The band arrives in New York. Leslie, Russell's "ex-wife, current girlfriend thing" arrives.
William learns that Penny is in the city, staying at the Plaza Hotel.
William receives a call from Jann Wenner at Rolling Stone, who informs him the story will be a cover, and that he can tell the band. He should MOJO (an early fax machine) over what he has to be fact checked.
At a restaurant, William breaks the news to the band that they will be on the cover of Rolling Stone.
While the band celebrates, Russell spots Penny from across the room. So does Leslie. Dick goes over to check on her, but it isn't long before Penny leaves, clearly upset.
William tries unsuccessfully to follow Penny.
At the Plaza, William finally finds Penny overdosing on Quaaludes in her room. He calls for a doctor.
We cut from shots of Elaine at William's graduation (at which he is not present), back to William, who is trying to keep Penny conscious.
"Why doesn't he love me?" asks a fading Penny Lane.
"I love you," William confides. "Now I'm about to go where… many men have gone before."
William kisses Penny as the doctors arrive. They pump her stomach to the tune of "My Cherie Amour" by Stevie Wonder, the love-filled soundtrack of William's mind juxtaposing Penny's hardly flattering vomiting.
Later, Penny and William walk together through the park. She reveals her family history, and her real name—"Lady Goodman." "Now you now all my secrets," she tells him.
William accompanies Penny to the airport, where she takes off for home, while Nancy Wilson's introspective guitar and mandolin score plays.