-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VNjBqaPeBCmPWbbuIBna+QWh0MdNSGegzL0EbJ50sVtbJBBaTesmqRy74wlawC/W AChBkF76djMhgA0Bi/dZPA== 0000881905-04-000029.txt : 20040909 0000881905-04-000029.hdr.sgml : 20040909 20040909172839 ACCESSION NUMBER: 0000881905-04-000029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20040731 FILED AS OF DATE: 20040909 DATE AS OF CHANGE: 20040909 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED RETAIL GROUP INC/DE CENTRAL INDEX KEY: 0000881905 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] IRS NUMBER: 510303670 STATE OF INCORPORATION: DE FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19774 FILM NUMBER: 041023719 BUSINESS ADDRESS: STREET 1: 365 W PASSAIC ST CITY: ROCHELLE PARK STATE: NJ ZIP: 07662 BUSINESS PHONE: 2018450880 MAIL ADDRESS: STREET 1: 365 W PASSAIC STREET STREET 2: 365 W PASSAIC STREET CITY: ROCHELLE PARK STATE: NJ ZIP: 07662 10-Q 1 form10q0904.htm FORM 10-Q SEPTEMBER 2004 Form 10-Q September 2004

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2004

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to _____________________

Commission file number 00019774

United Retail Group, Inc.
(Exact name of registrant as specified in its charter)


	Delaware	51-0303670
	(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)

365 West Passaic Street, Rochelle Park, New Jersey 07662
(Address of principal executive offices) (Zip Code)

(201) 845-0880
Registrant's telephone number, including area code

_______________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ___X___ NO _______

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES _______ NO ___X____

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act subsequent to the distribution of securities under a plan confirmed by a court.

YES _______ NO _______

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

As of July 31, 2004, 12,657,434 units, each consisting of one share of the registrant’s common stock, $.001 par value per share, and one attached stock purchase right, were outstanding. The units are referred to herein as “shares.”

PART I - FINANCIAL INFORMATION

ITEM I - FINANCIAL STATEMENTS

UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)

	ASSETS	July 31, 2004 (Unaudited)	January 31, 2004	August 2, 2003 (Unaudited)
Current Assets:
Cash and cash equivalents		$18,366	$14,421	$23,867
Accounts receivable		1,199	1,789	1,255
Inventory		48,549	49,054	44,902
Prepaid rents		4,704	4,826	4,935
Other prepaid expenses		1,900	2,044	2,395
Total current assets		74,718	72,134	77,354

Property and equipment, net		71,364	76,710	82,950
Deferred compensation plan assets		3,962	4,893	4,217
Trademarks, net of accumulated
amortization of $421, $389 and $357		462	493	525
Other assets		1,309	1,465	1,477
Total Assets		$151,815	$155,695	$166,523

	LIABILITIES
Current liabilities:
Short-term distribution center financing		$664	$635	$771
Short-term capital leases		2,018	2,086	2,032
Accounts payable and other		22,708	19,795	21,686
Disbursement accounts		8,992	9,434	8,014
Accrued expenses		20,954	21,737	20,683
Total current liabilities		55,336	53,687	53,186

Long-term distribution center financing		2,987	3,326	3,650
Long-term capital leases		2,661	3,646	4,712
Deferred compensation plan liabilities		4,519	4,893	4,217
Other long-term liabilities		10,708	10,123	10,459
Total liabilities		76,211	75,675	76,224
	STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized
1,000,000 shares; none issued
Series A junior participating preferred stock
$.001 par value; authorized 150,000 shares; none issued
Common stock, $.001 par value; authorized
30,000,000 shares; issued 14,248,200 shares		14	14	14
Additional paid-in capital		84,853	83,696	83,696
Retained earnings		(936)	3,986	14,265
Treasury stock
(1,590,766, 1,310,906 and 1,310,906 shares) at cost		(8,327)	(7,676)	(7,676)
Total stockholders' equity		75,604	80,020	90,299
Total liabilities and stockholders' equity		$151,815	$155,695	$166,523

The accompanying notes are an integral part of the Consolidated Financial Statements.

UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
(Unaudited)

	Thirteen Weeks Ended		Twenty-Six Weeks Ended
	July 31, 2004	August 2, 2003	July 31, 2004	August 2, 2003
Net sales	$101,269	$104,790	$198,788	$206,320

Cost of goods sold, including
buying and occupancy costs	80,415	83,119	157,060	162,480

Gross profit	20,854	21,671	41,728	43,840

General, administrative and
store operating expenses	23,600	25,616	47,572	51,996

Operating loss	(2,746)	(3,945)	(5,844)	(8,156)

Interest income	1,193	45	1,207	55
Interest expense	(190)	(257)	(420)	(519)

Loss before income taxes	(1,743)	(4,157)	(5,057)	(8,620)

(Benefit from) provision
for income taxes	(184)	89	(135)	171

Net loss	($1,559)	($4,246)	($4,922)	($8,791)

Net loss per share
Basic	($0.12)	($0.33)	($0.38)	($0.68)
Diluted	($0.12)	($0.33)	($0.38)	($0.68)

Weighted average number of
shares outstanding
Basic	12,742,459	12,937,304	12,839,882	12,937,304
Common stock equivalents
(stock options)	0	0	0	0
Diluted	12,742,459	12,937,304	12,839,882	12,937,304

The accompanying notes are an integral part of the Consolidated Financial Statements.

UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)

	Twenty-Six Weeks Ended
	July 31, 2004	August 2, 2003
Cash Flows From Operating Activities:
Net loss	($4,922)	($8,791)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization of property and equipment	5,912	6,289
Amortization of deferred charges and other
intangible assets	251	255
Loss on disposal of assets	40	276
Deferred compensation (income) expense	(145)	95
Unrealized loss on deferred compensation plan assets	51	-
Deferred lease assumption revenue amortization	(2)	(21)
Changes in operating assets and liabilities:
Accounts receivable	590	1,739
Income taxes	32	1,246
Inventory	505	16,667
Accounts payable and accrued expenses	1,973	(4,559)
Prepaid expenses	266	(68)
Other assets and liabilities	521	587
Net Cash Provided by Operating Activities	5,072	13,715

Investing Activities:
Capital expenditures	(606)	(1,795)
Deferred payment for property and equipment	127	58

Net Cash Used in Investing Activities	(479)	(1,737)

Financing Activities:
Repayments of long-term debt	(310)	(760)
Payments on capital lease obligations	(1,053)	(983)
Decrease in disbursement accounts	(442)	(3,908)
Internal Revenue Service settlement related to warrants	1,157	-
Issuance of short-term debt	-	290
Repayments of short-term debt	-	(290)

Net Cash Used in Financing Activities	(648)	(5,651)

Net increase in cash and cash equivalents	3,945	6,327
Cash and cash equivalents, beginning of period	14,421	17,540
Cash and cash equivalents, end of period	$18,366	$23,867

The accompanying notes are an integral part of the Consolidated Financial Statements.

UNITED RETAIL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The consolidated financial statements include the accounts of United Retail Group, Inc. and its subsidiaries (the “Company”). All significant intercompany balances and transactions have been eliminated.

The consolidated financial statements as of and for the thirteen and twenty-six weeks ended July 31, 2004 and August 2, 2003 are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, the consolidated financial statements should be read in conjunction with the financial statement disclosures contained in the Company’s 2003 Annual Report and 2003 Form 10-K. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments necessary to present fairly the financial position and results of operations and cash flows for the interim periods, but are not necessarily indicative of the results of operations for a full fiscal year.

Certain prior year balances have been reclassified to conform with the current year presentation.

2. Net Loss Per Share

Basic per share data has been computed based on the weighted average number of shares of common stock outstanding. Diluted per share data has been computed on the basic shares because for the thirteen and twenty-six weeks ended July 31, 2004 and August 2, 2003, the effect of stock options is anti-dilutive.

Options to purchase shares of common stock which were not included in the computation of diluted per share data were as follows:

	Thirteen Weeks Ended		Twenty-Six Weeks Ended
	July 31, 2004	August 2, 2003	July 31, 2004	August 2, 2003
Options	1,927,772	1,812,912	1,927,772	1,812,912
Range of option prices per share	$1.80 - $15.13	$2.25 - $15.13	$1.80 - $15.13	$2.25 - $15.13

The Company uses the intrinsic value method to account for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting For Stock Issued To Employees” (Opinion No. 25) and has adopted the disclosure provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting For Stock-Based Compensation.” Under Opinion No. 25, compensation expense, if any, is measured as the excess of the market price of the stock over the exercise price on the measurement date. In accordance with Opinion No. 25, compensation expense is recorded ratably over the five-year vesting period of the options.

The following table illustrates the effect on net loss and loss per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting For Stock-Based Compensation” to stock-based employee compensation:

	Thirteen Weeks Ended		Twenty-Six Weeks Ended
(dollars in thousands except for loss per share amounts)	July 31, 2004	August 2, 2003	July 31, 2004	August 2, 2003
Reported net loss	($1,559)	($4,246)	($4,992)	($8,791)
Add back: Compensation expense	-	17	-	95
Deduct: Total stock-based
employee compensation
expense determined under fair
value based method for all
awards, net of related tax effects	(42)	(99)	(117)	(168)

Pro forma net loss	($1,601)	($4,328)	($5,109)	($8,864)

Loss per share:
Basic - as reported	($0.12)	($0.33)	($0.38)	($0.68)
Basic - pro forma	($0.13)	($0.33)	($0.40)	($0.69)

Diluted - as reported	($0.12)	($0.33)	($0.38)	($0.68)
Diluted - pro forma	($0.13)	($0.33)	($0.40)	($0.69)

3. Financing Arrangements

In 1993, the Company executed a ten-year $7.0 million note bearing interest at 7.3%. Interest and principal were payable in equal monthly installments beginning November 1993. Final payment on this note was made in October 2003.

In 1994, the Company executed a fifteen-year $8.0 million loan bearing interest at 8.64%. Interest and principal are payable in equal monthly installments beginning May 1994. The loan is collateralized by a mortgage on the national distribution center owned by the Company in Troy, Ohio.

The Company and certain of its subsidiaries (collectively, the “Companies”) are parties to a Financing Agreement, dated August 15, 1997 (the “Financing Agreement”), with The CIT Group/Business Credit, Inc.(“CIT”). The Financing Agreement was extended and expanded during fiscal 2003. The term was extended three years to August 15, 2008. The line of credit was increased from $40 million to $50 million for the Companies, subject to availability of credit according to a borrowing base computation. The line of credit may be used on a revolving basis by any of the Companies to support trade letters of credit and standby letters of credit and to finance loans.

The Companies are required to maintain unused at all times combined asset availability of at least $5 million. Except for the maintenance of a minimum availability of $5 million and a limit on capital expenditures, the Financing Agreement does not contain any significant financial covenants.

The Financing Agreement also includes certain restrictive covenants that impose limitations (subject to certain exceptions) on the Companies with respect to, among other things, making certain investments, declaring or paying dividends, making loans, engaging in certain transactions with affiliates, or consolidating, merging or making acquisitions outside the ordinary course of business.

In the event a loan is made to one of the Companies, interest is payable monthly based on a 360-day year at the Chase Manhattan Bank prime rate plus incremental percentages ranging from 0.00% to 0.75% or LIBOR rate plus incremental percentages ranging from 1.75% to 2.50% as determined by the average excess availability each month per the Financing Agreement on a per annum basis. The borrower can select either the prime rate or the LIBOR rate as the basis for determining the interest rate.

The line of credit is collateralized by a security interest in i) inventory and its proceeds ii) bank credit card receivables and iii) the balance on deposit from time to time in a bank account that has been pledged to the lenders.

At July 31, 2004, the borrowing capacity of the Companies under the Financing Agreement with CIT, after satisfying the $5 million minimum availability requirement, was $7.2 million, trade letters of credit for the account of the Companies were outstanding in the amount of $27.0 million, standby letters of credit were outstanding in the amount of $6.1 million and no loan from CIT was outstanding. The Company’s cash and cash equivalents of $18.4 million were unrestricted.

In January 2002, the Company executed a five-year $8.2 million sale and lease back agreement for certain fixtures in new and remodeled stores. The lease bears an interest rate of 7.0% per annum. The Company was required to pay sales tax as part of the agreement. The agreement provides for equal monthly rent payments beginning February 2002 and gives the Company the option of buying back the fixtures at the end of the term for a nominal price.

Between January 2002 through January 2003, the Company executed a series of three-year capital lease agreements for call center systems at the Company’s national distribution center in Troy, Ohio, bearing interest at rates between 6.09% to 6.64% per annum aggregating approximately $1.4 million. The Company has the option of buying the systems at the end of the term for a nominal price.

4. Income Taxes

In November 2003, the Company agreed in principle with the Internal Revenue Service (“IRS”) on a settlement and the closure of its examination of the Company’s tax returns for the years through 1996.

In November 2003, the Company also agreed in principle with the IRS on the settlement of a matter related to tax refund claims the Company had filed for research credits and for deductions attributable to certain bank financing transactions during 1989 to 1992. In April 2004, the Company received payment from the IRS in the amount of $2.5 million which was initially deferred on the balance sheet. The Company has recently received final clearance from the IRS regarding this amount. Consequently, the Company has recognized the benefit of the refund claims, including the related interest thereon during the second fiscal quarter of 2004. $1.1 million was recorded as an increase to additional paid-in capital as it related to stock warrant deductions, $1.2 million of interest income was recorded in the Company’s results of operations and $0.2 million in federal tax benefit was recorded related to research credits. An additional payment of approximately $0.3 million was received in August 2004 in connection with further claims related to research credits.

The Company recorded a $7.3 million non-cash charge to establish a valuation allowance for its net deferred tax assets and net operating loss carryforwards in the fourth quarter of fiscal 2002. The valuation allowance was calculated in accordance with the provisions of SFAS No. 109, “Accounting for Income Taxes” (SFAS No. 109), which places significant importance on the Company’s cumulative operating results in the most recent three-year period when assessing the need for a valuation allowance. The Company’s cumulative loss in the three-year period ended February 1, 2003, which included the net loss reported in the fourth quarter of fiscal 2002, was sufficient to require a full valuation allowance under the provisions of SFAS No. 109. The Company recorded additional valuation allowances of $12.6 million and $2.6 million in the fiscal year ended January 31, 2004 and twenty-six week period ended July 31, 2004, respectively. The Company intends to maintain a valuation allowance for its net deferred tax assets and net operating loss carryforwards until sufficient positive evidence exists to support its reversal.

5. Stock Appreciation Rights Plan

Commencing in May 2000 and annually thereafter, each nonmanagement Director received an award under the Company’s Stock Appreciation Rights Plan that provides for a cash payment by the Company when the Director exercises the stock option granted to him contemporaneously under the Company’s Stock Option Plans. The payment will be an amount equivalent to the after tax equity in the option that is being exercised, that is, the excess of the then current market price of the shares issued over the exercise price of the corresponding option plus any personal income tax withholding on the gain arising from the exercise.

6. Supplemental Cash Flow Information

Net cash flow from operating activities reflects cash payments for interest and income taxes as follows (dollars in thousands):

	Thirteen Weeks Ended		Twenty-Six Weeks Ended
	July 31, 2004	August 2, 2003	July 31, 2004	August 2, 2003
Net cash interest income (expense) received (paid), including interest income of $1,193, $45, $1,207 and $55	$971	($249)	$778	($505)
Net income taxes refunded	$1,339	$1,114	$1,324	$1,075

Non-cash financing activities include the acquisition of 279,870 shares of Company common stock within the deferred compensation plan in the second quarter of fiscal 2004 which cost $651,000 and is reflected as a reduction in equity in the balance sheet.

7. Contingencies

The Company is involved in legal actions and claims arising in the ordinary course of business. Management believes (based on advice of legal counsel) that such litigation and claims, net of reserves, will not have a material adverse effect on the Company’s financial position, annual results of operations or annual cash flows.

In addition, on May 1, 2003, a suit in California Superior Court, Los Angeles County, styled Erik Stanford vs. United Retail Incorporated was served on the Company by a former store manager in California. On March 3, 2004, an amended complaint was served that added another plaintiff. The suit is purportedly a class action on behalf of certain current and former associates in California in the previous four years.

The plaintiffs in the Stanford case assert state wage and hour claims.

The Company intends to oppose class certification strongly and to defend the Stanford case vigorously on the merits at trial, which is likely to be scheduled to take place after fiscal 2004. However, the plaintiffs have raised the possibility of settlement (without making a specific settlement demand) and the Company intends to participate in mediation proceedings to resolve the matter. Mediation is scheduled for the third quarter of fiscal 2004 but might extend beyond then.

Although counsel is unable to predict the ultimate outcome of the Stanford case, management does not believe that the case will have a material impact on the Company’s financial position. However, given the uncertainty at this stage, it is possible that if either an adverse judgment for damages is rendered or a negotiated settlement is agreed upon, the amount payable could be material to the Company’s annual cash flows. Further, the amount payable, net of reserves, could be material to the Company’s results of operations for the fiscal year in which the matter is resolved.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

EXECUTIVE SUMMARY

Introduction

The Executive Summary section of Management’s Discussion and Analysis of Financial Condition and Results of Operations provides a high level summary of the more detailed information elsewhere in this Report, an overview to put this information in context and a plan to return the Company to long-term profitability. This section is also an introduction to the discussion and analysis that follows. Accordingly, it necessarily omits details that appear elsewhere in this Report. It should not be relied upon separately from the balance of this Report.

Products and Purchasing

United Retail Group, Inc. and its subsidiaries (collectively, the “Company”) is a leading specialty retailer featuring its proprietary AVENUE® brand large size (14 or larger) women’s wearing apparel. It also offers AVENUE BODY® brand large size women’s undergarments and lingerie, CLOUDWALKERS® brand women’s footwear and AVENUE® brand large size women’s hosiery, as well as AVENUE® brand accessories and gifts.

Most of the Company’s products are made for the Company by contract manufacturing abroad.

Customer Base

The Company serves the mass market in the United States and targets fashion conscious women between 25 and 55 years of age who wear large size apparel. Management believes that the number of women in this age range who wear large size apparel has increased in recent years.

Merchandising and Marketing

Design is an important aspect of the Company’s apparel. Many AVENUE® and AVENUE BODY® products are custom designed. The Company emphasizes a contemporary brand image and consistency of merchandise quality and fit.

The Company uses direct mail, credit card statement inserts, in-store signage and e-mail messages in its marketing activities and plans to use print media selectively.

Channel of Distribution

The Company’s channel of distribution is retail stores using its AVENUE® trade name. It leases 530 stores in 37 states, principally in strip shopping centers. The Company also operates a website at www.avenue.com that sells a selection of the merchandise that is also on sale in the stores.

Until March 2003, the Company also mailed catalogs that featured a merchandise selection that included both items in the stores and similar products. (The website and the catalog, while it was in existence, are referred to as the “shop@home” business.)

Increased Competition

The women’s retail apparel and shoe industries are highly competitive. Operating results of businesses in these industries, especially businesses that emphasize fashionable merchandise, can vary materially from time to time. The Company’s competition includes other specialty retailers, mass merchants, department stores, discount stores, mail order companies, television shopping channels and Internet websites. Management believes that total sales of large size women’s apparel from these sources of supply increased in recent years. Among specialty retailers for large size women like the Company, the competition includes large store chains that have announced long-term store growth plans to aggressively expand into additional strip shopping center locations.

Deflationary Price Trend in Apparel Industry

The Consumer Price Index published by the U.S. Dept. of Labor, Bureau of Labor Statistics city average for women’s and girls’ apparel (the “CPI”) declined 5.0% in fiscal 2001, 1.9% in fiscal 2002 and 1.8% in fiscal 2003. There is no assurance that this deflationary trend will not continue.

Company Sales Fluctuations

Sales figures and merchandise margins are central to regaining the Company’s profitability. The Company conducts a weekly interdisciplinary review of sales and merchandise margins and prepares budgets for two six-month seasons each year, the Spring season and the Fall season. Management uses comparable store sales (for stores open at least 12 months at the time) as an analytical tool. However, there is no industry standard for calculating comparable store sales and the Company’s approach may differ from those of competitors.

Seasonal sales and CPI data follows:

	2001		2002		2003		2004
	Spring	Fall	Spring	Fall	Spring	Fall	Spring
Total store sales ($ millions)*	$208.8	$206.7	$225.1	$198.7	$203.5	$187.7	$196.0

Sales per average store ($000's)	$393	$373	$406	$356	$371	$344	$368

Average number of stores	532	554	555	558	548	545	532

Comparable store sales	-3.4%	-2.1%	+3.2%	-5.3%	-9.3%	-4.2%	-2.2%

Six-month CPI**	-3.4%	-1.6%	-1.9%	0.0%	-1.4%	-0.4%	+0.4%

* Excluding shop@home sales
**U.S. Dept. of Labor, U.S. City Average, Women’s and Girls’ Apparel (for 2004, January through June)

Operating Results

The declines in sales per average store from Spring 2001 to Fall 2003 adversely affected operating results.

The Company had net income of $0.4 million in fiscal 2001 and incurred net losses of $23.1 million in fiscal 2002 and $19.1 million in fiscal 2003 and $4.9 million in Spring 2004. The Company had operating income of $0.6 million in fiscal 2001 and incurred operating losses of $22.8 million in fiscal 2002 and $18.8 million in fiscal 2003 and $5.8 million in Spring 2004.

In order to absorb normal cost inflation and return to long-term profitability, it will be necessary for the Company to increase sales per average store to levels better than in fiscal 2001 with merchandise margins at least as high.

Product Repositioning Plan

In the women’s retail specialty apparel industry, sales, especially in businesses that emphasize fashionable merchandise, can vary significantly over time. Sales are volatile because of shifts in consumer spending patterns, consumer preferences and overall economic conditions; the impact of competition; variations in weather patterns; fluctuations in consumer acceptance of products; changes in the ability to develop new merchandise; differences in promotional strategies; and movements in consumer confidence levels. These variables caused the Company’s sales per average store to fluctuate in the past. Thus, recent sales performance is not necessarily indicative of future sales performance. As a result, management believes that long-term sales projections within a defined narrow range are not reliable.

After fiscal 2001, when net income declined to $0.4 million, the Company incurred net losses. Since then, the Company has sought to absorb normal cost inflation and return to long-term profitability through a goal of sales per average store better than in fiscal 2001 with merchandise margins at least as high. This unrealized financial goal was translated early in fiscal 2003 into an integrated operational plan designed to reposition the Company’s product offering. This plan has four principal components: (i) to improve the design of the Company’s merchandise and thereby differentiate it from competitors’ merchandise, (ii) to market more items together as coordinated outfits rather than separately as individual garments, (iii) to put more emphasis on fashionable merchandise and less on basic items, and (iv) to raise the level of merchandise presentation in the store to make shopping easier and to encourage outfit buying. This plan relies primarily on the Company’s intellectual capital. Only small amounts of financial capital are required to execute the plan.

This section constitutes forward-looking information under the Reform Act, which is subject to the uncertainties and other risk factors referred to under the caption “Future Results.”

Fluctuation in Store Count

Store counts averaged 543, 557 and 546, respectively, for fiscal 2001, 2002 and 2003 and 532 for Spring 2004. In Spring 2004, the Company opened no stores and closed five stores as part of its normal lease maintenance program. The average number of stores is expected to decline further in Fall 2004.

The annual capital expenditure budgets after fiscal 2004 will provide for new store construction and other infrastructure development priorities. Prioritization will be based, among other things, on overall profitability and the availability of suitable locations at rents and on terms that fit the Company’s financial model for new store construction. This paragraph constitutes forward-looking information under the Reform Act, which is subject to the uncertainties and other risk factors referred to under the caption “Future Results.”

Liquidity

United Retail Group, Inc. and certain of its subsidiaries (collectively, the “Companies”) are parties to a Financing Agreement, dated August 15, 1997, as amended (the “Financing Agreement”), with The CIT Group/Business Credit, Inc. (“CIT”). The Financing Agreement provides credit on a revolving basis.

The Company’s historical sources of liquidity have been the availability of credit under the Financing Agreement on a revolving basis and short-term trade credit, as well as its cash on hand and net cash provided by operating activities. Management believes that the sources of liquidity mentioned in the preceding sentence will continue to be adequate to meet the Company’s cash requirements to conduct operations in the Fall 2004 season and the Spring 2005 season, respectively, in a manner consistent with the comparable seasonal operating results in the previous year. However, in the event the Company incurs an operating loss in Fall 2004 materially higher than in Fall 2003 or in Spring 2005 materially higher than in Spring 2004, additional sources of liquidity might be required. This paragraph contains forward-looking information under the Reform Act and is subject to the uncertainties and other risk factors referred to under the caption “Future Results.”

