of ten years, vesting in five equal annual
installments.
Respectfully submitted,
Dated: March 31, 1999 COMPENSATION COMMITTEE
Vincent P. Langone, Chairman
Joseph A. Alutto
Joseph Ciechanover
--------------------
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of the Company has been
composed of Vincent P. Langone, as Chairman, Joseph A. Alutto and Joseph
Ciechanover since May 1998. Previously, it was composed of Richard W.
Rubenstein, as Chairman, Ilan Kaufthal and Vincent P. Langone.
Raphael Benaroya, the Chairman of the Board, President and Chief Executive
Officer of the Company, is a member of the Compensation Committee of the Board
of Directors of Russ Berrie and Company, Inc. Russell Berrie is the Chairman of
the Board and Chief Executive Officer of Russ Berrie and Company, Inc. and is a
Director of the Company.
Richard W. Rubenstein is a partner of a law firm that performed services for the
Company in Fiscal 1998 with respect to the Employment Agreements, dated as of
November 20, 1998, between the Company and Mr. Benaroya, George R. Remeta, the
Vice Chairman and Chief Financial Officer of the Company, and Kenneth P.
Carroll, the Senior Vice President and General Counsel of the Company,
respectively.
13
<PAGE>
STOCKHOLDER RETURN GRAPH
The following graph shows the change at January 30, 1999 in the value of $100
invested in Common Stock of the Company on January 31, 1994 compared with the
changes since then in the Standard & Poor's 500 Composite Stock Index, which
includes companies that sell products other than women's apparel, and the
Standard & Poor's Retail Specialty Apparel Stock Index.
<TABLE>
<CAPTION>
1/94 1/95 1/96 1/97 1/98 1/99
<S> <C> <C> <C> <C> <C> <C>
United Retail Group, Inc. 100 84 41 33 57 105
S & P 500 100 101 139 176 224 296
S & P RETAIL (SPECIALTY APPAREL) 100 80 95 121 219 372
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors of the Company and officers of the Company and its subsidiaries are
required to file with the Securities and Exchange Commission Statements of
Changes in Beneficial Ownership with respect to the Company's Common Stock,
designated as Form 4's. The Form 4's are required to be filed monthly, with
certain exceptions, if a reporting person acquires or disposes of beneficial
ownership of the Company's Common Stock. Former officers are also required to
file Form 4's for up to six months after leaving the Company's employ.
Transactions not included on a Form 4, either pursuant to an exemption under the
rules or through inadvertence, are required to be reported after the end of the
fiscal year on Annual Statements of Changes In Beneficial Ownership, designated
as Form 5's. Based on copies of Form 4's and Form 5's received by the Company
from reporting persons with respect to transactions in Fiscal 1998, it appears
that a former officer of United Retail Incorporated, Jeffrey Krainess, did not
file a required Form 5 with respect to the cancellation of employee stock
options after he resigned from employment.
14
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of shares of Common Stock of the Company by persons who
were known by the Company to be the beneficial owners of more than 5% of the
outstanding shares. All information was determined in accordance with Rule 13d-3
under the Exchange Act based on information in filings by the persons listed
with the Securities and Exchange Commission. All information about beneficial
ownership amounts is as of December 31, 1998, except as noted below, and the
percents of outstanding shares are as of April 16, 1999.
Amount and Percent of
Name and Address Nature of Beneficial Outstanding
of Beneficial Owner Ownership Shares
------------------- --------- ------
Mr. Raphael Benaroya (1) ..................... 2,572,643 19.1%
c/o United Retail Group, Inc.
365 West Passaic Street
Rochelle Park, New Jersey 07662
Limited Direct Associates, L.P. (2) .......... 2,100,000 16.0%
Three Limited Parkway
Columbus, Ohio 43230
Buckingham Capital Management Incorporated (3) 909,950 6.9%
630 Third Avenue
New York, New York 10017
Franklin Advisory Services, Inc. (3) ......... 893,600 6.8%
One Parker Plaza
Fort Lee, New Jersey 07024
Cumberland Associates LLC (4) ................ 721,000 5.5%
1114 Avenue of the Americas
New York, New York 10036
Dimensional Fund Advisors, Inc. (3) .......... 677,800 5.2%
1299 Ocean Avenue
Santa Monica, California 90401
- ------------------
(1) As of March 31, 1999. Includes 394,706 shares which may be acquired within
60 days by the exercise of stock options. Excludes 90,000 shares held by a
private charitable foundation, as to which he disclaims beneficial
ownership. See "Security Ownership of Management - Stockholders' Agreement"
for a description of voting arrangements to which these shares are subject.
Except for provisions of the Restated Stockholders' Agreement, Mr. Benaroya
has the sole right to vote and dispose of these shares
(2) As of January 30, 1999. Limited Direct Associates, L.P. ("LDA") is an
affiliate of The Limited, Inc. See "Security Ownership of Management -
Stockholders' Agreement" for a description of voting arrangements to which
these shares are subject. Except for the provisions of the Restated
Stockholders' Agreement, LDA has the sole right to vote and dispose of these
shares.
(3) An investment adviser with the sole right to vote and dispose of these
shares.
(4) Cumberland Associates LLC has the sole right to vote and dispose of 681,000
of these shares and shared voting power and dispositive power for the
remainder.
15
<PAGE>
CERTAIN TRANSACTIONS
Before July 1989, the Company was an indirect, wholly-owned subsidiary of The
Limited, Inc. ("The Limited"), which has retained an interest in the Company.
See, "Security Ownership of Principal Stockholders."
One AVENUE store was subleased by United Retail Incorporated from a subsidiary
of The Limited in Fiscal 1998 pursuant to an Amended and Restated Master
Affiliate Sublease Agreement, dated as of July 17, 1989. United Retail
Incorporated was charged approximately $0.1 million as its share of the rent in
Fiscal 1998.
American Licensing Group, Inc., which is a subsidiary of The Limited, granted to
United Retail Incorporated pursuant to agreements dated as of April 30, 1989, as
amended (the "Accessories Sublicensing Agreements"), non-exclusive trademark
sublicenses to manufacture and sell accessories with a national brand name.
During Fiscal 1998, United Retail Incorporated made payments to American
Licensing Group, Inc. under the Accessories Sublicensing Agreements of
approximately $0.4 million, of which American Licensing Group, Inc. paid
approximately $0.3 million to the licensor of the trademark.
Management believes that the terms of the Restated Master Affiliate Sublease
Agreement and the Accessories Sublicensing Agreements are not more favorable to
The Limited's affiliates than the terms that would be available in arm's length
transactions between unaffiliated parties.
