-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G44JZ3wA0DpDoYt3pOIeMt1tj9b7yxRmwLPufVIJiGbcA/aGHZKGq2OX1uCJgXLP Z90gwuHN8BqdXxdbc0GiOg== 0001047469-08-013086.txt : 20081211 0001047469-08-013086.hdr.sgml : 20081211 20081211081539 ACCESSION NUMBER: 0001047469-08-013086 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20081101 FILED AS OF DATE: 20081211 DATE AS OF CHANGE: 20081211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: New York & Company, Inc. CENTRAL INDEX KEY: 0001211351 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] IRS NUMBER: 331031445 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-32315 FILM NUMBER: 081242372 BUSINESS ADDRESS: STREET 1: 450 WEST 33RD ST 5TH FL CITY: NEW YORK STATE: NY ZIP: 10001 BUSINESS PHONE: 212-884-2110 MAIL ADDRESS: STREET 1: 450 WEST 33RD ST 5TH FL CITY: NEW YORK STATE: NY ZIP: 10001 FORMER COMPANY: FORMER CONFORMED NAME: NY & CO GROUP INC DATE OF NAME CHANGE: 20021220 10-Q 1 a2189510z10-q.htm FORM 10-Q

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TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q


ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended November 1, 2008
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to .

COMMISSION FILE NUMBER: 1-32315

NEW YORK & COMPANY, INC.
(Exact name of registrant as specified in its charter)


DELAWARE (State of incorporation)		33-1031445 (I.R.S. Employer Identification No.)
450 West 33^rd Street 5^th Floor New York, New York 10001 (Address of Principal Executive Offices, including Zip Code)		(212) 884-2000 (Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer ý		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

As of November 28, 2008, the registrant had 60,141,979 shares of common stock outstanding.

Table of Contents

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements	1
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
	Item 4.	Controls and Procedures	25
	Item 4T.	Controls and Procedures	25
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	26
	Item 1A.	Risk Factors	26
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
	Item 3.	Defaults Upon Senior Securities	26
	Item 4.	Submission of Matters to a Vote of Security Holders	26
	Item 5.	Other Information	26
	Item 6.	Exhibits	27

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PART I.

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

New York & Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

		Three months ended November 1, 2008			Three months ended November 3, 2007			Nine months ended November 1, 2008		Nine months ended November 3, 2007

		(Amounts in thousands, except per share amounts)
Net sales		$	249,027		$	276,379		$	814,764	$	835,531
Cost of goods sold, buying and occupancy costs			186,089			194,263			579,503		595,281

	Gross profit		62,938			82,116			235,261		240,250
Selling, general and administrative expenses			76,070			73,758			222,573		214,334

	Operating (loss) income		(13,132	)		8,358			12,688		25,916
Interest expense, net of interest income of $293, $223, $958, and $1,183, respectively			232			437			412		917

	(Loss) income from continuing operations before income taxes		(13,364	)		7,921			12,276		24,999
(Benefit) provision for income taxes			(5,372	)		2,630			4,935		9,495

	(Loss) income from continuing operations		(7,992	)		5,291			7,341		15,504
	Income (loss) from discontinued operations, net of taxes		68			(21,321	)		235		(27,233	)

Net (loss) income		$	(7,924	)	$	(16,030	)	$	7,576	$	(11,729	)

Basic earnings (loss) per share:
	Basic (loss) earnings per share from continuing operations	$	(0.13	)	$	0.09		$	0.12	$	0.27
	Basic (loss) earnings per share from discontinued operations		—			(0.36	)		0.01		(0.47	)

	Basic (loss) earnings per share	$	(0.13	)	$	(0.27	)	$	0.13	$	(0.20	)

Diluted earnings (loss) per share:
	Diluted (loss) earnings per share from continuing operations	$	(0.13	)	$	0.09		$	0.12	$	0.25
	Diluted loss per share from discontinued operations		—			(0.35	)		—		(0.44	)

	Diluted (loss) earnings per share	$	(0.13	)	$	(0.26	)	$	0.12	$	(0.19	)

Weighted average shares outstanding:
	Basic shares of common stock		59,858			58,845			59,520		58,304

	Diluted shares of common stock		59,858			61,074			61,398		60,966

See accompanying notes.

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New York & Company, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

		November 1, 2008			February 2, 2008			November 3, 2007

		(Unaudited)			(Audited)			(Unaudited)
		(Amounts in thousands, except per share amounts)
Assets
Current assets:
	Cash and cash equivalents	$	41,152		$	73,734		$	14,900
	Accounts receivable		15,605			18,523			31,135
	Income taxes receivable		4,274			11,730			—
	Inventories, net		157,906			103,923			167,069
	Prepaid expenses		29,887			21,991			24,831
	Other current assets		3,663			1,913			3,926
	Current assets of discontinued operations		305			716			21,913

Total current assets			252,792			232,530			263,774
Property and equipment, net			247,547			239,557			230,175
Intangible assets			14,879			14,843			14,843
Deferred income taxes			—			—			884
Other assets			1,260			1,500			1,440
Non-current assets of discontinued operations			—			26			424

Total assets		$	516,478		$	488,456		$	511,540

Liabilities and stockholders' equity
Current liabilities:
	Current portion—long-term debt	$	6,000		$	6,000		$	6,000
	Accounts payable		101,400			77,177			110,926
	Accrued expenses		53,916			53,618			54,148
	Deferred income taxes		3,546			3,928			3,723
	Current liabilities of discontinued operations		757			7,328			6,402

Total current liabilities			165,619			148,051			181,199
Long-term debt, net of current portion			15,000			19,500			21,000
Deferred income taxes			2,824			3,747			—
Deferred rent			77,060			72,537			70,734
Other liabilities			4,680			4,660			4,377
Non-current liabilities of discontinued operations			—			—			1,409

Total liabilities			265,183			248,495			278,719
Stockholders' equity:
	Common stock, voting, par value $0.001; 300,000 shares authorized; 59,973, 59,286 and 59,260 shares issued and outstanding at November 1, 2008, February 2, 2008, and November 3, 2007, respectively		60			59			59
	Additional paid-in capital		151,965			148,208			147,866
	Retained earnings		99,550			91,974			85,102
	Accumulated other comprehensive loss		(280	)		(280	)		(206	)

Total stockholders' equity			251,295			239,961			232,821

Total liabilities and stockholders' equity		$	516,478		$	488,456		$	511,540

See accompanying notes.

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New York & Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

			Nine months ended November 1, 2008			Nine months ended November 3, 2007

			(Amounts in thousands)
Operating activities
Net income (loss)			$	7,576		$	(11,729	)
Less: Income (loss) from discontinued operations, net of taxes				235			(27,233	)

Income from continuing operations				7,341			15,504
Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations:
	Depreciation and amortization			32,130			28,337
	Amortization of deferred financing costs			133			186
	Share-based compensation expense			1,274			1,371
	Deferred income taxes			(1,305	)		(3,574	)
	Changes in operating assets and liabilities:
		Accounts receivable		2,918			(17,349	)
		Income taxes receivable		7,456			—
		Inventories, net		(53,983	)		(64,813	)
		Prepaid expenses		(7,896	)		(6,037	)
		Accounts payable		24,223			47,972
		Accrued expenses		298			(5,045	)
		Income taxes payable		—			(6,391	)
		Deferred rent		4,523			16,901
		Other assets and liabilities		(1,750	)		745

Net cash provided by operating activities of continuing operations				15,362			7,807
Investing activities
Acquisition of trademarks				(36	)		—
Proceeds from sale of fixed assets				260			—
Capital expenditures				(40,253	)		(55,977	)

Net cash used in investing activities of continuing operations				(40,029	)		(55,977	)
Financing activities
Repayment of debt				(4,500	)		(4,500	)
Payment of financing costs				—			(243	)
Proceeds from exercise of stock options				148			262
Excess tax benefit from exercise of stock options				2,336			4,431
Other				—			(136	)

Net cash used in financing activities of continuing operations				(2,016	)		(186	)
Cash flows from discontinued operations
	Operating cash flows			(6,122	)		(3,798	)
	Investing cash flows			—			(401	)
	Financing cash flows			—			—

Net cash used in discontinued operations				(6,122	)		(4,199	)
Net decrease in cash and cash equivalents				(32,805	)		(52,555	)
Cash and cash equivalents at beginning of period (including cash at discontinued operations of $223 and $206, respectively)				73,957			68,064

Cash and cash equivalents at end of period (including cash at discontinued operations of $0 and $609, respectively)			$	41,152		$	15,509

See accompanying notes.

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New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements

November 1, 2008

(Unaudited)

1. Organization and Basis of Presentation

New York & Company, Inc. (together with its subsidiaries, collectively the "Company") is a leading specialty retailer of fashion oriented, moderately priced women's apparel. The Company designs and sources its proprietary branded New York & Company™ merchandise sold exclusively through its national network of retail stores and E-commerce store at www.nyandcompany.com. The target customers for the Company's merchandise are fashion conscious, value sensitive women between the ages of 25 and 45. As of November 1, 2008, the Company operated 600 stores in 44 states.

The accompanying condensed consolidated financial statements include the accounts for New York & Company, Inc. and Lerner New York Holding, Inc. ("Lerner Holding") and its wholly owned subsidiaries, which include Lerner New York, Inc. (and its wholly owned subsidiaries, including the discontinued business at Jasmine Company, Inc.), Lernco, Inc. and Nevada Receivable Factoring, Inc. On a stand alone basis, without the consolidation of Lerner Holding and its subsidiaries, New York & Company, Inc. has no significant independent assets or operations. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly the financial condition, results of operations and cash flows for the interim periods. Certain amounts in the prior period have been reclassified to conform to the current period presentation.

The condensed consolidated financial statements as of November 1, 2008 and November 3, 2007 and for the thirteen weeks ("three months") and thirty-nine weeks ("nine months") ended November 1, 2008 and November 3, 2007 are unaudited and are presented pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC"). Accordingly, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the 52-week fiscal year ended February 2, 2008 ("fiscal year 2007"), which were filed with the Company's Annual Report on Form 10-K with the SEC on April 8, 2008. The 52-week fiscal year ending January 31, 2009 is referred to herein as "fiscal year 2008." The Company's fiscal year is a 52 or 53 week year that ends on the Saturday closest to January 31.

Due to seasonal variations in the retail industry, the results of operations for any interim period are not necessarily indicative of the results expected for the full fiscal year.

2. Discontinued Operations

On October 18, 2007, the Company announced its decision to close all stores operated by the Company's subsidiary, Jasmine Company, Inc. ("JasmineSola"), by the end of the fourth quarter of fiscal year 2007. JasmineSola was a women's retailer of upscale and contemporary apparel, footwear and accessories sold through its chain of JasmineSola branded stores. The Company decided to exit the JasmineSola business after a thorough assessment and analysis. This decision enabled the Company to focus financial and management resources on its New York & Company brand. As of February 2, 2008, the Company, as planned, completed the closure of all of the Company's JasmineSola stores and substantially completed all other exit procedures. As a result, the Company's financial statements reflect JasmineSola as discontinued operations for all periods presented in accordance with Statement

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New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

November 1, 2008

(Unaudited)

2. Discontinued Operations (Continued)

of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144").

In accordance with SFAS No. 144 and SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"), the Company recorded a $35.2 million non-cash charge in October 2007 related to the impairment of JasmineSola assets, including $17.2 million of trademarks, $11.1 million of goodwill, and $6.9 million of property and equipment. In accordance with SFAS No. 146, "Accounting for Costs Associated With Exit or Disposal Activities," the Company recorded charges during the third and fourth quarters of fiscal year 2007 of $5.8 million for lease termination costs and $1.3 million for severance costs. As of February 2, 2008, approximately $3.4 million of lease termination accruals and $0.8 million of severance accruals are included in current liabilities of discontinued operations on the consolidated balance sheet. As of November 1, 2008, the Company had paid all lease termination and severance liabilities relating to the discontinued operations.

