UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
CHECK THE APPROPRIATE BOX:
[ ] PRELIMINARY PROXY STATEMENT
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2))
[X] DEFINITIVE PROXY STATEMENT
[ ] DEFINITIVE ADDITIONAL MATERIALS
[ ] SOLICITING MATERIAL PURSUANT TO SS.240.14A-12
Cache, Inc.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] NO FEE REQUIRED.
[ ] FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14A-6(I)(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 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
CACHE, INC.
1440 BROADWAY
NEW YORK, NEW YORK 10018
(212) 575-3200
October 2, 2006
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 Wednesday, November 8, 2006, 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 five
named nominees as directors and (ii) to ratify the appointment of Deloitte &
Touche LLP, certified public accountants, as Cache's auditors for the fiscal
year ending December 30, 2006.
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
---------------------
Brian Woolf
Chairman of the Board
CACHE, INC.
1440 BROADWAY
NEW YORK, NEW YORK 10018
-------------------
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 8, 2006
--------------------
TO THE SHAREHOLDERS:
The Annual Meeting of the Shareholders of Cache, Inc. will be held on
Wednesday, November 8, 2006 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 five 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 ratify the appointment of Deloitte & Touche LLP certified
public accountants, as auditors of the Company for the fiscal year
ending December 30, 2006.
3. 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 25,
2006 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
--------------------
Victor J. Coster
Secretary
October 2, 2006
CACHE, INC.
1440 BROADWAY
NEW YORK, NEW YORK 10018
--------------
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
25, 2006 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 October 2, 2006.
Only shareholders of record at the close of business on September 25,
2006 will be entitled to vote at the Annual Meeting. At the close of business on
such record date the Company had outstanding 15,791,003 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 25, 2006, Messrs. Andrew and Joseph Saul, Ms. Norma
Saul and certain Saul family trusts (sometimes collectively referred to herein
as the "Sauls") owned of record an aggregate of 2,959,692 shares of Common
Stock, representing approximately 18.7% 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 and 2.
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, 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.
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.
-1-
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; and (2) 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, the proposal 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 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 and ratification of auditors. Under applicable law, a broker non-vote
will have no effect on the outcome of the election of directors 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 31, 2005 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., 1440 BROADWAY, NEW YORK, NEW YORK 10018.
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 five members: Messrs. Andrew M. Saul, Brian Woolf, Gene G. Gage,
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 ........................ 57 CHAIRMAN OF THE BOARD AND 2000
CHIEF EXECUTIVE OFFICER (1)
ANDREW M. SAUL ..................... 59 PARTNER, SAUL PARTNERS (2) 1986
MORTON J. SCHRADER ................. 74 PRINCIPAL, PBS REALTY ADVISORS, LLC (3) 1989
ARTHUR S. MINTZ..................... 61 PRESIDENT, BEES & JAM, INC. (4) 2002
GENE G. GAGE........................ 59 FINANCIAL ADVISOR (5) 2004
-----------------------------------
(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. Mr. Woolf has
held various management positions within the retail industry over the
past 30 years.
(2) 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.
(3) 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 and is a principal of PBS Realty
Advisors.
-3-
(4) 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.
(5) Mr. Gage has served as one of our directors since September 2004. Mr.
Gage is currently the President and Chief Executive Officer of Gage
Associates, a firm which provides financial planning and services to
individuals and businesses. He is a certified public accountant, as
well as a certified financial planner. He has over 30 years of
financial experience.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 2005 ("Fiscal 2005"), the
Board of Directors held four meetings. Each then-current Director attended all
of such Board meetings, with the exception of the July 26, 2005 meeting, which
Mr. Saul could not attend. The Board of Directors has an Audit Committee, a
Nominating and Governance Committee, and a Compensation and Plan Administration
Committee. The Audit Committee, established in July 1989, currently consists of
Messrs. Arthur Mintz, Morton Schrader and Gene Gage. The Audit Committee held
five meetings in Fiscal 2005. Each then-current member of the Committee attended
all such Committee meetings, with the exception of the May 3, 2005 meeting,
which Mr. Schrader could not attend.
