-----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, OZF0XJkzKHFCZkJIbceMY+D4r5PhqeNeSEozo9PyA67dM8XaaP3+4FwqgDYaM14M WByEWimPWXZdDy9JPu+Z3A== 0001104659-04-039321.txt : 20041213 0001104659-04-039321.hdr.sgml : 20041213 20041213164130 ACCESSION NUMBER: 0001104659-04-039321 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20041030 FILED AS OF DATE: 20041213 DATE AS OF CHANGE: 20041213 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: 041199183 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 a04-14499_110q.htm 10-Q

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 October 30, 2004

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	33-1031445
(State of incorporation)	(I.R.S. Employer Identification No.)

450 West 33^rd Street
5^th Floor
New York, New York 10001	(212) 884-2000
(Address of Principal Executive Offices, including Zip Code)	(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 o No ý

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes o No ý

As of December 10, 2004, the registrant had 52,757,092 shares of common stock outstanding.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	2
Item 1. Financial Statements	2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3. Quantitative and Qualitative Disclosures About Market Risk	22
Item 4. Controls and Procedures	22

PART II. OTHER INFORMATION	23
Item 1. Legal Proceedings	23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3. Defaults Upon Senior Securities	24
Item 4. Submission of Matters to a Vote of Security Holders	24
Item 5. Other Information	24
Item 6. Exhibits	24

SPECIAL NOTE REGARDING

FORWARD-LOOKING STATEMENTS

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

This quarterly report on Form 10-Q includes forward-looking statements. 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:

• the Company’s ability to open and operate new stores successfully;

• seasonal fluctuations in the Company’s business;

• the Company’s ability to anticipate and respond to fashion trends and launch new product lines successfully;

• the Company’s dependence on mall traffic for its sales;

• the susceptibility of the Company’s business to extreme and/or unseasonable weather conditions;

• 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;

• the Company’s reliance on foreign sources of production;

• the ability of the Company’s manufacturers to manufacture and deliver products in a timely manner while meeting the Company’s quality standards;

• 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 dependence on the success of its brand;

• competition in the Company’s market, including promotional and pricing competition;

• the effects of government regulation;

• restrictions imposed by the covenants in the amended and restated credit facilities that may limit the Company’s flexibility; and

• the control of the Company by its sponsors.

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. Factors that could cause or contribute to such differences include those discussed under the heading “Risk Factors” in the Company’s prospectus dated October 6, 2004, filed with the United States Securities and Exchange Commission.

PART I.

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

New York & Company, Inc. and Subsidiaries
Consolidated Balance Sheets

(Amounts in thousands, except per share amounts)	October 30, 2004 (Unaudited)			January 31, 2004 (Audited)			November 1, 2003 (Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	33,285		$	98,798		$	63,576
Accounts receivable	16,574			10,866			13,622
Inventories, net	108,316			78,220			114,362
Prepaid expenses	21,948			14,908			13,477
Deferred income taxes	—			89			7,402
Other current assets	1,522			2,192			2,152
Total current assets	181,645			205,073			214,591

Property and equipment, net	87,318			64,052			59,879
Intangible assets	14,515			14,515			15,104
Deferred income taxes	—			1,882			2,866
Other assets	4,652			4,079			5,543
Total assets	$	288,130		$	289,601		$	297,983

Liabilities and stockholders’ equity (deficit)

Current liabilities:
Accounts payable	$	64,738		$	47,771		$	63,935
Accrued expenses	50,418			53,491			49,999
Income taxes payable	—			10,118			5,141
Deferred income taxes	1,108			—			—
Total current liabilities	116,264			111,380			119,075

Long-term debt	75,000			82,500			95,180
Deferred income taxes	6,696			—			—
Other liabilities	5,554			13,002			16,506
Total liabilities	203,514			206,882			230,761
Commitments and contingencies	—			—			—
Series A redeemable preferred stock, 12.5% cumulative, non-voting, par value $0.01; 5,000 shares authorized; No shares outstanding at October 30, 2004; 63 shares issued and outstanding (aggregate liquidation preference of $1,000 per share plus unpaid dividends) at January 31, 2004 and November 1, 2003, respectively	—			69,697			67,576
Stockholders’ equity (deficit):
Common stock, voting, par value $0.001; 300,000 shares authorized; 52,594, 45,620, and 45,620 shares issued and outstanding at October 30, 2004, January 31, 2004, and November 1, 2003, respectively	53			46			46
Additional paid-in capital	108,088			216			96
Less stock subscription receivable	—			(222		)	(212		)
Retained earnings (deficit)	(23,525		)	12,982			(284		)
Total stockholders’ equity (deficit)	84,616			13,022			(354		)
Total liabilities and stockholders’ equity (deficit)	$	288,130		$	289,601		$	297,983

See accompanying notes.

New York & Company, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)

(Amounts in thousands, except per share amounts)	Three Months Ended October 30, 2004			Three Months Ended November 1, 2003		Nine Months Ended October 30, 2004			Nine Months Ended November 1, 2003
Net sales	$	242,264		$	223,385	$	737,183		$	659,845

Costs of goods sold, buying and occupancy costs	156,759			151,577		479,715			472,674

Gross profit	85,505			71,808		257,468			187,171

Selling, general and administrative expenses	67,156			55,969		194,028			163,589

Operating income	18,349			15,839		63,440			23,582

Interest expense, net of interest income of $197, $86, $588, and $289, respectively	3,008			2,737		7,686			8,420

Accrued dividends-redeemable preferred stock	—			—		2,703			—

Loss on modification and extinguishment of debt	1,682			—		2,034			—

Loss on derivative instrument (related to LFAS, Inc. warrant)	12,630			—		29,398			—

Income before income taxes	1,029			13,102		21,619			15,162

Provision for income taxes	5,659			5,152		22,192			5,608

Net income (loss)	(4,630		)	7,950		(573		)	9,554

Accrued dividends-redeemable preferred stock	—			2,138		—			6,157

Net income (loss) available for common stockholders	$	(4,630	)	$	5,812	$	(573	)	$	3,397

Basic earnings (loss) per share:	$	(0.10	)	$	0.13	$	(0.01	)	$	0.08

Diluted earnings (loss) per share:	$	(0.10	)	$	0.10	$	(0.01	)	$	0.06

Weighted average shares outstanding:

Basic	47,488			43,761		45,505			43,761

Diluted	47,488			55,445		45,505			52,861

See accompanying notes.

New York & Company, Inc. and Subsidiaries
Consolidated Statement of Stockholders’ Equity
(Unaudited)

	Common Stock				Treasury Stock						Additional Paid-in Capital			Stock Subscriptions			Retained Earnings (Deficit)
(Amounts in thousands)	Shares	Amount			Shares		Amount				Additional Paid-in Capital			Stock Subscriptions			Retained Earnings (Deficit)			Total
Balance at January 31, 2004	45,620	$	46		—		$	—			$	216		$	(222	)	$	12,982		$	13,022

Initial public offering, net of commissions and discounts	6,667	7			—		—				105,393			—			—			105,400
Payment of fees related to the initial public offering	—	—			—		—				(3,071		)	—			—			(3,071			)
Purchase of treasury stock	—	—			(54	)	(173			)	—			—			—			(173			)
Stock options exercised	307	—			54		173				(92		)	—			—			81
Excess tax benefit of exercised non-qualified stock options	—	—			—		—				281			—			—			281
Equity-based compensation expense	—	—			—		—				5,698			—			—			5,698
Payment of stock subscription receivable	—	—			—		—				—			222			—			222
Repurchase of common stock warrant	—	—			—		—				(337		)	—			(35,934		)	(36,271			)
Net loss	—	—			—		—				—			—			(573		)	(573			)

Balance at October 30, 2004	52,594	$		53	—		$		—		$	108,088		$	—		$	(23,525	)	$		84,616

See accompanying notes.

New York & Company, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

(Amounts in thousands)	Nine Months Ended October 30, 2004			Nine Months Ended November 1, 2003
Operating activities
Net income (loss)	$	(573	)	$	9,554
Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	13,670			9,446
Amortization / write off of deferred financing costs	3,016			960
Excess tax benefit of exercised non-qualified stock options	281			—
Equity-based compensation	5,698			98
Deferred income taxes	9,775			441
Non cash interest	—			5,809
Change in operating assets and liabilities:
Accounts receivable	(5,708		)	(3,119		)
Inventories, net	(30,096		)	(17,622		)
Prepaid expenses	(7,040		)	1,722
Accounts payable	16,967			28,007
Accrued expenses	(3,073		)	(1,776		)
Income taxes payable	(10,118		)	5,141
Change in other assets and liabilities	(6,721		)	1,928
Net cash (used in) provided by operating activities	(13,922		)	40,589

Investing activities
Capital expenditures	(36,536		)	(17,175		)
Net cash used in investing activities	(36,536		)	(17,175		)

Financing activities
Net proceeds from initial public offering	105,400			—
Payment of offering costs related to initial public offering	(3,071		)	—
Proceeds from issuance of long-term debt	150,000			—
Repayment of long-term debt	(157,500		)	—
Payment of financing costs	(4,046		)	—
Redemption of Series A preferred stock	(69,696		)	—
Repurchase of common stock warrant	(36,271		)	—
Payment to Limited Brands, Inc.	—			(39,662		)
Other financing activities	129			—
Net cash used in financing activities	(15,055		)	(39,662		)

Net decrease in cash and cash equivalents	(65,513		)	(16,248		)
Cash and cash equivalents at beginning of period	98,798			79,824

Cash and cash equivalents at end of period	$	33,285		$	63,576

See accompanying notes.

New York & Company, Inc.
Notes to Consolidated Financial Statements
October 30, 2004
(Unaudited)

1. Basis of Presentation

New York & Company, Inc. (together with all of its subsidiaries, the “Company”) is a specialty retailer of moderately-priced women’s apparel and accessories in the United States, serving its customers for over 86 years. The Company designs, sources and markets its proprietary New York & Company merchandise through its national network of 486 retail stores in 43 states, which are located primarily in major malls and lifestyle centers.

The accompanying consolidated financial statements include the accounts for New York & Company, Inc. and all of its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The consolidated financial statements as of October 30, 2004 and November 1, 2003 and for the thirteen weeks (“three months”) and thirty-nine weeks (“nine months”) ended October 30, 2004 and November 1, 2003 are unaudited and are presented pursuant to the rules and regulations of the United States Securities and Exchange Commission. Accordingly, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended January 31, 2004, which were included as part of the Company’s registration statement on Form S-1 (Registration No. 333-115778), as declared effective on October 6, 2004 and filed with the United States Securities and Exchange Commission on October 7, 2004. 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 position and results of operations and cash flows for the interim periods.

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. Public Offering of Common Stock

The initial public offering (the “offering”) of 11,500,000 shares of common stock, of which 6,666,667 shares were offered by the Company and 4,833,333 shares were offered by certain selling stockholders at a price to the public of $17.00 per share, was consummated on October 13, 2004. Upon consummation of the offering, net proceeds of $105.4 million and $76.4 million were distributed to the Company and selling stockholders, respectively. Immediately prior to the effectiveness of the offering, the remaining one outstanding share of the Company’s Series A redeemable preferred stock was cancelled. The Company is now authorized to issue 300,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of preferred stock, $0.001 par value.

Approximately $75.2 million of the net proceeds received by the Company was used to repay the $75.0 million outstanding principal amount under its new credit facility (see Long-Term Debt and Revolving Credit Facilities), plus accrued and unpaid interest of approximately $0.2 million. The remainder of the net proceeds plus cash on hand was used to pay the $45.7 million contingent obligation due to LFAS, Inc., an affiliate of Limited Brands, Inc., incurred on March 16, 2004 in connection with the repurchase of the common stock warrant to acquire 8,050,671 shares of the Company’s common stock at $0.11 per share (the “common stock warrant”) and to pay a $4.0 million fee related to the termination of the advisory services agreement with Bear Stearns Merchant Manager II, LLC.

