New York DEF 14A 2005
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NEW YORK & COMPANY, INC.
May 20, 2005
You are cordially invited to attend the Company's 2005 Annual Meeting of Stockholders which will be held at 450 West 33rd Street, 5th Floor, New York, NY, on Friday, June 24, 2005, beginning at 10:00 a.m., EDT.
The enclosed proxy statement provides you with detailed information regarding the business to be considered at the meeting. Please sign and return the accompanying proxy card so that your shares will be voted as you direct, even if you cannot attend the meeting.
NEW YORK & COMPANY, INC.
Why did I receive these proxy materials?
The Company is providing this Notice of Annual Meeting, Proxy Statement, voting instructions and Annual Report (the "proxy materials") in connection with the solicitation by the board of directors of New York & Company, Inc. ("New York & Company," the "Company," "we," "us" or "our"), a Delaware corporation, of proxies to be voted at the Company's 2005 Meeting of Stockholders and at any adjournment or postponement.
You are invited to attend the Company's Annual Meeting of Stockholders on June 24, 2005 (the "Meeting"), beginning at 10:00 am, EDT. The Meeting will be held at 450 West 33rd Street, 5th Floor, New York, New York 10001. Stockholders will be admitted to the Meeting beginning at 9:30 am, EDT. Seating will be limited.
These proxy materials are being mailed on or about May 20, 2005.
What should I bring with me to attend the Annual Meeting?
Stockholders must present a form of personal identification in order to be admitted to the Meeting.
If your shares are held beneficially in the name of a bank, broker or other holder of record and you plan to attend the Meeting, you must also present proof of your ownership of New York & Company stock, such as a bank or brokerage account statement, to be admitted to the Meeting.
No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the Meeting.
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
If your shares are registered directly in your name with New York & Company's transfer agent, Registrar and Transfer Company, you are considered the "stockholder of record" with respect to those shares. The proxy materials have been sent directly to you by New York & Company.
If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the "beneficial owner" of shares held in street name. The proxy materials have been forwarded to you by your broker, bank or other holder of record who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other holder of record on how to vote your shares by using the proxy or voting instructions included in the mailing or by following their instructions for voting by telephone or on the Internet.
Who is entitled to vote at the Annual Meeting?
Stockholders of record on May 9, 2005, the record date for the Meeting, are entitled to receive notice of and vote at the Meeting. At the close of business on May 9, 2005, there were 53,484,741 shares of the Company's common stock outstanding.
How do I vote?
You may vote using either of the following methods:
Be sure to complete, sign and date the proxy card or voting instruction card and return it in the prepaid envelope. If you are a stockholder of record and you return your signed proxy card but do not
indicate your voting preferences, the persons named in the proxy card will vote the shares represented by that proxy as recommended by the board of directors.
If you are a stockholder of record, and the prepaid envelope is missing, please mail your completed proxy card to: Registrar and Transfer Company, Attention: Investor Relations, 10 Commerce Drive, Cranford, NJ 07016.
All stockholders may vote in person at the Meeting. You may also be represented by another person at the Meeting by executing a proper proxy designating that person. If you are a beneficial owner of shares, you must obtain a legal proxy from your broker, bank or other holder of record and present it to the inspectors of election with your ballot to be able to vote at the Meeting.
What can I do if I change my mind after I vote my shares?
If you are a stockholder of record, you can revoke your proxy before it is exercised by:
If you are a beneficial owner of shares, you may submit new voting instructions by contacting your bank, broker or other holder of record. You may also vote in person at the Meeting if you obtain a legal proxy as described in the answer to the previous question.
What is "householding" and how does it affect me?
The Company has adopted a procedure approved by the U.S. Securities and Exchange Commission ("SEC") called "householding." Under this procedure, stockholders of record who have the same address and last name will receive only one copy of the Company's proxy materials, unless one or more of these stockholders notifies the Company that they wish to continue receiving individual copies. This procedure will reduce the Company's printing costs and postage fees.
Stockholders who participate in householding will continue to receive separate proxy cards. Also, householding will not in any way affect dividend check mailings.
If you are eligible for householding, but you and other stockholders of record with whom you share an address currently receive multiple copies of the proxy materials, or if you hold stock in more than one account, and in either case you wish to receive only a single copy of each of these documents for your household, please make a written request to: Registrar and Transfer Company, Attention: Investor Relations, 10 Commerce Drive, Cranford, NJ 07016.
Beneficial owners can request information about householding from their banks, brokers or other holders of record.
What are the voting requirements for the proposals?
Under the Company's by-laws, the holders of a majority of the outstanding shares of common stock entitled to vote at the Meeting, present in person or represented by proxy, constitute a quorum. A plurality of the votes cast is required for the election of directors and the affirmative vote of the majority of shares present in person or represented by proxy at the Meeting is required for the ratification of Ernst & Young LLP.
Could other matters be decided at the Annual Meeting?
At the date this Proxy Statement went to press, the Company did not know of any matters to be raised at the Meeting other than those referred to in this Proxy Statement.
If other matters are properly presented at the Meeting for consideration, the Proxy Committee appointed by the board of directors (the persons named in your proxy card if you are a stockholder of record) will have the discretion to vote on those matters for you.
Who will pay for the cost of this proxy solicitation?
The Company will pay for the cost of this proxy solicitation. The Company does not intend to solicit proxies otherwise than by use of the mail, but certain officers and regular employees of the Company or its subsidiaries, without additional compensation, may use their personal efforts, by telephone or otherwise, to obtain proxies.
Who will count the vote?
Representatives of the Company's transfer agent, Registrar and Transfer Company, will tabulate the votes and act as inspectors of election.
The Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2005 ("fiscal year 2004") accompanies this Proxy Statement. No material contained in the Annual Report is to be considered a part of the proxy solicitation material.
The contents of the Company's corporate website (http:\\www.nyandcompany.com) are not incorporated by reference into this Proxy Statement.
The "Report of the Compensation Committee on Executive Compensation" and "Performance Graph" included in this Proxy Statement shall not be deemed incorporated by reference by general statement incorporating by reference this Proxy Statement into any of the Company's filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended ("Exchange Act"), except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.
The Company's board of directors currently has nine members. Each of these board members is standing for reelection to hold office until the next Annual Meeting of Stockholders.
The Proxy Committee appointed by the board of directors intends to vote the proxy (if you are a stockholder of record) for the election of each of these nominees unless you indicate on the proxy card that your vote should be withheld from any or all of the nominees.
Each nominee elected as a director will continue in office until his or her successor has been elected and qualified, or until his or her earlier death, resignation or retirement.
The Company expects each nominee for election as a director to be able to serve if elected. If any nominee is not able to serve, proxies will be voted in favor of the remainder of those nominated and may be voted for substitute nominees, unless the board chooses to reduce the number of directors serving on the board.
The principal occupation and certain other information about the nominees are set forth on the following pages.
The board of directors unanimously recommends a vote FOR the election of these nominees as directors.
Nominees for Directors
The following table sets forth the name, age and position of each of the Company's nominees for the nine director positions:
Richard P. Crystal was named President and Chief Executive Officer in 1996 and became Chairman in 2004. Previously, Mr. Crystal had a 20 year career at R.H. Macy/Federated, including a variety of senior management positions, culminating in his serving as Chairman and Chief Executive Officer, Product Development and Specialty Retail (Aéropostale, Inc.). Mr. Crystal began his career in retailing at Stern's. He has approximately 30 years of experience in the retail industry and 17 years experience in specialty retail. Mr. Crystal holds a B.A. in history from New York University.