The operating results of JasmineSola, which are being presented as discontinued operations, are as follows:

	Three months ended November 1, 2008		Three months ended November 3, 2007			Nine months ended November 1, 2008		Nine months ended November 3, 2007

	(Amounts in thousands, except per share amounts)
Net sales	$	—	$	10,601		$	—	$	29,813

Income (loss) from discontinued operations before income taxes		194		(35,655	)		361		(45,540	)
Income tax provision (benefit)		126		(14,334	)		126		(18,307	)

Income (loss) from discontinued operations, net of taxes	$	68	$	(21,321	)	$	235	$	(27,233	)

3. Earnings Per Share

Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Except when the effect would be anti-dilutive at the continuing operations level, diluted earnings (loss) per share are calculated based on the weighted average number of outstanding shares of common stock plus the dilutive effect, using the

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New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

November 1, 2008

(Unaudited)

3. Earnings Per Share (Continued)

treasury stock method, of stock options as if they were exercised and unvested restricted stock as if it were vested. A reconciliation between basic and diluted earnings (loss) per share is as follows:

		Three months ended November 1, 2008			Three months ended November 3, 2007			Nine months ended November 1, 2008		Nine months ended November 3, 2007

		(Amounts in thousands, except per share amounts)
(Loss) income from continuing operations		$	(7,992	)	$	5,291		$	7,341	$	15,504
Income (loss) from discontinued operations, net of taxes			68			(21,321	)		235		(27,233	)

Net (loss) income		$	(7,924	)	$	(16,030	)	$	7,576	$	(11,729	)

Basic earnings (loss) per share
Weighted average shares outstanding:
	Basic shares of common stock		59,858			58,845			59,520		58,304

	Basic (loss) earnings per share from continuing operations	$	(0.13	)	$	0.09		$	0.12	$	0.27
	Basic (loss) earnings per share from discontinued operations		—			(0.36	)		0.01		(0.47	)

	Basic (loss) earnings per share	$	(0.13	)	$	(0.27	)	$	0.13	$	(0.20	)

Diluted earnings (loss) per share
Weighted average shares outstanding:
	Basic shares of common stock		59,858			58,845			59,520		58,304
	Plus impact of stock options and restricted stock, net		—			2,229			1,878		2,662

	Diluted shares of common stock		59,858			61,074			61,398		60,966

	Diluted (loss) earnings per share from continuing operations	$	(0.13	)	$	0.09		$	0.12	$	0.25
	Diluted loss per share from discontinued operations		—			(0.35	)		—		(0.44	)

	Diluted (loss) earnings per share	$	(0.13	)	$	(0.26	)	$	0.12	$	(0.19	)

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New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

November 1, 2008

(Unaudited)

3. Earnings Per Share (Continued)

The calculation of diluted (loss) earnings per share for the three and nine months ended November 1, 2008 excludes options to purchase 3,052,364 and 1,396,452 shares, respectively, due to their anti-dilutive effect. The calculation of diluted earnings (loss) per share for the three and nine months ended November 3, 2007 excludes options to purchase 965,585 and 974,865 shares, respectively, due to their anti-dilutive effect.

4. Share-Based Compensation

In December 2004, the Financial Accounting Standards Board ("FASB") published SFAS No. 123 (Revised 2004), "Share Based Payment" ("SFAS No. 123-R"). SFAS No. 123-R retains certain of the requirements of the original SFAS No. 123, "Accounting for Stock Based Compensation" ("SFAS No. 123") and requires that the cost resulting from all share-based payment transactions be treated as compensation and recognized in the consolidated financial statements. The Company adopted SFAS No. 123-R in December 2004, utilizing the modified prospective method. Prior to the Company's adoption of SFAS No. 123-R, the Company followed SFAS No. 123 and treated all forms of share-based payments as compensation recognized in the consolidated statement of operations. Therefore, the adoption of SFAS No. 123-R did not have a material impact on the Company's consolidated financial statements.

The Company recorded share-based compensation expense in the amount of $0.5 million and $0.4 million for the three months ended November 1, 2008 and November 3, 2007, respectively, and $1.3 million and $1.4 million for the nine months ended November 1, 2008 and November 3, 2007, respectively.

During the nine months ended November 1, 2008, the Company issued 44,000 shares of restricted stock and 650,476 shares of common stock were issued upon exercise of stock options.

5. Pension Plan

The Company sponsors a single employer defined benefit pension plan (the "plan") covering substantially all union employees. Employees covered by collective bargaining agreements are primarily non-management store associates, representing approximately 10% of the Company's total employees. The Company's collective bargaining agreement with the Local 1102 unit of the Retail, Wholesale and Department Store Union (RWDSU) AFL-CIO is set to expire on February 28, 2009. The Company anticipates that the collective bargaining agreement with Local 1102 will be extended.

The plan provides retirement benefits for union employees, consisting of non-management store associates, who have attained the age of 21 and complete 1,000 or more hours of service in any calendar year following the date of employment. The plan provides benefits based on length of service. The Company's funding policy for the pension plan is to contribute annually the amount necessary to provide for benefits based on accrued service. The Company does not anticipate the need for a

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New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

November 1, 2008

(Unaudited)

5. Pension Plan (Continued)

material contribution to the plan for the remainder of the current fiscal year. Net periodic benefit cost includes the following components:

	Three months ended November 1, 2008			Three months ended November 3, 2007			Nine months ended November 1, 2008			Nine months ended November 3, 2007

	(Amounts in thousands)
Service cost	$	61		$	90		$	184		$	270
Interest cost		138			137			413			411
Expected return on plan assets		(173	)		(178	)		(519	)		(536	)

Net periodic benefit cost	$	26		$	49		$	78		$	145

6. Income Taxes

The effective tax rates for the three months ended November 1, 2008 and November 3, 2007 were 40.2% and 33.2%, respectively. The effective tax rates for the nine months ended November 1, 2008 and November 3, 2007 were 40.2% and 38.0%, respectively. The change in the effective tax rates for the three and nine months ended November 1, 2008, as compared to last year, is primarily due to the recognition of tax benefits during the three months ended November 3, 2007 related to the settlement of U.S. federal income taxes for the tax years 2003 through 2005.

The Company files U.S. federal income tax returns and income tax returns in various state and local jurisdictions. The Company is subject to U.S. federal income tax examinations for the 2006 tax year and each year thereafter and state and local income tax examinations for the 2004 tax year and each year thereafter.

At February 2, 2008, the Company reported a total liability of $4.3 million for unrecognized tax benefits, including interest and penalties, all of which would impact the Company's effective tax rate if reversed. There were no material changes to the liability for unrecognized tax benefits during the nine months ended November 1, 2008. The Company does not anticipate any significant increases or decreases to the balance of unrecognized tax benefits during the next twelve months.

The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense.

7. Long-Term Debt and Credit Facilities

The Company's credit facilities currently consist of a term loan, of which $21.0 million was outstanding at November 1, 2008, and a $90.0 million revolving credit facility (which includes a sub-facility available for issuance of letters of credit of up to $75.0 million), both having a maturity date of March 17, 2012.

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New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

November 1, 2008

(Unaudited)

7. Long-Term Debt and Credit Facilities (Continued)

As of November 1, 2008, the Company had availability under its revolving credit facility of $74.6 million, net of letters of credit outstanding of $7.3 million, as compared to availability of $75.3 million, net of letters of credit outstanding of $6.9 million, as of November 3, 2007.

The revolving loans under the credit facilities bear interest, at the Company's option, either at a floating rate equal to the Eurodollar rate plus a margin of between 1.00% and 1.25% per year, depending upon the Company's financial performance, or the Prime rate. The Company pays the lenders under the revolving credit facility a monthly fee on outstanding commercial letters of credit at a rate of 0.625% per year and on standby letters of credit at a rate of between 1.00% and 1.25% per year, depending upon the Company's financial performance, plus a monthly fee on a proportion of the unused commitments under that facility at a rate of 0.20% per year. The term loan bears interest at a floating rate equal to the Eurodollar rate plus 2.50% per year. If any default were to exist under the revolving credit facility and for so long as such default were to continue, at the option of the agent or lenders, the monthly fee on outstanding standby letters of credit may increase to 3.25% per year, interest on the revolving loans may increase to 3.25% per year above the Eurodollar rate for Eurodollar rate loans and 2.00% per year above the Prime rate for all Prime rate loans, and interest on the term loan may increase to the Eurodollar rate plus 4.50% per year.

The Company's credit facilities contain certain covenants, including restrictions on the Company's ability to pay dividends on its common stock, incur additional indebtedness and to prepay, redeem, defease or purchase other debt. Subject to such restrictions, the Company may incur more debt for working capital, capital expenditures, stock repurchases, acquisitions and for other purposes. The terms of the Company's credit facilities also subject it to certain maintenance covenants, which were amended on December 9, 2008. The amendment removed the maximum leverage ratio of 2.75 to 1.00 and limited the application of the minimum fixed charge coverage ratio of 1.00 to 1.00, such that the Company is only subject to the minimum fixed charge coverage ratio if borrowing availability under its revolving credit facility plus qualified cash falls below specified minimum levels. Prior to the existing term loan being repaid in full, the Company will only be subject to the minimum fixed charge coverage ratio in the event that borrowing availability under its revolving credit facility plus qualified cash falls below $30.0 million ($20.0 million during March and November). Should the Company fully repay its existing term loan, the Company will only be subject to the minimum fixed charge coverage ratio in the event that borrowing availability under its revolving credit facility falls below $12.5 million. In addition, the Company is required at all times to maintain minimum borrowing availability under its credit facility of $10.0 million. The Company is currently in compliance with the financial covenants referred to above.

The lenders have been granted a pledge of the common stock of Lerner Holding and certain of its subsidiaries, and a first priority security interest in substantially all other tangible and intangible assets of New York & Company, Inc. and its subsidiaries, as collateral for the Company's obligations under the credit facilities. In addition, New York & Company, Inc. and certain of its subsidiaries have fully and unconditionally guaranteed the credit facilities, and such guarantees are joint and several.

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New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

November 1, 2008

(Unaudited)

8. New Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157 establishes a common definition for fair value to be applied to US GAAP guidance requiring the use of fair value, establishes a framework for measuring fair value, and expands the disclosure about such fair value measurements. The application of SFAS No. 157 as it relates to financial assets and financial liabilities is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. On February 12, 2008, the FASB issued FSP FAS 157-2, "Effective Date of FASB Statement No. 157," which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis, to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company's adoption of SFAS No. 157 on February 3, 2008 for all financial assets and liabilities and any other assets and liabilities that are recognized or disclosed at fair value on a recurring basis did not impact the Company's consolidated financial statements. The provisions of SFAS No. 157 are to be applied prospectively as of the beginning of the fiscal year in which it is applied, with any transition adjustment recognized as a cumulative effect adjustment to the opening balance of retained earnings. The Company does not anticipate that the adoption of SFAS No. 157 for nonfinancial assets and liabilities measured at fair value on a non-recurring basis will have a material impact on its financial position and results of operations.

In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB statements No. 87, 88, 106, and 132(R)" ("SFAS No. 158"). SFAS No. 158 requires recognition of the overfunded or underfunded status of defined benefit postretirement plans as an asset or liability in the statement of financial position and requires companies to recognize changes in that funded status in comprehensive income (loss) in the year in which the changes occur. SFAS No. 158 also requires measurement of the funded status of a plan as of the date of the statement of financial position. SFAS No. 158 is effective for recognition of the funded status of benefit plans for fiscal years ending after December 15, 2006 and is effective for the measurement date provisions for fiscal years ending after December 15, 2008. The adoption of the recognition provisions of this Statement at February 3, 2007 did not have an impact on the Company's financial position and results of operations. The Company does not anticipate that the adoption of the measurement date provisions of this Statement will have a material impact on its financial position and results of operations.

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS No. 162"). SFAS No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with US GAAP for non-governmental entities. SFAS No. 162 is effective on November 15, 2008, which is 60 days following the SEC's September 16, 2008 approval of the Public Company Accounting Oversight Board amendments to AU Section 411, the meaning of "Present Fairly in Conformity with GAAP." Any effect of applying the provisions of SFAS No. 162 is to be reported as a change in accounting principle in accordance with FASB Statement No. 154, "Accounting Changes and Error Corrections." The Company's adoption of SFAS No. 162 will not have a material impact on its financial position and results of operations.