The Company’s cash requirements include, among other things, (i) anticipated working capital needs, including seasonal inventory financing, (ii) financing activities, including payments due on its principal contractual obligations, (iii) investing activities, including costs for building stores and replacing fixtures where appropriate and (iv) litigation costs.

DISCUSSION AND ANALYSIS

(The following two sections provide details about the material line items in the Company’s statements of operations.)

Second Quarter of Fiscal 2004 Versus Second Quarter of Fiscal 2003

Net sales for the second quarter of fiscal 2004 decreased 3.4% from the second quarter of fiscal 2003, to $101.3 million from $104.8 million, principally from lower prices. Comparable store sales for the second quarter of fiscal 2004 decreased 2.2%. (Comparable store sales are at stores that were open at least 12 months; this measure of sales performance is used by management to filter out the generally unrepresentative sales results of new stores.) Average number of stores decreased from 546 to 532. See, “Stores.”

Gross profit decreased to $20.9 million in the second quarter of fiscal 2004 from $21.7 million in the second quarter of fiscal 2003 decreasing as a percentage of net sales to 20.6% from 20.7%. Gross profit as a percentage of net sales decreased principally because of higher marketing expenses. Gross profit levels in the future will be subject to the uncertainties and other risk factors referred to under the caption “Future Results.”

General, administrative and store operating expenses decreased to $23.6 million in the second quarter of fiscal 2004 from $25.6 million in the second quarter of fiscal 2003 decreasing as a percentage of net sales to 23.3% from 24.4%. The percentage decrease was principally because of lower expenses for self-insured employee healthcare benefits and workers’ compensation benefits in the current quarter.

The Company incurred operating losses of $2.7 million in the second quarter of fiscal 2004 and $3.9 million in the second quarter of the previous year.

Interest income was $1.2 million in the second quarter of fiscal 2004, principally as a result of the recognition of interest from the Internal Revenue Service on the settlement of certain tax claims asserted by the Company. During the quarter, the Company received final clearance from the IRS on the settlement. The claims related to deductions attributable to stock purchase warrants used in bank financing transactions prior to 1993 and to research credits. Interest income was $45,000 in the second quarter of fiscal 2003.

The Company’s effective tax rate was 10.6% for the second quarter of fiscal 2004 and (2.1%) for the second quarter of fiscal 2003. The primary factor contributing to this rate in each period was the valuation allowance provided for the Company’s net operating loss (“NOL”) carryforwards and other net deferred tax assets. The tax valuation allowance was increased by $1.2 million in the second quarter of fiscal 2004 and by $1.9 million in the second quarter of fiscal 2003.

The benefit from income taxes was $0.2 million for the second quarter of fiscal 2004, principally from $0.2 million for research credits included in the IRS settlement. The provision for income taxes was $0.1 million for the second quarter of fiscal 2003, primarily representing state taxes.

The Company incurred net losses of $1.6 million in the second quarter of fiscal 2004 and $4.2 million in the second quarter of fiscal 2003.

See, “Critical Accounting Policies” for a discussion of estimates made by management in preparing financial statements in accordance with generally accepted accounting principles.

First Half of Fiscal 2004 Versus First Half of Fiscal 2003

Net sales for the first half of fiscal 2004 decreased 3.7% from the first half of fiscal 2003, to $198.8 million from $206.3 million, principally from lower prices. Comparable store sales for the first half of fiscal 2004 decreased 2.2%. Average number of stores decreased from 548 to 532.

Gross profit decreased to $41.7 million in the first half of fiscal 2004 from $43.8 million in the first half of fiscal 2003 decreasing as a percentage of net sales to 21.0% from 21.2%. Gross profit as a percentage of net sales decreased principally because of higher freight costs, partially offset by reduced inventory “shrinkage.”

General, administrative and store operating expenses decreased to $47.6 million in the first half of fiscal 2004 from $52.0 million in the first half of fiscal 2003 decreasing as a percentage of net sales to 23.9% from 25.2%. The percentage decrease was principally because of lower expenses for self-insured workers’ compensation benefits and employee healthcare benefits in the current half.

The Company incurred operating losses of $5.8 million in the first half of fiscal 2004 and $8.2 million in the first half of the previous year.

The Company’s effective tax rate was 2.7% for the first half of fiscal 2004 and (2.0%) for the first half of fiscal 2003. The tax valuation allowance was increased by $2.6 million in the first half of fiscal 2004 and by $4.0 million in the first half of fiscal 2003.

The benefit from income taxes was $0.1 million for the first half of fiscal 2004. The provision for income taxes was $0.2 million for the first half of fiscal 2003, primarily representing state taxes.

The Company incurred net losses of $4.9 million in the first half of fiscal 2004 and $8.8 million in the first half of fiscal 2003.

August Sales Results

Net sales for August 2004 decreased 3.2% from August 2003, to $24.1 million from $24.9 million. Comparable store sales for the month decreased 2.1%. The fiscal month of August 2003 included the Saturday before the Labor Day holiday. The fiscal month of August 2004 ended before the Labor Day weekend. Accordingly, the Company’s current sales performance versus last year can be measured more accurately when comparable store sales data for the two-month period of August and September combined becomes available.

Increased Competition

Product Repositioning Plan

After fiscal 2001, when net income declined to $0.4 million, the Company incurred net losses. Since then, the Company has sought to absorb normal cost inflation and return to long-term profitability through a goal of sales per average store better than in fiscal 2001 with merchandise margins at least as high. This unrealized financial goal was translated in early fiscal 2003 into an integrated operational plan designed to reposition the Company’s product offering. This plan has four principal components: (i) to improve the design of the Company’s merchandise and thereby differentiate it from competitors’ merchandise, (ii) to market more items together as coordinated outfits rather than separately as individual garments, (iii) to put more emphasis on fashionable merchandise and less on basic items, and (iv) to raise the level of merchandise presentation in the store to make shopping easier and to encourage outfit buying. This plan relies primarily on the Company’s intellectual capital. Only small amounts of financial capital are required to execute the plan.

This section constitutes forward-looking information under the Reform Act, which is subject to the uncertainties and other risk factors referred to under the caption “Future Results.”

Liquidity and Capital Resources

(This section provides details about the Company’s principal sources of liquidity.)

Cash Flow

Net cash provided from operating activities was $5.1 million in the first half of fiscal 2004 and $13.7 million in the first half of fiscal 2003. This change resulted principally from smaller decreases in inventory ($0.5 million in the first half of fiscal 2004 versus $16.7 million in the first half of fiscal 2003) and accounts receivable ($0.6 million in the first half of fiscal 2004 versus $1.7 million in the first half of fiscal 2003) partially offset by an increase in accounts payable and accrued expenses of $2.0 million in the first half of fiscal 2004 versus a decrease in that item of $4.6 million in the first half of fiscal 2003 and a smaller net loss ($4.9 million in the first half of fiscal 2004 versus $8.8 million in the first half of fiscal 2003).

Balance Sheet Sources of Liquidity

The Company’s cash and cash equivalents were $18.4 million at July 31, 2004 compared with $23.9 million at August 2, 2003 and $14.4 million at January 31, 2004.

Inventories were stated at $48.5 million at July 31, 2004 compared with $44.9 million at August 2, 2003, principally as a result of more units, and compared with $49.1 million at January 31, 2004. (See, “Critical Accounting Policies – Inventory” for a discussion of estimates made by management in stating inventories in financial statements prepared in accordance with generally accepted accounting principles.) The additional units of inventory were primarily new Fall merchandise items.

Property and equipment decreased to $71.4 million at July 31, 2004 from $83.0 million at August 2, 2003, principally from depreciation, compared with $76.7 million at January 31, 2004.

Other Liquidity Sources

Import purchases by the Company are made in U.S. dollars. Imports are generally financed by trade letters of credit. They constituted approximately 53% of total purchases in fiscal 2003.

The Financing Agreement was extended and expanded during fiscal 2003. The term was extended three years to August 15, 2008. The line of credit was increased from $40 million to $50 million for the Companies, subject to availability of credit as described in the following paragraphs. The line of credit may be used on a revolving basis by any of the Companies to support trade letters of credit and standby letters of credit and to finance loans. At July 31, 2004, trade letters of credit for the account of the Companies and supported by CIT were outstanding in the amount of $27.0 million and standby letters of credit were outstanding in the amount of $6.1 million. Standby letters of credit were used principally in connection with insurance policies issued to the Company. Subject to the following paragraph, the availability of credit (within the aggregate $50 million line of credit) to any of the Companies at any time is the excess of its borrowing base over the sum of (x) the aggregate outstanding amount of its letters of credit and its revolving loans, if any, and (y) at CIT’s option, the sum of (i) unpaid sales taxes, and (ii) up to $500,000 in total liabilities of the Companies under permitted encumbrances (as defined in the Financing Agreement). The borrowing base, as to any of the Companies, is the sum of (x) a percentage of the book value of its eligible inventory (both on hand and unfilled purchase orders financed with letters of credit), ranging from 65% to 75% depending on the time of year, (y) the balance from time to time in an account in its name that has been pledged to the lenders (a “Pledged Account”) and (z) 85% of certain receivables from credit card companies.

The provisions of the preceding paragraph to the contrary notwithstanding, the Companies are required to maintain unused at all times combined asset availability of at least $5 million. Except for the maintenance of a minimum availability of $5 million and a limit on capital expenditures, the Financing Agreement does not contain any significant financial covenants.

The combined borrowing capacity of the Companies is cyclical due to the seasonality of the retail industry. At July 31, 2004, the combined borrowing capacity of the Companies, after satisfying the $5 million minimum availability requirement, was $7.2 million; the Pledged Account had a zero balance; the Companies’ cash on hand was unrestricted; and no loan was outstanding.

The line of credit is collateralized by a security interest in (i) inventory and its proceeds, (ii) receivables from credit card companies and (iii) the balance from time to time in the Pledged Account.

The Financing Agreement includes certain restrictive covenants that impose limitations (subject to certain exceptions) on the Companies with respect to making certain investments, declaring or paying dividends, making loans, engaging in certain transactions with affiliates, or consolidating, merging or making acquisitions outside the ordinary course of business.

The Company has drawn on the revolving loan facility under the Financing Agreement from time to time to meet its peak working capital requirements. Interest is payable monthly based on a 360-day year either at the prime rate plus an incremental percentage up to 0.75% per annum or at the LIBOR rate plus an incremental percentage ranging from 1.75% to 2.50% per annum. The borrower can select either the prime rate or the LIBOR rate as the basis for determining the interest rate. In either case, the incremental percentage is determined by the average excess availability.

The Company’s obligation to pay customs duties on merchandise imports was collateralized by an unsecured surety bond for $1.5 million during the first quarter of fiscal 2003. The surety bond is now $2.0 million. The tightening market for surety bonds has made it necessary for the Company to support the surety bond with a standby letter of credit under the Financing Agreement in the amount of $0.5 million.

Short-term trade credit represents a significant source of financing for domestic merchandise purchases. Trade credit arises from the willingness of the Company’s domestic vendors to grant extended payment terms for inventory purchases and is generally financed either by the vendor or a third-party factor. The availability of trade credit depends on the Company’s having other sources of liquidity, as well. In particular, credit authorizations by trade creditors focus on the amount of the Company’s cash and cash equivalents and its borrowing capacity under the Financing Agreement.

In November 2003, the Company agreed in principle with the IRS on the settlement of tax refund claims the Company had filed for research credits and for deductions attributable to certain bank financing transactions during 1989 to 1992. In April 2004, the Company received payment from the IRS in the amount of $2.5 million (which was initially deferred on the balance sheet); the Company recently received final clearance from the IRS regarding this amount. Consequently, the Company recognized the benefit of these refund claims, including the related interest thereon, during the second quarter of fiscal 2004.

(The following three sections provide details about certain uses of cash by the Company.)

Capital Expenditures

Capital expenditures in the first half of fiscal 2004 were $0.6 million compared with $1.8 million in the first half of fiscal 2003.

Capital expenditures are projected to be approximately $3.0 million for fiscal 2004, including implementation of the Company’s product repositioning plan. This paragraph constitutes forward-looking information under the Reform Act and is subject to the uncertainties and other risk factors referred to under the caption “Future Results.”

Principal Contractual Obligations and Certain Other Commercial Commitments

The principal contractual obligations of the Company and certain other commercial commitments at July 31, 2004 (see, also “Critical Accounting Policies – Incurred But Not Reported Claims For Personal Injuries and Medical Benefits”) are summarized in the following charts:

	Payments Due by Period (000's omitted)
Principal Contractual Obligations	Total Payments Due (000's omitted)	Less than 1 Year	1-3 Years	4-5 Years	Over 5 Years
Fixture Capital Leases*	$4,310	$1,674	$2,636	$0	$0
Distribution Center Mortgage*	3,650	663	1,512	1,475	0
Call Center Systems Capital Lease	370	345	25	0	0
Total	$8,330	$2,682	$4,173	$1,475	$0

	Amount of Commitment Per Period (000's omitted)
Certain Other Commercial Commitments	Total Amounts Committed (000's omitted)	Less than 1 Year	1-3 Years	4-5 Years	Over 5 Years
Operating Leases	$259,158	$43,471	$73,762	$56,604	$85,321
Trade Letters of Credit**	26,986	26,986	0	0	0
Standby Letters of Credit	6,145	6,145	0	0	0
Customs Duties Bond***	1,500	1,500	0	0	0
Total	$293,789	$78,102	$73,762	$56,604	$85,321

*The proceeds of the fixture capital leases were principally used to partially finance new store construction in fiscal 2001. The proceeds of the distribution center mortgage were principally used to partially finance the construction cost of the Company’s national distribution center, which was completed in fiscal 1993.

**Trade letters of credit support Company obligations under certain purchase orders for merchandise imports for which payment is not yet due. (Other purchase orders represent material commercial obligations but are not supported by trade letters of credit.)

***The Company maintains a surety bond for customs duties in the amount of $2.0 million, which is supported by a standby letter of credit in the amount of $0.5 million included on the Standby Letters of Credit line.

Pending Litigation

The plaintiffs in the Stanford case assert state wage and hour claims.

Meeting Cash Requirements

During the first half of fiscal 2004, the Company funded repayments of long term debt and payments on capital lease obligations and net cash used in investing activities from net cash provided by operating activities. The Company’s historical sources of liquidity have been the availability of credit under the Financing Agreement on a revolving basis and short-term trade credit, as well as its cash on hand and net cash provided by operating activities.

Management believes the sources of liquidity mentioned in the preceding paragraph will continue to be adequate to meet the Company’s cash requirements to conduct operations in the Fall 2004 season and the Spring 2005 season, respectively, in a manner consistent with the seasonal operating results in the previous year. However, in the event the Company incurs an operating loss in Fall 2004 materially higher than in Fall 2003 or in Spring 2005 materially higher than in Spring 2004, additional sources of liquidity might be required.

This section constitutes forward-looking information under the Reform Act and is subject to the uncertainties and other risk factors referred to under the caption “Future Results.”

Critical Accounting Policies

Introduction

This section discusses the Company’s critical accounting policies.

Financial statements prepared by companies in accordance with generally accepted accounting principles are affected by the policies followed by management in preparing them. Some accounting policies require difficult, subjective or complex judgments by corporate management, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Among the most important accounting policies of the Company that involve such management judgments are (i) the use of the retail method of accounting for inventory, (ii) the use of estimates of incurred but not reported claims for uninsured damages for personal injuries, for self-insured workers’ compensation benefits and for benefits under the Company’s self-insured medical, dental and prescription plans for its associates, as well as future development costs of reported claims (collectively, “IBNR Claims”) and (iii) determining whether to continue the valuation allowance for the Company’s net deferred tax assets, including NOL’s.

Inventory

In accordance with generally accepted accounting principles, inventories are stated at the lower of cost or market. The Company utilizes the retail method, under which a cost-to-price relationship is developed on the basis of original cost as compared to initial retail selling price. The valuation of inventories at cost and the resulting margins are calculated by applying this cost-to-price relationship to the retail value of inventories. Consequently, the use of the retail inventory method results in valuing inventories at lower of cost or market.

Inherent in the retail inventory method are management estimates on current and future selling value of the inventory. These estimates, which are described in the following paragraphs, can significantly impact the ending inventory valuation at cost, as well as resulting margins. In the women’s retail specialty apparel industry, sales, especially in businesses that emphasize fashionable merchandise, can vary significantly over time. Sales are volatile because of shifts in consumer spending patterns, consumer preferences and overall economic conditions; the impact of increased competition; variations in weather patterns; fluctuations in consumer acceptance of products; changes in the ability to develop new merchandise; differences in promotional strategies; and movements in consumer confidence levels. The necessity for management estimates based on these variables, coupled with the fact that the retail inventory method is an averaging process, can produce inventory valuations at any point in time that are inexact.

Permanent markdowns, when taken, reduce both the price and cost components of inventory on hand, which maintains the established cost-to-price relationship. Deferred markdowns can result in an overstatement of inventories under the lower of cost or market principle. Accordingly, at the end of each six-month season, management conducts a thorough review of inventory on hand. Based on management’s business judgment, the Company may reduce further the carrying value of inventories by recording a markdown reserve. Markdown reserves are established for inventory categories with sales performance below expectations and/or unsold quantities in excess of expectations. Also, a markdown reserve is established by management to reduce the carrying value of obsolete categories of merchandise to their estimated net realizable value.

The markdown reserves at the end of the second quarter of fiscal 2004, fiscal 2003 and fiscal 2002, respectively, ranged from a high of $1.8 million to a low of $1.5 million. Giving effect to these reserves, inventories were stated at approximately $48.5 million at July 31, 2004, $44.9 million at August 2, 2003 and $58.1 million at August 3, 2002.

Markdown reserves are likely to continue to fluctuate, principally because the market environment is dynamic for the reasons set forth above. However, a consistent methodology for markdown reserves is one of the Company’s important accounting objectives.

Recording a reserve reduces the inventory on the Company’s balance sheet and is charged to the Company’s cost of sales. If inventories, net of reserves, were overestimated at the end of a period, assets and income for that period would be overstated and margins for the beginning of the next period would be lower. (The opposite would be true if inventories were underestimated.)

Management believes that the inventories shown on all the balance sheets included in the financial statements contained in this Report were properly stated in all material respects.

Incurred But Not Reported Claims For Personal Injuries and Medical Benefits

In accordance with generally accepted accounting principles, the Company records a liability for IBNR Claims. This liability is based on (i) the number and size of outstanding claims, (ii) a comparison between the dates paid claims were incurred and the dates they were paid, (iii) an analysis of the amounts previously paid, (iv) projections of inflation in medical costs and (v) advice from time to time from its insurance broker. (The Company has insurance policies with coverage for personal injury claims but it remains liable for a self-insured retention, which is collateralized by standby letters of credit under the Financing Agreement. The Company is self-insured for most workers’ compensation benefits and for its medical, dental and prescription plans for associates but it has stop loss insurance policies to limit its liability.) The estimates underlying the liability for IBNR Claims are matters of judgment on which insurance experts may differ.

If the outcome of claims made with respect to a fiscal period were to exceed the recorded IBNR liability for that period, the liabilities on the balance sheet would have been understated and income would have been overstated for the period in question. (The opposite would be true if the subsequent outcome was less than the recorded IBNR liability.)

As the use of different estimates would change the IBNR liability recorded materially, a consistent approach to estimating liability for IBNR Claims is one of the Company’s important accounting objectives.

Management believes that the liabilities for IBNR Claims reflected in the balance sheets at July 31, 2004 and August 2, 2003 included in the financial statements contained in this Report were fairly stated in all material respects, subject to the uncertainties of litigation and the risk of different than anticipated inflation in medical costs.

Tax Valuation Allowance

In fiscal 2002, the Company recorded a $7.3 million charge to establish a valuation allowance for its NOL carryforwards and other net deferred tax assets. The tax valuation allowance was calculated in accordance with the provisions of SFAS No. 109, “Accounting for Income Taxes” (“SFAS No. 109”), which places significant importance on the Company’s cumulative operating results in the most recent three-year period when assessing the need for a tax valuation allowance. The tax valuation allowance was increased by $12.6 million in fiscal 2003 and by $2.6 million in the first half of fiscal 2004.

The Company intends to maintain a valuation allowance for its net deferred tax assets until management determines that sufficient positive evidence regarding operating results exists to support reversal of the allowance remaining at that time. A reversal of the tax valuation allowance would improve the Company’s net income/loss. Accordingly, whether to continue a tax valuation allowance is one of the Company’s important accounting matters.

Private Label Credit Cards Issued By The Bank

The Company and World Financial Network National Bank (the “Bank”) are parties to a Private Label Credit Card Program Agreement, dated January 27, 1998 (as amended, the “Credit Card Program Agreement”).

Under the Credit Card Program Agreement, the Bank issues credit cards to eligible Company customers who apply to the Bank. Net credit sales volume with the Bank increased to $58.6 million in the first half of fiscal 2004 from $55.1 million in the first half of fiscal 2003. Customers must meet standards for creditworthiness set by the Bank with the approval of the Company, provided, however, that the Bank shall take any actions required to prevent unsafe and unsound banking practices. The credit cards issued by the Bank are co-branded with both the Company’s AVENUE service mark and the Bank’s name. The credit cards are used only for merchandise and services offered by the Company. Credit card holders remit payments to the Bank, generally by mailing personal checks. The Bank also handles all statement processing, payment processing, cardholder customer service and collections from delinquent cardholders.

In accordance with generally accepted accounting principles, the Company does not include the receivable asset created under the Credit Card Program Agreement in the Company’s accounts receivable on its balance sheets because the Company has no interest in the customer accounts or receivables. In this connection, it should be noted that the Credit Card Program Agreement states that (i) the Bank is the sole and exclusive owner of all customer accounts, (ii) the Company has no interest in the customer accounts and (iii) the Bank is the creditor in respect of receivables (defined in the Credit Card Program Agreement as amounts owed with respect to retail purchases, finance charges, deferred finance charges, other fees and charges for sales tax). Also, depending on the circumstances, the Company might not purchase the accounts from the Bank upon the expiration of the contractual term.

The Credit Card Program Agreement is currently scheduled to expire on February 28, 2007. The Company shall then have the right to purchase the customer accounts from the Bank for a price equal to the receivables. Also, the Bank shall then have the right to sell the customer accounts to the Company at that price if the Company commences a private label credit card program either on its own or through another issuer of credit cards. When the Credit Card Program Agreement is about to expire without being renewed, the Company is likely to submit requests for proposals to other banks that issue private label credit cards to retailers’ customers and to use the banks’ proposals to evaluate a continuation of the private label credit card program. There is no assurance, however, that other banks would make proposals to continue the program on terms satisfactory to the Company or that the Company could finance a program on its own without involving a bank.

Receivables as defined in the Credit Card Program Agreement at the close of the last billing cycle in the second quarter were $72.9 million in fiscal 2004 and $75.0 million in fiscal 2003.

The credit card program premium (or, potentially, discount) reflected in general, administrative and store operating expenses is an amount equal to royalties paid to the Company by the Bank minus costs charged by the Bank. Costs are based on the volume of credit card program processing activities performed by the Bank.

General, administrative and store operating expenses were offset in part by premiums received from the Bank of $2.3 million in the first half of fiscal 2004 and $1.8 million in the first half of fiscal 2003. The increase in premiums from the Bank was primarily due to a decrease in bad debt write-offs by the Bank, partially offset by lower finance income.

Royalties are based on program revenues minus receivables written off by the Bank and the cost of funds for the program. For up to the first $85 million of receivables, cost of funds means the one-year Constant Maturities Treasury (“CMT”) rate plus 25 basis points to be reset every three months (the published CMT rate was 2.16% per annum at July 30, 2004). However, the CMT rate shall not be more than 6.75% per annum and not be less than 5.00% per annum for the purpose of this calculation. (The Bank’s receivables for the program were less than $85 million at July 31, 2004, but, if they grew larger than that amount, the cost of funds for the excess would be based primarily on the cost of borrowing of a trust for the purpose of securitizing receivables.)

Stores

The Company’s channel of distribution is retail stores using its AVENUE® trade name. The Company leased 530 stores at July 31, 2004.

