SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549
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SCHEDULE 14A
RULE 14A-101
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
FILED BY REGISTRANT /x/
FILED BY PARTY OTHER THAN REGISTRANT
CHECK THE APPROPRIATE BOX:
/ / PRELIMINARY PROXY STATEMENT
/x/ DEFINITIVE PROXY STATEMENT
/ / DEFINITIVE ADDITIONAL MATERIALS
/ / SOLICITING MATERIAL PURSUANT TO RULE 14-11 (C) OR RULE 14A-12
CACHE INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CACHE INC.
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(NAME OF PERSON(S) FILING PROXY STATEMENT)
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Payment of filing fee (Check the appropriate box);
/ / $125 per Exchange Act Rules 0-11(c) (1) (ii). 14a-6(i) (1) or 14-6(j) (2)
/ / $500 per each party to the controversy pursuant of Exchange Act Rule
14a-6(i) (3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i) (4) and 0-11
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (1)
4. Proposed maximum aggregate value of transaction:
(1) Set forth the amount on which the filing is calculated and
state how it was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a) (2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, of the form or schedule and the date of filing.
CACHE, INC.
1460 Broadway
New York, New York 10036
(212) 575-3200
September 30, 2003
Dear Shareholder:
On behalf of the officers and directors of the Company, you are
cordially invited to attend the Cache, Inc. Annual Meeting of Shareholders to
be held at 10:00 a.m. on Tuesday, November 11, 2003, at our headquarters,
1440 Broadway, 5th Floor, New York, New York.
The Notice of Meeting and Proxy Statement on the following pages
cover the formal business of the meeting, which includes proposals (i) to elect
six named nominees as directors, (ii) to consider and act upon a proposal to
approve the Company's 2003 Stock Option and Performance Incentive Plan and
(iii) to ratify the appointment of KPMG LLP, certified public accountants, as
Cache's auditors for the fiscal year ending December 27, 2003.
The Board of Directors unanimously recommends that shareholders vote in
favor of each proposal. We strongly encourage all shareholders to participate
by voting their shares by Proxy whether or not they plan to attend the meeting.
Please sign, date and mail the enclosed Proxy as soon as possible. If you do
attend the Annual Meeting, you may still vote in person.
Sincerely,
/s/ Brian Woolf
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Brian Woolf
Chairman of the Board
CACHE, INC.
1460 Broadway
New York, New York 10036
___________________
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 11, 2003
____________________
TO THE SHAREHOLDERS:
The Annual Meeting of the Shareholders of Cache, Inc. will be held on
Tuesday, November 11, 2003 at 10:00 a.m. local time, at our headquarters, 1440
Broadway, 5th Floor, New York, New York, 10018, for the purpose of considering
and acting upon the following proposals as set forth in the accompanying Proxy
Statement:
1. To elect six named nominees as Directors of the Company to serve
until the next Annual Meeting of Shareholders and until their
successors are elected and qualified.
2. To consider and act upon a proposal to approve the Company's
2003 Stock Option and Performance Incentive Plan.
3. To ratify the appointment of KPMG LLP, certified public
accountants, as auditors of the Company for the fiscal year
ending December 27, 2003.
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only shareholders of record at the close of business on September 12,
2003 are entitled to notice of and to vote at the meeting or any adjournment
thereof.
Whether or not you plan to attend the Annual Meeting, please complete,
date and sign the enclosed Proxy and return it promptly to the Company in the
return envelope enclosed for your use, which requires no postage if mailed in
the United States. You may revoke your Proxy at any time before it is voted by
delivering to the Secretary of the Company a written notice of revocation
bearing a later date than the Proxy, by duly executing a subsequent Proxy
relating to the same shares of Common Stock and delivering it to the Secretary
of the Company, or by attending and voting at the Annual Meeting.
You are cordially invited to attend.
By Order of the Board of Directors,
/s/ Victor J. Coster
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VICTOR J. COSTER
Secretary
September 30, 2003
CACHE, INC.
1460 Broadway
New York, New York 10036
_______________
PROXY STATEMENT
_______________
Accompanying this Proxy Statement is a Notice of Annual Meeting of
Shareholders and a form of Proxy for such meeting solicited by the Board of
Directors. The Board of Directors has fixed the close of business on September
12, 2003 as the record date for the determination of shareholders who are
entitled to notice of and to vote at the meeting or any adjournment thereof.
The holders of a majority of the outstanding shares of Common Stock present
in person, or represented by proxy, will constitute a quorum at the meeting.
This Proxy Statement and the enclosed Proxy are being sent to the shareholders
of the Company on or about September 30, 2003.
Only shareholders of record at the close of business on September 12,
2003 will be entitled to vote at the Annual Meeting. At the close of business
on such record date the Company had outstanding 9,949,650 shares of Common
Stock, par value $.01 per share ("Common Stock"). No other class of voting
security of the Company is issued and outstanding. Each share of Common Stock
entitles the holder to one vote. Shareholders do not have cumulative voting
rights.
As of September 30, 2003, Messrs. Andrew and Joseph Saul and certain
Saul family trusts (sometimes collectively referred to herein as the "Sauls")
owned of record an aggregate of 3,664,128 shares of Common Stock, representing
approximately 36.8% of the outstanding shares of Common Stock. See "Principal
Shareholders and Share Ownership by Management." The Sauls intend to vote their
Common Stock in favor of Proposals 1, 2 and 3.
A Proxy that is properly submitted to the Company may be properly
revoked at any time before it is voted. Proxies may be revoked by (i)
delivering to the Secretary of the Company at or before the Annual Meeting a
written notice of revocation bearing a later date than the Proxy, (ii) duly
executing a subsequent Proxy relating to the same shares of Common Stock and
delivering it to the Secretary of the Company at or before the Annual Meeting,
or (iii) attending the Annual Meeting and voting in person (although attendance
at the Annual Meeting will not in and of itself constitute revocation of a
Proxy). With respect to Proposal 1, unless authority to vote for all Directors
or any individual Director is withheld, all the shares represented by the Proxy
will be voted for the election of Directors as set forth in the Proxy Statement.
Where a shareholder has specified a vote for or against Proposal 2, 3 or 4,
such Proxy will be voted as specified; if no direction is given, all the shares
represented by the Proxy will be voted in favor of the Proposal.
-1-
Under SEC rules, boxes and a designated blank space are provided on the
proxy card for shareholders to mark if they wish either to vote "for," "against"
or "abstain" on one or more of the proposals, or to withhold authority to vote
for one or more of the Company's nominees for director. Florida law requires the
presence of a quorum for the annual meeting, defined as a majority of the votes
entitled to be cast at the meeting. Votes withheld from director nominees and
abstentions will be counted in determining whether a quorum has been reached.
Broker-dealer non-votes, which are defined in the third paragraph below, are
not counted for quorum purposes.
Assuming a quorum has been reached, a determination must be made as to
the results of the vote on each matter submitted for shareholder approval: (1)
the election of directors; (2) the approval of the Company's 2003 Stock Option
and Performance Incentive Plan ("the 2003 Plan"); and (3) the ratification of
auditors. Director nominees must receive a plurality of the votes cast at the
meeting, which means that a vote withheld from a particular nominee or nominees
will not affect the outcome of the meeting. In order to pass, each of the
proposals to approve the 2003 Plan and to ratify the Company's auditors must be
approved by a majority of the votes cast on such matter. Abstentions are not
counted in determining the number of votes cast in connection with the approval
of the 2003 Plan or the ratification of auditors.
Brokers who hold shares in street name have the authority to vote on
certain items when they have not received instructions from beneficial owners.
Brokers that do not receive instructions are entitled to vote on the election
of directors, the approval of the 2003 Plan and ratification of auditors. Under
applicable law, a broker non-vote will have no effect on the outcome of the
election of directors, the approval of the 2003 Plan or the ratification of
auditors.
The cost of soliciting Proxies will be paid by the Company, which will
reimburse brokerage firms, custodians, nominees and fiduciaries for their
expenses in forwarding proxy material to the beneficial owners of the Company's
stock.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO ANY SHAREHOLDER
UPON WRITTEN REQUEST A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
(EXCLUDING EXHIBITS BUT INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES) FOR THE FISCAL YEAR ENDED DECEMBER 28, 2002 AND/OR A
COPY OF ANY OF THE COMPANY'S QUARTERLY REPORTS ON FORM 10-Q OR CURRENT
REPORTS ON FORM 8-K. SUCH WRITTEN REQUESTS SHOULD BE DIRECTED TO: VICTOR
COSTER, SECRETARY, CACHE, INC., 1460 BROADWAY, NEW YORK, NEW YORK 10036.
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THIS MEETING,
PLEASE SIGN, DATE AND MAIL THE PROXY PROMPTLY.
-2-
ELECTION OF DIRECTORS
(Proposal 1)
The Board of Directors of the Company presently consists of the
following six members: Messrs. Andrew M. Saul, Joseph E. Saul, Brian Woolf,
Thomas E. Reinckens, Morton J. Schrader and Arthur S. Mintz, each of whom is
a nominee for re-election.
Unless authority to vote on the election of all Directors or any
individual Director is specifically withheld by appropriate designation on the
face of the Proxy, the persons named in the accompanying Proxy will nominate as
Directors, and vote such Proxy for the election as Directors of, the persons
named below. If elected, such persons will serve as Directors until the next
Annual Meeting of Shareholders and until their successors are elected and
qualified.
Management does not contemplate that any of the nominees for Director
will be unable to serve, but if such a situation should arise, the persons
named in the accompanying Proxy will nominate and vote for the election of
such other person or persons as the Board of Directors may recommend.
NOMINEES FOR DIRECTORS
Director
Name Age Principal Occupation Since
---------------------- --- ------------------------------ --------
Brian Woolf .......... 54 Chairman of the Board and 2000
Chief Executive Officer (1)
Thomas E. Reinckens... 49 President, Chief Operating 1993
Officer (2)
Arthur S. Mintz....... 58 President, Bees & Jam, Inc.(3) 2002
Andrew M. Saul ....... 56 Partner, Saul Partners (4) 1986
Joseph E. Saul ....... 83 Partner, Saul Partners (5) 1986
Morton J. Schrader ... 71 Real Estate Broker (6) 1989
___________________________________
(1) Mr. Woolf has served as our Chief Executive Officer and Chairman of the
Board since October 2000. From March 1999 to October 2000, Mr. Woolf
served as Vice President and General Merchandise Manager for the Limited.
From 1995 to March 1999, Mr. Woolf served as Senior Vice President and
General Merchandise Manager for Caldor.
(2) Mr. Reinckens has served as our President and Chief Operating Officer
since October 2000 and as director since February 1993. Mr. Reinckens
joined our company in February 1987 and has held various positions
throughout his tenure, most recently serving as Chief Financial Officer
from November 1989 to October 2000 and Executive Vice President from
September 1995 to October 2000.