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New York & Company, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

November 1, 2008

(Unaudited)

9. Fair Value Measurements

As described in footnote 8, "New Accounting Pronouncements," on February 3, 2008 the Company adopted SFAS No. 157 for financial assets and liabilities and any other assets and liabilities that are recognized or disclosed at fair value on a recurring basis. SFAS No. 157 establishes a common definition for fair value to be applied to US GAAP guidance requiring the use of fair value, establishes a framework for measuring fair value, and expands the disclosure about such fair value measurements. SFAS No. 157 establishes a three level fair value hierarchy that requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs used to measure fair value are as follows:


	Level 1:		Observable inputs such as quoted prices in active markets;
	Level 2:		Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
	Level 3:		Unobservable inputs in which there is little or no market data and require the reporting entity to develop its own assumptions.

As of November 1, 2008, the carrying amount of the Company's long-term debt approximates its fair value due to the variable interest rate it carries, and as such it is classified within level 2 of the fair value hierarchy.

10. Legal Matters

On April 29, 2008, a class action claim was filed in the Superior Court of the State of California for the County of Contra Costa captioned Jannika Schakow v. Lerner New York, Inc. and New York & Company, Inc. The class action seeks relief for, among other things, meal and rest periods allegedly not provided or permitted to certain eligible employees in California. The Company has denied liability and is defending the matter.

On March 25, 2008, a class action claim was filed in the Superior Court of the State of California for the County of San Diego, the caption of which has been changed to Leslie Johnson v. Lerner New York, Inc. The class action seeks relief for, among other things, collection of customers' personal information in a manner that is allegedly in violation of California law. The Company has denied liability and is defending the matter.

11. Subsequent Events

On November 26, 2008, the Company announced that its Board of Directors authorized the repurchase of up to 3,750,000 shares over the next 12 months. Repurchases, if any, will be made from time to time in the manner the Company believes appropriate, through open market or private transactions including through pre-established trading plans. The Company plans to fund repurchases, if any, with cash from operations.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS

(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)

This Quarterly Report on Form 10-Q includes forward looking statements. Certain matters discussed in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and other sections of this Quarterly Report on Form 10-Q are forward looking statements intended to qualify for safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Some of these statements can be identified by terms and phrases such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "could," "may," "plan," "project," "predict" and similar expressions and include references to assumptions that the Company believes are reasonable and relate to its future prospects, developments and business strategies. Factors that could cause the Company's actual results to differ materially from those expressed or implied in such forward looking statements, include, but are not limited to those discussed under the heading "Item 3. Quantitative and Qualitative Disclosures About Market Risk" in this Quarterly Report on Form 10-Q and:

•: the Company's business is impacted by general economic conditions and their effect on consumer confidence and spending patterns, which have recently deteriorated significantly and may continue to do so for the foreseeable future;
•: the deteriorating economic conditions could negatively impact the Company's merchandise vendors and their ability to deliver products;
•: the Company's ability to open and operate stores successfully and the potential lack of availability of suitable store locations on acceptable terms;
•: seasonal fluctuations in the Company's business;
•: the Company's ability to anticipate and respond to fashion trends, develop new merchandise and launch new product lines successfully;
•: the Company's dependence on mall traffic for its sales;
•: the Company's dependence on the success of its brand;
•: competition in the Company's market, including promotional and pricing competition;
•: the Company's reliance on the effective use of customer information;
•: the Company's ability to service any debt it incurs from time to time as well as its ability to maintain the requirements that the agreements related to such debt impose upon the Company;
•: the susceptibility of the Company's business to extreme and/or unseasonable weather conditions;
•: the Company's ability to retain, recruit and train key personnel;
•: the Company's reliance on third parties to manage some aspects of its business;
•: changes in the cost of raw materials, distribution services or labor, including federal and state minimum wage rates;
•: the potential impact of national and international security concerns on the retail environment, including any possible military action, terrorist attacks or other hostilities;
•: the Company's reliance on foreign sources of production, including the disruption of imports by labor disputes, political instability, legal and regulatory matters, duties, taxes, other charges and

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quotas on imports, local business practices, potential delays in shipping and related pricing impacts and political issues and fluctuation in currency and exchange rates;

•: the potential impact of natural disasters and health concerns relating to outbreaks of widespread diseases, particularly on manufacturing operations of the Company's vendors;
•: the ability of the Company's manufacturers to manufacture and deliver products in a timely manner while meeting its quality standards;
•: the Company's ability to successfully integrate new or acquired businesses into its existing business;
•: the Company's reliance on manufacturers to maintain ethical business practices;
•: the Company's ability to protect its trademarks and other intellectual property rights;
•: the Company's ability to maintain, and its reliance on, its information technology infrastructure;
•: the effects of government regulation;
•: the control of the Company by its sponsors and any potential change of ownership of those sponsors; and
•: risks and uncertainties as described in the Company's documents filed with the SEC, including its Annual Report on Form 10-K, as filed on April 8, 2008.

The Company undertakes no obligation to revise the forward looking statements included in this Quarterly Report on Form 10-Q to reflect any future events or circumstances. The Company's actual results, performance or achievements could differ materially from the results expressed or implied by these forward looking statements.

Overview

The Company is a leading specialty retailer of fashion oriented, moderately priced women's apparel. The Company designs and sources its proprietary branded New York & Company merchandise sold exclusively through its national network of retail stores and E-commerce store at www.nyandcompany.com. The target customers for the Company's merchandise are fashion conscious, value sensitive women between the ages of 25 and 45. As of November 1, 2008, the Company operated 600 stores in 44 states.

As of February 2, 2008, the Company, as planned, completed the closure of the Company's 23 JasmineSola stores and substantially completed all other exit procedures. As a result, the Company's financial statements reflect JasmineSola as discontinued operations for all periods presented. Unless otherwise noted, all financial and store operating data presented in this Quarterly Report on Form 10-Q relate to the New York & Company business.

The dramatic deterioration in financial markets and the adverse effect on the U.S. and global economy throughout the three months ended November 1, 2008, resulted in a significant reduction in consumer confidence and the level of consumer spending on the merchandise the Company offers. As a result, the Company's comparable store sales decreased significantly, which resulted in a loss of leverage on buying and occupancy costs and a decline in profit margins. In response, the Company continued to manage expenses and inventory tightly, reducing selling, general and administrative expenses during the three months ended November 1, 2008 by 2.9% on an average store basis and reducing inventory levels at November 1, 2008 by 10.5% on an average store basis, as compared to last year. Despite the economic downturn, the Company strengthened its financial position as of November 1, 2008, as compared to November 3, 2007, ending the quarter with $41.2 million in cash

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and cash equivalents, working capital of $87.2 million and $74.6 million of availability under its revolving credit facility.

Net sales for the three months ended November 1, 2008 decreased 9.9% to $249.0 million, as compared to $276.4 million for the three months ended November 3, 2007. Comparable store sales decreased 14.0% for the three months ended November 1, 2008, as compared to a comparable store sales decrease of 4.8% for the three months ended November 3, 2007. Income from continuing operations for the three months ended November 1, 2008 decreased to a loss of $8.0 million, or $0.13 per diluted share, as compared to income of $5.3 million, or $0.09 per diluted share, for the three months ended November 3, 2007.

Capital spending for the nine months ended November 1, 2008 was $40.3 million, as compared to $56.0 million for the nine months ended November 3, 2007. The $40.3 million of capital spending represents $26.3 million related to the construction of new stores and the remodeling of existing stores and $13.9 million related to non-store capital projects, which principally represent information technology enhancements including, among other projects, a new POS system implemented across the chain and the upgrade of the Company's existing merchandise planning system. The Company completed the implementation of the new POS system during the third quarter and expects to complete the upgrade of its merchandise planning system during fiscal year 2009. During the nine months ended November 1, 2008, the Company opened 25 new stores, closed three stores and completed 13 remodels, ending the period operating 600 stores, as compared to 568 stores as of November 3, 2007. During the nine months ended November 3, 2007, the Company opened 37 new stores, closed five stores and remodeled 23 stores. Total selling square footage as of November 1, 2008 was 3.372 million, as compared to 3.318 million as of November 3, 2007.

The Company views the retail apparel market as having two principal selling seasons: spring (first and second quarters) and fall (third and fourth quarters). The Company's business experiences seasonal fluctuations in net sales and operating income, with a significant portion of its operating income typically realized during the fourth quarter. Seasonal fluctuations also affect inventory levels. The Company must carry a significant amount of inventory, especially before the holiday season selling period.

General

Net Sales. Net sales consist of sales from comparable and non-comparable stores and the Company's E-commerce store. A store is included in the comparable store sales calculation after it has completed 13 full fiscal months of operation from the store's original opening date or once it has been reopened after remodeling. Beginning in February 2008, sales from the Company's E-commerce store are included in comparable store sales. Non-comparable store sales include stores which have not completed 13 full fiscal months of operations, sales from closed stores, and sales from stores closed or in temporary locations during periods of remodeling. In addition, in a year with 53 weeks, sales in the last week of the year are not included in determining comparable store sales. Net sales from the sale of merchandise at the Company's stores are recognized when the customer takes possession of the merchandise and the purchases are paid for, primarily with either cash or credit card. Net sales from the sale of merchandise at the Company's E-commerce store are recognized when the merchandise is shipped to the customer. A reserve is provided for projected merchandise returns based on prior experience.

The Company issues gift cards which do not contain provisions for expiration or inactivity fees. The portion of the dollar value of gift cards that ultimately is not used by customers to make purchases is known as breakage. The Company estimates gift card breakage and records such amount as revenue as gift cards are redeemed. The Company's estimate of gift card breakage is based on analysis of

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historical redemption patterns as well as the remaining balance of gift cards for which the Company believes the likelihood of redemption to be remote.

Cost of Goods Sold, Buying and Occupancy Costs. Cost of goods sold, buying and occupancy costs is comprised of direct inventory costs for merchandise sold, distribution, payroll and related costs for design, sourcing, production, merchandising, planning and allocation personnel, and store occupancy and related costs.

Gross Profit. Gross profit represents net sales less cost of goods sold, buying and occupancy costs.

Selling, General and Administrative Expenses. Selling, general and administrative expenses include selling, store management and corporate expenses, including payroll and employee benefits, employment taxes, management information systems, marketing, insurance, legal, store pre-opening and other corporate level expenses. Store pre-opening expenses include store level payroll, grand opening event marketing, travel, supplies and other store opening expenses.

Results of Operations

The following tables summarize the Company's results of operations as a percentage of net sales and selected store operating data for the three and nine months ended November 1, 2008 and November 3, 2007:



Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold, buying and occupancy costs	74.7	%	70.3	%	71.1	%	71.2	%

Gross profit	25.3	%	29.7	%	28.9	%	28.8	%
Selling, general and administrative expenses	30.6	%	26.7	%	27.3	%	25.7	%

Operating (loss) income	(5.3	)%	3.0	%	1.6	%	3.1	%
Interest expense, net	0.1	%	0.2	%	0.1	%	0.1	%

(Loss) income from continuing operations before income taxes	(5.4	)%	2.8	%	1.5	%	3.0	%
(Benefit) provision for income taxes	(2.2	)%	0.9	%	0.6	%	1.1	%

(Loss) income from continuing operations	(3.2	)%	1.9	%	0.9	%	1.9	%
Income (loss) from discontinued operations, net of taxes	—	%	(7.7	)%	—	%	(3.3	)%

Net (loss) income	(3.2	)%	(5.8	)%	0.9	%	(1.4	)%

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	Three months ended November 1, 2008			Three months ended November 3, 2007			Nine months ended November 1, 2008			Nine months ended November 3, 2007

	(Dollars in thousands, except square foot data)
Selected operating data:
Comparable store sales decrease		(14.0	)%		(4.8	)%		(7.6	)%		(0.3	)%
Net sales per average selling square foot(1)	$	74		$	84		$	243		$	255
Net sales per average store(2)	$	416		$	491		$	1,383		$	1,514
Average selling square footage per store(3)		5,620			5,841			5,620			5,841

(1): Net sales per average selling square foot is defined as net sales divided by the average of beginning and end of period selling square feet.
(2): Net sales per average store is defined as net sales divided by the average of beginning and end of period number of stores.
(3): Average selling square footage per store is defined as end of period selling square feet divided by end of period number of stores.

