-----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, BkldKQ2PXtyaTAHvUmEPggkePQy1MknXU8kxJ7gi4qK5p+4zoYt3t896KeIqxUev HxTGUCpb83MjEzo+8FjkSw== 0000950172-01-501324.txt : 20020413 0000950172-01-501324.hdr.sgml : 20020413 ACCESSION NUMBER: 0000950172-01-501324 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20011103 FILED AS OF DATE: 20011213 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: 1812944 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 s10q.txt 10-Q 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 November 3, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------- --------------------- Commission file number 00019774 --------------------------------------------------- United Retail Group, Inc. ------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 51 0303670 - ------------------------------------ --------------- State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 365 West Passaic Street, Rochelle Park, NJ 07662 - ------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (201) 845-0880 --------------- - -------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "1934 Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------- ------- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the 1934 Act subsequent to the distribution of securities under a plan confirmed by a court. YES NO ------- ------- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. As of November 3, 2001, 13,191,133 units, each consisting of one share of the registrant's common stock, $.001 par value per share, and one stock purchase right, were outstanding. The units are referred to herein as "shares." PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS UNITED RETAIL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands) November 3, February 3, October 28, 2001 2001 2000 --------------------- --------------- -------------- ASSETS (Unaudited) (Unaudited) Current assets: Cash and cash equivalents $18,234 $36,781 $39,503 Accounts receivable 3,319 2,573 3,927 Inventory 68,886 59,002 68,527 Prepaid rents 4,785 4,425 4,196 Other prepaid expenses 4,996 3,555 4,121 Deferred taxes 0 0 581 --------------------- ----------- -------------- Total current assets 100,220 106,336 120,855 Property and equipment, net 87,658 77,651 75,197 Deferred charges and other intangible assets, net of accumulated amortization of $3,033, $2,656 and $2,823 7,484 6,786 6,883 Deferred income taxes 1,206 589 0 Other assets 200 268 299 --------------------- ------------ -------------- Total assets $196,768 $191,630 $203,234 ===================== ============ ============== LIABILITIES Current liabilities: Current portion of distribution center financing $1,407 $1,367 $1,302 Accounts payable and other 38,567 32,746 44,425 Accrued expenses 22,291 22,373 23,388 Deferred income taxes 185 283 0 --------------------- ------------ -------------- Total current liabilities 62,450 56,769 69,115 Distribution center financing 5,551 6,616 6,958 Other long-term liabilities 6,372 6,449 6,280 --------------------- ------------ -------------- Total liabilities 74,373 69,834 82,353 --------------------- ------------ -------------- STOCKHOLDERS' EQUITY Preferred stock, $.001 par value; authorized 1,000,000; none issued Series A junior participating preferred stock, $.001 par value; authorized 150,000; none issued Common stock, $.001 par value; authorized 14 14 14 30,000,000; issued (14,236,000; 14,231,000 and 14,215,400); outstanding (13,191,133; 13,268,633 and 13,314,033) Additional paid-in capital 80,375 80,269 80,239 Retained earnings 46,757 45,703 44,511 Treasury stock (1,044,867; 962,367 and 901,367 shares) at cost (4,751) (4,190) (3,883) --------------------- ------------ -------------- Total stockholders' equity 122,395 121,796 120,881 --------------------- ------------ -------------- Total liabilities and stockholders' equity $196,768 $191,630 $203,234 ===================== ============ ============== 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 Thirty-Nine Weeks Ended November 3, October 28, November 3, October 28, 2001 2000 2001 2000 ---------------- ---------------- ---------------- ---------------- Net sales $96,641 $92,301 $312,790 $300,400 Cost of goods sold, including buying and occupancy costs 75,858 71,653 238,455 230,311 ---------------- ---------------- ---------------- ---------------- Gross profit 20,783 20,648 74,335 70,089 General, administrative and store operating expenses 24,323 22,813 72,945 66,293 ---------------- ---------------- ---------------- ---------------- Operating (loss) income (3,540) (2,165) 1,390 3,796 Interest income, net 45 515 453 1,392 ---------------- ---------------- ---------------- ---------------- (Loss) income before income taxes (3,495) (1,650) 1,843 5,188 (Benefit from) provision for income taxes (1,209) (513) 789 2,160 ---------------- ---------------- ---------------- ---------------- Net (loss) income ($2,286) ($1,137) $1,054 $3,028 ================ ================ ================ ================ Net (loss) income per share Basic ($0.17) ($0.09) $0.08 $0.23 Diluted ($0.17) ($0.09) $0.08 $0.22 ================ ================ ================ ================ Weighted average number of shares outstanding Basic 13,213,441 13,314,033 13,246,968 13,309,666 Common stock equivalents (stock options) 0 0 242,089 263,411 ---------------- ---------------- ---------------- ---------------- Diluted 13,213,441 13,314,033 13,489,057 13,573,077 ================ ================ ================ ================ 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) Thirty-Nine Weeks Ended November 3, October 28, 2001 2000 ---------------- ---------------- Cash Flows From Operating Activities: Net income $1,054 $3,028 Adjustments to reconcile net income to net cash (used for) provided from operating activities: Depreciation and amortization of property and equipment 8,004 6,722 Amortization of deferred charges and other intangible assets 395 353 Loss on disposal of assets 60 728 Compensation expense 233 233 Deferred income taxes (715) 1,177 Deferred lease assumption revenue amortization (229) (270) Tax benefit from exercise of stock options 0 16 Changes in operating assets and liabilities: Accounts receivable (746) (2,781) Income taxes 995 (295) Inventory (9,884) (13,204) Accounts payable and accrued expenses 3,648 19,537 Prepaid expenses (1,801) (2,052) Other (1,102) 46 ---------------- ----------------- Net Cash (Used For) Provided From Operating Activities (88) 13,238 ---------------- ----------------- Investing Activities: Capital expenditures (18,199) (19,346) Deferred payment for property and equipment 1,325 1,453 Proceeds from sale of lease 128 0 ---------------- ----------------- Net Cash Used In Investing Activities (16,746) (17,893) ---------------- ----------------- Financing Activities: Repayments of long-term debt (1,025) (912) Issuance of loans to officers (141) (146) Treasury stock acquired (561) 0 Exercise of stock options 26 108 Other (12) (115) ---------------- ----------------- Net Cash Used In Financing Activities (1,713) (1,065) ---------------- ----------------- Net decrease in cash and cash equivalents (18,547) (5,720) Cash and cash equivalents, beginning of period 36,781 45,223 ---------------- ----------------- Cash and cash equivalents, end of period $18,234 $39,503 ================ ================= 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 thirty-nine weeks ended November 3, 2001 and October 28, 2000 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 2000 Annual Report and 2000 Form 10-K. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments necessary (which are of a normal recurring nature) to present fairly the financial position and results of operations and cash flows for the interim periods, but are not necessarily indicative of the results of operations for a full fiscal year. Certain prior year balances have been reclassified to conform to the current year presentation. 2. Net Income Per Share Basic per share data has been computed based on the weighted average number of shares of common stock outstanding. Diluted per share data has been computed on the basic plus the dilution of stock options with the exception of the thirteen weeks ended November 3, 2001 and October 28, 2000, where the effect of stock options is anti-dilutive. Options to purchase shares of common stock which were not included in the computation of diluted net income per share because the exercise prices were greater than the average market price of the common shares were as follows:\