-3-
(3) Mr. Mintz has served as one of our directors since September 2002. Mr.
Mintz has served as the President of Bees & Jam, Inc., an apparel
manufacturer, since 1971.
(4) Mr. Saul has served as one of our directors since 1986. Mr. Saul also
served as our Chairman of the Board from February 1993 to October 2000.
Mr. Saul is a partner in Saul Partners, an investment partnership, a
position he has held since 1986. He is the son of Joseph E. Saul.
(5) Mr. Saul has served as one of our directors since 1986. Mr. Saul is a
partner in Saul Partners, a position he has held since 1986. He is the
father of Andrew M. Saul.
(6) Mr. Schrader has served as one of our directors since 1989. Mr. Schrader
was the President of Abe Schrader Corp., a manufacturer of women's
apparel, from 1968 through March 1989. Since 1989, he has been active as
a real estate broker.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the year ended December 28, 2002 ("Fiscal 2002"), the Board of
Directors held four meetings. Each Director attended all of such Board meetings.
The Board of Directors has an Audit Committee and a Compensation and Plan
Administration Committee of the Board of Directors, established in July 1989,
currently consists of Messrs. Andrew Saul, Arthur S. Mintz and Morton J.
Schrader. The Audit Committee held six meetings in Fiscal 2002. In September
2002, Mr. Mintz was elected to the Audit Committee to fill the vacancy created
by the resignation of Mr. Goldberg.
Duties of the Audit Committee include meeting with the independent
accountants and certain personnel of the Company to discuss the planned scope
of their examinations, the adequacy of internal controls and financial
reporting; reviewing the results of the annual examination of the financial
statements and periodic internal audit examinations; reviewing the services
and fees of the Company's independent accountants; authorizing special
investigations and studies; and performing any other duties or functions deemed
appropriate by the Board of Directors.
The Compensation and Plan Administration Committee was established in
July 1991 as the Plan Administration Committee to administer the Company's
stock option plans. In May 1993 it was renamed the Compensation and Plan
Administration Committee and delegated additional authority to determine the
remuneration arrangements for the three most senior executive officers and to
review and approve the remuneration arrangements for the Company's other
executive officers. It currently consists of Messrs. Andrew M. Saul, Arthur S.
Mintz and Morton J. Schrader. The Compensation and Plan Administration
Committee met twice in Fiscal 2002. Each member of the Committee attended
such Committee meeting. In September 2002, Mr. Mintz was elected to the
Compensation and Plan Administration Committee to fill the vacancy created by
the resignation of Mr. Goldberg.
-4-
EXECUTIVE COMPENSATION
Summary Compensation Table
The following sets forth the compensation earned for the past three
years of the Chief Executive Officer and the Company's other two most highly
compensated executive officers collectively, the "Named Executive Officers".
ANNUAL LONG TERM
COMPENSATION COMPENSATION AWARDS
------------------- ---------------------------
SECURITIES ALL OTHER
NAME AND FISCAL UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) (1)
-------------------- ------ ---------- -------- ---------- ------------
BRIAN WOOLF 2002 $449,934 $359,947 45,500 $ 14,014
CHIEF EXECUTIVE 2001 401,857 --- 100,000 $ 3,640
OFFICER AND CHAIRMAN 2000 74,203 (2) --- 300,000 --
OF THE BOARD
THOMAS E. REINCKENS 2002 356,473 285,178 45,500 2,967
PRESIDENT & CHIEF 2001 326,857 250,244 -- 2,847
OPERATING OFFICER 2000 284,973 --- 28,125 2,662
AND DIRECTOR
DAVID DESJARDINS 2002 211,539(3) 117,692 35,000 --
EXECUTIVE VICE
PRESIDENT
____________________________
(1) These amounts consist of insurance premiums paid for life insurance for the
benefit of the named executive officers and long-term disability insurance.
(2) Mr. Woolf became one of our executive officers in October 2000.
(3) Mr. Desjardins is 41 years old and became one of our executive officers
in March 2002.
-5-
AGGREGATED FISCAL 2002 YEAR-END STOCK OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Stock Options at Fiscal In-the-Money Stock Options
Year-End at Fiscal Year-End (1)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
------------------- ----------- ------------- ----------- -------------
Brian Woolf 222,750 222,750 $ 2,521,215 $ 2,521,215
Thomas E. Reinckens 147,750 22,750 $ 1,590,028 $ 169,715
David Desjardins 8,750 26,250 $ 83,563 $ 205,688
Amounts described in the preceding table under the heading "Value of
Unexercised In-the-Money Stock Options at Fiscal Year End" are
determined by multiplying the number of shares underlying the options
by the difference between the last reported per share sale price of our
common stock on December 28, 2002 and the per share option exercise
prices.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to stock options
granted in fiscal 2002 to each of the named executive officers.
Potential
Realizable Value
% of Total At Assumed Annual
Number of Options Exercise Rates of Stock Price
Securities Granted to or Base Appreciation for
Underlying Employees in Price Expiration Option Term (2)
Name Options(1) Fiscal Year ($/share) Date 5% 10%
------------------- ---------- ------------ --------- ---------- ---------- ---------
Brian Woolf 45,500 24.5% $ 7.04 4/16/12 $ 88,499 $ 195,559
Thomas E. Reinckens 45,500 24.5% $ 7.04 4/16/12 88,499 195,559
David Desjardins 35,000 18.8% $ 4.95 3/11/12 47,866 105,771
__________________________
(1) These options vest no later than December 31, 2005 but may vest sooner.
On December 31, 2002, Mr. Woolf and Mr. Reinckens had vested options
totaling 22,750 each, respectively and Mr. Desjardins had vested options
totaling 8,750 shares. On each of December 31, 2003 and 2004, another
25% of the shares may vest, to the extent our earnings plan for these
years is achieved, based on the following sliding scale:
-6-
Percentage of Original
Options that Becomes
Exercisable
----------------------
Percentage of Earnings Plan Achieved 2002 2003/2004
----------------------------------------------- --------- ----------
Greater than or equal to 90% .................. 50% 25%
Greater than or equal to 75%, but less than 90% 40% 20%
Greater than or equal to 60%, but less than 75% 30% 15%
Less than 60%.................................. 0% 0%
(2) These amounts represent hypothetical gains that could be achieved for the
options if exercised at the end of the option term. As required by SEC
rules, these gains are based on assumed rates of stock price appreciation
of 5% and 10% compounded annually from the date the options were granted
until their expiration dates. These assumptions are not intended to
forecast future appreciation of our stock price. The potential realizable
value computation does not take into account federal or state income tax
consequences of option exercises or sales of appreciated stock.
Employment Agreements and Change-of-Control Provisions
In September 2003, we entered into a new employment agreement with
Brian Woolf, our Chief Executive Officer and Chairman, which expires January
31, 2007. Under the agreement, Mr. Woolf's annual salary during 2003 is
$500,000 and he is eligible to receive annual incremental increases of $75,000
in each of the next three years contingent on the Company's profitability, as
defined in the contract. Mr. Woolf is also eligible to participate in the
Company's bonus program. The amount of Mr. Woolf's bonus is based on our
achieving specified pre-tax earnings goals. In addition, under his employment
agreement, Mr. Woolf is entitled to a term life insurance policy equal to three
times his annual salary, participation in our long-term disability coverage and
our other benefits packages. Pursuant to the terms of his new employment
agreement, if we terminate Mr. Woolf's employment prior to January 31, 2007
for any reason other than for certain circumstances described therein, then
until Mr. Woolf accepts other employment we are required to continue to pay
him the full balance of his contract mitigated by future employment. The
contract contains a covenant of Mr. Woolf not to solicit employees of Cache for
two years and a covenant for Mr. Woolf not to compete with Cache for one year.
In addition, if there is a change in control of Cache, as defined in the
contract, Mr. Woolf is entitled to an one time payment equal to 18 months of
salary.
When he entered into his initial employment agreement with us in October 2000,
Mr. Woolf received an option to purchase 300,000 shares of our common stock at
an exercise price of $2.59 per share, the then-current market price. This option
vests no later than October 2004 but may vest earlier on a sliding scale based
on the percentage of our planned earnings that we achieve. On July 25, 2003,
Mr. Woolf exercised options to acquire shares of common stock and simultaneously
sold those shares as part of the Company's secondary stock offering. As of
September 30, 2003, this option was vested as to 50,000 shares. In October 2001,
we granted Mr. Woolf an option to purchase an additional 100,000 shares at an
exercise price of $3.20 per share, the then-current market price. This option
vests no later than December 31, 2004 but may vest earlier based on whether
we achieve our planned earnings during 2002, 2003 and 2004. As of September 30,
2003, this option was vested as to 50,000 shares. In April 2002, we granted
Mr. Woolf an option to purchase an additional 45,500 shares at an exercise
price of $7.04 per share, the then-current market price. This option vests no
later than December 31, 2004 but may vest earlier based on whether we achieve
our planned earnings during 2002, 2003 and 2004. As of September 30, 2003,
this option was vested as to 22,750 shares.
-7-
All of the options granted under the Company's 2003, 2000 and 1994 Stock
Option Plans contain a provision under which the option will become immediately
exercisable (the "Accelerated Exercise") with respect to all shares subject to
it as follows: (i) except as provided in clause (iii) below, immediately after
the first date on which less than 25% of the outstanding Common Stock in the
aggregate is beneficially owned (as defined in Rule 13d-3 under the Securities
and Exchange Act of 1934) by Andrew M. Saul and Joseph E. Saul, members of their
immediate families and one or more trusts established for the benefit of such
individuals or members, (ii) immediately prior to the sale of the Company
substantially as an entirety (whether by sale of stock, sale of assets, merger,
consolidation or otherwise), (iii) immediately prior to the expiration of any
tender offer or exchange offer for shares of Common Stock of the Company, where:
(x) all holders of Common Stock are entitled to participate, and (y) the Sauls
have agreed (or have announced their intent) to sell such number of their shares
of Common Stock as will result in the Sauls beneficially owning less than 25%
of the outstanding shares of Common Stock in the aggregate, and (iv)
immediately, if 20% or more of the directors elected by shareholders to the
Board of Directors are persons who were not nominated by management in the most
recent proxy statement of the Company. The Company is required to give
appropriate notice so as to permit an optionee to take advantage of the
foregoing provisions.
