-----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, A+GyoPNqkADawcxKIO9DD1Qfg6C2pYI5TT8OvQgRK8EIDtpA/U/pDiaY/v7NMEmM lmWP0cZ7NWwRhC6hv12zfQ== 0000019353-01-500009.txt : 20010507 0000019353-01-500009.hdr.sgml : 20010507 ACCESSION NUMBER: 0000019353-01-500009 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20010203 FILED AS OF DATE: 20010504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHARMING SHOPPES INC CENTRAL INDEX KEY: 0000019353 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] IRS NUMBER: 231721355 STATE OF INCORPORATION: PA FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-07258 FILM NUMBER: 1622998 BUSINESS ADDRESS: STREET 1: 450 WINKS LANE CITY: BENSALEM STATE: PA ZIP: 19020 BUSINESS PHONE: 2152459100 MAIL ADDRESS: STREET 1: 450 WINKS LANE CITY: BENSALEM STATE: PA ZIP: 19020 10-K 1 form10k.txt FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 3, 2001 OR ( ) 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 0-7258 CHARMING SHOPPES, INC. (Exact name of registrant as specified in its charter) PENNSYLVANIA 23-1721355 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 450 Winks Lane, Bensalem, Pennsylvania 19020 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (215) 245-9100 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock (par value $.10 per share) (Title of Class) 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. (X) YES ( ) NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (S.229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( ) As of April 16, 2001, 101,742,782 common shares were outstanding. The aggregate market value of the common shares (based upon the closing price on April 16, 2001), held by non-affiliates was approximately $487 million. DOCUMENTS INCORPORATED BY REFERENCE: As stated in Part III of this annual report, portions of the following document are incorporated herein by reference: Definitive proxy statement for annual shareholders meeting to be filed within 120 days after the end of the fiscal year covered by this Annual Report. PART I Item 1. Business General Charming Shoppes, Inc., a Pennsylvania corporation formed in 1969, operates through its subsidiary corporations 1,754 women's specialty retail apparel stores in 48 states, under the names Fashion Bug(R), Fashion Bug Plus(R), Catherine's Plus Sizes(R), The Answer(TM) and Added Dimensions(R) (as of the fiscal year ended February 3, 2001 ("Fiscal 2001"). Unless the context indicates otherwise, the term "Company" refers to Charming Shoppes, Inc. and, where appropriate, one or more of its subsidiaries. Charming Shoppes opened its first store on September 13, 1940 in Philadelphia, Pennsylvania. In 1971, Charming Shoppes became a public corporation, trading on the over-the-counter market (Nasdaq) under the ticker symbol "CHRS". During the fiscal year ended January 29, 2000, the Company acquired the Catherines Stores Corporation, a chain of 436 retail stores, and the Modern Woman chain of 136 retail stores. Both chains served a similar customer -- the plus-size woman. The Company consolidated the two businesses so as to benefit from synergies. The combination provided the Company with an enhanced platform to strengthen and accelerate its large-size growth strategy. Charming Shoppes has become a leading provider of large-size fashion, a segment that continues to outpace the overall growth of the women's apparel market. In addition to synergies and efficiencies in buying and administrative functions, the Company achieved improved geographic diversity in its overall store base and resulting revenue stream. During Fiscal 2001, the Company completed the integration of the Modern Woman stores into the Catherines Stores Corporation. With $1.6 billion in sales and 1,754 stores nationwide, Charming Shoppes is the largest women's specialty apparel retailer in the strip shopping center. The Company is a leading women's specialty retailer in plus sizes, servicing the plus-size woman through three distinct brands: Fashion Bug (including Fashion Bug Plus), Catherine's Plus Sizes and The Answer/Added Dimensions. Through varied fashion concepts, the Company offers merchandise at budget to moderate price points, with classic to updated fashion tastes, for a wide range of ethnically diverse women. The fashion apparel needs of the Misses and Junior customer are served through the Fashion Bug, Monsoon, and Accessorize brands. The Company's Brands Fashion Bug(R) and Fashion Bug Plus(R) The Company's 1,230 Fashion Bug and Fashion Bug Plus stores specialize in selling a wide variety of plus-size, misses and junior sportswear, dresses, coats, lingerie, accessories, and casual footwear. The stores sell both developed product, uniquely designed for the Fashion Bug customer, and brand-name merchandise. The majority of these stores are located in the Northeast quadrant of the United States, in strip shopping centers. The Company's Fashion Bug stores average 8,900 square feet in size and are located in 46 states. Customers are in the 20- to 49-year-old age group, shop in the low to moderate price range, and are on trend with current fashions. Plus-size sportswear is the largest merchandise category, with 41% of sales