Thirteen Weeks Ended Thirty-Nine Weeks Ended ------------------------ ----------------------- November 3, October 28, November 3, October 28, 2001 2000 2001 2000 ------------ ----------- ------------- ----------- Options 840,072 941,100 842,472 941,100 Range of option prices per share $7.56 - $15.13 $5.88 - $15.13 $7.56 - $15.13 $5.88 - $15.13
3. Financing Arrangements In 1993, the Company executed a ten-year $7.0 million note bearing interest at 7.3%. Interest and principal are payable in equal monthly installments beginning November 1993. The note is collateralized by the material handling equipment in the distribution center. In 1994, the Company executed a fifteen-year $8.0 million loan bearing interest at 8.64%. Interest and principal are payable in equal monthly installments beginning May 1, 1994. The loan is collateralized by a mortgage on the national distribution center owned by the Company in Troy, Ohio. 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 provides a revolving line of credit for a term ending August 15, 2004 in the aggregate amount of $40 million for the Companies, subject to availability of credit according to a borrowing base computation. The line of credit may be used on a revolving basis by 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 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. In the event a loan is made to one of the Companies, interest is payable monthly based on a 360-day year at the prime rate or at two percent plus the LIBOR rate on a per annum basis, at the borrower's option. The line of credit is secured by a security interest in inventory and proceeds and by the balance on deposit from time to time in a bank account that has been pledged to the lenders. 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 At November 3, 2001, the combined availability of the Companies was $19.3 million, no balance was in the pledged account, the aggregate outstanding amount of letters of credit arranged by CIT was $20.7 million and no loan had been drawn down. The Company's cash on hand was unrestricted. 4. Income Taxes
The (benefit from) provision for income taxes consists of (dollars in thousands): Thirteen Weeks Ended Thirty-Nine Weeks Ended ------------------------- ------------------------ November 3, October 28, November 3, October 28, 2001 2000 2001 2000 ---------------- -------------- ------------ ----------- Currently payable: Federal $(1,213) $(1,538) $1,270 $769 State (21) (65) 234 214 ---- ---- --- --- (1,234) (1,603) 1,504 983 ------- ------ ----- --- Deferred: Federal 20 961 (589) 968 State 5 129 (126) 209 - --- ----- --- 25 1,090 (715) 1,177 -- ----- ----- ----- $(1,209) $(513) $789 $2,160 ======== ====== ==== ======
Reconciliation of the (benefit from) provision for income taxes from the U.S. Federal statutory rate to the Company's effective rate is as follows (dollars in thousands):
Thirteen Weeks Ended --------------------------------------------- November 3, 2001 October 28, 2000 -------------------- ----------------- Tax at Federal rate $(1,222) (35.0%) $(578) (35.0%) State income taxes, net of federal benefit (10) (0.3%) 42 2.5% Goodwill amortization 18 0.5% 18 1.1% Other 5 0.2% 5 0.3% --------- -------- ------- ------- $(1,209) (34.6%) $(513) (31.1%) ========== ======== ======= ========
Thirty-Nine Weeks Ended ------------------------------------------------ November 3, 2001 October 28, 2000 -------------------- ----------------- Tax at Federal rate $647 35.0% $1,816 35.0% State income taxes, net of federal benefit 70 3.8% 275 5.3% Goodwill amortization 54 3.0% 54 1.0% Other 18 1.0% 15 0.3% ------ ------ ---------- ------ $789 42.8% $2,160 41.6% ==== ======= ====== =====
The net deferred tax asset reflects the tax impact of temporary differences. The components of the net deferred tax asset as of November 3, 2001 are as follows (dollars in thousands): Net long-term asset: Accruals and reserves $2,940 State NOL's 1,080 Compensation 414 Depreciation (3,228) ------- $1,206 ------- Net current liability: Prepaid rent $1,702 State NOL's (280) Accruals and reserves (456) Inventory (781) ----- $185 ----- Net deferred tax asset $1,021 ======= Future realization of the tax benefits attributable to the existing deductible temporary differences and NOL carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period available under the tax law at the time of the tax deduction. Based on management's assessment, it is more likely than not that the net deferred tax asset will be realized through future taxable earnings or available carrybacks. The NOL's are scheduled to expire beginning in fiscal 2001 through fiscal 2015. 5. Advances To Officers Advances were made by the Company in February 1998, February 1999 and November 1999 to Raphael Benaroya, the Company's Chairman of the Board, President and Chief Executive Officer. The purpose of the advances was to finance payment of income taxes incurred in connection with the exercise of stock options, totalling approximately $2.3 million. Interest on the advances at the prime rate through NOvember 30, 2001 was approximately $0.5 million. The advances and interest through November 30, 2001 are represented by Mr. Benaroya's promissory note, dated November 30, 2001, in the amount of approzximately $2.8 million with a term of two years. Payment of the note is secured by a pledge of 899,719 shares of the Company's Common Stock, equivalent to the shares issued upon the option exercises. The note is a full recourse obligation. The principal of the note is payable in two installments, approximately $0.5 million on November 30, 2002 and the balance on November 18, 2003. Interest on the note is payable annually in cash at the prime rate. 6. Stock Appreciation Rights Plan Commencing May 2000, each nonmanagement Director received an annual 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 under the Company's 1999 Stock Option Plan. The payment will be an amount equivalent to the equity in the option that is being exercised, that is, the excess of the then current market price of the shares issued over the sum of the exercise price paid by the Director and any personal income tax withholding on the gain arising from the exercise. 7. Segment Information The Company operates its business in two reportable segments: Avenue Retail and Shop @ Home (see Management's Discussion and Analysis of Financial Condition and Results of Operations in the Quarterly Report on Form 10-Q for the period ended November 3, 2001). In deciding how to allocate resources and assess performance, the Company regularly evaluates the performance of its operating segments on the basis of net sales and earnings from operations. Certain information relating to the Company's reportable operating segments is set forth below (dollars in thousands):
Thirteen Weeks Ended Thirty-Nine Weeks Ended ------------------------- ----------------------- November 3, October 28, November 3, October 28, 2001 2000 2001 2000 -------------- ------------ ----------- ----------- Net sales: Avenue Retail $94,586 $89,187 $303,397 $294,210 Shop @ Home 2,055 3,114 9,393 6,190 ----- ----- ----- ----- $96,641 $92,301 $312,790 $300,400 ======= ======= ======== ======== Earnings from operations*: Avenue Retail $(767) $2,621 $12,459 $16,469 Shop @ Home (1,230) (2,518) (4,554) (4,916) ------- -------- --------- ------- $(1,997) $ 103 $ 7,905 $11,553 ======== ======= ======= =======
* Represents earnings from operations before unallocated corporate expenses and net interest income. The Company evaluates the performance of its assets on a consolidated basis. Therefore, separate financial information for the Company's assets on a segment basis is not available. The following table sets forth a reconciliation of the reportable segment's earnings from operations to the Company's consolidated (loss) income before income taxes (dollars in thousands):
Thirteen Weeks Ended Thirty-Nine Weeks Ended ------------------------------ ----------------------- November 3, October 28, November 3, October 28, 2001 2000 2001 2000 -------------- ------------- ---------- --------- Earnings from operations for reportable segments $(1,997) $103 $7,905 $11,553 Unallocated corporate expenses (1,543) (2,268) (6,515) (7,757) Interest income, net 45 515 453 1,392 -- --- --- ----- Income before income taxes $(3,495) $(1,650) $1,843 $5,188 ======== ======== ====== ======