Store counts averaged 543, 557 and 546, respectively, for fiscal 2001, 2002 and 2003 and 532 for Spring 2004. In Spring 2003, the Company opened two stores and closed 11 stores. In Spring 2004, the Company opened no stores and closed five stores as part of its normal lease maintenance program. The average number of stores is expected to decline further in Fall 2004.

Retail selling space was approximately 2.3 million square feet at July 31, 2004 and 2.4 million square feet at August 2, 2003.

Depreciation and amortization of property and equipment relate principally to assets in stores and were $5.9 million in the first half of fiscal 2004 and $6.3 million in the first half of fiscal 2003.

E-Commerce

The Company has an Internet site (www.avenue.com) that sells a selection of the merchandise that is also for sale in the Company’s stores. The Company ships its avenue.com orders from its national distribution center in Troy, Ohio.

Sales on the website have not been material to the Company’s operations.

Suspension of Catalog Operations

The Company mailed catalogs until March 2003, when the Company suspended catalog mailings indefinitely.

Stock Repurchases

The Company did not repurchase shares of its own stock in the first half of fiscal 2004 except that the trust under the Company’s Supplemental Retirement Savings Plan (“SRSP”) purchased 279,870 shares using funds in the deferred compensation account of Raphael Benaroya, the Company’s Chairman, President and Chief Executive Officer. The shares held in Mr. Benaroya’s SRSP account are treasury shares. The Company has no plans to repurchase shares of its own stock at present except with trust funds under the Company’s SRSP to satisfy obligations that may arise under that plan to invest a portion of participants’ accounts in Company stock.

With respect to the deferred compensation obligations of the SRSP, the liability is marked to market and this liability adjustment flows through the statement of operations as either an increase or a decrease in compensation expense. With respect to the SRSP assets, marketable securities are also marked to market except shares of Company stock, which are recorded permanently at cost. This asset adjustment also flows through the statement of operations. The liability adjustment and the asset adjustment are not necessarily equal in amount because of the disparate treatment of Company stock. In the second quarter of fiscal 2004, the market price of Company stock declined and compensation expense was reduced $0.1 million as a result.

Corporate Acquisition Reviews

As a matter of routine, the Company from time to time conducts “due diligence” reviews of businesses that are either for sale as a going concern or are in liquidation. The Company would consider making a bid on a suitable corporate acquisition at an opportune price if adequate financing at acceptable rates were available.

Seasonality

In fiscal 2001, fiscal 2002 and fiscal 2003, the Company’s operating income (loss) was better in the Spring season than in the Fall season.

Future Results

The Company cautions that any forward-looking statements (as such term is defined in the Reform Act) contained in this Report or otherwise made by management of the Company involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond the Company’s control. Accordingly, the Company’s future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements.

The following factors, among others, could affect the Company’s actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements included in this Report or otherwise made by management: threats of terrorism; war risk; shifts in consumer spending patterns, consumer preferences and overall economic conditions; the impact of increased competition; variations in weather patterns; fluctuations in consumer acceptance of the Company’s products; uncertainties relating to execution of the Company’s product repositioning strategy; store lease expirations; risks associated with the financial performance of the World Financial Network National Bank private label credit card program; increases in interest rates; the ability to retain, hire and train key personnel; risks associated with the ability of the Company’s manufacturers to deliver products in a timely manner; and political instability and other risks associated with foreign sources of production. Also, in the Fall season of fiscal 2004, the transition from the international quota system for apparel may disrupt apparel imports into the United States. As a result of these variables, risks and uncertainties, management believes that it is not possible to make reliable projections that the Company’s operating results will fall within a defined narrow range.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company does not hold or issue financial instruments for trading purposes, provided, however, that the trust under the Company’s Supplemental Retirement Savings Plan holds mutual fund shares and other listed securities. See, the subcaption “Stock Repurchases” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Management of the Company believes that its exposure to interest rate risk with financial instruments is not material. See, however, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (i) the eighth paragraph under the caption “Other Liquidity Sources” regarding the variable interest rate payable on revolving loans to the Companies and (ii) the final paragraph under the caption “Private Label Credit Cards Issued By The Bank” for a discussion of the cost of funds associated with the credit cards that are co-branded with the Company’s AVENUE service mark and the name of the issuer of the cards, World Financial Network National Bank.

ITEM 4. CONTROLS AND PROCEDURES.

The Company performed an evaluation, in which the Company's Chief Executive Officer and Chief Financial Officer participated, of its disclosure controls and procedures (as defined by Exchange Act Rule 13a-14(c)) with respect to information required to be disclosed by the Company ("Disclosures") in filings with the Securities and Exchange Commission (the "Commission"). Based on their evaluation, the Company's Chief Executive Officer and Chief Financial Officer each concluded that, as of July 31, 2004, these controls and procedures provided reasonable assurance that Disclosures are (i) recorded, accumulated, processed, summarized and communicated to him on a timely basis and (ii) reported within the time periods specified in the Commission's rules and forms.
During the second quarter of fiscal 2004, there were no changes in the Company's internal control over financial reporting that materially affected or are reasonably likely to materially affect internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LITIGATION.

The subsection in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” captioned “Pending Litigation” is incorporated herein by reference.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
May 2 to May 31	247,616	2.55	-0-	-0-
June 1 to June 30	32,254	2.60	-0-	-0-
July 1 to July 31	-0-	-0-	-0-	-0-

(1) The shares were purchased in open market transactions by the trust under the Company’s Supplemental Retirement Savings Plan with funds in the deferred compensation account of Raphael Benaroya, the Company’s Chairman of the Board, President and Chief Executive Officer.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

(a)	The 12^th Annual Meeting of Stockholders (the “Meeting”) was held on May 28, 2004.

(c)	The Meeting elected all the directors of the Company to serve until the 13^th Annual Meeting of Stockholders and their successors are elected, by the following vote:

Name	For	Withhold Authority to Vote
Joseph A. Alutto	10,044,191	738,284
Raphael Benaroya	10,719,007	63,468
Joseph Ciechanover	10,721,744	60,731
Michael Goldstein	10,691,841	90,634
Ilan Kaufthal	10,750,257	32,218
Vincent P. Langone	10,750,257	32,218
George R. Remeta	10,719,007	63,468
Richard W. Rubenstein	9,947,140	835,335

ITEM 5. OTHER INFORMATION.

(a) Employment Agreements

General Terms

In accordance with its annual practice, on September 6, 2004 United Retail Group, Inc. extended by approximately one additional year the term of the Employment Agreements with Raphael Benaroya, Chairman of the Board, President and Chief Executive Officer, George R. Remeta, Vice Chairman and Chief Administrative Officer, and Kenneth P. Carroll, Senior Vice President-General Counsel and Secretary, respectively (each, an “Executive”). Certain other contractual provisions were changed and, to make the amended contracts more easily readable, each original contract, together with its amendments, was restated in its entirety. On September 3, 2004, the restated contracts had been recommended by the Compensation Committee of the Board of Directors in executive session and then had been approved by the Board of Directors in executive session. (The restated contracts had been discussed at previous executive sessions of the Compensation Committee and the Board, respectively.)

All the Restated Employment Agreements are dated as of September 3, 2004 and have a term (the “Contract Term”) ending on the fifth anniversary of that date. Each contract provides for specified base pay, subject to an automatic annual cost of living increase, and semi-annual cash incentive compensation based on targets set by the Compensation Committee for improving the consolidated operating income (loss) for the six-month periods ending January 31st and July 31st, respectively (each a “season”), each year. Continuation of executive perquisites in accordance with past practice is provided.

Each Restated Employment Agreement grants specified severance pay in the event either (a) that employment is terminated without cause (as defined in the contract) by United Retail Group, Inc. or (b) that (i) United Retail Group, Inc. otherwise breaches the contract in any material respect, (ii) the Executive tenders a letter of resignation specifying the breach and (iii) United Retail Group, Inc. fails to cure the breach within 15 days after the delivery of the letter of resignation (the termination described in clause (a) or the uncured breach described in clause (b) being referred to as “Termination Without Cause”). Alternatively, in the event a corporate change of control (as defined in the contract) occurs and the Executive promptly tenders a letter of resignation (“Resignation For Change of Control”), the Company is obligated to pay the Executive specified resignation compensation. Severance pay or resignation compensation is payable in a lump sum.

In the event of Termination Without Cause or Resignation For Change of Control, the Executive is entitled to the following benefits and additional payments:

pro rata incentive compensation for the current season; if earned;
COBRA health insurance benefits, including supplemental executive preventive medicine and wellness benefits, for himself and his dependents at United Retail Group, Inc.’s expense until the COBRA benefits expire and, thereafter, through the remainder, if any, of the Contract Term equivalent reimbursement of healthcare expenses directly by United Retail Group, Inc.; and
a gross-up to offset personal income tax with respect to the payments made pursuant to clause (ii) of this sentence.

The Restated Employment Agreements require United Retail Group, Inc. to use reasonable efforts to continue $20 million directors’ and officers’ liability insurance coverage during the Contract Term and for three years afterwards. In addition, the Executive is indemnified against any personal excise tax on “golden parachute” payments made to him by United Retail Group, Inc. and the amount of the excise tax indemnity is grossed up to offset personal income tax on the indemnity.

The Restated Employment Agreements forbid the Executive to recruit away any other person who at any time within one year prior to the Executive’s termination was employed by the Company. This anti-raid provision continues during the Contract Term and for 18 months afterwards. Further, the Executive is not permitted to divulge the Company’s confidential information for any unauthorized purpose at any time.

Restated Employment Agreement with Raphael Benaroya

Mr. Benaroya’s Restated Employment Agreement contains the following provisions, among others, in addition to the provisions common to all three contracts.

During the Contract Term, Mr. Benaroya shall serve as the President and Chief Executive Officer and shall report directly to the Board of Directors. His contractual base salary is $685,000 per annum (although at present he is drawing or deferring base salary at the rate of only $590,000 per annum). His semi-annual incentive compensation, in an arrangement dating back more than 10 years, can range from zero to 120% of base salary for the six-month period depending on the degree of success in meeting Compensation Committee goals for improving consolidated operating income (loss).

Mr. Benaroya is covered by a $4 million term life insurance policy (and the Company has maintained a $4 million “key man” life insurance policy on him with the Company as the beneficiary) and group life insurance benefits of an additional $2,380,000, and receives reimbursement of $20,000 per annum for the premium on an individual supplemental disability insurance policy with a gross-up to offset personal income tax on the reimbursement.

In addition to the factors mentioned in the “General Terms” subsection, the election of another person as Chairman or Cochairman of the Board without Mr. Benaroya’s consent constitutes Termination Without Cause of his employment.

In the event of Termination Without Cause of Mr. Benaroya’s employment, his severance pay is three times the sum of (A) his contractual annual base salary at the time, plus, (B) 60% of annual base salary (representing mid-range target incentive compensation), plus (C) $20,000. In the event of Mr. Benaroya’s Resignation For Change of Control, his resignation compensation is three times the sum of (A) his contractual annual base salary at the time, plus (B) $20,000.

In the event of either Mr. Benaroya’s Termination Without Cause or his Resignation for Change of Control, he is entitled at United Retail Group, Inc. expense through the remainder of the Contract Term to continuation of his individual term life insurance policy and group life insurance with a gross-up to offset personal income tax on the cost of $1,500,000 of the total insurance coverage.

Mr. Benaroya shall not compete with the Company, directly or indirectly, during the Contract Term and for 18 months afterwards.

Restated Employment Agreement with George R. Remeta

Mr. Remeta’s Restated Employment Agreement contains the following provisions, among others, in addition to the provisions common to all three contracts.

During the Contract Term, Mr. Remeta shall serve as the Vice Chairman and Chief Administrative Officer and shall report directly to the Chief Executive Officer. His contractual base salary is $500,000 per annum. His semi-annual incentive compensation can range from zero to 100% of base salary for the six-month period depending on the degree of success in meeting Compensation Committee goals for improving consolidated operating income (loss).

Mr. Remeta is covered by a $1 million term life insurance policy payable to his family and group life insurance benefits of an additional $1,820,000 and receives reimbursement of $4,000 per annum for the premium on an individual supplemental disability insurance policy with an income tax gross-up on the reimbursement.

In the event of Termination Without Cause of Mr. Remeta’s employment, his severance pay is three times the sum of (A) his contractual annual base salary at the time, plus, (B) 50% of annual base salary (representing mid-range target incentive compensation), plus (C) $4,000. In the event of Mr. Remeta’s Resignation For Change of Control, his resignation compensation is three times the sum of (A) his contractual annual base salary at the time, plus (B) $4,000.

In the event of either Mr. Remeta’s Termination Without Cause or his Resignation for Change of Control, he is entitled at United Retail Group, Inc.’s expense through the remainder of the Contract Term to continuation of his individual term life insurance policy and group life insurance with a gross-up to offset personal income tax on the cost of $1,500,000 of the total insurance coverage.

Mr. Remeta shall not compete with the Company, directly or indirectly, for 36 months after termination of employment, provided, however, that the non-competition period shall be reduced to 24 months in the event that he receives Severance Pay or resignation compensation and returns one-third of the amount to United Retail Group, Inc.

Restated Employment Agreement with Kenneth P. Carroll

Mr. Carroll’s Restated Employment Agreement contains the following provisions, among others, in addition to the provisions common to all three contracts.

During the Contract Term, Mr. Carroll shall serve as the Senior Vice President-General Counsel and shall report directly to the Chief Executive Officer. His contractual base salary is $298,000 per annum. His semi-annual incentive compensation can range from zero to 80% of base salary for the six-month period depending on the degree of success in meeting Compensation Committee goals for improving consolidated operating income (loss).

In the event of Termination Without Cause of Mr. Carroll’s employment, his severance pay is three times the sum of (A) his contractual annual base salary at the time, plus, (B) 40% of annual base salary (representing mid-range target incentive compensation). In the event of Mr. Carroll’s Resignation For Change of Control, his resignation compensation is three times his contractual annual base salary at the time.

In the event of either Mr. Carroll’s Termination Without Cause or his Resignation For Change of Control, he is entitled at United Retail Group, Inc.’s expense through the remainder of the Contract Term to conversion of his $894,000 group life insurance to an individual policy and to a gross-up to offset personal income tax on the insurance cost.

Mr. Carroll shall not compete with the Company, directly or indirectly, during the Contract Term and for 18 months afterwards.

(b) Severance Pay Agreements

In order to provide formal assurances of severance pay in the event of termination of employment without cause and to give appropriate recognition to those with long tenure, United Retail Group, Inc. entered into Severance Pay Agreements on September 9, 2004 with its officers other than those who are a party to a Restated Employment Agreement, namely, Paul M. McFarren, Senior Vice President-Chief Information Officer, and Jon Grossman, Vice President-Finance. Also, United Retail Group Inc.’s respective subsidiaries entered into Severance Pay Agreements on the same day with the 12 officers of the subsidiaries. The purpose of the Severance Pay Agreements is to give officers without the protection of employment agreements an incentive to remain in the Company’s employ.

All 14 Severance Pay Agreements provide that, in the event employment is terminated without cause (as defined in the contract), the officer will receive severance pay equivalent to 26 weeks’ base pay plus an additional week’s pay for each year of service over 10 years with the Company and its predecessor. Severance pay will be remitted in weekly installments, provided, however, that, if new employment is obtained, the weekly payments then remaining unpaid shall be reduced by the compensation received from new employment. In addition, during the period for which severance pay is remitted, the Company will reimburse the officer for the excess premiums paid for COBRA health insurance and converted group life insurance coverage over the group rates paid while in the Company’s employ.

Under their Severance Pay Agreements, the total severance pay and insurance premium reimbursements payable by United Retail Group, Inc. at September 9, 2004 would be $155,000 to Mr. McFarren and $147,000 to Mr. Grossman. Average total benefits for an officer of a subsidiary of United Retail Group, Inc. would be $144,000 at September 9, 2004.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) The following exhibits are filed herewith:

Number	Description
10.1*	Employment Agreement, dated as of September 3, 2004, between the Corporation and Raphael Benaroya
10.2*	Employment Agreement, dated as of September 3, 2004, between the Corporation and George R. Remeta
10.3*	Employment Agreement, dated as of September 3, 2004, between the Corporation and Kenneth P. Carroll
10.4*	Form of Severance Pay Agreement, dated September 9, 2004 (entered into separately by the Corporation with Paul McFarren and Jon Grossman; similar contracts were entered into at the same time between the Corporation's respective subsidiaries and the respective officers of the subsidiaries)
31	Certifications pursuant to Section 302

The following exhibit is furnished herewith:

Number	Description
32	Certifications pursuant to Section 906

The following exhibit to the Corporation’s Quarterly Report on Form 10-Q for the period ended May 1, 2004 is incorporated herein by reference:

Number in Filing	Description
10*	Bonus agreement, dated May 28, 2004, between the Corporation and Joann Fielder

The following exhibits to the Corporation’s Annual Report on Form 10-K for the year ended January 31, 2004 are incorporated herein by reference:

Number in Filing	Description
3	Restated By-Laws of the Corporation
10.1*	Tandem Merit Bonus Plan
10.2	Form of Indemnification Agreement between the Corporation and each of its Directors
14	Code of Business Ethics for Principal Executive and Senior Financial Officers pursuant to Section 406

The following exhibit to the Corporation’s Current Report on Form 8-K, dated January 8, 2004, is incorporated herein by reference.

Number in Filing	Description
10	Amendment, dated December 23, 2003, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and The CIT Group/Business Credit, Inc., as Agent and Lender ("CIT")

The following exhibit to the Corporation’s Quarterly Report on Form 10-Q for the period ended August 2, 2003 is incorporated herein by reference:

Number in Filing	Description
21	Subsidiaries of the Corporation

The following exhibit to the Corporation’s Quarterly Report on Form 10-Q for the period ended May 3, 2003 is incorporated herein by reference:

Number in Filing	Description
10*	Amendment to Restated Supplemental Retirement Savings Plan

The 2003 Stock Option Plan set forth as the appendix to the Corporation’s proxy statement on Schedule 14A for its 2003 annual meeting of stockholders is incorporated herein by reference.*

The following exhibits to the Corporation’s Annual Report on Form 10-K, as amended, for the year ended February 1, 2003 are incorporated herein by reference:

Number in Filing	Description
10.1	Amendment, dated January 31, 2003, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and CIT
10.2	Amendment to Restated Supplemental Retirement Savings Plan

The following exhibits to the Corporation’s Quarterly Report on Form 10-Q for the period ended August 3, 2002 are incorporated herein by reference:

Number in Filing	Description
10.1	Amendment, dated August 2, 2002, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and CIT
10.2*	Amendment to Restated Supplemental Retirement Savings Plan

The following exhibits to the Corporation’s Annual Report on Form 10-K for the year ended February 2, 2002 are incorporated herein by reference:

Number in Filing	Description
10.1	Amendment, dated April 5, 2002, to Private Label Credit Card Program Agreement, dated January 27, 1998, between the Corporation, United Retail Incorporated and World Financial Network National Bank ("Private Label Credit Card Program Agreement")
10.2	Amendment, dated December 29, 1999, to Private Label Credit Card Program Agreement
10.3	Amendment, dated August 19, 1999, to Private Label Credit Card Program Agreement

The following exhibits to the Corporation’s Quarterly Report on Form 10-Q for the period ended November 3, 2001 are incorporated herein by reference:

Number in Filing	Description
10.4*	Summary Plan Description for United Retail Group, Inc. Incentive Compensation Program for Executives
10.5	Amendment, dated October 1, 2001, to Private Label Credit Card Program Agreement (Confidential portions filed separately with the Secretary of the Commission)

The following exhibit to the Corporation’s Quarterly Report on Form 10-Q for the period ended August 4, 2001 is incorporated herein by reference:

Number in Filing	Description
10.1*	Restated Stock Appreciation Rights Plan

The 2001 Stock Option Plan set forth as an appendix to the Corporation’s proxy statement on Schedule 14A for its 2001 annual meeting of stockholders is incorporated herein by reference.*

The following exhibit to the Corporation’s Registration Statement on Form S-8 (Registration No. 333-44868) is incorporated herein by reference:

Number in Filing	Description
10	Amendment, dated August 21, 2000, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and CIT

The following exhibits to the Corporation’s Annual Report on Form 10-K for the year ended January 29, 2000 are incorporated herein by reference:

Number in Filing	Description
10.1	Amendment, dated December 28, 1999, to Financing Agreement among the Corporation, United Retail Incorporated and CIT ("Financing Agreement")
10.2	Amendment, dated January 31, 2000, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and CIT

The following exhibit to the Corporation’s Quarterly Report on Form 10-Q for the period ended October 30, 1999 is incorporated herein by reference:

Number in Filing	Description
10.1	Amendment, dated October 6, 1999, to Financing Agreement

The following exhibit to the Corporation’s Current Report on Form 8-K, filed September 23, 1999, is incorporated herein by reference:

Number in Filing	Description
3	Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock

The stockholders’ rights plan filed as the exhibit to the Corporation’s Registration Statement on Form 8-A, dated September 15, 1999, is incorporated herein by reference.

The following exhibit to the Corporation’s Annual Report on Form 10-K for the year ended January 30, 1999 is incorporated herein by reference:

Number in Filing	Description
10.1	Amendment, dated March 29, 1999, to Financing Agreement

The 1999 Stock Option Plan set forth as the Appendix to the Corporation’s proxy statement on Schedule 14A for its 1999 annual meeting of stockholders is incorporated herein by reference.*

The following exhibits to the Corporation’s Quarterly Report on Form 10-Q for the period ended May 2, 1998 are incorporated herein by reference:

Number in Filing	Description
10.1*	1998 Stock Option Agreement, dated May 21, 1998, between the Corporation and Raphael Benaroya
10.2*	1998 Stock Option Agreement, dated May 21, 1998, between the Corporation and George R. Remeta

The following exhibits to the Corporation’s Annual Report on Form 10-K for the year ended January 31, 1998 are incorporated herein by reference:

Number in Filing	Description
10.1	Restated Stockholders' Agreement, dated December 23, 1992, between the Corporation and certain of its stockholders and Amendment No. 1, Amendment No. 2 and Amendment No. 3 thereto
10.2	Private Label Credit Card Program Agreement
10.4*	Restated 1990 Stock Option Plan as of March 6, 1998
10.5*	Restated 1990 Stock Option Plan as of May 28, 1996
10.6*	Restated 1996 Stock Option Plan as of March 6, 1998

The following exhibit to the Corporation’s Quarterly Report on Form 10-Q for the period ended November 1, 1997 is incorporated herein by reference:

Number in Filing	Description
10.1	Amendment, dated September 15, 1997, to Financing Agreement

The following exhibits to the Corporation’s Quarterly Report on Form 10-Q for the period ended August 2, 1997 are incorporated herein by reference:

Number in Filing	Description
10.1	Financing Agreement
10.2*	Amendment to Restated Supplemental Retirement Savings Plan

The following exhibit to the Corporation’s Quarterly Report on Form 10-Q for the period ended November 2, 1996 is incorporated herein by reference:

Number in Filing	Description
10.1*	Restated Supplemental Retirement Savings Plan

The following exhibits to the Corporation's Registration Statement on Form S-1 (Registration No. 33-44499), as amended, are incorporated herein by reference:

Number in Filing	Description
3.1	Amended and Restated Certificate of Incorporation of the Corporation
4.1	Specimen Certificate for Common Stock of the Corporation
10.2.1	Software License Agreement, dated as of April 30, 1989, between The Limited Stores, Inc. and Sizes Unlimited, Inc. (now known as United Retail Incorporated) ("Software License")
10.2.2	Amendment, dated December 10, 1991, to Software License

*A compensatory plan for the benefit of the Corporation’s management or a management contract.

(b)	During the second quarter of fiscal 2004, the Company filed a Current Report on Form 8-K on May 18, 2004 to furnish summary financial information for the first quarter of fiscal 2004.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

(Registrant) UNITED RETAIL GROUP, INC.