represented by plus-sizes. Catherine's Plus Sizes(R) The Catherine's Plus Sizes customer wears size 16 and larger, and generally shops in the moderate price range. The brand targets women 40-65 years old and offers classic apparel and accessories for career and casual lifestyles in a one-to-one selling environment. The target customer has classic but fashion-conscious tastes, and is primarily concerned with fit and value in apparel selection. As a size specialist, Catherine's also has developed an expertise in providing merchandise catering to plus-size women wearing sizes 28 and above, as well as petite sizes. These 414 stores, which exclusively sell plus-size women's apparel, are located in 45 states, primarily in the Southeast, Mid-Atlantic, and Eastern Central regions of the United States, and average 4,000 square feet in size. Employing a strip shopping center strategy, Catherine's Plus Sizes is a destination store, with a competitive advantage in super sizes, petites, and the body basics fit program, designed to help a woman choose the merchandise styles that flatter her figure. The Answer(TM)/Added Dimensions(R) The Answer and Added Dimensions stores cater to an ethnically diverse, plus-size woman, over 35 years of age, who shops in the moderate to better price range. The brand caters to her need for career, church, social occasion, and casual apparel and accessories offering high quality fashion. She is fashion forward, has a strong fashion attitude, and prefers dramatic styles and bold colors. These 110 stores, which exclusively sell plus-size women's apparel, are located primarily in metropolitan areas throughout the Southeastern and Midwestern United States, and average 3,900 square feet in size. The stores employ a strip center strategy, and are located in 23 states and the District of Columbia. Monsoon(R) and Accessorize(R) On October 26, 2000, Charming Shoppes, Inc. and Monsoon plc of London announced the signing of a joint venture agreement, for the purpose of bringing the successful apparel and accessories concepts of Monsoon and Accessorize stores from the United Kingdom to the United States. The Company plans to open approximately 10 Monsoon and/or Accessorize stores during the fiscal year ending February 2, 2002 ("Fiscal 2002") and will be evaluating the performance of these stores in developing a longer-term growth strategy for the brands. The Monsoon concept is a women's apparel specialty store in the "better" price range, with locations in premier malls. All product is private label and created by Monsoon's team of designers and buyers using manufacturing resources throughout the world. Product offerings include leading fashion in both career and special occasion dressing. The target customer is 25 to 55 years old. Accessorize specializes in women's accessories in the "moderate" to "better" price range. All product is private label and is sourced from around the world using Accessorize's design, buying, and development teams. Product offerings include bags, necklaces, bracelets, earrings, hair accessories, hats, purses, scarves, sunglasses, and sarongs, among others. The target customer is 16 to 45 years old. The Company's real estate strategy for Fashion Bug, Catherine's Plus Sizes, and The Answer/Added Dimensions stores is focused on locating stores in strip shopping centers. As of the end of Fiscal 2001, approximately 85% of the Company's stores were located in strip shopping centers. The Company believes that its low to moderate customer base visits strip shopping centers more frequently than malls for their shopping needs as a result of the mix of the tenants in, and the convenience of, strip shopping centers. In addition, the Company benefits from substantially lower occupancy costs as compared to store occupancy costs in malls. Growth Strategy The Company's primary growth strategy is to increase its market share in women's specialty plus-size apparel. In support of this strategy, the Company plans to increase store units aggressively. The Company expects to fund store growth plans from internally generated funds. During Fiscal 2001, the Company announced plans to eliminate the girls merchandise from the Fashion Bug stores. Store space and inventory previously committed to girls will primarily be redirected to the expansion of the plus-size apparel offerings. Through branded websites, the Company also plans to develop an online marketing medium for plus-size women, and to introduce e- commerce for plus-size women's apparel. Merchandising and Marketing The Company employs a merchandise strategy that emphasizes a variety of choices in its merchandise assortment. The Company uses domestic fashion market guidance, fashion advisory services, and in-store testing to determine the optimal product assortment for its customer base. Management believes that this strategy results in a higher degree of accuracy in predicting consumer preferences while reducing the Company's inventory investment and risk. The purpose of this strategy is to enable the Company to provide merchandise assortments to meet its customers' preferences. The Company offers an assortment of both casual and career-oriented products, in