Summary of CACHE INC - Yahoo! Finance

Entry into a Material Definitive Agreement, Unregistered Sale of Equity Securities, Cha

Item 1.01 Entry into a Material Definitive Agreement

Backstop and Investment Agreement; Voting Agreement; Voting and Standstill Agreements

Backstop and Investment Agreement

On February 5, 2013, Cache, Inc., a Florida corporation ("Cache") entered into an Investment Agreement (the "Backstop and Investment Agreement") with MFP Partners, L.P. ("MFP Partners"), Mill Road Capital, L.P. ("Mill Road") and Jay Margolis. MFP Partners and Mill Road are shareholders of the Company. Mr. Margolis is the newly-appointed Chief Executive Officer and Chairman of the Board, as discussed under Item 5.02 below. Pursuant to the Backstop and Investment Agreement, the Company has agreed to commence an $8.0 million rights offering of its common stock (the "Rights Offering"), as described in more detail below. Under the terms of the Rights Offering, the Company will distribute, at no charge to the holders of its common stock as of the record date, 0.374 transferable subscription rights for each share of common stock owned on the record date, and each whole right will entitle the holder to purchase one share of common stock. The rights, if exercised in full, will provide gross proceeds to the Company of $8.0 million. In addition, holders of rights who fully exercise their basic subscription rights will be entitled to over subscribe for additional shares of common stock that remain unsubscribed as a result of any unexercised rights (up to the number of shares purchased under the holder's basic subscription rights). The subscription price for the rights will be $1.65 per share (the "Subscription Price"). The Company will seek to list the rights on the NASDAQ Global Select Market.

Subject to the terms and conditions of the Backstop and Investment Agreement,
(i) each of MFP Partners and Mill Road has agreed to purchase, at a price per share equal to the Subscription Price, a number of shares of common stock equal to its full pro rata share of the shares of common stock offered in the Rights Offering, (ii) each of MFP Partners, Mill Road and Mr. Margolis has agreed, severally and not jointly, to purchase from the Company the unsubscribed shares of the Company's common stock, after the other shareholders have exercised their basic subscription rights and over subscription privileges, in specified amounts, such that gross proceeds of the Rights Offering and the backstop will be $8.0 million, and (iii) the Company has agreed to issue to each of Mill Road and Mr. Margolis additional shares of common stock in an amount sufficient to enable them to acquire an aggregate of $3.5 million and $1.0 million of common stock, respectively, to the extent they are not able to acquire such amounts otherwise pursuant to the Backstop and Investment Agreement. The sale of common stock to MFP Partners and Mill Road described in clause (i) of the foregoing sentence is not contingent upon the exercise by MFP Partners and Mill Road of their basic subscription rights, and the basic subscription rights of MFP Partners and Mill Road will be transferable in the same manner as the basic subscription rights held by other holders of the Company's common stock. The price per share paid by MFP Partners, Mill Road and Mr. Margolis for all such common stock under the Backstop and Investment Agreement will be equal to the Subscription Price.

The closing of the transactions contemplated by the Backstop and Investment Agreement is subject to satisfaction or waiver of certain conditions, including, without limitation: (i) the

effectiveness of the registration statement registering shares of common stock pursuant to the Rights Offering (the "Rights Offering Registration Statement");
(ii) the receipt by the Company of gross proceeds pursuant to the issuance of shares in the Rights Offering and under the Backstop and Investment Agreement of at least $8.0 million; (iii) approval of the Company's shareholders of the issuance of shares in the Rights Offering and under the Backstop and Investment Agreement; and (iv) absence of any changes or events that, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect (as defined in the Backstop and Investment Agreement).