8. New Accounting Pronouncements In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations" and No. 142 "Goodwill and Other Intangible Assets". The Company will adopt SFAS No. 141 and SFAS No. 142 in the first quarter of fiscal 2002. In October 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". The Company is currently evaluating the impact, if any, of adopting SFAS No. 144 on the financial statements in fiscal 2002. 9. 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 will not have a material adverse effect on the Company's financial position, annual results of operations or cash flows. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Third Quarter Fiscal 2001 Versus Third Quarter Fiscal 2000 Net sales for the third quarter of fiscal 2001 increased 4.7% from the third quarter of fiscal 2000, to $96.6 million from $92.3 million, from an increase in both average price and unit volume. Comparable store sales for the third quarter of fiscal 2001 decreased 1.4%. Average stores open increased from 505 to 546. Internet and catalog sales (collectively, "shop@home sales") were $2.1 million in the third quarter of fiscal 2001 compared with $3.1 million in the third quarter of fiscal 2000. Shop@home sales declined because the Company no longer mailed CLOUDWALKERS.COM(R) catalogs for footwear. Other shop@home sales increased slightly. Gross profit was $20.8 million in the third quarter of fiscal 2001 compared with $20.6 million in the third quarter of fiscal 2000, decreasing as a percentage of net sales to 21.5% from 22.4%. The decrease in gross profit as a percentage of net sales was attributable primarily to higher occupancy costs resulting from more new stores whose sales have not yet reached maturity. Gross profit in the future is subject to the uncertainties and other risk factors referred to under the caption "Future Results." General, administrative and store operating expenses increased to $24.3 million in the third quarter of fiscal 2001 from $22.8 million in the third quarter of fiscal 2000, principally as a result of an increase in store payroll. As a percentage of net sales, general, administrative and store operating expenses increased to 25.2% from 24.7%. During the third quarter of fiscal 2001, the operating loss was $3.5 million compared with $2.2 million in the third quarter of fiscal 2000. Operating loss reflects the results of two business segments, retail store sales and shop@home sales. During the third quarter of fiscal 2001, the loss from operations before unallocated corporate expenses and net interest income (combined, "unallocated expenses") was $0.8 million from retail store sales and $1.2 million from shop@home sales. During the third quarter of fiscal 2000, the income (loss) from operations before unallocated expenses was $2.6 million from retail store sales and ($2.5 million) from shop@home sales. Net interest income was $45,000 in the third quarter of fiscal 2001 and $515,000 in the third quarter of fiscal 2000, as a result of lower cash balances and lower interest rates. The Company had a benefit from income taxes of $1.2 million in the third quarter of fiscal 2001 and $0.5 million in the third quarter of fiscal 2000. The Company had a net loss of $2.3 million in the third quarter of fiscal 2001 and of $1.1 million in the third quarter of fiscal 2000. First 39 Weeks Fiscal 2001 Versus First 39 Weeks Fiscal 2000 Net sales for the first 39 weeks of fiscal 2001 increased 4.1% from the first 39 weeks of fiscal 2000, to $312.8 million from $300.4 million, principally from an increase in average price. Comparable store sales for the first 39 weeks of fiscal 2001 decreased 2.7%. Average stores open increased from 504 to 537. Shop@home sales were $9.4 million in the first 39 weeks of fiscal 2001 compared with $6.2 million in the first 39 weeks of fiscal 2000, increasing principally as a result of the AVENUE(R) catalog having been launched in September 2000. Gross profit was $74.3 million in the first 39 weeks of fiscal 2001 compared with $70.1 million in the first 39 weeks of fiscal 2000, increasing as a percentage of net sales to 23.8% from 23.3%. The increase in gross profit as a percentage of net sales was attributable primarily to higher margins partially offset by higher buying and occupancy costs. General, administrative and store operating expenses increased to $72.9 million in the first 39 weeks of fiscal 2001 from $66.3 million in the first 39 weeks of fiscal 2000, principally as a result of an increase in store payroll. As a percentage of net sales, general, administrative and store operating expenses increased to 23.3% from 22.1%. During the first 39 weeks of fiscal 2001, operating income was $1.4 million compared with $3.8 million in the first 39 weeks of fiscal 2000. Operating income reflects the results of two business segments, retail store sales and shop@home sales. During the first 39 weeks of fiscal 2001, income (loss) from operations before unallocated expenses was $12.5 million from retail store sales and ($4.6 million) from shop@home sales compared with $16.5 million from retail store sales and ($4.9 million) from shop@home sales during the first 39 weeks of fiscal 2000. Net interest income was $0.5 million in the first 39 weeks of fiscal 2001 and $1.4 million in the first 39 weeks of fiscal 2000, as a result of lower cash balances and lower interest rates. The Company had a provision for income taxes of $0.8 million in the first 39 weeks of fiscal 2001 and $2.2 million in the first 39 weeks of fiscal 2000. The Company had net income of $1.1 million in the first 39 weeks of fiscal 2001 and of $3.0 million in the first 39 weeks of fiscal 2000. Liquidity and Capital Resources The Company's cash and cash equivalents decreased to $18.2 million at November 3, 2001 from $39.5 million at October 28, 2000 and $36.8 million at February 3, 2001. Property and equipment, net increased to $87.7 million at November 3, 2001 from $75.2 million at October 28, 2000 and $77.7 million at February 3, 2001, primarily from constructing new stores and remodeling existing stores. Inventory increased to $68.9 million at November 3, 2001 from $68.5 million at October 28, 2000 and $59.0 million at February 3, 2001, as a result of a higher store count. During fiscal 2000, the highest inventory level was $69.9 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. Import purchases are made in U.S. dollars, are generally financed by trade letters of credit and constituted approximately 59% of total purchases in fiscal 2000. 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 a revolving line of credit for a term ending August 15, 2004 in the aggregate amount of $40 million for the Companies, subject to availability of credit as described in the following paragraphs. The line of credit may be used on a revolving basis by any of the Companies to support trade letters of credit and standby letters of credit and to finance loans. As of November 3, 2001, letters of credit for the account of the Companies and supported by CIT were outstanding in the amount of $20.7 million. Subject to the following paragraph, the availability of credit (within the aggregate $40 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 60% to 65% depending on the season, and (y) the balance in an account in its name that has been pledged to the lenders (a "Pledged Account"). (At November 3, 2001, the combined availability of the Companies was $19.3 million; the Pledged Account had a zero balance; the Companies' cash on hand was unrestricted; and no loan had been drawn down.) The provisions of the preceding paragraph to the contrary notwithstanding, the Companies are required to maintain unused at all times combined availability of at least $5 million. Except for the maintenance of a minimum availability of $5 million and a limit on capital expenditures, the Financing Agreement does not contain any financial covenants. In the event a revolving loan is made to one of the Companies, interest is payable monthly based on a 360-day year at the prime rate or at two percent plus the LIBOR rate on a per annum basis, at the borrower's option. The line of credit is secured by a security interest in inventory and proceeds and by the balance from time to time in the Pledged Account. 