Ronald W. Ristau was named Chief Operating Officer in 2002 and had served as Executive Vice President, Operations and Administration since 1998. Mr. Ristau has also held the position of Chief Financial Officer since April 2004. Previously, Mr. Ristau was Executive Vice President and Chief Financial Officer of Revlon Consumer Products USA. Prior to that, he served at Max Factor as Vice President of Finance. Additionally, Mr. Ristau was employed at Playtex U.S. and United Technologies,
and began his career in business at Peat, Marwick, Mitchell & Co. Mr. Ristau holds an M.B.A. from The Fuqua School of Business at Duke University and a B.B.A. from Roanoke College. Mr. Ristau is a Certified Public Accountant.
Bodil M. Arlander has served as a director since 2002 and currently is a Senior Managing Director of Bear, Stearns & Co. Inc. and a Partner of Bear Stearns Merchant Banking, LLC, an affiliate of Bear, Stearns & Co. Inc. and of the controlling shareholder of New York & Company, which she joined in April 1997. Between 1991 and 1997, she worked in the Mergers and Acquisitions Group of Lazard & Co. LLC. Prior to entering the finance industry, Ms. Arlander worked throughout Europe in the fashion and beauty industry. She also currently serves as a director of CamelBak Group, LLC, Hand Innovations, LLC and the publicly traded company Aéropostale, Inc.
Philip M. Carpenter III has served as a director since 2002 and is a Managing Director of Bear, Stearns & Co. Inc. and a Principal of Bear Stearns Merchant Banking, LLC, an affiliate of Bear, Stearns & Co. Inc. and of the controlling shareholder of New York & Company, which he joined in August 2002. Previously, Mr. Carpenter was a Principal with Brockway Moran & Partners, Inc., a private equity investment firm with whom he was employed from 1998 to 2002. Prior to that, he was with the private equity investment firm Trivest, Inc. and the investment banking department of Bear, Stearns & Co. Inc. Mr. Carpenter is currently a director of CamelBak Group, LLC, Packaging Holdings, Inc., and Reddy Ice Holdings, Inc. Mr. Carpenter holds a B.S. in Accounting from the State University of New York at Binghamton.
John D. Howard has served as a director since 2002. He is currently a Senior Managing Director of Bear, Stearns & Co. Inc. and is the Chief Executive Officer of Bear Stearns Merchant Banking LLC, an affiliate of Bear, Stearns & Co. Inc. and of the controlling shareholder of New York & Company. Mr. Howard has been the head of the merchant banking department of Bear, Stearns & Co. Inc. since its inception in 1997. From 1990 to 1997, he was a co-CEO of Vestar Capital Partners, Inc., a private investment firm specializing in management buyouts. Previously he was a Senior Vice President of Wesray Capital Corporation, a private investment firm specializing in leveraged buyouts. Mr. Howard also currently serves as a director of several private companies and the publicly traded companies Aéropostale, Inc. and Integrated Circuit Systems, Inc.
Richard L. Perkal has served as a director since 2004. Mr. Perkal is currently a Senior Managing Director of Bear, Stearns & Co. Inc. and is a Partner of Bear Stearns Merchant Banking, LLC, an affiliate of Bear, Stearns & Co. Inc. and of the controlling shareholder of New York & Company, which he joined in July 2000. Prior to joining Bear, Stearns & Co. Inc., Mr. Perkal was a senior partner in the law firm of Kirkland & Ellis LLP where he headed the Washington D.C. corporate transactional practice, primarily focusing on leveraged buyouts and recapitalizations. Mr. Perkal currently serves as a director of several private corporations including CamelBak Group, LLC and Vitamin Shoppe Industries, Inc.
M. Katherine Dwyer has served as a director since 2003 and is currently the Chief Executive Officer and founder of Skinklinic, Inc., where she has been since its founding in 2001. From 2000 to 2001, Ms. Dwyer was self-employed, working to develop Skinklinic, Inc. From 1998 to 2000 she was President of Revlon Consumer Products USA and from 1995 to 1998 she was President of Revlon Cosmetics USA. Before Revlon she held general management and marketing positions in beauty, cosmetics, hair care and skin care at the Clairol division of Bristol-Myers Squibb, Avon, Cosmair, Victoria Creations and Gillette. She was also an accountant for Price Waterhouse. In 1997, Ms. Dwyer was named Woman Achiever of the Year by Cosmetics Executive Women, and she received the group's Best New Product award for five out of six years, from 1994 to 1999. In 1998, she was named one of the 100 top women in business by Fortune Magazine. Ms. Dwyer has a B.A. from the University of
Massachusetts and an M.B.A. from Boston University. She sits on the board of directors of Westpoint Stevens, Inc.
David H. Edwab has served as a director since 2003 and is currently the Vice Chairman of Men's Wearhouse, Inc. From 2000 until 2002 he served part time as Vice Chairman of Men's Wearhouse while holding a position as Senior Managing Director, Head of the Retail Investment Banking Group at Bear, Stearns & Co. Inc. an affiliate of Bear Stearns Merchant Banking LLC, an affiliate of the controlling shareholder of New York & Company. Mr. Edwab has worked for Men's Wearhouse for over ten years, starting as Vice President of Finance and Director in 1991 and as Chief Operating Officer from 1993 to 1997. He also served as President from 1997 to 2000 before becoming Vice Chairman of Men's Wearhouse. Before joining Men's Wearhouse, Mr. Edwab was a partner at Deloitte & Touche LLP responsible for the Southwest Corporate Finance Group and Retail Practice. He received his B.S. in finance from Fairleigh Dickinson University and is a Certified Public Accountant. He serves on the board of directors of the publicly traded company Aéropostale, Inc.
Arthur E. Reiner has served as a director since 2003 and is currently Chairman and Chief Executive Officer of Finlay Enterprises, Inc. and Finlay Fine Jewelry Corporation. Mr. Reiner joined Finlay in 1995. He became Chief Executive Officer of Finlay Enterprises in 1996 and was named Chairman in 1999. Mr. Reiner began his retailing career in 1962 at Bamberger's, then a division of R. H. Macy's and held various positions with Macy's including Chairman and Chief Executive Officer of Macy's Northeast and Macy's East until 1995. A graduate of Rutgers University, Mr. Reiner served as Chairman of the Education Foundation of the Fashion Institute of Technology from 1985 to 1995 and was named Executive Vice President in 1995. He is a member of the Board of Directors and Executive Committee of the Jewelers for Children.
Board and Committee Membership
The Company is a controlled company under New York Stock Exchange rules and therefore does not need to have an independent board, compensation committee or nomination and governance committee. A company of which more than 50% of the voting power is held by an individual, a group or another company is considered to be a controlled company. Bear Stearns Merchant Banking, LLC has held over 50% of the voting power of the Company since its acquisition of Lerner New York, Holding, Inc. and its subsidiaries from Limited Brands, Inc. ("Limited Brands") on November 27, 2002. In addition, the several limited partnerships directly or indirectly controlled by Bear Stearns Merchant Capital II, L.P., referred to herein as "Bear Stearns Merchant Banking," has the right to designate seven people to the Company's board of directors pursuant to a stockholders agreement. See "Certain Relationships and Related Transactions" for a description of material relationships between Bear Stearns Merchant Banking and the Company.