plus (large-size), misses, petite, and junior sizes. Merchandise that complements these areas, such as accessories, intimate apparel, and footwear, are also featured. In addition, Catherine's Plus Sizes stores offers a broad assortment of merchandise in extended sizes (over size 26), making the Company one of the few retailers to emphasize these sizes. The Company has eliminated girls apparel from its Fashion Bug stores as of the end of the 2000-2001 winter. Sales of girls apparel represented approximately 3% of Fashion Bug sales. Store space and inventory commitments previously allocated to girls apparel will be redirected primarily to growth in plus-size apparel. Product assortments are generally tailored to the demographics of an area, and merchandise is available for six seasons -- spring, summer, transitional, fall, holiday, and transitional. The Company maintains quality standards with respect to merchandise fabrication, construction, and fit. Realistic initial pricing is also part of the business strategy. The pricing provides sufficient margin to permit merchandise discounts in order to stimulate customer purchases. In order to meet the demands of its primary customers, the Company uses the domestic wholesale apparel marketplace for a significant portion of its purchases. This allows management to maintain short lead times, respond quickly to current fashion trends, and quickly replenish merchandise inventory as necessary. The Company uses its overseas sourcing operation and agency relationships to procure basic low-risk commodity merchandise, which generally requires longer lead times. The Company continues to redefine its merchandise assortments to reflect the needs and demands of diverse customer groups. The Company has distribution systems in place whereby stores that are identified as having certain customer profiles can be merchandised with products specifically targeted to such customers. In addition, the Company continues to work to improve inventory turnover by better managing the flow of seasonal merchandise to its stores across all geographic regions. Further, the Company addresses the different lifestyle needs of its customers with respect to fashion by varying the depth and assortments of career and casual merchandise. The Company employs a realistic pricing strategy that is aimed at setting the initial price markup of fashion merchandise in order to increase the percentage of sales at the ticketed price. Management believes this strategy has resulted in a greater degree of credibility with the customer, reducing the need for aggressive price promotions. The pricing does allow sufficient margin to permit merchandise discounts in order to stimulate customer purchases when necessary. The Company expects to continue to achieve a higher initial markup in the basic low-risk commodity merchandise that is purchased through its overseas sourcing operations. The retail sale of women's apparel is a highly competitive business with numerous competitors, including moderate-price department stores, discount department stores, other low- to moderate-price, moderate-price, and moderate-to-better-price specialty apparel stores, and mail-order companies. The Company cannot reasonably estimate the number of competitors due to the large number of companies selling women's apparel. However, the Company believes that it currently holds an estimated 20% market share of the women's large-size specialty apparel business. The primary elements of competition are merchandise style, size, selection, quality, display, and price, as well as store location, design, advertising, and promotion and personalized service to the customers. The Company's stores experience a normal seasonal sales pattern for the retail apparel industry, with peak sales occurring during the Easter, Labor Day, and Christmas seasons. The Company generally builds inventory levels prior to these peak selling periods. To keep inventory current and fashionable, the Company reduces the price of slow-moving merchandise throughout the year. End-of-season sales are conducted with the objective of carrying a minimal amount of seasonal merchandise over from one season to another. Sales for the four quarters of Fiscal 2001, as a percent of total sales, were 23.6%, 26.7%, 22.6% and 27.1%, respectively. The Company continues to be promotionally oriented. The Company's advertising expenditures are focused on stimulating customer traffic through targeted direct mail advertising to preferred customers. These customers are selected from a database of more than 18 million proprietary credit card, third-party credit card, and cash customers. The Company also may use radio, television, and newspaper advertising to stimulate traffic at certain strategic times of the year. Pricing policies, displays, store promotions, and convenient store hours are also used to attract customers. With the planning and guidance of specialized home office personnel, each store provides such displays and advertising as may be necessary to feature certain merchandise or certain promotional selling prices from time to time. The Company encourages sales through its proprietary credit cards. The Company's