Date: September 9, 2004	By: /s/ GEORGE R. REMETA George R. Remeta Vice Chairman of the Board and Chief Administrative Officer- Authorized Signatory

	By: /s/ JON GROSSMAN Jon Grossman Vice President-Finance and Chief Accounting Officer

EXHIBIT INDEX

(a) The following exhibits are filed herewith:

Number	Description
10.1*	Employment Agreement, dated as of September 3, 2004, between the Corporation and Raphael Benaroya
10.2*	Employment Agreement, dated as of September 3, 2004, between the Corporation and George R. Remeta
10.3*	Employment Agreement, dated as of September 3, 2004, between the Corporation and Kenneth P. Carroll
10.4*	Form of Severance Pay Agreement, dated September 9, 2004 (entered into separately by the Corporation with Paul McFarren and Jon Grossman; similar contracts were entered into at the same time between the Corporation's respective subsidiaries and the respective officers of the subsidiaries)
31	Certifications pursuant to Section 302

The following exhibit is furnished herewith:

Number	Description
32	Certifications pursuant to Section 906

The following exhibit to the Corporation’s Quarterly Report on Form 10-Q for the period ended May 1, 2004 is incorporated herein by reference:

Number in Filing	Description
10*	Bonus agreement, dated May 28, 2004, between the Corporation and Joann Fielder

The following exhibits to the Corporation’s Annual Report on Form 10-K for the year ended January 31, 2004 are incorporated herein by reference:

Number in Filing	Description
3	Restated By-Laws of the Corporation
10.1*	Tandem Merit Bonus Plan
10.2	Form of Indemnification Agreement between the Corporation and each of its Directors
14	Code of Business Ethics for Principal Executive and Senior Financial Officers pursuant to Section 406

The following exhibit to the Corporation’s Current Report on Form 8-K, dated January 8, 2004, is incorporated herein by reference.

Number in Filing	Description
10	Amendment, dated December 23, 2003, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and The CIT Group/Business Credit, Inc., as Agent and Lender ("CIT")

The following exhibit to the Corporation’s Quarterly Report on Form 10-Q for the period ended August 2, 2003 is incorporated herein by reference:

Number in Filing	Description
21	Subsidiaries of the Corporation

The following exhibit to the Corporation’s Quarterly Report on Form 10-Q for the period ended May 3, 2003 is incorporated herein by reference:

Number in Filing	Description
10*	Amendment to Restated Supplemental Retirement Savings Plan

The 2003 Stock Option Plan set forth as the appendix to the Corporation’s proxy statement on Schedule 14A for its 2003 annual meeting of stockholders is incorporated herein by reference.*

The following exhibits to the Corporation’s Annual Report on Form 10-K, as amended, for the year ended February 1, 2003 are incorporated herein by reference:

Number in Filing	Description
10.1	Amendment, dated January 31, 2003, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and CIT
10.2	Amendment to Restated Supplemental Retirement Savings Plan

The following exhibits to the Corporation’s Quarterly Report on Form 10-Q for the period ended August 3, 2002 are incorporated herein by reference:

Number in Filing	Description
10.1	Amendment, dated August 2, 2002, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and CIT
10.2*	Amendment to Restated Supplemental Retirement Savings Plan

The following exhibits to the Corporation’s Annual Report on Form 10-K for the year ended February 2, 2002 are incorporated herein by reference:

Number in Filing	Description
10.1	Amendment, dated April 5, 2002, to Private Label Credit Card Program Agreement, dated January 27, 1998, between the Corporation, United Retail Incorporated and World Financial Network National Bank ("Private Label Credit Card Program Agreement")
10.2	Amendment, dated December 29, 1999, to Private Label Credit Card Program Agreement
10.3	Amendment, dated August 19, 1999, to Private Label Credit Card Program Agreement

The following exhibits to the Corporation’s Quarterly Report on Form 10-Q for the period ended November 3, 2001 are incorporated herein by reference:

Number in Filing	Description
10.4*	Summary Plan Description for United Retail Group, Inc. Incentive Compensation Program for Executives
10.5	Amendment, dated October 1, 2001, to Private Label Credit Card Program Agreement (Confidential portions filed separately with the Secretary of the Commission)

The following exhibit to the Corporation’s Quarterly Report on Form 10-Q for the period ended August 4, 2001 is incorporated herein by reference:

Number in Filing	Description
10.1*	Restated Stock Appreciation Rights Plan

The 2001 Stock Option Plan set forth as an appendix to the Corporation’s proxy statement on Schedule 14A for its 2001 annual meeting of stockholders is incorporated herein by reference.*

The following exhibit to the Corporation’s Registration Statement on Form S-8 (Registration No. 333-44868) is incorporated herein by reference:

Number in Filing	Description
10	Amendment, dated August 21, 2000, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and CIT

The following exhibits to the Corporation’s Annual Report on Form 10-K for the year ended January 29, 2000 are incorporated herein by reference:

Number in Filing	Description
10.1	Amendment, dated December 28, 1999, to Financing Agreement among the Corporation, United Retail Incorporated and CIT ("Financing Agreement")
10.2	Amendment, dated January 31, 2000, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and CIT

The following exhibit to the Corporation’s Quarterly Report on Form 10-Q for the period ended October 30, 1999 is incorporated herein by reference:

Number in Filing	Description
10.1	Amendment, dated October 6, 1999, to Financing Agreement

The following exhibit to the Corporation’s Current Report on Form 8-K, filed September 23, 1999, is incorporated herein by reference:

Number in Filing	Description
3	Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock

The stockholders’ rights plan filed as the exhibit to the Corporation’s Registration Statement on Form 8-A, dated September 15, 1999, is incorporated herein by reference.

The following exhibit to the Corporation’s Annual Report on Form 10-K for the year ended January 30, 1999 is incorporated herein by reference:

Number in Filing	Description
10.1	Amendment, dated March 29, 1999, to Financing Agreement

The 1999 Stock Option Plan set forth as the Appendix to the Corporation’s proxy statement on Schedule 14A for its 1999 annual meeting of stockholders is incorporated herein by reference.*

The following exhibits to the Corporation’s Quarterly Report on Form 10-Q for the period ended May 2, 1998 are incorporated herein by reference:

Number in Filing	Description
10.1*	1998 Stock Option Agreement, dated May 21, 1998, between the Corporation and Raphael Benaroya
10.2*	1998 Stock Option Agreement, dated May 21, 1998, between the Corporation and George R. Remeta

The following exhibits to the Corporation’s Annual Report on Form 10-K for the year ended January 31, 1998 are incorporated herein by reference:

Number in Filing	Description
10.1	Restated Stockholders' Agreement, dated December 23, 1992, between the Corporation and certain of its stockholders and Amendment No. 1, Amendment No. 2 and Amendment No. 3 thereto
10.2	Private Label Credit Card Program Agreement
10.4*	Restated 1990 Stock Option Plan as of March 6, 1998
10.5*	Restated 1990 Stock Option Plan as of May 28, 1996
10.6*	Restated 1996 Stock Option Plan as of March 6, 1998

The following exhibit to the Corporation’s Quarterly Report on Form 10-Q for the period ended November 1, 1997 is incorporated herein by reference:

Number in Filing	Description
10.1	Amendment, dated September 15, 1997, to Financing Agreement

The following exhibits to the Corporation’s Quarterly Report on Form 10-Q for the period ended August 2, 1997 are incorporated herein by reference:

Number in Filing	Description
10.1	Financing Agreement
10.2*	Amendment to Restated Supplemental Retirement Savings Plan

The following exhibit to the Corporation’s Quarterly Report on Form 10-Q for the period ended November 2, 1996 is incorporated herein by reference:

Number in Filing	Description
10.1*	Restated Supplemental Retirement Savings Plan

The following exhibits to the Corporation's Registration Statement on Form S-1 (Registration No. 33-44499), as amended, are incorporated herein by reference:

Number in Filing	Description
3.1	Amended and Restated Certificate of Incorporation of the Corporation
4.1	Specimen Certificate for Common Stock of the Corporation
10.2.1	Software License Agreement, dated as of April 30, 1989, between The Limited Stores, Inc. and Sizes Unlimited, Inc. (now known as United Retail Incorporated) ("Software License")
10.2.2	Amendment, dated December 10, 1991, to Software License

*A compensatory plan for the benefit of the Corporation’s management or a management contract.

EX-10 2 ex10_1form10q0904.htm EXHIBIT 10.1 TO FORM 10-Q SEPT 2004 Exhibit 10.1 to Form 10-Q Sept 2004

Exhibit No. 10.1

RESTATED EMPLOYMENT AGREEMENT

Agreement made as of the 3^rd day of September, 2004 (referred to herein as “the date first set forth above”), between UNITED RETAIL GROUP, INC., a Delaware corporation, with principal offices at 365 West Passaic Street, Rochelle Park, New Jersey 07662-6563 (the “Company”), and RAPHAEL BENAROYA, residing at 179 Lincoln Street, Englewood, New Jersey 07631 (the “Executive”).

WHEREAS, the Executive has been employed by the Company and its predecessors for more than 20 years, most recently as its Chairman of the Board, President and Chief Executive Officer pursuant to an Employment Agreement, dated November 20, 1998, as amended on August 18, 2000, November 29, 2001, May 30, 2002, December 6, 2002 and September 2, 2003 (as amended, the “Original Agreement”);

WHEREAS, the Company desires to continue the services of the Executive, and the Executive desires to continue to provide such services to the Company, on the terms set forth in this Agreement;

WHEREAS, this Agreement was reviewed in executive sessions of the Compensation Committee of the Company’s Board of Directors on August 27, 2004 and September 3, 2004 and was recommended at the latter meeting; and

WHEREAS, this Agreement was reviewed in an executive session of the Company’s Board of Directors on August 27, 2004 and approved in an executive session of the Board on September 3, 2004.

NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree that the Original Agreement is further amended and restated effective immediately to read in its entirety as follows:

1. Definitions.

Affiliated Companies shall mean, with respect to the Company, any corporation, limited partnership, general partnership, association, joint-stock company, joint venture, trust, bank, trust company, land trust, business trust, fund or any organized group of persons, whether or not a legal entity, that is directly or indirectly controlled by the Company.
Base Salary shall have the meaning set forth in Section 4(a).
Board of Directors shall mean the Board of Directors of the Company.
Business of the Company shall mean the operation of a retail store chain which markets and sells apparel for women principally in sizes 14 and larger and any other future business in which the Company and its subsidiaries and Affiliated Companies engage that produces more than 10% of the Company's consolidated sales.
By-laws shall mean the Restated By-laws of the Company as currently in force.
Cause shall mean the occurrence of one or more of the following events:


	(i) a judgment of conviction against the Executive or a plea of guilty has been entered for any felony which is both based on his personal actions (excluding liability imputed to him by reason of his position as an executive of the Company) and involves common law fraud, embezzlement, breach of duty as a fiduciary, willful dishonesty or moral turpitude (the entry of a judgment or plea being the only event or circumstance sufficient to constitute Cause under this subparagraph (i)), provided, however, that any felony an essential element of which is predicated on the operation of a vehicle shall be deemed not to involve moral turpitude;
	(ii) (A) the Executive has willfully and continuously failed to perform his duties to the Company in any material respect or (B) the Executive has failed in any material respect to follow specific directions of the Board of Directors in the performance of his duties;
	(iii) the Executive has demonstrated willful misconduct in the performance of his duties to the Company in any material respect and material economic harm to the Company has resulted; or
	(iv) there has been a breach in any material respect of any of the provisions of Section 11;

provided, however, that the judgment of conviction or a plea of guilty referred to in subparagraph (i), the failure of performance referred to in subparagraph (ii), the misconduct referred to in subparagraph (iii) and the breach referred to in subparagraph (iv) shall constitute Cause for a maximum of only 90 days after the judgment of conviction or plea of guilty was entered, the failure of performance commenced, the material economic harm resulted, or the breach first took place, as the case may be.

Change of Control shall mean either:


	(i) the acquisition after August 27, 2004 by any person or group acting in concert of shares of Company Common Stock if, after such acquisition, such person or group is the beneficial owner of 30% or more of the Common Stock then outstanding but shall not include acquisition by:


		(A) the Company;
		(B) any subsidiary of the Company;
		(C) any employee benefit plan of the Company, or of any subsidiary of the Company, or any person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan;
		(D) any person who becomes the beneficial owner of 30% or more of the shares of Company Common Stock then outstanding as a result of a reduction in the number of shares of Common Stock outstanding due to the repurchase of shares of Common Stock by the Company unless and until such person, after becoming aware that such person has become the beneficial owner of 30% or more of the then outstanding shares of Common Stock, acquires beneficial ownership of additional shares of Common Stock representing 1% or more of the shares of Common Stock then outstanding;
		(E) any person who has reported or is required to report such ownership (but less than 50%) on Schedule 13G under the Securities Exchange Act of 1934, as amended and in effect on the date of this Agreement (the "Exchange Act"), (or any comparable or successor report) or on Schedule 13D under the Exchange Act (or any comparable or successor report) which Schedule 13D does not state any intention to or reserve the right to control or influence the management or policies of the Company or engage in any of the actions specified in Item 4 of such schedule (other than the disposition of the Common Stock) and, within 10 business days of being requested by the Company to advise it regarding the same, certifies to the Company that such person acquired shares of Common Stock in excess of 29.9% inadvertently or without knowledge of the terms of the Company's Stockholder Rights Plan and who, together with all affiliates, thereafter does not acquire additional shares of Common Stock while the beneficial owner of 30% or more of the shares of Company Common Stock then outstanding, provided, however, that if the person requested to so certify fails to do so within 10 business days, then such person shall become an acquiring person immediately after such 10-business-day period;
		(F) the Executive, his spouse, any descendant of the parents of the Executive, the spouse of any such descendant, the estate of any of the foregoing individuals, any trust for the primary benefit of any of the foregoing individuals or for the primary benefit of any of the foregoing individuals and any charitable organization, any corporation or limited liability company of which all the shareholders or members are any of the foregoing individuals, The Benaroya Foundation or any charitable organization established by any of the foregoing individuals; or
		(G) any person acting in concert with the Executive;

(ii) the election of a majority of the Directors, elected at any meeting of the holders of voting securities of the Company, who were not nominated for such election by the Board or a duly constituted committee of the Board; or

(iii) the merger or consolidation of the Company with another person, or the transfer to one or more persons in a single transaction or a related series of transactions of substantially all of the assets of the Company, unless, before the Company enters into any agreement for such merger, consolidation or transfer, the Executive sends the Company a written consent determining that it is not a Change of Control.

Company Car shall have the meaning set forth in Section 6(d).
Contract Term shall mean the period of time commencing November 20, 1998 and ending on the fifth anniversary of the date first set forth above or such later date as may be mutually agreed upon by the Company and the Executive. (For the avoidance of doubt, Contract Term as used herein may extend beyond the termination of Executive's employment under this Agreement.)
CPI shall have the meaning set forth in Section 4(a).
Cure Period shall have the meaning set forth in Section 14(c).
Group Benefits shall have the meaning set forth in Section 6(a).
Incentive Compensation Participation shall mean 60% of Base Salary, without regard to whether any payment actually shall have been made under the Company's incentive compensation program. (For example, as of the date first set forth above, the Incentive Compensation Participation was $411,000.)
Individual Disability Policy shall have the meaning set forth in Section 6(c).
Individual Life Policy shall have the meaning set forth in Section 6(b).
Options shall mean employee stock options under a benefit plan or arrangement between the Company and the Executive, including those which may be granted during the Contract Term, held by the Executive or his assigns or donees.
Performance Bonus shall have the meaning set forth in Section 4(b).
Permanent Disability shall mean the inability of the Executive to perform his duties and responsibilities to the Company by reason of a physical or mental disability or infirmity (i) for a continuous period of at least four months or (ii) at such earlier time as the Executive submits medical evidence satisfactory to the Company that the Executive has a physical or mental disability or infirmity that will likely prevent him from substantially performing his duties and responsibilities for four months or longer (the date of such Permanent Disability shall be on the earlier of the last day of such four-month period or the day on which the Executive submits such evidence, as the case may be).
Protected Information shall mean trade secrets, confidential or proprietary information, and all other knowledge, know-how, information, documents or materials, owned or developed by the Company, or otherwise in the possession of the Company, whether in tangible or intangible form, pertaining to the Business of the Company, the confidentiality of which the Company takes reasonable measures to protect, including, but not limited to, the Company's research and development, store operating results, identities and habits of customers and prospective customers, suppliers, business relationships, products (including prices, costs, sales or content), processes, techniques, machinery, contracts, financial information or measures, business methods, future business plans, data bases, computer programs, designs, models, operating procedures, knowledge of the organization, and other information owned, developed or possessed by the Company; provided, however, that Protected Information shall not include information that shall become generally known to the public or the trade without violation of Section 11.
Resignation Compensation shall have the meaning set forth in Section 14(e).
Severance Pay shall have the meaning set forth in Section 14(c).
Short Term Disability shall mean the inability of the Executive to substantially perform his duties and responsibilities to the Company by reason of a physical or mental disability or infirmity for a continuous period of less than four months.
Successor shall have the meaning set forth in Section 20.
Tax shall mean all taxes on income, which shall be assumed to be at a rate equal to the sum of the highest marginal rates, including any applicable surcharges, of federal income tax, state income tax, local income tax, Medicare payroll tax and any similar income or payroll tax for a married citizen filing a joint return from the Executive's residence, as now in effect or as amended from time to time.
Termination Without Cause shall have the meaning set forth in Section 14(c).
Unauthorized shall mean: (i) in contravention of the Company's policies or procedures; (ii) otherwise inconsistent with the Company's measures to protect its interests in its Protected Information; or (iii) in contravention of any duty existing under law or contract.

2. Term; and Location.

The Company hereby employs the Executive, and the Executive hereby accepts such employment, in the capacities and upon the terms and conditions hereinafter set forth, during the Contract Term.
In no event shall the Executive's office be relocated without his prior written consent.

3. Duties.

During the Contract Term, the Executive shall serve as the President and Chief Executive Officer of the Company. In such capacity, the Executive shall perform such duties and shall have such responsibilities as are set forth in the By-laws and such additional duties and responsibilities, commensurate with his position and title, as may be determined and assigned to the Executive from time to time by the Board of Directors. Notwithstanding the above, the Executive shall not be required to perform any duties and responsibilities which would be likely to result in a non-compliance with or violation of any applicable law or regulation. The Executive shall report solely and directly to the Board of Directors; all other officers and other employees of the Company shall report directly to the Executive or the Executive's designees. No other employee of the Company or any subsidiary shall have authority and responsibilities that are generally equal to or greater than those of the Executive.
The Executive accepts such employment and hereby agrees to serve the Company faithfully, industriously and to the best of his ability in such capacities, with undivided loyalty, devoting substantially all of his business time, attention, knowledge, energy and skills to such employment as President and Chief Executive Officer of the Company except during vacation not to exceed three weeks in any 12-month period and except as otherwise provided in the following sentence. However, the Executive may engage in the following additional activities:


	(i) continuing through a controlled corporation, Raphael Benaroya, Inc., to manage American Licensing Group Limited Partnership, subject to the restrictions contained in Section 11(h);
	(ii) serving as a director of not more than four business corporations in addition to Raphael Benaroya, Inc. that do not engage in the Business of the Company, including service as nonmanagement chairman of the board or chairman of one or more committees of a board;
	(iii) overseeing personal and family investments in a manner in which the Executive does not actively operate portfolio companies in the ordinary course of business; and
	(iv) engaging in local, national and international charitable, relief, human rights, civic, religious, military and related activities on behalf of private organizations and governmental agencies;

provided, however, that the Executive’s duties and responsibilities as President and Chief Executive Officer of the Company shall take precedence over his other activities except for not more than 45 consecutive days of military service in the event he is called to active duty in the armed forces of the United States or any other country.

4. Compensation.

As compensation to the Executive for performance of the services required hereunder and as consideration for his execution and delivery of this Agreement, the Company shall pay him (subject to Sections 7 and 14), and the Executive agrees to accept a base salary, payable in accordance with the regular executive payroll practices of the Company, at a rate of $685,000 per annum during the period ending on January 31, 2005 and thereafter at such higher rate as may be determined by the Board of Directors upon recommendation of the Compensation Committee of the Board of Directors, but in any event base salary shall increase as of February 1, 2005 by a percentage at least equal to the increase, if any, in the Consumer Price Index for All Urban Consumers for New York and Northern New Jersey published by the Bureau of Labor Statistics of the Department of Labor ("CPI") during the year ending on December 31, 2004 and shall increase as of each anniversary of February 1, 2005 by a percentage at least equal to the annual increase, if any, in the CPI at the time (as increased from time to time and whether or not deferred, the "Base Salary").
The Executive shall continue to be eligible to receive, and the Company shall continue to pay, a semi-annual cash incentive compensation payment ("Performance Bonus") based on the Company's consolidated operating income for the six-month periods ending January 31st and July 31st, respectively. The Executive's participation percentage shall be 60% with a semi-annual award ranging from zero to 120% of Base Salary for the six-month period in accordance with the Summary Plan Description for United Retail Group, Inc. Incentive Compensation Program for Executives as of the date first set forth above, provided, however, that the Performance Bonus shall be earned and fully vested in the Executive as of January 31st or July 31st, as the case may be, whether or not the Executive shall remain in the Company's employ after the Performance Bonus shall have vested and provided, further, that the Performance Bonus shall be paid to the Executive as soon as practicable after the consolidated operating income for the period in question shall be determined.

5. Expenses. The Executive will continue to be required to incur reasonable and necessary travel, business entertainment and other business expenses. The Company shall reimburse the Executive for all reasonable and necessary travel, business entertainment and other business expenses incurred or expended by the Executive incident to the performance of the Executive’s duties hereunder, upon submission by the Executive to the Company of vouchers or expense statements satisfactorily evidencing such expenses.

6. Executive Benefits.

The Company shall provide the Executive with benefits ("Group Benefits"), taken as a whole, that are at least equal to those provided by the Company to the other senior executives of the Company as of the date first set forth above including, without limitation, availability of enhanced group disability insurance benefits (or, if the group disability insurance policy can not be continued in force, the Company shall make available other disability benefits equivalent to the benefits under the group policy). The Executive shall be entitled to three weeks' vacation and two personal days with pay at any time during the year after the date first set forth above and each 12 months thereafter.
In addition to Group Benefits, the Company shall maintain in force the existing term life insurance policies on the Executive in an amount of $4,880,000 or a similar policy issued by an insurance company with an equal or higher rating (the "Individual Life Policy") at the Company's expense. The Executive shall have the right to select and change the beneficiary(ies) of such life insurance policies.
The Company shall reimburse the Executive in the amount of $20,000 per annum with respect to the premium on the existing special supplemental long term disability insurance policy covering the Executive (the "Individual Disability Policy") and the Taxes on such premium amount.
The Company shall provide the Executive perquisites in accordance with past practice, including, without limitation, exclusive use of a full size sedan (the "Company Car") free of charge for business and personal travel.
Group Benefits, the Individual Life Policy and the Company Car shall be provided while the Executive is employed under this Agreement and thereafter as provided pursuant to the terms of this Agreement.
The Executive shall cooperate with the Company in maintaining key man life insurance up to $4 million during the Executive's employment hereunder.
All Options shall be fully vested and immediately exercisable after either Termination Without Cause or a Change of Control, anything in any stock option agreement between the Company and the Executive to the contrary notwithstanding. In the event of Termination Without Cause, Options shall be exercisable for the lesser of 90 days thereafter or the remainder of the term of the Option. In the event of Change of Control, Options shall be exercisable until the earlier of 90 days after the termination of the Executive's employment hereunder (including resignation) or the expiration of the term of the Option.

7. Permanent Disability;Death.

In the event of the Permanent Disability of the Executive during the Contract Term, the Board of Directors shall, upon written notice to the Executive, have the right to terminate the Executive's employment hereunder by reason of Permanent Disability.
In the event of the death of the Executive during the Contract Term, this Agreement shall automatically terminate

8. Benefits Upon Death or Disability. In the event of the Executive’s death or a termination of the Executive’s employment by the Company due to Permanent Disability, the Executive, his executor or his heirs at law, as the case may be, shall be entitled to:

any Base Salary accrued or any Performance Bonus vested but not yet paid;
a pro rata Performance Bonus for the season in which death or Permanent Disability occurs determined and payable on the basis of the number of days worked during the season and the bonus percentage established for the season;
any accrued vacation pay;
reimbursement for expenses incurred but not yet paid prior to such death or Permanent Disability;
in the case of death, the proceeds of the Individual Life Policy and other compensation and benefits as may be provided in accordance with the terms and provisions of the Group Benefits or of this Agreement; and
in the case of Permanent Disability, for five years following the date of Permanent Disability, first, COBRA health insurance benefits, including supplemental executive preventive medicine and wellness benefits, for the Executive and his dependents at the Company's expense until the COBRA benefits expire and, thereafter, for the remainder of such five-year period, equivalent reimbursement of healthcare expenses directly by the Company.