	Three months ended November 1, 2008						Three months ended November 3, 2007						Nine months ended November 1, 2008						Nine months ended November 3, 2007

	Store Count			Selling Square Feet			Store Count			Selling Square Feet			Store Count			Selling Square Feet			Store Count			Selling Square Feet
Store count and selling square feet:
Stores open, beginning of period		596			3,380,169			557			3,289,341			578			3,327,450			536			3,236,540
New stores		5			22,181			12			52,063			25			104,641			37			162,527
Closed stores		(1	)		(8,682	)		(1	)		(8,800	)		(3	)		(22,804	)		(5	)		(36,823	)
Net impact of remodeled stores on selling square feet		—			(21,649	)		—			(14,752	)		—			(37,268	)		—			(44,392	)

Stores open, end of period		600			3,372,019			568			3,317,852			600			3,372,019			568			3,317,852

Three Months Ended November 1, 2008 Compared to Three Months Ended November 3, 2007

Net Sales. Net sales for the three months ended November 1, 2008 decreased 9.9% to $249.0 million, as compared to $276.4 million for the three months ended November 3, 2007. The decrease in net sales is primarily due to a decrease in comparable store sales of 14.0% for the three months ended November 1, 2008, as compared to a 4.8% decrease for the three months ended November 3, 2007. The decrease in comparable store sales for the three months ended November 1, 2008 reflects the impact of a shift in a key promotional event from the third quarter into the fourth quarter of fiscal year 2008. In the prior year, this promotional event occurred during the third quarter. The comparable store sales decrease was partially offset by an increase in non-comparable store sales, driven by net sales from new store openings not yet included in comparable store sales. In the comparable store base, average dollar sales per transaction decreased by 3.9%, and the number of transactions per average store decreased by 10.6%, as compared to the same period last year.

Gross Profit. Gross profit decreased by $19.2 million to $62.9 million, or 25.3% of net sales, for the three months ended November 1, 2008, as compared to $82.1 million, or 29.7% of net sales, for the three months ended November 3, 2007. The 440 basis point decrease in gross profit as a percentage of net sales during the three months ended November 1, 2008 is primarily the result of a 410 basis point increase in buying and occupancy costs as a percentage of net sales due to the impact of negative comparable store sales combined with an increase in real estate costs related to new and remodeled stores. In addition, merchandise margins decreased by 30 basis points during the three months ended November 1, 2008.

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Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $2.3 million to $76.1 million, or 30.6% of net sales, for the three months ended November 1, 2008, as compared to $73.8 million, or 26.7% of net sales, for the three months ended November 3, 2007. This increase in selling, general and administrative expenses as a percentage of net sales is primarily a result of the decrease in comparable store sales, partially offset by the impact of the Company's ongoing cost savings initiatives. In addition, the Company recorded a $2.5 million charge during the three months ended November 1, 2008 related to management changes that occurred during the quarter. On an average store basis, selling, general and administrative expenses declined by 2.9% during the three months ended November 1, 2008, as compared to the three months ended November 3, 2007, reflecting improved cost controls.

Operating (Loss) Income. For the reasons discussed above, operating loss for the three months ended November 1, 2008 was $13.1 million, or 5.3% of net sales, as compared to operating income of $8.4 million, or 3.0% of net sales, for the three months ended November 3, 2007.

Interest Expense, Net. Net interest expense decreased to $0.2 million for the three months ended November 1, 2008, as compared to $0.4 million for the three months ended November 3, 2007. The decrease in net interest expense for the three months ended November 1, 2008, as compared to the three months ended November 3, 2007, is primarily related to a decrease in borrowings and fluctuations in interest rates.

(Benefit) Provision for Income Taxes. The effective tax rates for the three months ended November 1, 2008 and November 3, 2007 were 40.2% and 33.2%, respectively. The change in the effective tax rate for the three months ended November 1, 2008, as compared to the three months ended November 3, 2007, is primarily due to the recognition of tax benefits during the three months ended November 3, 2007 related to the settlement of U.S. federal income taxes for the tax years 2003 through 2005.

(Loss) Income from Continuing Operations. For the reasons discussed above, loss from continuing operations for the three months ended November 1, 2008 was $8.0 million, or 3.2% of net sales, as compared to income of $5.3 million, or 1.9% of net sales, for the three months ended November 3, 2007.

Income (Loss) from Discontinued Operations, Net of Taxes. Income (loss) from discontinued operations, net of taxes represents the Company's discontinued JasmineSola business.

Nine Months Ended November 1, 2008 Compared to Nine Months Ended November 3, 2007

Net Sales. Net sales for the nine months ended November 1, 2008 decreased 2.5% to $814.8 million, as compared to $835.5 million for the nine months ended November 3, 2007. The decrease in net sales is primarily due to a decrease in comparable store sales of 7.6% for the nine months ended November 1, 2008, as compared to a 0.3% decrease for the nine months ended November 3, 2007. The comparable store sale decrease was partially offset by an increase in non-comparable store sales, driven by net sales from new store openings not yet included in comparable store sales. In the comparable store base, average dollar sales per transaction was flat, while the number of transactions per average store decreased by 7.5%, as compared to the same period last year.

Gross Profit. Gross profit decreased $5.0 million to $235.3 million, or 28.9% of net sales, for the nine months ended November 1, 2008, as compared to $240.3 million, or 28.8% of net sales, for the nine months ended November 3, 2007. Gross profit as a percentage of net sales during the nine months ended November 1, 2008 increased by 10 basis points as compared to the nine months ended November 3, 2007. This is the result of a 220 basis point improvement in merchandise margin, resulting

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primarily from a decrease in markdowns. The improvement during the first half of 2008 reflects the success of the Company's strategy to improve margin through disciplined inventory control and targeted, well-planned promotions. This improvement was largely offset by a 210 basis point increase in buying and occupancy costs as a percentage of net sales due to the impact of negative comparable store sales, combined with an increase in real estate costs related to new and remodeled stores.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $8.2 million to $222.6 million, or 27.3% of net sales, for the nine months ended November 1, 2008, as compared to $214.3 million, or 25.7% of net sales, for the nine months ended November 3, 2007. The increase in selling, general and administrative expenses as a percentage of net sales is primarily a result of the decrease in comparable store sales, partially offset by the impact of the Company's ongoing cost savings initiatives. On an average store basis, selling, general and administrative expenses declined by 2.7% during the nine months ended November 1, 2008, as compared to the nine months ended November 3, 2007.

Operating Income. For the reasons discussed above, operating income decreased $13.2 million to $12.7 million, or 1.6% of net sales, for the nine months ended November 1, 2008, as compared to $25.9 million, or 3.1% of net sales, for the nine months ended November 3, 2007.

Interest Expense, Net. Net interest expense decreased to $0.4 million for the nine months ended November 1, 2008, as compared to $0.9 million for the nine months ended November 3, 2007. The decrease in net interest expense for the nine months ended November 1, 2008, as compared to the nine months ended November 3, 2007, is primarily related to a decrease in borrowings and fluctuations in interest rates

Provision for Income Taxes. The effective tax rates for the nine months ended November 1, 2008 and November 3, 2007 were 40.2% and 38.0%, respectively. The change in the effective tax rate for the nine months ended November 1, 2008, as compared to the nine months ended November 3, 2007, is primarily due to the recognition of tax benefits during the nine months ended November 3, 2007 related to the settlement of U.S. federal income taxes for the tax years 2003 through 2005.

Income from Continuing Operations. For the reasons discussed above, income from continuing operations decreased $8.2 million to $7.3 million, or 0.9% of net sales, for the nine months ended November 1, 2008, as compared to $15.5 million, or 1.9% of net sales, for the nine months ended November 3, 2007.

Income (Loss) from Discontinued Operations, Net of Taxes. Income (loss) from discontinued operations, net of taxes represents the Company's discontinued JasmineSola business.

Non-GAAP Financial Measure

The Company has provided a non-GAAP financial measure to adjust (loss) income from continuing operations for the three and nine months ended November 1, 2008 and November 3, 2007. This information reflects, on a non-GAAP adjusted basis, the Company's (loss) income from continuing operations before interest expense, net; (benefit) provision for income taxes; and depreciation and amortization ("EBITDA"). The calculation for EBITDA is provided to enhance the user's understanding of the Company's operating results. EBITDA is provided because management believes it is an important measure of financial performance commonly used to determine the value of companies and to define standards for borrowing from institutional lenders. The non-GAAP financial information should be considered in addition to, not as an alternative to, (loss) income from continuing operations, as an indicator of the Company's operating performance, and cash flows from operating activities of continuing operations, as a measure of the Company's liquidity, as determined in

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accordance with accounting principles generally accepted in the United States. The Company may calculate EBITDA differently than other companies.

Reconciliation of (Loss) Income from Continuing Operations to EBITDA

		Three months ended November 1, 2008						Three months ended November 3, 2007					Nine months ended November 1, 2008					Nine months ended November 3, 2007

		Amounts in thousands			As a % of net sales			Amounts in thousands		As a % of net sales			Amounts in thousands		As a % of net sales			Amounts in thousands		As a % of net sales
(Loss) income from continuing operations		$	(7,992	)		(3.2	)%	$	5,291		1.9	%	$	7,341		0.9	%	$	15,504		1.9	%
Add back:
	Interest expense, net		232			0.1	%		437		0.2	%		412		0.1	%		917		0.1	%
	(Benefit) provision for income taxes		(5,372	)		(2.2	)%		2,630		0.9	%		4,935		0.6	%		9,495		1.1	%
	Depreciation and amortization		10,887			4.4	%		9,887		3.6	%		32,130		3.9	%		28,337		3.4	%

EBITDA		$	(2,245	)		(0.9	)%	$	18,245		6.6	%	$	44,818		5.5	%	$	54,253		6.5	%

Liquidity and Capital Resources

The Company's primary uses of cash are to fund working capital, operating expenses, debt service and capital expenditures related primarily to the construction of new stores, remodeling of existing stores and development of the Company's information technology infrastructure. Historically, the Company has financed these requirements from internally generated cash flow. The Company intends to fund its ongoing capital and working capital requirements, as well as debt service obligations, primarily through cash flows from operations, supplemented by borrowings under its credit facilities, if needed. The Company is in compliance with all debt covenants as of November 1, 2008.

The following tables contain information regarding the Company's liquidity and capital resources:

	November 1, 2008		February 2, 2008		November 3, 2007

	(Amounts in thousands)
Cash and cash equivalents (including cash at discontinued operations of $0, $223 and $609, respectively)	$	41,152	$	73,957	$	15,509
Working capital	$	87,173	$	84,479	$	82,575

	Nine months ended November 1, 2008			Nine months ended November 3, 2007

	(Amounts in thousands)
Net cash provided by operating activities of continuing operations	$	15,362		$	7,807
Net cash used in investing activities of continuing operations	$	(40,029	)	$	(55,977	)
Net cash used in financing activities of continuing operations	$	(2,016	)	$	(186	)
Net cash used in discontinued operations	$	(6,122	)	$	(4,199	)

Net decrease in cash and cash equivalents	$	(32,805	)	$	(52,555	)

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Operating Activities of Continuing Operations

Net cash provided by operating activities of continuing operations was $15.4 million for the nine months ended November 1, 2008, as compared to $7.8 million for the nine months ended November 3, 2007. The increase in net cash provided by operating activities for the nine months ended November 1, 2008, as compared to the nine months ended November 3, 2007, is primarily related to changes in accounts receivable, income taxes receivable, inventory, accrued expenses, and income taxes payable, partially offset by a decrease in income from continuing operations, and changes in prepaid expenses, accounts payable, deferred rent, and other assets and liabilities.