The Backstop and Investment Agreement may be terminated at any time prior to the closing of the Rights Offering and the issuances contemplated by the Backstop and Investment Agreement:

† by mutual written agreement of the Company, on the one hand, and both of MFP Partners and Mill Road, on the other hand;

† by each of MFP Partners, Mill Road or Mr. Margolis, with respect to such party and without the consent of any other party, under the following circumstances: (i) if there is a breach by the Company of any covenant or representation or warranty that would cause the failure to satisfy a closing condition and is not capable of cure by July 4, 2013; (ii) upon the occurrence of any event that results in a failure to satisfy a closing condition and is not capable of cure by July 4, 2013; (iii) if the Rights Offering Registration Statement has not been declared effective by the Securities and Exchange Commission by July 4, 2013; (iv) if any other party (other than the Company) terminates the Backstop and Investment Agreement with respect to itself; or
(v) if the closing has not occurred by July 4, 2013;

† by the Company under the following circumstances: (i) if there is a breach by any of MFP Partners, Mill Road or Mr. Margolis of any covenant or . . .

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Departure of Chairman of the Board and Chief Executive Officer

On February 5, 2013, Thomas E. Reinckens resigned as Chairman of the Board and Chief Executive Officer of the Company. In connection with his resignation, Mr. Reinckens and the Company entered into a Separation and General Release Agreement, dated as of February 5, 2013 (the "Separation Agreement"). Under the Separation Agreement, (i) Mr. Reinckens

acknowledges and agrees to abide by the restrictive covenants in his Employment Agreement, dated as of February 24, 2012, (ii) Mr. Reinckens grants the Company a general release from any claims or liability to Mr. Reinckens, and (iii) in accordance with the terms of Mr. Reinckens' Employment Agreement, Mr. Reinckens is provided with severance, in the form of: (A) continuing payments for the remaining balance of his employment term, in the amount of approximately $1.2 million over a period of approximately two years, subject to reduction for any compensation he receives from any employment or consultant position during the remainder of the term, and (B) continuing eligibility for coverage under the Company's medical and dental insurance plans for the remainder of the term of his Employment Agreement, subject to the cancellation of such coverage if Mr. Reinckens becomes eligible for alternative coverage during the remainder of the term. Pursuant to the terms of the Company's 2008 Stock Option and Performance Incentive Plan, and Mr. Reinckens' applicable stock option agreements, he will have 30 calendar days to exercise any of his 400,000 stock options, after which time such options will be forfeited. Mr. Reinckens' will also retain his 143,333 unvested restricted shares until the earlier of the termination date of the Backstop and Investment Agreement and the completion of the rights offering contemplated by the Backstop and Investment Agreement, after which time such shares will be forfeited.

The foregoing summary of certain terms of the Separation Agreement is qualified in its entirety by the text of the Separation Agreement which is attached as Exhibit 10.5 to this Current Report on Form 8-K.

Appointment of Chairman of the Board and Chief Executive Officer

On February 5, 2013, Jay Margolis, 64, was appointed Chairman of the Board and Chief Executive Officer of the Company.

Mr. Margolis is a highly accomplished executive with over 30 years of retail, merchandising and product development experience in the specialty retail industry. Prior to joining the Company, Mr. Margolis had been the Chairman of Intuit Consulting since January 2008. He has held senior leadership positions with several high profile retail and apparel companies, most recently serving as President and Chief Executive Officer of Limited Brands' Apparel Group (Express and Limited Stores), where he was responsible for revamping the product line and leading the successful operational turnaround of the businesses. Prior to Limited Brands, Mr. Margolis was President, Chief Operating Officer & Director of Reebok International, where he played a critical role in improving the financial and operating performance of the Reebok, Rockport and Ralph Lauren Footwear brands. Prior to Reebok, Mr. Margolis served as Chairman and CEO of Esprit de Corporation, USA, President and Vice Chairman of the Board of Directors of Tommy Hilfiger Inc. and in several senior executive positions at Liz Claiborne Inc. Mr. Margolis currently sits on the Board of Directors of Burlington Coat Factory Warehouse Corporation, Godiva Chocolatier Inc. and Boston Beer Company. He earned his B.A. degree from Queens College, part of The City University of New York.