3. Equity-Based Compensation

The Company follows Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), which establishes a fair-value method of accounting for stock-based compensation. The Company recorded equity-based compensation

expense in the amount of $0.8 million for the three months ended October 30, 2004 and approximately thirty thousand dollars in equity-based compensation expense during the three months ended November 1, 2003. The Company recorded equity-based compensation expense in the amount of $5.7 million and $0.1 million for the nine months ended October 30, 2004 and November 1, 2003, respectively.

Included in equity-based compensation expense reported in the nine months ended October 30, 2004 are the following:

Concurrently upon entering into the new credit facility on May 19, 2004, the vesting of stock options to purchase 1,854,267 shares issued pursuant to grants under the Company’s stock option plan was accelerated. As a result, the Company recorded $0.4 million of compensation expense related to the accelerated vesting during the nine months ended October 30, 2004.

On May 19, 2004, certain of the Company’s executive officers were granted stock options to purchase 630,663 shares of the Company’s common stock at an exercise price of $3.23 per share. Such options were immediately exercisable upon grant. In connection with these grants, the Company recorded equity-based compensation expense in the amount of $4.3 million during the nine months ended October 30, 2004.

4. Earnings Per Share

Basic earnings per share are computed by dividing net income available for common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share are calculated based on the weighted average number of common shares outstanding plus the dilutive effect of all stock options outstanding and the common stock warrant as if they were exercised.

A reconciliation between basic and diluted earnings per share is as follows:

(Amounts in thousands, except per share amounts)	Three Months Ended October 30, 2004			Three Months Ended November 1, 2003		Nine Months Ended October 30, 2004			Nine Months Ended November 1, 2003
Net income (loss) available for common stockholders	$	(4,630	)	$	5,812	$	(573	)	$	3,397
Basic EPS
Weighted average shares outstanding:
Basic common shares	47,488			43,761		45,505			43,761
Basic EPS	$	(0.10	)	$	0.13	$	(0.01	)	$	0.08
Diluted EPS
Weighted average shares outstanding:
Basic common shares	47,488			43,761		45,505			43,761
Plus impact of stock options	—			4,420		—			3,273
Plus impact of common stock warrant	—			7,264		—			5,827
Diluted common shares	47,488			55,445		45,505			52,861
Diluted EPS	$	(0.10	)	$	0.10	$	(0.01	)	$	0.06

4,195,494 shares were excluded from the three months ended October 30, 2004 and 5,906,277 shares were excluded from the nine months ended October 30, 2004 in the above table as the impact would have been antidilutive.

The Company’s Board of Directors approved an 8.7484-for-one stock split of the Company’s common stock effective October 6, 2004. In connection therewith, the authorized common stock was increased from 15,000,000, $0.01 par value shares to 300,000,000, $0.001 par value shares. All earnings per share amounts and number of shares outstanding, including all common stock equivalents, have been retroactively restated in the accompanying consolidated financial statements and notes to consolidated financial statements.

5. Employee Benefit Plans

The Company sponsors a single-employer defined benefit pension plan covering substantially all union employees. The plan provides retirement benefits for union employees who have attained the age of 18 and completed 425 hours of service in the twelve-month period following the date of employment. The plan provides benefits based on length of service. The Company’s funding policy for the plan is to contribute annually the amount necessary to provide for benefits based on accrued service. The Company does not anticipate the need to contribute to the plan during fiscal 2004.

Net pension cost includes the following components:

(Amounts in thousands)	Three Months Ended October 30, 2004			Three Months Ended November 1, 2003			Nine Months Ended October 30, 2004			Nine Months Ended November 1, 2003
Service cost	$	79		$	61		$	237		$	184
Interest cost	144			158			434			473
Expected return on plan assets	(200		)	(185		)	(600		)	(557		)
Net periodic benefit cost	$	23		$	34		$	71		$	100

On July 1, 2004, the Company funded and distributed the assets of its terminated non-qualified deferred compensation plan that had been assumed from Limited Brands, Inc. Such distribution resulted in cash payments to executive officers of $2.1 million, out of a total $5.9 million distributed.

6. Long-Term Debt and Revolving Credit Facilities

On March 16, 2004, certain terms of the Company’s revolving credit facility were amended. The amended and restated credit facilities currently consist of a three-year $90.0 million revolving credit facility (containing a sub-facility available for the issuance of letters of credit of up to $75.0 million), and a three-year $75.0 million term loan facility.

The revolving loans under the amended and restated credit facilities bear interest, at the Company’s option, either at a floating rate equal to the Eurodollar rate plus a margin of between 2.00% and 2.50% per year, or the Prime rate plus a margin of between 0.00% and 0.50% per year, in each case depending upon the Company’s financial performance. The term loan bears interest at a floating rate equal to the greater of 6.75% or the Eurodollar rate plus 5.50% per year. In addition, the Company pays the lenders under the revolving credit facility a monthly fee on a proportion of the unused commitments under that facility at a rate of between 0.25% and 0.50% per annum depending upon the Company’s financial performance. For so long as any default under the revolving credit facility continues, interest on the revolving loans will increase to 4.50% per year above the Eurodollar rate for Eurodollar rate loans and 2.50% per year above the Prime rate for all Prime rate loans, and interest on the term loan may, at the option of the agent or the lenders, increase to the greater of 8.75% or the Eurodollar rate plus 7.50% per year.

Maximum availability for loans and letters of credit accommodations under the amended and restated credit facilities is governed by a monthly borrowing base, determined by the application of specified advance rates against certain eligible assets, in addition to, restrictions on minimum earnings, liquidity, and coverage levels. The amended and restated credit facilities contain certain restrictive covenants, including limitations on (i) indebtedness, liens and guarantees, (ii) mergers, consolidations, acquisitions and asset sales, and (iii) dividends and stock repurchases. In addition, the amended and restated credit facilities contain restrictive covenants limiting the payment of dividends to New York & Company, Inc. by its subsidiaries, determined by the Company’s (i) net income, (ii) liquidity, (iii) indebtedness, and (iv) a change in ownership of the Company. The lenders have been granted a pledge of the common stock of Lerner New York Holding, Inc. 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 certain of its subsidiaries, as collateral for the Company’s obligations under the amended and restated 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.

On March 16, 2004, the $75.0 million term loan proceeds along with $32.2 million of cash on hand were used to: (i) repurchase from Limited Brands, Inc. a 10% subordinated note for $85.0 million, which includes $75.0 million of principal and all accrued and unpaid interest, (ii) repurchase from LFAS, Inc. the common stock warrant for $20.0 million, plus a contingent payment (see below) and (iii) pay $2.2 million of fees and expenses associated with the transactions. Such fees represent financing fees paid primarily to the lenders and were capitalized as deferred financing fees included in other assets on the consolidated balance sheet, to be amortized over the life of the loan.

In connection with the common stock warrant repurchase, the Company entered into an agreement with LFAS, Inc., which provided, among other things, if a) on or before December 31, 2004, (i) the Company files a public offering of its common stock, or (ii) the Company is acquired and b) the related transaction value exceeds approximately $156.8 million, the Company shall pay to LFAS, Inc. an amount in cash equal to approximately 6.38% of the implied equity value of the transaction over $156.8 million minus $4.5 million. The Company measured the fair value of this obligation on March 16, 2004, and reported $16.3 million as a reduction in stockholders’ equity (deficit) and as an obligation on the consolidated balance sheet. All subsequent changes in fair value of the obligation were reported in earnings and reported on the consolidated statement of operations as a loss on derivative instrument. During the nine months ended October 30, 2004, the Company remeasured the fair value of the obligation, which resulted in a charge to earnings of $29.4 million. In connection with the consummation of the offering, the Company paid LFAS, Inc. the obligation in the amount of $45.7 million.

Unamortized deferred financing costs related to the 10% subordinated note in the amount of $0.4 million were written off and reported as a loss on modification and extinguishment of debt in the consolidated statement of operations for the nine months ended October 30, 2004.

On May 19, 2004, Lerner New York, Inc., a subsidiary of New York & Company, Inc., entered into a new subordinated secured term loan facility with a third party consisting of a $75.0 million, five-year term loan (“new credit facility”). On May 19, 2004, the $75.0 million term loan proceeds were used to repurchase all but one share of the Company’s $0.01 par value, non-voting, Series A redeemable preferred stock for $62.5 million, plus $12.5 million of accrued and unpaid dividends. The Company incurred $1.9 million of fees and expenses related to the transaction. The remaining one share of preferred stock was cancelled immediately prior to the effectiveness of the offering. On October 13, 2004, the Company used approximately $75.2 million of the net proceeds received from the offering to repay the $75.0 million outstanding principal amount under its new credit facility, plus accrued and unpaid interest of approximately $0.2 million. In connection with the repayment of the term loan, $1.7 million of unamortized deferred financing costs were written off and reported as a loss on modification and extinguishment of debt in the consolidated statement of operations for the three and nine months ended October 30, 2004.

Prior to May 19, 2004, promissory notes made by certain members of the Company’s senior management, in the aggregated principal amount of $2.8 million, were issued in connection with these executives’ purchases of the Company’s common and preferred stock. On May 19, 2004, all of these notes were repaid in conjunction with the closing of the Company’s new credit facility and the repurchase of the Company’s preferred stock.

7. Product Sales

The Company operates in one business segment. Net sales by product are as follows:

(Amounts in thousands)	Three Months Ended October 30, 2004		Three Months Ended November 1, 2003		Nine Months Ended October 30, 2004		Nine Months Ended November 1, 2003
Product Sales
Women’s Apparel Net Sales	$	209,074	$	197,249	$	636,189	$	582,643
Women’s Accessories Net Sales	33,190		26,136		100,994		77,202
Total Company Net Sales	$	242,264	$	223,385	$	737,183	$	659,845

	Three Months Ended October 30, 2004		Three Months Ended November 1, 2003		Nine Months Ended October 30, 2004		Nine Months Ended November 1, 2003
Product Sales as Percentage of Total Net Sales
Women’s Apparel	86.3	%	88.3	%	86.3	%	88.3	%
Women’s Accessories	13.7	%	11.7	%	13.7	%	11.7	%
Total Company	100.0	%	100.0	%	100.0	%	100.0	%

8. Income Tax Provision

The income tax provisions for interim periods are based upon management’s estimate of the Company’s annualized effective tax rate. Effective tax rates differ from statutory federal income tax rates primarily due to provisions for state and local taxes and permanent tax differences, including accrued dividends-redeemable preferred stock and the loss on the derivative instrument.

9. Recently Issued Accounting Pronouncements

In May 2003, SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS 150”) was issued. This statement establishes standards for how a company classifies and measures certain financial instruments with characteristics of both liabilities and equity. In accordance with SFAS 150, the Company adopted this statement in February 2004 by recording accrued dividends-redeemable preferred stock as expense in the consolidated statement of operations and as a liability in the consolidated balance sheet.

In December 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 132 (Revised 2003), “Employer’s Disclosure about Pensions and Other Postretirement Benefits” (“SFAS 132-R”). SFAS 132-R retains disclosure requirements of the original SFAS No. 132 and requires additional disclosures relating to assets, obligations, cash flows, and net periodic benefit cost. SFAS 132-R is effective for fiscal years ending after December 15, 2003, except that certain disclosures are effective for fiscal years ending after June 15, 2004. Interim period disclosures are effective for interim periods beginning after December 15, 2003. The adoption of the disclosure provisions of SFAS 132-R did not have a material effect on the Company’s consolidated financial statements.

In March 2004, the FASB published an Exposure Draft, “Share-Based Payment, an amendment of FASB Statement No. 123 and 95.” Under this FASB proposal, all forms of share-based payment to employees, including employee stock options, would be treated as compensation and recognized in the consolidated statement of operations. This proposed statement would be effective for the first interim or annual period beginning after June 15, 2005. Since the Company currently accounts for stock options under SFAS 123, it does not expect this statement to have a material effect on the consolidated financial statements.

10. Legal Proceedings

The Company is involved in various legal proceedings in the ordinary course of business. There are currently no material legal proceedings pending against the Company.