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, and 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 Board of Directors has determined
that Gene Gage is qualified to serve as the Audit Committee's financial expert
and Chairman. Mr. Gage is independent, as such term is used in Item 7(d)(3)(iv)
of Schedule 14A under the Exchange Act.
The Board of Directors has adopted a written charter for the Audit
Committee. The charter has not changed from the charter filed with our 2004
proxy statement and is available on our website at www.cache.com.
-4-
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is composed of three non-management directors. All
three members of the Audit Committee meet the independence and experience
requirements of Rule 4200(a)(15) of the NASDAQ Stock Exchange. Mr. Gene Gage has
served as Chairman of Audit Committee since September 2004. He is a certified
public accountant and has over 30 years of financial experience.
During 2005, 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 meetings with the Company's independent
auditors, at which candid discussions of financial management, accounting and
internal control issues took place.
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
-5-
financial information systems design and implementation and other non-audit
services provided by them to the Company during 2005 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
31, 2005, for the filing with the Securities and Exchange Commission.
Audit Committee
Gene G. Gage, Chairman
Morton J. Schrader, Director
Arthur S. Mintz, Director
-6-
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 Saul, Arthur Mintz,
Morton Schrader and Gene Gage. The Compensation and Plan Administration
Committee met three times in Fiscal 2005. Each then-current member of the
Committee attended all Committee meetings, with the exception of the July 26,
2005 meeting, which Mr. Saul could not attend.
The Board of Directors adopted a written charter in August 2004 for the
Compensation and Plan Administration Committee, which is available on our
website at www.cache.com.
The Board of Directors established the Nominating and Governance
Committee in September 2004. The Committee currently consists of Messrs. Andrew
Saul, Gene Gage, Arthur Mintz and Morton Schrader. The Nominating and Governance
Committee is responsible for identifying, evaluating and recommending director
nominees to the Board of Directors.
The Nominating and Governance Committee will consider candidates for
the Board from any reasonable source, including stockholder recommendations. The
Nominating and Governance Committee does not evaluate candidates differently
based on who has made the proposal. Stockholders who wish to suggest qualified
candidates should write to Victor J. Coster, Corporate Secretary, at the
Company's headquarters' address. These recommendations should include detailed
biographical information concerning the nominee, his or her qualifications to be
member of the Board, and a description of any relationship the nominee has to be
a stockholder making the recommendation or to other stockholders of the Company.
A written statement from the candidate consenting to be named as a candidate
and, if nominated and elected, to serve as director, subject to the candidate's
due diligence of the Company, should accompany any such recommendation.
Stockholders who wish to nominate a director for election at an annual meeting
of stockholders of the Company must comply with the Company's By-Laws regarding
stockholder proposals and nominations.
While the Nominating and Governance Committee does not have minimum
qualification requirements for candidates, it does assess whether candidates
have good business judgment, high ethical standards, substantial experience in
the Company's line of business or other applicable fields such as science or
technology, and ability to prepare for and attend Board meetings, committee
meetings and stockholder meetings. The Nominating and Governance Committee also
considers whether candidates are independent and possess leadership qualities.
The Board of Directors has adopted a written charter for the Nominating
and Governance Committee, which is available on our website at www.cache.com.
STOCKHOLDER COMMUNICATIONS
Company stockholders may communicate with the Board by addressing their
communications to one or more directors to our corporate headquarters at 1440
Broadway, 5th Floor, New York, NY 10018. The Company may screen such
communications to ensure that the Company forwards only material that is germane
to the Company's business to each director to whom the correspondence is
addressed.
-7-
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".