REPORT OF THE AUDIT COMMITTEE
For many years, we have had an Audit Committee composed of two
non-management directors along with Mr. Andrew Saul. The two non-management
members of the Audit Committee meet the independence and experience requirements
of Rule 4200(a)(15) of the NASDAQ Stock Exchange. Mr. Andrew Saul served as
Chairman of the Board of Directors of the Company from February 1993 to October
2000. The Board of Directors has determined that his participation on the
Audit Committee is in the best interests of the Company and its shareholders
due to his understanding of the affairs of the Company and related financial
and management expertise. In 2002, the Committee met six times. Our Audit
Committee has long followed the substance of the procedures recommended in the
report of the Blue Ribbon Committee on Improving the Effectiveness of Corporate
Audit Committees, sponsored by the major securities markets, issued in February
1999. Thus, when three years ago the SEC and the Exchange adopted new audit
committee requirements, no significant changes in the practices of our Audit
Committee were required.
During the year 2002, at each of its meetings, the Committee met with the
senior members of the Company's financial management team and our independent
auditors. The Committee's agenda is established by the meetings with the
Company's independent auditors, at which candid discussions of financial
management, accounting and internal control issues took place.
In June 2002, the Committee recommended to the Board of Directors to end the
engagement of Arthur Andersen LLP ("Arthur Andersen" ) as our independent
auditors and to authorize the engagement of KPMG LLP ("KPMG" ) as our
independent auditors for the fiscal year ending December 28, 2002.
Arthur Andersen no longer provides service as the Company's principal
independent auditor. Arthur Andersen's report on the Company's 2001 financial
statements was issued on February 1, 2002, for the Fiscal year ended December
29, 2001.
During the Company's Fiscal years ended December 30, 2000 and December 29, 2001,
and the subsequent interim period through June 12, 2002, there were no
disagreements between the Company and Arthur Andersen on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to Arthur Andersen's
satisfaction, would have caused Arthur Andersen to make reference to the subject
matter of the disagreement in connection with its reports.
The audit reports of Arthur Andersen on the consolidated financial statements
of the Company and subsidiaries as of and for the fiscal years ended December
30, 2000 and December 29, 2001 did not contain any adverse opinion or disclaimer
of opinion, nor were they qualified or modified as to uncertainty, audit scope,
or accounting principles.
-8-
The Committee reviews with the Company's financial managers and the
independent auditor's overall audit scopes and plans, the results of external
audit examinations, evaluations by the auditors of the Company's internal
controls and the quality of the Company's financial reporting.
Management has reviewed the audited financial statements in the Annual
Report with the Audit Committee including a discussion of the quality and not
just the acceptability, of the accounting principles, the reasonableness of
significant judgments, and the clarity of disclosures in the financial
statements. In addressing the quality of management's accounting judgments,
members of the Audit Committee have asked whether statements of the Company
have been prepared in conformity with generally accepted accounting principles,
and have expressed to both management and auditors their general preference
for conservative policies when a range of accounting options is available.
In its meetings with representatives of the independent auditors, the
Committee asks them to address, and discuss their responses to, several
questions that the Committee believes are particularly relevant to its
oversight. These questions include:
- Are there any significant accounting judgments made by management
in preparing the financial statements that would have been made
differently had the auditors themselves prepared and been responsible
for the financial statements?
- Based on the auditors' experience, and their knowledge of the
Company, do the Company's financial statements fairly present to
investors, with clarity and completeness, the Company's financial
position and performance for the reporting period in accordance
with generally accepted accounting principles, and SEC disclosure
requirements?
- Based on the auditors' experience, and their knowledge of the
Company, has the company implemented internal controls and internal
audit procedures that are appropriate for the Company?
- The Committee believes that, by thus focusing its discussions with
the independent auditors, it can promote a meaningful dialogue that
provides a basis for its oversight judgments.
The Committee also discussed with the independent auditors other matters
required to be discussed by the auditors with the Committee under Statement on
Auditing Standards No. 61 (communication with audit committees). The Committee
received and discussed with the auditors their annual written report on their
independence from the Company and its management, which is made under
Independence Standards Board Standard No. 1 (independence discussions with audit
committees), and considered with the auditors whether the provision of financial
information systems design and implementation and other non-audit services
provided by them to the Company during 2002 was compatible with the auditors'
independence.
In performing all of these functions, the Audit Committee acts only in an
oversight capacity. The Committee does not complete its review prior to the
Company's public announcements of financial results and, necessarily, in its
oversight role, the Committee relies on the work and assurances of the Company's
management, which has the primary responsibility for financial statements and
reports, and of the independent auditors, who, in their report, express an
opinion on the conformity of the Company's annual financial statements to
generally accepted accounting principles.
In reliance on these reviews and discussions, and the report of the independent
auditors, the Audit Committee has recommended to the Board of Directors, and
the Board has approved, that the audited financial statements be included in
the Company's Annual Report on Form 10-K for the year ended December 28, 2002,
for the filing with the Securities and Exchange Commission.
Audit Committee
Andrew M. Saul, Chairman
Morton J. Schrader, Director
Arthur S. Mintz, Director
-9-
Compensation of Directors
We compensate two of our non-employee directors for their services to us by
participation in our group medical insurance program at an approximate cost to
us of $11,500 per individual per year. They currently do not receive cash or
equity-based compensation. The third non-employee director receives a director's
fee equal to $12,000 per year.
Indemnification of Directors and Executive Officers
Our Articles of Incorporation require us, to the extent permitted by law, to
indemnify our directors and officers against any personal liabilities incurred
as a result of their positions as directors or officers of our company.
We maintain directors' and officers' insurance providing indemnification for our
directors, officers and management employees for liabilities arising as a result
of their services to us.
The indemnification provision in our articles of incorporation may discourage
stockholders from bringing a lawsuit against our directors for breach of their
fiduciary duty. They may also reduce the likelihood of derivative litigation
against our directors and officers, even though such an action, if successful,
might otherwise benefit us and our stockholders. Furthermore, a stockholder's
investment may be adversely affected to the extent we pay the cost of settlement
and damage awards against any of our directors and officers under
indemnification provisions. We believe that these indemnification provisions
are necessary to attract and retain qualified directors and officers.
Compensation Committee Interlocks and Insider Participation
Our Compensation and Plan Administration Committee consists of Andrew M. Saul,
Arthur S. Mintz and Morton J. Schrader. No member of our Compensation and Plan
Administration Committee has been an employee of ours. None of our executive
officers serves as a member of the board of directors or compensation committee
of any other entity that has one or more executive officers serving as a member
of our board of directors of our compensation committee.
Executive compensation consists generally of two components - base salary and
option awards, and sometimes a third component - a discretionary bonus award.
The Compensation and Plan Administration Committee (the "Committee"), consisted
of Messrs. Andrew M. Saul, Morton J. Schrader and Arthur S. Mintz, during the
past year, and administered the Company's option plans pursuant to which option
awards are granted, determined the remuneration arrangements for the three most
senior executive officers and reviews and approved the remuneration arrangements
for the other executive officers of the Company, which arrangements are
determined by the Chairman, in accordance with parameters set by the Committee.
In September 2002, Arthur S. Mintz was elected to the Compensation and Plan
Administration Committee to fill the vacancy created by the resignation of Mr.
Goldberg.
This report of the Committee of the Board of Directors addresses the Company's
compensation policies for Fiscal 2002 applicable to Cache's executives including
the Named Executive Officers.
The Committee's Report on Executive Compensation shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this Report on Executive Compensation by reference,
and shall not otherwise be deemed filed under such Acts.
-10-
Philosophy
The Cache executive compensation program is designed to attract and retain key
executives. Its objectives are to reward executives who contribute to the
success of the Company through individual and company performances.
Specifically, compensation includes a competitive base salary program and
long-term stock option awards. The Company will sometimes grant discretionary
bonuses to certain key executive officers with respect to prior contributions
as well as to serve as incentives to attract key executives into the Company's
employ.
Base Salary
The Company believes a competitive base salary is necessary to retain key
management employees. Base salaries are determined based upon a review of an
individual's experience and responsibilities, general industry practice and
the competitive environment for each position. Annual salary adjustments are
determined based upon an individual's performance, the Company's performance,
general industry practice and any new duties or responsibilities assumed by
the individual during the last year.
Mr. Woolf's base salary of $400,000 was determined by his original employment
agreement with the Company, made as of September 29, 2000, which provided for
a base salary of $400,000 per annum during that period. In connection with
entering into a new employment agreement with Mr. Woolf in September 2003
(described in this proxy statement under "Executive Compensation - Employee
Contracts and Change of Control Provisions"), the Compensation and Plan
Administration Committee determined Mr. Woolf's base salary amount to be
appropriate in light of the competitive environment for his position and his
individual management experience. In addition, Mr. Woolf was granted an
incentive opportunity under the Company's 2003 Stock Option Plan as described
below.
Long-Term Incentives
The Company believes that employee equity ownership is highly motivating,
provides a major incentive to employees in building stockholder value, and
serves to align the interests of employees with stockholders. Options are
based upon the relative position and responsibilities of each executive officer,
historical and expected contributions of each officer to the Company, and
previous options grants to such executive officers. Options are recommended
with a goal to provide competitive equity compensation for executive officers
compared to executive officers of similar rank in companies of the Company's
industry, geographical location and size.
Cache's stock option programs were designed by the Company as a long-term
incentive program, for key executives. The stock option programs have created
an incentive for executives to maximize shareholder return, by linking long-term
compensation with the valuation of the Company's Common Stock. The stock option
plans typically have included initial grants, which have vested from three to
five years. Stock options granted under the 2003, 2000 and 1994 Plans are
required to have an exercise price at least equal to the fair market value of
the Company's common stock at the date of grant. Among other factors considered
by the Committee in determining who qualified for stock option grants under
the 2003, 2000 and 1994 Plans and the amount of such grants were an executive's
business experience and his potential to contribute to the future success of
the Company.
Other Compensation
The Company provides certain other benefits, such as health insurance, to the
executive officers that are generally available to Company employees. In
addition, the Company provides its executives, including the Named Executive
Officers, with term life insurance and additional long-term disability
insurance, at the Company's cost.
The foregoing report has been furnished by the Compensation and Plan
Administration Committee, consisting of Messrs. Andrew M. Saul, Morton J.
Schrader and Arthur S. Mintz.
-11-
FIVE-YEAR PERFORMANCE COMPARISON
The following graph compares the yearly percentage change in the
Company's cumulative total shareholder return on Common Stock with (i) the
cumulative total return of the NASDAQ National Market Index (which tracks the
aggregate performance of equity securities of companies traded on the NASDAQ
National Market System ("NASDAQ/NMS")) and (ii) the cumulative total return of
companies with the same four-digit standard industrial code (SIC) as the
Company (SIC Code 5621, titled "Women's Clothing Stores"), over the period
from January 1, 1998 to December 31, 2002. The graph assumes an initial
investment of $100 and reinvestment of dividends. The graph is not
necessarily indicative of future price performance.
The graph shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
COMPARE 5 - YEAR CUMULATIVE TOTAL RETURN
AMONG CACHE INC.