A case has been filed by the Center for Environmental Health against Lerner New York, Inc. and several other retailers of jewelry products in California. It alleges that lead in one of Lerner New York, Inc.’s jewelry products (a metal charm necklace suspended on a flexible cord) sold in California violates the state’s Proposition 65 statute, which precludes the sale of products in California that result in exposures to listed chemicals absent a specified warning label. The case is a companion case to two similar cases filed by the California Attorney General and an organization called As You Sow against several retail outlets selling such jewelry. The Company has not been named as a party in either of the companion cases. Violation of the statute exposes the seller to fines as well as injunctive relief. The complaint does not include a request for a specific fine amount. The case against Lerner New York, Inc. is about to commence a mediation process that is intended to resolve the case without substantial additional litigation.

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

Overview

The Company is a specialty retailer of fashion-oriented, moderately-priced women’s apparel, serving its customers for over 86 years. The Company designs and sources its proprietary branded New York & Company merchandise which is sold exclusively through its national network of 486 retail stores in 43 states, as of October 30, 2004. The Company’s target customers are fashion-conscious, value-sensitive women between the ages of 25 and 45 with annual household incomes ranging from $40,000 to $75,000.

Net sales for the three and the nine months ended October 30, 2004 increased 8.5% and 11.7%, respectively, to $242.3 million and $737.2 million, respectively. Strong customer acceptance of the Company’s merchandise offerings, disciplined inventory management, managed store growth, and improvement in productivity and expense controls are evident in the Company’s results and in its increase in comparable store sales of 7.0% and 11.7% in the three and the nine months ended October 30, 2004, respectively, as compared to comparable store sales of 6.2% and 4.4% in the same periods last year. In addition, sales per selling square foot for the three and the nine months ended October 30, 2004 increased to $74 and $223, respectively, reflecting an increase of 15.6% and 19.3%, as compared to the same periods last year. Net sales of apparel product categories increased 6.0% and 9.2% for the three and the nine months ended October 30, 2004, respectively, as compared to the same periods last year. Net sales of accessories product categories increased 27.0% and 30.8% for the three and the nine months ended October 30, 2004, respectively, as compared to the same periods last year. In addition, the Company’s merchandising testing and replenishment strategies contributed to a 13.3% improvement in inventory turn in the three months ended October 30, 2004.

The Company opened 13 new stores in the three months ended October 30, 2004 and 22 new stores in the nine months ended October 30, 2004.

The Company’s business is impacted by economic conditions which affect the level of consumer spending on the merchandise it offers. These economic factors include, but are not limited to, interest rates, economic growth, unemployment levels, energy prices, consumer confidence and consumer spending. Consumer preferences and economic conditions may change from time to time in the markets in which the Company operates and negatively impact its net sales and profitability. There can be no assurance that future trends and fluctuations in economic factors will not have a material adverse effect on the Company’s financial condition and results of operations. The Company’s strategy is to focus on its customers, current fashion trends, merchandise testing, value pricing, and responsive inventory management, which the Company believes should enable it to react quickly to changes as they occur.

The Company expects to be impacted as a result of the phase out of quotas on textiles and clothing under the World Trade Organization Agreement on Textiles and Clothing as implemented on January 1, 1995. Under this agreement, import quotas are to be phased out over a period of ten years, ending January 1, 2005. This phase out would eliminate existing restrictions on the Company’s ability to import textiles. Groups representing textile manufacturers have been urging the extension of these quotas. Several requests for China safeguards have already been filed and the Committee for the Implementation of Textile Agreements has 60 days to decide if these or any additional safeguards are required. These restrictions would only apply to China. The Company cannot accurately assess how this issue will impact its operations, or whether the extensions or other types of restrictions will be implemented.

General

Net Sales. Net sales consist of sales from comparable stores and non-comparable stores. A store is included in the comparable store sales calculation once it has completed 52 weeks of operation or once it has been reopened after remodeling. Non-comparable store sales include sales from new stores opened in the previous year and new stores opened in the current year which have not been opened for 52 weeks and sales from closed stores and stores closed during periods of remodeling. Net sales are recorded when the customer takes possession of the merchandise at the point of sale. Revenue from gift certificate sales and store credits is recognized at redemption. Prior to redemption, gift certificate sales and store credits are recorded as a liability. A reserve is provided for projected merchandise returns based on prior experience.

Cost of Goods Sold, Buying and Occupancy Costs. Cost of goods sold, buying and occupancy costs are 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 in the three and the nine months ended October 30, 2004 and November 1, 2003 in dollars (except per share data) and as a percentage of net sales, as well as certain store data.

(Amounts in thousands, except per share amounts)	Three Months Ended October 30, 2004			Three Months Ended November 1, 2003		Nine Months Ended October 30, 2004			Nine Months Ended November 1, 2003
Statements of operations data:
Net sales	$	242,264		$	223,385	$	737,183		$	659,845
Cost of goods sold, buying and occupancy costs (1)	156,759			151,577		479,715			472,674
Gross profit	85,505			71,808		257,468			187,171
Selling, general and administrative expenses	67,156			55,969		194,028			163,589
Operating income	18,349			15,839		63,440			23,582
Interest expense, net	3,008			2,737		7,686			8,420
Accrued dividends-redeemable preferred stock (2)	—			—		2,703			—
Loss on modification and extinguishment of debt (3)	1,682			—		2,034			—
Loss on derivative instrument (4)	12,630			—		29,398			—
Income before income taxes	1,029			13,102		21,619			15,162
Provision for income taxes	5,659			5,152		22,192			5,608
Net income (loss)	(4,630		)	7,950		(573		)	9,554
Accrued dividends-redeemable preferred stock (2)	—			2,138		—			6,157
Net income (loss) available for common stockholders	$	(4,630	)	$	5,812	$	(573	)	$	3,397

Basic earnings (loss) per share	$	(0.10	)	$	0.13	$	(0.01	)	$	0.08
Diluted earnings (loss) per share	$	(0.10	)	$	0.10	$	(0.01	)	$	0.06

(1) In connection with the acquisition of Lerner New York Holding, Inc. from Limited Brands, Inc. on November 27, 2002 (the “acquisition”) and the application of purchase accounting, the Company recorded inventory at partial fair value, resulting in an increase of $34.5 million in the acquired cost basis of inventory. Cost of goods sold, buying and occupancy costs include $5.7 million of costs associated with the sell through of the fair value increase in the nine months ended November 1, 2003.

(2) The Company adopted SFAS 150 in February 2004 by recording accrued dividends-redeemable preferred stock as expense in the consolidated statement of operations and as a liability in the consolidated balance sheet.

(3) During the nine months ended October 30, 2004, the Company wrote off $2.1 million of unamortized financing fees related to the early repayment of debt. Of the $2.1 million write off, $0.4 million was associated with the repayment of the $75.0 million, 10% subordinated note in March 2004 and $1.7 million was associated with the repayment of the $75.0 million term loan under the new credit facility in October 2004.

(4) On March 16, 2004, the Company amended and restated the credit facility to include a three-year $75.0 million term loan. The Company used $75.0 million of term loan proceeds, together with $32.2 million of cash on hand, to repay the $75.0 million principal amount, 10% subordinated note, plus $10.0 million of accrued interest, repurchase from LFAS, Inc. the common stock warrant for $20.0 million plus a contingent payment, and pay $2.2 million of fees and expenses associated with the transactions. The Company measured the fair value of the contingent payment on March 16, 2004 and reported $16.3 million as a reduction of stockholders’ equity and a liability. During the nine months ended October 30, 2004, the Company remeasured the fair value of the derivative obligation, which resulted in a charge to earnings of $29.4 million. The Company paid the obligation with proceeds from the offering.

	Three Months Ended October 30, 2004		Three Months Ended November 1, 2003		Nine Months Ended October 30, 2004		Nine Months Ended November 1, 2003
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold, buying and occupancy costs	64.7	%	67.9	%	65.1	%	71.6	%
Gross profit	35.3	%	32.1	%	34.9	%	28.4	%
Selling, general and administrative expenses	27.7	%	25.1	%	26.3	%	24.8	%
Operating income	7.6	%	7.0	%	8.6	%	3.6	%
Interest expense, net	1.2	%	1.2	%	1.0	%	1.3	%
Accrued dividends-redeemable preferred stock	0.0	%	0.0	%	0.4	%	0.0	%
Loss on modification and extinguishment of debt	0.7	%	0.0	%	0.3	%	0.0	%
Loss on derivative instrument	5.2	%	0.0	%	4.0	%	0.0	%
Income before income taxes	0.5	%	5.8	%	2.9	%	2.3	%
Provision for income taxes	2.3	%	2.3	%	3.0	%	0.9	%
Net income (loss)	(1.8	)%	3.5	%	(0.1	)%	1.4	%
Accrued dividends-redeemable preferred stock	0.0	%	0.9	%	0.0	%	0.9	%
Net income (loss) available for common stockholders	(1.8	)%	2.6	%	(0.1	)%	0.5	%
Number of:
Total stores open, beginning of period	474		482		468		493
New stores	13		4		22		4
Closed stores	(1	)	(3	)	(4	)	(14	)
Total stores open, end of period	486		483		486		483

(Dollars in thousands, except square foot data)	Three Months Ended October 30, 2004			Three Months Ended November 1, 2003			Nine Months Ended October 30, 2004			Nine Months Ended November 1, 2003
Selected operating data (at period end):
Total net sales growth	8.5		%	4.3		%	11.7		%	2.4		%
Comparable store sales increase	7.0		%	6.2		%	11.7		%	4.4		%
Net sales per average selling square foot (1)	$	74		$	64		$	223		$	187
Net sales per average store (2)	$	505		$	462		$	1,545		$	1,352
Total selling square footage at end of period	3,293,878			3,454,173			3,293,878			3,454,173
Average selling square footage per store (3)	6,778			7,151			6,778			7,151

(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 foot per store is defined as end of period selling square feet divided by end of period number of stores.

Three Months Ended October 30, 2004 Compared to Three Months Ended November 1, 2003

Net Sales. Net sales for the three months ended October 30, 2004 increased 8.5% to $242.3 million, from $223.4 million for the three months ended November 1, 2003. The increase was primarily attributable to a $15.3 million, or 7.0%, increase in comparable store sales. Comparable store sales were primarily driven by a 6.1% increase in the number of sales transactions and a 0.6% increase in the average dollar sale per transaction. Comparable store sales growth was strongest in wear-to-work apparel and accessory products. In the three months ended October 30, 2004, the Company opened 13 stores and closed one store.

Gross Profit. Gross profit increased $13.7 million to $85.5 million, or 35.3% of net sales, during the three months ended October 30, 2004 from $71.8 million, or 32.1% of net sales, during the three months ended November 1, 2003. The increase in gross profit reflects increased initial markup, increased volume, and improved leverage on buying and occupancy expenses.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $11.2 million to $67.2 million, or 27.7% of net sales, during the three months ended October 30, 2004 from $56.0 million, or 25.1% of net sales, during the three months ended November 1, 2003. This increase as a percentage of net sales is primarily the result of a $4.0 million fee related to the termination of the advisory services agreement with Bear Stearns Merchant Manager II, LLC; a $0.5 million increase in advisory services fees prior to the termination of the agreement, due to improved operating performance; and a $3.3 million increase in marketing expenses to support the Company’s business plan. The increase as a percentage of net sales was partially offset by the Company’s ability to improve leverage on store operating expenses, which decreased as a percentage of net sales by 0.5%.

Operating Income (Loss). Increases in net sales and gross profit more than offset higher selling, general and administrative expenses resulting in a $2.5 million increase in operating income to $18.3 million, or 7.6% of net sales, during the three months ended October 30, 2004 from $15.8 million, or 7.0% of net sales, in the three months ended November 1, 2003.

Interest Expense, Net. Net interest expense increased $0.3 million to $3.0 million for the three months ended October 30, 2004 from $2.7 million in the three months ended November 1, 2003. The increase in net interest expense is due to higher average borrowings as a result of the $75.0 million term loan entered into on May 19, 2004 under the new credit facility. This facility was repaid in full on October 13, 2004 with proceeds from the offering.