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
--------------------------------------------- -------------------------
SECURITIES ALL OTHER
NAME AND FISCAL OTHER ANNUAL UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS (1)
------------------ ------ ------ ----- ------------ -------- ------------
BRIAN WOOLF 2005 $629,808 $ --- $ --- --- $ 15,607
CHIEF EXECUTIVE 2004 554,808 --- 2,396,860 52,500 14,986
OFFICER AND CHAIRMAN 2003 500,000 475,200 1,433,000 375,000 14,459
OF THE BOARD
THOMAS E. REINCKENS 2005 479,231 --- --- --- 10,493
PRESIDENT, CHIEF 2004 436,539 --- 1,008,600 52,500 10,458
OPERATING OFFICER 2003 401,923 381,988 900,738 187,500 10,326
MARGARET FEENEY 2005 214,101 20,000 --- 20,000 ---
EXECUTIVE VICE PRESIDENT 2004 176,317 84,646 34,900 --- ---
CHIEF FINANCIAL OFFICER 2003 176,346 28,923 104,640 45,000 ---
----------------------------
(1) These amounts consist of insurance premiums paid for life insurance for
the benefit of the named executive officers and long-term disability
insurance.
AGGREGATED OPTION EXERCISES IN FISCAL 2005 AND YEAR-END STOCK OPTION
VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Stock Options
Stock Options at Fiscal at Fiscal Year-End (1)
Year-End
-------------------------- -------------------------
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----- ---------------- -------- ----------- ------------- ----------- -------------
Brian Woolf --- $ --- 409,875 253,875 $ 4,210,674 $ 1,113,581
Thomas E. Reinckens 7,000 $ 50,000 144,875 141,375 $ 985,277 $ 587,831
Margaret Feeney --- $ --- 25,750 43,000 $ 164,183 $ 218,730
(1) 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 31, 2005 and the per share option exercise prices. All
share amounts have been adjusted to reflect the 3 for 2 stock split
effective June 18, 2004.
-8-
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to stock
options granted in fiscal 2005 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 --- ---
THOMAS E. REINCKENS --- ---
MARGARET FEENEY 20,000 (3) 14.3% $ 11.53 5/3/15 $ 63,711 $ 140,784
(1) These options vest no later than May 3, 2009 but may vest sooner with
respect to up to 25% of the shares on each of December 31, 2005,
December 31, 2006, December 31, 2007 and December 31, 2008, to the
extent our earnings plan for these years is achieved, based on the
following sliding scale:
Percentage of Original
Options that Becomes
Exercisable
PERCENTAGE OF EARNINGS PLAN ACHIEVED
------------------------------------ -------------
Greater than or equal to 90% ....................... 25%
Greater than or equal to 75%, but less than 90%..... 20%
Greater than or equal to 60%, but less than 75%..... 15%
Less than 60%....................................... 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.
(3) At December 31, 2005, 4,000 options vested.
-9-
EMPLOYMENT AGREEMENTS AND CHANGE-OF-CONTROL PROVISIONS
In February 2006, we entered into a new employment agreement with Brian
Woolf, our Chief Executive Officer and Chairman, as well as an employment
agreement with Thomas E. Reinckens, our President and Chief Operating Officer.
Under the agreement with Mr. Woolf, which expires February 7, 2009, Mr. Woolf's
annual salary during 2006 will be $725,000 and he is eligible to receive annual
incremental increases of $75,000 in each of the next two years contingent on the
Company's profitability, as defined in the contract. Under the agreement with
Mr. Reinckens, which expires February 7, 2009, Mr. Reinckens' annual salary
during 2006 will be $530,000 and he is eligible to receive annual incremental
increases of $40,000 in each of the next two years contingent on the Company's
profitability, as defined in the contract. Messrs. Woolf and Reinckens are also
eligible to participate in the Company's bonus and stock option programs. In
addition, Messrs. Woolf and Reinckens are entitled to participate in our
long-term disability coverage healthcare and other benefits packages. Pursuant
to the terms of these new employment agreements, if we terminate Mr. Woolf's or
Mr. Reinckens' employment prior to February 7, 2009 for any reason other than
for certain circumstances described in the agreements then until Messrs. Woolf
or Reinckens accepts other employment we are required to continue to pay
him/them the full balance of his/their contract, mitigated by future employment.