The provisions of this Section 8 shall survive the termination of the Executive’s employment hereunder.

9. Representation, Warranty and Covenant of Executive. The Executive represents, warrants and covenants to the Company that he is not and will not become a party to any agreement, contract or understanding, whether employment or otherwise, which would in any way restrict or prohibit him from undertaking or performing his employment in accordance with the terms and conditions of this Agreement.

10. Representation, Warranty and Covenant of the Company.

The Company represents and warrants that this Agreement constitutes a valid and legally binding obligation of the Company enforceable in accordance with the terms herein set forth, except to the extent that the enforceability of this Agreement may be affected by bankruptcy, insolvency, reorganization, moratorium, or similar laws or equitable principles affecting creditors' rights generally.
The Company covenants that it shall give notice promptly to the Executive of the occurrence of Change of Control pursuant to Section 21.
The provisions of this Section 10 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.

11. Restrictive Covenants and Confidentiality.

The Executive shall not:

(i) solicit, raid, entice, encourage or induce any person, firm or corporation that at any time within one year prior to the termination of the Executive's employment hereunder shall have been an exclusive supplier to the Company, or any of its subsidiaries or Affiliated Companies, to become a supplier to any other person, firm or corporation that derives more than 10% of its sales, directly or indirectly, from a business the same as the Business of the Company and the Executive shall not approach any such person, firm or corporation for such purpose or authorize or knowingly approve the taking of such actions by any other person, firm or corporation or assist any such person, firm or corporation in taking such action; or

(ii) solicit, raid, entice, encourage or induce any person who at any time within one year prior to the termination of the Executive's employment shall have been an employee of the Company, or any of its subsidiaries or Affiliated Companies, to become employed by any person, firm or corporation, and the Executive shall not approach any such employee for such purpose or authorize or knowingly approve the taking of such actions by any other person, firm or corporation or assist any such person, firm or corporation in taking such action.

During the Contract Term and thereafter, the Executive will not use, disclose or divulge, furnish or make accessible to anyone, directly or indirectly, any Protected Information in any Unauthorized manner or for any Unauthorized purpose, provided, however, that in the event that the Executive is required to disclose any Protected Information by court order or decree or in compliance with the rules and regulations of a governmental agency or in compliance with law, the Executive will provide the Company with prompt notice of such required disclosure so that the Company may seek an appropriate protective order and/or waive the Executive's compliance with the provisions of this Section 11 and provided, further, that if, in the absence of a protective order or the receipt of a waiver hereunder, the Executive is advised by his counsel that such disclosure is necessary to comply with such court order, decree, rules, regulation or law, he may disclose such information without liability hereunder.
The Executive agrees that all processes, techniques, know-how, inventions, plans, products, and devices developed, made or invented by the Executive, alone or with others in connection with the Executive's employment hereunder, during the Contract Term, shall become and be the sole property of the Company unless released in writing by the Company.
The Executive agrees that the Executive shall not, directly or indirectly, within any area in the United States or elsewhere where the Company or any of its subsidiaries or Affiliated Companies is transacting business during the Contract Term, engage or participate or make any financial investments in or become employed by, or act as an attorney, agent or principal of, or render advisory or other services to or for any person, firm or corporation, or in connection with any business activity (other than that of the Company and its subsidiaries or Affiliated Companies), that derives more than 10% of its sales, directly or indirectly, from a business the same as the Business of the Company. Nothing herein contained, however, shall restrict the Executive from overseeing personal and family investments, including any investments in not more than 3% of the voting securities in any company whose stock is listed on a national securities exchange or actively traded in the over-the-counter market, so long as in connection with such investments the Executive does not actively operate any such business or enterprise that derives more than 10% of its sales, directly or indirectly, from a business the same as the Business of the Company.
The Executive shall be bound by the provisions of Section 11(a) and (d), and shall perform his obligations pursuant to Section 11(a) and (d), during the Contract Term and for 18 months thereafter, provided, however, that in the event of Termination Without Cause, the Executive shall be bound by the provisions of Section 11(a) and (d), and shall perform his obligations pursuant to Section 11(a) and (d), only in the event that the Company shall remit his Severance Pay strictly in accordance with the provisions of Section 14(d) and provided, further, that in the event of resignation by the Executive in accordance with Section 14(e), the Executive shall be bound by the provisions of Section 11(a) and (d), and shall perform his obligations pursuant to Section 11(a) and (d), only in the event that the Company shall remit his Resignation Compensation within 15 days after his resignation, time being of the essence.
The provisions of this Section 11 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.
The Executive acknowledges that the services to be rendered by the Executive are of a special, unique and extraordinary character and, in connection with such services, the Executive will have access to confidential information vital to the Company's and its subsidiaries and Affiliated Companies' businesses. By reason of this, the Executive consents and agrees that if the Executive violates any of the provisions of this Section 11, the Company and its subsidiaries and Affiliated Companies would sustain irreparable harm, and therefore, in addition to any other remedies which the Company may have under this Agreement or otherwise, the Company shall be entitled to an injunction from any court of competent jurisdiction restraining the Executive from committing or continuing any such violation of this Section 11. The Executive acknowledges that damages at law would not be an adequate remedy for violation of this Section 11, and the Executive therefore agrees that the provisions of this Section 11 may be specifically enforced against the Executive in any court of competent jurisdiction. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach, including the recovery of damages from the Executive.
The provision of paragraphs (a), (b) and (d) of this Section 11 shall not apply to or restrict the activities of the Executive as the chief executive officer, a director and a principal stockholder of Raphael Benaroya, Inc., which is the sole general partner of American Licensing Group Limited Partnership ("ALG"), for so long as, and only for so long as, Raphael Benaroya, Inc. and ALG do not engage in the Business of the Company. The Executive's duties and responsibilities as President and Chief Executive Officer of the Company shall at all times take precedence over his activities on behalf of ALG.

12. Deductions and Withholding. The Executive agrees that the Company shall withhold from any and all compensation required to be paid to the Executive pursuant to this Agreement all Federal, state, local and/or other taxes which the Company determines are required to be withheld in accordance with applicable statues and/or regulations from time to time in effect.

13. Mutual Non-Disparagement Neither the Executive nor the Company will make or authorize any public statement disparaging the other in its or his business interests and affairs. Notwithstanding the foregoing, neither party shall be (i) required to make any statement which it or he believes to be false or inaccurate, or (ii) restricted in connection with any litigation, arbitration or similar proceeding or with respect to its response to any legal process. The provisions of this Section 13 shall survive the termination of the Executive’s employment hereunder, irrespective of the reason therefor.

14. Termination.

Subject to Section 7(a), the Company shall terminate the Executive's employment under this Agreement prior to the expiration of the Contract Term only if the Board of Directors of the Company removes the Executive from office by the affirmative vote of a majority of the directors of the Company who have not disqualified themselves because of a potential conflict of interest, at a meeting at which the Executive is accorded an opportunity to speak. In such case, the Executive's employment under this Agreement shall terminate and the Executive shall be removed from office effective when such vote is taken by the Board or on such later date as may be specified by the Board.
For purposes of this Agreement, removal of the Executive from office in accordance with subparagraph (a) shall be deemed to be for "Cause" as defined in Section 1(f) only if the Company delivers to the Executive within a reasonable time before the removal of the Executive from office a notice of termination for Cause specifying in reasonable detail the conviction or plea, material failure, misconduct and economic harm or breach by the Executive that is the basis for termination and the Executive shall have failed prior to his removal to correct the stated failure, misconduct and economic harm or breach in all material respects. Short Term Disability shall not be a basis for removal of the Executive from office.
Subject to Section 7(a), in the event:


	(i) the Company terminates the Executive's employment under this Agreement pursuant to Section 14(a) without Cause;
	(ii) the Company terminates the Executive's employment under this Agreement for Cause by reason of a conviction that is later reversed on appeal and fails to reinstate him with full back pay and uninterrupted Group Benefits;
	(iii) (A) the Company breaches any of the covenants and agreements set forth in Sections 2(b), 3(a), 4, 5, 6, 14(a), 15 (a) or (c) or 20(c) in any material respect and (B) the Executive tenders to the Company a letter of resignation specifying such breach or election in reasonable detail and demanding Severance Pay; or
	(iv) a person other than the Executive is elected Chairman or Cochairman of the Board without the affirmative vote or written consent of the Executive (any termination or resignation under the circumstances referred to in clauses (i) through (iv) above being referred to as "Termination Without Cause" whether or not Cause shall exist);

then the Company shall pay the Executive an amount equal to the product of three times the sum of (A) the annual Base Salary at the rate payable immediately prior to termination, plus (B) the Incentive Compensation Participation, plus (C) $20,000 (“Severance Pay”). For example, on the date first set forth above, Severance Pay is $3,348,000. No demand or other notice from the Executive with respect to Severance Pay shall be necessary except in connection with clause (iii) of the preceding sentence. Anything in clause (iii) of the penultimate sentence to the contrary notwithstanding, the Executive shall not be entitled to Severance Pay, and the Company shall have no obligation to pay Severance Pay, if:


	(i) within 15 days after the delivery of a letter of resignation (the "Cure Period"), the Company shall cure the Company's breach specified in the letter of resignation in all material respects (or shall begin in good faith to cure a breach of a nature that requires more than 15 days to cure in all material respects) and shall deliver to the Executive a notice to that effect;
	(ii) the Board of Directors shall approve a resolution during the Cure Period requesting the Executive to withdraw his letter of resignation; and
	(iii) the Company shall deliver or send to the Executive during the Cure Period in accordance with Section 21 a certified copy of the Board resolution referred to in clause (ii) of this sentence and a written offer to reinstate the Executive with full back pay and uninterrupted Group Benefits and other benefits under this Agreement, including eligibility for a Performance Bonus.

Severance Pay shall be remitted as follows:


	(i) pursuant to clause (i) of the first sentence of Section 14(c), within 15 days following the termination of the Executive's employment under this Agreement;
	(ii) pursuant to clause (ii) of the first sentence of Section 14(c), within 15 days after notice requesting reinstatement with full back pay and uninterrupted Group Benefits;
	(iii) pursuant to clause (iii) of the first sentence of Section 14(c), within 15 days after the end of the Cure Period; or
	(iv) pursuant to clause (iv) of the first sentence of Section 14(c), within 15 days after such election of a Chairman or Cochairman of the Board.

No grace period shall be allowed for remittance of Severance Pay, time being of the essence.

In the event (i) a Change of Control occurs on a day at the beginning of which the Executive is an employee of the Company, and (ii) the Executive within 10 business days after first receiving notice from the Company of the Change of Control tenders a letter of resignation to the Company specifying such Change of Control (whether or not the Executive shall be an employee of the Company during the period between the end of the day preceding Change of Control and the tender of such letter) and demanding Resignation Compensation, the Company shall pay the Executive immediately after the resignation of the Executive under this Section 14(e), an amount equal to the product of three times the sum of (A) the annual Base Salary at the rate payable immediately prior to resignation, plus (B) $20,000 ("Resignation Compensation"). No grace period shall be allowed for remittance of Resignation Compensation, time being of the essence. Notice of Change of Control shall be given to the Executive by the Company pursuant to Section 21, provided, however, that the Executive, in his discretion, may accept as notice filing with the SEC of reports setting forth facts that, taken together, constitute Change of Control.
In the event of Termination Without Cause or resignation by the Executive in accordance with Section 14(e):


	(i) the Executive shall be under no obligation to seek other employment and there shall be no offset against any amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that the Executive may obtain (Severance Pay or Resignation Compensation is in the nature of liquidated damages and not in the nature of a penalty); and
	(ii) even though no longer in the Company's employ, the Executive shall be entitled to the following benefits and additional payments:


		(A) any Base Salary accrued or Performance Bonus vested but not yet paid;
		(B) a pro rata Performance Bonus for the season in which employment is terminated determined and payable on the basis of the number of days worked during the season and the bonus percentage established for the season;
		(C) any accrued vacation pay;
		(D) reimbursement for expenses incurred, but not paid prior to such termination of employment;
		(E) continuation at the Company's expense through the remainder of the Contract Term of the Individual Life Policy;
		(F) COBRA health insurance benefits, including supplemental executive preventive medicine and wellness benefits, for the Executive and his dependents at the Company's expense until the COBRA benefits expire and, thereafter, through the remainder, if any, of the Contract Term equivalent reimbursement of healthcare expenses directly by the Company;
		(G) conversion at the Company's expense through the remainder of the Contract Term of the group life insurance coverage on the Executive's life;
		(H) payment to the Executive by April 14th of each year of an amount equal to the Tax with respect to the payments made to or on behalf of the Executive pursuant to clauses (F) and (G) of this sentence in the preceding calendar year; and
		(I) use of the Company Car free of charge for three years after the Termination Without Cause or resignation by the Executive occurs.

If the Company terminates the Executive's employment hereunder for Cause (except as provided in clause (ii) of the first sentence of Section 14(c)), or in the event the Executive resigns (except as provided in clause (iii) of the first sentence of Section 14(c) or in 14(e)), the Executive shall be entitled to:


	(i) any Base Salary accrued and any Performance Bonus vested but not paid;
	(ii) any accrued vacation pay;
	(iii) reimbursement for expenses incurred, but not yet paid prior to such termination of employment; and
	(iv) any other compensation and benefits that accrued prior to termination of employment as may be provided in accordance with the terms and provisions of the Group Benefits.

In the event the Company removes the Executive from office, and terminates the Executive's employment under this Agreement, or in the event the Executive resigns, the Executive shall continue to have the obligations provided for in Section 11 hereof. The provisions of this Section 14 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.
The Executive shall accept the payments referred to in this Section 14 as liquidated damages in full discharge and release of the Company of and from any further payment obligations under this Agreement except obligations under Sections 15 and 16.
For the avoidance of doubt, the term "Base Salary" for purposes of Section 14(c) and 14(e) shall include both the base salary actually drawn or deferred by the Executive and any additional amount of base salary that he may have been entitled to draw or defer pursuant to the terms of this Agreement but that he shall not have drawn or deferred in fact. For example, as of the date first set forth above, Base Salary shall be deemed to be $685,000 even though less is being drawn or deferred by the Executive.
Every payment made hereunder by authority of the Executive Committee of the Board or of the Board itself shall be final and the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever other than the Executive's breach in any material respect of the provisions of Section 11.

15. Indemnification.

The Company shall indemnify the Executive as provided in the By-laws.
In the event of payment of indemnities under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Executive.
The Company shall use reasonable efforts to continue the existing directors' and officers' liability policies covering the Executive for $20 million and to maintain the policies during the Contract Term and for three years thereafter.
If the federal excise tax pursuant to Section 280G of the Code or any successor provision on "golden parachute" payments applies to the payments made pursuant to this Agreement, to any acceleration of vesting of Options or to any other benefit or distribution to the Executive from the Company, the Company shall immediately pay the Executive an amount equal to the excise tax incurred plus (i) an amount equal to the Tax with respect to the amount of the excise tax, plus (ii) an amount equal to the federal excise tax on "golden parachute" payments with respect to the payment, if any, made pursuant to clause (i) of this sentence plus (iii) an amount equal to the Tax with respect to the payment made pursuant to clause (ii) of this sentence and continuing sequentially until the amount of federal excise tax on "golden parachute" payments unreimbursed by the Company shall be less than 1% of Base Salary. The amount of the payments due from the Company pursuant to this Section 15(d) may be determined in writing by a certified public accountant ("CPA") selected by the Executive, provided, however, that the CPA selected by the Executive shall, upon the Company's request, consult with another CPA selected by the Company. Such determination by the CPA selected by the Executive after such consultation, if so requested, shall be conclusive and binding on the Company except for manifest error.
The provisions of this Section 15 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.

16. Enforcement; Interest.

If any amount owing to the Executive under this Agreement is not paid by the Company, or on its behalf, within 15 days after a written demand, claim or request for payment has been delivered or sent to the Company, time being of the essence, the Executive may at any time thereafter bring suit against the Company to recover the unpaid amount and interest thereon and, if successful in whole or in part, the Executive shall be entitled to be paid also the expenses of prosecuting such suit, including reasonable attorneys' fees. Interest shall be payable from the date any amount is first due and payable to the Executive at a rate equal to the highest rate payable on any of the Company's indebtedness after the date first set forth above but in no event at a rate higher than the maximum rate then permitted by law.
The provisions of this Section 16 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.

17. Entire Agreement; Legal Representation.

This Agreement, the By-laws, the stock option agreements between the Company and the Executive and the provisions of the Group Benefits embody the entire agreement of the parties with respect to the Executive's employment and shall be interpreted in accordance with the past practice of the parties. This Agreement may not be changed or terminated orally but only by an agreement in writing signed by the parties hereto. No Company policy adopted after the date first set forth above shall change this Agreement, even if approved as a policy by the Executive. This Agreement amends the Initial Agreement and cancels and supersedes any and all other prior agreements and understandings between the parties hereto respecting the employment of the Executive by the Company and/or its subsidiaries or any Affiliated Company and the payment of compensation.
Each party has been represented by counsel in the preparation of this Agreement. This Agreement shall not be deemed to have been drafted by either party.

18. Waiver. The waiver by the Company of a breach of any provision of this Agreement by the Executive shall not operate or be construed as a waiver of any subsequent breach by him. The waiver by the Executive of a breach of any provision of this Agreement by the Company shall not operate or be construed as a waiver of any subsequent breach by the Company.

19. Governing Law.

This Agreement shall be subject to, and governed by, the laws of the State of New Jersey.

20. Assignability.

The obligations of the Executive may not be delegated and, except as to the designation of beneficiaries of insurance and similar benefits, the Executive may not, without the Company's written consent thereto, assign, transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this Agreement or any interest herein. Any such attempted delegation or disposition shall be null and void ab initio and without effect.
This Agreement and all of the Company's rights and obligations hereunder may be assigned or transferred by the Company to, and shall be binding upon and inure to the benefit of, any subsidiary of the Company or any Successor to the Company, but any such assignment shall not relieve the assigning party of any of its obligations hereunder. Except as provided in this Section 20(b), this Agreement may not otherwise be assigned by the Company. (The term "Successor" shall mean, with respect to the Company or any of its subsidiaries, any corporation or other business entity which, by merger, consolidation, purchase of the assets, or otherwise, acquires all or substantially all of the assets of the Company or such subsidiary.)
The Company shall obtain the agreement of any Successor that the Successor shall assume and be bound by the terms of this Agreement prior to the effectiveness of any such succession. Failure of the Company to obtain the agreement of any Successor to assume and be bound by the terms of this Agreement prior to the effectiveness of any such succession shall be a breach of this Agreement.

21. Notices. All notices, requests, demands and other communications hereunder shall (i) be in writing, (ii) shall be delivered personally or sent by registered mail to the other party hereto at his or its address as set forth at the beginning of this Agreement and, in the case of the Company, addressed to the attention of its Secretary and (iii) if mailed, be effective on the date stamped on the postage receipt of the post office. A copy of each notice, request, demand, and other communication to the Company hereunder shall be sent by first class mail to its counsel, Richard W. Rubenstein, Esq., Squire, Sanders & Dempsey, Huntington Center, 41 South High Street, 13th Floor, Columbus, Ohio 43215. Either party may change the address to which notices, requests, demands and other communications hereunder shall be sent by sending written notice of such change of address to the other party.

22. Severability. If any provision of this Agreement as applied to either party or to any circumstances shall be adjudged by a court of competent jurisdiction to be void or unenforceable, the same shall in no way affect any other provision of this Agreement or the validity or enforceability of this Agreement.

23. Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

24. Counterparts. This Agreement may be executed in one or more counterparts, which shall, collectively and separately, constitute one agreement.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement in Englewood, New Jersey, in duplicate originals on September 6, 2004, in the case of the Company by an officer thereunto duly authorized.


	UNITED RETAIL GROUP, INC.

	By: /s/ GEORGE R. REMETA Name: George R. Remeta Title: Chief Administrative Officer /s/ RAPHAEL BENAROYA Raphael Benaroya

empagtRB.doc

EX-10 3 ex10_2form10q0904.htm EXHIBIT 10.1 TO FORM 10-Q SEPT 2004 Exhibit 10.2 to Form 10-Q Sept 2004

Exhibit No. 10.2

RESTATED EMPLOYMENT AGREEMENT

Agreement made as of the 3^rd day of September, 2004 (referred to herein as “the date first set forth above”), between UNITED RETAIL GROUP, INC., a Delaware corporation, with principal offices at 365 West Passaic Street, Rochelle Park, New Jersey 07662-6563 (the “Company”), and GEORGE R. REMETA, residing at 25 Lee Way, Oakland, New Jersey 07436 (the “Executive”).

WHEREAS, the Executive has been employed by the Company as its Vice Chairman of the Board and Chief Administrative Officer pursuant to an Employment Agreement, dated November 20, 1998, as amended on November 29, 2001, December 6, 2002 and September 2, 2003 (as amended, the “Original Agreement”);

WHEREAS, the Company desires to continue the services of the Executive, and the Executive desires to continue to provide such services to the Company, on the terms set forth in this Agreement;

WHEREAS, this Agreement was reviewed in executive sessions of the Compensation Committee of the Board of Directors on August 27, 2004 and September 3, 2004 and was recommended in the latter meeting; and

WHEREAS, this Agreement was reviewed in an executive session of the Company’s Board of Directors on August 27, 2004 and approved in an executive session of the Board on September 3, 2004.