American Licensing Group, L.P. ("ALGLP") provides management and administrative
services to American Licensing Group, Inc. under a management services agreement
between ALGLP and American Licensing Group, Inc. dated as of August 26, 1989
(the "Management Services Agreement") for a base fee and a share of the net
profits of American Licensing Group, Inc. During Fiscal 1998, total fees by
American Licensing Group, Inc. to ALGLP were approximately $0.1 million. The
partners of ALGLP are an affiliate of The Limited, which owns a 20% limited
partnership interest, and Raphael Benaroya, Inc., an affiliate of Raphael
Benaroya, the Chairman of the Board, President and Chief Executive Officer of
the Company, which owns an 80% partnership interest. Mr. Benaroya has advised
the Company that he believes the arrangements made to have ALGLP provide
management and administrative services to American Licensing Group, Inc.,
including the execution and delivery of the Management Services Agreement, were
not more favorable to ALGLP than the arrangements that would have been available
to American Licensing Group, Inc. in a transaction with a service provider
unaffiliated with Mr. Benaroya.
ALGLP granted to United Retail Incorporated pursuant to agreements dated as of
March 11, 1994, as amended, and March 17, 1995, respectively (the "ALGLP
Sublicensing Agreements"), non-exclusive trademark sublicenses to sell
foundations and sleepwear with a national brand name. During Fiscal 1998, United
Retail Incorporated made payments to ALGLP under the ALGLP Sublicensing
Agreements of approximately $0.4 million, of which ALGLP paid approximately $0.3
million to the licensor of the trademark. ALGLP subleases a two-room suite of
offices from United Retail Incorporated, which also provides certain office
services and supplies to ALGLP at estimated cost. During Fiscal 1998, ALGLP paid
approximately $6,000 rent and reimbursed United Retail Incorporated
approximately $29,000 (on a cash rather than an accrual basis) for office
services and supplies. At January 30, 1999, the account receivable from ALGLP
was approximately $11,000. Management believes that the terms of the business
arrangements between United Retail Incorporated and ALGLP are not more favorable
to ALGLP than the arrangements that would be available in arm's length
transactions between unaffiliated parties.
The father of Raphael Benaroya is employed by United Retail Incorporated. His
salary in Fiscal 1998 was approximately $63,000. Management believes that the
terms of employment of Mr. Benaroya's father are not more favorable to him than
the terms that would have been available to him from an employer unaffiliated
with Mr. Benaroya.
16
<PAGE>
The Company is required to bear the expenses of registering shares of Common
Stock under the Securities Act as follows. Raphael Benaroya, the Chairman of the
Board, President and Chief Executive Officer of the Company, and the Company are
among the parties to the Restated Stockholders' Agreement. Pursuant to the
Restated Stockholders' Agreement, Limited Direct Associates, L.P. ("LDA"), an
affiliate of The Limited, has the right ("Demand Registration Right") on two
occasions to require the Company to prepare and file a registration statement
under the Securities Act with respect to not more than 2,500,000 shares of
Common Stock. Mr. Benaroya has a similar Demand Registration Right exercisable
on one occasion with respect to an offering of not more than 2,687,500 shares of
Common Stock. Further, in the event that the Company proposes to register any of
its securities under the Securities Act for its own account (subject to certain
exceptions), or pursuant to the exercise of a Demand Registration Right, the
other parties to the Restated Stockholders' Agreement, including George R.
Remeta, the Vice Chairman and Chief Financial Officer of the Company, Ellen
Demaio, the Senior Vice President-Merchandise of United Retail Incorporated, and
certain other stockholders are entitled to include shares in such registration,
subject to the right of the underwriters of any such offering to limit the
number of shares included in such registration.
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.
Alan R. Jones, the Vice President - Real Estate of United Retail Incorporated,
borrowed approximately $75,000 from the Company in Fiscal 1995 to pay investment
expenses. The advance was a full recourse, unsecured obligation and bears
interest at the prime rate plus one percentage point. After 1996, interest has
been payable in kind, that is, interest has been added to the principal amount.
The principal and interest outstanding on January 30, 1999 was approximately
$90,000. The advance is payable in February 2001 but the Company has agreed to
forgive the advance, if Mr. Jones remains in United Retail Incorporated's employ
until the maturity date of the advance.
-------------------------
INDEPENDENT PUBLIC ACCOUNTANTS
During Fiscal 1998, PricewaterhouseCoopers LLP served as the Company's
independent public accountants and in that capacity rendered an opinion on the
Company's consolidated financial statements as of and for the year ended January
30, 1999. The Company has selected PricewaterhouseCoopers LLP as its independent
public accountants for the current fiscal year.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
Annual Meeting. They will be available to respond to appropriate questions and
may make a statement if they so desire.
17
<PAGE>
PROPOSAL TO APPROVE ADOPTION OF 1999 STOCK OPTION PLAN
Introduction
On February 26, 1999, the Board of Directors of the Company adopted the 1999
Stock Option Plan (referred to below as the "Plan"), subject to stockholder
approval. The following is a fair summary of the terms of the Plan, which is
nevertheless qualified in its entirety by reference to the complete text of the
plan attached to this Proxy Statement as Exhibit A. (The Restated 1996 Stock
Option Plan as currently in effect is referred to below as the "Existing Plan.")
Eligibility and Participation; Administration
Eligibility to participate in the Plan is limited to full-time associates of the
Company and its subsidiaries who are not Directors and to Directors who are not
associates. The Directors who are associates have declined to be eligible to
participate.
Approximately 1,500 full-time associates of the Company and its subsidiaries are
within the class eligible to participate in the Plan. The Company anticipates
that approximately 50 eligible associates and nonmanagement Directors will
participate in the Plan. (Unless otherwise indicated, references herein to
optionees includes eligible associates and nonmanagement Directors.)
Participation in the Plan by associates shall be based upon the associate's
present and potential contributions to the success of the Company and its
subsidiaries and such other factors as the Committee deems relevant. Each
nonmanagement Director will receive an annual award of an option to purchase
3,000 shares.
The Compensation Committee of the Board of Directors (the "Committee") will
administer the Plan. The Committee has the full power in its discretion to grant
awards under the Plan, to determine the terms thereof, to interpret the
provisions of the Plan, to authorize loan guaranties and loans to finance tax
payments and to take such action as it deems necessary or advisable for the
administration of the Plan.