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. The Company believes that its cash on hand, the availability of short-term trade credit and of credit under the Financing Agreement on a revolving basis, and cash flows from future operating activities will be adequate for the next 12 months to meet its cash requirements, including (i) anticipated working capital needs, including seasonal inventory financing, (ii) the cost of distributing catalogs and marketing its Internet selling sites and (iii) construction costs for the stores that it is committed to open (see, "Store Expansion; Capital Expenditures"). This paragraph constitutes forward-looking information under the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and is subject to the uncertainties and other risk factors referred to under the caption "Future Results." Store Expansion; Capital Expenditures The Company leased 552 stores at November 3, 2001, of which 388 stores were in strip shopping centers, 135 stores were in malls, 23 stores were in downtown shopping districts and 6 stores were in outlet malls. Total retail selling space was 2.4 million square feet at November 3, 2001 and 2.1 million square feet a year earlier. In the first 39 weeks of fiscal 2001, the Company opened 42 new stores with an average of approximately 4,700 square feet of retail selling space and closed 13 smaller stores. The Company has made commitments to lease and open approximately 13 new stores during the fourth quarter of fiscal 2001. See, "Liquidity and Capital Resources." Start-up costs will be expensed but are not expected to have a material effect on general, administrative and store operating expenses. During the fourth quarter of fiscal 2001, the Company plans to close at least 5 stores, the term of whose leases shall have expired. Substantially all the construction cost of new stores has been capitalized. Depreciation and amortization related principally to assets in stores and were approximately $9.7 million in fiscal 2000 and are expected to total approximately $11.3 million in fiscal 2001. The Company currently has plans to lease and open from 20 to 30 new stores during the first half of fiscal 2002. These plans will be reviewed at the end of fiscal 2001. Capital expenditures for the fourth quarter of fiscal 2001 are budgeted at approximately $5 million. This entire 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." Shop @ Home The Company has entered an additional channel of distribution for its merchandise, Internet and catalog (collectively, "shop @ home") sales, to seek to expand its customer base and to attract more business from its existing customers, both in the stores and in the shop @ home channel of distribution. The Company has mailed AVENUE(R) catalogs since September 2000 and has operated an Internet site (www.avenue.com) since November 2000. The catalog and website feature the Company's proprietary brands, AVENUE(R) apparel and accessories and CLOUDWALKERS.COM(R) footwear. CLOUDWALKERS.COM(R) footwear is also available at another Internet site (www.cloudwalkers.com) operated by the Company. Fulfillment of shop @ home sales has been outsourced. There is no assurance of gross profit on shop @ home sales. 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. During the second quarter of fiscal 2001, expenses associated with the submission of an unsuccessful bid to acquire the business of a competitor were approximately $0.8 million and were included in general, administrative and store operating expenses. Tax Matters The Company's federal income tax returns for fiscal 1994, fiscal 1995 and fiscal 1996 were audited by the Internal Revenue Service and settled except for the disallowance of a refund claim by the auditor. The disallowance was affirmed by an IRS appeals officer and is the subject of mediation. The refund claim, which has not been recorded, would affect stockholders' equity positively rather than increasing the Company's earnings, if the disallowance were overruled in mediation. Future Results The Company cautions that any forward-looking statements (as such term is defined in the Reform Act) contained in this Report on Form 10-Q (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 for the fourth quarter of fiscal 2001 and for fiscal 2002 to differ materially from those expressed or implied in any forward-looking statements included in this Report or otherwise made by management: war risk, changes in consumer spending patterns, consumer preferences and overall economic conditions; the impact of competition and pricing; changes in weather patterns; risks associated with the seasonality of the retail industry; risks related to consumer acceptance of the Company's products and the ability to develop new merchandise; 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; political instability and other risks associated with foreign sources of production; postal rate increases; increases in paper and printing costs; increases in interest rates; and availability of suitable store locations on appropriate terms. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. The following exhibits are filed herewith: Number Description 10.1* Amendment, dated November 29, 2001, to Employment Agreement, dated November 20, 1998, between the Corporation and Raphael Benaroya 10.2* Amendment, dated November 29, 2001, to Employment Agreement, dated November 20, 1998, between the Corporation and George R. Remeta 10.3* Amendment, dated November 29, 2001, to Employment Agreement, dated November 20, 1998, between the Corporation and Kenneth P. Carroll 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 Program Agreement, dated January 27, 1998, between the Corporation, United Retail Incorporated and World Financial Network National Bank ("WFN") (Confidential portions filed separately with the Secretary of the Commission) 10.6* Promissory note, dated November 30, 2001, from Raphael Benaroya to the Corporation The following exhibits to the Corporation's Quarterly Report on Form 10-Q for the period ended August 4, 2001 are incorporated herein by reference: Number in Filing Description 10.1* Incentive Compensation Program Agreement 10.2* Restated Stock Appreciation Rights Plan The 2001 Stock Option Plan set forth as the appendix to the Corporation's proxy statement on Schedule 14A for its 2001 annual meeting of stockholders is incorporated herein by reference.* The following exhibits to the Corporation's Annual Report on Form 10-K for the year ended February 3, 2001 are incorporated herein by reference. Number in Filing Description 10.1* Promissory note, dated November 17, 2000, from Raphael Benaroya to the Corporation 10.2 Consent of Independent Accountants 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 The CIT Group/Business Credit, Inc., as Agent and Lender ("CIT") The following exhibits to the Corporation's Quarterly Report on Form 10-Q for the period ended October 28, 2000 are incorporated herein by reference: Number in Filing Description 10.1* Amendment, dated August 18, 2000, to Employment Agreement, dated November 20, 1998, between the Corporation and Raphael Benaroya 10.2* Amendment, dated August 18, 2000, to Employment Agreement, dated November 20, 1998, between the Corporation and Kenneth P. Carroll 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 10.2 Amendment, dated December 28, 1999, to Financing Agreement among the Corporation, United Retail Incorporated and CIT 10.3 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 among the Corporation, United Retail Incorporated and CIT The promissory note, dated November 18, 1999, from Raphael Benaroya to the Corporation filed as the exhibit to Mr. Benaroya's Schedule 13D, dated November 18, 1999, is incorporated herein by reference.* 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 following exhibit to the Corporation's Current Report on Form 8-K, filed September 17, 1999, is incorporated herein by reference: Number in Filing Description 3 Restated By-Laws of the Corporation 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 exhibits to the Corporation's Annual Report on Form 10-K for the year ended January 30, 1999 are incorporated herein by reference: Number in Filing Description 10.1 Amendment, dated March 29, 1999, to Financing Agreement among the Corporation, United Retail Incorporated and CIT 21 Subsidiaries of the Corporation The 1999 Stock Option Plan set forth as the Appendix to the Corporation's proxy statement on Schedule 14A for its 1999 annual meeting of stockholders is incorporated herein by reference.