Accrued Dividends-Redeemable Preferred Stock. Accrued dividends-redeemable preferred stock decreased $2.1 million to zero in the three months ended October 30, 2004 from $2.1 million, or 0.9% of net sales, in the three months ended November 1, 2003. On May 19, 2004, the Company redeemed substantially all of its Series A redeemable preferred stock. Immediately prior to the effectiveness of the offering, the remaining one outstanding share of the Company’s Series A redeemable preferred stock was cancelled.

Loss on Modification and Extinguishment of Debt. On October 13, 2004, the Company used proceeds from the offering to repay the $75.0 million principal amount outstanding under the new credit facility, which resulted in a $1.7 million charge, or 0.7% of net sales, associated with the write off of unamortized deferred financing costs. The Company incurred no such charges in the same period last year.

Loss on Derivative Instrument. In connection with the repurchase of the common stock warrant on March 16, 2004 from LFAS, Inc., the Company entered into an agreement with LFAS, Inc. that required it to pay LFAS, Inc. an amount based on the implied equity value of the Company upon a sale of the Company or the consummation of a public offering. The offering price established the final liability to LFAS, Inc., which resulted in a charge to earnings of $12.6 million, or 5.2% of net sales, during the three months ended October 30, 2004. The obligation was repaid in full on October 13, 2004 using proceeds from the offering and cash on hand.

Provision for Income Taxes. The effective tax rate for the three months ended October 30, 2004 was 550.0% as compared to 39.3% for the three months ended November 1, 2003. The increase in rate for the three months ended October 30, 2004 is primarily due to the recording of a $12.6 million loss on derivative instrument, which is non-deductible for tax purposes.

Net Income (Loss). For the reasons discussed above, net income decreased $12.6 million to a loss of $(4.6) million for the three months ended October 30, 2004 from $8.0 million in the three months ended November 1, 2003.

Nine Months Ended October 30, 2004 Compared to Nine Months Ended November 1, 2003

Net Sales. Net sales for the nine months ended October 30, 2004 increased 11.7% to $737.2 million from $659.8 million for the nine months ended November 1, 2003. The increase was primarily attributable to a $75.2 million, or 11.7%, increase in comparable store sales. Comparable store sales were primarily driven by a 9.2% increase in the number of sales transactions and a 2.2% increase in the average dollar sale per transaction. Comparable store sales growth was strongest in wear-to-work apparel and accessory products. In the nine months ended October 30, 2004, the Company opened 22 stores and closed four stores.

Gross Profit. Gross profit increased $70.3 million to $257.5 million, or 34.9% of net sales, during the nine months ended October 30, 2004 from $187.2 million, or 28.4% of net sales, during the nine months ended November 1, 2003. The increase in gross profit reflects increased initial markup, increased volume, decreased unit cost, and improved leverage on buying and occupancy expenses. In addition, the acquisition of the Company in November 2002 and the related application of purchase accounting resulted in an increase of $5.7 million in cost of goods sold, buying and occupancy costs for the nine months ended November 1, 2003.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $30.4 million to $194.0 million, or 26.3% of net sales, during the nine months ended October 30, 2004 from $163.6 million, or 24.8% of net sales, during the nine months ended November 1, 2003. This increase as a percentage of net sales is primarily the result of a $4.0 million fee related to the termination of the advisory services agreement with Bear Stearns Merchant Manager II, LLC; a $1.3 million increase in advisory services fees prior to termination of the agreement due to improved operating performance; a $5.6 million increase in equity-based compensation expense primarily as a result of a one-time grant of stock options to certain key employees; and a $7.1 million increase in marketing expenses to support the Company’s business plan. The increase as a percentage of net sales was partially offset by the Company’s ability to improve leverage on store operating expenses, which decreased as a percentage of net sales by 1.0%.

Operating Income (Loss). Increases in net sales and gross profit more than offset higher selling, general and administrative expenses resulting in a $39.8 million increase in operating income to $63.4 million, or 8.6% of net sales, during the nine months ended October 30, 2004 from $23.6 million, or 3.6% of net sales, in the nine months ended November 1, 2003.

Interest Expense, Net. Net interest expense decreased $0.7 million to $7.7 million for the nine months ended October 30, 2004 from $8.4 million in the nine months ended November 1, 2003. The decrease in net interest expense is primarily due to the repayment of the $75.0 million, 10% subordinated note on March 16, 2004.

Accrued Dividends-Redeemable Preferred Stock. Accrued dividends-redeemable preferred stock decreased $3.5 million to $2.7 million, or 0.4% of net sales, in the nine months ended October 30, 2004 from $6.2 million, or 0.9% of net sales, in the nine months ended November 1, 2003. In February 2004, the Company adopted SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity’’ (‘‘SFAS 150’’). In accordance with SFAS 150, the Company recorded accrued dividends-redeemable preferred stock as expense in the nine months ended October 30, 2004. In the nine months ended November 1, 2003, the Company recorded accrued dividends-redeemable preferred stock as a reduction to net income (loss) available to common stockholders. On May 19, 2004, the Company used the $75.0 million of loan proceeds from the new credit facility to redeem substantially all of its Series A redeemable preferred stock.

Loss on Modification and Extinguishment of Debt. Loss on modification and extinguishment of debt for the nine months ended October 30, 2004 was $2.1 million, or 0.3% of net sales. On March 16, 2004, the Company repaid the $75.0 million, 10% subordinated note with proceeds from the amended and restated credit facilities, which resulted in a $0.4 million charge associated with the write off of unamortized deferred financing costs. In addition, on October 13, 2004, the Company used proceeds from the offering to repay the $75.0 million principal amount outstanding under the new credit facility, which resulted in a $1.7 million charge associated with the write off of unamortized deferred financing costs. The Company incurred no such charges in the same period last year.

Loss on Derivative Instrument. In connection with the repurchase of the common stock warrant on March 16, 2004 from LFAS, Inc., the Company entered into an agreement with LFAS, Inc. that requires the Company to pay LFAS, Inc. an amount based on the implied equity value of the Company upon a sale of the Company or the consummation of a public offering. During the nine months ended October 30, 2004, the Company remeasured the fair value of the derivative instrument, which resulted in a charge to earnings of $29.4 million, or 4.0% of net sales. The obligation was repaid in full on October 13, 2004 using proceeds from the offering and cash on hand.

Provision for Income Taxes. The effective tax rate for the nine months ended October 30, 2004 was 102.7% as compared to 37.0% for the nine months ended November 1, 2003. The increase in rate for the nine months ended October 30, 2004 is primarily due to the recording of a $29.4 million loss on derivative instrument and $2.7 million in accrued dividends-redeemable preferred stock, both of which are non-deductible for tax purposes.

Net Income (Loss). For the reasons discussed above, net income decreased $10.2 million to a loss of $(0.6) million for the nine months ended October 30, 2004 from $9.6 million in the nine months ended November 1, 2003.

Quarterly Results and Seasonality

The Company views the retail apparel market as having two principal selling seasons, spring (first and second fiscal quarters) and fall (third and fourth fiscal 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 fiscal quarter. Any decrease in sales or margins during this period could have a disproportionate effect on the Company’s financial condition and results of operations. Seasonal fluctuations in sales also affect the Company’s inventory levels.

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 and remodeling of existing stores. Historically, the Company has financed these requirements from internally generated cash flow or investments by its former parent prior to the acquisition. 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 the Company’s revolving credit facility, if needed. The Company is in compliance with all debt covenants.

On March 16, 2004, the Company repurchased the common stock warrant from LFAS, Inc. for $20.0 million in cash and a $16.3 million contingent obligation, which was reported as a reduction to stockholders’ equity and as a liability on the consolidated balance sheet. Subsequently, the Company remeasured the value of the contingent obligation which resulted in a charge to earnings of $29.4 million for the nine months ended October 30, 2004 and is reported as a loss on derivative instrument on the consolidated statement of operations. On the consolidated statement of cash flows and in the discussion below, the $20.0 million cash payment and the $16.3 million initial fair value of the contingent obligation on March 16, 2004 are reported as a reduction of cash flows from financing activities while the $29.4 million mark-to-market is reported as a reduction of cash flow from operating activities.

Operating Activities

Net cash used in operating activities was $13.9 million for the nine months ended October 30, 2004, while net cash provided by operating activities was $40.6 million for the nine months ended November 1, 2003. Net income (loss) was $(0.6) million for the nine months ended October 30, 2004, as compared to $9.6 million for the nine months ended November 1, 2003. The loss for the nine months ended October 30, 2004 and the resulting decrease in net income as compared to the prior year are directly related to a $29.4 million loss on derivative instrument, which reflects the mark-to-market of the contingent obligation to LFAS, Inc. incurred on March 16, 2004 in connection with the repurchase of the common stock warrant. The obligation to LFAS, Inc. was paid on October 13, 2004 using proceeds from the offering. The Company’s obligations to LFAS, Inc. have been fully satisfied. In addition, the following contributed to the reduction in cash flows from operating activities: inventories increased $30.1 million in the nine months ended October 30, 2004 as compared to $17.6 million in the nine months ended November 1, 2003. The inventory build for the nine month period ended October 30, 2004 was greater than the prior year period due to lower inventory levels at the start of fiscal 2004. Inventory levels at the end of the nine months ended October 30, 2004 have decreased by $6.1 million as compared to inventory levels at November 1, 2003. Prepaid expenses increased $7.0 million in the nine months ended October 30, 2004 as compared to a decrease of $1.7 million in the nine months ended November 1, 2003; accounts payable increased $17.0 million in the nine months ended October 30, 2004 as compared to $28.0 million in the nine months ended November 1, 2003; income taxes payable decreased $10.1 million in the nine months ended October 30, 2004 as compared to an increase of $5.1 million in the nine months ended November 1, 2003; and $6.7 million net cash used in changes in other assets/liabilities in the nine months ended October 30, 2004 as compared to $1.9 million net cash provided in the nine months ended November 1, 2003.

Investing Activities

Cash used in investing activities was $36.5 million for the nine months ended October 30, 2004 as compared to $17.2 million for the nine months ended November 1, 2003. The increase reflects capital expenditures related to the construction of new stores, remodeling of existing stores and converting stores to the New York & Company storefront signage.

Projected capital expenditures for the fiscal year ending January 29, 2005 are approximately $44.0 million, to be used primarily to fund new store openings, the remodeling of existing stores and, to a lesser extent, information technology and related investments. Historically, the Company has financed such capital expenditures with cash from operations and borrowing under its credit facility, if needed. The Company believes that it will continue to finance ongoing capital expenditures in this manner.

Financing Activities

Net cash used in financing activities was $15.1 million for the nine months ended October 30, 2004 as compared to $39.7 million for the nine months ended November 1, 2003. Net cash used in financing activities for the nine months ended October 30, 2004 consisted of the following: net proceeds of $105.4 million from the offering; proceeds of $75.0 million from the amended and restated credit facilities entered into on March 16, 2004; proceeds of $75.0 million from the new credit facility entered on May 19, 2004; the repayment of the $75.0 million, 10% subordinated note, plus accrued and unpaid interest; $36.3 million used to repurchase from LFAS, Inc. the common stock warrant; the redemption of substantially all of the Company’s outstanding Series A preferred stock for $72.4 million; the repayment of the $75.0 million principal amount outstanding under the new credit facility, plus accrued and unpaid interest; and the payment of $7.1 million in fees and expenses related to these transactions. Net cash used in financing activities for the nine months ended November 1, 2003 represents a $39.7 million payment to Limited Brands, Inc. relating to the acquisition.

Credit Facilities and Other Long-Term Debt

Amended and Restated Credit Facilities. On March 16, 2004, certain terms of the Company’s revolving credit facility were amended. The amended and restated credit facilities currently consist of a three-year $90.0 million revolving credit facility (containing a sub-facility available for the issuance of letters of credit of up to $75.0 million), and a three-year $75.0 million term loan facility. As of October 30, 2004, the Company had no outstanding amounts under the revolving credit facility and had availability of $54.7 million with outstanding letters of credit of $16.8 million as compared to $39.5 million in outstanding letters of credit as of November 1, 2003. The reduction in letters of credit reflects changes in terms with vendors.

The amended and restated 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 or repurchase other debt. Subject to such restrictions, the Company may incur more debt for working capital, capital expenditures, acquisitions and for other purposes.