On February 5, 2013, Jay Margolis and the Company entered into an Employment Agreement (the "Employment Agreement"), which has a term of three years. Under the Employment Agreement, Mr. Margolis will serve as Chief Executive Officer and Chairman of the Board of Directors, and is entitled to receive the following compensation and benefits:

† an annual base salary of $900,000;

† participation in the welfare, benefit and retirement plans that the Company's employees are entitled to participate in;

† participation in the retirement and savings plans that the Company's employees are entitled to participate in;

† participation in the Company's 2008 Stock Option and Performance Incentive Plan, as it may be amended from time to time, and will be entitled to participate in any other executive bonus or incentive plan established by the Company;

† an award of 1,000,000 common stock options (the "Options") pursuant to a Nonqualified Stock Option Agreement, which shall vest in equal installments on the first, second and third anniversary of the grant date; and

† an annual bonus with a target of fifty percent (50%) of his annual base salary, subject to financial performance targets set by the Company; provided, however, that for the 2013 calendar year, he is entitled to a guaranteed bonus of $225,000.

The Employment Agreement provides that if Mr. Margolis' employment with the Company is terminated by mutual agreement, resignation, disability or death or with cause (as that term is defined in the Employment Agreement), then Mr. Margolis is terminated without compensation, except for any unpaid salary or vested benefits as of the date of termination. In addition, the Employment Agreement provides that if the shareholders of the Company do not approve the issuances of shares in the Rights Offering and under the Backstop and Investment Agreement on or before July 4, 2013, then Mr. Margolis may resign from his positions with the Company. In the event of a resignation, (i) Mr. Margolis will not be entitled to any compensation, (ii) all of the Options will terminate, and (iii) Mr. Margolis will not be subject to any post-employment non-competition obligations. The Employment Agreement further provides that if the Company terminates Mr. Margolis' employment prior to a Change of Ownership or Control (as such term is defined in the Employment Agreement) without cause, then Mr. Margolis: (i) is entitled to receive his annual base salary then in effect for the remainder of the term of the Employment Agreement in accordance with the Company's normal payroll practices, subject to reduction for any compensation he receives from any employment or consultant position during the remainder of the term, and (ii) will continue to be eligible for coverage under the Company's medical and dental insurance plans for the remainder of the term of the Employment Agreement, subject to the cancellation of such coverage if Mr. Margolis becomes eligible for alternative coverage during the remainder of the term. If Mr. Margolis' employment with the Company is terminated following a Change of Ownership or Control, then he is entitled to receive a one-time payment equal to twenty-four (24) months of his annual base

. . .

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

The following exhibits are filed herewith:

3.1 Articles of Amendment to Articles of Incorporation, effective February 4, 2013.

3.2 Amendment to Bylaws, effective February 4, 2013

10.1 Investment Agreement, by and among Mill Road Capital, L.P., MFP Partners, L.P., Jay Margolis and the Company, dated as of February 5, 2013 (including the form of Registration Rights Agreement).

10.2 Voting Agreement by and among Mill Road Capital, L.P., MFP Partners, L.P. and the Company, dated as of February 5, 2013 (including the form of Indemnification Agreement).

10.3 Voting, Standstill and Indemnification Letter Agreement, by and between the Company and Andrew Saul, dated as of February 5, 2013.

10.4 Voting and Standstill Letter Agreement, by and between the Company and Thomas E. Reinckens, dated as of February 5, 2013.

10.5 Separation and General Release Agreement between Cache, Inc. and Thomas E. Reinckens, dated as of February 5, 2013.

10.6 Employment Agreement between Cache, Inc. and Jay Margolis, dated as of February 5, 2013

10.7 Nonqualified Stock Option Agreement between Cache, Inc. and Jay Margolis, dated as of February 5, 2013.