The Company's business, property and affairs are managed under the direction of the Company's board of directors. The board of directors has established four committees consisting of an audit committee, a nomination and governance committee, a compensation committee and an ethics committee. Members of the Company's board of directors are kept informed of its business through discussions with the Company's Chairman, President and Chief Executive Officer and other officers, by reviewing materials provided to them and by participating in meetings of the board of directors and its committees.
The board of directors of New York & Company, Inc. is currently comprised of nine directors. During fiscal year 2004, the board of directors met five times. Each of the Company's incumbent directors attended at least 75 percent of the regularly scheduled and special meetings of the board of directors and board committees on which they served in fiscal year 2004.
All board members are expected to attend the Company's Annual Meetings of Stockholders, unless an emergency prevents them from doing so.
The Audit Committee
Under the terms of its charter, the audit committee represents and assists the board with the oversight of the integrity of the Company's financial statements, the Company's compliance with legal and regulatory requirements, the qualifications and independence of the Company's independent registered public accounting firm, the performance of the Company's internal audit function, and the preparation of an audit committee report as required by the SEC to be included in the Company's annual proxy statement. The audit committee meets at least four times a year, including periodic meetings held separately with management, the internal auditor, and the independent registered public accounting firm. In fiscal year 2004, the committee met ten times. The audit committee is comprised of David H. Edwab (chairperson), M. Katherine Dwyer and Philip M. Carpenter III.
The board of directors has determined that David H. Edwab, chairperson of the audit committee, is an "audit committee financial expert" for purposes of the SEC's rules adopted pursuant to the Sarbanes-Oxley Act of 2002.
M. Katherine Dwyer and David H. Edwab are independent members of the audit committee for purposes of the SEC's rules. Philip M. Carpenter III is employed by Bear, Stearns & Co. Inc. and is a Principal of Bear Stearns Merchant Banking, LLC, an affiliate of Bear, Stearns & Co. Inc. and of the controlling shareholder of New York & Company. In accordance with the independence requirements of the New York Stock Exchange and Exchange Act Rule 10A-3, the Company plans to have all audit committee members independent within one year of its initial public offering, which was effective October 6, 2004.
The Nomination and Governance Committee
Under the terms of its charter, the nomination and governance committee is responsible for assisting the board of directors in its oversight of board composition, corporate governance policies and practices, and related matters. The nomination and governance committee did not meet in fiscal year 2004. The nomination and governance committee is comprised of Richard P. Crystal (chairperson), John D. Howard, Richard L. Perkal and Ronald W. Ristau.
The nomination and governance committee periodically reviews the appropriate size of the board of directors, whether any vacancies are expected due to retirement or otherwise, and the need for particular expertise on the board of directors. In evaluating and determining whether to recommend a candidate to the board of directors, the committee reviews the appropriate skills and characteristics required of board members in the context of the background of existing members and in light of the perceived needs for the future development of the Company's business, including issues of diversity and experience in different substantive areas, such as retail operations, marketing, technology, distribution, real estate and finance. Candidates may come to the attention of the committee from a variety of sources, including current board members, stockholders, management, and search firms. The committee shall have sole authority to retain and terminate any search firm used to identify candidates for the board of directors, including the sole authority to approve such firm's fees and other retention terms. The committee shall also have the authority to retain other professional advisors, when necessary or appropriate. All candidates are reviewed in the same manner regardless of the source of the recommendation. See "STOCKHOLDER PROPOSALS FOR THE 2006 ANNUAL MEETING" for procedures describing how a stockholder can submit a proposal to the board of directors.
The Compensation Committee
Under the terms of its charter, the compensation committee is directly responsible for assisting the board of directors in its oversight of compensation for the Company's senior management, compensation for the board of directors, evaluation and succession planning for the CEO and related matters. The committee shall have sole authority to retain and terminate any executive compensation consultants engaged to provide advice to the committee related to its responsibilities, including the sole authority to approve such consultants' fees and other retention terms. The committee shall also have the authority to retain other professional advisors, when necessary or appropriate. In fiscal year 2004, the compensation committee met three times. The compensation committee is comprised of Arthur E. Reiner (chairperson) and Bodil M. Arlander.
The Ethics Committee
Under the terms of its charter, the ethics committee is directly responsible for assisting the board of directors in fulfilling its responsibilities relating to the Company's compliance procedures for the code of business conduct. The ethics committee shall have sole authority to retain and terminate any advisors engaged to provide advice to the ethics committee related to its responsibilities, including the sole authority to approve such advisors' fees and other retention terms. In fiscal year 2004, the ethics committee met one time. The ethics committee is comprised of M. Katherine Dwyer (chairperson) and Arthur E. Reiner.
2004 Compensation of Directors
Directors who are also employees of the Company are not compensated for their duties as a director. Independent members of the board of directors are compensated for their services. Each independent director receives an annual retainer of $20,000, which is supplemented by additional payments of: $1,000 for each board meeting attended in person, $500 for each board meeting attended telephonically, $2,000 annually for acting as a committee chairperson ($7,500 for acting as audit committee chairperson), $1,000 for each committee meeting attended in person, $500 for each committee meeting attended telephonically, and reasonable travel expenses for in-person attendance at board of directors and committee meetings. In addition, independent members of the board of directors received in May 2003 an initial grant of 113,729 non-qualified stock options issued with an exercise price of $0.11, under the Company's 2002 Stock Option Plan. These options vested 20% immediately upon issuance and the remaining 80% were to vest over the following four years at 20% per year. All of the unvested director options were accelerated upon the consummation of the Company's initial public offering.
Board Committee Charters
The charters for the Company's audit committee, nomination and governance committee, compensation committee and the ethics committee are available free of charge on the Company's website at http://www.nyandcompany.com, or upon written request to the Corporate Secretary, New York & Company, 450 West 33rd Street, 5th Floor, New York, New York 10001. A copy of the audit committee charter is also attached to this Proxy Statement as Annex 1.
Corporate Governance Guidelines
The board of directors of the Company adopted the corporate governance guidelines to assist in the exercise of its responsibilities. The Company's corporate governance guidelines are available free of charge on the Company's website at http://www.nyandcompany.com, or upon written request to the Corporate Secretary, New York & Company, 450 West 33rd Street, 5th Floor, New York, New York 10001.
Code of Business Conduct Guidelines
The Company has code of business conduct guidelines that applies to all Company associates, including its principal executive officer, principal financial officer and principal accounting officer, as well as members of the board of directors. The code of business conduct guidelines are available free of charge on the Company's website at http://www.nyandcompany.com, or upon written request to the Corporate Secretary, New York & Company, 450 West 33rd Street, 5th Floor, New York, New York 10001. Any updates or amendments to the code of business conduct guidelines, and any waiver that applies to a director or executive officer, will also be posted on the website.
Stockholder Communications with the Board of Directors
Securityholders and other interested parties may contact the board of directors or the non-employee directors as a group at the following address:
of Directors or
Communications regarding accounting, internal accounting controls or auditing matters may also be reported to the Company's board of directors using the above address or through the New York & Company Ethics Hotline. Information about how to contact the board of directors and the Ethics Hotline is also available on the Company's website at http://www.nyandcompany.com.
The board of directors, upon the recommendation of its audit committee, has ratified the selection of Ernst & Young LLP to serve as the Company's independent registered public accounting firm for the fiscal year ending January 28, 2006 ("fiscal year 2005"), subject to ratification by the Company's stockholders.