Investing Activities of Continuing Operations

Net cash used in investing activities of continuing operations was $40.0 million for the nine months ended November 1, 2008, as compared to $56.0 million for the nine months ended November 3, 2007. These amounts primarily reflect capital expenditures related to the construction of new stores, the remodeling of existing stores and non-store capital projects, which principally represent information technology enhancements including, among other projects, a new POS system being implemented across the chain and the upgrade of the Company's existing merchandise planning system. The Company completed the implementation of the new POS system during the third quarter and expects to complete the upgrade of its merchandise planning system during fiscal year 2009.

The Company opened 25 new stores and completed 13 remodels in the nine months ended November 1, 2008, as compared to opening 37 new stores and 23 remodels in the nine months ended November 3, 2007. The Company currently plans to have opened 25 stores, closed 15 stores and remodeled 14 stores in fiscal year 2008, ending the fiscal year with 588 stores and approximately 3.3 million selling square feet in operation.

The Company anticipates that the current economic downturn may continue into the foreseeable future and in response, for the fiscal year ending January 30, 2010 ("fiscal year 2009"), the Company plans to focus on improving the productivity of its existing locations and be extremely selective in the opening of new stores. The Company currently expects fiscal year 2009 capital expenditures to be approximately $15.0 million, as compared to the current fiscal year 2008 capital expenditure forecast of $50.0 million.

The Company's future capital requirements will depend primarily on the number of new stores it opens, the number of existing stores it remodels and the timing of these expenditures.

Financing Activities of Continuing Operations

Net cash used in financing activities of continuing operations was $2.0 million for the nine months ended November 1, 2008, as compared to $0.2 million for the nine months ended November 3, 2007. Net cash used in financing activities of continuing operations for the nine months ended November 1, 2008 consists of quarterly payments against the Company's outstanding term loan totaling $4.5 million, partially offset by $2.5 million of proceeds from the exercise of stock options and the related tax benefit to the Company. Net cash used in financing activities of continuing operations for the nine months ended November 3, 2007 primarily consists of quarterly payments against the Company's outstanding term loan totaling $4.5 million offset by $4.7 million of proceeds from the exercise of stock options and the related tax benefit to the Company.

Discontinued Operations Cash Flows

Net cash used in discontinued operations was $6.1 million for the nine months ended November 1, 2008, as compared to $4.2 million for the nine months ended November 3, 2007. Net cash used in discontinued operations for the nine months ended November 1, 2008 consisted primarily of lease

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termination payments and the payment of other exit related liabilities. Net cash used in discontinued operations for the nine months ended November 3, 2007 consisted primarily of cash flows from the operations of the discontinued JasmineSola business.

Long-Term Debt and Credit Facilities

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Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that impact the amounts reported on the Company's consolidated financial statements and related notes. On an ongoing basis, management evaluates its estimates and judgments, including those related to inventories, long-lived assets, goodwill and other intangible assets. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ materially from these judgments. Management believes the following estimates and assumptions are most significant to reporting the Company's results of operations and financial position.

Inventory Valuation. Inventories are principally valued at the lower of average cost or market, on a weighted average cost basis, using the retail method. The Company records a charge to cost of goods sold, buying and occupancy costs for all inventory on-hand when a permanent retail price reduction is reflected in its stores. In addition, management makes estimates and judgments regarding, among other things, initial markup, markdowns, future demand and market conditions, all of which significantly impact the ending inventory valuation. If actual future demand or market conditions are different than those projected by management, future period merchandise margin rates may be unfavorably or favorably affected. Other significant estimates related to inventory include shrink and obsolete and excess inventory which are also based on historical results and management's operating projections.

Impairment of Long-Lived Assets. The Company evaluates long-lived assets in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). Long-lived assets are evaluated for recoverability in accordance with SFAS No. 144 whenever events or changes in circumstances indicate that an asset may have been impaired. In evaluating an asset for recoverability, the Company estimates the future cash flow expected to result from the use of the asset and eventual disposition. If the sum of the expected future undiscounted cash flow is less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount over the fair value of the asset, is recognized. An impairment loss could have a material adverse impact on the Company's financial condition and results of operations. The Company's evaluation for the nine months ended November 1, 2008 resulted in no material asset impairment charge.

Goodwill and Other Intangible Assets. SFAS No. 142, "Goodwill and Other Intangible Assets," prohibits the amortization of goodwill and intangible assets with indefinite lives. The Company's intangible assets consist of the New York & Company trademarks and historically the JasmineSola trademarks and goodwill associated with the acquisition of JasmineSola on July 19, 2005, which were initially valued at $14.8 million, $17.2 million and $11.1 million, respectively. The trademarks were initially valued using the "relief from royalty method" and were determined to have indefinite lives by an independent appraiser. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired.

The Company tests for impairment of goodwill and other intangible assets at least annually in the fourth quarter, or more frequently if events or circumstances indicate that the asset may be impaired, by comparing the fair value with the carrying amount for each individual asset. Goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is to identify a potential impairment by comparing the fair value of a reporting unit with its carrying amount, including the goodwill assigned to the reporting unit. The estimate of fair value of a reporting unit is determined using a discounted cash flow model. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not deemed to be impaired and the second step of the impairment test is not performed. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The

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second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit.

The impairment test for other intangible assets not subject to amortization consists of a comparison of the fair value of the intangible asset with its carrying value. The estimates of fair value of intangible assets not subject to amortization, specifically trademarks, are determined using the "relief from royalty method." If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

The calculation of estimated fair values used in the evaluation of goodwill and other intangible assets requires estimates of future cash flows, growth rates, discount rates and other variables, that are based on historical experience, knowledge, and market data. If actual experience differs materially from management's estimates or if changes in strategic direction occur, an impairment charge may be required. Management's estimates may be affected by factors such as those outlined in the section of this report entitled Management's Discussion and Analysis of Financial Condition and Results of Operations—Special Note Regarding Forward-Looking Statements and Risk Factors. An impairment loss could have a material adverse impact on the Company's results of operations. In connection with the decision to exit the JasmineSola business, during the third quarter of fiscal year 2007, the Company recorded non-cash impairment charges of $17.2 million and $11.1 million related to the JasmineSola trademarks and goodwill, respectively.

Income Taxes. Income taxes are calculated in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires the use of the liability method. Deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Inherent in the measurement of deferred balances are certain judgments and interpretations of enacted tax laws and published guidance with respect to applicability to the Company's operations. Deferred tax assets are believed to be fully realizable as management expects future taxable income will be sufficient to recover the asset values and, as such, no related valuation allowance has been provided for. The Company adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109" in the first quarter of fiscal year 2007. This Interpretation prescribes a comprehensive model of how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. Under this Interpretation, the Company recognizes a tax benefit when a tax position is more-likely-than-not to be sustained upon examination, based solely on its technical merits. The Company measures the recognized tax benefit as the largest amount of tax benefit that has greater than a 50% likelihood of being realized upon the ultimate settlement with a taxing authority. The Company reverses a previously recognized tax benefit if it determines that the tax position no longer meets the more-likely-than-not threshold of being sustained. The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense.

Adoption of New Accounting Standards

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financial assets and financial liabilities is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. On February 12, 2008, the FASB issued FSP FAS 157-2, "Effective Date of FASB Statement No. 157," which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis, to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company's adoption of SFAS No. 157 on February 3, 2008 for all financial assets and liabilities and any other assets and liabilities that are recognized or disclosed at fair value on a recurring basis did not impact the Company's consolidated financial statements. The provisions of SFAS No. 157 are to be applied prospectively as of the beginning of the fiscal year in which it is applied, with any transition adjustment recognized as a cumulative effect adjustment to the opening balance of retained earnings. The Company does not anticipate that the adoption of SFAS No. 157 for nonfinancial assets and liabilities measured at fair value on a non-recurring basis will have a material impact on its financial position and results of operations.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rates. The Company's market risks relate primarily to changes in interest rates. The Company's credit facilities carry floating interest rates that are tied to the Eurodollar rate and the Prime rate and therefore, the consolidated statements of operations and the consolidated statements of cash flows will be exposed to changes in interest rates. A 1.0% interest rate increase would increase interest expenses by approximately $0.3 million annually. The Company historically has not engaged in interest rate hedging activities.

Currency Exchange Rates. The Company historically has not been exposed to currency exchange rate risks with respect to inventory purchases as such expenditures have been, and continue to be, denominated in U.S. Dollars. The Company purchases some of its inventory from suppliers in China, for which the Company pays U.S. Dollars. Since July 2005, China has been slowly increasing the value of the Chinese Yuan, which is now linked to a basket of world currencies. If the exchange rate of the Chinese Yuan to the U.S. Dollar continues to increase, the Company may experience fluctuations in the cost of inventory purchased from China and the Company would adjust its supply chain accordingly.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures. The Company carried out an evaluation, as of November 1, 2008, under the supervision and with the participation of the Company's management, including the Company's Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures are effective in ensuring that all information required to be filed in this Quarterly Report on Form 10-Q was (i) recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission's rules and forms (ii) and that the disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its Principal Executive and Principal Financial Officers, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting. There has been no change in the Company's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 or 15d-15 that occurred during the Company's last fiscal quarter (the Company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

ITEM 4T. CONTROLS AND PROCEDURES

(a) Not Applicable.

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PART II.
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material changes in the Company's legal proceedings from what was reported in its Annual Report on Form 10-K filed with the SEC on April 8, 2008.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report and the risk factor set forth below, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2008 as filed with the Securities and Exchange Commission on April 8, 2008, which could materially affect the Company's business, financial condition, financial results or future performance. Reference is made to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations—Special Note Regarding Forward-Looking Statements and Risk Factors" of this report which is incorporated herein by reference.

Economic conditions may cause a decline in business and consumer spending which could adversely affect our business and financial performance.

The Company's business is impacted by general economic conditions and their effect on consumer confidence and the level of consumer spending on the merchandise the Company offers, which have recently deteriorated significantly and may continue to do so for the foreseeable future. These economic factors include recessionary cycles, interest rates, economic growth, wage rates, unemployment levels, energy prices, availability of consumer credit, and consumer confidence, among others. The current downturn in the economy may continue to affect consumer purchases of the Company's merchandise and to adversely impact the Company's results of operations, liquidity and continued growth. In addition, the deteriorating economic conditions could negatively impact the Company's merchandise vendors and their ability to deliver products, which may adversely impact the Company's results of operations, liquidity and continued growth.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

(a) On December 9, 2008, the Company amended certain terms of the Second Amended and Restated Loan and Security Agreement by and among Lerner New York, Inc., Lernco, Inc., Jasmine Company, Inc., Wachovia Bank, National Association, as Agent for itself and the other Lender named therein (the "Loan Agreement"). The amendment removed the maximum leverage ratio of 2.75 to 1.00 and limited the application of the minimum fixed charge coverage ratio of 1.00 to 1.00, such that the Company is only subject to the minimum fixed charge coverage ratio if borrowing availability under its revolving credit facility plus qualified cash falls below specified minimum levels. Prior to the existing term loan being repaid in full, the Company will only be subject to the minimum fixed charge coverage

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ratio in the event that borrowing availability under its revolving credit facility plus qualified cash falls below $30.0 million ($20.0 million during March and November). Should the Company fully repay its existing term loan, the Company will only be subject to the minimum fixed charge coverage ratio in the event that borrowing availability under its revolving credit facility falls below $12.5 million. In addition, the Company is required at all times to maintain minimum borrowing availability under its credit facility of $10.0 million.

The amendment does not affect any of the interest rates, letter of credit fees, unused line fees or any other provisions of the Loan Agreement.

ITEM 6. EXHIBITS

The following exhibits are filed with this report and made a part hereof.