* The following exhibits to the Corporation's Quarterly Report on Form 10-Q for the period ended October 31, 1998 are incorporated herein by reference: Number in Filing Description 10.1* Employment Agreement, dated November 20, 1998, between the Corporation and Raphael Benaroya 10.2* Employment Agreement, dated November 20, 1998, between the Corporation and George R. Remeta 10.3* Employment Agreement, dated November 20, 1998, between the Corporation and Kenneth P. Carroll 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 Program Agreement, dated January 27, 1998, between the Corporation, United Retail Incorporated and WFN 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 among the Corporation, United Retail Incorporated and CIT The following exhibits to the Corporation's Quarterly Report on Form 10-Q for the period ended August 2, 1997 are incorporated herein by reference: Number in Filing Description 10.1 Financing Agreement, dated August 15, 1997, among the Corporation, United Retail Incorporated and CIT 10.2* Amendment No. 1 to Restated Supplemental Retirement Savings Plan The following exhibit to the Corporation's Quarterly Report on Form 10-Q for the period ended November 2, 1996 is incorporated herein by reference: Number in Filing Description 10.1* Restated Supplemental Retirement Savings Plan The following 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) 10.2.2 Amendment to Software License Agreement, dated December 10, 1991 - -------------------- *A compensatory plan for the benefit of the Corporation's management or a management contract. (b) No current reports on Form 8-K were filed by the Corporation during the fiscal quarter ended November 3, 2001. 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. UNITED RETAIL GROUP, INC. ------------------------------------------------ (Registrant) 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 Date: December 13, 2001 EXHIBIT INDEX ITEM 14. EXHIBITS. The following exhibits are filed herewith: Number Description 10.1* Amendment, dated November 29, 2001, to Employment Agreement, dated November 20, 1998, between the Corporation and Raphael Benaroya 10.2* Amendment, dated November 29, 2001, to Employment Agreement, dated November 20, 1998, between the Corporation and George R. Remeta 10.3* Amendment, dated November 29, 2001, to Employment Agreement, dated November 20, 1998, between the Corporation and Kenneth P. Carroll 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 Program Agreement, dated January 27, 1998, between the Corporation, United Retail Incorporated and World Financial Network National Bank ("WFN") (Confidential portions filed separately with the Secretary of the Commission) 10.6* Promissory note, dated November 30, 2001, from Raphael Benaroya to the Corporation The following exhibits to the Corporation's Quarterly Report on Form 10-Q for the period ended August 4, 2001 are incorporated herein by reference: Number in Filing Description 10.1* Incentive Compensation Program Agreement 10.2* Restated Stock Appreciation Rights Plan The 2001 Stock Option Plan set forth as the appendix to the Corporation's proxy statement on Schedule 14A for its 2001 annual meeting of stockholders is incorporated herein by reference.* The following exhibits to the Corporation's Annual Report on Form 10-K for the year ended February 3, 2001 are incorporated herein by reference. Number in Filing Description 10.1* Promissory note, dated November 17, 2000, from Raphael Benaroya to the Corporation 10.2 Consent of Independent Accountants 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 The CIT Group/Business Credit, Inc., as Agent and Lender ("CIT") The following exhibits to the Corporation's Quarterly Report on Form 10-Q for the period ended October 28, 2000 are incorporated herein by reference: Number in Filing Description 10.1* Amendment, dated August 18, 2000, to Employment Agreement, dated November 20, 1998, between the Corporation and Raphael Benaroya 10.2* Amendment, dated August 18, 2000, to Employment Agreement, dated November 20, 1998, between the Corporation and Kenneth P. Carroll 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 10.2 Amendment, dated December 28, 1999, to Financing Agreement among the Corporation, United Retail Incorporated and CIT 10.3 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 among the Corporation, United Retail Incorporated and CIT The promissory note, dated November 18, 1999, from Raphael Benaroya to the Corporation filed as the exhibit to Mr. Benaroya's Schedule 13D, dated November 18, 1999, is incorporated herein by reference.* 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 following exhibit to the Corporation's Current Report on Form 8-K, filed September 17, 1999, is incorporated herein by reference: Number in Filing Description 3 Restated By-Laws of the Corporation 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 exhibits to the Corporation's Annual Report on Form 10-K for the year ended January 30, 1999 are incorporated herein by reference: Number in Filing Description 10.1 Amendment, dated March 29, 1999, to Financing Agreement among the Corporation, United Retail Incorporated and CIT 21 Subsidiaries of the Corporation The 1999 Stock Option Plan set forth as the Appendix to the Corporation's proxy statement on Schedule 14A for its 1999 annual meeting of stockholders is incorporated herein by reference.* The following exhibits to the Corporation's Quarterly Report on Form 10-Q for the period ended October 31, 1998 are incorporated herein by reference: Number in Filing Description 10.1* Employment Agreement, dated November 20, 1998, between the Corporation and Raphael Benaroya 10.2* Employment Agreement, dated November 20, 1998, between the Corporation and George R. Remeta 10.3* Employment Agreement, dated November 20, 1998, between the Corporation and Kenneth P. Carroll 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 Program Agreement, dated January 27, 1998, between the Corporation, United Retail Incorporated and WFN 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 among the Corporation, United Retail Incorporated and CIT The following exhibits to the Corporation's Quarterly Report on Form 10-Q for the period ended August 2, 1997 are incorporated herein by reference: Number in Filing Description 10.1 Financing Agreement, dated August 15, 1997, among the Corporation, United Retail Incorporated and CIT 10.2* Amendment No. 1 to Restated Supplemental Retirement Savings Plan The following exhibit to the Corporation's Quarterly Report on Form 10-Q for the period ended November 2, 1996 is incorporated herein by reference: Number in Filing Description 10.1* Restated Supplemental Retirement Savings Plan The following 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) 10.2.2 Amendment to Software License Agreement, dated December 10, 1991 - -------------------- *A compensatory plan for the benefit of the Corporation's management or a management contract. EX-99 3 rbamend2.txt EXHIBIT 10.1 Exhibit No. 10.1 ---------------- AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT This AMENDMENT NO. 2 made as of the 29th day of November, 2001, to the Employment Agreement made as of the 20th day of November, 1998 (the "Agreement"), between UNITED RETAIL GROUP, INC., a Delaware corporation, with principal offices at 365 West Passaic Street, Rochelle Park, New Jersey 07662-6563, and RAPHAEL BENAROYA, residing at 179 Lincoln Street, Englewood, NJ 07631. WHEREAS, the Executive has been employed by the Company as its Chairman of the Board, President and Chief Executive Officer; WHEREAS, the Company desires to continue the services of the Executive, and the Executive desires to continue to provide such services to the Company, on the terms set forth in the Agreement; and WHEREAS, the provisions of this Amendment were recommended by the Compensation Committee of the Company's Board of Directors on November 28, 2001 and approved by the Company's Board of Directors on November 29, 2001 with the Executive abstaining. NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Section 1(u) of the Agreement is amended to read in its entirety as follows: "(u) Term of Employment shall mean the period of time commencing on November 20, 1998 and ending on July 30, 2006 or such later date as may be mutually agreed upon by the Company and the Executive." 