Representatives of Ernst & Young LLP will be present at the Meeting to answer questions. They also will have the opportunity to make a statement if they desire to do so.
The Company is asking its stockholders to ratify the selection of Ernst & Young LLP as the Company's independent registered public accounting firm. Although ratification is not required by the Company's by-laws or otherwise, the board of directors is submitting the selection of Ernst & Young LLP to the Company's stockholders for ratification because the Company values its stockholders' views on the Company's independent registered public accounting firm and as a matter of good corporate practice. In the event that the Company's stockholders fail to ratify the selection, it will be considered as a direction to the board of directors and the audit committee to consider the selection of a different firm. Even if the selection is ratified, the audit committee in its discretion may select a different independent registered public accounting firm, subject to ratification by the board of directors, at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.
Your board of directors unanimously recommends a vote FOR the ratification of Ernst & Young LLP as the Company's independent registered public accounting firm for 2005.
Audit and Non-Audit Fees
The following table presents fees for professional audit services rendered by Ernst & Young LLP for the audit of the Company's annual financial statements for fiscal year 2004 and the fiscal year ended January 31, 2004 ("fiscal year 2003"), and fees billed for other services rendered by Ernst & Young LLP during those periods.
In fiscal year 2004, Audit Fees included $1,330,500 related to the Company's initial public offering, which included the audit of prior year financial statements.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
Consistent with SEC policies regarding auditor independence, the audit committee has responsibility for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. In recognition of this responsibility, the audit committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm.
Prior to engagement of the independent registered public accounting firm for the next year's audit, management will submit a list of services and related fees expected to be rendered during that year within each of four categories of services to the audit committee for approval:
1. Audit services include audit work performed on the financial statements and internal control over financial reporting, as well as work that generally only the independent registered public accounting firm can reasonably be expected to provide, including comfort letters, statutory audits, and discussions surrounding the proper application of financial accounting and/or reporting standards;
2. Audit-Related services are for assurance and related services that are traditionally performed by the independent registered public accounting firm, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements;
3. Tax services include all services, except those services specifically related to the audit of the financial statements, performed by the independent registered public accounting firm's tax personnel, including tax analysis; assisting with coordination of execution of tax-related activities, primarily in the area of corporate development; supporting other tax-related regulatory requirements; and tax compliance and reporting; and
4. All Other services are those services not captured in the audit, audit-related or tax categories. The Company generally does not request such services from the independent registered public accounting firm.
The fees are budgeted and the audit committee requires the independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval categories. In those instances, the audit committee requires specific pre-approval before engaging the independent registered public accounting firm.
The audit committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the audit committee at its next scheduled meeting.
Audit Committee Report
The role of the audit committee is to assist the board of directors in fulfilling its oversight responsibilities with respect to the accounting and financial reporting processes and the systems of internal controls of the Company. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The Company's independent registered public accounting firm, Ernst & Young LLP, is responsible for auditing the financial statements and expressing an opinion as to their conformity with generally accepted accounting principles and for reviewing the unaudited quarterly financial statements.
In this context, the audit committee has met and held discussions with management and the independent registered public accounting firm and independently as a committee. Management represented to the audit committee that the Company's consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the audit committee has reviewed and discussed the consolidated financial statements as of and for the year ended January 29, 2005 with management and the independent registered public accounting firm, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The audit committee discussed with the independent registered public accounting firm all matters required to be discussed by generally
accepted auditing standards, including those described in Statement on Auditing Standards No. 61, as amended, "Communication With Audit Committees."
In addition, the audit committee has discussed with the independent registered public accounting firm the auditor's independence from the Company and its management, including the matters in the written disclosures required by the Independence Standards Board Standard No. 1, "Independence Discussions With Audit Committees." The audit committee also has considered whether the independent registered public accounting firm's provision of non-audit services to the Company is compatible with the auditor's independence. The audit committee has concluded that the independent registered public accounting firm, Ernst & Young LLP, is independent from the Company and its management.
The audit committee discussed with the Company's independent registered public accounting firm the overall scope and plans for its audit. In addition, the audit committee met with the independent registered public accounting firm, with and without management present, to discuss the results of their examinations, the evaluations of the Company's internal controls, and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the audit committee recommended to the board of directors, and the board has approved, that the audited financial statements be included in the Company's Annual Report on Form 10-K for the year ended January 29, 2005, for filing with the Securities and Exchange Commission. The audit committee has selected, and the board of directors has ratified, subject to stockholder ratification, the selection of the Company's independent registered public accounting firm, Ernst & Young LLP.
H. Edwab (Chairperson)
The following graph shows a comparison of the cumulative total return as of the third quarter and fiscal year end, since the Company's initial public offering on October 6, 2004, for New York & Company, Inc. common stock, the Standard & Poor's SmallCap 600 Index and the Standard & Poor's SmallCap 600 Apparel Retail Index, each of which assumes an initial investment value of $100 on October 6, 2004, in the common stock of the Company, and in the Standard & Poor's SmallCap 600 Index and the Standard & Poor's SmallCap 600 Apparel Retail Index. The comparison also assumes the reinvestment of any dividends.
The following table sets forth the name, age and position and each of the Company's executive officers:
All executive officers are employed by Lerner New York, Inc., except Richard P. Crystal and Ronald W. Ristau, who are employed by New York & Company, Inc.
See the table under "Nominees for Directors" for the past business experience of Richard P. Crystal and Ronald W. Ristau.
Robert J. Luzzi was named Executive Vice President, Creative Director in 2003. Previously, Mr. Luzzi was an independent investor from 2000 to 2003 and the Senior Vice President of Creative/Design and Advertising Worldwide for Estée Lauder Inc. from 1990 to 2000. Prior to that, Mr. Luzzi ran his own design firm. Mr. Luzzi has also created visual identities for leading fragrance and cosmetics brands including Calvin Klein, Ralph Lauren and Oscar de la Renta. Mr. Luzzi began his career in design at Grey Advertising. Mr. Luzzi holds a B.F.A. from Syracuse University.
Charlotte L. Neuville was named Executive Vice President, Design in 2001 and had served as Vice President, Design since 1996. Previously, Ms. Neuville was Senior Vice President, Creative Director of Cygne Designs. Prior to that, she launched her own collection, Charlotte Neuville Inc. Additionally, Ms. Neuville was employed at Outlander, Jones New York Sport, and Adrienne Vittadini. She began her design career as an Assistant Designer at Perry Ellis. Ms. Neuville has more than 20 years of experience in apparel design and holds a B.F.A. from Parsons School of Design as well as a B.A. from Williams College.
Steven M. Newman was named Executive Vice President, Merchandising, Design and Visual in 2005 and had served as Executive Vice President, Merchandising since 2002. Previously, Mr. Newman was President of Apparel for Eddie Bauer from 2000 to 2002. From 1995 until 2000, he served in several capacities with responsibilities ranging from merchandising, planning and store operations as well as President for Brooks Brothers. Additionally, Mr. Newman was previously employed at Ann Taylor and Gap, Inc. Mr. Newman began his career in retailing at R.H. Macy's & Co. Mr. Newman has more than 20 years of experience in retail merchandising and holds a B.A. from the University of South Florida.