	10.1		Separation Agreement and General Release between New York & Company, Inc., Lerner New York, Inc. and Ronald W. Ristau, dated November 19, 2008.
	10.2		Amendment No. 1 to Second Amended and Restated Loan and Security Agreement by and among Lerner New York, Inc., Lernco, Inc., Jasmine Company, Inc., Wachovia Bank, National Association, as Agent for itself and the other Lender named therein, dated as of December 9, 2008.
	31.1		Certification by the Chairman and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated December 11, 2008.
	31.2		Certification by the Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated December 11, 2008.
	32.1		Written Statement of the Chairman and Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated December 11, 2008.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		NEW YORK & COMPANY, INC.
		/s/ SHEAMUS G. TOAL
		By:		Sheamus G. Toal
		Its:		Executive Vice President and Chief Financial Officer (Principal Financial Officer)
		Date:		December 11, 2008

EX-10.1 2 a2189510zex-10_1.htm EXHIBIT 10.1

Exhibit 10.1

Execution Copy

SEPARATION AGREEMENT AND GENERAL RELEASE

This Separation Agreement and General Release (the “Agreement”), is entered into on this 19th day of November, 2008, by and among New York & Company, Inc. (f/k/a/ NY & Co. Group, Inc.), a Delaware corporation (“Holdings”), Lerner New York, Inc., a Delaware corporation (“Lerner,” and, together with Holdings, the “Companies”), and Ronald Ristau (“Executive”).

WHEREAS, the parties are party to the Second Amended and Restated Employment Agreement, dated as of August 25, 2004, as amended by Amendment No. 1 to the Second Amended and Restated Employment Agreement, dated as of December 22, 2006, by and among the Companies and Executive, and as further amended by Amendment No. 2 to the Second Amended and Restated Employment Agreement, dated as of April 10, 2008, by and among the Companies and Executive (the “Employment Agreement”);

WHEREAS, Executive’s employment with the Companies has terminated as of October 24, 2008 (the “Separation Date”); and

WHEREAS, Executive and the Companies would like to formalize their agreement regarding the termination of their relationships.

NOW, THEREFORE, in consideration of the payments due Executive under the Employment Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Termination. Executive and the Companies agree that Executive’s employment with the Companies and their direct and indirect Subsidiaries (as defined in Section 16 of the Employment Agreement) ceased as of the close of business on the Separation Date. Executive and the Companies further agree that, in accordance with the provisions of Section 21 of the Employment Agreement, any requirement under the Employment Agreement in respect of any written notice of termination shall be deemed waived. In connection therewith, the Companies acknowledge (i) having received, as of the Separation Date, written notice of Executive’s resignation (the “Resignation Letter”) from each of Executive’s positions as an officer, director or manager of Holdings or any of its Subsidiaries, including Executive’s positions as President and Chief Financial Officer of Holdings and Lerner as well as Executive’s position as a member of the Board of Directors of Holdings and (ii) that the receipt of such Resignation Letter will have fully discharged the Executive of any responsibilities to the Companies under Section 22 of the Employment Agreement.

2. Acceptance of Agreement; Revocation. This Agreement was received by Executive on November 19, 2008. Executive may accept this Agreement by returning a signed original to Lerner or to Holdings at any time before December 11, 2008. This Agreement shall be withdrawn if not accepted as provided in the previous sentence on or before December 10, 2008. Executive shall have seven days after signing this Agreement to revoke it by delivering written

confirmation of revocation to Lerner or to Holdings within such seven day period. This Agreement will not become effective until the revocation period has expired without revocation of this Agreement by Executive (the “Effective Date”); provided that revocation of this Agreement shall not affect the resignation of Executive in Section 1 above.

3. Separation Benefits. Subject to (i) the execution and delivery of this Agreement, and the expiration of the applicable revocation period without this Agreement being revoked by Executive, in each case by December 11, 2008, and in full discharge of all obligations owed to Executive by the Companies and their Subsidiaries under the Employment Agreement, and (ii) continued observance by Executive in all material respects of the covenants contained in Section 11 of the Employment Agreement (as modified herein), Executive shall be entitled to the following benefits:

(a) On or before November 30, 2008, and without regard to whether Executive complies with Section 2 of this Agreement, Holdings shall pay Executive (i) the Accrued Compensation (as defined in Section 9(a) of the Employment Agreement, without regard to clause (iii) thereof), which shall include three days of unused paid time off and (ii) reimbursement in accordance with Section 7(b) of all expenses reasonably incurred by Executive in connection with the performance of his duties under the Employment Agreement or for promoting, pursuing or otherwise furthering the business or interests of Holdings or its Subsidiaries incurred through the Separation Date and presented to Holdings for reimbursement.

(b) Holdings shall pay Executive a Bonus (as defined in Section 4(a) of the Employment Agreement) in an amount equal to (i) the product of (A) Fall Bonus (as defined in Section 4(b) of the Employment Agreement) that would otherwise have been payable to Executive for the period ending on January 31, 2009, (had Executive continued to be an employee of Holdings through the end of such period) determined based on the actual performance of the Companies and their Subsidiaries through such date and (B) 50% (the “Pro Rata Fall Bonus”) and (ii) the product of (A) Full Year Bonus (as defined in Section 4(b) of the Employment Agreement) that would otherwise have been payable to Executive for the period ending January 31, 2009, (had Executive continued to be an employee of Holdings through the end of such period) determined based on the actual performance of the Companies and their Subsidiaries through such date and (B) 75% (the “Pro Rata Full Year Bonus”). If such bonuses become due, the Pro Rata Fall Bonus and Pro Rata Full Year Bonus shall each be paid to Executive when similar fall and annual bonuses, respectively, are paid to Lerner’s employees generally, but in any event, on or after April 24, 2009 and prior to May 8, 2009.

(c) As consideration for the continued observance by Executive in all material respects of the covenants contained in Section 11(b) of the Employment Agreement (as modified herein), Holdings shall continue Executive’s Base Salary (as defined in Section 3 of the Employment Agreement) of $600,000 from the date immediately following the Separation Date to the second anniversary of the Separation Date (the “Salary Continuation Period”). Payments during the Salary Continuation Period (the “Salary Continuation Payments”) shall be made on a weekly basis, the gross amount of each such weekly payment being $11,538.46, with the first such payment being made on the first day of the seventh month following the Separation Date in respect of the Salary Continuation Payments that otherwise would have been made to Executive during the period

beginning on the first day of the Salary Continuation Period and ending on April 24, 2009. Payments following this initial payment shall be made on a weekly basis, the gross amount of each such weekly payment being $11,538.46, through the duration of the Salary Continuation Period.

(d) As consideration for the continued observance by Executive in all material respects of the covenants contained in Section 11(b) of the Employment Agreement (as modified herein), Holdings shall pay Executive an amount equal to (i) Executive’s Spring Target Bonus ($157,500) (as defined in Section 4(b) of the Employment Agreement) for the six-month period commencing on each of February 1, 2009 and January 31, 2010, with each such payment to be made at the time Spring Target Bonuses are paid to other executives, but in any event prior to August 31, 2009 (in the case of the first payment) and on or after January 1, 2010, but in any event prior to August 31, 2010 (in the case of the second payment), (ii) Executive’s Fall Target Bonus ($202,500) (as defined in Section 4(b) of the Employment Agreement) for the six-month period commencing on each of August 2, 2009 and August 1, 2010, with each such payment to be made at the time Fall Target Bonuses are paid to other executives, but in any event on or after January 1, 2010 and prior to March 31, 2010 (in the case of the first payment) and on or after January 1, 2011 and prior to March 31, 2011 (in the case of the second payment), and (iii) Executive’s Full-Year Target Bonus ($90,000) (as defined in Section 4(b) of the Employment Agreement) for the twelve-month period commencing on each of February 1, 2009 and January 31, 2010, with each such payment to be made at the time Full-Year Target Bonuses are paid to other executives, but in any event on or after January 1, 2010 and prior to March 31, 2010 (in the case of the first payment) and on or after January 1, 2011 and prior to March 31, 2011 (in the case of the second payment). No payment under this Section 3(d) shall be made prior to April 24, 2009.

(e) Holdings shall take such actions as may be necessary to immediately vest Executive’s unvested stock option or other unvested long-term incentive awards that, by their terms, would have vested during the calendar year in which Executive’s employment was terminated. Since there are no unvested stock options or long-term incentive awards held by Executive that, by their terms, vest during 2008, Executive is not entitled to additional vesting of any outstanding equity awards and all equity awards held by or through Executive shall continue to be subject to the terms and conditions applicable to such equity awards.

(f) During the Salary Continuation Period, Holdings shall, at its expense, provide to Executive and Executive’s covered dependents medical and dental benefits substantially similar in the aggregate to those provided to Executive and Executive’s covered dependents immediately prior to the Separation Date, including benefits provided under the New York & Company Executive Medical Plan (the “Executive Medical Plan”). Holdings shall (i) provide Executive with a monthly cash reimbursement equal to the total monthly premium payment (employee and employer portion) paid for coverage of Executive and Executive’s covered dependents, such payment to be made within one month of Executive’s payment of the applicable premium, and (ii) provide a monthly cash reimbursement to Executive of amounts not covered under such continued medical coverage, to the extent permitted by the Executive Medical Plan, such monthly reimbursement to be made as soon as administratively practicable after submission of the documents required for reimbursement. The amount of expenses eligible for reimbursement under this Section 4(f) during one taxable year of the Executive shall not affect the expenses eligible for reimbursement in any other taxable year of the Executive. The Executive’s right to reimbursement under this Section 4(f) shall not be subject to

liquidation or exchange for another benefit. Notwithstanding the foregoing provisions of this Section 4(f), Holdings’ obligation with respect to coverage under this Section 4(f) shall be eliminated to the extent that Executive or Executive’s covered dependents, as applicable, obtain, during the Salary Continuation Period, equivalent or substantially similar benefits pursuant to a subsequent employer’s benefit plans. Holdings hereby acknowledges and agrees that Executive’s termination of employment with the Companies as of the Separation Date shall not be treated as a “qualifying event” within the meaning of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), and that, upon the cessation of coverage under this Section 4(f), Executive and Executive’s covered dependents shall have all rights to which they are entitled under COBRA. Thereafter, Holdings’ obligation with respect to such coverage shall be eliminated to the extent that such coverage terminates in accordance with COBRA.

(g) Holdings will provide Executive with Holdings’ executive level outplacement services through Lee Hecht Harrison; provided that Executive begins using such service no later than January 31, 2009.

(h) Holdings shall cause its legal counsel to render any number of opinions (but not more than two opinions in any 45 day period and not more than 15 opinions in the aggregate) to its transfer agent to permit the sale of Executive’s shares of Holdings common stock pursuant to Rule 144 under the Securities Act of 1933, as amended, within ten business days of receiving all documentation reasonably requested from Executive, including any certificates from third parties, as being necessary for legal counsel to render such opinions. Holdings or its counsel shall provide appropriate instruction to Executive regarding documentation necessary in order to render such opinions.

(i) Holdings shall, at its expense, assist Executive in compliance with Executive’s obligations under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including, but not limited to, preparation and filing of any Forms 4 required to be filed by Executive; provided, however, that Executive shall provide Holdings with appropriate notice of any transactions required to reported under Section 16(a) of the Exchange Act, either prior to the time such transactions are effected or contemporaneously with such transactions if prior notice is impractical, so that Holdings will have adequate time to prepare any necessary filings on a timely basis.

(j) Each weekly or monthly installment payment made pursuant to this Section 3 shall be treated by the Companies and Executive as a separate payment for all purposes of the Final Treasury Regulations under Section 409A (“409A”) issued on April 17, 2007 (the “Regulations”).

(k) For purposes of determining whether Executive has incurred a “separation from service” under the Regulations, the Companies agree that the “default rule” should be applied for purposes of defining “service recipient” and “employer” under the Regulations.

(l) The parties acknowledge and agree that Executive is not entitled to any further payment under the Employment Agreement, including Section 9 thereof, and that any of the Companies’ payment obligations contained in the Employment Agreement (other than those set forth in Section 23 of the Employment Agreement) shall become null and void upon the Effective Date.

(m) Notwithstanding anything in this Agreement to the contrary, Lerner shall be jointly and severally liable for the obligations to Executive under this Agreement, including, but not limited to, the obligations of Holdings under Section 3 of this Agreement.