The lenders have been granted a pledge of the common stock of Lerner New York Holding, Inc. 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 certain of its subsidiaries, as collateral for the Company’s obligations under the amended and restated 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.

The terms of the amended and restated credit facilities were further amended on May 19, 2004 to allow for the consummation of the new credit facility described below.

New Credit Facility. On May 19, 2004, the Company entered into a new subordinated secured term loan facility with a third party consisting of a $75.0 million, five-year term loan. The Company used the $75.0 million loan proceeds to repurchase substantially all of its Series A preferred stock. On October 13, 2004, the new credit facility was repaid in full from the proceeds of the offering.

Preferred Stock

In connection with the acquisition, the Company issued shares of $0.01 par value, non-voting, Series A redeemable preferred stock, which accrued dividends at 12.5% per annum. On May 19, 2004, all but one share of the preferred stock was repurchased and accrued and unpaid dividends were paid with proceeds from the new credit facility. The remaining one share of preferred stock was cancelled immediately prior to the effectiveness of the offering.

Cash Requirements

As of October 30, 2004, the Company had $33.3 million in cash available to fund operations and future growth, in addition to $54.7 million available for borrowings under the revolving credit facility, net of letter of credit accommodations outstanding of $16.8 million. The Company believes that cash flows from operations, the current cash balance and funds available under the amended and restated credit facilities will be sufficient to meet the Company’s working capital needs and planned capital expenditures for at least the next twelve months.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires the Company to make estimates and assumptions that impact the amounts reported on its consolidated financial statements and related notes. On an on-going basis, management evaluates its estimates and judgments, including those related to inventories, long-lived assets and the fair market value of assets acquired in the acquisition. 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 valued at the lower of cost or market, on a weighted average cost basis using the retail method. The Company calculates inventory costs on an individual item-class level to ensure a high degree of accuracy. The Company records a charge to cost of goods sold, buying and occupancy costs when a permanent retail price reduction is reflected in the stores. In addition, management makes estimates and judgments regarding initial markups, markdowns, future demand and market conditions. These assumptions can have a significant impact on current and future operating results and financial position. The Company’s estimates have historically been valid. At the end of each season, goods related specifically to that season are marked down and valued at the estimated current retail value. The use of the retail method and the recording of markdowns effectively values the inventory at the lower of cost or market. In addition, an inventory loss estimate is recorded each period. These estimates are adjusted based upon physical inventories performed twice each year.

Impairment of Long-Lived Assets. The Company evaluates long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). This Statement supercedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” Long-lived assets are evaluated for recoverability in accordance with SFAS 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 flows expected to result from the use of the asset and eventual disposition. If the sum of the expected future undiscounted cash flows 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 evaluations for fiscal 2004 disclosed no impaired assets.

Goodwill and Other Intangible Assets. SFAS No. 142, “Goodwill and Other Intangible Assets,” prohibits the amortization of goodwill and intangible assets with indefinite lives. This Statement requires that these assets be reviewed for impairment at least annually. The intangible assets relate primarily to the New York & Company trademark. The trademark was initially valued using the “relief from royalty method” by an independent appraiser. The Company tests for impairment annually. Management’s estimate of future cash flows is based on historical experience, knowledge, and market data. An impairment loss could have a material adverse impact on the Company’s financial condition and results of operations.

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. At October 30, 2004, no valuation allowance had been provided for deferred tax assets because management believes that it is more likely than not that the full amount of the net deferred tax assets will be realized in the future.

Adoption of New Accounting Standards

In December 2003, the FASB issued SFAS No. 132 (Revised 2003), “Employer’s Disclosure about Pensions and Other Postretirement Benefits” (“SFAS 132-R”). SFAS 132-R retains disclosure requirements of the original SFAS No. 132 and requires additional disclosures relating to assets, obligations, cash flows, and net periodic benefit cost. SFAS 132-R is effective for fiscal years ending after December 15, 2003, except that certain disclosures are effective for fiscal years ending after June 15, 2004. Interim period disclosures are effective for interim periods beginning after December 15, 2003. The adoption of the disclosure provisions of SFAS 132-R did not have a material effect on the Company’s consolidated financial statements.

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 amended and restated 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 $0.8 million annually. The Company historically has not engaged in interest rate hedging activities.

Currency Exchange Rates. The Company is not exposed to currency exchange rate risks with respect to inventory purchases as such expenditures are denominated in U.S. dollars.

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’)) as of the end of the period covered by this quarterly report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.

(b) Internal Controls Over Financial Reporting. There have not been any changes in the Company’s internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II.

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is involved in various legal proceedings in the ordinary course of business. There are currently no material legal proceedings pending against the Company.

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

(a) For the three months ended October 30, 2004, the Company (i) granted to directors, employees and management options to purchase 234,336 shares of the Company’s common stock at a weighted average exercise price of approximately $17.00 per share under its 2002 Stock Option Plan; and (ii) issued 288,863 shares of the Company’s common stock upon the exercise of outstanding options under its 2002 Stock Option Plan. These grants and shares were exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Rule 701 promulgated thereunder in as much as they were offered and sold under written compensatory benefit plans and otherwise in compliance with the provisions of Rule 701.

(b) On October 6, 2004, the United States Securities and Exchange Commission declared effective the Company’s Registration Statement on Form S-1 (Registration No. 333-115778). The Registration Statement covered the offering of 11,500,000 shares of common stock, of which 6,666,667 shares were offered by the Company and 4,833,333 shares were offered by certain selling stockholders at a price to the public of $17.00 per share, for an aggregate offering price of $195.5 million through a syndicate of underwriters with Bear, Stearns & Co. Inc. and J.P. Morgan Securities Inc. as co-lead managers. Upon consummation of the offering, net proceeds of $105.4 million and $76.4 million were distributed to the Company and selling stockholders, respectively. The Company incurred approximately $13.7 million in underwriting commissions and discounts and $3.1 million in offering expenses. On October 6, 2004 the remaining one outstanding share of the Company’s Series A redeemable preferred stock was cancelled. The Company is now authorized to issue 300,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of preferred stock, $0.001 par value.

Approximately $75.2 million of the net proceeds received by the Company was used to repay the $75.0 million outstanding principal amount plus $0.2 million in interest under its new credit facility. The remainder of the net proceeds plus cash on hand was used to pay the $45.7 million contingent obligation due to LFAS, Inc. and to pay a $4.0 million fee related to the termination of the advisory services agreement with Bear Stearns Merchant Manager II, LLC. Bear Stearns Merchant Banking, an affiliate of Bear Stearns Merchant Manager II, LLC, is a holder of more than 10% of common stock of the Company. Bear, Stearns & Co. Inc., an affiliate of Bear Stearns Merchant Banking, served as co-lead manager of the offering and received a portion of the underwriting discounts and commissions. No other expenses incurred by the Company in connection with the offering were paid to officers or directors of the Company or their associates or to a person owning 10% or more of the Company’s common stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

Prior to the offering, pursuant to Written Consents of Stockholder of New York & Company, Inc., (i) dated August 25, 2004, the Company’s stockholders consented to the expansion of the board of directors to nine members, and the election of Richard L. Perkal to fill the vacancy (the following directors’ terms of office continued as well after the date of the written consent: Richard P. Crystal, Ronald W. Ristau, Bodil M. Arlander, Philip M. Carpenter III, John D. Howard, M. Katherine Dwyer, David H. Edwab and Arthur E. Reiner); and (ii) dated September 30, 2004, the Company’s stockholders consented to taking the following actions in connection with the offering: (1) the approval and adoption of the Company’s Restated Certificate of Incorporation, and (2) the cancellation of the remaining one outstanding share of Series A redeemable preferred stock; as well as a general ratification of board and board committee action.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

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

3.1 Restated Certificate of Incorporation.

3.2 Amended and Restated Bylaws.

31.1 Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

31.2 Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

32 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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

NEW YORK & COMPANY, INC.

/s/ Ronald W. Ristau

By: Ronald W. Ristau

Its: Chief Operating Officer and

Chief Financial Officer

Dated: December 13, 2004

/s/ Ronald W. Ristau

By: Ronald W. Ristau

Its: Principal Financial Officer

Dated: December 13, 2004

EX-3.1 2 a04-14499_1ex3d1.htm EX-3.1

Exhibit 3.1

CERTIFICATE OF

RESTATED CERTIFICATE OF INCORPORATION

NEW YORK & COMPANY, INC.

I, Richard Crystal, being the duly elected President and Chief Executive Officer of New York & Company, Inc., a corporation organized and existing under and by virtue of the Delaware General Corporation Law (the “Corporation”), do hereby certify as follows:

1. The original name of the Corporation was NY & Co. Group, Inc. The date of filing the original Certificate of Incorporation of the Corporation with the Secretary of State of the State of Delaware was November 8, 2002.

2. The original Certificate of Incorporation of the Corporation was amended and restated by filing of a Certificate of Restated Certificate of Incorporation with the Secretary of State of the State of Delaware on November 26, 2002.

3. The Restated Certificate of Incorporation of the Corporation was amended by filing of a Certificate of Amendment of Restated Certificate of Incorporation with the Secretary of State of the State of Delaware on May 20, 2004.

4. That the Board of Directors of the Corporation, pursuant to Sections 141(f), 242 and 245 of the General Corporation Law of the State of Delaware, has adopted resolutions authorizing the Corporation to amend, integrate and restate the Corporation’s Restated Certificate in its entirety to read as set forth in Exhibit A attached hereto and made a part hereof (the “Restated Certificate”).

5. That the holders of the Corporation’s issued and outstanding capital stock approved and adopted the Restated Certificate in accordance with Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the undersigned affirms as true the foregoing under penalties of perjury and has executed this Certificate as of this 6^th day of October 2004.

	NEW YORK & COMPANY, INC.


	By:	/s/ Richard P. Crystal
	Name:	Richard P. Crystal
	Title:	Chairman, Chief Executive Officer and
		President

EXHIBIT A

RESTATED CERTIFICATE OF INCORPORATION

NEW YORK & COMPANY, INC.

ARTICLE ONE

The name of the corporation is New York & Company, Inc. (hereinafter, the “Corporation”).

ARTICLE TWO

The address of the Corporation’s registered office in the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808. The name of its registered agent at such address is Corporation Service Company.

ARTICLE THREE

The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

ARTICLE FOUR

Section 1. Authorized Shares. The total number of shares of capital stock which the Corporation has authority to issue is 305,000,000 shares, consisting of:

(a) 5,000,000 shares of Preferred Stock, par value $0.001 per share (“Preferred Stock”); and

(b) 300,000,000 shares of Common Stock, par value $0.001 per share (“Common Stock”).

The Preferred Stock and the Common Stock shall have the rights, preferences and limitations set forth below. Capitalized terms used but not otherwise defined in other Sections of this Article are defined in Section 5.

Section 2. Preferred Stock. The Preferred Stock may be issued from time to time and in one or more series. The Board of Directors of the Corporation is authorized to determine or alter the powers, preferences and rights, and the qualifications (including, without limitation, dividend rates, conversion prices, voting rights, redemption rights and other similar matters), limitations and restrictions granted to or imposed upon any wholly unissued series of Preferred

Stock, and within the limitations or restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series of Preferred Stock, to increase or decrease (but not below the number of shares of any such series of Preferred Stock then outstanding) the number of shares of any such series of Preferred Stock, and to fix the number of shares of any series of Preferred Stock. In the event that the number of shares of any series of Preferred Stock shall be so decreased, the shares constituting such decrease shall resume the status which such shares had prior to the adoption of the resolution originally fixing the number of shares of such series of Preferred Stock subject to the requirements of applicable law.

Section 3. Common Stock.

(a) Dividends. Except as otherwise provided by the Delaware General Corporation Law or this Certificate of Incorporation, the holders of Common Stock: (i) subject to the rights of holders of any series of Preferred Stock, shall share ratably in all dividends payable in cash, stock or otherwise and other distributions, whether in respect of liquidation or dissolution (voluntary or involuntary) or otherwise and (ii) are subject to all the powers, rights, privileges, preferences and priorities of any series of Preferred Stock as provided herein or in any resolution or resolutions adopted by the Board of Directors pursuant to authority expressly vested in it by the provisions of Section 2 of this Article Four.