The following table sets forth information known to the Company with respect to the beneficial ownership of its common stock as of April 29, 2005. The table reflects the beneficial ownership by (i) each stockholder known by the Company to own beneficially more than 5% of its common stock, (ii) each of the named executive officers, (iii) each of its directors, and (iv) all of its directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. Such rules provide that in calculating the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options held by that person that are currently exercisable or will become exercisable within 60 days after April 29, 2005 are deemed outstanding.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who own more than ten percent (10%) of the New York & Company, Inc. outstanding common stock, to file with the Securities and Exchange Commission an initial report of ownership and report changes in ownership of common stock. Based on the Company's records and other information, the Company believes that during the fiscal year ended January 29, 2005 the Company's directors and executive officers met all applicable filing requirements, other than an unintentional omission on one report filed on Form 3 for Robert J. Luzzi that was amended in a subsequent Form 3/A.
Executive Officer Compensation
General. The key components of the Company's executive officer compensation include both short-term and long-term components. Short-term compensation consists of an executive officer's annual base salary and annual incentive cash bonus. Long-term compensation may include grants of stock options, restricted stock or other equity-based incentives established by the Company, as determined by the board of directors. The board of directors has delegated to the compensation committee the authority with respect to the Company's overall compensation policy, including authority to establish the annual salary and incentive compensation targets of the Chairman, President and CEO, and approval of the compensation structure for the other executive officers. The compensation committee also has the authority to grant awards in the form of stock options under the New York & Company, Inc. Amended and Restated 2002 Stock Option Plan (the "stock option plan").
Annual Base Salary. The Company's compensation committee periodically reviews the base salaries of its executive officers and approves adjustments, as appropriate. In determining salary adjustments, the compensation committee considers the size and responsibility of the individual's position, the Company's overall performance, the individual's overall performance and future potential, and the base salaries paid by competitors to employees in comparable positions.
Incentive Compensation Plan. The Company's incentive compensation plan provides its senior management with cash bonuses linked to the seasonal financial results of the business. Target spring and fall bonus levels are set for each executive participating in the program (as a percentage of base salary) with a target bonus attained if the executive meets certain performance results, which through fiscal year 2004 have been linked to EBITDA. Beginning in fiscal year 2005, performance results will be linked to operating income. Maximum bonuses under the incentive compensation plan are two times target bonus.
Stock Option Awards. The stock option plan was approved by the board of directors on August 25, 2004 for the purpose of providing incentives to key employees of the Company and its affiliates, consultants who provide significant services to the Company and its affiliates, and directors of the Company who are not employees. The stock option plan is intended to motivate these individuals to further the growth and profitability of the Company as well as to assist the Company in retaining key employees and directors.
Chief Executive Officer's Compensation
Annual Base Salary. Richard P. Crystal serves as Chairman, President and Chief Executive Officer. During the earlier part of fiscal year 2004, Mr. Crystal's base salary was $775,000, representing a 0.0% increase from fiscal year 2003. The compensation committee approved a new employment agreement for Mr. Crystal dated August 25, 2004, which included his appointment to Chairman of the Board. Pursuant to the agreement, Mr. Crystal's base salary was increased beginning August 1, 2004 to $900,000, which is subject to annual review by the board of directors. In determining Mr. Crystal's compensation in connection with his appointment to Chairman of the Board, the compensation committee considered the Company's historical financial performance, individual performance, anticipated future contribution to the success of the Company and salary data for chief executive officers of other publicly held apparel companies having a size and focus that the compensation committee believes comparable to the Company's.
Incentive Compensation Plan. Mr. Crystal's incentive compensation target remained at 110% of his base salary during fiscal year 2004. As a result of the Company's fiscal year 2004 results exceeding the performance targets set by the compensation committee pursuant to the Incentive Compensation Plan, Mr. Crystal received a $1,127,500 annual cash bonus.
Stock Option Awards. During fiscal year 2004, the compensation committee granted Mr. Crystal 157,856 fully vested options on February 1, 2004 and 504,529 fully vested options on May 14, 2004. The determination to grant the options was based on Mr. Crystal's attainment of performance targets pursuant to his employment agreement dated December 2, 2002 and the Company's refinancings on March 16, 2004 and May 19, 2004.
E. Reiner (Chairperson)
The following summarizes, for the years indicated, the principal components of compensation for the Company's Chief Executive Officer and the other four highest compensated executive officers (collectively, the "named executive officers"). The compensation set forth below fully reflects compensation for work performed on the Company's behalf.
The following table shows the (i) number of shares of common stock acquired by each named executive officer upon the exercise of Company stock options during fiscal year 2004, (ii) aggregate dollar value realized by each named executive officer upon such exercise, based upon the fair market value of the common stock on the date of exercise, (iii) number of all vested (exercisable) and unvested (not yet exercisable) stock options held by each named executive officer at the end of fiscal year 2004, and (iv) value of all such options that were "in the money" (i.e., the market price of the common stock was greater than the exercise price of the options) at the end of fiscal year 2004.
Option Grants in Fiscal Year 2004
This table shows all options to purchase the Company's common stock granted to each of the Company's named executive officers in fiscal year 2004 and the potential value of such grants at stock price appreciation rates of 5% and 10%, compounded annually over the maximum ten-year term of the options. The 5% and 10% rates of appreciation are required to be disclosed by SEC rules and are not intended to forecast possible future appreciation, if any, in the Company's stock price.
Equity Compensation Plan Information
The following table sets forth additional information as of January 29, 2005 about shares of the Company's common stock that may be issued upon the exercise of options and other rights under the Company's existing equity compensation plan, divided between plans approved by the Company's stockholders and plans or arrangements not submitted to the Company's stockholders for approval. The information includes the number of shares covered by, and the weighted average exercise price of,
outstanding options and the number of shares remaining available for future grants excluding the shares to be issued upon exercise of outstanding options.
Employment and Severance Agreements
On August 25, 2004, the Company entered into amended and restated employment agreements with Richard P. Crystal and Ronald W. Ristau, certain provisions of which became effective upon the consummation of the initial public offering. These employment agreements will remain effective through August 25, 2007, and are automatically renewable for additional one year terms. Under the terms of these agreements, Mr. Crystal and Mr. Ristau are entitled to base salaries of $900,000 and $575,000 per year, respectively.
Each of Mr. Crystal and Mr. Ristau is entitled to continue to be paid a base salary and target bonuses for two years following a termination by the Company without cause (including its failure to renew), or if he resigns with good reason. After a change of control of the Company, each is entitled to be paid a lump sum equal to three times his base salary plus bonus if he is terminated without cause (including the Company's failure to renew) or if he resigns with good reason within two years of such change of control. Mr. Crystal and Mr. Ristau's employment agreements also restrict the executives' business activities that compete with the Company's business for two years from the date of termination and the solicitation of its employees for three years from the date of termination.
The Company has also entered into letter agreements of employment with Robert J. Luzzi, Charlotte L. Neuville and Steven M. Newman which provide for annual base salaries of $450,000, $402,000 and $535,000, respectively. Each executive is also entitled to participate in the Company's employee benefit plans and its current incentive compensation plan. After one year of employment, Mr. Luzzi, Ms. Neuville and Mr. Newman are entitled to severance payments equal to one year of base salary of final rate of pay upon termination by the Company without cause. Each executive has agreed to be bound by an 18 month non-compete provision upon resignation or termination for cause, and an 18 month non-solicitation provision.
