CACHE INC

In August 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-15 Presentation of Financial Statements — Going Concern which provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and the related footnote disclosure.  For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financials are issued.  When management identifies conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, the ASU also outlines disclosures that are required in the company’s footnotes based on whether or not there are any plans intended to mitigate the relevant conditions or events to alleviate the substantial doubt.  The ASU becomes effective for annual periods ending after December 15, 2016, and for any annual and interim periods thereafter.  Early application is permitted.  The Company is currently assessing the impact that this standard will have on its consolidated financial statements.

sublimit of $5.0 million. Short term borrowings were limited to the lower of the line of credit available or the borrowing base available as defined in the Prior Credit Agreement. Borrowings bore interest, at the Company’s option, either at the London interbank offering rate (“LIBOR”) Margin or at the Base Rate Margin. LIBOR Margin was equal to LIBOR plus a margin of 1.50% per annum when the average daily availability was equal to or greater than 50% of the borrowing base. When the average daily availability was less than 50% of the borrowing base, the LIBOR Margin was equal to LIBOR plus a margin of 1.75% per annum. Base Rate Margin was equal to the base rate as defined below, plus a margin of 0.50% per annum when the average daily availability was equal to or greater than 50% of the borrowing base. When the average daily availability was less than 50% of the borrowing base, the Base Rate Margin was equal to the base rate as defined below, plus a margin of 0.75% per annum.  The base rate, as defined in the Prior Credit Agreement, was a fluctuating rate per annum equal to the highest of (a) the U. S. federal funds rate plus a margin of 0.50% per annum, (b) the adjusted LIBOR rate plus a margin of 1.00% or (c) the Bank prime rate in effect at that time. On September 19, 2014 borrowings under the Prior Credit Agreement of $15.4 million were paid in full.

Borrowings under the New Credit Facility bear interest at a variable rate equal to the greater of 0.25% per annum and the adjusted London interbank offering rate, as defined in the New Credit Agreement, plus a margin of 5.50% per annum. At September 27, 2014, borrowings under the New Credit Facility bore interest at a rate of 5.75%. The Company has also agreed to pay a commitment fee equal to 0.25% on unused commitments and an early termination fee of 2.0% of the aggregate commitments, if the termination occurs prior to the first anniversary, or 0.75% of the aggregate commitments if the termination occurs after the first anniversary but prior to the second anniversary.

On June 30, 2014, the Company re-launched its website. There were a number of issues associated with the re-launch including: (i) the ability of online customers to purchase and redeem Company gift cards; (ii) the ability of online customers to participate in the Company’s  loyalty program; (iii) the ability of international customers to purchase merchandise online; (iv) the ability to offer online multi-tier discounts; (v) the ability to process customer returns in an automated fashion; and (vi) the ability to fulfill online orders in the Company’s brick and mortar stores. These issues impacted the Company’s results for the third quarter and as a result, the Company filed a breach of contract action against the web developer in New York Supreme Court on or about October 7, 2014, pursuant to the terms and conditions of the Master Services Agreement and Statement of Work between the parties.

On November 7, 2014, the Company entered into change in control agreements with a number of employees, including Anthony DiPippa, our Executive Vice President, Chief Financial Officer. Mr. DiPippa’s agreement provides that if a change in control (as defined in the agreement) occurs while Mr. DiPippa is employed by the Company and (i) neither the Company, nor the corporation resulting from the change in control, has a class of equity securities registered under the Securities and Exchange Act of 1934 or (ii) there is a material reduction in Mr. DiPippa’s authority, duties or responsibilities, the Company shall pay Mr. DiPippa a lump sum equal to twelve (12) months of his base salary in effect immediately prior to the change in control. Mr. DiPippa’s agreement also provides that if a change in control occurs during his employment, and he remains continuously employed by the Company until a date that is six (6) months after the change in control, the Company shall pay Mr. DiPippa a retention bonus equal to 75% of his base salary in effect immediately prior to the change in control.  Mr. DiPippa’s agreement further provides that upon termination of his employment by the Company, other than for cause (as defined in the agreement), disability (as defined in the agreement) or death, or by Mr. DiPippa with good reason (as defined in the agreement), within six (6) months following a change of control, (i) the Company shall pay Mr. DiPippa any accrued obligations and (ii) subject to signing a release of claims, the Company shall continue to provide health and welfare benefits at least equal to those provided on the date of the change of control for a period of three (3) months, unless Mr. DiPippa is reemployed and eligible for benefits under another employer provided plan.