In the event that Mr. Woolf or Mr. Reinckens is terminated in connection with a
change in control of Cache, as defined in the contract, he is entitled to
receive an amount equal to 24 months of his salary then in effect. The contract
contains a covenant of Messrs. Woolf and Reinckens not to solicit employees of
Cache for two years and a covenant not to compete with Cache for a minimum of
one year.
All of the options granted under the Company's 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.
COMPENSATION OF DIRECTORS
We compensate one of our non-employee directors for his services to us
by participation in our group medical insurance program at an approximate cost
to us of $11,500 per individual per year. He currently does not receive cash or
equity-based compensation. The other three non-employee directors receive a
director's fee equal to $20,000 per year.
-10-
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 (the "Compensation
Committee") presently consists of Messrs. Andrew Saul, Arthur Mintz, Morton
Schrader and Gene Gage. No member of our Compensation 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.
REPORT OF THE COMPENSATION AND PLAN ADMINISTRATION COMMITTEE
Executive compensation consists generally of two components - base
salary and option awards, and sometimes a third component - a discretionary
bonus award. During the past year, the Compensation Committee 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
reviewed 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 Compensation Committee.
This report of the Compensation Committee of the Board of Directors
addresses the Company's compensation policies for Fiscal 2005 applicable to
Cache's executives including the Named Executive Officers.
The Compensation 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.
-11-
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 $575,000 was determined by his employment
agreement with the Company, made as of September 2003, which provided for a base
salary of $575,000 per annum during that period. In connection with entering
into the new employment agreement with Mr. Woolf in February 2006 (described in
this proxy statement under "Executive Compensation - Employee Contracts and
Change of Control Provisions"), the Compensation 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, 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.
-12-
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.
Compensation and Plan
Administration Committee
Andrew M. Saul, Chairman
Morton J. Schrader, Director
Arthur S. Mintz, Director
Gene G. Gage, Director
CODE OF ETHICS
The Company has adopted a Code of Ethics that applies to all of the
Company's directors, officers and employees. The Code of Ethics is available on
our website at www.cache.com. We will disclose any amendment to, other than
technical, administrative or non-substantive amendments, or waiver of its code
of ethics granted to a director or executive officer by filing a Form 8-K
disclosing the amendment or waiver within two business days.
-13-
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, 2001 to December 31, 2005. 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.
COMPAGE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG CACHE, INC.
NASDAQ MARKET INDEX AND SIC CODE INDEX
--------------------FISCAL YEAR ENDING---------------------
2000 2001 2002 2003 2004 2005
-----------------------------------------------------------
CACHE INC. 100.00 120.00 483.33 687.67 900.55 865.57
SIC CODE INDEX 100.00 97.82 86.29 113.88 138.31 162.09
NASDAQ MARKET INDEX 100.00 79.71 55.60 83.60 90.63 92.62
ASSUMES $100 INVESTED ON JAN. 1, 2001
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 30, 2005
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
See Also "Executive Compensation--Compensation Committee Interlocks and
Insider Participation."
As of September 25, 2006, the Sauls beneficially owned in the aggregate
2,959,692 shares of the Company's outstanding Common Stock, representing
approximately 18.7% of the Company's outstanding Common Stock. See "Principal
Shareholders and Share Ownership by Management."
-14-
PRINCIPAL SHAREHOLDERS AND SHARE OWNERSHIP BY CERTAIN BENEFICIAL
OWNERS AND BY MANAGEMENT
The following table sets forth certain information as to the beneficial
ownership of the Company's equity securities as of September 25, 2006 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. No person listed below
is a party adverse to the Company or its subsidiary in any material proceeding
and no person listed below has a material interest adverse to the Company or its
subsidiary in any material proceeding.