Bear Stearns Merchant Banking and certain of the Company's senior management stockholders are party to a stockholders agreement that governs certain relationships among, and contains certain rights and obligations of, such stockholders. This agreement replaces a security holders agreement between certain of the Company's stockholders and became effective immediately prior to the consummation of the initial public offering.
The stockholders agreement provides that the parties must vote their securities in favor of the individuals nominated to the board of directors by Bear Stearns Merchant Banking, provided that each of Richard P. Crystal and Ronald W. Ristau shall be so nominated for so long as he serves as an executive officer of New York & Company. From and after the date that the stockholders party to the agreement and their transferees hold less than 50% of the Company's outstanding common stock, the parties to the agreement will be obliged to vote for two individuals nominated to the board of directors by Bear Stearns Merchant Banking. Such voting obligations will terminate when Bear Stearns Merchant Banking and certain of its transferees own less than 20% of the Company's outstanding common stock.
The stockholders agreement also gives the parties certain rights with respect to registration under the Securities Act of shares of the Company's securities held by them and certain customary indemnification rights. These registration rights include demand registration rights requiring the Company to register their shares under the Securities Act. In addition, in the event the Company proposes to register any shares of common stock under the Securities Act, whether in connection with a primary or secondary offering, the stockholders party to the stockholders agreement may request that the Company affect a registration of their shares under the Securities Act.
Advisory Services Agreement
The Company had an advisory services agreement with Bear Stearns Merchant Manager II, LLC. The services consisted of formulating and implementing business strategies, including identifying and assisting the Company in evaluating corporate opportunities, such as marketing opportunities and financial strategies. Under the terms of the advisory services agreement, at the closing of the acquisition from Limited Brands, Inc., the Company paid a transaction fee equal to $4.0 million in connection with services rendered in connection with the acquisition.
The advisory services agreement called for an annual advisory fee, payable in advance in quarterly installments, equal to the greater of $0.8 million or 2.5% of EBITDA. The Company paid Bear Stearns Merchant Manager II, LLC such fees in the amounts of $3.1 million, $1.0 million and $0.3 million in fiscal year 2004, fiscal year 2003 and the period from November 27, 2002 to February 1, 2003, respectively. Upon consummation of the initial public offering on October 13, 2004, the Company paid a $4.0 million fee related to the termination of the advisory services agreement with Bear Stearns Merchant Manager II, LLC. 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.
The Company believes that the fees paid are reasonable for the services provided and supported its operations as a private company; however, they do not reflect arms-length negotiations. Although the Company believes these fees are comparable to management fees paid by portfolio companies of other private equity firms with comparable experience and sophistication, the Company did not pursue any alternate arrangements and therefore there is no assurance that these agreements were on terms comparable to those that could have been obtained from unaffiliated third parties.
Commercial and Investment Banking Activities
Bear Stearns Merchant Banking and their affiliates have provided and may continue to provide certain commercial banking, financial advisory and investment banking services for the Company for which they will receive reasonable fees to be negotiated on an arms-length basis.
Relationships with the Company's Former Parent and Its Affiliates
Transition Services Agreement
The Company continues to use the services of Limited Brands and its business units Limited Logistics Services and Independent Production Services under the transition services agreement for the distribution, transportation and delivery and compliance support services needs.
Under the agreement, these services will terminate upon the earliest of the following:
The Company believes that these services are provided at a competitive price and the Company anticipates continuing to use Limited Brands for these services. If termination of these logistics and related services under the transition service agreement results in excess logistics and related service labor for Limited Brands, the Company will be liable for 50% of severance related costs of such labor up to a maximum of $0.5 million.
In connection with the acquisition by Bear Stearns Merchant Banking on November 27, 2002, the Company entered into the following agreements relating to its dealings with Limited Brands as they relate to the Company's store leases, each of which the Company believes have comparable or better terms than the Company could have obtained from unrelated third parties:
Store Leases Agreement. The store leases agreement formalizes the agreements between the parties as to the rights and obligations of each party relating to store leases where:
The agreements therein are generally coextensive with the prime leases to which they relate.
Covenant Agreement. In order that Limited Brands and its affiliates would continue to guarantee the leases of some of its stores, the Company entered into the covenant agreement whereby the Company agreed to certain negative covenants relating to the incurrence of indebtedness, limitations of restricted payments and transactions with affiliates. The terms of the agreement were amended on March 16, 2004 in connection with its note and warrant purchase from LFAS, Inc. described in further detail below. The covenant agreement terminates on the earliest to occur of:
Master Sublease Agreement. The master sublease agreement gives the Company a sublease on space sublet from and guaranteed by Limited Brands. This agreement generally terminates for each sublease with the term of each prime lease.
Master Assignment and Assumption Agreement. The master assignment and assumption agreement provides for the assignment of certain leases to Limited Brands which leases are guaranteed by Limited Brands. Pursuant to the master sublease agreement described above, the store premises subject to the master assignment and assumption agreement are subleased to the Company.
Relationship with Mast Industries
The Company purchases apparel and accessories from Mast Industries, Inc., ("Mast") an affiliate of Limited Brands. Mast is a significant vendor of apparel and accessories to third parties. The Company purchases goods through Mast on a purchase order basis, and has no long-term contract. Total annual purchases from Mast in fiscal year 2004 and fiscal year 2003 were $128.2 million and $109.6 million, respectively, making Mast one of its top three importers. Though the Company does not expect to lose Mast as a supplier, ample alternative suppliers exist in a competitive market, and the Company believes the loss of Mast would not be material to its business.
Repayment of 10% Subordinated Note and Purchase of Warrant
On March 16, 2004, the Company repurchased the 10% subordinated note issued November 27, 2002 from LFAS, Inc., an affiliate of Limited Brands, for $85.0 million, which included $75.0 million of
the initial principal amount and all accrued and unpaid interest thereon. The Company also purchased for $20.0 million from LFAS, Inc. the common stock purchase warrant issued by the Company on November 27, 2002 to acquire 8,050,671 shares of its common stock for $0.11 per share. As part of the note and warrant purchase, the Company agreed to pay LFAS, Inc. an amount in cash equal to approximately 6.38% of the pre-offering equity value of the company that was over $156.8 million, less $4.5 million. In connection with the consummation of the initial public offering, the Company paid LFAS, Inc. the obligation in the amount of $45.7 million and thereby has settled all obligations to LFAS, Inc.
Repurchase of Preferred Stock
Concurrently upon entering into the new credit facility on May 19, 2004, the Company repurchased substantially all issued and outstanding preferred stock of New York & Company for $75.0 million, which included all accrued and unpaid dividends. BSMB/NYCG LLC owned 93.1% of such preferred stock and the remaining 6.9% was owned by certain members of the Company's senior management. The remaining one share of preferred stock was cancelled immediately prior to the consummation of the initial public offering.
Acceleration of Vesting of Certain Stock Options
Concurrently upon entering into the new credit facility on May 19, 2004, the vesting of certain of the stock options issued pursuant to grants under the Company's 2002 Stock Option Plan were accelerated. The then current total number of shares of common stock underlying such vested options was 4,523,395, 1,854,267 of which were exercisable as a result of accelerated vesting and 2,669,128 of which were options that had previously vested.
Transactions with Management
As part of the acquisition, certain members of the Company's senior management were paid retention bonuses by Limited Brands between May 2003 and May 2004 totaling in the aggregate approximately $2.9 million, for completing the sale of the company and remaining with the Company throughout the acquisition and separation period. Approximately $2.0 million of such amount was paid to the Company's executive officers.