1. Definitions.

Affiliated Companies shall mean, with respect to the Company, any corporation, limited partnership, general partnership, association, joint-stock company, joint venture, trust, bank, trust company, land trust, business trust, fund or any organized group of persons, whether or not a legal entity, that is directly or indirectly controlled by the Company.
Base Salary shall have the meaning set forth in Section 4(a).
Board of Directors shall mean the Board of Directors of the Company.
Business of the Company shall mean the operation of a retail store chain which markets and sells apparel for women principally in sizes 14 and larger and any other future business in which the Company and its subsidiaries and Affiliated Companies engage that produces more than 10% of the Company's consolidated sales.
By-laws shall mean the Restated By-laws of the Company as currently in force.
Cause shall mean the occurrence of one or more of the following events:


	(i) a judgment of conviction against the Executive or a plea of guilty has been entered for any felony which is both based on his personal actions (excluding liability imputed to him by reason of his position as an executive of the Company) and involves common law fraud, embezzlement, breach of duty as a fiduciary, willful dishonesty or moral turpitude (the entry of a judgment or plea being the only event or circumstance sufficient to constitute Cause under this subparagraph (i)), provided, however, that any felony an essential element of which is predicated on the operation of a vehicle shall be deemed not to involve moral turpitude;
	(ii) (A) the Executive has willfully and continuously failed to perform his duties to the Company in any material respect or (B) the Executive has failed in any material respect to follow specific directions of the Board of Directors or the Chief Executive Officer of the Company in the performance of his duties;
	(iii) the Executive has demonstrated willful misconduct in the performance of his duties to the Company in any material respect and material economic harm to the Company has resulted; or
	(iv) there has been a breach in any material respect of any of the provisions of Section 11;

Change of Control shall mean resignation or removal (including failure to reelect) for any reason of the Chief Executive Officer of the Company within 90 days after either:


	(i) the acquisition after August 27, 2004 by any person or group acting in concert of shares of Company Common Stock if, after such acquisition, such person or group is the beneficial owner of 30% or more of the Common Stock then outstanding, but shall not include acquisition by:


		(A) the Company;
		(B) any subsidiary of the Company;
		(C) any employee benefit plan of the Company, or of any subsidiary of the Company, or any person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan;
		(D) any person who becomes the beneficial owner of 30% or more of the shares of Company Common Stock then outstanding as a result of a reduction in the number of shares of Common Stock outstanding due to the repurchase of shares of Common Stock by the Company unless and until such person, after becoming aware that such person has become the beneficial owner of 30% or more of the then outstanding shares of Common Stock, acquires beneficial ownership of additional shares of Common Stock representing 1% or more of the shares of Common Stock then outstanding;
		(E) any person who has reported or is required to report such ownership (but less than 50%) on Schedule 13G under the Securities Exchange Act of 1934, as amended and in effect on the date of this Agreement (the "Exchange Act"), (or any comparable or successor report) or on Schedule 13D under the Exchange Act (or any comparable or successor report) which Schedule 13D does not state any intention to or reserve the right to control or influence the management or policies of the Company or engage in any of the actions specified in Item 4 of such schedule (other than the disposition of the Common Stock) and, within 10 business days of being requested by the Company to advise it regarding the same, certifies to the Company that such person acquired shares of Common Stock in excess of 29.9% inadvertently or without knowledge of the terms of the Company's Stockholder Rights Plan and who, together with all affiliates, thereafter does not acquire additional shares of Common Stock while the beneficial owner of 30% or more of the shares of Company Common Stock then outstanding, provided, however, that if the person requested to so certify fails to do so within 10 business days, then such person shall become an acquiring person immediately after such 10-business-day period;
		(F) the Executive, his spouse, any descendant of the parents of the Executive, the spouse of any such descendant, the estate of any of the foregoing individuals, any trust for the primary benefit of any of the foregoing individuals or for the primary benefit of any of the foregoing individuals and any charitable organization, any corporation or limited liability company of which all the shareholders or members are any of the foregoing individuals, or any charitable organization established by any of the foregoing individuals, Raphael Benaroya or The Benaroya Foundation; or
		(G) any person acting in concert with the Executive;

Company Car shall have the meaning set forth in Section 6(d).
Contract Term shall mean the period of time commencing November 20, 1998 and ending on the fifth anniversary of the date first set forth above or such later date as may be mutually agreed upon by the Company and the Executive. (For the avoidance of doubt, Contract Term as used herein may extend beyond the termination of Executive's employment under this Agreement.)
CPI shall have the meaning set forth in Section 4(a).
Cure Period shall have the meaning set forth in Section 14(b).
Group Benefits shall have the meaning set forth in Section 6(a).
Incentive Compensation Participation shall mean 50% of Base Salary, without regard to whether any payment actually shall have been made under the Company's incentive compensation program. (For example, as of the date first set forth above, the Incentive Compensation Participation was $250,000.)
Individual Disability Policy shall have the meaning set forth in Section 6(c).
Individual Life Policy shall have the meaning set forth in Section 6(b).
Options shall mean employee stock options under a benefit plan or arrangement between the Company and the Executive, including those which may be granted during the Contract Term, held by the Executive or his assigns or donees.
Performance Bonus shall have the meaning set forth in Section 4(b).
Permanent Disability shall mean the inability of the Executive to perform his duties and responsibilities to the Company by reason of a physical or mental disability or infirmity (i) for a continuous period of at least four months or (ii) at such earlier time as the Executive submits medical evidence satisfactory to the Company that the Executive has a physical or mental disability or infirmity that will likely prevent him from substantially performing his duties and responsibilities for four months or longer (the date of such Permanent Disability shall be on the earlier of the last day of such four-month period or the day on which the Executive submits such evidence, as the case may be).
Protected Information shall mean trade secrets, confidential or proprietary information, and all other knowledge, know-how, information, documents or materials, owned or developed by the Company, or otherwise in the possession of the Company, whether in tangible or intangible form, pertaining to the Business of the Company, the confidentiality of which the Company takes reasonable measures to protect, including, but not limited to, the Company's research and development, store operating results, identities and habits of customers and prospective customers, suppliers, business relationships, products (including prices, costs, sales or content), processes, techniques, machinery, contracts, financial information or measures, business methods, future business plans, data bases, computer programs, designs, models, operating procedures, knowledge of the organization, and other information owned, developed or possessed by the Company; provided, however, that Protected Information shall not include information that shall become generally known to the public or the trade without violation of Section 11.
Resignation Compensation shall have the meaning set forth in Section 14(d).
Severance Pay shall have the meaning set forth in Section 14(b).
Short Term Disability shall mean the inability of the Executive to substantially perform his duties and responsibilities to the Company by reason of a physical or mental disability or infirmity for a continuous period of less than four months.
Successor shall have the meaning set forth in Section 20.
Tax shall mean all taxes on income, which shall be assumed to be at a rate equal to the sum of the highest marginal rates, including any applicable surcharges, of federal income tax, state income tax, local income tax, Medicare payroll tax and any similar income or payroll tax for a married citizen filing a joint return from the Executive's residence, as now in effect or as amended from time to time.
Termination Without Cause shall have the meaning set forth in Section 14(b).
Unauthorized shall mean: (i) in contravention of the Company's policies or procedures; (ii) otherwise inconsistent with the Company's measures to protect its interests in its Protected Information; or (iii) in contravention of any duty existing under law or contract.

2. Term; and Location.

The Company hereby employs the Executive, and the Executive hereby accepts such employment, in the capacities and upon the terms and conditions hereinafter set forth, during the Contract Term.
In no event shall the Executive's office be relocated without his prior written consent.

3. Duties.

During the Contract Term, the Executive shall serve as the Chief Administrative Officer of the Company. In such capacity, the Executive shall supervise the preparation of the Company's financial statements and budgets and manage the design and operation of the Company's processes and perform such additional duties, commensurate with his position and title, as may be determined and assigned to the Executive from time to time by the Board of Directors and the Chief Executive Officer of the Company. Notwithstanding the above, the Executive shall not be required to perform any duties and responsibilities which would be likely to result in a non-compliance with or violation of any applicable law or regulation. The Executive shall report solely and directly to the Chief Executive Officer.
The Executive accepts such employment and hereby agrees to serve the Company faithfully, industriously and to the best of his ability in such capacities, with undivided loyalty, devoting substantially all of his business time, attention, knowledge, energy and skills to such employment as Chief Administrative Officer of the Company except during vacation not to exceed three weeks in any 12-month period and except as otherwise provided in the following sentence. However, the Executive may engage in overseeing personal and family investments in a manner in which the Executive does not actively operate portfolio companies in the ordinary course of business.

4. Compensation.

As compensation to the Executive for performance of the services required hereunder and as consideration for his execution and delivery of this Agreement, the Company shall pay him (subject to Sections 7 and 14), and the Executive agrees to accept a base salary, payable in accordance with the regular executive payroll practices of the Company, at a rate of $500,000 per annum during the period ending on January 31, 2005 and thereafter at such higher rate as may be determined by the Board of Directors upon recommendation of the Compensation Committee of the Board of Directors, but in any event base salary shall increase as of February 1, 2005 by a percentage at least equal to the increase, if any, in the Consumer Price Index for All Urban Consumers for New York and Northern New Jersey published by the Bureau of Labor Statistics of the Department of Labor ("CPI") during the year ending on December 31, 2004 and shall increase as of each anniversary of February 1, 2005 by a percentage at least equal to the annual increase, if any, in the CPI at the time (as increased from time to time and whether or not deferred, the "Base Salary").
The Executive shall continue to be eligible to receive, and the Company shall continue to pay, a semi-annual cash incentive compensation payment ("Performance Bonus") based on the Company's consolidated operating income for the six-month periods ending January 31st and July 31st, respectively. The Executive's participation percentage shall be 50% with a semi-annual award ranging from zero to 100% of Base Salary for the six-month period in accordance with the Summary Plan Description for United Retail Group, Inc. Incentive Compensation Program for Executives as of the date first set forth above, provided, however, that the Performance Bonus shall be earned and fully vested in the Executive as of January 31st or July 31st, as the case may be, whether or not the Executive shall remain in the Company's employ after the Performance Bonus shall have vested and provided, further, that the Performance Bonus shall be paid to the Executive as soon as practicable after the consolidated operating income for the period in question shall be determined.

5. Expenses

The Executive will continue to be required to incur reasonable and necessary travel, business entertainment and other business expenses. The Company shall reimburse the Executive for all reasonable and necessary travel, business entertainment and other business expenses incurred or expended by the Executive incident to the performance of the Executive’s duties hereunder, upon submission by the Executive to the Company of vouchers or expense statements satisfactorily evidencing such expenses.

6. Executive Benefits.

The Company shall provide the Executive with benefits ("Group Benefits"), taken as a whole, that are at least equal to those provided by the Company to the other senior executives of the Company as of the date first set forth above including, without limitation, availability of enhanced group disability insurance benefits (or, if the group disability insurance policy can not be continued in force, the Company shall make available other disability benefits equivalent to the benefits under the group policy). The Executive shall be entitled to three weeks' vacation and two personal days with pay at any time during the year after the date first set forth above and each 12 months thereafter.
In addition to Group Benefits, the Company shall maintain in force the existing term life insurance policies on the Executive in an amount of $1,320,000 or a similar policy issued by an insurance company with an equal or higher rating (the "Individual Life Policy") at the Company's expense. The Executive shall have the right to select and change the beneficiary(ies) of such life insurance policies.
The Company shall reimburse the Executive in the amount of $4,000 per annum with respect to the premium on the existing special supplemental long term disability insurance policy covering the Executive (the "Individual Disability Policy") and the Taxes on such premium amount.
The Company shall provide the Executive perquisites in accordance with past practice, including, without limitation, exclusive use of a vehicle (the "Company Car") free of charge for business and personal travel.
Group Benefits, the Individual Life Policy and the Company Car shall be provided while the Executive is employed under this Agreement and thereafter as provided pursuant to the terms of this Agreement.
All Options shall be fully vested and immediately exercisable after either Termination Without Cause or a Change of Control, anything in any stock option agreement between the Company and the Executive to the contrary notwithstanding. In the event of Termination Without Cause, Options shall be exercisable for the lesser of 90 days thereafter or the remainder of the term of the Option. In the event of Change of Control, Options shall be exercisable until the earlier of 90 days after the termination of the Executive's employment hereunder (including resignation) or the expiration of the term of the Option.

7. Permanent Disability; Death.

In the event of the Permanent Disability of the Executive during the Contract Term, the Board of Directors shall, upon written notice to the Executive, have the right to terminate the Executive's employment hereunder by reason of Permanent Disability.
In the event of the death of the Executive during the Contract Term, this Agreement shall automatically terminate.

8. Benefits Upon Death or Disability.

In the event of the Executive’s death or a termination of the Executive’s employment by the Company due to Permanent Disability, the Executive, his executor or his heirs at law, as the case may be, shall be entitled to:

any Base Salary accrued or any Performance Bonus vested but not yet paid;
a pro rata Performance Bonus for the season in which death or Permanent Disability occurs determined and payable on the basis of the number of days worked during the season and the bonus percentage established for the season;
any accrued vacation pay;
reimbursement for expenses incurred but not yet paid prior to such death or Permanent Disability;
in the case of death, the proceeds of the Individual Life Policy and other compensation and benefits as may be provided in accordance with the terms and provisions of the Group Benefits or of this Agreement; and
in the case of Permanent Disability, for five years following the date of Permanent Disability, first, COBRA health insurance benefits, including supplemental executive preventive medicine and wellness benefits, for the Executive and his dependents at the Company's expense until the COBRA benefits expire and, thereafter, for the remainder of such five-year period, equivalent reimbursement of healthcare expenses directly by the Company.

The provisions of this Section 8 shall survive the termination of the Executive’s employment hereunder.

9. Representation, Warranty and Covenant of Executive.

The Executive represents, warrants and covenants to the Company that he is not and will not become a party to any agreement, contract or understanding, whether employment or otherwise, which would in any way restrict or prohibit him from undertaking or performing his employment in accordance with the terms and conditions of this Agreement.

10. Representation, Warranty and Covenant of the Company.

The Company represents and warrants that this Agreement constitutes a valid and legally binding obligation of the Company enforceable in accordance with the terms herein set forth, except to the extent that the enforceability of this Agreement may be affected by bankruptcy, insolvency, reorganization, moratorium, or similar laws or equitable principles affecting creditors' rights generally.
The Company covenants that it shall give notice promptly to the Executive of the occurrence of Change of Control pursuant to Section 21.
The provisions of this Section 10 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.

11. Restrictive Covenants and Confidentiality.

The Executive shall not:

During the Contract Term and thereafter, the Executive will not use, disclose or divulge, furnish or make accessible to anyone, directly or indirectly, any Protected Information in any Unauthorized manner or for any Unauthorized purpose, provided, however, that in the event that the Executive is required to disclose any Protected Information by court order or decree or in compliance with the rules and regulations of a governmental agency or in compliance with law, the Executive will provide the Company with prompt notice of such required disclosure so that the Company may seek an appropriate protective order and/or waive the Executive's compliance with the provisions of this Section 11 and provided, further, that if, in the absence of a protective order or the receipt of a waiver hereunder, the Executive is advised by his counsel that such disclosure is necessary to comply with such court order, decree, rules, regulation or law, he may disclose such information without liability hereunder.
The Executive agrees that all processes, techniques, know-how, inventions, plans, products, and devices developed, made or invented by the Executive, alone or with others in connection with the Executive's employment hereunder, during the Contract Term, shall become and be the sole property of the Company unless released in writing by the Company.
The Executive agrees that the Executive shall not, directly or indirectly, within any area in the United States or elsewhere where the Company or any of its subsidiaries or Affiliated Companies is transacting business during the Contract Term, engage or participate or make any financial investments in or become employed by, or act as an attorney, agent or principal of, or render advisory or other services to or for any person, firm or corporation, or in connection with any business activity (other than that of the Company and its subsidiaries or Affiliated Companies), that derives more than 10% of its sales, directly or indirectly, from a business the same as the Business of the Company. Nothing herein contained, however, shall restrict the Executive from overseeing personal and family investments, including any investments in not more than 3% of the voting securities in any company whose stock is listed on a national securities exchange or actively traded in the over-the-counter market, so long as in connection with such investments the Executive does not actively operate any such business or enterprise that derives more than 10% of its sales, directly or indirectly, from a business the same as the Business of the Company.
The Executive shall be bound by the provisions of Section 11(a) and (d), and shall perform his obligations pursuant to Section 11(a) and (d), while employed by the Company and for 36 months thereafter, provided, however, that in the event of Termination Without Cause, the Executive shall be bound by the provisions of Section 11(a) and (d), and shall perform his obligations pursuant to Section 11(a) and (d), only in the event that the Company shall remit his Severance Pay strictly in accordance with the provisions of Section 14(c) and provided, further, that in the event of resignation by the Executive in accordance with Section 14(d), the Executive shall be bound by the provisions of Section 11(a) and (d), and shall perform his obligations pursuant to Section 11(a) and (d), only in the event that the Company shall remit his Resignation Compensation within 15 days after his resignation, time being of the essence, and provided, further, that the Executive after receiving Severance Pay or Resignation Compensation, shall have the right at any time to refund one-third of the Severance Pay or Resignation Compensation to the Company, in which event the length of his obligations pursuant to Section 11(a) and (d) shall be reduced from 36 months after employment to 24 months after employment.
The provisions of this Section 11 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.
The Executive acknowledges that the services to be rendered by the Executive are of a special, unique and extraordinary character and, in connection with such services, the Executive will have access to confidential information vital to the Company's and its subsidiaries and Affiliated Companies' businesses. By reason of this, the Executive consents and agrees that if the Executive violates any of the provisions of this Section 11, the Company and its subsidiaries and Affiliated Companies would sustain irreparable harm, and therefore, in addition to any other remedies which the Company may have under this Agreement or otherwise, the Company shall be entitled to an injunction from any court of competent jurisdiction restraining the Executive from committing or continuing any such violation of this Section 11. The Executive acknowledges that damages at law would not be an adequate remedy for violation of this Section 11, and the Executive therefore agrees that the provisions of this Section 11 may be specifically enforced against the Executive in any court of competent jurisdiction. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach, including the recovery of damages from the Executive.

12. Deductions and Withholding.

The Executive agrees that the Company shall withhold from any and all compensation required to be paid to the Executive pursuant to this Agreement all Federal, state, local and/or other taxes which the Company determines are required to be withheld in accordance with applicable statues and/or regulations from time to time in effect.

13. Mutual Non-Disparagement.

Neither the Executive nor the Company will make or authorize any public statement disparaging the other in its or his business interests and affairs. Notwithstanding the foregoing, neither party shall be (i) required to make any statement which it or he believes to be false or inaccurate, or (ii) restricted in connection with any litigation, arbitration or similar proceeding or with respect to its response to any legal process. The provisions of this Section 13 shall survive the termination of the Executive’s employment hereunder, irrespective of the reason therefor.

14.	*Termination.*

For purposes of this Agreement, removal of the Executive from office shall be deemed to be for "Cause" as defined in Section 1(f) only if the Company delivers to the Executive within a reasonable time before the removal of the Executive from office a notice of termination for Cause specifying in reasonable detail the conviction or plea, material failure, misconduct and economic harm or breach by the Executive that is the basis for termination and the Executive shall have failed prior to his removal to correct the stated failure, misconduct and economic harm or breach in all material respects. Short Term Disability shall not be a basis for removal of the Executive from office.
Subject to Section 7(a), in the event:


	(i) the Company terminates the Executive's employment under this Agreement without Cause;
	(ii) the Company terminates the Executive's employment under this Agreement for Cause by reason of a conviction that is later reversed on appeal and fails to reinstate him with full back pay and uninterrupted Group Benefits; or
	(iii) A) the Company breaches any of the covenants and agreements set forth in Sections 2(b), 3(a), 4, 5, 6, 15 (a) or (c) or 20 (c) in any material respect and (B) the Executive tenders to the Company a letter of resignation specifying such breach or election in reasonable detail and demanding Severance Pay (any termination or resignation under the circumstances referred to in clauses (i) through (iii) above being referred to as "Termination Without Cause" whether or not Cause shall exist);

then the Company shall pay the Executive an amount equal to the product of three times the sum of (A) the annual Base Salary at the rate payable immediately prior to termination, plus (B) the Incentive Compensation Participation, plus (C) $4,000 (“Severance Pay”). For example, on the date first set forth above, Severance Pay is $2,262,000. No demand or other notice from the Executive with respect to Severance Pay shall be necessary except in connection with clause (iii) of the preceding sentence. Anything in clause (iii) of the penultimate sentence to the contrary notwithstanding, the Executive shall not be entitled to Severance Pay, and the Company shall have no obligation to pay Severance Pay, if:


	(i) within 15 days after the delivery of a letter of resignation (the "Cure Period"), the Company shall cure the Company's breach specified in the letter of resignation in all material respects (or shall begin in good faith to cure a breach of a nature that requires more than 15 days to cure in all material respects) and shall deliver to the Executive a notice to that effect;
	(ii) during the Cure Period the Chief Executive Officer of the Company shall request in writing that the Executive withdraw his letter of resignation; and
	(iii) the Company shall deliver or send to the Executive during the Cure Period in accordance with Section 21 a written offer to reinstate the Executive with full back pay and uninterrupted Group Benefits and other benefits under this Agreement, including eligibility for a Performance Bonus.

Severance Pay shall be remitted as follows:


	(i) pursuant to clause (i) of the first sentence of Section 14(b), within 15 days following the termination of the Executive's employment under this Agreement;
	(ii) pursuant to clause (ii) of the first sentence of Section 14(b), within 15 days after notice requesting reinstatement with full back pay and uninterrupted Group Benefits; or
	(iii) pursuant to clause (iii) of the first sentence of Section 14(b), within 15 days after the end of the Cure Period.

No grace period shall be allowed for remittance of Severance Pay, time being of the essence.

In the event (i) a Change of Control occurs on a day at the beginning of which the Executive is an employee of the Company, and (ii) the Executive within 10 business days after first receiving notice from the Company of the Change of Control tenders a letter of resignation to the Company specifying such Change of Control (whether or not the Executive shall be an employee of the Company during the period between the end of the day preceding Change of Control and the tender of such letter) and demanding Resignation Compensation, the Company shall pay the Executive immediately after the resignation of the Executive under this Section 14(d), an amount equal to the product of three times the sum of (A) the annual Base Salary at the rate payable immediately prior to resignation, plus (B) $4,000 ("Resignation Compensation"). No grace period shall be allowed for remittance of Resignation Compensation, time being of the essence. Notice of Change of Control shall be given to the Executive by the Company pursuant to Section 21, provided, however, that the Executive, in his discretion, may accept as notice filing with the SEC of reports setting forth facts that, taken together, constitute Change of Control.
In the event of Termination Without Cause or resignation by the Executive in accordance with Section 14(d):


	(i) the Executive shall be under no obligation to seek other employment and there shall be no offset against any amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that the Executive may obtain (Severance Pay or Resignation Compensation is in the nature of liquidated damages and not in the nature of a penalty); and
	(ii) even though no longer in the Company's employ, the Executive shall be entitled to the following benefits and additional payments:


		(A) any Base Salary accrued or Performance Bonus vested but not yet paid;
		(B) a pro rata Performance Bonus for the season in which employment is terminated determined and payable on the basis of the number of days worked during the season and the bonus percentage established for the season;
		(C) any accrued vacation pay;
		(D) reimbursement for expenses incurred, but not paid prior to such termination of employment;
		(E) continuation at the Company's expense through the remainder of the Contract Term of the Individual Life Policy;
		(F) COBRA health insurance benefits, including supplemental executive preventive medicine and wellness benefits, for the Executive and his dependents at the Company's expense until the COBRA benefits expire and, thereafter, through the remainder, if any, of the Contract Term equivalent reimbursement of healthcare expenses directly by the Company;
		(G) conversion at the Company's expense through the remainder of the Contract Term of the group life insurance coverage on the Executive's life;
		(H) payment to the Executive by April 14th of each year of an amount equal to the Tax with respect to the payments made to or on behalf of the Executive pursuant to clauses (F) and (G) of this sentence in the preceding calendar year; and
		(I) use of the Company Car free of charge for three years after the Termination Without Cause or resignation by the Executive occurs.

If the Company terminates the Executive's employment hereunder for Cause (except as provided in clause (ii) of the first sentence of Section 14(b)), or in the event the Executive resigns (except as provided in clause (iii) of the first sentence of Section 14(b) or in 14(d)), the Executive shall be entitled to:


	(i) any Base Salary accrued and any Performance Bonus vested but not paid;
	(ii) any accrued vacation pay;
	(iii) reimbursement for expenses incurred, but not yet paid prior to such termination of employment; and
	(iv) any other compensation and benefits that accrued prior to termination of employment as may be provided in accordance with the terms and provisions of the Group Benefits.

In the event the Company removes the Executive from office, and terminates the Executive's employment under this Agreement, or in the event the Executive resigns, the Executive shall continue to have the obligations provided for in Section 11 hereof. The provisions of this Section 14 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.
The Executive shall accept the payments referred to in this Section 14 as liquidated damages in full discharge and release of the Company of and from any further payment obligations under this Agreement except obligations under Sections 15 and 16.
Every payment made hereunder by authority of the Executive Committee of the Board or of the Board itself shall be final and the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever other than the Executive's breach in any material respect of the provisions of Section 11.

15. Indemnification.

The Company shall indemnify the Executive as provided in the By-laws.
In the event of payment of indemnities under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Executive.
The Company shall use reasonable efforts to continue the existing directors' and officers' liability policies covering the Executive for $20 million and to maintain the policies during the Contract Term and for three years thereafter.
If the federal excise tax pursuant to Section 280G of the Code or any successor provision on "golden parachute" payments applies to the payments made pursuant to this Agreement, to any acceleration of vesting of Options or to any other benefit or distribution to the Executive from the Company, the Company shall immediately pay the Executive an amount equal to the excise tax incurred plus (i) an amount equal to the Tax with respect to the amount of the excise tax, plus (ii) an amount equal to the federal excise tax on "golden parachute" payments with respect to the payment, if any, made pursuant to clause (i) of this sentence plus (iii) an amount equal to the Tax with respect to the payment made pursuant to clause (ii) of this sentence and continuing sequentially until the amount of federal excise tax on "golden parachute" payments unreimbursed by the Company shall be less than 1% of Base Salary. The amount of the payments due from the Company pursuant to this Section 15(d) may be determined in writing by a certified public accountant ("CPA") selected by the Executive, provided, however, that the CPA selected by the Executive shall, upon the Company's request, consult with another CPA selected by the Company. Such determination by the CPA selected by the Executive after such consultation, if so requested, shall be conclusive and binding on the Company except for manifest error.
The provisions of this Section 15 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.

16. Enforcement; Interest.

If any amount owing to the Executive under this Agreement is not paid by the Company, or on its behalf, within 15 days after a written demand, claim or request for payment has been delivered or sent to the Company, time being of the essence, the Executive may at any time thereafter bring suit against the Company to recover the unpaid amount and interest thereon and, if successful in whole or in part, the Executive shall be entitled to be paid also the expenses of prosecuting such suit, including reasonable attorneys' fees. Interest shall be payable from the date any amount is first due and payable to the Executive at a rate equal to the highest rate payable on any of the Company's indebtedness after the date first set forth above but in no event at a rate higher than the maximum rate then permitted by law.
The provisions of this Section 16 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.