2. Section 4(b) of the Agreement is amended to read in its entirety as follows: "(b) The Executive shall continue to be eligible to receive, and the Company shall continue to pay, a semi-annual cash incentive compensation payment ("Performance Bonus") based on the Company's consolidated operating income for the six-month periods ending January 31st and July 31st, respectively. 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 August 4, 2001, 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." 3. All the other provisions of the Agreement shall remain in force unchanged. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement in Rochelle Park, New Jersey, in duplicate originals on November 30, 2001. UNITED RETAIL GROUP, INC. By: GEORGE R. REMETA ---------------------------------- Name: George R. Remeta Title: Chief Administrative Officer RAPHAEL BENAROYA Raphael Benaroya RB Amend No 2 KPC:jw EX-99 4 grramend.txt EX 10.2 Exhibit No. 10.2 ---------------- AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT This AMENDMENT NO. 1 made as of the 29th day of November, 2001, to the Employment Agreement made as of the 20th day of November, 1998 (the "Agreement"), between UNITED RETAIL GROUP, INC., a Delaware corporation, with principal offices at 365 West Passaic Street, Rochelle Park, New Jersey 07662-6563, and GEORGE R. REMETA, residing at 25 Lee Way, Oakland, New Jersey 07436. WHEREAS, the Executive has been employed by the Company as its Vice Chairman, Secretary and Chief Administrative Officer; WHEREAS, the Company desires to continue the services of the Executive, and the Executive desires to continue to provide such services to the Company, on the terms set forth in the Agreement; and WHEREAS, the provisions of this Amendment were recommended by the Compensation Committee of the Company's Board of Directors on November 28, 2001 and approved by the Company's Board of Directors on November 29, 2001 with the Executive abstaining. NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Section 1(u) of the Agreement is amended to read in its entirety as follows: "(u) Term of Employment shall mean the period of time commencing on November 20, 1998 and ending on July 30, 2006 or such later date as may be mutually agreed upon by the Company and the Executive." 2. Section 4(a) of the Agreement is amended to read in its entirety as follows: "(a) A base salary, payable in accordance with the regular executive payroll practices of the Company, at a rate of $450,000 per annum during the period ending on January 31, 2002 and thereafter at such higher rate as may be determined by the Compensation Committee of the Board of Directors, but in any event base salary shall increase as of February 1, 2002 by a percentage at least equal to the increase in the Consumer Price Index for all Urban Consumers for New York and Northern New Jersey published by the Bureau of Labor Statistics of the Department of Labor ("CPI") since January 31, 2001 and shall increase as of each anniversary of February 1, 2002 by a percentage at least equal to the increase, if any, in the CPI since the previous January 31st (as increased from time to time, the "Base Salary"). 3. Section 4(b) of the Agreement is amended to read in its entirety as follows: "(b) The Executive shall continue to be eligible to receive, and the Company shall continue to pay, a semi-annual cash incentive compensation payment ("Performance Bonus") based on the Company's consolidated operating income for the six-month periods ending January 31st and July 31st, respectively. 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 August 4, 2001, 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." 4. Section 11(e) of the Agreement is amended to read in its entirety as follows: "(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), while employed by the Company and for 36 months thereafter, provided, however, that in the event of Termination Without Cause or resignation by the Executive in accordance with Section 14(c), the Executive shall be bound by the provisions of Section 11(a) and (d), and shall perform his obligations pursuant to Section 11(a) and (d), only in the event that the Company shall pay his Severance Pay in accordance with the provisions of Section 14(b) no later than the 15th day after the termination of the Executive's employment under this Agreement or his Resignation Compensation in accordance with the provisions of Section 14(c) no later than the 15th day after the effective date of the Executive's resignation, as the case may be, and provided, further, that the Executive, after receiving Severance Pay or Resignation Compensation within such 15-day period, 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. For purposes of the first proviso in the preceding sentence only, payment of Severance Pay or Resignation Compensation within the time specified above in an amount at least equal to the amount determined in advance to be due and owing to the Executive by a firm of independent public accountants of nationally recognized standing shall satisfy the condition of said proviso, and cause the Executive to be bound by the provisions of Section 11(a) and (d), and shall obligate the Executive to perform his obligations pursuant to Section 11(a) and (d), even if such amount is less than the amount actually due and owing." 5. All the other provisions of the Agreement shall remain in force unchanged. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement in Rochelle Park, New Jersey, in duplicate originals on November 30, 2001. UNITED RETAIL GROUP, INC. By: RAPHAEL BENAROYA -------------------------------------- Name: Raphael Benaroya Title: Chairman of the Board GEORGE R. REMETA ----------------------------------------- George R. Remeta GRR Amend to Employment Agr. KPC:jw EX-99 5 kpcamend2.txt EX 10.3 Exhibit No. 10.3 ---------------- AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT This AMENDMENT NO. 2 made as of the 29th day of November, 2001, to the Employment Agreement (the "Agreement") made as of the 20th day of November, 1998, between UNITED RETAIL GROUP, INC., a Delaware corporation, with principal offices at 365 West Passaic Street, Rochelle Park, New Jersey 07662-6563, and KENNETH P. CARROLL, residing at 140 Prospect Avenue, Apartment 11J, Hackensack, New Jersey 07601. WHEREAS, capitalized terms used herein and defined in the Agreement shall have the same meaning as in the 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; WHEREAS, the Executive has been employed by the Company as its Senior Vice President - General Counsel to provide, among other things, advice on the laws of the State of New York and the federal laws of the United States and to supervise the representation before courts and legislative and administrative bodies of the Company and its subsidiaries; WHEREAS, the Company desires to continue the professional services of the Executive, and the Executive desires to continue to provide such services to the Company, on the terms set forth in the Agreement; and WHEREAS, the provisions of this Amendment were recommended by the Compensation Committee of the Company's Board of Directors on November 28, 2001, and approved by the Company's Board of Directors on November 29, 2001. NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Section 1(s) of the Agreement is amended to read in its entirety as follows: "(s) Term of Employment shall mean the period of time commencing on November 20, 1998 and ending on July 30, 2006 or such later date as may be mutually agreed upon by the Board of Directors and the Executive." 2. Section 4(b) of the Agreement is amended to read in its entirety as follows: "(b) The Executive shall continue to be eligible to receive, and the Company shall continue to pay, a semi-annual cash incentive compensation payment ("Performance Bonus") based on the Company's consolidated operating income for the six-month periods ending January 31st and July 31st, respectively. 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 August 4, 2001, 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." 