NASDAQ MARKET INDEX AND SIC CODE INDEX
FISCAL YEAR ENDED
------------------------------------------------------
COMPANY/INDEX/MARKET 1997 1998 1999 2000 2001 2002
------------------------------------------------------
CACHE INC. 100.00 160.82 214.43 98.97 118.76 478.34
SIC CODE INDEX 100.00 116.96 154.91 148.57 145.33 128.20
NASDAQ MARKET INDEX 100.00 141.04 248.76 156.35 124.64 86.94
ASSUMES $100 INVESTED ON JAN. 1, 1998
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31,2002
-12-
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In November 2000, we loaned $350,000 to Brian Woolf, our Chief Executive Officer
and Chairman of the Board. The loan was unsecured and was repaid in full in
February 2001. The loan bore an annual interest rate of 6% per annum.
In December 1994, we loaned $170,000 to Roy Smith, formerly an Executive Vice
President and director. The loan was payable on demand by us, secured by a
pledge of shares of our common stock owned by Mr. Smith, with full recourse
against him and bore interest at a rate of 9% per annum. The loan for $170,000
plus accrued interest, was repaid on July 14, 2003.
In December 1994, we loaned $80,000 to Thomas E. Reinckens, our President and
Chief Operating Officer and one of our directors. The loan was payable on
demand by us, secured by a pledge of shares of our common stock owned by Mr.
Reinckens, with full recourse against him and bore interest at a rate of 7% per
annum. The loan for $80,000 plus accrued interest, was repaid on July 25, 2003.
Additionally, in December 2000, we loaned $121,000 to Mr. Reinckens. This loan
was also payable on demand by us, secured by a pledge of shares of our common
stock, with full recourse against him and bore interest at the rate of 6% per
annum. Mr. Reinckens repaid $50,000 of this loan to us in March 2002 and the
remaining balance of $71,000 of this loan, plus accrued interest, was repaid
on July 25, 2003. In April 2002, we loaned Mr. Reinckens $260,000, which was
repaid by him in June 2002.
See Also "Executive Compensation--Compensation Committee Interlocks
and Insider Participation."
As of September 30, 2003, the Sauls beneficially owned in the aggregate
3,664,128 shares of the Company's outstanding Common Stock, representing
approximately 36.8% of the Company's outstanding Common Stock. See
"Principal Shareholders and Share Ownership by Management."
-13-
PRINCIPAL SHAREHOLDERS AND SHARE OWNERSHIP
BY MANAGEMENT
The following table sets forth certain information as to the beneficial
ownership of the Company's equity securities as of September 30, 2003 by (i)
each director or nominee of the Company, (ii) each Named Executive Officer,
(iii) each person who is known to the Company to be the beneficial owner of
more than 5% of the Common Stock, and (iv) all executive officers and directors
as a group. Unless otherwise indicated, the beneficial ownership for each
person consists of the sole voting and sole investment power with respect to
all shares beneficially owned by him. For purposes of this table, a person or
group of persons is deemed to have "beneficial ownership" of any shares as of
a given date which such person has the right to acquire within 60 days after
such date. For purposes of computing the percentage of outstanding shares held
by each person or group of persons named above on a given date, any security
which such person or persons has the right to acquire within 60 days after such
date is deemed to be outstanding, but is not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person.
Percentage of
Number of shares Outstanding shares
Name and Address Of Common Stock Of Common Stock
------------------------- ---------------- ------------------
Andrew M. Saul 3,664,128 36.8%
9 West 57th Street
New York, NY 10019 (1)
Joseph E. Saul 3,664,128 36.8%
9 West 57th Street
New York, NY 10019 (2)
Norma G. Saul 3,664,128 36.8%
9 West 57th Street
New York, NY 10019 (3)
Trust f/b/o 302,594 3.0%
Jennifer B. Saul
pursuant to Trust
Agreement dated
March 28, 1995
9 West 57th Street
New York, NY 10019 (4)
Trust f/b/o 302,594 3.0%
Kimberly E. Saul
pursuant to Trust
Agreement dated
March 28, 1995
9 West 57th Street
New York, NY 10019 (5)
-14-
Percentage of
Number of shares Outstanding shares
Name and Address Of Common Stock Of Common Stock
------------------------- ---------------- ------------------
Thomas E. Reinckens (6) 146,469 1.4%
Cache Inc.
1460 Broadway
New York, NY 10036
Brian Woolf(7) 122,750 1.2%
Cache Inc.
1460 Broadway
New York, NY 10036
Morton J. Schrader 13,000 *
200 Park Avenue, 16th Floor
New York, NY 10166
Arthur S. Mintz None N/A
70 West 36th Street
New York, NY 10018
David Desjardins (8) 8,750 *
Cache Inc.
1460 Broadway
New York, NY 10036
Catherine McNeal None N/A
Cache Inc.
1460 Broadway
New York, NY 10036
All Current Executive 3,942,097 38.9%
Officers and Directors as a
Group (eight persons)
_______________________________
* Less than 1% of the outstanding shares of common stock.
(1) Represents (a) 1,420,232 shares held directly by Andrew Saul, (b)
1,338,496 shares beneficially owned by Joseph Saul, Andrew Saul's father,
including 605,188 shares held by two trusts (see Notes 4 and 5 below), (c)
900,400 shares held by Norma Saul, Andrew Saul's mother, and (d) 5,000
shares held by the Andrew Saul Foundation, of which Andrew Saul is a director.
All of the foregoing shares are subject to an oral agreement, subject in the
case of the trusts to any fiduciary duties of the trustees, to vote and
dispose of the shares jointly. The holders of the foregoing shares have
filed with the SEC as a "group" within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934. Each of these holders disclaims beneficial
ownership of all shares other than those held in his, her or its name.
-15-
(2) Represents (a) 733,308 shares held directly by Joseph Saul, (b) 900,400
shares held by Norma Saul, Joseph Saul's wife, (c) 1,425,232 shares
beneficially owned by Andrew Saul, Joseph Saul's son (d) 302,594 shares held
by the 85 J. Saul Trust, of which Joseph Saul is a trustee, (see Note 4 below)
and (e) 302,594 shares held by the 85 K. Saul Trust, of which Joseph Saul is
a trustee, (see note 5 below). All of the foregoing shares are subject to an
oral agreement, subject in the case of the trusts to any fiduciary duties of
the trustees, to vote and dispose of these shares jointly. The holders of the
foregoing shares have filed with the SEC as a "group" within the meaning of
Rule 13d-3 of the Securities Exchange act of 1934. Each of these holders
disclaims beneficial ownership of all shares other than those held in his,
her or its name.
(3) Represents (a) 900,400 shares held directly by Norma Saul, (b) 733,308
shares beneficially owned by Joseph Saul, Norma Saul's husband, (c) 1,425,232
shares held by Andrew Saul, Norma Saul's son (d) 302,594 shares held by the
85 J. Saul Trust, of which Norma Saul is a trustee, (see Note 4 below) and
(e) 302,594 shares held by the 85 K. Saul Trust, of which Norma Saul is a
trustee, (see Note 5 below). All of the foregoing shares are subject to an
oral agreement, subject in the case of the trusts to any fiduciary duties of
the trustees, to vote and dispose of these shares jointly. The holders of the
foregoing shares have filed with the SEC as a "group" within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934. Each of these holders
disclaims beneficial ownership of all shares other than those held in his,
her or its name.
(4) Represents 302,594 shares held by the 85 J. Saul Trust pursuant to a
Trust Agreement dated March 28, 1985.
(5) Represents 302,594 shares held by the 85 K. Saul Trust pursuant to a
Trust Agreement dated March 28, 1985.
(6) Includes options to acquire 72,750 shares of our common stock.
(7) Includes options to acquire 122,750 shares of our common stock.
(8) Includes options to acquire 8,750 shares of our common stock.
-16-
PROPOSAL TO APPROVE THE
2003 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
(PROPOSAL 2)
Introduction
On July 22, 2003, the Board of Directors of the Company adopted, subject
to shareholder approval, the Cache Inc. 2003 Stock Option and Performance
Incentive Plan (the "Plan"). The following is a fair summary of the terms of the
Plan, which is nevertheless qualified in its entirety by reference to the
complete text of the 2003 Plan attached to this Proxy Statement as Appendix A.
Purpose of Plan
The purpose of the 2003 Plan is to encourage and enable all employees
of the Company and its subsidiaries to acquire a proprietary interest in the
Company through the ownership of the Company's Common Stock, and other rights
with respect to the Common Stock. Such ownership will provide such employees
with a more direct stake in the future welfare of the Company and encourage
them to remain with the Company and its subsidiaries. It is also expected that
the 2003 Plan will encourage qualified persons to seek and accept employment
with the Company and its subsidiaries.
Maximum Shares Available
The maximum aggregate number of shares of Common Stock available for
award under the Plan to employees of the Company and its subsidiaries is
900,000; provided, however, that no employee may receive awards of or relating
to more than 300,000 shares of Common Stock in the aggregate in any Fiscal year
of the Company. The shares of Common Stock available under the 2003 Plan and
all awards are subjected to adjustment in certain circumstances as hereinafter
described. Shares of Common Stock attributable to lapsed or forfeited awards
may become available for subsequent awards under the 2003 Plan.
Administration of the Plan
A committee of two or more directors (the "Committee") must be
designated to administer the 2003 Plan. The Committee must be composed of
disinterested directors. The determination of which members of the Board may
serve on the Committee will be made in accordance with the requirements of
Rule 16b-3 of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act").
The Committee has the full power in its discretion to grant awards under
the 2003 Plan, to determine the terms thereof, to interpret the provisions of
the 2003 Plan and take such action as it deems necessary or advisable for the
administration of the 2003 Plan. The Board of Directors has authorized its
Compensation and Plan Administration Committee to function as the Committee
under the 2003 Plan.
-17-
Eligibility and Participation
All employees of the Company and its subsidiaries are generally eligible
to receive awards under the 2003 Plan. Approximately 2000 employees of the
Company and its subsidiaries are eligible to participate in the 2003 plan;
however, the Committee currently expects to select as participants only certain
members of senior management (which currently consists of approximately 25
employees). Participation in the 2003 Plan is at the discretion of the Committee
and shall be based upon the employee's present and potential contributions to
the success of the Company and such other factors as the Committee deems
relevant.
Type of Awards Under the Plan
If approved by the shareholders, the 2003 Plan provides that the
Committee may grant awards to employees in any of the following forms, subject
to such terms, conditions and provisions as the Committee may determine to be
necessary or desirable: (i) incentive stock options ("ISOs") and (ii)
nonstatutory stock options ("NSOs").
Grant of Options
The Committee may award ISOs and/or NSOs to employees (collectively,
"Options").
Option Price
The option price is determined by the Committee at the time of grant.