17. Entire Agreement; Legal Representation.

This Agreement, the By-laws, the stock option agreements between the Company and the Executive and the provisions of the Group Benefits embody the entire agreement of the parties with respect to the Executive’s employment and shall be interpreted in accordance with the past practice of the parties. This Agreement may not be changed or terminated orally but only by an agreement in writing signed by the parties hereto. No Company policy adopted after the date first set forth above shall change this Agreement, even if approved as a policy by the Executive. This Agreement amends the Initial Agreement and cancels and supersedes any and all other prior agreements and understandings between the parties hereto respecting the employment of the Executive by the Company and/or its subsidiaries or any Affiliated Company and the payment of compensation.

18. Waiver.

The waiver by the Company of a breach of any provision of this Agreement by the Executive shall not operate or be construed as a waiver of any subsequent breach by him. The waiver by the Executive of a breach of any provision of this Agreement by the Company shall not operate or be construed as a waiver of any subsequent breach by the Company.

19. Governing Law.

This Agreement shall be subject to, and governed by, the laws of the State of New Jersey.

20. Assignability.

The obligations of the Executive may not be delegated and, except as to the designation of beneficiaries of insurance and similar benefits, the Executive may not, without the Company's written consent thereto, assign, transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this Agreement or any interest herein. Any such attempted delegation or disposition shall be null and void ab initio and without effect.
This Agreement and all of the Company's rights and obligations hereunder may be assigned or transferred by the Company to, and shall be binding upon and inure to the benefit of, any subsidiary of the Company or any Successor to the Company, but any such assignment shall not relieve the assigning party of any of its obligations hereunder. Except as provided in this Section 20(b), this Agreement may not otherwise be assigned by the Company. (The term "Successor" shall mean, with respect to the Company or any of its subsidiaries, any corporation or other business entity which, by merger, consolidation, purchase of the assets, or otherwise, acquires all or substantially all of the assets of the Company or such subsidiary.)
The Company shall obtain the agreement of any Successor that the Successor shall assume and be bound by the terms of this Agreement prior to the effectiveness of any such succession. Failure of the Company to obtain the agreement of any Successor to assume and be bound by the terms of this Agreement prior to the effectiveness of any such succession shall be a breach of this Agreement.

21. Notices.

All notices, requests, demands and other communications hereunder shall (i) be in writing, (ii) shall be delivered personally or sent by registered mail to the other party hereto at his or its address as set forth at the beginning of this Agreement and, in the case of the Company, addressed to the attention of its Secretary and (iii) if mailed, be effective on the date stamped on the postage receipt of the post office. A copy of each notice, request, demand, and other communication to the Company hereunder shall be sent by first class mail to its counsel, Richard W. Rubenstein, Esq., Squire, Sanders & Dempsey, Huntington Center, 41 South High Street, 13th Floor, Columbus, Ohio 43215. Either party may change the address to which notices, requests, demands and other communications hereunder shall be sent by sending written notice of such change of address to the other party.

22. Severability.

If any provision of this Agreement as applied to either party or to any circumstances shall be adjudged by a court of competent jurisdiction to be void or unenforceable, the same shall in no way affect any other provision of this Agreement or the validity or enforceability of this Agreement.

23. Section Headings.

The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

24. Counterparts.

This Agreement may be executed in one or more counterparts, which shall, collectively and separately, constitute one agreement.


	UNITED RETAIL GROUP, INC.

	By: /s/ RAPHAEL BENAROYA Name: Raphael Benaroya Title: Chief Executive Officer /s/ GEORGE R. REMETA George R. Remeta

empagGRR.doc

EX-10 4 ex10_3form10q0904.htm EXHIBIT 10.3 TO FORM 10-Q SEPT 2004 Exhibit 10.3 to Form 10-Q Sept 2004

Exhibit No. 10.3

RESTATED EMPLOYMENT AGREEMENT

Agreement made as of the 3^rd day of September, 2004 (referred to herein as “the date first set forth above”), between UNITED RETAIL GROUP, INC., a Delaware corporation, with principal offices at 365 West Passaic Street, Rochelle Park, New Jersey 07662-6563 (the “Company”), and KENNETH P. CARROLL, residing at 140 Prospect Avenue, 11J, Hackensack, New Jersey 07601 (the “Executive”).

WHEREAS, the Executive has been employed by the Company and its predecessors for more than 10 years, most recently as its Senior Vice President – General Counsel pursuant to an Employment Agreement, dated November 20, 1998, as amended on August 18, 2000, November 29, 2001, December 6, 2002 and September 2, 2003 (as amended, the “Original Agreement”);

WHEREAS, the Executive is an attorney admitted to practice before the courts of the State of New York and the United States District Court for the Southern District of New York and has been employed to provide advice to the Company on the laws of the State of New York and the federal laws of the United States and to supervise the representation before courts and legislative and administrative bodies of the Company and its subsidiaries;

WHEREAS, the Company desires to continue the professional services of the Executive, and the Executive desires to continue to provide such services to the Company, on the terms set forth in this Agreement;

WHEREAS, this Agreement was reviewed in an executive session of the Company’s Board of Directors on August 27, 2004 and approved in an executive session of the Board on September 3, 2004.

1. Definitions.

Affiliated Companies shall mean, with respect to the Company, any corporation, limited partnership, general partnership, association, joint-stock company, joint venture, trust, bank, trust company, land trust, business trust, fund or any organized group of persons, whether or not a legal entity, that is directly or indirectly controlled by the Company.
Base Salary shall have the meaning set forth in Section 4(a).
Board of Directors shall mean the Board of Directors of the Company.
Business of the Company shall mean the operation of a retail store chain which markets and sells apparel for women principally in sizes 14 and larger and any other future business in which the Company and its subsidiaries and Affiliated Companies engage that produces more than 10% of the Company's consolidated sales.
By-laws shall mean the Restated By-laws of the Company as currently in force.
Cause shall mean the occurrence of one or more of the following events:


	(i) a judgment of conviction against the Executive or a plea of guilty has been entered for any felony which is both based on his personal actions (excluding liability imputed to him by reason of his position as an executive of the Company) and involves common law fraud, embezzlement, breach of duty as a fiduciary, willful dishonesty or moral turpitude (the entry of a judgment or plea being the only event or circumstance sufficient to constitute Cause under this subparagraph (i)), provided, however, that any felony an essential element of which is predicated on the operation of a vehicle shall be deemed not to involve moral turpitude;
	(ii) the Executive has been disbarred by the New York Supreme Court or permanently barred from practice before the Securities and Exchange Commission ("SEC");
	(iii) (A) the Executive has willfully and continuously failed to perform his duties to the Company in any material respect or (B) the Executive has failed in any material respect to follow specific directions of the Board of Directors or the Chief Executive Officer in the performance of his duties;
	(iv) the Executive has demonstrated willful misconduct in the performance of his duties to the Company in any material respect and material economic harm to the Company has resulted; or
	(v) there has been a breach in any material respect of any of the provisions of Section 11;

provided, however, that the judgment of conviction or a plea of guilty referred to in subparagraph (i), the disbarment referred to in subparagraph (ii), the failure of performance referred to in subparagraph (iii), the misconduct referred to in subparagraph (iv) and the breach referred to in subparagraph (v) shall constitute Cause for a maximum of only 90 days after the judgment of conviction or plea of guilty was entered, the failure of performance commenced, the material economic harm resulted, or the breach first took place, as the case may be.

Change of Control shall mean resignation or removal (including failure to reelect) for any reason of the Chief Executive Officer of the Company, within 90 days after either:


	(i) the acquisition after August 27, 2004 by any person or group acting in concert of shares of Company Common Stock if, after such acquisition, such person or group is the beneficial owner of 30% or more of the Common Stock then outstanding but shall not include acquisition by:


		(A) the Company;
		(B) any subsidiary of the Company;
		(C) any employee benefit plan of the Company, or of any subsidiary of the Company, or any person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan;
		(D) any person who becomes the beneficial owner of 30% or more of the shares of Company Common Stock then outstanding as a result of a reduction in the number of shares of Common Stock outstanding due to the repurchase of shares of Common Stock by the Company unless and until such person, after becoming aware that such person has become the beneficial owner of 30% or more of the then outstanding shares of Common Stock, acquires beneficial ownership of additional shares of Common Stock representing 1% or more of the shares of Common Stock then outstanding;
		(E) any person who has reported or is required to report such ownership (but less than 50%) on Schedule 13G under the Securities Exchange Act of 1934, as amended and in effect on the date of this Agreement (the "Exchange Act"), (or any comparable or successor report) or on Schedule 13D under the Exchange Act (or any comparable or successor report) which Schedule 13D does not state any intention to or reserve the right to control or influence the management or policies of the Company or engage in any of the actions specified in Item 4 of such schedule (other than the disposition of the Common Stock) and, within 10 business days of being requested by the Company to advise it regarding the same, certifies to the Company that such person acquired shares of Common Stock in excess of 29.9% inadvertently or without knowledge of the terms of the Company's Stockholder Rights Plan and who, together with all affiliates, thereafter does not acquire additional shares of Common Stock while the beneficial owner of 30% or more of the shares of Company Common Stock then outstanding, provided, however, that if the person requested to so certify fails to do so within 10 business days, then such person shall become an acquiring person immediately after such 10-business-day period;
		(F) the Executive, his spouse, any descendant of the parents of the Executive, the spouse of any such descendant, the estate of any of the foregoing individuals, any trust for the primary benefit of any of the foregoing individuals or for the primary benefit of any of the foregoing individuals and any charitable organization, any corporation or limited liability company of which all the shareholders or members are any of the foregoing individuals, any charitable organization established by any of the foregoing individuals, Raphael Benaroya or The Benaroya Foundation; or
		(G) any person acting in concert with the Executive;

Company Car shall have the meaning set forth in Section 6(b).
Contract Term shall mean the period of time commencing November 20, 1998 and ending on the fifth anniversary of the date first set forth above or such later date as may be mutually agreed upon by the Company and the Executive. (For the avoidance of doubt, Contract Term as used herein may extend beyond the termination of Executive's employment under this Agreement.)
CPI shall have the meaning set forth in Section 4(a).
Cure Period shall have the meaning set forth in Section 14(b).
Group Benefits shall have the meaning set forth in Section 6(a).
Incentive Compensation Participation shall mean 40% of Base Salary, without regard to whether any payment actually shall have been made under the Company's incentive compensation program. (For example, as of the date first set forth above, the Incentive Compensation Participation was $119,200.)
Options shall mean employee stock options under a benefit plan or arrangement between the Company and the Executive, including those which may be granted during the Contract Term, held by the Executive or his assigns or donees.
Performance Bonus shall have the meaning set forth in Section 4(b).
Permanent Disability shall mean the inability of the Executive to perform his duties and responsibilities to the Company by reason of a physical or mental disability or infirmity (i) for a continuous period of at least four months or (ii) at such earlier time as the Executive submits medical evidence satisfactory to the Company that the Executive has a physical or mental disability or infirmity that will likely prevent him from substantially performing his duties and responsibilities for four months or longer (the date of such Permanent Disability shall be on the earlier of the last day of such four-month period or the day on which the Executive submits such evidence, as the case may be).
Protected Information shall mean trade secrets, confidential or proprietary information, and all other knowledge, know-how, information, documents or materials, owned or developed by the Company, or otherwise in the possession of the Company, whether in tangible or intangible form, pertaining to the Business of the Company, the confidentiality of which the Company takes reasonable measures to protect, including, but not limited to, the Company's research and development, store operating results, identities and habits of customers and prospective customers, suppliers, business relationships, products (including prices, costs, sales or content), processes, techniques, machinery, contracts, financial information or measures, business methods, future business plans, data bases, computer programs, designs, models, operating procedures, knowledge of the organization, and other information owned, developed or possessed by the Company; provided, however, that Protected Information shall not include information that shall become generally known to the public or the trade without violation of Section 11.
Resignation Compensation shall have the meaning set forth in Section 14(e).
Severance Pay shall have the meaning set forth in Section 14(b).
Short Term Disability shall mean the inability of the Executive to substantially perform his duties and responsibilities to the Company by reason of a physical or mental disability or infirmity for a continuous period of less than four months.
Successor shall have the meaning set forth in Section 20.
Tax shall mean all taxes on income, which shall be assumed to be at a rate equal to the sum of the highest marginal rates, including any applicable surcharges, of federal income tax, state income tax, local income tax, Medicare payroll tax and any similar income or payroll tax for a married citizen filing a joint return from the Executive's residence, as now in effect or as amended from time to time.
Termination Without Cause shall have the meaning set forth in Section 14(b).
Unauthorized shall mean: (i) in contravention of the Company's policies or procedures; (ii) otherwise inconsistent with the Company's measures to protect its interests in its Protected Information; or (iii) in contravention of any duty existing under law or contract.

2. Term; and Location.

The Company hereby employs the Executive, and the Executive hereby accepts such employment, in the capacities and upon the terms and conditions hereinafter set forth, during the Contract Term.
In no event shall the Executive's office be relocated without his prior written consent.

3. Duties.

During the Contract Term, the Executive shall serve as the Senior Vice President - General Counsel of the Company. In such capacity, the Executive shall (i) provide advice on the laws of the State of New York and the federal laws of the United States, (ii) supervise the representation before courts and legislative and administrative bodies of the Company and its subsidiaries, (iii) engage and approve the fees of all attorneys who represent or advise the Company or a subsidiary of the Company, (iv) approve the form of all material contracts entered into by the Company or one of its subsidiaries, and (vi) perform such other professional duties as may be determined and assigned to the Executive from time to time by the Board of Directors and the Chief Executive Officer. Notwithstanding the above, the Executive shall not be required to perform any duties and responsibilities which would be likely to result in a non-compliance with or violation of any applicable law or regulation or canon of legal ethics. The Executive shall report solely and directly to the Chief Executive Officer.
The Executive accepts such employment and hereby agrees to serve the Company faithfully, industriously and to the best of his ability in such capacities, with undivided loyalty, devoting substantially all of his business time, attention, knowledge, energy and skills to such employment except during vacation not to exceed three weeks in any 12-month period and except as otherwise provided in the following sentence. However, the Executive may engage in overseeing personal and family investments in a manner in which the Executive does not actively operate portfolio companies in the ordinary course of business.

4. Compensation.

As compensation to the Executive for performance of the services required hereunder and as consideration for his execution and delivery of this Agreement, the Company shall pay him (subject to Sections 7 and 14), and the Executive agrees to accept a base salary, payable in accordance with the regular executive payroll practices of the Company, at a rate of $298,000 per annum during the period ending on January 31, 2005 and thereafter at such higher rate as may be determined by the Board of Directors upon recommendation of the Compensation Committee of the Board of Directors, but in any event base salary shall increase as of February 1, 2005 by a percentage at least equal to the increase, if any, in the Consumer Price Index for All Urban Consumers for New York and Northern New Jersey published by the Bureau of Labor Statistics of the Department of Labor ("CPI") during the year ending on December 31, 2004 and shall increase as of each anniversary of February 1, 2005 by a percentage at least equal to the annual increase, if any, in the CPI at the time (as increased from time to time and whether or not deferred, the "Base Salary").
The Executive shall continue to be eligible to receive, and the Company shall continue to pay, a semi-annual cash incentive compensation payment ("Performance Bonus") based on the Company's consolidated operating income for the six-month periods ending January 31st and July 31st, respectively. The Executive's participation percentage shall be 40% with a semi-annual award ranging from zero to 80% of Base Salary for the six-month period in accordance with the Summary Plan Description for United Retail Group, Inc. Incentive Compensation Program for Executives as of the date first set forth above, provided, however, that the Performance Bonus shall be earned and fully vested in the Executive as of January 31st or July 31st, as the case may be, whether or not the Executive shall remain in the Company's employ after the Performance Bonus shall have vested and provided, further, that the Performance Bonus shall be paid to the Executive as soon as practicable after the consolidated operating income for the period in question shall be determined.

5. Expenses.

6. Executive Benefits.

The Company shall provide the Executive with benefits ("Group Benefits"), taken as a whole, that are at least equal to those provided by the Company to the other senior executives of the Company as of the date first set forth above including, without limitation, availability of enhanced group disability insurance benefits (or, if the group disability insurance policy can not be continued in force, the Company shall make available other disability benefits equivalent to the benefits under the group policy). The Executive shall be entitled to three weeks' vacation and two personal days with pay at any time during the year after the date first set forth above and each 12 months thereafter.
The Company shall provide the Executive perquisites in accordance with past practice, including, without limitation, exclusive use of a full size sedan (the "Company Car") free of charge for business and personal travel.
Group Benefits and the Company Car shall be provided while the Executive is employed under this Agreement and thereafter as provided pursuant to the terms of this Agreement.
All Options shall be fully vested and immediately exercisable after either Termination Without Cause or a Change of Control, anything in any stock option agreement between the Company and the Executive to the contrary notwithstanding. In the event of Termination Without Cause, Options shall be exercisable for the lesser of 90 days thereafter or the remainder of the term of the Option. In the event of Change of Control, Options shall be exercisable until the earlier of 90 days after the termination of the Executive's employment hereunder (including resignation) or the expiration of the term of the Option.

7. Permanent Disability; Death.

In the event of the Permanent Disability of the Executive during the Contract Term, the Board of Directors shall, upon written notice to the Executive, have the right to terminate the Executive's employment hereunder by reason of Permanent Disability.
In the event of the death of the Executive during the Contract Term, this Agreement shall automatically terminate.

8. Benefits Upon Death or Disability.

In the event of the Executive's death or a termination of the Executive’s employment by the Company due to Permanent Disability, the Executive, his executor or his heirs at law, as the case may be, shall be entitled to:

any Base Salary accrued or any Performance Bonus vested but not yet paid;
a pro rata Performance Bonus for the season in which death or Permanent Disability occurs determined and payable on the basis of the number of days worked during the season and the bonus percentage established for the season;
any accrued vacation pay;
reimbursement for expenses incurred but not yet paid prior to such death or Permanent Disability;
any other compensation and benefits as may be provided in accordance with the terms and provisions of the Group Benefits or of this Agreement; and
in the case of Permanent Disability, for five years following the date of Permanent Disability, first, COBRA health insurance benefits, including supplemental executive preventive medicine and wellness benefits, for the Executive and his dependents at the Company's expense until the COBRA benefits expire and, thereafter, for the remainder of such five-year period, equivalent reimbursement of healthcare expenses directly by the Company.

The provisions of this Section 8 shall survive the termination of the Executive’s employment hereunder.

9. Representation, Warranty and Covenant of Executive.

10. Representation, Warranty and Covenant of the Company.

The Company represents and warrants that this Agreement constitutes a valid and legally binding obligation of the Company enforceable in accordance with the terms herein set forth, except to the extent that the enforceability of this Agreement may be affected by bankruptcy, insolvency, reorganization, moratorium, or similar laws or equitable principles affecting creditors' rights generally.
The Company covenants that it shall give notice promptly to the Executive of the occurrence of Change of Control pursuant to Section 21.
The provisions of this Section 10 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.

11. Restrictive Covenants and Confidentiality.

The Executive shall not:

During the Contract Term and thereafter, the Executive will not use, disclose or divulge, furnish or make accessible to anyone, directly or indirectly, any Protected Information in any Unauthorized manner or for any Unauthorized purpose, provided, however, that in the event that the Executive is required to disclose any Protected Information by court order or decree or in compliance with the rules and regulations of a governmental agency or in compliance with law, the Executive will provide the Company with prompt notice of such required disclosure so that the Company may seek an appropriate protective order and/or waive the Executive's compliance with the provisions of this Section 11 and provided, further, that if, in the absence of a protective order or the receipt of a waiver hereunder, the Executive is advised by his counsel that such disclosure is necessary to comply with such court order, decree, rules, regulation or law, he may disclose such information without liability hereunder.
The Executive agrees that all processes, techniques, know-how, inventions, plans, products, and devices developed, made or invented by the Executive, alone or with others in connection with the Executive's employment hereunder, during the Contract Term, shall become and be the sole property of the Company unless released in writing by the Company.
The Executive agrees that the Executive shall not, directly or indirectly, within any area in the United States or elsewhere where the Company or any of its subsidiaries or Affiliated Companies is transacting business during the Contract Term, engage or participate or make any financial investments in or become employed by, or act as an attorney, agent or principal of, or render advisory or other services to or for any person, firm or corporation, or in connection with any business activity (other than that of the Company and its subsidiaries or Affiliated Companies), that derives more than 10% of its sales, directly or indirectly, from a business the same as the Business of the Company. Nothing herein contained, however, shall restrict the Executive from overseeing personal and family investments, including any investments in not more than 3% of the voting securities in any company whose stock is listed on a national securities exchange or actively traded in the over-the-counter market, so long as in connection with such investments the Executive does not actively operate any such business or enterprise that derives more than 10% of its sales, directly or indirectly, from a business the same as the Business of the Company. The Executive further agrees that the Executive shall not act as trial counsel for any party in a lawsuit against the Company or any of its subsidiaries or Affiliated Companies, provided, however, that the Executive shall be permitted to appear pro se.
The Executive shall be bound by the provisions of Section 11(a) and (d), and shall perform his obligations pursuant to Section 11(a) and (d), during the Contract Term and for 18 months thereafter, provided, however, that in the event of Termination Without Cause, the Executive shall be bound by the provisions of Section 11(a) and (d), and shall perform his obligations pursuant to Section 11(a) and (d), only in the event that the Company shall remit his Severance Pay strictly in accordance with the provisions of Section 14(c) and provided, further, that in the event of resignation by the Executive in accordance with Section 14(d), the Executive shall be bound by the provisions of Section 11(a) and (d), and shall perform his obligations pursuant to Section 11(a) and (d), only in the event that the Company shall remit his Resignation Compensation within 15 days after his resignation, time being of the essence.
The provisions of this Section 11 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.
The Executive acknowledges that the services to be rendered by the Executive are of a special, unique and extraordinary character and, in connection with such services, the Executive will have access to confidential information vital to the Company's and its subsidiaries and Affiliated Companies' businesses. By reason of this, the Executive consents and agrees that if the Executive violates any of the provisions of this Section 11, the Company and its subsidiaries and Affiliated Companies would sustain irreparable harm, and therefore, in addition to any other remedies which the Company may have under this Agreement or otherwise, the Company shall be entitled to an injunction from any court of competent jurisdiction restraining the Executive from committing or continuing any such violation of this Section 11. The Executive acknowledges that damages at law would not be an adequate remedy for violation of this Section 11, and the Executive therefore agrees that the provisions of this Section 11 may be specifically enforced against the Executive in any court of competent jurisdiction. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach, including the recovery of damages from the Executive.

12. Deductions and Withholding.

13. Mutual Non-Disparagement.

14. Termination.

For purposes of this Agreement, removal of the Executive from office shall be deemed to be for "Cause" as defined in Section 1(f) only if the Company delivers to the Executive within a reasonable time before the removal of the Executive from office a notice of termination for Cause specifying in reasonable detail the conviction, plea, or disbarment, material failure, misconduct and economic harm or breach by the Executive that is the basis for termination and the Executive shall have failed prior to his removal to correct the stated failure, misconduct and economic harm or breach in all material respects. Short Term Disability shall not be a basis for removal of the Executive from office.
In the event:


	(i) the Company terminates the Executive's employment under this Agreement without Cause;
	(ii) the Company terminates the Executive's employment under this Agreement for Cause by reason of a conviction or disbarment that is later reversed on appeal and fails to reinstate him with full back pay and uninterrupted Group Benefits; or
	(iii) (A) the Company breaches any of the covenants and agreements set forth in Sections 2(b), 3(a), 4, 5, 6, 15 (a) or (c), or 20(c) in any material respect and (B) the Executive tenders to the Company a letter of resignation specifying such breach or election in reasonable detail and demanding Severance Pay (any termination or resignation under the circumstances referred to in clauses (i) through (iii) above being referred to as "Termination Without Cause" whether or not Cause shall exist);

then the Company shall pay the Executive an amount equal to the product of three times the sum of (A) the annual Base Salary at the rate payable immediately prior to termination, plus (B) the Incentive Compensation Participation (“Severance Pay”). For example, on the date first set forth above, Severance Pay is $1,251,600. No demand or other notice from the Executive with respect to Severance Pay shall be necessary except in connection with clause (iii) of the preceding sentence. Anything in clause (iii) of the penultimate sentence to the contrary notwithstanding, the Executive shall not be entitled to Severance Pay, and the Company shall have no obligation to pay Severance Pay, if:


	(i) within 15 days after the delivery of a letter of resignation (the "Cure Period"), the Company shall cure the Company's breach specified in the letter of resignation in all material respects (or shall begin in good faith to cure a breach of a nature that requires more than 15 days to cure in all material respects) and shall deliver to the Executive a notice to that effect;
	(ii) during the Cure Period the Chief Executive Officer of the Company shall request in writing that the Executive withdraw his letter of resignation; and
	(iii) the Company shall deliver or send to the Executive during the Cure Period in accordance with Section 21 a written offer to reinstate the Executive with full back pay and uninterrupted Group Benefits and other benefits under this Agreement, including eligibility for a Performance Bonus.