Number of Shares Available for Option Grants; Outstanding Options
The Plan provides for awards of options to purchase up to 400,000 shares of
Common Stock, equivalent to 3.1% of the outstanding shares, during the term of
the Plan.
At March 31, 1999, the Existing Plan had 38,500 shares of Common Stock available
to be optioned. If the adoption of the Plan is not approved by the stockholders,
the Existing Plan shall remain in effect. If the adoption of the Plan is
approved, no further option grants will be made under the Existing Plan except
in exchange for the surrender and cancellation of an equal number of outstanding
options issued under the Existing Plan.
At March 31, 1999, there were 1,687,600 options outstanding, equivalent to 12.9%
of the outstanding shares of Common Stock, at an average exercise price of
$6.1482 per share. The last reported sale price of the Common Stock on the
National Association of Securities Dealers, Inc. National Market System was
$10.50 per share on April 14, 1999. See, "Aggregated Option Exercises in Fiscal
1998 and Fiscal 1998 Year End Option Values" for information with respect to
total options held by the Company's Chief Executive Officer and the four other
most highly compensated executive officers of the Company and its subsidiaries.
The total options held by each of these five executive officers did not change
from January 30, 1999 to March 31, 1999. As of March 31, 1999, the other
associates of the Company held options to purchase a total of 471,400 shares;
the nonmanagement Directors held options to purchase a total of 105,200 shares;
and a former nonmanagement Director held options to purchase a total of 6,000
shares.
18
<PAGE>
Purpose of the Plan
The purpose of the Plan is to attract and retain the best available Directors
and executive and key management associates for the Company and its subsidiaries
and to encourage the highest level of performance by them, thereby enhancing the
value of the Company for the benefit of its stockholders. The Plan is also
intended to motivate Directors and executive and key management associates to
contribute to the Company's future growth and profitability and to reward their
performance in a manner that provides them with a means to increase their
holdings of the Common Stock of the Company and aligns their interests with the
interests of the stockholders of the Company.
Type of Awards Under the Plan
The Plan provides that the Committee may grant awards to eligible associates of
(i) incentive stock options ("ISO's"), and (ii) nonqualified stock options
("NSO's"). All awards to Directors will be NSO's.
Exercise Price; Vesting
The exercise price of Options will be determined by the Committee at the time of
grant. The option price per share of Options to associates will not be less than
the fair market value of the Common Stock on the date of such grant ("Fair
Market Value"). All Options to Directors will be exercisable at Fair Market
Value.
For Options held by associates, the Committee will determine at the time of
grant the terms under which Options shall vest and become exercisable. Options
granted to Directors will vest 20% annually commencing on the completion of the
first full year after the date of grant.
Special Limitations on ISO's
The Internal Revenue Code of 1986, as amended (the "Code") and regulations
thereunder provide that the total Fair Market Value of shares subject to ISO's
that are exercisable for the first time by an eligible associate in a given
calendar year shall not exceed $100,000.
Exercise of Options
An Option may be exercised by written notice to the Company stating the number
of shares of Common Stock with respect to which the Option is being exercised
and tendering payment therefor. Shares of Common Stock already held by the
optionholder (valued at the fair market value on the date of exercise) may be
tendered in payment of the exercise price.
Nontransferability of Options
Options are not transferable except by will, applicable laws of descent and
distribution or qualified domestic relations orders, provided, however, that
options may be transferred to members of the optionee's immediate family.
Expiration and Termination of Options
Options will expire at such time as the Committee determines; provided, however,
that an NSO may not be exercised more than ten years and one day from the date
of grant and an ISO may not be exercised more than ten years from the date of
grant.
Options may be exercised within 90 days after the termination of an associate's
employment or Director's term (other than by death or total disability). Upon
the death of an associate or Director while employed by the Company or its
subsidiaries or during a Director's term (or upon death within 90 days after
19
<PAGE>
termination of employment or Director's term), Options shall remain exercisable
for one year following termination. Upon total disability of an associate or
Director while employed by the Company or its subsidiaries or during a
Director's term, Options shall remain exercisable for one year following
termination. In no case, however, shall an option be exercisable later than the
end of the term specified in the grant.
Lapsed Awards
Shares of Common Stock attributable to unexercised Options that expire or are
terminated, surrendered or canceled may become available for subsequent award
under the Plan at the Committee's discretion.
Adjustment upon Changes in Capitalization
The number and class of shares available under the Plan may be adjusted by the
Committee to prevent dilution or enlargement of rights in the event of various
changes in the capitalization of the Company.
Amendment and Termination
The Board of Directors may suspend, amend, modify or terminate the Plan;
provided, however, that the Company's stockholders shall be required to approve
any amendment that would (i) materially increase the aggregate number of shares
issuable under the Plan, (ii) materially increase the benefits accruing to
optionees under the Plan, or (iii) materially modify the requirements for
eligibility to participate in the Plan.
Options granted prior to a termination of the Plan shall continue in accordance
with their terms following such termination. No amendment, suspension or
termination of the Plan shall adversely affect rights previously granted to an
optionee without his or her consent.
Accounting Treatment
No compensation expense accrues in connection with the vesting of options
granted under the Plan.
Federal Income Tax Consequences; Financing Tax Payments
There will be no Federal income tax consequences to the optionee or the Company
upon the grant of either an ISO or an NSO under the Plan. Upon exercise of an
NSO, an optionee will recognize ordinary income in an amount equal to (i) the
fair market value, on the date of exercise, of the acquired shares of Common
Stock, less (ii) the exercise price of the NSO. The Company will be entitled to
a tax deduction in the same amount.
Upon the exercise of an ISO, an associate recognizes no immediate taxable
income. Income recognition is deferred until the associate sells the shares of
Common Stock. If the Option is exercised no later than three months after the
termination of the associate's employment, and the associate does not dispose of
the shares acquired pursuant to the exercise of the Option within two years from
the date the Option was granted and within one year after the exercise of the
Option, the gain on the sale will be treated as long term capital gain. Certain
of these holding periods and employment requirements are liberalized in the
event of an associate's death or disability while employed by the Company. The
Company is not entitled to any tax deduction, except that if the Common Stock is
not held for the full term of the holding period outlined above, the gain on the
sale of such Common Stock, being the lesser of (i) the fair market value of the
Common Stock on the date of exercise minus the exercise price, or (ii) the
amount realized on disposition minus the exercise price, will be taxed to the
associate as ordinary income and the Company will be entitled to a deduction in
the same amount. The excess of the fair market value of the Common Stock
acquired upon exercise of an ISO over the exercise price constitutes a tax
preference item for purposes of computing the "alternative minimum tax" under
the Code.