The option price per share of Common Stock will not be less than 100%
of the market price of the Common Stock on the date of such grant. The last
sales price of the Common Stock, as reported on the NASDAQ National Market
System on September 30, 2003, was $20.40 per share.
Vesting
The Committee will determine at the time of grant the terms under which
Options shall vest and become exercisable.
-18-
Special Limitations on ISOs
No ISO may be granted to an employee who owns, at the time of the grant,
stock representing more than 10% of the total voting power of all classes of
stock of the Company or its subsidiaries (a "10% Stockholder") unless the option
price for the shares subject to such ISO is at least 110% of the market price
on the date of grant and is such ISO award is not exercisable more than five
years after its date of grant. In addition, the total fair market value of
shares subject to ISOs which are exercisable for the first time by an employee
in a given calendar year shall not exceed $100,000, valued as of the date of
the ISO's grant. ISOs may not be granted more than ten years after the date the
2003 Plan is approved by the Company's shareholders.
Exercise of Options
An Option may be exercised in whole or in part in accordance with
procedures to be established by the Committee. Common Stock purchased upon the
exercise of the Option shall be paid for at the time of purchase. Such payment
shall be made in cash or, in the discretion of the Committee, (i) through
delivery of shares of Common Stock already owned by the employee (valued at the
market price on the date of exercise), (ii) by having the Company withhold from
shares of Common Stock otherwise deliverable to the employee (valued at the
market price on the date of exercise), or (iii) by a combination of any of the
foregoing.
Nontransferability of Option
Options are not transferable except by will or applicable laws of
descent and distribution; however, the Committee may authorize certain transfers
to the extent allowable under applicable law.
Expiration of Options
Options will expire at such time as the Committee determines; however,
an ISO may not be exercised more than ten years from the date of grant, unless
held by a 10% Stockholder, in which case such ISO may not be exercised more
than five years from the date of grant.
-19-
Effect of Termination of Employment, Disability, Death or Change in Control
on Options
If an employee ceases to be employed by the Company for any reason
(other than death or disability), such employee has the right to exercise any
vested Options within three months after termination of employment or such
longer period as the Committee shall determine. All Options that have been
granted to an employee which have not vested as of the date of the employee's
termination of employment (other than by death or disability) shall terminate
as of such date. The Committee in its sole discretion may cause an Option
to be forfeited upon an employee's termination of employment for any of the
following reasons: (i) the employee's conviction or plea of guilty nolo
contendere to the commission of a felony, (ii) the employee's commission of
any fraud, misappropriation or misconduct which causes demonstrable injury to
the Company, (iii) any act of dishonesty resulting or intended to result in
gain or personal enrichment at the Company's expense, or (iv) any breach of
the employee's fiduciary duties to the Company as an employee or officer.
In the event the employee's employment is terminated by his death, the
designated beneficiary or the employee's personal representatives, heirs or
legatees, as applicable, may exercise any date of the employee's death; provided
that any ISO shall no longer be treated as an ISO unless exercised within 3
months of the employee's death.
In the event of the Disability (as defined in the 2003 Plan) of an
employee, the employee may exercise any Options (whether or not vested) then
held by him until the expiration date of such Options provided that any ISO
shall no longer be treated as an ISO within one year in the case of an employee
who is "disabled" within the meaning of Section 22 (e) (3) of the Code).
If so determined by the Committee at the time of grant, any Options
may provide that they become immediately exercisable upon a "Change in Control"
(defined below) of the Company. The 2003 Plan defines a "Change in Control" as
the occurrence of any of the following events: (i) if less than 25% of the
outstanding Common Stock in the aggregate is beneficially owned (as defined in
Rule 13d-3 under the Exchange Act) by Andrew M. Saul and Joseph E. Saul, members
of their immediate families and one or more trusts established for the benefit
of such individuals or members, (ii) the sale of the Company substantially as
an entirety (whether by sale of stock, sale of assets, merger, consolidation or
otherwise), (iii) any tender offer or exchange offer for shares of Common Stock
in which all holders of Common Stock are entitled to participate and in
connection with which the Sauls have agreed to sell such a number of shares of
Common Stock as will result in the Sauls beneficially owning less than 25% of
the Common Stock outstanding, or (iv) if 20% or more of the directors elected
by shareholders to the Board of Directors are persons who were not nominated by
management in the most recent proxy statement of the Company.
Adjustment Upon Changes in Capitalization
The number and class of shares available under the 2003 Plan may be
adjusted by the Committee to prevent dilution or enlargement of rights in the
event of various changes in the capitalization of the Company. At the time of
grant of any Options, the Committee may provide for such adjustments as the
Committee shall deem appropriate to prevent dilution or enlargement of rights
in the event of various changes in the capitalization of the Company.
-20-
Amendment and Termination
The Board of Directors may suspend, amend, modify or terminate the 2003
Plan; however, the Company's shareholders must approve any amendment that would
(i) materially increase the aggregate number of shares issuable under the 2003
Plan, (ii) materially increase the benefits accruing to employees under the 2003
plan, or (iii) materially modify the requirements for eligibility to participate
in the 2003 Plan.
Awards granted prior to a termination of the 2003 Plan shall continue
in accordance with their terms following such termination. No amendment,
suspension or termination of the 2003 Plan shall adversely affect the rights of
an employee in awards previously granted without such employee's consent.
Outstanding Options
The following table sets forth all grants of ISO and NSOs made under
the 2003 Plan to (i) each of the Named Executive Officers, (ii) all executive
officers as a group, and (iii) all employees, including all officers who are
not executive officers, as a group. All such grants are subject to shareholder
approval of the 2003 Plan. In addition, the Company intends to grant Options to
members of senior management at a time to be determined. Non-employee members
of the Board of Directors are not eligible to participate in the 2003 Plan.
Except as set forth below, no grants have been made under the 2003 Plan. Grants
under the 2003 Plan are made at the discretion of the Committee; accordingly,
future grants under the 2003 Plan are not yet determinable.
Name of Individual and Exercise
Position of Number of ISO NSO Price
Persons in Group Shares Shares Per Share
--------------------------------------------- ------ ------- ---------
Brian Woolf .............. 21,086 228,914 $18.97
(Chairman / Chief Executive Officer)
Thoms E. Reinckens............ 21,086 103,914 $18.97
(Chief Operating Officer/President)
All current executive officers as a group ... 42,172 332,828 $18.97
(2 persons)
All other participating employees as a group. --- --- N/A
-21-
Federal Income Tax Consequences
The following summary is based upon an analysis of the Internal Revenue
Code of 1986, as amended (the "Code") as currently in effect, existing laws,
judicious decisions, administrative rulings, regulations and proposed
regulations, all of which are subject to change. Moreover, the following is only
a summary of federal income tax consequences and the federal income tax
consequences to employees may be either more or less favorable than those
described below depending on their particular circumstances.
Incentive Stock Options. All options that qualify under the rules of
Section 422 of the Code will be entitled to "incentive option" treatment. In
general, neither the grant nor the exercise of an ISO granted under the 2003
Plan will result in taxable income to fair market value of the Common Stock
acquired upon exercise of an ISO over the option price is included in the
"alternative minimum taxable income" of the optionee for the year in which the
ISO is exercised and may subject the optionee to increased taxes under the
"alternative minimum tax." To receive incentive option treatment, generally,
the optionee must not dispose (a "disqualifying disposition") of the Common
Stock within two years after the option is granted and must hold the Common
Stock itself for at least one year after the transfer of such Common Stock to
such optionee.
If Common Stock acquired pursuant to the exercise of an ISO is disposed
of in a disqualifying disposition, any gain realized by the optionee generally
will be taxable at the time of such disqualifying disposition as (i) ordinary
income to the extent of the difference between the exercise price and the lesser
of (a) the fair market value of the Common Stock on the date the ISO is
exercised or (b) the amount realized on such disqualifying disposition and (ii)
short-term or long-term capital gain to the extent of any excess of the amount
realized on the disposition over the fair market value of the Common Stock on
the date the ISO is exercised. Upon a disqualifying disposition, the Company
will be entitled to a deduction equal to the amount of ordinary income included
by the optionee in his income.
Payment for Common Stock upon the exercise of an ISO may, at the
discretion of the Committee, be made in whole or in part with other shares of
Common Stock. In such case, if an optionee uses stock acquired pursuant to the
exercise of any ISO to acquire other stock in connection with the exercise of
an ISO, it may result in ordinary income if the stock so used has not met the
minimum statutory holding period necessary to receive incentive stock option
treatment.
Nonstatutory Stock Options. Generally, no taxable income will be
recognized by the optionee and no deduction will be allowed to the Company upon
the grant of an NSO. Upon exercise of an NSO, an optionee generally will
recognize an amount of ordinary income and the Company will generally be
entitled to a corresponding tax deduction equal to the amount by which the fair
market value of the shares on the exercise date exceeds the exercise price.
-22-
Persons Subject to Liability Under Section 16 (b) of the Exchange Act.
Special rules apply under the Code which may delay the timing and alter the
amount of income recognized with respect to awards granted to persons subject
to liability under the short-swing profits recapture rules of Section 16 (b) of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). Such
persons include directors, "officers" for purposes of Section 16 of the Exchange
Act and holders of more than 10% of the outstanding Common Stock ("16 (b)
Insiders"). Generally, 16 (b) Insiders are subject to such liability for the
six-month period after the grant of stock-based awards. Unless a Section 83 (b)
Election is made, the computation and the recognition of income by a 16 (b)
Insider with respect to an award not otherwise subject to a restriction is
deferred until he is no longer subject to suit under Section 16 (b) of the
Exchange Act.
Limitations on the Company's Compensation Deduction. Section 162 (m) of
the Code limits the Company's deduction for certain compensation in excess of
$1 million paid to the Chief Executive Officer and the four other most
highly-compensated officers. Compensation which is "performance-based" is
excepted from such deduction limitation. To date, only proposed, and not
final, Treasury Regulations have been issued with respect to Section 162 (m) of
the Code.
Although the company intends that awards granted under the 2003 Plan
will satisfy the requirements to be considered performance-based for purposes
of Section 162 (m) of the Code, there is no assurance such awards will satisfy
such requirements, and, accordingly, the Company may be limited by Section 162
(m) of the Code in the amount of deductions it would otherwise be entitled to
take (as described in the foregoing summary) with respect to awards under the
2003 Plan.
Change in Control. If all or any portion of an Option becomes
immediately exercisable in connection with a Change in Control, such accelerated
vesting could be deemed a parachute payment for purposes of the "golden
parachute" provisions of Sections 280G and 4999 of the Code, which could result
in a non-deductible excise tax for the recipient and in the disallowance of a
deduction to the Company.
Tax Withholding. The Committee may require payment, or withhold payments
made by the 2003 Plan, in order to satisfy applicable withholding tax
requirements.