Severance Pay shall be remitted as follows:


	(i) pursuant to clause (i) of the first sentence of Section 14(b), within 15 days following the termination of the Executive's employment under this Agreement;
	(ii) pursuant to clause (ii) of the first sentence of Section 14(b), within 15 days after notice requesting reinstatement with full back pay and uninterrupted Group Benefits; or
	(iii) pursuant to clause (iii) of the first sentence of Section 14(b), within 15 days after the end of the Cure Period.

No grace period shall be allowed for remittance of Severance Pay, time being of the essence.

In the event (i) a Change of Control occurs on a day at the beginning of which the Executive is an employee of the Company, and (ii) the Executive within 10 business days after first receiving notice from the Company of the Change of Control tenders a letter of resignation to the Company specifying such Change of Control (whether or not the Executive shall be an employee of the Company during the period between the end of the day preceding Change of Control and the tender of such letter) and demanding Resignation Compensation, the Company shall pay the Executive immediately after the resignation of the Executive under this Section 14(d), an amount equal to three times the annual Base Salary at the rate payable immediately prior to resignation ("Resignation Compensation"). No grace period shall be allowed for remittance of Resignation Compensation, time being of the essence. Notice of Change of Control shall be given to the Executive by the Company pursuant to Section 21, provided, however, that the Executive, in his discretion, may accept as notice filing with the SEC of reports setting forth facts that, taken together, constitute Change of Control.
In the event of Termination Without Cause or resignation by the Executive in accordance with Section 14(d):


	(i) the Executive shall be under no obligation to seek other employment and there shall be no offset against any amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that the Executive may obtain (Severance Pay or Resignation Compensation is in the nature of liquidated damages and not in the nature of a penalty); and
	(ii) even though no longer in the Company's employ, the Executive shall be entitled to the following benefits and additional payments:


		(A) any Base Salary accrued or Performance Bonus vested but not yet paid;
		(B) a pro rata Performance Bonus for the season in which employment is terminated determined and payable on the basis of the number of days worked during the season and the bonus percentage established for the season;
		(C) any accrued vacation pay;
		(D) reimbursement for expenses incurred, but not paid prior to such termination of employment;
		(E) COBRA health insurance benefits, including supplemental executive preventive medicine and wellness benefits, for the Executive and his dependents at the Company's expense until the COBRA benefits expire and, thereafter, through the remainder, if any, of the Contract Term equivalent reimbursement of healthcare expenses directly by the Company;
		(F) conversion at the Company's expense through the remainder of the Contract Term of the group life insurance coverage on the Executive's life;
		(G) payment to the Executive by April 14th of each year of an amount equal to the Tax with respect to the payments made to or on behalf of the Executive pursuant to clauses (E) and (F) of this sentence in the preceding calendar year; and
		(H) use of the Company Car free of charge for three years after the Termination Without Cause or resignation by the Executive occurs.

If the Company terminates the Executive's employment hereunder for Cause (except as provided in clause (ii) of the first sentence of Section 14(b)), or in the event the Executive resigns (except as provided in clause (iii) of the first sentence of Section 14(b) or in 14(d)), the Executive shall be entitled to:


	(i) any Base Salary accrued and any Performance Bonus vested but not paid;
	(ii) any accrued vacation pay;
	(iii) reimbursement for expenses incurred, but not yet paid prior to such termination of employment; and
	(iv) any other compensation and benefits that accrued prior to termination of employment as may be provided in accordance with the terms and provisions of the Group Benefits.

In the event the Company removes the Executive from office, and terminates the Executive's employment under this Agreement, or in the event the Executive resigns, the Executive shall continue to have the obligations provided for in Section 11 hereof. The provisions of this Section 14 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.
The Executive shall accept the payments referred to in this Section 14 as liquidated damages in full discharge and release of the Company of and from any further payment obligations under this Agreement except obligations under Sections 15 and 16.
Every payment made hereunder by authority of the Executive Committee of the Board or of the Board itself shall be final and the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever other than the Executive's breach in any material respect of the provisions of Section 11.

15. Indemnification.

The Company shall indemnify the Executive as provided in the By-laws.
In the event of payment of indemnities under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Executive.
The Company shall use reasonable efforts to continue the existing directors' and officers' liability policies covering the Executive for $20 million and to maintain the policies during the Contract Term and for three years thereafter.
If the federal excise tax pursuant to Section 280G of the Code or any successor provision on "golden parachute" payments applies to the payments made pursuant to this Agreement, to any acceleration of vesting of Options or to any other benefit or distribution to the Executive from the Company, the Company shall immediately pay the Executive an amount equal to the excise tax incurred plus (i) an amount equal to the Tax with respect to the amount of the excise tax, plus (ii) an amount equal to the federal excise tax on "golden parachute" payments with respect to the payment, if any, made pursuant to clause (i) of this sentence plus (iii) an amount equal to the Tax with respect to the payment made pursuant to clause (ii) of this sentence and continuing sequentially until the amount of federal excise tax on "golden parachute" payments unreimbursed by the Company shall be less than 1% of Base Salary. The amount of the payments due from the Company pursuant to this Section 15(d) may be determined in writing by a certified public accountant ("CPA") selected by the Executive, provided, however, that the CPA selected by the Executive shall, upon the Company's request, consult with another CPA selected by the Company. Such determination by the CPA selected by the Executive after such consultation, if so requested, shall be conclusive and binding on the Company except for manifest error.
The provisions of this Section 15 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.

16. Enforcement; Interest.

If any amount owing to the Executive under this Agreement is not paid by the Company, or on its behalf, within 15 days after a written demand, claim or request for payment has been delivered or sent to the Company, time being of the essence, the Executive may at any time thereafter bring suit against the Company to recover the unpaid amount and interest thereon and, if successful in whole or in part, the Executive shall be entitled to be paid also the expenses of prosecuting such suit, including reasonable attorneys' fees. Interest shall be payable from the date any amount is first due and payable to the Executive at a rate equal to the highest rate payable on any of the Company's indebtedness after the date first set forth above but in no event at a rate higher than the maximum rate then permitted by law.
The provisions of this Section 16 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.

17. Entire Agreement; Legal Representation.

This Agreement, the By-laws, the stock option agreements between the Company and the Executive and the provisions of the Group Benefits embody the entire agreement of the parties with respect to the Executive's employment and shall be interpreted in accordance with the past practice of the parties. This Agreement may not be changed or terminated orally but only by an agreement in writing signed by the parties hereto. No Company policy adopted after the date first set forth above shall change this Agreement, even if approved as a policy by the Executive. This Agreement amends the Initial Agreement and cancels and supersedes any and all other prior agreements and understandings between the parties hereto respecting the employment of the Executive by the Company and/or its subsidiaries or any Affiliated Company and the payment of compensation.
The Company has been represented by independent counsel in the preparation of this Agreement. This Agreement shall not be deemed to have been drafted by either party.

18. Waiver.

19. Governing Law.

This Agreement shall be subject to, and governed by, the laws of the State of New Jersey.

20. Assignability.

The obligations of the Executive may not be delegated and, except as to the designation of beneficiaries of insurance and similar benefits, the Executive may not, without the Company's written consent thereto, assign, transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this Agreement or any interest herein. Any such attempted delegation or disposition shall be null and void ab initio and without effect.
This Agreement and all of the Company's rights and obligations hereunder may be assigned or transferred by the Company to, and shall be binding upon and inure to the benefit of, any subsidiary of the Company or any Successor to the Company, but any such assignment shall not relieve the assigning party of any of its obligations hereunder. Except as provided in this Section 20(b), this Agreement may not otherwise be assigned by the Company. (The term "Successor" shall mean, with respect to the Company or any of its subsidiaries, any corporation or other business entity which, by merger, consolidation, purchase of the assets, or otherwise, acquires all or substantially all of the assets of the Company or such subsidiary.)
The Company shall obtain the agreement of any Successor that the Successor shall assume and be bound by the terms of this Agreement prior to the effectiveness of any such succession. Failure of the Company to obtain the agreement of any Successor to assume and be bound by the terms of this Agreement prior to the effectiveness of any such succession shall be a breach of this Agreement.

21. Notices.

All notices, requests, demands and other communications hereunder shall (i) be in writing, (ii) shall be delivered personally or sent by registered mail to the other party hereto at his or its address as set forth at the beginning of this Agreement and, in the case of the Company, addressed to the attention of its Chief Administrative Officer and (iii) if mailed, be effective on the date stamped on the postage receipt of the post office. A copy of each notice, request, demand, and other communication to the Company hereunder shall be sent by first class mail to its counsel, Richard W. Rubenstein, Esq., Squire, Sanders & Dempsey, Huntington Center, 41 South High Street, 13th Floor, Columbus, Ohio 43215. Either party may change the address to which notices, requests, demands and other communications hereunder shall be sent by sending written notice of such change of address to the other party.

22. Severability.

23. Section Headings.

The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

24. Counterparts.

This Agreement may be executed in one or more counterparts, which shall, collectively and separately, constitute one agreement.


	UNITED RETAIL GROUP, INC.

	By: /s/ RAPHAEL BENAROYA Name: Raphael Benaroya Title: Chief Executive Officer /s/ KENNETH P. CARROLL Kenneth P. Carroll

empagKPC 8.18.04.doc

EX-10 5 ex10_4form10q0904.htm EXHIBIT 10.4 TO FORM 10-Q SEPT 2004 Exhibit 10.4 to Form 10-Q Sept 2004

Exhibit No. 10.4

SEVERANCE PAY AGREEMENT

This Severance Pay Agreement (the “Agreement”), dated September 9, 2004 (the “date first set forth above”) between United Retail Group, Inc., a Delaware corporation, with principal offices at 365 West Passaic Street, Rochelle Park, New Jersey 07662 (the “Company”) and the undersigned officer of the Company (the “Executive”).

WHEREAS, the availability of severance pay and certain other post-employment benefits will encourage those entitled to them to remain in the Company’s employ; and

WHEREAS, this Agreement was authorized by the Company’s Board of Directors on September 3, 2004;

NOW, THEREFORE, in consideration of the Executive’s continued employment with the Company and other good and valuable consideration, the parties, intending to be legally bound, hereby agree as follows:

1. Definitions.

By-laws shall mean the By-laws of the Company as in force on the date first set forth above.
Cause shall mean the occurrence after the date first set forth above of one or more of the following events:


	(i) a judgment of conviction against the Executive or a plea of guilty has been entered for any felony which is both based on his or her personal actions (excluding liability imputed by reason of his or her position as an associate of the Company) and involves common law fraud, embezzlement, breach of duty as a fiduciary, willful dishonesty or moral turpitude (the entry of a judgment or plea being the only event or circumstance sufficient to constitute Cause under this clause (i)), provided, however, that any felony an essential element of which is predicated on the operation of a vehicle shall be deemed not to involve moral turpitude;
	(ii) the Executive has willfully and continuously failed to perform his or her duties to the Company in any material respect, except in the case of Short Term Disability, and material economic harm to the Company has resulted;
	(iii) the Executive has willfully failed in any material respect to follow specific directions of the President of the Company in the performance of his or her duties, except in the case of Short Term Disability;
	(iv) there has been a breach in any material respect of any of the provisions of Section 7; or
	(v) the Executive has willfully failed to report promptly in writing to the Senior Vice President-General Counsel of United Retail Group, Inc. any fraud of which he or she is aware, or has reasonable grounds to suspect, on the part of any officer of United Retail Group, Inc. or one of its subsidiaries that involves United Retail Group, Inc. or one of its subsidiaries, whether or not the fraud is material and whether it occurred before or after the date first set forth above;

provided, however, that the judgment of conviction or a plea of guilty referred to in clause (i), the failure of performance referred to in clause (ii) and (iii) and the breach referred to in clause (iv) shall constitute Cause for a maximum of only 90 days after the judgment of conviction or plea of guilty was entered, the material economic harm commenced, the directions were not followed or the breach first took place, as the case may be. For purposes of determining Cause, no act or omission by the Executive shall be considered “willful” unless it is done or omitted in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act or failure to act based upon advice of counsel for the Company shall be conclusively presumed to be done or omitted to be done by the Executive in good faith and in the best interests of the Company. Termination of employment shall be deemed to be for Cause only if the Company sends the Executive by certified mail to his or her residence before the termination of employment a notice of termination for Cause specifying in reasonable detail the circumstance that is the basis for termination. Short Term Disability shall not be a basis for termination of employment.

Protected Information shall mean trade secrets, confidential or proprietary information, and all other knowledge, know-how, information, documents or materials, owned or developed by the Company, or otherwise in the possession of the Company, whether in tangible or intangible form, pertaining to the business of the Company, the confidentiality of which the Company takes reasonable measures to protect, including, but not limited to, the Company's research and development, store operating results, identities and habits of customers and prospective customers, suppliers, business relationships, products (including prices, costs, sales or content), processes, techniques, machinery, contracts, financial information or measures, business methods, future business plans, data bases, computer programs, designs, models, operating procedures, knowledge of the organization, and other information owned, developed or possessed by the Company; provided, however, that Protected Information shall not include information that shall become generally known to the public or the trade without violation of Section 7.
Severance Pay shall have the meaning set forth in Section 2(b).
Short Term Disability shall mean the inability of the Executive to substantially perform his or her duties and responsibilities to the Company by reason of a physical or mental disability or infirmity for a continuous period of less than six months.
Successor shall have the meaning set forth in Section 10(b).
Term shall mean the year ending on the first anniversary of the date first set forth above.
Termination Without Cause shall have the meaning set forth in Section 2(a).
Unauthorized shall mean: (i) in contravention of the Company's policies or procedures; (ii) otherwise inconsistent with the Company's measures to protect its interests in its Protected Information; or (iii) in contravention of any duty existing under law or contract.

2. Severance Pay.

If, before the end of the Term either:


	(i) the Company unilaterally terminates the Executive's employment without Cause;
	(ii) the Executive's base salary, incentive compensation or group benefits are reduced materially by the Company, and the Executive, within 15 days after first learning of the reduction sends a notice of resignation to the Company at its address first set forth above to the attention of the Associate Services Dept. by certified mail; or
	(iii) the Company fails to obtain the consent of a Successor required pursuant to Section 10(c);

then Termination Without Cause shall have occurred.

If Termination Without Cause shall occur and within 21 days thereafter the Executive shall send to the Company's Vice President-Associate Services a general release in form and substance satisfactory to the Company, then the Company shall remit Severance Pay equivalent to __ weeks' base pay at the higher of the rate paid on the date first set forth above or on the date on which Termination Without Cause occurred. Severance Pay shall be remitted to the Executive's residence in ___ equal weekly installments commencing on the fourth Thursday following Termination Without Cause. No grace period shall be allowed for remittance of Severance Pay, time being of the essence.
In the event Severance Pay is due:


	(i) the Executive shall use reasonable efforts to seek other employment and keep the Company informed of all remuneration from employment received during the period Severance Pay is otherwise due;
	(ii) there shall be set off against each weekly installment of Severance Pay otherwise due all remuneration from employment that the Executive may have obtained during the previous week; and
	(iii) the Executive shall be entitled to the following additional payments:


		(A) any base salary accrued or incentive compensation vested but not yet paid;
		(B) pay for any vacation days not taken; and
		(C) reimbursement for business expenses incurred, but not paid, prior to termination of employment.

Payments made pursuant to this Section 2 shall be final and the Company shall not seek to recover all or any part of such payments from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever other than the Executive's breach in any material respect of the provisions of Section 7.

3. Deductions and Withholding.

4. Group Benefits.

Subject to Section 4(c), for ____ months after Termination Without Cause, the Company shall remit to the Executive monthly an amount equal to the excess of the monthly life insurance premium for a converted policy issued to the Executive over the premium previously paid by the Executive for his or her group life insurance.
The Company shall make available to the Executive and his or her dependents health, dental and prescription drug benefits in accordance with COBRA regulations. Subject to Section 4(c), for ____ months after Termination Without Cause, the Company shall remit to the Executive monthly an amount equal to the excess of the monthly premium for COBRA coverage over the payroll withholding previously paid by the Executive for group health benefits.
The premium reimbursements provided in Section 4(a) and (b) shall be available upon submission to the Company of evidence of payment of the premiums by the Executive.

5. Indemnification.

The Company shall indemnify the Executive as provided in the By-laws.
The Company shall use reasonable efforts to continue the existing directors' and officers' liability policies covering officers of the Company for $20 million and to maintain the policies during the Term, whether or not the Executive shall be in the Company's employ.
The provisions of this Section 5 shall survive the termination of the Executive's employment, irrespective of the reason therefor.

6. Death.

In the event of the death of the Executive, all Severance Pay and other benefits under this Agreement shall automatically terminate.

7. Restrictive Covenants and Confidentiality.

During the Term and for 12 months thereafter, the Executive shall not solicit, raid, entice, encourage or induce any person who at any time within one year prior to the end of the Term shall have been an associate of the Company to become employed by any person, firm or corporation, and the Executive shall not approach any such associate for such purpose or authorize or knowingly approve the taking of such actions by any other person, firm or corporation or assist any such person, firm or corporation in taking such action.
During the Term and for 12 months thereafter, the Executive will not use, disclose or divulge, furnish or make accessible to anyone, directly or indirectly, any Protected Information in any Unauthorized manner or for any Unauthorized purpose, provided, however, that in the event that the Executive is required to disclose any Protected Information by court order or decree or in compliance with the rules and regulations of a governmental agency or in compliance with law, the Executive will provide the Company with prompt notice of such required disclosure so that the Company may seek an appropriate protective order and/or waive the Executive's compliance with the provisions of this Section 7(b) and provided, further, that if, in the absence of a protective order or the receipt of a waiver hereunder, the Executive is advised by his or her counsel that such disclosure is necessary to comply with such court order, decree, rules, regulation or law, the Executive may disclose such information without liability hereunder.
During the Term and for any period afterwards for which Severance Pay is owing, the Executive shall report promptly in writing to the Senior Vice President-General Counsel of United Retail Group, Inc. any fraud of which he or she is aware, or has reasonable grounds to suspect, on the part of any officer of United Retail Group, Inc. or one of its subsidiaries that involves United Retail Group, Inc. or one of its subsidiaries, whether or not the fraud is material.
The Executive agrees that all processes, techniques, know-how, inventions, plans, products, and devices developed, made or invented by the Executive, alone or with others in connection with the Executive's employment with the Company shall become and be the sole property of the Company.
Neither the Company nor the Executive shall publicly disparge the other during the Term or afterwards.
The provisions of this Section 7 shall survive the termination of the Executive's employment with the Company, irrespective of the reason therefor.

8. Enforcement; Interest.

If any amount owing to the Executive under this Agreement is not paid by the Company, or on its behalf, within 15 days after a written demand, claim or request for payment has been sent to the Company to the attention of its Associate Services Dept. by certified mail, time being of the essence, the Executive may at any time thereafter bring suit against the Company to recover the unpaid amount and interest thereon and, if successful in whole or in part, the Executive shall be entitled to be paid also the expenses of prosecuting such suit, including reasonable attorneys' fees. Interest shall be payable from the date any amount is first due and payable to the Executive at a rate equal to the highest rate payable on any of the Company's indebtedness after the date first set forth above but in no event at a rate higher than the maximum rate then permitted by law.
The provisions of this Section 8 shall survive the termination of the Executive's employment hereunder, irrespective of the reason therefor.

9. Governing Law.

This Agreement shall be subject to, and governed by, the internal laws of the State of New Jersey, without regard to conflicts of laws.

10. Assignability.

The obligations of the Executive may not be delegated and, except as to the designation of beneficiaries of insurance and similar benefits, the Executive may not, without the Company's written consent thereto, assign, transfer, convey, pledge, encumber, hypothecate or otherwise dispose of benefits under this Agreement. Any such attempted delegation or disposition shall be null and void ab initio and without effect.
This Agreement and all of the Company's rights and obligations hereunder may be assigned or transferred by the Company to, and shall be binding upon and inure to the benefit of, any subsidiary of the Company or any Successor to the Company, but any such assignment shall not relieve the assigning party of any of its obligations hereunder. Except as provided in this Section 10(b), this Agreement may not otherwise be assigned by the Company. (The term "Successor" shall mean, with respect to the Company or any of its subsidiaries, any corporation or other business entity which, by merger, consolidation, purchase of the assets, or otherwise, acquires all or substantially all of the assets of the Company or such subsidiary.)
The Company shall obtain the agreement of any Successor that the Successor shall assume and be bound by the terms of this Agreement prior to the effectiveness of any such succession. Failure of the Company to obtain the agreement of any Successor to assume and be bound by the terms of this Agreement prior to the effectiveness of any such succession shall be a breach of this Agreement.

11. Amendment and Termination of Agreement.

This Agreement may be amended or terminated by the Company without liability to the Executive at any time after the first anniversary of the date first set forth above. The rights of the Executive under this Agreement shall be vested irrevocably until the first anniversary of the date first set forth above. However, this Agreement shall not confer any right to continued employment on the Executive.

IN WITNEES WHEREOF, the parties have subscribed their names, in Rochelle Park, New Jersey, in the case of the Company by an officer thereunto duly authorized.


	____________________ (Please sign your name) ____________________ (Please print your name) UNITED RETAIL GROUP, INC. By: ____________________ Chief Administrative Officer

URGI Severance Pay Agreement 9.7.04

***

The Company entered into Severance Pay Agreements in the form set forth above with Paul McFarren, the Company’s Senior Vice President-Chief Information Officer, and Jon Grossman, the Company’s Vice President-Finance. The total severance pay and insurance premium reimbursements payable by the Company at September 9, 2004 would be $155,000 to Mr. McFarren and $147,000 to Mr. Grossman.

On September 9, 2004, the Company’s respective subsidiaries also entered into Severance Pay Agreements in the form set forth above with their respective officers. Twelve officers of subsidiaries would be entitled to average severance pay and insurance premium reimbursements totaling $144,000 at September 9, 2004.

EX-31 6 ex31form10q0904.htm EXHIBIT 31 FORM 10-Q SEPT. 2004 Exhibit 31 to Form 10-Q September 2004

Exhibit No. 31

CERTIFICATIONS

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT

I, Raphael Benaroya, the registrant’s Chairman of the Board, President and Chief Executive Officer, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of United Retail Group, Inc.;

2.	based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	the registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:

(a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	the registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: September 9, 2004	/s/ RAPHAEL BENAROYA Raphael Benaroya

I, George R. Remeta, the registrant’s Chief Administrative Officer and Chief Financial Officer, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of United Retail Group, Inc.;

2.	based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	the registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:

(a)

(b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

5.	the registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: September 9, 2004	/s/ GEORGE R. REMETA George R. Remeta

EX-32 7 ex32form10q0904.htm EXHIBIT 32 FORM 10-Q SEPT. 2004 Exhibit 32 to Form 10-Q September 2004

Exhibit 32

CERTIFICATION

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT

In connection with the Quarterly Report of United Retail Group, Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Raphael Benaroya, Chief Executive Officer of the Company, and George R. Remeta, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act, that based on our knowledge:

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ RAPHAEL BENAROYA Raphael Benaroya Chief Executive Officer September 9, 2004 /s/ GEORGE R. REMETA George R. Remeta Chief Financial Officer September 9, 2004

-----END PRIVACY-ENHANCED MESSAGE-----

FORM 10-Q

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

APPLICABLE ONLY TO CORPORATE ISSUERS:

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

ITEM 4. CONTROLS AND PROCEDURES.

PART II – OTHER INFORMATION

ITEM 1. LITIGATION.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

ITEM 5. OTHER INFORMATION.

(a) Employment Agreements

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

SIGNATURES

EXHIBIT INDEX

RESTATED EMPLOYMENT AGREEMENT

RESTATED EMPLOYMENT AGREEMENT

RESTATED EMPLOYMENT AGREEMENT

SEVERANCE PAY AGREEMENT

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.