(n) In the event of Executive’s death prior to the end of the Salary Continuation Period, Holdings shall pay to Executive’s estate, or as may be directed by the legal representatives of such estate, the benefits due pursuant to (a)-(f) of this Section 3, at the time and in the same form that such payments are due to the Executive thereunder.

(o) Section 11(b) of the Employment Agreement is hereby modified so that only Competitive Activity for any of the entities listed on Exhibit A hereto, including their Subsidiaries and successors and assigns by reason of merger, consolidation, reorganization or otherwise, will be considered restricted by such Section 11(b) of the Employment Agreement.

4. Unconditional and Full General Release of All Claims. Executive on his behalf and on behalf of his agents, heirs, administrators, executors, attorneys and assigns, and anyone acting or claiming on each of their respective behalves, hereby covenants never to sue, releases, waives, acquits, and forever discharges the Companies, their divisions, Subsidiaries, affiliates, parents, members, related entities, and their respective past or present employees, officers, directors, stockholders, partners, investors, executives, managers, agents, attorneys, representatives, successors and assigns, and anyone acting on their joint or several behalf (collectively, the “Releasees”), from any and all claims, actions, causes of action, demands, damages, suits in equity, costs, expenses, liabilities, or other losses, of any kind whatsoever, whether known or unknown, which exist or may exist from the beginning of time up to and including the date of Executive’s execution of this Agreement or which in any way arise from, grow out of, or are related to events or circumstances that occurred on or prior to the date of Executive’s execution of this Agreement, including but not limited to any matter related to Executive’s employment with the Companies and their Subsidiaries or the termination thereof. By way of example only and without limiting the immediately preceding sentence, as used herein the terms “claims,” “causes of action” and “demands” shall include, and Executive agrees that neither Executive nor Executive’s representative(s) shall file, or cause to be filed, a charge, complaint, lawsuit, or any other claim against the Releasees with respect to, (a) any federal, state, or local employment law or statute, including, but not limited to Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, the Americans with Disabilities Act, the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act), the Family and Medical Leave Act of 1993, the Worker Adjustment Retraining and Notification Act or the Employee Retirement Income Security Act, or (b) any claim based on the existence or breach of oral or written contracts of employment, the negligence of any Releasee, negligent or intentional misrepresentations, promissory estoppel, interference with contract or employment, defamation or damage to business or personal reputation, assault and battery, negligent or intentional infliction of emotional distress, unlawful discharge in violation of public policy, discrimination, retaliation, wrongful discharge, sexual harassment, whistleblowing, breach of implied covenant of good faith, fraud, stock fraud, equity, tort, intellectual property, personal injury, spoliation of evidence, wage and hour law, statute or common law, claims for severance pay, claims related to equity compensation and/or fringe benefits, claims for attorneys’ fees, vacation pay, debts, accounts, compensatory damages, punitive or exemplary damages or liquidated damages. Notwithstanding the foregoing, Executive shall not be deemed to have released any of the following

claims: (i) claims for indemnity or contribution or claims for coverage under any D&O insurance policies maintained by the Companies or their Subsidiaries, in each case, in respect of claims asserted against Executive in his capacity as an employee, director or officer of the Companies or their Subsidiaries, (ii) claims for vested retirement benefits or continued welfare coverage pursuant to COBRA, (iii) claims based on events occurring after this agreement is executed by Executive or (iv) payments required to be made under this Agreement . Except as provided herein and Section 23 of the Employment Agreement (which shall apply in accordance with its terms), Executive acknowledges and agrees that the Companies and their Subsidiaries have no further obligations or commitments to Executive under the Employment Agreement.

5. Continuing Covenants. In consideration of Holdings’ promise to provide the benefits set forth in Section 3(b)-3(i), Executive hereby agrees to comply with and be subject to Section 11 of the Employment Agreement (as modified herein) and that Section 11(e) of the Employment Agreement shall apply to any violation of this Section 5 or Section 11 of the Employment Agreement (as modified herein). Executive hereby acknowledges that the enforcement of the provisions of this Section 5 and Section 11 of the Employment Agreement (as modified herein) may potentially interfere with Executive’s ability to pursue a proper livelihood. Executive recognizes and agrees that the enforcement of this Agreement is necessary to ensure the preservation, protection and continuity of the business, trade secrets and goodwill of Holdings and Lerner. Executive agrees that, due to the proprietary nature of Holdings’ business, the restrictions set forth in this Agreement are reasonable as to time and scope. Executive hereby acknowledges that he has been advised to consult with an attorney before executing this Agreement and that he has done so or, after careful reading and consideration, he has chosen not to do so of his own volition.

6. Future Cooperation.

(a) Executive agrees to fully and completely cooperate with the Companies, their advisors, and their legal counsel with respect to any litigation that is pending against either or both of the Companies and any claim or action that may be filed against either or both of the Companies in the future, in each case, to the extent Executive has knowledge relevant to such action. Such cooperation shall include making Executive available at reasonable times and places, taking into account Executive’s personal and business schedule, for interviews, reviewing documents, testifying in a deposition or a legal or administrative proceeding, and providing advice to either or both of the Companies in preparing defenses to any pending or potential future claims against either or both of the Companies.

(b) If Executive is legally required to appear or participate in any proceeding that involves or is brought against either or both of the Companies, Executive agrees to disclose to the Companies no later than ten business days prior to the date that such disclosure is to be made, unless compelled by law or the written advice of engaged legal counsel to do otherwise, what Executive plans to say or produce and to otherwise cooperate fully with the Companies.

(c) Executive agrees to reasonably cooperate with Holdings as necessary for Holdings to comply with its public disclosure requirements.

(d) Executive shall be entitled to be reimbursed by the Companies for all reasonable and necessary out-of-pocket expenses actually incurred by him during the period beginning on the first day of the Salary Continuation Period and ending on the last date with respect to which Executive discharges his obligations under (a), (b) or (c) of this Section 6 as a result of the performance of his obligations under Section 6 of this Agreement; provided that such expenses over U.S. $100 must be pre-approved by the Companies.

7. Nondisparagement; No Communication Regarding the Companies. Executive agrees that he shall not make any malicious, disparaging, or defamatory statements regarding the Companies, their Subsidiaries, any of their affiliates, directors, stockholders, members, officers or employees, or any of their businesses or products, or any aspect of Executive’s prior employment therewith; provided that Holdings shall not withhold any payments or benefits required to be made under this Agreement because of a violation of this Section 7 unless Executive materially or intentionally violates this Section 7 and such violation results in demonstrable damage to Holdings or its Subsidiaries. Nothing herein shall prevent Executive from making truthful statements required to be made pursuant to applicable law.

8. No Admission of Wrongful Conduct. Executive hereby acknowledges and agrees that, by the Companies’ entering into this Agreement, neither the Companies nor the Releasees are admitting any unlawful or otherwise wrongful conduct or liability to Executive or Executive’s heirs, executors, administrators, assigns, agents, or other representatives.

9. Executive Acknowledgment. EXECUTIVE UNDERSTANDS AND AGREES THAT EXECUTIVE MAY BE WAIVING SIGNIFICANT LEGAL RIGHTS BY SIGNING THIS AGREEMENT, AND ACKNOWLEDGES THAT EXECUTIVE IS EXECUTING THIS AGREEMENT VOLUNTARILY AND OF EXECUTIVE’S OWN FREE WILL AND THAT EXECUTIVE FULLY UNDERSTANDS THE TERMS OF THIS AGREEMENT. Further, Executive acknowledges that Executive has had an opportunity to review this Agreement fully and to discuss its terms with legal counsel or any other advisor of Executive’s choice prior to its execution.

10. Ownership of Claims; No Filing of Claims. Executive represents, warrants and agrees that Executive has not heretofore assigned or transferred, or purported to assign or transfer, to any person, any claim or portion thereof or interest therein. Executive further represents and warrants that Executive does not presently have on file any claims, charges, grievances or complaints against any of the Releasees in or with any administrative, state, federal or governmental entity, agency, board or court, or before any other tribunal or panel or arbitrators, public or private, based upon any actions or omissions by the Releasees occurring prior to the Effective Date.

11. No Attorneys’ Fees or Costs. Executive and the Companies acknowledge and agree that the parties to this Agreement shall not be required to pay any attorneys’ fees or any other costs incurred by any other party to this Agreement in connection with the negotiation and execution of this Agreement.

12. Arbitration. Any dispute regarding any aspect of this Agreement, including its formation, or any act which would violate any provision in this Agreement (other than disputes with respect to alleged violations of the Covenants and Sections 5, 6 and 7 of this Agreement, which shall

be governed by Section 11(e) of the Employment Agreement) shall be resolved in accordance with Section 18 of the Employment Agreement.

13. No Representations. The parties hereto represent and warrant that they are not relying on statements, representations or promises made by the other party or its agent(s) except as specifically set forth herein.

14. Successors. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by the parties hereto and their respective successors and assigns.

15. Governing Law; Jurisdiction. This Agreement is made and entered into in the State of New York, and shall in all respects be interpreted, enforced and governed by and under the internal laws of the State of New York, and Holdings and Lerner shall require any successor or assign to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Holdings and/or Lerner, as applicable, would be required to perform it if no such succession or assignment had taken place.

16. Counterparts and Facsimile Execution. This Agreement may be executed and delivered (a) in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument, and/or (b) by facsimile, in which case (i) the instrument so executed and delivered shall be binding and effective and deemed an original for all purposes, and (ii) the parties shall nevertheless exchange substitute hard copies of such facsimile instruments as soon thereafter as practicable (but the failure to do so shall not affect the validity of the instruments executed and delivered by facsimile).

17. Entire Agreement. This Agreement constitutes the entire agreement among the Companies and Executive and this Agreement shall supersede any prior written or oral agreements, understandings, or arrangements between the parties regarding any of the items addressed in the sections above, except for the terms of the Employment Agreement, which agreement shall remain in full force and effect, and any benefit plan document that shall continue to be governed by the terms and conditions of said document, including, without limitation, any medical or dental insurance plan, any stock option plan or any other vested retirement benefits or continued welfare coverage. Any modifications to this Agreement must be done in writing and signed by Executive and Holdings.

18. Miscellaneous.

(a) Should any provision of this Agreement be declared or determined by any court to be illegal or invalid, the validity of the remaining parts, terms, or provisions shall not be affected thereby and said illegal or invalid part, terms, or provisions shall be deemed not to be a part of this Agreement.

(b) As used in this Agreement, the masculine, feminine or neuter gender, and the singular or plural number, shall be deemed to include the others whenever the context so indicates or requires.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

IN WITNESS WHEREOF, Executive and duly authorized representatives of Holdings and Lerner hereby certify that they have read this Agreement in its entirety and voluntarily executed it in the presence of competent witnesses, as of the date set forth under their respective signatures.

EMPLOYEE		NEW YORK & COMPANY, INC.

/s/ Ronald W. Ristau		/s/ Sandra Brooslin Viviano
Ronald W. Ristau		Sandra Brooslin Viviano
		Executive Vice President, Human Resources

November 19, 2008		November 19, 2008
Date		Date


		LERNER NEW YORK, INC.

		/s/ Sandra Brooslin Viviano
		Sandra Brooslin Viviano
		Executive Vice President, Human Resources

		November 19, 2008
		Date

EXHIBIT A

Ann Taylor Stores Corporation

Ashley Stewart Ltd.

Cato Corp.

Cache, Inc.

Charming Shoppes, Inc.

Chico’s FAS, Inc.

Christopher & Banks Corporation

Coldwater Creek Inc.

Deb Shops, Inc.

The Dress Barn, Inc.

Express LLC

Forever 21, Inc.

The Gap, Inc.

J. C. Penney Company, Inc.

J. Crew Group, Inc.

The J. Jill Group, Inc.

Liz Claiborne, Inc.

Macy’s, Inc.

Mother’s Work, Inc.

Sears Holdings Corporation

The Talbots, Inc.

Target Corporation

The TJX Companies, Inc.

Zara International, Inc.