(b) Conversion Rights. The Common Stock shall not be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same class of the Corporation’s capital stock.

(c) Preemptive Rights. No holder of Common Stock shall have any preemptive rights with respect to the Common Stock or any other securities of the Corporation, or to any obligations convertible (directly or indirectly) into securities of the Corporation whether now or hereafter authorized.

(d) Voting Rights. Except as otherwise provided by the Delaware General Corporation Law or this Certificate of Incorporation and subject to the rights of holders of any series of Preferred Stock, all of the voting power of the stockholders of the Corporation shall be vested in the holders of the Common Stock, and each holder of Common Stock shall have one vote for each share held by such holder on all matters voted upon by the stockholders of the Corporation.

(e) Registration or Transfer. The Corporation shall keep at its principal office (or such other place as the Corporation reasonably designates) a register for the registration of Common Stock. Upon the surrender of any certificate representing shares of any class of Common Stock at such place, the Corporation shall, at the request of the registered holder of such certificate, execute and deliver a new certificate or certificates in exchange therefor representing in the aggregate the number of shares of such class represented by the surrendered certificate, and the Corporation forthwith shall cancel such surrendered certificate. Each such new certificate will be registered in such name and will represent such number of shares of such class as is requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate. The issuance of new certificates shall be made

without charge to the holders of the surrendered certificates for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such issuance.

(f) Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder will be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing one or more shares of any class of Common Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the holder is a financial institution or other institutional investor, its own agreement will be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.

(g) Notices. All notices referred to herein shall be in writing, shall be delivered personally or by first class mail, postage prepaid, and shall be deemed to have been given when so delivered or mailed to the Corporation at its principal executive offices and to any stockholder at such holder’s address as it appears in the stock records of the Corporation (unless otherwise specified in a written notice to the Corporation by such holder).

Section 4. Stock Split.

(a) Immediately upon filing this Restated of Certificate of Incorporation (the “Effective Time”) each share of Common Stock outstanding at the Effective Time shall be, without further action by the Corporation or any of the holders thereof, changed and converted into a number of shares of Common Stock equal to that number determined by multiplying each outstanding share of Common Stock by 8.7484 (the “Stock Split Factor”). The par value of the Common Stock after such stock split shall be $0.001 per share. Each certificate then outstanding representing shares of Common Stock shall automatically represent from and after the Effective Time that number of shares of Common Stock equal to the number of shares shown on the face of the certificate multiplied by the Stock Split Factor.

(b) As soon as possible after a conversion has been effected, the Corporation shall deliver to the converting holder a certificate or certificates representing the number of shares of Common Stock issuable by reason of such conversion in such name or names and such denomination or denominations as the converting holder has specified.

(c) The issuance of certificates for shares of Common Stock upon conversion shall be made without charge to the holders of such Common Stock for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion.

(d) The Corporation shall assist and cooperate with any holder of shares required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of shares hereunder (including, without limitation, making any filings required to be made by the Corporation).

(e) All shares of Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges.

The Corporation shall take all such actions as may be necessary to assure that all such shares of Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Corporation upon each such issuance).

Section 5. Definitions.

“Affiliate” means, with respect to any Person, any other Person, entity or investment fund controlling, controlled by or under common control with such Person and, in the case of a Person which is a partnership or a limited liability company, any partner or member of such Person.

“Liquidation Value” of any share of Existing Preferred as of any particular date shall be equal to the initial price paid to the Corporation for such share on its date of issuance.

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

“Public Offering” means any offering by the Corporation of its capital stock or equity securities to the public pursuant to an effective registration statement under the Securities Act of 1933, as then in effect, or any comparable statement under any similar federal statute then in force.

ARTICLE FIVE

The Corporation is to have perpetual existence.

ARTICLE SIX

Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

ARTICLE SEVEN

The number of directors which constitute the entire Board of Directors of the Corporation shall be designated in the Bylaws of the Corporation.

ARTICLE EIGHT

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws of the Corporation.

ARTICLE NINE

Section 1. Limitation of Liability.

(a) To the fullest extent permitted by the Delaware General Corporation Law as it now exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), and except as otherwise provided in the Corporation’s Bylaws, no director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages arising from a breach of fiduciary duty owed to the Corporation or its stockholders.

(b) Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.

Section 2. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved (including involvement as a witness) in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”), by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as a director or officer, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys’ fees, judgments, fines, excise exercise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee’s heirs, executors and administrators; provided that, except as provided in Section 3 of this Article Nine with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section 2 of this Article Nine shall be a contract right and shall include the obligation of the Corporation to pay the expenses incurred in defending any such proceeding in advance of its final disposition (an “advance of expenses”); provided that, if and to the extent that the Delaware General Corporation Law requires, an advance of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (a “final adjudication”)

that such indemnitee is not entitled to be indemnified for such expenses under this Section 2 or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same or lesser scope and effect as the foregoing indemnification of directors and officers.

Section 3. Procedure for Indemnification. Any indemnification of a director or officer of the Corporation or advance of expenses under Section 2 of this Article Nine shall be made promptly, and in any event within forty-five days (or, in the case of an advance of expenses, twenty days), upon the written request of the director or officer. If a determination by the Corporation that the director or officer is entitled to indemnification pursuant to this Article Nine is required, and the Corporation fails to respond within sixty days to a written request for indemnity, the Corporation shall be deemed to have approved the request. If the Corporation denies a written request for indemnification or advance of expenses, in whole or in part, or if payment in full pursuant to such request is not made within forty-five days (or, in the case of an advance of expenses, twenty days), the right to indemnification or advances as granted by this Article Nine shall be enforceable by the director or officer in any court of competent jurisdiction. Such person’s costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of expenses where the undertaking required pursuant to Section 2 of this Article Nine, if any, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. The procedure for indemnification of other employees and agents for whom indemnification is provided pursuant to Section 2 of this Article Nine shall be the same procedure set forth in this Section 3 for directors or officers, unless otherwise set forth in the action of the Board of Directors providing indemnification for such employee or agent.

Section 4. Insurance. The Corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee or agent of the Corporation or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss asserted against him or her and incurred by him or her in any such capacity, whether or not the Corporation would have the power to indemnify such person against such expenses, liability or loss under the Delaware General Corporation Law.

Section 5. Service for Subsidiaries. Any person serving as a director, officer, employee or agent of another corporation, partnership, limited liability company, joint venture or other enterprise, at least 50% of whose equity interests are owned by the Corporation (a

“subsidiary” for this Article Nine) shall be conclusively presumed to be serving in such capacity at the request of the Corporation.

Section 6. Reliance. Persons who after the date of the adoption of this provision become or remain directors or officers of the Corporation or who, while a director or officer of the Corporation, become or remain a director, officer, employee or agent of a subsidiary, shall be conclusively presumed to have relied on the rights to indemnity, advance of expenses and other rights contained in this Article Nine in entering into or continuing such service. The rights to indemnification and to the advance of expenses conferred in this Article Nine shall apply to claims made against an indemnitee arising out of acts or omissions which occurred or occur both prior and subsequent to the adoption hereof.

Section 7. Non-Exclusivity of Rights. The rights to indemnification and to the advance of expenses conferred in this Article Nine shall not be exclusive of any other right which any person may have or hereafter acquire under this Certificate of Incorporation or under any statute, by-law, agreement, vote of stockholders or disinterested directors or otherwise.

Section 8. Merger or Consolidation. For purposes of this Article Nine, references to the “Corporation” shall include, in addition to the resulting Corporation, any constituent Corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent Corporation, or is or was serving at the request of such constituent Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article Nine with respect to the resulting or surviving Corporation as he or she would have with respect to such constituent Corporation if its separate existence had continued.

ARTICLE TEN

Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

ARTICLE ELEVEN

Section 1. Certain Acknowledgments. In recognition and anticipation that (a) the directors, officers or employees of Bear Stearns Merchant Banking may serve as directors or officers of the Corporation, (b) Bear Stearns Merchant Banking and the Affiliated Companies (as defined below) thereof engage and may continue to engage in the same or similar activities or related lines of business as those in which the Corporation, directly or indirectly, may engage or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, and (c) that the Corporation and the Affiliated Companies thereof will engage in material business transactions with Bear Stearns Merchant Banking and Affiliated Companies thereof and that the Corporation is expected to benefit therefrom, the

provisions of this Article Eleven are set forth to regulate and define the conduct of certain affairs of the Corporation as they may involve Bear Stearns Merchant Banking or Affiliated Companies and its officers and directors, and the powers, rights, duties and liabilities of the Corporation and its officers, directors and stockholders in connection therewith.

Section 2. Competition and Corporate Opportunities. None of Bear Stearns Merchant Banking and any of its Affiliated Companies shall have any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as the Corporation or any of its Affiliated Companies, and none of Bear Stearns Merchant Banking and any officer, director or employee thereof (except as provided in Section 3 below) shall be liable to the Corporation or its stockholders for breach of any fiduciary duty solely by reason of any such activities of Bear Stearns Merchant Banking or any of its Affiliated Companies. In the event that Bear Stearns Merchant Banking or any of its Affiliated Companies acquires knowledge of a potential transaction or matter which may be a corporate opportunity for itself and the Corporation or any of its Affiliated Companies, none of Bear Stearns Merchant Banking and any of its Affiliated Companies shall have any duty to communicate or offer such corporate opportunity to the Corporation or any of its Affiliated Companies and shall not be liable to the Corporation or its stockholders for breach of any fiduciary duty as a stockholder of the Corporation solely by reason of the fact that Bear Stearns Merchant Banking or any of its Affiliated Companies pursues or acquires such corporate opportunity for itself, directs such corporate opportunity to another person, or does not communicate information regarding such corporate opportunity to the Corporation.

Section 3. Allocation of Corporate Opportunities. In the event that a director or officer of the Corporation who is also a director, officer or employee of Bear Stearns Merchant Banking acquires knowledge of a potential transaction or matter which may be a corporate opportunity for the Corporation or any of its Affiliated Companies and Bear Stearns Merchant Banking or any of its Affiliated Companies, such director or officer of the Corporation shall have fully satisfied and fulfilled the fiduciary duty of such director or officer to the Corporation and its stockholders with respect to such corporate opportunity, if such director or officer acts in a manner consistent with the following policy:

(a) A corporate opportunity offered to any Person who is a director or officer of the Corporation, and who is also a director, officer or employee of Bear Stearns Merchant Banking, shall belong to the Corporation if such opportunity is expressly offered to such Person in writing solely in his or her capacity as a director or officer of the Corporation.

(b) Otherwise, such corporate opportunity shall belong to Bear Stearns Merchant Banking.

Section 4. Certain Matters Deemed Not Corporate Opportunities. In addition to and notwithstanding the foregoing provisions of this Article Eleven, a corporate opportunity shall not be deemed to belong to the Corporation if it is a business opportunity that the Corporation is not permitted to undertake under the terms of Article Three or that the Corporation is not financially able or contractually permitted or legally able to undertake, or that is, from its nature, not in the line of the Corporation’s business or is of no practical advantage to it or that is one in which the Corporation has no interest or reasonable expectancy.

Section 5. Agreements and Transactions with Bear Stearns Merchant Banking. In the event that Bear Stearns Merchant Banking or any of its Affiliated Companies enters into an agreement or transaction with the Corporation or any of its Affiliated Companies, a director or officer of the Corporation who is also a director, officer or employee of Bear Stearns Merchant Banking shall have fully satisfied and fulfilled the fiduciary duty of such director or officer to the Corporation and its stockholders with respect to such agreement or transaction, if:

(a) The agreement or transaction was approved, after being made aware of the material facts of the relationship between each of the Corporation or an Affiliated Company thereof and Bear Stearns Merchant Banking or an Affiliated Company thereof and the material terms and facts of the agreement or transaction, by (i) an affirmative vote of a majority of the members of the Board of Directors of the Corporation who are not persons or entities with a material financial interest in the agreement or transaction (“Interested Persons”), (ii) an affirmative vote of a majority of the members of a committee of the Board of Directors of the Corporation consisting of members who are not Interested Persons or (iii) one or more of the Corporation’s officers or employees who are not Interested Persons and who were authorized by the Board of Directors of the Corporation or committee thereof in the manner set forth in (i) and (ii) above.