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The Committee may either require payment or retain shares of Common Stock
otherwise issuable under the Plan, in order to satisfy applicable withholding
tax requirements.
The Committee will have authority, at the time of grant of an NSO or on the
exercise by the optionee of an Option which is not taxed as an ISO, to authorize
an unconditional guaranty of payment by the Company of a full recourse loan on
terms acceptable to the Committee obtained by the optionee who exercised the
Option from a commercial bank or a registered broker-dealer for the exclusive
purpose of paying personal income or excise taxes incurred as a result of such
exercise. The Committee will also have authority to make loans to finance such
tax payments. Loan guaranties and loans will be issued if the Committee, in its
sole discretion, determines them to be appropriate and in the best interests of
the Company to assist in the payment of income and excise taxes incurred on
exercise of an Option.
Approval of Plan
Approval of the adoption of the Plan requires the affirmative vote of a majority
of the votes cast at the Annual Meeting of Stockholders. FOR votes will be
counted in favor of approval of the Plan. AGAINST votes will be counted as
opposing approval of the Plan. ABSTAIN votes will not be counted for or against
approval, but will be counted for quorum purposes. Broker non-votes will not be
counted for any purpose.
It is the intention of the persons named in the accompanying form of proxy to
vote FOR the proposal unless a contrary choice is indicated by the stockholder
executing the proxy.
-------------------------
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the Annual
Meeting of Stockholders. However, if other matters should come before the
meeting, it is the intention of each of the persons named in the proxy to vote
in accordance with his judgment on such matters.
-------------------------
STOCKHOLDER PROPOSALS
Any proposals of stockholders that are intended to be presented at the 2000
Annual Meeting of Stockholders, but which are not received by the Secretary of
the Company at the principal executive offices of the Company on or before
December 27, 1999 may be omitted by the Company from the proxy statement and
form of proxy relating to that meeting.
-------------------------
EXPENSES OF SOLICITATION
The expenses of preparing, assembling, printing and mailing the proxy and the
material used in solicitation of proxies will be paid by the Company. In
addition to the use of the mails, solicitation may be made by associates of the
Company by telephone, mailgram, facsimile and personal interview. The Company
does not expect to pay any compensation for the solicitation of proxies.
By Order of the Board of Directors,
/s/ Raphael Benaroya
---------------------------------------
Raphael Benaroya
Chairman of the Board
<PAGE>
Exhibit A
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UNITED RETAIL GROUP, INC.
1999 STOCK OPTION PLAN
WHEREAS, United Retail Group, Inc., a Delaware corporation (the "Company"),
desires to attract and retain the best available directors, executives, and key
management associates for itself and its direct and indirect subsidiaries, to
provide long range inducements for them to remain associated with the Company
and its direct and indirect subsidiaries, to provide the highest level of
performance by such directors, executives and associates, and to acquire a
permanent stake in the Company with the interest and outlook of owners; and
WHEREAS, the Board of Directors of the Company adopted the United Retail Group,
Inc. 1999 Stock Option Plan and the stockholders of the Company approved the
same;
NOW, THEREFORE, the Company hereby approves and adopts the United Retail Group,
Inc. 1999 Stock Option Plan on the following terms and conditions:
Section 1. Definitions. The following terms have the following meanings when
used in this Plan, in both singular and plural forms:
"Assignee" means a member of the immediate family of an Optionee to whom the
Optionee has assigned an Option.
"Associate" means any full-time associate of an Employer.
"Change in Control" means (a) the acquisition after the Effective Date by any
person (defined for the purposes of this Section to mean any person within the
meaning of Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange
Act")), other than the Company, the Chief Executive Officer of the Company, or
an employee benefit plan created by the Board of Directors of the Company for
the benefit of its Associates, either directly or indirectly, of the beneficial
ownership (determined under Rule 13d-3 of the Regulations promulgated by the
Securities and Exchange Commission ("SEC") under Section 13(d) of the Exchange
Act) of any securities issued by the Company if, after such acquisition, such
person is the beneficial owner of securities issued by the Company having 20% or
more of the voting power in the election of Directors at the next meeting of the
holders of voting securities to be held for such purpose of all of the voting
securities issued by the Company, if such person acquired such beneficial
ownership without the prior consent of the Board of Directors of the Company;
(b) the election of a majority of the Directors, elected at any meeting of the
holders of voting securities of the Company, who were not nominated for such
election by the Board of Directors or a duly constituted committee of the Board
of Directors; or (c) the merger or consolidation with or transfer of
substantially all of the assets of the Company to another person if the Board of
Directors does not adopt a resolution, before the Company enters into any
agreement for such merger, consolidation or transfer, determining that it is not
a Change in Control.
"Code" means the Internal Revenue Code of 1986, as now in effect or hereafter
amended and as now or hereafter interpreted, construed and applied by
regulations, rulings and cases.
"Committee" means (a) the members of the Compensation Committee of the Board of
Directors of the Company who are non-employee directors within the meaning of
SEC Rule 16b-3(b)(3)(i), who, if they are fewer than all the members, shall
constitute an ad hoc committee of the Board of Directors, or (b) if the
Compensation Committee has fewer than two members who are such non-employee
directors, such other committee of the Board of Directors of the Company having
at least two members who are such non-employee directors as may be designated
from time to time by the Board of Directors of the Company, provided, however,
that if any such Committee is not composed exclusively of such non-employee
directors, the Committee will consist only of those members who are such
non-employee directors.
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"Company" means United Retail Group, Inc., a Delaware corporation.
"Date of Grant" means (a) in the case of a formula grant to a Director under
Section 2, the date of the annual meeting of stockholders of the Company to
which the grant relates, (b) in the case of a discretionary Committee grant
under Section 3, generally, the date action is taken by the Committee to grant
an Option, or (c) in the case of a discretionary Committee grant under Section 3
where the grant is being made to an Associate being hired by the Employer, in
the sole discretion of the Committee, the Associate's date of hire rather than
the date on which the Committee subsequently or previously approves the grant of
an Option to him or her; provided, however, that the Date of Grant for purposes
of determining whether or not an Option is an Incentive Option will be the later
of the date of such action or the date of hire.
"Director" means a duly elected and acting member of the Board of Directors of
the Company who is not an Associate.
"Disability" means a disability as defined under the Company's long-term
disability benefits plan in effect on the Effective Date.
"Effective Date" means May 26, 1999.
"Employer" means the Company and any corporation which is a subsidiary
corporation of the Company, as defined in Section 424(f) of the Code.