EX-10.2 3 a2189510zex-10_2.htm EXHIBIT 10.2

Exhibit 10.2

[Execution]

AMENDMENT NO. 1

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

This AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as of December 9, 2008, is entered into by and among Lerner New York, Inc., a Delaware corporation (“Lerner”), Lernco, Inc., a Delaware corporation (“Lernco”), and Jasmine Company, Inc., a Massachusetts corporation (“Jasmine” and together with Lerner and Lernco, collectively, “Borrowers” and individually each a “Borrower”), the Lenders (as defined in the Loan Agreement), and Wachovia Bank, National Association, a national banking association, in its capacity as agent for the Lenders and the Bank Product Providers (in such capacity, “Agent”).

W I T N E S S E T H :

WHEREAS, Borrowers, New York & Company, Inc., a Delaware corporation, (“NY&Co”), Lerner New York Holding, Inc., a Delaware corporation (“Parent”), Nevada Receivable Factoring, Inc., a Nevada corporation (“Nevada Factoring”), Associated Lerner Shops of America, Inc., a New York corporation (“Associated Lerner”), and Lerner New York GC, LLC, an Ohio limited liability company (“Lerner GC” and together with NY&Co, Parent, Nevada Factoring and Associated Lerner, collectively, “Guarantors” and each a “Guarantor”), Lenders, Agent, Bank of America, N.A., as successor by merger to LaSalle Business Credit, LLC, as Agent for LaSalle Bank Midwest National Association, acting through its division, LaSalle Retail Finance, in its capacity as documentation agent for Lenders (in such capacity, “Documentation Agent”), have entered into financing arrangements pursuant to which Lenders (or Agent on behalf of Lenders) may make loans and advances and provide other financial accommodations to Borrowers as set forth in the Second Amended and Restated Loan and Security Agreement, dated as of August 22, 2007, among Borrowers, Guarantors, Lenders, Agent and Documentation Agent (as the same now exists and may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”) and the other agreements, documents and instruments referred to therein or any time executed and/or delivered in connection therewith or related thereto, including this Amendment (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the “Financing Agreements”);

WHEREAS, Borrowers and Guarantors have requested that Agent and Lenders make certain amendments to the Loan Agreement and the other Financing Agreements, and Agent and Lenders are willing to agree to such amendments, subject to the terms and conditions contained herein; and

WHEREAS, the parties hereto desire to enter into this Amendment to evidence and effectuate such amendments, subject to the terms and conditions and to the extent set forth herein;

NOW, THEREFORE, in consideration of the premises and covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Definitions.

1.1 Amendment to Definition. The term “Leverage Ratio” in the definition section of the Loan Agreement is hereby amended as follows:

“Leverage Ratio” [Intentionally Deleted]

1.2 Interpretation. All capitalized terms used herein and not defined herein shall have the meanings given to such terms in the Loan Agreement.

2. Amendments to Loan Agreement.

2.1 Minimum Excess Availability. Section 9.17 of the Loan Agreement is hereby replaced with the following:

“9.17 Minimum Excess Availability. Borrowers shall at all times maintain Excess Availability of at least $10,000,000.”

2.2 Financial Covenants. Section 9.18 of the Loan Agreement is hereby replaced with the following:

“9.18 Financial Covenant.

(a) Until such time as the Existing Term Loan and all Obligations related thereto are indefeasibly paid and satisfied in full in immediately available funds in accordance with the terms of this Agreement, if the sum of Excess Availability plus Qualified Cash (i) is equal to or less than $30,000,000 at any time, other than during the fiscal months of March or November of any fiscal year of Borrowers or (ii) is equal to or less than $20,000,000 at any time during the fiscal months of March or November of any fiscal year of Borrowers, Borrowers shall be required to maintain a Fixed Charge Coverage Ratio of not less than 1.0:1.0 calculated on a trailing twelve (12) month basis when measured as of the end of each fiscal month.

(b) Upon the indefeasible payment and satisfaction in full of the Existing Term Loan and all Obligations related thereto in immediately available funds in accordance with the terms of this Agreement, if as of the end of any fiscal month of the Borrowers the average amount of Borrowers’ Excess Availability is less than $12,500,000, Borrowers shall be required to maintain a Fixed Charge Coverage Ratio of not less than 1.0:1.0 calculated on a trailing twelve (12) month basis when measured as of the end of each fiscal month.”

3. Conditions Precedent. Concurrently with the execution and delivery hereof, and as a further condition to the effectiveness of this Amendment and the agreement of Agent to the modifications and amendments set forth in this Amendment, each of the following conditions precedent, in a manner satisfactory to Agent:

3.1 Agent shall have received, in form and substance satisfactory to Agent, an executed copy of an original or executed original counterparts of this Amendment by electronic mail or facsimile (with the originals to be delivered within five (5) Business Days after the date hereof), duly authorized, executed and delivered by each Borrower, Guarantor and Required Lenders;

3.2 Agent shall have received, in form and substance satisfactory to Agent, an executed copy of an original or executed original counterparts of a fee letter, dated of even date herewith, among Agent, Borrowers and Guarantors; and

3.3 as of the date of this Amendment, no Default or Event of Default shall exist or shall have occurred and be continuing.

4. Additional Representations, Warranties and Covenants. Each Borrower and Guarantor represents, warrants and covenants with, to and in favor of Agent as follows, which representations, warranties and covenants are continuing and shall survive the execution and delivery hereof, the truth and accuracy of, or compliance with each, together with the representations, warranties and covenants in the other Financing Agreements, being a condition of the effectiveness of this Amendment and a continuing condition of the making or providing of any Revolving Loans or Letters of Credit by Agent and Lenders to Borrowers:

4.1 This Amendment and each other agreement or instrument to be executed and delivered by Borrowers or Guarantors hereunder have been duly authorized, executed and delivered by all necessary action on the part of Borrowers and Guarantors which is a party hereto and thereto and, if necessary, their respective stockholders, and is in full force and effect as of the date hereof, as the case may be, and the agreements and obligations of Borrowers or Guarantors, as the case may be, contained herein and therein constitute legal, valid and binding obligations of Borrowers and Guarantors, as the case may be, enforceable against them in accordance with their terms.

4.2 All of the representations and warranties set forth in the Loan Agreement as amended hereby, and the other Financing Agreements, are true and correct in all material respects after giving effect to the provisions of this Amendment, except to the extent any such representation or warranty is made as of a specified date, in which case such representation or warranty shall have been true and correct as of such date.

4.3 Borrowers and Guarantors are not required to obtain any consents, waivers or approvals to the transactions contemplated by this Amendment from any other Person with respect to any agreement, mortgage, instrument with any other Person to which any Borrower or Guarantor is a party or may be bound.

4.4 No Default or Event of Default exists or has occurred and is continuing as of the date of this Amendment.

5. Acknowledgments by Guarantors. Each Guarantor hereby expressly and specifically ratifies, restates and confirms the terms and conditions of the Amended and Restated Guarantee, dated August 22, 2007 (the “Guarantee”), in favor of Agent and Lenders and its liability for all of the Guaranteed Obligations (as defined in the Guarantee), and all other obligations, liabilities, agreements and covenants thereunder. Each Guarantor hereby acknowledges, confirms and agrees that as of the date hereof and after giving effect to the terms of this Amendment, the Guarantee guaranteeing the payment and performance of all Obligations of Borrowers are in full force and effect.

6. Effect of this Amendment. This Amendment constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior oral or written communications, memoranda, proposals, negotiations, discussions, term sheets and commitments with respect to the subject matter hereof. Except as expressly provided herein, no other changes or modifications to the Loan Agreement or any of the other Financing Agreements, or waivers of or consents under any provisions of any of the foregoing, are intended or implied by this Amendment, and in all other respects the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date of this Amendment. The applicable provisions of this Amendment and the Loan Agreement shall be read and interpreted as one agreement. To the extent that any provision of the Loan Agreement or any of the other Financing Agreements conflicts with any provision of this Amendment, the provision of this Amendment shall control.

7. Further Assurances. Borrowers and Guarantors shall execute and deliver such additional documents and take such additional action as may be reasonably requested by Agent to effectuate the provisions and purposes of this Amendment.

8. Governing Law. The validity, interpretation and enforcement of this Amendment in any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise shall be governed by the internal laws of the State of New York, without regard to any principle of conflict of laws or other rule of law that would result in the application of the law of any jurisdiction other than the State of New York. Without in any way limiting the foregoing, the parties elect to be governed by New York law in accordance with, and relying on (at least in part), Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York.

9. Binding Effect. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.

10. Counterparts. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original but all of which when taken together shall constitute one and the same instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart hereof signed by each of the parties hereto. This Amendment may be executed and delivered by telecopier (or other electronic transmission of a manually executed counterpart) with the same force and effect as if

it were a manually executed and delivered counterpart. Any party delivering an executed counterpart of this Amendment by telecopier (or other electronic transmission of a manually executed counterpart) shall also deliver an original executed counterpart of this Amendment, but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Amendment as to such party or any other party.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on the day and year first written.

	BORROWERS


	LERNER NEW YORK, INC.

	By:	/s/ Sheamus G. Toal

	Title:			Executive Vice President and
	Chief Financial Officer


	LERNCO, INC.

	By:	/s/ Sheamus G. Toal

	Title:		President


	JASMINE COMPANY, INC.

	By:	/s/ Sheamus G. Toal

	Title:			Treasurer

[SIGNATURES CONTINUED ON NEXT PAGE]

[Signature Page to Amendment No. 1 to Second

Amended and Restated Loan and Security Agreement]

[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

AGENT

WACHOVIA BANK, NATIONAL ASSOCIATION, as Agent

By:		/s/ Constantine Krikos

Title:			Vice President


LENDERS

WACHOVIA BANK, NATIONAL ASSOCIATION

By:	/s/ Constantine Krikos

Title:			Vice President


BANK OF AMERICA, N.A., as successor by merger to LaSalle Business Credit, LLC, as Agent for LaSalle Bank Midwest National Association, acting through its division, LaSalle Retail Finance

By:	/s/ Kathleen Dimock

Title:			Managing Director

[SIGNATURES CONTINUE ON NEXT PAGE]

[Signature Page to Amendment No. 1 to Second

Amended and Restated Loan and Security Agreement]

[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

NEW YORK & COMPANY, INC.						NEVADA RECEIVABLE FACTORING, INC.

By:		/s/ Sheamus G. Toal				By:	/s/ Sheamus G. Toal

Title:					Executive Vice President and	Title:			President and Chief Financial Officer
Chief Financial Officer

LERNER NEW YORK HOLDING, INC.						LERNER NEW YORK GC, LLC.

By:	/s/ Sheamus G. Toal					By:		/s/ Sheamus G. Toal

Title:				Executive Vice President and		Title:				Treasurer
Chief Financial Officer

ASSOCIATED LERNER SHOPS OF AMERICA, INC.

By:	/s/ Sheamus G. Toal

Title:			Assistant Secretary

[Signature Page to Amendment No. 1 to Second

Amended and Restated Loan and Security Agreement]

EX-31.1 4 a2189510zex-31_1.htm EXHIBIT 31.1
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Exhibit 31.1

CERTIFICATION

I, Richard P. Crystal, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of New York & Company, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: December 11, 2008		/s/ RICHARD P. CRYSTAL Richard P. Crystal Chairman and Chief Executive Officer

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Exhibit 31.1

CERTIFICATION
EX-31.2 5 a2189510zex-31_2.htm EXHIBIT 31.2
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Exhibit 31.2

CERTIFICATION

I, Sheamus G. Toal, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of New York & Company, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: December 11, 2008		/s/ SHEAMUS G. TOAL Sheamus G. Toal Executive Vice President and Chief Financial Officer

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Exhibit 31.2

CERTIFICATION
EX-32.1 6 a2189510zex-32_1.htm EXHIBIT 32.1
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Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350
As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, we, the undersigned Chairman and Chief Executive Officer, and Executive Vice President and Chief Financial Officer of New York & Company, Inc. (the "Company"), hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended November 1, 2008 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: December 11, 2008


		/s/ RICHARD P. CRYSTAL Richard P. Crystal Chairman and Chief Executive Officer
		/s/ SHEAMUS G. TOAL Sheamus G. Toal Executive Vice President and Chief Financial Officer

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Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350 As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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