(b) The agreement or transaction was fair to the Corporation at the time the agreement or transaction was entered into by the Corporation; or

(c) The agreement or transaction was approved by an affirmative vote of a majority of the shares of the Corporation’s Common Stock entitled to vote, excluding Bear Stearns Merchant Banking, any Affiliated Company or Interested Person.

Section 6. Certain Definitions. For purposes of this Article Eleven, “Bear Stearns Merchant Banking” means (a) the merchant banking group of Bear Stearns as comprised from time to time, including all entities that employ investment professionals of the merchant banking group or through which the management of the investment partnerships managed by the merchant banking group of Bear Stearns is conducted, including Bear Stearns Merchant Capital II, L.P. and Bear Stearns Merchant Manager II, LLC, and (b) any investment partnership managed by any of the Persons described in clause (a) above. “Affiliated Company” shall mean (a) in respect of Bear Stearns Merchant Banking, any Person which is controlled by Bear Stearns Merchant Banking (other than the Corporation or any Person that is controlled by the Corporation), and (b) in respect of the Corporation, any Person controlled by the Corporation; and “Person” shall have the meaning given such term in Section 5 of Article Four.

Section 7. Termination. The provisions of this Article shall have no further force or effect for Bear Stearns Merchant Banking at such time as Bear Stearns Merchant Banking and any company controlling, controlled by or under common control with Bear Stearns Merchant Banking shall first cease to be the owner, in the aggregate, of Common Stock representing five percent (5%) or more of the votes entitled to be cast by the holders of all the then outstanding shares of Common Stock; provided that such termination shall not terminate the effect of such provisions with respect to (i) any agreement between the Corporation or an Affiliated Company thereof and Bear Stearns Merchant Banking or an Affiliated Company thereof that was entered into before such time or any transaction entered into in the performance of such agreement,

whether entered into before or after such time, or (ii) any transaction or agreement entered into between the Corporation or an Affiliated Company thereof and Bear Stearns Merchant Banking or an Affiliated Company thereof.

Section 8. Amendment of this Article. Notwithstanding anything to the contrary elsewhere contained in the Corporation’s Certificate of Incorporation, the affirmative vote of the holders of at least 80% of the voting power of all shares of Common Stock then outstanding, voting together as a single class, shall be required to alter, amend or repeal, or to adopt any provision inconsistent with, this Article Eleven.

Section 9. Deemed Notice. Any Person purchasing or otherwise acquiring any interest in any shares of the Corporation shall be deemed to have notice or and to have consented to the provisions of this Article Eleven.

ARTICLE TWELVE

The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

ARTICLE THIRTEEN

The Corporation expressly elects not to be governed by section 203 of the Delaware General Corporation Law.

EX-3.2 3 a04-14499_1ex3d2.htm EX-3.2

Exhibit 3.2

AMENDED AND RESTATED

BY-LAWS

NEW YORK & COMPANY, INC.

A Delaware Corporation
(Effective as of October 13, 2004)

ARTICLE I

OFFICES

Section 1. Registered Office. The registered office of New York & Company, Inc. (the “Corporation”) in the State of Delaware shall be located at 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808. The name of the Corporation’s registered agent at such address shall be Corporation Service Company. The registered office and registered agent of the Corporation may be changed from time to time by action of the Board of Directors.

Section 2. Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. Annual Meeting. An annual meeting of the stockholders shall be held each year within 150 days after the close of the immediately preceding fiscal year of the Corporation or at such other time specified by the Board of Directors for the purpose of electing directors and conducting such other proper business as may come before the annual meeting. At the annual meeting, stockholders shall elect directors and transact such other business as properly may be brought before the annual meeting pursuant to Section 11 of Article II hereof.

Section 2. Special Meetings. Special meetings of stockholders may be called for any purpose, and may be held at such time and place, within or without the State of Delaware, as shall be stated in a notice of meeting or in a duly executed waiver of notice thereof. Such meetings may be called at any time by the Board of Directors or the holders of at least twenty percent (20%) of the outstanding shares of the Corporation’s common stock.

Section 3. Place of Meetings. The Board of Directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal executive office of the Corporation. If for any reason any

annual meeting shall not be held during any year, the business thereof may be transacted at any special meeting of the stockholders.

Section 4. Notice. Whenever stockholders are required or permitted to take action at a meeting, written or printed notice stating the place, date, time and, in the case of special meetings, the purpose or purposes, of such meeting, shall be given to each stockholder entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. All such notices shall be delivered, either personally or by mail, by or at the direction of the Board of Directors, the chairman of the board, the chief executive officer, the president, the chief operating officer or the secretary, and if mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder at his, her or its address as the same appears on the records of the Corporation. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.

Section 5. Stockholders List. The officer having charge of the stock ledger of the Corporation shall make, at least 10 days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

Section 6. Quorum. The holders of a majority of the outstanding shares of capital stock entitled to vote, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by the General Corporation Law of the State of Delaware or in the Corporation’s certificate of incorporation (the “Certificate of Incorporation”). If a quorum is not present, the holders of a majority of the shares present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time or place. When a specified item of business requires a vote by a class or series (if the Corporation shall then have outstanding shares of more than one class or series) voting as a class or series, the holders of a majority of the shares of such class or series shall constitute a quorum (as to such class or series) for the transaction of such item of business.

Section 7. Adjourned Meetings. When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 8. Vote Required. When a quorum is present, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless by express provisions of an applicable law or of the Certificate of Incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question.

Section 9. Voting Rights. Except as otherwise provided by the General Corporation Law of the State of Delaware, the Certificate of Incorporation of the Corporation or any amendments thereto or these By-laws, every stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of capital stock held by such stockholder.

Section 10. Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. Any proxy is suspended when the person executing the proxy is present at a meeting of stockholders and elects to vote, except that when such proxy is coupled with an interest and the fact of the interest appears on the face of the proxy, the agent named in the proxy shall have all voting and other rights referred to in the proxy, notwithstanding the presence of the person executing the proxy. At each meeting of the stockholders, and before any voting commences, all proxies filed at or before the meeting shall be submitted to and examined by the secretary or a person designated by the secretary, and no shares may be represented or voted under a proxy that has been found to be invalid or irregular.

ARTICLE III

DIRECTORS

Section 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to such powers as are herein and in the Certificate of Incorporation expressly conferred upon it, the Board of Directors shall have and may exercise all the powers of the Corporation, subject to the provisions of the laws of Delaware, the Certificate of Incorporation and these By-laws.

Section 2. Number, Election and Term of Office. Subject to any rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors which shall constitute the Board of Directors shall be fixed from time to time by resolution adopted by the affirmative vote of a majority of the total number of directors then in office. The directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote in the election of directors; provided that, whenever the holders of any class or series of capital stock of the Corporation are entitled to elect one or more directors pursuant to the provisions of the Certificate of Incorporation of the

Corporation (including, but not limited to, for purposes of these By-laws, pursuant to any duly authorized certificate of designation), such directors shall be elected by a plurality of the votes of such class or series present in person or represented by proxy at the meeting and entitled to vote in the election of such directors. The directors shall be elected and shall hold office only in the manner provided in the Certificate of Incorporation.

Section 3. Removal and Resignation. No director may be removed from office without the affirmative vote of the holders of a majority of the voting power of the then outstanding shares of capital stock entitled to vote generally in the election of directors voting together as a single class; provided that if the holders of any class or series of capital stock are entitled by the provisions of the Certificate of Incorporation (it being understood that any references to the Certificate of Incorporation shall include any duly authorized certificate of designation) to elect one or more directors, such director or directors so elected may be removed without cause only by the vote of the holders of a majority of the outstanding shares of that class or series entitled to vote. Any director may resign at any time upon written notice to the Corporation.

Section 4. Vacancies. Vacancies and newly created directorships resulting from any increase in the total number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

Section 5. Annual Meetings. The annual meeting of the Board of Directors shall be held without other notice than this By-law immediately after, and at the same place as, the annual meeting of stockholders.

Section 6. Other Meetings and Notice. Regular meetings, other than the annual meeting, of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of the Board of Directors. Special meetings of the Board of Directors may be called by the chairman of the board, the chief executive officer, the president (if the president is a director) or, upon the written request of at least a majority of the directors then in office, the secretary of the Corporation on at least 24 hours notice to each director, either personally, by telephone, by mail or by telecopy.

Section 7. Chairman of the Board, Quorum, Required Vote and Adjournment. The Board of Directors shall elect, by the affirmative vote of a majority of the total number of directors then in office, a chairman of the board, who shall preside at all meetings of the stockholders and Board of Directors at which he or she is present and shall have such powers and perform such duties as the Board of Directors may from time to time prescribe. If the chairman of the board is not present at a meeting of the stockholders or the Board of Directors, the chief executive officer (if the chief executive officer is a director and is not also the chairman of the board) shall preside at such meeting, and, if the chief executive officer is not present at such meeting, a majority of the directors present at such meeting shall elect one of their members to so preside. A majority of the total number of directors then in office shall constitute a quorum for the transaction of business. Unless by express provision of an applicable law, the Certificate of Incorporation or these By-laws a different vote is required, the vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. If a

quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 8. Committees. The Board of Directors may, by resolution passed by a majority of the total number of directors then in office, designate one or more committees, each committee to consist of one or more of the directors of the Corporation, which to the extent provided in such resolution or these By-laws shall have, and may exercise, the powers of the Board of Directors in the management and affairs of the Corporation, except as otherwise limited by law. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors upon request.

Section 9. Committee Rules. Each committee of the Board of Directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the Board of Directors designating such committee. Unless otherwise provided in such a resolution, the presence of at least a majority of the members of the committee shall be necessary to constitute a quorum. Unless otherwise provided in such a resolution, in the event that a member and that member’s alternate, if alternates are designated by the Board of Directors, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member.

Section 10. Communications Equipment. Members of the Board of Directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear and speak with each other, and participation in the meeting pursuant to this section shall constitute presence in person at the meeting.

Section 11. Waiver of Notice and Presumption of Assent. Any member of the Board of Directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action.

Section 12. Action by Written Consent. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of such

board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee.

ARTICLE IV

OFFICERS

Section 1. Number. The officers of the Corporation shall be elected by the Board of Directors and shall consist of a chairman of the board, a chief executive officer, a president, a chief operating officer, a chief financial officer, one or more vice-presidents, a secretary and such other officers and assistant officers as may be deemed necessary or desirable by the Board of Directors. Any number of offices may be held by the same person, except that neither the chief executive officer nor the president shall also hold the office of secretary. In its discretion, the Board of Directors may choose not to fill any office for any period as it may deem advisable, except that the offices of president and secretary shall be filled as expeditiously as possible.

Section 2. Election and Term of Office. The officers of the Corporation shall be elected annually by the Board of Directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as convenient. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided.

Section 3. Removal. Any officer or agent elected by the Board of Directors may be removed by the Board of Directors at its discretion, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.

Section 4. Vacancies. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise may be filled by the Board of Directors.

Section 5. Compensation. Compensation of all executive officers shall be approved by the Board of Directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the Corporation; provided that compensation of all executive officers may be determined by a committee established for that purpose if so authorized by the unanimous vote of the Board of Directors.

Section 6. Chairman of the Board. The chairman of the board shall preside at all meetings of the stockholders and of the Board of Directors and shall have such other powers and perform such other duties as may be prescribed to him or her by the Board of Directors or provided in these By-laws.

Section 7. Chief Executive Officer. The chief executive officer shall have the powers and perform the duties incident to that position. Subject to the powers of the Board of Directors and the chairman of the board, the chief executive officer shall be in the general and active charge of the entire business and affairs of the Corporation, and shall be its chief policy making officer. The chief executive officer shall have such other powers and perform such other duties

as may be prescribed by the Board of Directors or provided in these By-laws. The chief executive officer is authorized to execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. Whenever the president is unable to serve, by reason of sickness, absence or otherwise, the chief executive officer shall perform all the duties and responsibilities and exercise all the powers of the president.