"Holder" means the person who is, at the time of reference, entitled to exercise
an Option.
"Incentive Option" means an Option which meets the requirements of Section 422
of the Code.
"Nonincentive Option" means any Option which is not an Incentive Option.
"Notice of Exercise" means a notice of exercise of any Option in a form
determined by the Committee.
"Option" means any right to purchase Shares granted under the Plan.
"Option Agreement" means a written agreement between the Company and an Optionee
setting forth the terms of an Option.
"Option Price" means the price per Share at which an Option is exercisable.
"Optionee" means an Associate or Director to whom an unexercised Option has been
granted under the Plan.
"Plan" means this United Retail Group, Inc. 1999 Stock Option Plan.
"Retirement" means the Termination of an Associate after the Associate's 65th
birthday.
"Shares" means shares of Common Stock, with par value equal to $.001 per share,
of the Company.
"Tax Payment Loan Guaranty" shall mean a guaranty of payment made by the Company
in the amount and under the circumstances described in Section 5.
"Termination" means the termination of the Optionee's relationship with the
Company including termination of the Optionee's employment and status as
Director. An Optionee who is absent from employment or other relationship with
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the Company for a reason or purpose and for a period of time approved by the
Committee, in its sole discretion, shall not for the period of such absence be
deemed, solely because of such absence, to have suffered a Termination, unless
and until the Committee otherwise determines.
"Termination Date" means May 26, 2009.
"Value" means (a) if the Shares are listed or admitted to trading on a national
securities exchange (including the National Market System of the National
Association of Securities Dealers Automated Quotation System ("NASDAQ")), the
closing price of Shares on the principal securities exchange on which the Shares
are listed or admitted to trading on the day prior to the date of determination,
or if no closing price can be determined for the date of determination, the most
recent date for which such price can reasonably be ascertained, or (b) if the
Shares are not listed or admitted to trading on a national securities exchange
but are publicly traded, the mean between the representative bid and asked
prices of the Shares in the over-the-counter market at the closing of the day
prior to the date of determination or the most recent such bid and asked prices
then available, as reported by NASDAQ or if the Shares are not then quoted by
NASDAQ as furnished by any market maker selected from time to time by the
Company for that purpose, or (c) if neither (a) nor (b) is applicable, the fair
market value on the applicable date as determined by the Committee in good faith
using factors the Committee deems to be relevant including but not limited to
any sale of Shares to an independent third party.
Section 2. Formula Grants to Directors.
2.1. Eligibility and Formula. Beginning on the Effective Date and until
the Termination Date, all Directors elected at each year's annual meeting of the
stockholders will automatically be granted an Option to purchase 3,000 Shares.
All Options granted under this Section are intended to be formula awards under
SEC Rule 16b-3 and will not be subject to any provision of the Plan that gives
the Committee discretion to change the terms of such Options to the extent that
such Committee discretion will cause the Options granted under this Section to
cease to be formula awards under SEC Rule 16b-3.
2.2. Terms. All Options granted to Directors under this Section 2 will
be on the following terms:
2.2.1. Each Option will be a Nonincentive Option.
2.2.2. Each Option will have an Option Price equal to the
Value of a Share as of the Date of Grant.
2.2.3. Each Option will become exercisable as to 20% of the
Shares subject to the Option on the completion of the first full year after the
Date of Grant and as to an additional 20% of such Shares on the completion of
each full year thereafter prior to Termination.
2.2.4. Notwithstanding Section 2.2.3 but subject to Section
4.5, each Option will become immediately exercisable as to 100% of the Shares
subject to the Option upon (a) a Change in Control or (b) the Optionee's death
or Disability, provided, however, that the Committee within 90 days after the
Termination of an Optionee for a reason other than death or Disability may make
his Option(s) immediately exercisable as to 100% of the Shares subject to the
Option.
2.2.5. Each Option will lapse on the earliest of (a) the date
10 years and one day after the Date of Grant, or (b) the date one year after the
Termination of the Optionee if the Termination is due to death or Disability or
if the Optionee dies within 90 days of Termination, or (c) the date 90 days
after Termination if the Termination is for any reason other than death or
Disability, provided, however, that the Committee within 90 days after the
Termination of an Optionee may defer the lapse of his Option(s) to the date 10
years and one day after the Date of the Grant.
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Section 3. Discretionary Grants to Associates.
3.1. Eligibility and Discretionary Awards. Subject to the limitations
contained in the Plan, the Committee may, at any time prior to the Termination
Date, grant Options to Associates whom the Committee determines to be executive
and key management Associates of the Employer. In determining the Associates to
whom Options may be granted and the terms and conditions of such grants, the
Committee may take into account the nature of the services rendered by such
Associates, their past, present and potential contributions to the success of
the Employer, and such other factors as the Committee deems relevant. In no
event, however, shall the Committee grant Options to any Associate who also
serves as a member of the Board of Directors on the Date of the Grant.
3.2. Terms of Associate Options.
3.2.1. Subject to the provisions of the Plan and applicable
law, the Committee will, in its sole discretion, determine the terms and
conditions of any Options granted to an Associate at the time of grant.
3.2.2. In the absence of any provision in the grant of an
Option to the contrary, the Option will have the following terms:
(a) The Options will be Incentive Options with
respect to the maximum number of Shares that may be Incentive Options and
Nonincentive Options with respect to all other Shares.
(b) Each Option will have an Option Price equal to
the Value of a Share as of the Date of Grant.
(c) Each Option will become exercisable as to 20% of
the Shares subject to the Option on completion of the first full year of
employment of the Optionee after the Date of Grant and as to an additional 20%
of such Shares on the completion of each full year of such employment thereafter
until Termination.
(d) Each Option will lapse on the earliest of (i) for
an Incentive Option, the date 10 years after the Date of Grant, and for a
Nonincentive Option, the date 10 years and one day after the Date of Grant, (ii)
the date one year after the Termination of the Optionee if the Termination is
due to death or Disability or if the Optionee dies within 90 days of the date of
Termination, or (iii) the date 90 days after Termination for any other reason.
3.2.3. Subject to Section 4.5, each Option granted under
Section 3 will become immediately exercisable as to 100% of the Shares subject
to the Option upon (a) a Change in Control, or (b) the Optionee's death,
Disability, or Retirement.