3. All the other provisions of the Agreement shall remain in force unchanged. IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment in Rochelle Park, New Jersey, in duplicate originals on November 30, 2001. UNITED RETAIL GROUP, INC. By: RAPHAEL BENAROYA ------------------------------ Name: Raphael Benaroya Title: Chairman of the Board KENNETH P. CARROLL --------------------------------- Kenneth P. Carroll KPC amend no. 2 KPC:jw EX-99 6 icurgi.txt EX. 10.4 Exhibit No. 10.4 ---------------- SUMMARY PLAN DESCRIPTION United Retail Group, Inc. Incentive Compensation Program for Executives as of August 4, 2001 The Incentive Compensation Program provides each Executive of United Retail Group, Inc. with an opportunity each season to earn a Performance Bonus based on attainment of targets for consolidated operating income (loss) by the Company (the "Operating Results"). (Capitalized terms used herein and defined in the respective Employment Agreements between the Company and the Executives shall have the same meanings as in the pertinent Agreement.) Section 1. Each Executive has been assigned an individual participation percentage in his Employment Agreement. Further, seasonal targets for Operating Results will be established by the Compensation Committee of the Board of Directors of the Company. The targets will be assigned percentages ranging from 20% for the lowest acceptable Operating Results to 200% at and above the highest target. There will be no payout if the 20% target is missed. Section 2. The amount of an Executive's Performance Bonus shall be the product of his seasonal Base Salary multiplied by the Executive's participation percentage multiplied by the target percentage achieved by the Company. For example, an Executive with a seasonal Base Salary of $120,000 ($240,000 per annum) and a participation percentage of 20% would receive $4,800 if the 20% target is met. Section 3. Except as otherwise provided in Section 5, the Operating Results shall be determined by reference to the consolidated statement of operations of the Company for the season in question. Section 4. The seasonal consolidated statement of operations shall be prepared by the Company's Chief Accounting Officer, shall be in accordance with generally accepted accounting principles consistently applied ("GAAP") and shall be reviewed by the independent certified public accountants for the Company (the "Accounting Firm"). The preceding sentence to the contrary notwithstanding, (i) if all the Executives waive the performance of a review by the Accounting Firm in writing, no review by the Accounting Firm shall be required and (ii) if the Company shall have acquired or organized one or more new subsidiaries during the season in question, the seasonal consolidated statement of operations shall be prepared by the Company's Chief Accounting Officer on a pro forma basis excluding the new subsidiary or subsidiaries but shall otherwise be in accordance with GAAP. Promptly after the end of each season the Company shall deliver to the Executives copies of such seasonal consolidated statement of operations and the letter, if required, from the Accounting Firm with respect to its review of the seasonal consolidated statement of operations. Section 5. Anything above to the contrary notwithstanding, in the event that the Company shall merge or consolidate with another corporation, or shall sell all or substantially all of its assets, during a season, then the Performance Bonus for the season shall be determined on a basis that is fair and equitable in light of the circumstances instead of solely by reference to the Operating Results. The determination of the Performance Bonus for such a season shall be made by the executive compensation consulting division of a firm of independent certified public accountants of nationally recognized standing designated in writing by a plurality of the Executives or by a retired partner of that firm designated by that firm. Section 6. The Company shall pay the professional fee and disbursements of the Accounting Firm that reviews the seasonal consolidated statement of operations and of any accountant(s) who determine(s) the Performance Bonus. Section 7. In compliance with the law, Performance Bonuses are subject to withholding taxes and deductions for contributions to the Retirement Savings Plan and the Supplemental Retirement Savings Plan, respectively. IC URGI EX-99 7 samend.txt EX 10.5 Exhibit 10.5 ------------ **CONFIDENTIAL TREATMENT REQUESTED OF INFORMATION FILED SEPARATELY (asterisks indicate redacted numbers contained in the amendment, which has been filed separately with the Securities and Exchange Commission) AMENDMENT TO PRIVATE LABEL CREDIT CARD PROGRAM AGREEMENT This Amendment is to that certain Private Label Credit Card Program Agreement between World Financial Network National Bank, ("Bank ") and United Retail Group, Inc. and United Retail Incorporated (collectively referred to as "Retailer"). WHEREAS, Bank and Retailer entered into that certain Private Label Credit Card Program Agreement dated January 27, 1998, (the "Agreement"); and, WHEREAS, Bank and Retailer now desire to amend the Agreement as set forth herein; NOW, THEREFORE, Bank and Retailer hereby agree as follows: 1. Definitions. The following definition is added to Section 1.1, Definitions: "Pay by Phone" - Bank shall from time to time permit certain Cardholders to make payments to Bank with a pay by phone product offered by Bank. Bank may charge the Cardholders a fee for the use of the product. The definition of "BDIP Incentive Percentage" in Section 1.1, is hereby amended to provide that the BDIP Incentive Percentages for the years ending subsequent to 2/29/2004 shall be the same as the percentages set forth in the table for the Year Ending 2/29/2004. 2. Initial Term. Section 13.1, Term of Agreement, is hereby amended to extend the Initial Term of the Agreement through and including February 28, 2007. 3. Servicing Fees. The following new fee is added to Exhibit 6.1(b) Service Fees: Pay by Phone Processing Per transaction $** 4. Consumer Charges. Pursuant to Section 2.3, the parties agree to add to the Consumer Charges applicable to Accounts any Pay by Phone fees imposed by Bank upon Cardholders after review and approval of such fee by Retailer. 5. Increase in Fees. Bank and Retailer agree to increase the Service Fees charged by Bank to Retailer pursuant to this Agreement by ** percent (**%), effective on February 1, 2002. Such ** percent (**%) increase shall be added to the total fees shown on the Bank's invoice, an example of such calculation is set forth on sample invoice attached hereto. 6. The effective date of this Amendment shall be October 1, 2001. 7. As hereby amended and supplemented, the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment. World Financial Network National Bank By: Daniel T. Groomes ----------------- Title: President United Retail Group, Inc. United Retail Incorporated By: Jon Grossman By: Kenneth P. Carroll ------------ ------------------------ Title: Vice President Title: President **CONFIDENTIAL TREATMENT REQUESTED OF INFORMATION FILED SEPARATELY (asterisks indicate redacted numbers contained in the amendment, which has been filed separately with the Securities and Exchange Commission) Attachment Service Fees Invoice Example Effective February 1, 2002 EXAMPLE STATEMENT United Retail Group, Inc. ---------------- Attn: Scott Weiss Invoice Example Date: ---------------- 365 West Passaic Street Processing Period: February-02 ---------------- Rochelle Park NJ 07662 Invoice Number: ----------------
- ----------------------------------------------------------------------------------------------------------------------------------- Service Fees Quantity Unit Cost Total Cost - ----------------------------------------------------------------------------------------------------------------------------------- A. New Account Acquisitions 1. Mail In Applications 387 Per Application ** ** 2. Quick Credit Referrals 3,894 Per Application ** ** 3. Instant Credits 432 Per Application ** ** 4. Other New Accounts Calls 722 Per Application ** ** 5. Quick Credit 14,760 Per Application ** ** 6. Catalog 639 Per Call ** ** 7. Embossing 12,895 Per Card ** ** B. Processing and Servicing Fees 1. Statement Generation (Including Postage of $0.298) 150,001 - 200,000 Per Statement ** ** 200,001 - 250,000 Per Statement ** ** 250,001 - 300,000 255,958 Per Statement ** ** 300,001 - 400,000 Per Statement ** ** 400,001 - 500,000 Per Statement ** ** 500,001 - and over Per Statement ** ** 2. Zero Balance Statements 26,068 Per Statement ** ** 3. Remittance Processing 146,568 Per Remittance ** ** Customer Service 4. Phone (800# Included) 20,907 Per Inquiry ** ** Written 680 Per Inquiry ** ** Automated Response 24,215 Per Inquiry ** ** 5. Letters (Including Postage of $0.298) Collection 38,199 Per Letter Mailed ** ** Customer Service 12,129 Per Letter Mailed ** ** Decline 10,443 Per Letter Mailed ** ** Retailer's Adverse Action Regret Letter 0 Per Letter Mailed ** ** 6. Collection Accounts Worked Collector Accounts 10,149 Per Account Worked ** ** Dialer Accounts 28,133 Per Account Worked ** ** 7. Voice Authorizations (800# Included) 11,480 Per Voice Auth Call ** ** 8. Network Authorization 214,706 Per Transaction ** ** 9 Pay by Phone Processing xxx Per Transaction ** ** SubTotal ** **% Renewal ** - ----------------------------------------------------------------------------------------------------------------------------------- Total Servicing Due From URG ** - -----------------------------------------------------------------------------------------------------------------------------------