Section 8. The President. The president of the Corporation shall, subject to the powers of the Board of Directors, the chairman of the board and the chief executive officer, have general charge of the business, affairs and property of the Corporation, and control over its officers, agents and employees. The president shall see that all orders and resolutions of the Board of Directors are carried into effect. The president is authorized to execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. The president shall have such other powers and perform such other duties as may be prescribed by the chairman of the board, the chief executive officer, the Board of Directors or as may be provided in these By-laws.

Section 9. Chief Operating Officer. The chief operating officer of the Corporation shall, subject to the powers of the Board of Directors, the chairman of the board, the chief executive officer and the president, have general charge of the business, affairs and property of the Corporation, and control over its officers, agents and employees. The chief operating officer shall see that all orders and resolutions of the Board of Directors are carried into effect. The chief operating officer is authorized to execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except when required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other Officer or agent of the Corporation. The chief operating officer shall have such other powers and perform such other duties as may be prescribed by the chairman of the board, the chief executive officer, the president, the Board of Directors or as may be provided in these By-laws.

Section 10. Vice-Presidents. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the Board of Directors or the chairman of the board, shall, in the absence or disability of the chief executive officer, president and the chief operating officer, act with all of the powers and be subject to all the restrictions of the president. The vice-presidents shall also perform such other duties and have such other powers as the Board of Directors, the chairman of the board, the chief executive officer, the president, the chief operating officer or these By-laws may, from time to time, prescribe. The vice-presidents may also be designated as executive vice-presidents or senior vice-presidents, as the Board of Directors may from time to time prescribe.

Section 11. The Secretary and Assistant Secretaries. The secretary shall attend all meetings of the Board of Directors, all meetings of the committees thereof and all meetings of

the stockholders and record all the proceedings of the meetings in a book or books to be kept for that purpose or shall ensure that his or her designee attends each such meeting to act in such capacity. Under the chairman of the board’s supervision, the secretary shall give, or cause to be given, all notices required to be given by these By-laws or by law; shall have such powers and perform such duties as the Board of Directors, the chairman of the board, the chief executive officer, the president, the chief operating officer or these By-laws may, from time to time, prescribe; and shall have custody of the corporate seal of the Corporation. The secretary, or an assistant secretary, shall have authority to affix the corporate seal to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature. The assistant secretary, or if there be more than one, any of the assistant secretaries, shall in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors, the chairman of the board, the chief executive officer, the president, or secretary may, from time to time, prescribe.

Section 12. The Chief Financial Officer. The chief financial officer shall have the custody of the corporate funds and securities; shall keep full and accurate all books and accounts of the Corporation as shall be necessary or desirable in accordance with applicable law or generally accepted accounting principles; shall deposit all monies and other valuable effects in the name and to the credit of the Corporation as may be ordered by the chairman of the board, the chief executive officer or the Board of Directors; shall cause the funds of the Corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the Board of Directors, at its regular meeting or when the Board of Directors so requires, an account of the Corporation; shall have such powers and perform such duties as the Board of Directors, the chairman of the board, the chief executive officer, the president or these By-laws may, from time to time, prescribe. If required by the Board of Directors, the chief financial officer shall give the Corporation a bond (which shall be rendered every six years) in such sums and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the office of chief financial officer and for the restoration to the Corporation, in case of death, resignation, retirement or removal from office of all books, papers, vouchers, money and other property of whatever kind in the possession or under the control of the chief financial officer belonging to the Corporation.

Section 13. Other Officers, Assistant Officers and Agents. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these By-laws, shall have such authority and perform such duties as may from time to time be prescribed by resolution of the Board of Directors.

Section 14. Absence or Disability of Officers. In the case of the absence or disability of any officer of the Corporation and of any person hereby authorized to act in such officer’s place during such officer’s absence or disability, the Board of Directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person selected by it.

ARTICLE V

CERTIFICATES OF STOCK

Section 1. Certificated and Uncertificated Shares; Form. Shares of the stock of the Corporation may be represented by certificates or uncertificated. If certificated, such certificate shall be signed by or in the name of the Corporation by the chairman of the board, the chief executive officer, the president, or the chief operating officer and the secretary or an assistant secretary of the Corporation, certifying the number of shares owned by such holder in the Corporation. If such a certificate is countersigned (i) by a transfer agent or an assistant transfer agent other than the Corporation or its employee or (ii) by a registrar, other than the Corporation or its employee, the signature of any such chairman of the board, chief executive officer, president, chief operating officer, secretary or assistant secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation whether because of death, resignation or otherwise before such certificate or certificates have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the Corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the Corporation. Uncertificated shares of stock of the Corporation shall be transferred in the share register of the Corporation only upon a written instruction originated by the appropriate person to transfer the shares. Certificated shares of stock of the Corporation shall only be transferred on the books of the Corporation by the holder of record thereof or by such holder’s attorney duly authorized in writing, upon surrender to the Corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates and record the transaction on its books. The Board of Directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the Corporation.

Section 2. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Corporation may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his or her legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against the

Corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate.

Section 3. Fixing a Record Date for Stockholder Meetings. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is first given. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 4. Fixing a Record Date for Other Purposes. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

Section 5. Registered Stockholders. Prior to the surrender to the Corporation of the certificate or certificates for a share or shares of stock with a request to record the transfer of such share or shares, the Corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications and otherwise to exercise all the rights and powers of an owner. The Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof.

Section 6. Subscriptions for Stock. Unless otherwise provided for in the subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times, as shall be determined by the Board of Directors. Any call made by the Board of Directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the Corporation may proceed to collect the amount due in the same manner as any debt due the Corporation.

ARTICLE VI

GENERAL PROVISIONS

Section 1. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, in accordance with applicable law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or any other purpose and the directors may modify or abolish any such reserve in the manner in which it was created.

Section 2. Checks, Drafts or Orders. All checks, drafts or other orders for the payment of money by or to the Corporation and all notes and other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner, as shall be determined by resolution of the Board of Directors or a duly authorized committee thereof.

Section 3. Contracts. In addition to the powers otherwise granted to officers pursuant to Article VI hereof, the Board of Directors may authorize any officer or officers, or any agent or agents, of the Corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances.

Section 4. Loans. Except to the extent that such loans or guarantees would be prohibited by applicable law or by the listing requirements of any stock exchange upon which shares of the Corporation’s capital stock may be listed, the Corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Corporation or of its subsidiaries, including any officer or employee who is a director of the Corporation or its subsidiaries, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Corporation. Nothing in this section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Corporation at common law or under any statute.

Section 5. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.

Section 6. Corporate Seal. The Board of Directors may provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the Corporation and the words “Corporate Seal, Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

Section 7. Voting Securities Owned By Corporation. Voting securities in any other Corporation held by the Corporation shall be voted by the chief executive officer, the president, the chief operating officer or a vice-president, unless the Board of Directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution.

Section 8. Inspection of Books and Records. The Board of Directors shall have power from time to time to determine to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders; and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation.

Section 9. Section Headings. Section headings in these By-laws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein.

Section 10. Inconsistent Provisions. In the event that any provision of these By-laws is or becomes inconsistent with any provision of the Certificate of Incorporation, the General Corporation Law of the State of Delaware or any other applicable law, the provision of these By-laws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect.

ARTICLE VII

AMENDMENTS

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized to make, alter, amend, change, add to or repeal these By-laws by the affirmative vote of a majority of the total number of directors then in office. Any alteration or repeal of these By-laws by the stockholders of the Corporation shall require the affirmative vote of a majority of the outstanding shares of the Corporation entitled to vote on such alteration or repeal.

ARTICLE VIII

EFFECTIVE DATE

The Corporation has filed a registration statement on Form S-1 (File No. 333-115778) with the Securities and Exchange Commission to register shares of its common stock for sale to the public (the “Public Offering”). Notwithstanding anything herein to the contrary, these amended and restated By-Laws shall become effective on the date of the consummation of the Public Offering (the “Effective Date”); provided that if the Effective Date does not occur on or before December 31, 2004, then this amendment and restatement of the Corporation’s By-laws

shall lapse and be of no further force and effect and the then existing By-laws of the Corporation Original Agreement shall survive and continue in full force and effect.

EX-31.1 4 a04-14499_1ex31d1.htm EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

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 period 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)) 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) 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

c) 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 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 controls 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 13, 2004	/s/ Richard P. Crystal
	Chairman, Chief Executive Officer and
	President

EX-31.2 5 a04-14499_1ex31d2.htm EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Ronald W. Ristau, 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 13, 2004	/s/ Ronald W. Ristau
	Chief Operating Officer and Chief Financial Officer

EX-32 6 a04-14499_1ex32.htm EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of New York & Company, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended October 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard P. Crystal, Chairman, Chief Executive Officer and President of the Company, and I, Ronald W. Ristau, Chief Operating Officer and Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge,:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

	/s/ Richard P. Crystal
	Richard P. Crystal
December 13, 2004	Chairman, Chief Executive Officer and
	President

	/s/ Ronald W. Ristau
	Ronald W. Ristau
December 13, 2004	Chief Operating Officer and Chief Financial Officer

-----END PRIVACY-ENHANCED MESSAGE-----

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4. CONTROLS AND PROCEDURES

PART II.

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

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

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS

ARTICLE ONE

ARTICLE TWO

ARTICLE THREE

ARTICLE FOUR

Section 1. Authorized Shares. The total number of shares of capital stock which the Corporation has authority to issue is 305,000,000 shares, consisting of:

(a) 5,000,000 shares of Preferred Stock, par value $0.001 per share (“Preferred Stock”); and

(b) 300,000,000 shares of Common Stock, par value $0.001 per share (“Common Stock”).

Section 3. Common Stock.

(b) Conversion Rights. The Common Stock shall not be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same class of the Corporation’s capital stock.

(c) Preemptive Rights. No holder of Common Stock shall have any preemptive rights with respect to the Common Stock or any other securities of the Corporation, or to any obligations convertible (directly or indirectly) into securities of the Corporation whether now or hereafter authorized.

without charge to the holders of the surrendered certificates for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such issuance.

Section 4. Stock Split.

(c) The issuance of certificates for shares of Common Stock upon conversion shall be made without charge to the holders of such Common Stock for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion.

(e) All shares of Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges.

Section 5. Definitions.

ARTICLE FIVE

ARTICLE SIX

ARTICLE SEVEN

ARTICLE EIGHT

ARTICLE NINE

Section 1. Limitation of Liability.

(b) Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.

Section 5. Service for Subsidiaries. Any person serving as a director, officer, employee or agent of another corporation, partnership, limited liability company, joint venture or other enterprise, at least 50% of whose equity interests are owned by the Corporation (a

“subsidiary” for this Article Nine) shall be conclusively presumed to be serving in such capacity at the request of the Corporation.

ARTICLE TEN

ARTICLE ELEVEN

(b) Otherwise, such corporate opportunity shall belong to Bear Stearns Merchant Banking.

(b) The agreement or transaction was fair to the Corporation at the time the agreement or transaction was entered into by the Corporation; or

(c) The agreement or transaction was approved by an affirmative vote of a majority of the shares of the Corporation’s Common Stock entitled to vote, excluding Bear Stearns Merchant Banking, any Affiliated Company or Interested Person.

whether entered into before or after such time, or (ii) any transaction or agreement entered into between the Corporation or an Affiliated Company thereof and Bear Stearns Merchant Banking or an Affiliated Company thereof.

Section 9. Deemed Notice. Any Person purchasing or otherwise acquiring any interest in any shares of the Corporation shall be deemed to have notice or and to have consented to the provisions of this Article Eleven.

ARTICLE TWELVE

ARTICLE THIRTEEN

ARTICLE I

OFFICES

Section 2. Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

annual meeting shall not be held during any year, the business thereof may be transacted at any special meeting of the stockholders.

PART I.

FINANCIAL INFORMATION