-23-
Approval of Plan
Approval of the 2003 Plan requires the affirmative vote of the holders
of a majority of the shares of Common Stock present or represented at the
meeting and entitled to vote. The Sauls intend to vote shares of Common Stock
they own in favor of Proposal 2.
The Board of Directors recommends that shareholders vote their shares
FOR approval of the 2003 Plan as described herein.
-24-
RATIFICATION OF THE APPOINTMENT OF
KPMG AS AUDITORS
(Proposal 3)
The Board of Directors has appointed the firm of KPMG LLP to examine the
financial statements of the Company for the year ending December 27, 2003,
subject to ratification by shareholders. KPMG LLP was employed by the Company,
as its independent auditors for Fiscal 2002. Shareholders are asked to ratify
the action of the Board of Directors in making such appointment.
The Company, upon recommendation of its Audit Committee, ended the
engagement of Arthur Andersen as the Company's independent public accountants,
effective June 12, 2002. Arthur Andersen's report on the Company's 2001
financial statements was issued on February 1, 2002, for the Fiscal year ended
December 29, 2001.
During the Company's Fiscal years ended December 30, 2000 and December 29,
2001, and the subsequent interim period through June 12, 2002, there were no
disagreements between the Company and Arthur Andersen on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to Arthur Andersen's
satisfaction, would have caused Arthur Andersen to make reference to the subject
matter of the disagreement in connection with its reports.
The audit reports of Arthur Andersen on the consolidated financial
statements of the Company and subsidiaries as of and for the fiscal years ended
December 30, 2000 and December 29, 2001 did not contain any adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope, or accounting principles.
The Board of Directors recommends a vote for ratification. The affirmative
vote of a majority of the votes cast with respect to this proposal is required
for the ratification of the appointment of auditors. The Sauls intend to vote
shares of Common Stock they own in favor of Proposal 3.
Representatives of KPMG LLP will attend the Annual Meeting. They also will
have the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
-25-
The following table sets forth the aggregate fees billed to the Company for the
fiscal years ended December 29, 2001 and December 28, 2002 by KPMG LLP and
Arthur Andersen LLP. KPMG LLP replaced Arthur Andersen LLP during the second
quarter of Fiscal 2002.
Fees Fiscal 2001 Fiscal 2002
Amount Amount
--------------- ----------- -----------
Audit Fees $115,000 $121,200
Audit-Related
Fees $ 7,000 $253,920
Tax Fees $ -- $ --
All Other Fees $ 13,436 $ 5,000
----------- -----------
Total Fees $135,436 $380,120
=========== ===========
The Audit Committee of the Board of Directors has considered whether the
provision of these services is compatible with maintaining the principal
accountants' independence.
Audit fees includes fees for annual audit and reviews of the Company's quarterly
reports on Form 10-Q, as well as statutory audits and audits of subsidiaries.
Audit-related fees includes fees for audits of benefit plans and audits related
to a potential stock offering.
All other fees includes fees for evaluations and advisory services.
During fiscal 2002, the Audit Committee had a policy to monitor and limit as
appropriate non-audit related services performed by our Independent Auditors.
The policy required pre-approval by our Chief Operating Officer of any contract
for services, other than audit and audit-related services, up to $100,000 and
by the Audit Committee for any such contract in excess of $100,000. Effective
in fiscal 2003, the Audit Committee further enhanced this policy to require
pre-approval of all services performed by the Independent Auditors.
-26-
OTHER BUSINESS
Management knows of no business to be brought before the meeting other
than Proposals 1, 2 and 3 in the Notice of Annual Meeting. If any other
proposals come before the meeting, it is intended that the shares represented
by Proxies shall be voted in accordance with the judgment of the person or
persons exercising the authority conferred by the Proxies.
Financial statements of the Company, the Company's certified public
accountants' report thereon and management's discussion and analysis of the
Company's financial condition and results of operations are contained in the
Company's 2002 Annual Report to Shareholders, a copy which has been sent to
each shareholder of record along with a copy of this Proxy Statement. The
Annual Report is not to be regarded as proxy soliciting material or a
communication by means of which any solicitation is to be made.
SHAREHOLDER PROPOSALS
Proposals by shareholders intended to be presented at the next Annual
Meeting (to be held in 2004) must be received by the Company on or before May
14, 2004 in order to be included in the Proxy Statement and Proxy for that
meeting. The mailing address of the Company for submission of any such proposal
is given on the first page of the Proxy Statement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of the Forms 3, 4 and 5 and any amendments thereto
furnished to the Company pursuant to Rule 16a-3(c) promulgated under the
Exchange Act, the Company is not aware of any failure of any officer, director
or beneficial owner of more than 10% of the Common Stock to timely file with
the Commission any Form 3, 4 or 5 in respect of the Company during fiscal 2002.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
SHAREHOLDERS ARE REQUESTED TO SIGN, DATE AND RETURN THE PROXY CARD AS
SOON AS POSSIBLE, WHETHER OR NOT THEY EXPECT TO ATTEND THE 2002 ANNUAL
MEETING IN PERSON.
By Order of the Board of Directors,
/s/ Victor J. Coster
--------------------
VICTOR J. COSTER
Secretary
APPENDIX A
CACHE, INC.
2003 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
CACHE INC.
2003 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1. ESTABLISHMENT AND PURPOSE ................ 1
1.1 Establishment and Effective Date.. 1
1.2 Purpose........................... 1
ARTICLE 2. AWARDS.................................... 1
2.1 Form of Awards.................... 1
2.2 Maximum Shares Available.......... 1
2.3 Return of Prior Awards............ 1
ARTICLE 3. ADMINISTRATION............................ 2
3.1 Committee......................... 2
3.2 Powers of the Committee........... 2
3.3 Delegation........................ 2
3.4 Interpretations................... 2
3.5 Liability; Indemnification........ 2
ARTICLE 4. ELIGIBILITY............................... 3
ARTICLE 5. STOCK OPTIONS............................. 3
5.1 Grant of Options.................. 3
5.2 Designation as Non-Qualified Stock
Option or Incentive Stock Option.. 3
5.3 Option Price...................... 3
5.4 Limitation on Amount of Incentive
Stock Options..................... 4
5.5 Limitation on Time of Grant....... 4
5.6 Vesting, Exercise and Payment..... 4
5.7 Term.............................. 4
5.8 Rights as Stockholder............. 4
5.9 General Restrictions.............. 4
- i -
Page
ARTICLE 6. NONTRANSFERABILITY OF OPTIONS ............ 5
ARTICLE 7. EFFECT OF TERMINATION OF EMPLOYMENT,
DISABILITY, DEATH OR CHANGE IN CONTROL ... 5
7.1 General Rule...................... 5
7.2 Disability........................ 5
7.3 Death............................. 6
7.4 Change in Control................. 6
ARTICLE 8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. 7
ARTICLE 9. AMENDMENT AND TERMINATION................. 7
ARTICLE 10. WRITTEN AGREEMENT......................... 7
ARTICLE 11. MISCELLANEOUS PROVISIONS.................. 8
11.1 Tax Withholding................... 8
11.2 Compliance With Section 16(b)..... 8
11.3 Successors........................ 8
11.4 General Creditor Status........... 8
11.5 No Right to Employment............ 8
11.6 Other Plans....................... 8
11.7 Notices........................... 9
11.8 Severability...................... 9
11.9 Governing Law..................... 9
-ii-
CACHE, INC.
2003 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
ARTICLE 1.
ESTABLISHMENT AND PURPOSE
1.1 Establishment and Effective Date. Cache, Inc., a Florida
---------------------------------
corporation (the "Corporation"), hereby establishes a stock incentive plan to
be known as the "Cache, Inc. 2003 Stock Option and Performance and Incentive
Plan" (the "Plan"). The plan shall become effective as of July 22, 2003, subject
to the approval of the Corporation's stockholders at the 2003 Annual Meeting of
Stockholders. In the event that such stockholder approval is not obtained, any
awards made hereunder shall be cancelled and all rights of employees with
respect to such awards shall thereupon cease. Upon approval by the Board of
Directors of the Corporation (the "Board") and the Board's Compensation and Plan
Administration Committee (the "Committee"), awards may be made as provided
herein.
1.2 Purpose. The purpose of the Plan is to encourage and enable
--------
key employees (subject to such requirements as may be prescribed by the
Committee) of the Corporation and its subsidiaries to acquire a proprietary
interest in the Corporation through the ownership of the Corporation's common
stock, par value $.01 per share ("Common Stock"), and other rights with respect
to the Common Stock. Such ownership will provide such employees with a more
direct stake in the future welfare of the Corporation and encourage them to
remain with the Corporation and its subsidiaries. It is also expected that the
Plan will encourage qualified persons to seek and accept employment with the
Corporation and its subsidiaries.
ARTICLE 2.
AWARDS
2.1 Form of Awards. Awards under the Plan may be granted in any one
---------------
or all of the following forms: (i) incentive stock options ("Incentive Stock
Options") meeting the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code") and (ii) non-qualified stock options
("Non-qualified Stock Options") (unless otherwise indicated, references in the
Plan to "Options" shall include both Incentive Stock Options and Non-qualified
Stock Options).
2.2 Maximum Shares Available. The maximum aggregate number of
-------------------------
shares of Common Stock available for award under the Plan is 900,000, subject
to adjustment pursuant to Article 8 hereof. Shares of Common Stock issued
pursuant to the Plan may be either authorized but unissued shares or issued
shares reacquired by the Corporation. In the event that prior to the end of the
period during which Options may be granted under the Plan, any Options under
the Plan expires unexercised or is terminated, surrendered or cancelled without
being exercised in whole or in part for any reason, or if such awards are
settled in cash in lieu of shares of Common Stock, then such shares shall be
available for subsequent awards under the Plan, upon such terms as the Committee
may determine.
2.3 Return of Prior Awards. As a condition to any subsequent award,
-----------------------
the Committee shall have the right, at its discretion, to require employees to
return to the Corporation awards previously granted under the Plan. Subject to
the provisions of the Plan, such new award shall be upon such terms and
conditions as are specified by the Committee at the time the new award is
granted.
-1-
ARTICLE 3.
ADMINISTRATION
3.1 Committee. Awards shall be determined, and the Plan shall be
----------
administered by the Committee as appointed from time to time by the Board,
which Committee shall consist of not less than two (2) members of the Board.
Except as permitted by Rule 16b-3 of the Securities Exchange Act of 1934, as
amended (the "Act"), and by Section 162 (m) of the Code (or regulations
promulgated thereunder), no member of the Board may serve on the Committee if
such member: (i) is or has been granted or awarded stock, stock options, stock
appreciation rights or any other equity security or derivative security of the
Corporation or any of its affiliates pursuant to the Plan or any other plan of
the Corporation or its affiliates either while serving on the Committee or
during the one year period prior to being appointed to the Committee: or
(ii) is an employee or former employee of the Corporation.