3.2.4. If the Holder of a Nonincentive Option shall so direct
at least 60 days prior to the date of exercise, either (i) the Shares issued
upon exercise of the Option shall be issued and registered on the Company's
stockholder list as follows: the number of Shares having a Value on the date of
exercise equal to the exercise price paid in connection with the exercise shall
be issued to and registered in the name of the Holder and the remainder of the
Shares shall be issued to and registered in the name of the trustee under the
Company's Supplemental Retirement Savings Plan, or (ii) the number of Shares
otherwise issuable upon exercise of the Option shall be reduced by the number of
Shares having a Value on the date of exercise equal in the aggregate to the
exercise price of the gross number of Options and the net number of Shares after
such reduction shall be issued to and registered in the name of the trustee
under the Company's Supplemental Retirement Savings Plan.
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Section 4. Restrictions on all Options.
4.1. Option Agreements. Each grant of an Option must be reduced to
writing in an Option Agreement, in such form as the Committee determines, within
a reasonable period after the Date of Grant. Any action taken after the Date of
Grant may be reflected in an amendment to or restatement of such Option
Agreement.
4.2. Corporate Mergers; Acquisitions. The Committee may grant Options
having terms and provisions which vary from those specified in the Plan if such
Options are granted in substitution for, or in connection with the assumption
of, existing options granted by another corporation and assumed or otherwise
agreed to be provided for by the Company in connection with a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to which any Employer is a party.
4.3. Restrictions on Terms of Options. Each Option shall be subject to
the following restrictions:
4.3.1. No Shares will be issued under the Plan unless and
until all applicable requirements imposed by federal and state securities laws
and by any stock exchanges or NASDAQ upon which the Shares may be listed have
been fully met.
4.3.2. No Option will have an Option Price less than 100% of
the Value of a Share as of the Date of Grant.
4.3.3. Each Option will lapse no later than the date 10 years
and one day after the Date of Grant.
4.3.4. Subject to Sections 2.2.4, 3.2.3 and 8, no more than
25% of the Shares subject to each Option may become exercisable before
completion of the second full year of employment of the Optionee after the Date
of Grant and no more than an additional 25% of such Shares may become
exercisable before the completion of each full year of such employment
thereafter until Termination.
4.4. Maximum Number. In no event shall the Committee grant Options to
an Associate to purchase a total of more than 100,000 Shares under the Plan,
including any Options that lapse or are surrendered for cancellation.
4.5. Six Month Rule. Nothing in the Plan will permit an Option to be
exercisable within six months of the Date of Grant except in the case of the
Optionee's death.
Section 5. Tax Payment Loan Guaranty. The Committee will have authority, at the
time of grant of a Nonincentive Option or on the exercise of an Option which is
not taxed as an Incentive Option, to authorize an unconditional guaranty of
payment by the Company of a full recourse loan on terms acceptable to the
Committee obtained by the Holder who exercised the Option from a commercial bank
or a registered broker-dealer for the exclusive purpose of paying personal
income or excise taxes incurred as a result of such exercise. The Committee will
also have authority to make a loan to finance such tax payments. Loan guaranties
and loans will be issued if the Committee, in its sole discretion, determines
them to be appropriate and in the best interests of the Employer to assist in
the payment of income and excise taxes incurred on exercise of such Option.
Section 6. Exercise of Options.
6.1. Notice of Exercise. Options may be exercised only by delivery to
the Vice President-Associate Services or such other person designated by the
Committee of a Notice of Exercise and payment under Section 6.2 for the Shares.
Except as specifically provided, an Option shall be exercisable during the
Optionee's lifetime only by the Optionee or his or her Assignee.
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6.2. Deliveries on Exercise.
6.2.1. Any Notice of Exercise will be effective only if the
Holder pays to the Company the Option Price for the portion of any Option being
exercised and pays the Company an amount equal to any tax withholding required
to be made.
6.2.2. The Holder may, in his or her sole discretion, pay all
or a portion of the Option Price for the portion of an Option being exercised by
surrender and delivery of Shares already owned by the Holder for not less than
six months. Any such Shares delivered in full or partial payment of the Option
Price shall be valued at the Value as of the date of receipt of the Shares by
the Company. In lieu of delivery of such previously owned Shares, the Holder may
direct the Company to withhold an equal number of Shares that otherwise would be
issued to the Holder upon exercise of the Option.
6.2.3. The Committee may, in its sole discretion, permit all
or a portion of any amount required to be withheld for taxes to be paid by
surrendering and delivering Shares already owned by the Holder or by withholding
a portion of the Shares that otherwise would be issued to the Holder upon
exercise of the Option. Any such Shares surrendered or withheld will be valued
at the Value as of the date of receipt for surrendered Shares or as of the date
of exercise of the Option for withheld Shares. Any election to have Shares
withheld from the Shares that would otherwise be issued to the Holder upon
exercise must be made during or as of the period beginning on the third business
day following the date of release of quarterly or annual financial data of the
Company and ending on the twelfth business day following such date.
6.3. Time and Manner Restrictions. The Committee has the right to limit
the time and manner of exercise of Options to comply with applicable law
including but not limited to federal securities laws.
6.4. Delivery of Shares. As soon as reasonably practicable following
exercise, a certificate representing the Shares purchased registered in the name
of the Holder will be delivered to the Holder or, at the direction of the Holder
in accordance with Section 3.2.4, to the trustee under the Company's
Supplemental Retirement Savings Plan.
Section 7. The Committee.
7.1. Powers of Committee. The Committee will have the power to do the
following:
7.1.1 To grant Options on such terms not inconsistent with the
Plan as the Committee determines;
7.1.2. To maintain records relating to Optionees, Assignees
and Holders;
7.1.3. To prepare and furnish to Optionees, Assignees and
Holders all information required by applicable law or the Plan;
7.1.4. To construe and apply the provisions of the Plan and to
correct defects and omissions therein;
7.1.5. To engage assistants and professional advisers;
7.1.6. To provide procedures for determination of claims under
the Plan;
7.1.7. To make any factual determinations necessary or useful
under the Plan; and
7.1.8. To adopt and revise rules, regulations and policies
under the Plan.
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7.2. Delegation. The Committee may delegate to any one or more of its
number authority to sign any documents on its behalf or to perform ministerial
acts, but no person to whom such authority is delegated shall perform any act
involving the exercise of any discretion without first obtaining the concurrence
of a majority of the members of the Committee, even though he or she alone may
sign any document required by third parties. The Committee may designate a
secretary, who may be a member of the Committee. All third parties may rely on
any communication signed by the secretary, acting as such, as an official
communication from the Committee.
7.3. Binding Effect of Actions. All actions taken by the Committee
under the Plan will be final and binding on all persons.