Prior to May 19, 2004, promissory notes made by certain members of the Company's senior management in the aggregate principal amount of approximately $2.8 million were issued in connection with these executives' purchase of its common and preferred stock. On May 19, 2004, all of these notes were repaid in conjunction with the closing of its new credit facility and the repurchase of substantially all of its preferred stock.
On May 19, 2004, certain of the Company's executive officers were granted stock options for a total of 630,663 shares of its common stock at an exercise price of $3.23. Such options were immediately exercisable upon grant.
On July 1, 2004, the Company funded and distributed the assets of its terminated non-qualified deferred compensation plan that had been maintained by Limited Brands prior to its separation. Such distribution resulted in cash payments to executive officers of $2.1 million out of a total $5.9 million distributed.
The Company's independent auditors, Ernst & Young LLP ("E&Y"), have, in the past, had certain business relationships with affiliates of The Bear Stearns Companies Inc. ("Bear Stearns") that are described below. None of these arrangements involved the Company, nor did they have any effect on its consolidated financial statements. The requirements of the Securities and Exchange Commission on auditor independence limit direct and material indirect business relationships between an auditor and its audit client. As a result of these business relationships between E&Y and affiliates of Bear Stearns, questions were raised regarding the independence of E&Y with respect to their audit of the Company.
In October 2001, E&Y entered into a services agreement with Bear Stearns Securities Corp. ("Bear Stearns Securities") whereby E&Y would, on a non-exclusive basis, identify Bear Stearns Securities to E&Y's personal financial consulting ("PFC") clients for custodial, brokerage, recordkeeping and performance reporting services. E&Y's PFC clients were billed for such services directly by Bear Stearns Securities. The agreement contained no provisions for payments between E&Y and Bear Stearns Securities, except for the reimbursement of certain costs incurred by E&Y in relation to non-timely delivery of performance reporting services by Bear Stearns Securities. Pursuant to those reimbursement provisions, in June 2004 E&Y received a payment from Bear Stearns Securities in the amount of $287,500 that represented a negotiated resolution of E&Y's claims for reimbursement of certain costs incurred by E&Y to obtain performance reports from another provider. E&Y received no compensation, direct or indirect, from Bear Stearns Securities or its affiliates for making referrals. On September 21, 2004, the parties terminated this agreement. Under the terms of the termination arrangements, E&Y's existing PFC clients may continue to use Bear Stearns Securities services and give E&Y access to their account records, but these relationships will be governed by contracts directly between the individual E&Y PFC client and Bear Stearns Securities. E&Y may, but is under no obligation to, continue to identify Bear Stearns Securities to E&Y's PFC clients for custodial, brokerage, recordkeeping and performance reporting services on a non-exclusive basis and such E&Y PFC client relationships will be governed by contracts directly between the individual PFC client and Bear Stearns Securities.
This matter was reviewed by the Company's audit committee in consultation with counsel and representatives of E&Y. The audit committee considered all relevant facts and circumstances, including E&Y's representations with respect to their relationship with affiliates of Bear Stearns and E&Y's conclusion that they were independent with respect to their audit of the Company and concluded that the arrangements did not compromise E&Y's independence with respect to their audit.
In November 2002, E&Y signed an agreement with Bear, Stearns & Co. Inc. to license, market and implement a specialized tax strategy developed by E&Y involving the repurchase of corporate debt expected to be of interest to a small number of entities. No business was ever conducted nor were any fees received or revenues recognized under the agreement and the agreement was terminated in June 2004.
In accordance with Rule 14a-8 of the Exchange Act, any stockholder proposals intended to be included in the Proxy Statement and presented at the 2006 Annual Meeting of Stockholders of the Company must be received by the Company no later than January 20, 2006. The proposal should be addressed to: Chairperson of the Nomination and Governance Committee, New York & Company, Inc., 450 West 33rd Street, 5th Floor, New York, NY 10001.
In addition, the Company has established an advance notice procedure with regard to certain matters, including stockholder proposals not included in the Company's Proxy Statement, to be brought before an annual meeting of stockholders. In general, notice must be received by the Company not less than 60 days or more than 90 days prior to the scheduled annual meeting, regardless of any postponements, deferrals or adjournments of that meeting unless less than 70 days notice or prior public disclosure of the date scheduled for the meeting is given or made, in which event notice by the stockholder to be timely must be delivered or received not later than the close of business on the tenth day following the earlier of (i) the day on which such notice of the date of the scheduled annual meeting was mailed or (ii) the day on which such public disclosure was made.
A stockholder's notice with respect to a director nomination must set forth: (i) name, address and number of shares of common stock beneficially owned by the nominating stockholder; (ii) name, address and number of shares of common stock beneficially owned by the nominee; (iii) a detailed biography outlining the candidate's relevant background; (iv) professional and business experience and other significant accomplishments; (v) an acknowledgement from the candidate that he or she would be willing to serve on the board, if elected; (vi) a statement by the stockholder outlining the reasons why this candidate's skills, experience and background would make a valuable contribution to the board; and (vii) a minimum of two references who have either worked with the candidate, served on a board of directors or board of trustees with the candidate, or can otherwise provide relevant perspective on the candidate's capabilities as a potential board member.
A stockholder's notice with respect to a proposed item of business must include: (i) name, address and number of shares of common stock beneficially owned by the stockholder; (ii) a brief description of the substance of, and the reasons for conducting, such business at the Annual Meeting; and (iii) any material interest of the stockholder in such business.
This Amended and Restated Audit Committee Charter was adopted by the Board of Directors (the "Board") of New York & Company, Inc. (the "Company") on September 30, 2004 and replaces any charter previously used by the committee.
The Audit Committee (the "Committee") assists the Board in its oversight responsibilities relating to financial matters including:
In discharging its responsibilities, the Committee is not itself responsible for the planning or conduct of audits, or for any determination that the Company's financial statements and disclosures are complete and accurate or are in accordance with generally accepted accounting principles and applicable rules and regulations. This is the responsibility of the Company's management, internal auditor (or others responsible for the internal audit function, including contracted non-employee or audit or accounting firms engaged to provide internal audit services (the "internal auditor")) and the Company's independent auditor.
The Committee shall be comprised of three directors. The members and the Chair of the Committee shall be appointed by the full Board on an annual basis and may be re-appointed or replaced at the Board's discretion at any time.
Each committee member shall be financially literate, as determined by the Board in their business judgment, or must become financially literate within a reasonable period of time after his or her appointment to the committee. At least one member of the Committee shall have accounting or related financial management expertise, as determined by the Board in its business judgment. In addition, at least one member of the Committee shall be an "audit committee financial expert" as defined by the SEC or the Company shall disclose in its periodic reports required pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") the reasons why at least one member of the Committee is not an "audit committee financial expert." If the Board has determined that a member of the Committee is an audit committee financial expert, it may presume that such member has accounting or related financial management expertise.
Each Committee member shall satisfy the independence requirements of the New York Stock Exchange and Exchange Act Rule 10A-3, unless the Company wishes to avail itself of any applicable exemption allowed under such rules and regulations. The Company shall make any required disclosures relating to the use of any such exemptions.
No Committee member may serve on the audit committee of more than three public companies unless the Board has determined that such simultaneous service would not impair the ability of such member to effectively serve on the Committee as such determination is disclosed in the Company's annual proxy statement.