3.2 Powers of the Committee. Subject to the express provisions of
------------------------
the Plan, the Committee shall have the power and authority (i) to grant Options
and to determine the purchase price of the Common Stock covered by each Option,
the term of each Option, the number of shares of Common Stock to be covered by
each Option and any performance objectives or vesting standards applicable to
each Option; (ii) to designate Options as Incentive Stock Options or
Non-qualified Stock Options; and (viii) to determine the employees to whom, and
the time or times at which Options shall be granted.
3.3 Delegation. The Committee may delegate to one or more of its
-----------
members or to any other person or persons such ministerial duties as it may
deem advisable; provided, however, that the Committee may not delegate any
of its responsibilities hereunder if such delegation would cause the Plan to
fail to comply with the "disinterested administration" rules under Section 16
of the Act. The Committee may also employ attorneys, consultants, accountants,
or other professional advisors and shall be entitled to rely upon the advice,
opinions or valuations of any such advisors.
3.4 Interpretations. The Committee shall have the sole
----------------
discretionary authority to interpret the terms of the Plan, to adopt and revise
rules, regulations and policies to administer the Plan and to make any other
factual determinations which it believes to be necessary and advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Corporation, all employees who have received awards under the Plan and
all other interested persons.
3.5 Liability; Indemnification. No member of the Committee, nor any
---------------------------
person to whom ministerial duties have been delegated, shall be personally
liable for any action, interpretation or determination made with respect to the
Plan or awards made thereunder, and each member of the Committee shall be fully
indemnified and protected by the Corporation with respect to any liability he
or she may incur with respect to any such action, interpretation, or
determination, to the extent permitted by applicable law and to the extent
provided in the Corporation's Articles of Incorporation and Bylaws, as amended
from time to time, or under any agreement between any such member and the
Corporation.
-2-
ARTICLE 4.
ELIGIBILITY
Awards may be made to all employees of the Corporation or any of its
subsidiaries (subject to such requirements as may be prescribed by the
Committee); provided, however, that no employee may receive awards of or
relating to more than 300,000 shares of Common Stock in the aggregate in any
fiscal year of the Corporation. Awards may be made to a director of the
Corporation who is not also a member of the Committee, provided that the
director is also an employee. In determining the key employees to whom awards
shall be granted and the number to be covered by each award, the Committee shall
take into account the nature of the services rendered by such employees, their
present and potential contributions to the success of the Corporation and its
Subsidiaries and such other factors as the Committee in its sole discretion
shall deem relevant.
As used herein, the term "Subsidiary" shall mean any present or future
corporation, partnership or joint venture in which the Corporation owns,
directly or indirectly, 40% or more of the economic interests. Notwithstanding
the foregoing, only employees of the Corporation and any present or future
corporation which is or may be a "subsidiary corporation" of the Corporation
(as such term is defined in Section 424 (f) of the Code) shall be eligible to
receive Incentive Stock Options.
ARTICLE 5.
STOCK OPTIONS
5.1 Grant of Options. Options may be granted under the plan for the
-----------------
purchase of shares of Common Stock. Options shall be granted in such form and
upon such terms and conditions, including the satisfaction of corporate or
individual performance objectives and other vesting standards, as the Committee
shall from time to time determine.
5.2 Designation as Non-qualified Stock Option or Incentive Stock
------------------------------------------------------------
Option. In connection with any grants of Options, the Committee shall designate
-------
in the written agreement required pursuant to Article 10 hereof whether the
Options granted shall be Incentive Stock Options or Non-qualified Stock Options,
or in the case both are granted, the number of shares of each.
5.3 Option price. The purchase price per share under each Option
-------------
shall be specified by the Committee, but in no event shall it be less than the
greater of 100% of the Market Price on the date the Option is granted or the
par value of the Common Stock ($.01). In the case of an Incentive Stock Option
granted to an employee owning (actually or constructively under Section 424(d)
of the Code), more than 10% of the total combined voting power of all classes
of stock of the Corporation or of a subsidiary (a "10% Stockholder"), the option
price shall not be less than 110% of the Market Price of the Common Stock on
the date of grant.
The Market Price of the Common Stock on any day shall be determined as
follows: (i) if the Common Stock is listed on a national securities exchange or
quoted through NASDAQ National Market System, the Market Price on any day shall
be, in the sole discretion of the Committee, either (x) the average of the high
and low reported Consolidated Trading sales prices, or if no such sale is made
on such day, the average of the closing bid and asked prices reported on the
Consolidated Trading listing for such day or (y) the closing price reported on
the Consolidated Trading listing for such day; (ii) if the Common Stock is
quoted in the NASDAQ inter-dealer quotation system, the Market Price on any
day shall be the average of the representative bid and asked prices at the
close of business for such day; or (iii) if the Common Stock is not listed on
a national stock exchange or quoted on NASDAQ, the Market Price on any day
shall be the average of the high bid and low asked prices reported by the
National Quotation Bureau, Inc. for such day.
-3-
In no event shall the Market Price of a share of Common Stock subject
to an Incentive Stock Option be less than the fair market value as determined
for purposes of Section 422(b)(4) of the Code.
5.4 Limitation on Amount of Incentive Stock Options. In the case
------------------------------------------------
of Incentive Stock Options, the aggregate Market Price (determined at the time
the Incentive Stock Option is granted) of the Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by any
optionee during any calendar year (under all plans of the Corporation and any
Subsidiary) shall not exceed $100,000.
5.5 Limitation on Time of Grant. No grant of an Incentive Stock
----------------------------
Option shall be made under the Plan more than ten (10) years after the date
the Plan is approved by stockholders of the Corporation.
5.6 Vesting, Exercise and Payment. Options may be exercised in
------------------------------
whole or in part after it has vested and become exercisable at any time and
from time to time over a period commencing on or after the date the Option is
granted and ending upon expiration or termination of the Option, as the
Committee shall determine and set forth in the written agreement pursuant to
Article 10. Common Stock purchased upon the exercise of Options shall be paid
for at the time of purchase. Such payments shall be made in cash or, in the
discretion of the Committee, (i) through the delivery of shares of Common Stock
already owned by the optionee, (ii) having the Corporation withhold from shares
of Common Stock otherwise deliverable to the optionee, (iii) such other method
as determined by the Committee in its sole discretion and (iv) a combination of
any of the foregoing, in accordance with procedures to be established by the
Committee. Any shares so delivered shall be valued at their Market Price on the
date of exercise. Upon receipt of notice of exercise and payment in accordance
with procedures to be established by the Committee, the Corporation or its
agent shall deliver to the person exercising the Option (or his or her designee)
a certificate for such shares.
5.7 Term. The term of each Option granted hereunder shall be
-----
determined by the Committee; provided, however, that, notwithstanding any other
provision of the Plan, in no event shall an Incentive Stock Option be
exercisable after ten (10) years from the date it is granted, or in the case of
an Incentive Stock Option granted to a 10% Stockholder, five (5) years from the
date it is granted.
5.8 Rights as a Stockholder. A recipient of Options shall have no
------------------------
rights as a stockholder with respect to any shares issuable or transferable upon
exercise thereof until the date a stock certificate is issued to such recipient
representing such shares. Except as otherwise expressly provided in the Plan, no
adjustment shall be made for cash dividends or other rights for which the record
date is prior to the date such stock certificate is issued.
5.9 General Restrictions. Each Option granted under the Plan shall
---------------------
be subject to the requirement that, if at any time the Board shall determine in
its discretion that the listing, registration or qualification of the shares
issuable or transferable upon the exercise thereof upon any securities exchange
or under any state of federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or
in connection with, the granting of such Option or the issue, transfer, or
purchase of shares thereunder, such Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent, or approval
shall have been effected or obtained free of any conditions not acceptable to
the Board. The Board or the Committee may, in connection with the granting of
any Option, require the individual to whom the Option is to be granted to enter
into an agreement with the Corporation stating that as a condition precedent
to each exercise of the Option, in whole or in part, such individual shall if
then required by the Corporation represent to the Corporation in writing that
such exercise is for investment only and not with a view to distribution, and
also setting forth such other terms and conditions as the Board or the Committee
may prescribe.
-4-
ARTICLE 6.
NONTRANSFERABILITY OF OPTIONS
No Options may be transferred, assigned, pledged or hypothecated
(whether by operation of law or otherwise), except as provided by will or the
applicable laws of descent and distribution, and no Option shall be subject to
execution, attachment, or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of an Option not specifically
permitted herein shall be null and void and without effect. An Option may be
exercised by the recipient only during his or her lifetime, or following his
or her death pursuant to Section 7.3 hereof.
Notwithstanding anything to the contrary in the preceding paragraph,
the Committee may, in its sole discretion, cause the written agreement relating
to any Non-qualified Stock Options granted hereunder to provide that the
recipient of such Non-qualified Stock Options may transfer any of such Non-
qualified Stock Options other than by will or the laws of descent and
distribution in any manner authorized under applicable law; provided, however,
that in no event may the Committee permit any transfers which would cause this
Plan to fail to satisfy the applicable requirements of Rule 16b-3 under the
Act, or would cause any recipient of awards hereunder to fail to be entitled
to the benefits Rule 16b-3 or other exemptive rules under Section 16 of the
Act or be subject to liability thereunder.
ARTICLE 7.
EFFECT OF TERMINATION OF EMPLOYMENT, DISABILITY, DEATH OR CHANGE IN CONTROL
7.1 General Rule. In the event the employment of a recipient
-------------
terminates for any reason (other than death or Disability), the Options granted
to such recipient and which are exercisable as of the date of termination of
employment may be so exercised within three (3) months after termination of
employment , or such longer period as the Committee may determine and shall
then terminate; provided, however, that in no event may such Options be
exercised after their expiration date as established in accordance with the
provisions of this Plan. All Options which are not exercisable as of the date
of the recipient's termination of employment shall terminate as of such date.
Options shall not be affected by any change of employment so long as
the recipient continues to be employed by either the Corporation or a
Subsidiary. The Committee may, in its sole discretion, cause any to be forfeited
upon an employee's termination of employment if the employee was terminated for
one (or more) of the following reasons: (i) the employee's conviction, or plea
of guilty or nolo contendere to the commission of a felony, (ii) the employee's
commission of any fraud, misappropriation or misconduct which causes
demonstrable injury to the Corporation or a Subsidiary, (iii) an act of
dishonesty by the employee resulting or intended to result, directly or
indirectly, in gain or personal enrichment at the expense of the Corporation or
a Subsidiary, or (iv) any breach of the employee's fiduciary duties to the
Corporation as an employee or officer. It shall be within the sole discretion
of the Committee to determine whether the employee's termination was for one of
the foregoing reasons, and the decision of the committee shall be final and
conclusive.