7.4. Indemnification. No member of the Committee, nor any Associate to
whom ministerial duties have been delegated, shall be personally liable for any
action, interpretation or determination made with respect to the Plan or awards
made thereunder, and each member of the Committee shall be fully indemnified and
protected by the Company with respect to any liability he or she may incur with
respect to any such action, interpretation or determination, to the extent
permitted by applicable law and to the extent provided in the Company's
Certificate of Incorporation and By-laws, as amended from time to time.
Section 8. Actions by Committee After Grant.
8.1. General. The Committee may, subject to the consent of the Holder
under Section 9.2, where the action impairs or adversely alters the rights of
the Holder, at any time and from time to time after the Date of Grant of any
Option, modify the terms of any grant to terms which would have been permitted
for such grant on the Date of Grant.
8.2. Antidilution Provisions. If, as a result of a stock split, stock
dividend, combination or exchange of shares, exchange for other securities,
reclassification, reorganization, redesignation, recapitalization or other such
change, the Shares are increased or decreased or changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or of another corporation; then:
8.2.1. The number and kind of shares of stock or other
securities into which each outstanding Share is changed or for which each such
Share may be exchanged, will automatically be substituted for each Share subject
to an unexercised Option and for each Share available for additional grants.
8.2.2. The Option Price will be increased or decreased
proportionately so that the aggregate Option Price for the securities subject to
the Option remains the same as immediately prior to such event and the ratio of
the Option Price to the Value of the securities subject to the Option is no more
favorable to the Holder than the ratio of the Option Price to the Value
immediately before such event.
8.2.3. The Committee shall make such other adjustments to
Options and the provisions of the Plan and Option Agreements as may be
appropriate and equitable, and not confer on the Holder more favorable benefits
than those of the Holder before the event, which adjustments may provide for the
elimination of fractional shares or units.
8.3. Merger of the Company. If, directly or indirectly, (a) the Company
is a party to a merger or consolidation agreement with a corporation that is not
a subsidiary of the Company, (b) the Company is a party to an agreement to sell
substantially all of its assets to any person other than a subsidiary of the
Company, or (c) any person other than the Company or one of its subsidiaries has
publicly announced an offer to purchase more than 5% of the outstanding voting
securities of the Company, the Committee, in its sole discretion, may provide
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that, for a period beginning on the later of the date six months after the Date
of Grant or 15 days before the closing of any such proposed transaction, and not
extending beyond the earlier of the date on which the Options would otherwise
lapse and the date of the closing of such proposed transaction, notwithstanding
the provisions of any Option Agreement, all Options granted under the Plan may
be exercised by the Holders in whole or in part during such period, and that
upon the closing of such proposed transaction, all Options under the Plan will
expire and be null and void. At least 15 days prior to the closing of such
proposed transaction, the Company must notify each Holder that the Option is
exercisable under this Section. If the agreement for such proposed transaction
is terminated, (a) all exercises under this Section of Options will be void ab
initio (from the outset), (b) the Company will refund the applicable Option
Price and withholding tax and the Holder will return any Shares issued, and (c)
the Option will be reinstated and exercisable thereafter on the terms of the
Options without regard to that application of this Section.
8.4. Authority to Accelerate. Notwithstanding anything else in the Plan
to the contrary other than Section 4.5, the Committee may, at the time of grant
or at any time or from time to time thereafter, accelerate the time at which
Options become exercisable or waive any provisions of the Plan relating to the
manner of payment or procedures for the exercise of any Options. Any such
acceleration or waiver may be made effective (a) with respect to one or more or
all Holders under the Plan, (b) with respect to some or all of the Shares
subject to an Option of any Holder or (c) for a period of time ending at or
before the expiration date of any Option. If the waiver of any provisions
constitutes a new grant of an Option or the grant of an additional derivative
security for purposes of SEC Rule 16b-3, the date of the waiver will be deemed
to be a new Date of Grant for purposes of Section 4.5. If the waiver of any
provisions constitutes a new grant of an Option for purposes of Code Section
424, the Committee must determine if the Option retains its status as an
Incentive Option.
8.5. Surrenders. The Committee may permit the voluntary surrender of
all or a portion of any Option granted under the Plan. Upon surrender, the
Options surrendered will be canceled and the Shares or units previously subject
to them will be available for the grant of other Options.
Section 9. Amendment of the Plan.
9.1. Right to Amend, Etc. The Company may amend, suspend or terminate
the Plan at any time, provided that, unless first approved by the stockholders
of the Company, no amendment may be made in the Plan which:
9.1.1. Materially increases the benefits accruing to
participants under the Plan;
9.1.2. Materially increases the number of securities which may
be issued under the Plan; or
9.1.3. Materially modifies the requirements as to eligibility
for participation in the Plan.
9.2. Impairment of Rights of Holders. No amendment to the Plan or the
terms of any grant hereunder shall be made so as to impair or adversely alter
the rights of any Holder without such Holder's consent. Actions by the Committee
under Section 8.2 or 8.3 do not constitute an amendment of the Plan or of any
grant.
Section 10. Shares Reserved; Previous Plans. The maximum number of Shares which
may be issued under the Plan will be 400,000 Shares, subject to adjustment under
Section 8.2, and such number of Shares will be reserved for issuance under the
Plan. Each previous stock option plan of the Company is hereby amended so that
no additional options may be granted thereunder on or after the Effective Date
except in exchange for the surrender and cancellation of an equal number of
outstanding options issued thereunder, provided, however, all Options granted
under any previous stock option plan will remain in full effect. The Shares
issued on exercise of Options may be authorized and unissued Shares or Shares
held by the Company as treasury stock. If any Option under this Plan terminates,
expires, lapses or is canceled as to any Shares, new Options may thereafter be
granted for the purchase of such Shares.
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Section 11. Miscellaneous.
11.1 Registration. The Company shall (i) prepare and file with the SEC
a Registration Statement with respect to the Plan as may be necessary or
advisable to permit the continued and uninterrupted exercise of Options and the
resale of Shares purchased pursuant to the exercise of Options or as may be
required by the SEC, (ii) execute such other documents, and take such other
actions, as may be necessary or advisable to cause the Registration Statement,
as the same may be amended, to comply with the Securities Act of 1933 (the
"Securities Act") and the Rules and Regulations thereunder, and (iii) register
and qualify all Shares purchased pursuant to the exercise of Options for resale
by the Holder in the State of New Jersey and in each state adjacent to the State
of New Jersey. An amendment to the Registration Statement necessary for the
resale of Shares purchased pursuant to the exercise of Options shall be filed by
the Company within five business days after the Secretary of the Company
receives a written request from a Holder to file an amendment. The Registration
Statement shall not be withdrawn by the Company until all the Options shall have
lapsed, or until all Shares purchased upon the exercise of Options shall have
been resold, as the case may be.