The Chair of the Committee shall be responsible for calling meetings of the Committee, developing the meeting agenda, providing pre-reading materials to Committee members relative to agenda items and chairing the meetings.
The Committee shall meet at least four times a year. Meetings may be in person or by conference call. A majority of the Committee members must be in attendance for a quorum. The Committee may also act by unanimous written consent. The Committee shall make regular reports to the Board on the Committee's activities.
The Committee shall meet periodically with management, the internal auditor and the independent auditor in separate executive sessions.
The Committee shall have the sole authority to retain any independent counsel, experts or advisors (accounting, financial or otherwise) that the Committee believes to be necessary or appropriate. The Committee may also use the services of the Company's regular legal counsel or other advisors to the Company. The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation to the independent auditor for the purposes of rendering or issuing an audit report or performing other audit, review or attestation services, for payment of compensation to any advisors employed by the Committee and for ordinary and administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
The Committee is empowered to conduct its own investigations into issues related to its responsibilities.
Appointment and Oversight of Independent Auditor
The Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor (including resolution of any disagreements between Company management and the independent auditor regarding financial reporting) for the purpose of
preparing or issuing an audit report or related work or performing other audit, review or attestation services for the Company, and the independent auditor shall report directly to the Committee.
Appointment and Oversight of Additional Audit Firm
The Committee shall be directly responsible for the appointment, compensation, retention and oversight work of any other registered public accounting firm engaged for the purpose of preparing or issuing an audit report or related work or performing other audit, review or attestation services for the Company and such firm shall also report directly to the Committee.
Pre-Approval of Services
Before the independent auditor is engaged by the Company or its subsidiaries to render audit or non-audit services, the Committee shall pre-approve the engagement. The Committee may delegate to one or more designated members of the Committee the authority to grant pre-approvals, provided such approvals are presented to the Committee at a subsequent meeting.
The Committee shall, at least annually, evaluate the independent auditor's qualifications, performance and independence. The Committee shall present its conclusions with respect to the independent auditor to the full Board. In conducting its evaluation the Committee shall take the following steps:
Financial Statements and Disclosures
In connection with each annual audit, the Committee shall discuss with management, the independent auditor and the internal auditor the overall scope and plans for such audits, including the adequacy of staffing and other factors that may affect the effectiveness and timeliness of such audits.
The Committee shall review and discuss with management and the independent auditor: (i) major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company's selection or application of accounting principles, and major issues as to the adequacy of the Company's internal controls and any special audit steps adopted in light of material control deficiencies; (ii) any analyses prepared by management or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the Company's financial statements, including analyses of the effects of alternative GAAP methods on the Company's financial statements; (iii) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the Company's financial statements and (iv) management's and/or the independent auditor's judgment about the quality, not just acceptability, of accounting principles, the reasonableness of significant judgments, the clarity of the disclosures in the financial statements and the adequacy of internal controls.
Review of Reports
The Committee shall review and discuss the annual audited financial statements and quarterly financial statements with management and the independent auditor, including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Communication with Independent Auditors
Review of Independent Auditor Report to Audit Committee
The Committee shall review the report that the independent auditor is required to make to the Committee regarding: (i) all accounting policies and practices to be used that the independent auditor identifies as critical; (ii) all alternative treatments within GAAP for policies and practices related to material items that have been discussed among management and the independent auditor, including the ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor; and (iii) all other material written communications between the independent auditor and management of the Company, such as any management letter, management representation letter, reports on observations and recommendations on internal controls, independent auditor's engagement letter, independent auditor's independence letter, schedule of unadjusted audit differences and a listing of adjustments and reclassifications not recorded, if any.
Recommendation to Include Financial Statements in Annual Report
The Committee shall, based on its review and discussions outlined in paragraphs above, determine whether to recommend to the Board that the audited financial statements be included in the Company's Annual Report on Form 10-K.
Internal Audit Function
The Committee shall meet periodically with the Company's internal auditor (or others responsible for the internal audit function, including contracted non-employee or audit or accounting firms engaged to provide internal audit services) to discuss the responsibilities, budget and staffing of the Company's internal audit function and any issues that the internal auditor believes warrant audit committee attention.
The Committee shall discuss with management and the independent auditor the Company's policies with respect to risk assessment and risk management, the Company's significant financial risk exposures and the actions management has taken to limit, monitor or control such exposures.
Communication with Board
The Committee shall report regularly to, and review with, the Board any issues that arise with respect to the quality or integrity of the Company's financial statements, the Company's compliance with legal or regulatory requirements, the performance and independence of the Company's independent auditor, the performance of the Company's internal audit function or any other matter the Committee determines is necessary or advisable to report to the Board.
The Committee shall approve guidelines for the Company's hiring of former employees of the outside auditor who participated in any capacity in the audit of the Company.
The Committee shall obtain from the independent auditor assurances that the independent auditor is not aware of any matters required to be reported under Section 10A(b) of the Exchange Act.
The Committee shall establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
Press Releases and Analyst Communications
The Committee shall discuss with management and the independent auditor the Company's earnings press releases (with particular focus on any "pro forma" or "adjusted" non-GAAP information), as well as financial information and earnings guidance provided to analysts and rating agencies. The Committee's discussion in this regard may be general in nature (i.e., discussion of the types of information to be disclosed and the type of presentation to be made) and need not take place in advance of each earnings release or each instance in which the Company may provide earnings guidance.
Disclosure Controls and Procedures
The Committee shall review with the Chief Executive Officer, Chief Operating Officer and the Chief Financial Officer the Company's disclosure controls and procedures and review periodically management's conclusions about the efficacy of such disclosure controls and procedures.
Preparation of Audit Committee Report
The Committee shall provide the Company with the report of the Committee with respect to the audited financial statements for inclusion in each of the Company's annual proxy statements.
The Committee shall review and discuss any reports concerning material violations submitted to the Committee by the Company's attorneys pursuant to SEC attorney professional responsibility rules or otherwise.
The Committee is responsible for developing and conducting an annual self-assessment of its performance. The Committee will work with the Nomination and Governance Committee to design and coordinate the annual self-assessment in conjunction with the overall Board assessment process. The Committee shall report to the full Board on the results of its assessment each year and shall make any appropriate recommendations to further enhance the Committee's performance.
The Committee shall also fulfill any other responsibilities that may be assigned to the Committee by the Board from time to time.
The Committee shall review this charter regularly and may recommend to the Board from time to time any proposed changes to the charter and to any other documents related to the responsibilities of the Audit Committee.
- - - - - - - - - - - - Detach above card, sign, date and mail in postage paid envelope provided. - - - - - - - - - - - -
NEW YORK & COMPANY, INC.
Please sign proxy as name appears on corporate records. Joint owners should each sign personally. Trustees and others in a representative capacity should indicate the capacity in which they sign. Vote must be indicated (x) in Black or Blue ink.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TABLE OF CONTENTS
PROPOSALS REQUIRING YOUR VOTE ITEM 1Election of Directors
ITEM 2Ratification of Independent Registered Public Accounting Firm
SECURITIES OWNERSHIP OF OFFICERS, DIRECTORS AND OWNERS OF 5% OR MORE OF THE COMPANY'S COMMON STOCK
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Summary Compensation Table
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDER PROPOSALS FOR THE 2006 ANNUAL MEETING
ANNEX 1 NEW YORK & COMPANY, INC.
AUDIT COMMITTEE CHARTER