7.2 Disability. Except as expressly provided otherwise in the
-----------
written agreement relating to any Option granted under the Plan, in the event
of the Disability of a recipient of Options, the Options which are held by
such recipient on the date of such Disability, whether or not otherwise
exercisable on such date, shall be exercisable at any time until the expiration
date of the Options; provided, however, that any Incentive Stock Option of such
recipient shall no longer be treated as an Incentive Stock Option unless
exercised within three (3) months of the date of such Disability (or within one
(1) year in the case of an employee who is "disabled" within the meaning of
Section 22(e)(3) of the code).
"Disability" shall mean any termination of employment with the
Corporation or a Subsidiary because of a long-term or total disability, as
determined by the Committee in its sole discretion.
-5-
7.3 Death. In the event of the death of a recipient of Options
------
while an employee of the Corporation or any subsidiary, Options which are held
by such employee at the date of death, whether or not otherwise exercisable on
the date of death, shall be exercisable by the beneficiary designated by the
employee for such purpose (the "Designated Beneficiary") or if no Designated
Beneficiary shall be appointed or if the Designated Beneficiary shall predecease
the employee, by the employee's personal representatives, heirs, or legatees
at any time within three (3) years from the date of death (subject to limitation
in Section 5.7 hereof), at which time such Options shall terminate; provided,
however, that any Incentive Stock Option of such recipient shall no longer be
treated as an Incentive Stock Option unless exercised within three (3) months
of the date of the recipient's death.
In the event of the death of a recipient of Options following a
termination of employment due to Disability, if such death occurs before the
Options are exercised, the Options which are held by such recipient in the
date of termination of employment, whether or not exercisable on such date,
shall be exercisable by such recipient's Designated Beneficiary, or if no
Designated Beneficiary shall be appointed or if the Designated Beneficiary
shall predecease such recipient, by such recipient's personal representatives,
heirs or legatees to the same extent such Options were exercisable by the
recipient following such termination of employment.
7.4 Change in Control. If so determined by the Committee at the
------------------
time of grant, any Options may provide that they shall become immediately
exercisable with respect to all of the shares subject to such Options: (a)
except as described in clause (c) below, immediately after the first date on
which less than 25% of the outstanding Common Stock in the aggregate is
beneficially owned (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) by Andrew M. Saul and Joseph E. Saul, members of their immediate
families and one or more trusts established for the benefit of such individuals
or members (the "Sauls"), (b) immediately prior to (and in such manner as to
enable the shares acquired on exercise to participate, in the same manner as
other outstanding shares, in) the sale of the Corporation substantially as an
entirety (whether by sale of stock, sale of assets, merger, consolidation, or
otherwise), (c) immediately prior to the expiration of (and in such manner as
to enable the shares acquired on exercise to participate, in the same manner as
other outstanding shares, in) any tender offer or exchange offer for shares of
Common Stock of the Corporation, (A) in which all holders of Common Stock are
entitled to participate, and (B) in connection with which the Sauls have agreed
(or have announced their intent) to sell such a number of shares of Common Stock
as will result in the Sauls beneficially owning less than 25% of the outstanding
shares of Common Stock in the aggregate and (d) immediately after the first date
on which twenty percent (20%) or more of the directors elected by shareholders
to the Board of Directors are persons who were not nominated by management in
the most recent proxy statement of the Corporation (each, a "Change in
Control"). Each Option containing the foregoing provision shall also contain
appropriate provisions for notice by the Corporation so as to permit the
recipient to obtain the benefit of the foregoing provision.
-6-
ARTICLE 8.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Notwithstanding any other provision of the Plan, the Committee may:
(i) at any time, make or provide for such adjustments to the Plan or to the
number and class of shares available thereunder or (ii) at the time of grant of
any Options, provide for such adjustments to such Options, in each case, as
the Committee shall deem appropriate to prevent dilution or enlargement of
rights, including, without limitation, adjustments in the event of stock
dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, separations, spin-offs, reorganizations,
liquidations and the like.
ARTICLE 9.
AMENDMENT AND TERMINATION
The Board may suspend, terminate, modify or amend the Plan, provided
that any amendment that would (i) materially increase the aggregate number of
shares which may be issued under the Plan, (ii) materially increase the benefits
accruing to employees under the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the Plan, shall be subject
to the approval of the Corporation's stockholders, except that any such increase
or modifications that may result from adjustments authorized by Article 8 hereof
shall not require stockholder approval. Any repricing of any grants under the
Plan shall be subject to stockholder approval. If the Plan is terminated, the
terms of the Plan shall, notwithstanding such termination, continue to apply to
awards granted prior to such termination. No suspension, termination,
modification, or amendment of the Plan may, without the consent of the employee
to whom an award shall theretofore have been granted, adversely affect the
rights of such employee under such award.
ARTICLE 10.
WRITTEN AGREEMENT
Each award of Options shall be evidenced by a written agreement
containing such restrictions, terms and conditions, if any, as the Committee
may require. In the Event of any conflict between a written agreement and the
Plan, the terms of the Plan shall govern.
-7-
ARTICLE 11.
MISCELLANEOUS PROVISIONS
11.1 Tax Withholding. The Corporation shall have the right to
----------------
require employees or their beneficiaries or legal representatives to remit to
the Corporation an amount sufficient to satisfy Federal, state and local
withholding requirements, or to deduct from all payments under the Plan, amounts
sufficient to satisfy all withholding tax requirements. Whenever payments under
the Plan are to be made to an employee in cash, such payments shall be net of
any amounts sufficient to satisfy all Federal, state and local withholding tax
requirements. The Corporation may, in its sole discretion, permit an employee
to satisfy his or her tax withholding obligation either by (i) surrendering
shares owned by the employee or (ii) having the Corporation withhold from shares
otherwise deliverable to the employee. Shares surrendered or withheld shall be
valued at their Market Price as of the date on which income is required to be
recognized for income tax purposes.
11.2 Compliance With Section 16(b). In the case of employees who are
------------------------------
or may be subject to Section 16 of the Act, it is the intent of the Corporation
that the Plan and any award granted hereunder satisfy and be interpreted in a
manner that satisfies the applicable requirements of Rule 16b-3, so that such
persons will be entitled to the benefits of Rule 16b-3 or other exemptive rules
under Section 16 of the Act and will not be subjected to liability thereunder.
If any provision of the Plan or any award would otherwise conflict with the
intent expressed herein, that provision, to the extent possible, shall be
interpreted and deemed amended so as to avoid such conflict. To the extent of
any remaining irreconcilable conflict with such intent, such provision shall
be deemed void as applicable to employees who are or may be subject to Section
16 of the Act.
11.3 Successors. The obligations of the Corporation under the Plan
-----------
shall be binding upon any successor corporation or organization resulting from
the merger, consolidation or other reorganization of the Corporation, or upon
any successor corporation or organization succeeding to all or substantially all
or the assets and business of the Corporation. In the event of any of the
foregoing, the Committee may, at its discretion prior to the consummation of the
transaction and subject to Article 9 hereof, cancel, offer to purchase,
exchange, adjust or modify any outstanding awards, at such time and in such
manner as the Committee deems appropriate and in accordance with applicable law.
11.4 General Creditor Status. Employees shall have no right, title,
------------------------
or interest whatsoever in or to any investments which the Corporation may make
to aid it in meeting its obligations under the Plan. Nothing contained in the
Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship between
the Corporation and any employee or beneficiary or legal representative of such
employee. To the extent that any person acquires a right to receive payments
from the Corporation under the Plan, such right shall be no greater than the
right of an unsecured general creditor of the Corporation. All payments to be
made hereunder shall be paid from the general funds of the Corporation and no
special or separate fund shall be established and no segregation of assets shall
be made to assure payment of such funds except as expressly set forth in the
Plan.
11.5 No Right to Employment. Nothing in the Plan or in any written
-----------------------
agreement entered into pursuant to the Article 10 hereof, nor the grant of any
awards, shall confer upon any employee any right to continue in the employ of
the Corporation or a Subsidiary or to be entitled to any remuneration or
benefits not set forth in the Plan or such written agreement or interfere with
or limit the right of the Corporation or a Subsidiary to modify the terms of or
terminate such employee's employment at any time.
11.6 Other Plans. [Reserved]
------------
-8-
11.7 Notices. Notices required or permitted to be made under the
--------
Plan shall be sufficiently made if personally delivered to the employee or sent
by regular mail addressed (a) to the employee at the employee's address as set
forth in the books and records of the Corporation or its subsidiaries, or (b)
to the Corporation or the Committee as the principal office of the Corporation
clearly marked "Attention: Plan Administration Committee."
11.8 Severability. In the event that any provision in the Plan shall
-------------
be held illegal or invalid for any reason, such illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall not be construed
and enforced as if the illegal or invalid provision had not been included.
11.9 Governing Law. To the extent not preempted by Federal law, the
--------------
Plan and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of New York.
-9-
PROXY PROXY
CACHE, INC.
ANNUAL MEETING OF SHAREHOLDERS NOVEMBER 11, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Brian Woolf and Thomas E. Reinckens,
and each of them, with full power of substitution, Proxies of the undersigned
to vote all shares of Common Stock of Cache, Inc. (the "Company") which the
undersigned is entitled to vote at the Annual Meeting of Shareholders to be
held on November 11, 2003 and all adjournments thereof, with all the powers the
undersigned would posses if personally present, and particularly, without
limiting the generality of the foregoing, to vote and act as follows:
1. Election of six directors of the Company.
/ / FOR all nominees listed below / / WITHOUT AUTHORITY to vote
(except as marked to the for all nominees listed below
contrary below)
Andrew M. Saul, Joseph E. Saul, Brian Woolf, Thomas E. Reinckens, Arthur S.
Mintz, Morton J. Schrader.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the nominee's name in the space below.)
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2. To approve the Company's 2003 Stock Option and Performance Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Ratification of the appointment of KPMG, LLP as the Company's independent
auditors for the fiscal year ending December 27, 2003.
/ / FOR / / AGAINST / / ABSTAIN
CONTINUED AND BE SGINED ON REVERSE
4. In their discretion, upon such other matters as may properly come before
the meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IF NO SPECIFICATION IS MADE,
THIS PROX WILL BE VOTED "FOR" THE ELECTION OF EACH DIRCTOR NAMED HEREIN AND
"FOR" ITEM 2 AND 3.
DATED ________________________. 2003
(please fill in date)
NOTE: Please sign as name appears.
Join owners should each sign.
____________________________________
Signature of Shareholder
____________________________________
Signature of Shareholder
When Signing as Attorney, Executor,
Administrator, Trustee or Guardian,
please give full title as such. If
signer is a corporation, please sign
with the full corporation name by
duly authorized officer of officers.