Percentage of
Number of shares Outstanding shares
Person and Address Of Common Stock Of Common Stock
------------------ --------------- ------------------
Andrew M. Saul 2,959,692 18.7%
9 West 57th Street
New York, NY 10019 (1)
Joseph E. Saul 2,959,692 18.7%
9 West 57th Street
New York, NY 10019 (2)
Norma G. Saul 2,959,692 18.7%
9 West 57th Street
New York, NY 10019 (3)
Vardon Capital LLC 1,577,142 10.0%
120 West 45th Street, 17th Floor
New York, NY 10036 (7)
Royce & Associates, LLC 1,345,150 8.5%
1414 Avenue of the Americas
New York, NY 10019 (7)
RS Investment Management, LP 1,323,196 8.4%
388 Market Street
San Francisco, CA 94111 (7)
Palo Alto Investors 803,900 5.1%
470 University Avenue
Palo Alto, CA 94301 (7)
-15-
Percentage of
Number of shares Outstanding shares
Person and Address Of Common Stock Of Common Stock
------------------ --------------- ------------------
Brian Woolf 584,625 3.5%
Cache Inc.
1440 Broadway
New York, NY 10018 (4)
Thomas E. Reinckens 249,328 1.5%
Cache Inc.
1440 Broadway
New York, NY 10018 (5)
Margaret Feeney 37,000 *
Cache Inc.
1440 Broadway
New York, NY 10018 (6)
Morton J. Schrader 19,500 *
230 Park Avenue, 18th Floor
New York, NY 10166
Arthur S. Mintz None N/A
70 West 36th Street
New York, NY 10018
Gene G. Gage None N/A
Cache Inc.
1440 Broadway
New York, NY 10018
All Current Executive 3,850,145 23.3%
Officers and Directors as a
Group (seven persons)
-------------------------------
* Less than 1% of the outstanding shares of common stock.
(1) Represents (a) 825,630 shares held directly by Andrew Saul, (b) 874,962
shares beneficially owned by Joseph Saul, Andrew Saul's father, (c) 1,251,600
shares held by Norma Saul, Andrew Saul's mother, and (d) 7,500 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.
-16-
(2) Represents (a) 852,462 shares held directly by Joseph Saul, (b) 1,251,600
shares held by Norma Saul, Joseph Saul's wife, (c) 833,130 shares beneficially
owned by Andrew Saul, Joseph Saul's son and (d) 22,500 shares held by the Joseph
E. and Norma G. Saul Foundation, of which Joseph 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 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) 1,251,600 shares held directly by Norma Saul, (b) 852,462
shares beneficially owned by Joseph Saul, Norma Saul's husband, (c) 833,130
shares held by Andrew Saul, Norma Saul's son and (d) 22,500 shares held by the
Joseph E. and Norma G. Saul Foundation, of which Norma 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 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) Includes options to acquire 503,625 shares of our common stock.
(5) Includes options to acquire 191,750 shares of our common stock.
(6) Includes options to acquire 31,550 shares of our common stock.
(7) Information is based on the most recent Form 13G or Form 13F filed by the
holder with the SEC.
-17-
RATIFICATION OF THE APPOINTMENT OF
DELOITTE & TOUCHE LLP AS AUDITORS
(PROPOSAL 2)
The Board of Directors has appointed the firm of Deloitte & Touche LLP
to examine the financial statements of the Company for the year ending December
30, 2006, subject to ratification by shareholders. Deloitte & Touche LLP was
employed by the Company, as its independent auditors for Fiscal 2005.
Shareholders are asked to ratify the action of the Board of Directors in making
such appointment.
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 2.
Representatives of Deloitte & Touche 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.
On February 11, 2005, KPMG LLP ("KPMG") notified the Company that it
would decline to stand for re-appointment as the Company's independent
registered accountants for fiscal 2005 and would cease to represent the Company
as its auditor upon completion of the audit of the Company's financial
statements as of and for the year ended January 1, 2005 (fiscal 2004), and
management's assessment of the effectiveness of internal control over financial
reporting and the effectiveness of internal control over financial reporting as
of January 1, 2005, and the issuance of their reports thereon. KPMG performed
audits of the Company's consolidated financial statements for the fiscal years
ended December 27, 2003 (fiscal 2003) and December 28, 2002 (fiscal 2002).