EX-99 8 rbnote1101.txt EX 10.6 Exhibit 10.6 ------------ CONSOLIDATED NOTE $2,844,393.24 November 30, 2001 WHEREAS, RAPHAEL BENAROYA (the "Maker") is the Chairman of the Board, President and Chief Executive Officer of United Retail Group, Inc., a Delaware corporation (the "Payee"); WHEREAS, the Payee has made advances to the Maker in the total amount of $2,307,430.63 from time to time commencing February 13, 1998; WHEREAS, accrued and unpaid interest on the advances totals $536,962.61; WHEREAS, the advances and interest thereon are represented by promissory notes of the Maker to the order of the Payee, dated November 18, 1999, in the principal amount of $2,416,437.52 and dated November 17, 2000, in the principal amount of $223,285.55 (collectively, the "Prior Notes"); WHEREAS, the Maker and the Payee desire to consolidate the Prior Notes, including accrued and unpaid interest thereon, into this promissory note; and WHEREAS, both the Maker and the Payee maintain offices at 365 West Passaic Street, Rochelle Park, New Jersey 07662. NOW, THEREFORE, FOR VALUE RECEIVED, the Maker promises to pay to the order of the Payee, at the office of the Chief Administrative Officer of the Payee or at such other place as may be designated in writing by the holder of this Note, the principal sum of (i) Five Hundred Thirty-Six Thousand Nine Hundred Sixty-Two and 61/100 ($536,962.61) on November 30, 2002 and (ii) Two Million Three Hundred Seven Thousand Four Hundred Thirty and 63/100 dollars ($2,307,430.63) on November 18, 2003. Interest on the outstanding balance of principal from the date hereof is payable on November 30, 2002 and at maturity at a rate per annum ("Interest Rate") equal to the Prime Rate (as hereinafter defined). "Prime Rate" means the prime commercial lending rate of The Chase Manhattan Bank announced to be in effect from time to time. (The Prime Rate is not necessarily the lowest rate charged by The Chase Manhattan Bank for commercial or other types of loans, it being understood that the Prime Rate is only one of the bases for computing interest on loans made by The Chase Manhattan Bank.) In the event of any change in the Prime Rate, the Interest Rate shall be adjusted on and as of the effective date of any change in Prime Rate provided that in no event shall such rate exceed the maximum rate of interest permitted by law. Interest shall be calculated on the basis of a 360-day year for the actual number of days involved. The Maker shall have the right to prepay this Note in whole at any time, or in part from time to time, without premium or penalty, but with accrued interest on the amount being prepaid to the date of such prepayment. This Note replaces and supersedes the Maker's Prior Notes to the order of the Payee, receipt of which by the Maker is hereby acknowledged. The Maker represents that: (a) there are no actions, suits or proceedings pending, or to the knowledge of the Maker threatened, against or affecting the Maker which could have an adverse effect on the ability of the Maker to honor his obligations hereunder, or involving the validity or enforceability of this Note, at law or in equity; the Maker, to the best of his knowledge after due investigation, is not in default or in violation with respect to, or operating under or subject to, any order, writ, injunction, decree or demand of any court, it being understood that the existence of any such suit or proceeding which in the judgment of the Payee would have an adverse impact on the ability of the Maker to honor his obligations hereunder shall be a default hereunder; (b) the consummation of the transactions hereby contemplated and performance of this Note will not result in any breach of, or constitute a default under, any mortgage, deed of trust, lease, bank loan or credit agreement, partnership agreement, or other agreement or instrument to which the Maker is a party or by which he may be bound or affected; (c) there is no default on the part of the Maker under or with respect to this Note and no event has occurred and is continuing which with the giving of notice or the passage of time or both would constitute a default hereof; (d) the Maker is not insolvent and will not be rendered insolvent by execution of this Note or consummation of the transaction contemplated thereby; (e) the Maker has no offsets, defenses or counterclaims to the enforcement of this Note and this Note is enforceable against the Maker in accordance with its terms; and (f) this Note constitutes the valid and binding obligation of the Maker and is enforceable against the Maker in accordance with its terms. No failure on the part of the Payee to exercise, and no delay in exercising, any right, remedy or power hereunder or under any other document or agreement executed in connection herewith shall operate as a waiver thereof, nor shall any single or partial exercise by the Payee of any right, remedy or power hereunder or under any other document or agreement executed in connection herewith preclude any other or future exercise of any other right, remedy or power. Each and every right, remedy and power hereby granted to the Payee or allowed it by law or other agreement shall be cumulative and not exclusive and may be exercised by the Payee from time to time. If any payment on this Note becomes due and payable on a Saturday, Sunday or public holiday under the laws of the State of New Jersey, the maturity thereof shall be extended to the next day. Payment of this Note shall be secured by a Pledge Agreement of even date herewith. In the event that the Payee, in enforcing its rights hereunder, determines that charges and fees incurred in connection with the Note may, under the applicable laws relative to usury, cause the interest rate herein to exceed the maximum rate allowed by law, then such interest shall be recalculated and any excess over the maximum interest permitted by said laws shall be credited to the then outstanding principal balance to reduce said balance by that amount. It is the intent of the parties hereto that the Maker, under no circumstances, shall be required to pay, nor shall the Payee be entitled to collect, any interest which is in excess of the maximum legal rate permitted under the applicable laws relative to usury. This Note may not be changed or modified orally, nor may any right or provision hereof be waived orally, but in each instance only by an instrument in writing signed by the holder of this Note, in the case of the Payee, by its Chief Administrative Officer. The Maker agrees that in the event that any interest due hereunder shall become overdue for a period in excess of fifteen (15) days, a late charge of two cents ($0.02) for each dollar ($1.00) so overdue shall be charged by the Payee for the purpose of defraying the expense incident to handling such delinquent payment, which the Maker agrees to pay. Presentment for payment, notice of dishonor, protest and notice of protest and all other demands and notices in connection with the delivery, performance and enforcement of this Note are hereby waived. If this Note shall be collected by legal proceedings or through any civil court or shall be referred to any attorney because of any default, the Maker agrees to pay a reasonable sum for attorney's fees and expenses. This Note shall be construed, enforced, and governed by the laws of the State of New Jersey, without regard to principles of conflicts of laws. RAPHAEL BENAROYA ----------------- RAPHAEL BENAROYA RB Note 11-01 -----END PRIVACY-ENHANCED MESSAGE-----