11.2. No Right to Employment. Nothing in the Plan or in any Option or
Option Agreement will confer upon any Associate or Director any right to
continue in the employment or other relationship of any Employer or to be
entitled to any remuneration or benefits not set forth in the Plan or such
Option Agreement or interfere with or limit the right of any Employer to
terminate such Associate's employment or Director's relationship at any time.
11.3. Successors and Assigns. The obligations of the Company under the
Plan will be binding upon any successor corporation or organization resulting
from the merger, consolidation or other reorganization of the Company, or upon
any successor corporation or organization succeeding to substantially all of the
assets and business of the Company.
11.4. Rights as Stockholder. No Holder will have any of the rights of a
stockholder of the Company with respect to the Shares issuable under the Plan
until certificates for such Shares have been issued.
11.5. Expenses. All expenses and costs in connection with
administration of the Plan will be borne by the Company.
11.6. Section 16. Any provision of this Plan will be deemed amended and
void to the extent it causes a violation under Section 16 of the Exchange Act
and the rules thereunder.
11.7. Limitation of Liability. The liability of the Company under this
Plan or in connection with any exercise of an Option is limited to the
obligations expressly set forth in the Plan and in any of the Option Agreements
and no term or provision of this Plan or any Option Agreement will be construed
to impose any further or additional duties, obligations or costs on the Employer
not expressly set forth in the Plan and the Option Agreement.
11.8. Beneficiaries and Assignment of Rights. No Option or other right
under the Plan may be assigned, pledged, hypothecated, given, or otherwise
transferred by the Holder, except that (a) an Optionee will be entitled to
designate a beneficiary of the Option upon the Optionee's death by delivering
such designation in writing to the Vice President-Associate Services of the
Company, (b) if no such designation is made by the Optionee, the Option will be
transferred upon the Optionee's death as determined under the applicable laws of
descent and distribution, (c) an Option shall be transferred in accordance with
a qualified domestic relations order (as defined in the Code), and (d) an
Optionee will be entitled to assign an Option to a member of his immediate
family, who, after such assignment, shall have all the rights and obligations of
the Optionee with respect to the Option, except the right to make further
9
<PAGE>
assignments, provided, however, that the provisions of the Plan relating to
death, Disability, Retirement, Termination and employment, including vesting
provisions, shall remain unchanged and shall continue to refer to the Optionee.
If a Holder suffers a Disability and does not have the capacity to exercise an
Option, such Option will be exercisable by the Holder's guardian or
attorney-in-fact during the Holder's lifetime.
11.9. Notices. Notices required or permitted to be made under the Plan
will be sufficiently made if personally delivered or sent by first-class,
registered, or certified mail addressed (a) to the Holder at the Holder's
address as set forth in the books and records of the Employer, or (b) to the
Company or the Committee at the principal office of the Company to the attention
of the Vice President-Associate Services. Any party may change its address
through the method described above.
11.10. Captions. The captions and section numbers appearing in this
Plan are inserted only as a matter of convenience. They do not define, limit,
construe or describe the scope or intent of the provisions of the Plan.
11.11. Applicable Law. The Plan will be governed by and interpreted,
construed, and applied in accordance with the laws of the State of New Jersey to
the extent that they apply.
11.12. Severability. If any provisions of the Plan are held illegal or
invalid for any reason, such illegality or invalidity will not affect the
remaining parts of the Plan, and the Plan will be construed and enforced as if
the illegal or invalid provision had not been included.
10
<PAGE>
UNITED RETAIL GROUP, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints RAPHAEL BENAROYA and GEORGE R. REMETA and each
of them, with power of substitution in each, proxies to represent the
undersigned and to vote, as noted below, all the common stock of UNITED RETAIL
GROUP, INC. (the "Company") which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders to
be held on May 26, 1999 at 11:00 A.M., or any adjournments thereof.
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees
listed below
Nominees: Joseph A. Alutto, Raphael Benaroya, Russell Berrie,
Joseph Ciechanover, Michael Goldstein, Ilan Kaufthal,
Vincent P. Langone, George R. Remeta and Richard W. Rubenstein
(Instruction: To withhold authority to vote for any individual nominee(s), write
name(s) in the space provided below.)
- --------------------------------------------------------------------------------
2. APPROVAL OF ADOPTION OF 1999 STOCK OPTION PLAN
FOR / / AGAINST / / ABSTAIN / /
(Continued and to be signed on opposite side)
UNITED RETAIL GROUP, INC.
3. In their discretion: (i) upon other matters as may properly come before the
meeting without notice to the Company before April 23, 1999, (ii) as to the
election of directors and the approval of adoption of the 1999 Stock Option
Plan, if the appropriate boxes above are not marked, (iii) for the election of a
substitute for any of the nominees listed above who become(s) unable to serve,
and (iv) on matters incidental to the conduct of the meeting.
The shares represented hereby will be voted as instructed by the
undersigned. If the appropriate boxes are not marked, the proxies appointed
hereby intend to vote FOR all the nominees listed and FOR approval of adoption
of the 1999 Stock Option Plan.
Please specify your votes by marking the appropriate boxes and date and
sign your name(s) below.
Dated ................., 1999
Signature(s).................
.................
<PAGE>
DIRECTIONS TO
MARRIOTT GLENPOINTE
100 Frank W. Burr Boulevard
Teaneck, NJ 07666
(201) 836-0600
FROM GEORGE WASHINGTON BRIDGE:
Take Route I-95/I-80 local lanes to Exit 70 Teaneck.
FROM LINCOLN TUNNEL:
Take the New Jersey Turnpike north (I-95 local) to Exit 70 Teaneck. Continue to
Exit 70B.
FROM WESTCHESTER:
Take the Tappan Zee Bridge to the Palisades Interstate Parkway south to Route
I-95/I-80 west to local lanes to Exit 70 Teaneck
<PAGE>
UNITED RETAIL GROUP, INC.
1999 ADMITTANCE CARD
If you plan to attend the Annual Meeting of Stockholders to be held on May 26,
1999 at 11:00 a.m., this form may be used as an admittance card. Please fill in
your name(s) and address and present it to the usher.
- ----------------------------------------- -----------------------------------
Name(s) (please print) Number of Shares Beneficially Owned
- -----------------------------------------
Street Address
- -----------------------------------------
City and State Zip Code