KPMG's reports for these periods did not contain an adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles.
During the two most recent fiscal years and the interim period through
March 17, 2005, (i) there have been no disagreements with KPMG on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
KPMG, would have caused it to make reference to the subject matter of the
disagreements in connection with its report, and (ii) there were no "reportable
events" (as defined in Item 304(a)(1)(v) of Regulation S-K).
The following table sets forth the aggregate fees billed to the Company
for the fiscal years ended January 1, 2005 (Fiscal 2004) and December 31, 2005
(Fiscal 2005) by KPMG LLP and Deloitte & Touche LLP. Deloitte and Touche LLP
replaced KPMG LLP during the first quarter of fiscal 2005.
FEES FISCAL 2004 FISCAL 2005
AMOUNT AMOUNT
AUDIT FEES $322,707 $320,000
AUDIT-RELATED FEES $402,000 $403,000
TAX FEES $ -- $ --
ALL OTHER FEES $ -- $ --
TOTAL FEES $724,707 $725,000
-18-
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 include fees for audits of benefit plans and audits
related to a potential stock offering, as well as testing of internal controls
for Sarbannes Oxley compliance during Fiscal 2004 and Fiscal 2005.
All other fees include fees for evaluations and advisory services.
During Fiscal 2003, the Audit Committee implemented a procedure to require
pre-approval of all services performed by the Independent Auditors.
Consequently during fiscal 2004 and 2005, any project for which
management hired the principal accountants to perform was presented to the Audit
Committee, along with an estimate of the costs to be incurred. The Audit
Committee would review and approve the estimate. The Audit Committee was updated
by management, if additional costs were incurred. All projects (which in fiscal
2004 and 2005 consisted only of audit and audit-related projects) were performed
by the independent accountants, and were approved by the Audit Committee, during
fiscal 2004 and 2005.
OTHER BUSINESS
Management knows of no business to be brought before the meeting other
than Proposals 1 and 2 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 2005 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 2007) must be received by the Company on or before May 5,
2007 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.
-19-
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 2005,
except for the following instances: Officer Thomas Reinckens filed two late
Forms 4; Officer Margaret Feeney filed two late Forms 3; Officer Lisa Decker
filed one late Form 3; Officer Clifford Gray filed one late Form 3 and one late
Form 4; Officer Joanne Marselle filed one late Form 3; Officer Donna James filed
one late Form 3; Officer Catherine McNeal filed one late Form 4; and Officer
Maria Comfort filed one late Form 4.
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 2006 ANNUAL MEETING IN
PERSON.
By Order of the Board of Directors,
/s/ Victor J. Coster
-----------------------
Victor J. Coster
Secretary
-20-
CACHE, INC.
ANNUAL MEETING OF SHAREHOLDERS NOVEMBER 8, 2006
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 8, 2006, and all adjournments thereof, with all the powers the
undersigned would possess if personally presented, and particularly, without
limiting the generality of the foregoing, to vote and act as follows:
1. Election of five directors of the Company.
---- FOR all nominees listed below ---- WITHHOLD AUTHORITY vote for all
(except as marked to the contrary below) nominees listed below
Andrew M. Saul, Brian Woolf, Gene G. Gage, Arthur S. Mintz, Morton J. Schrader.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THE NOMINEE'S NAME IN THE SPACE BELOW.)
--------------------------------------------------------------------------------
2. Ratification of the appointment of Deliotte & Touche LLP as the
Company's independent auditors for the fiscal year ending December 30,
2006.
--- FOR --- AGAINST --- ABSTAIN
3. In their discretion, upon such matters as may properly come before the
meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IF NO SPECIFICATION IS MADE,
THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF EACH DIRECTOR NAMED HEREIN
AND "FOR" ITEM 2.
Dated ______________________, 2006
(please fill in date)
Note: Please sign as name appears. Joint
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 full
corporation name by duly authorized
officer or officers.