proprietary credit card programs have approximately 2.8 million active accounts, which accounted for approximately 33% of retail sales in Fiscal 2001. The Company believes that the credit card is a promotional vehicle in itself, engendering customer loyalty, creating a substantial base for targeted direct mail promotion, and encouraging incremental sales. The Company controls and services its entire Fashion Bug proprietary credit card file, and has entered into various agreements whereby it securitizes and sells all of these receivables. In each securitization, the receivables are transferred by the Company's credit card bank to a trust, which issues certificates representing ownership interests in the trust. Under these agreements, the Company continues to service the receivables and control credit policies. This allows the Company to continue to fund receivable growth, provide customer service, and collect past-due accounts. Accordingly, its relationship with its credit card customers is not affected by the securitization agreements. The Company's Fashion Bug proprietary credit card portfolio is originated by Spirit of America National Bank, a national banking association and wholly owned subsidiary of the Company. Spirit of America National Bank approves credit applications and a third party performs all billing and collection activities. The Company's proprietary credit card customers tend to be a higher credit risk than bank-issued credit card customers. Catherine's Plus Sizes and The Answer/Added Dimensions also offer customers the convenience of a private-label credit card. The Company uses a third- party bank to finance and service these private-label credit card programs. This third-party bank provides new account approval, credit authorization, billing, and account collection services. Under a non-recourse agreement with the third-party bank, the Company is reimbursed daily with respect to sales generated by the private-label credit cards. The agreement may require the Company to repurchase receivables from the third-party bank under certain conditions relating to a change in control of the Company. Purchasing Purchasing is conducted on a departmental basis for each of the Fashion Bug, Catherine's Plus Sizes, and The Answer/Added Dimensions merchandise groups by staffs of buyers supervised by one or more merchandise managers. The Company believes that specialization of buyers within their departments enhances their expertise in obtaining quality merchandise at a cost that will permit attractive selling prices, while obtaining the desired markup for the Company. The merchandising staffs obtain store and chain-wide inventory information generated by merchandise information systems that use point-of-sale terminals. Through these terminals, merchandise can be followed from the placement of the order to the actual sale. Based upon this data, the merchandise managers compare budgeted-to-actual sales and make merchandising decisions, as needed, including re-order, markdowns, and changes in the buying plans for upcoming seasons. During Fiscal 2001, the Company's stores purchased merchandise from approximately 1,150 suppliers, none of which accounted for more than 4% of the Company's purchases. The Company purchased approximately 70% of its Fashion Bug merchandise and 80% of its Catherine's Stores merchandise in the domestic market on an open account basis, with the remainder being obtained through the Company's sourcing organization. Sourcing In order to meet the demands of its primary customers, the Company uses the domestic wholesale apparel marketplace for a significant portion of its purchases. This allows management to maintain short lead times, respond quickly to current fashion trends, and quickly replenish merchandise inventory as necessary. The Company uses its overseas sourcing operation to procure basic low-risk commodity merchandise, which generally requires longer lead times. In Fiscal 2001, the Company purchased approximately 70% of its Fashion Bug merchandise and 80% of its Catherine's Stores merchandise in the domestic market, with the remainder being developed by the Company's sourcing organization. The Company anticipates a reduction in the percentage of domestically sourced product for Catherine's Stores to a level closer to the Company's Fashion Bug domestic sourcing percentage of 70%. During Fiscal 2001, the Company conducted its sourcing operations in 24 countries through its offices in Hong Kong and Singapore. Merchandise purchases outside the United States are done via letter of credit with third party vendors, with the Company being the importer of record. To date, the Company has not experienced difficulties in purchasing merchandise overseas or importing such merchandise into the United States. Should political instability result in a disruption of normal activities in a country with which the Company does business, the Company believes it would have adequate alternative sources of supply. Distribution The Company operates two distribution centers. For its Fashion Bug and The Answer/Added Dimensions stores, the Company uses a distribution center in Greencastle, Indiana. The 150-acre tract of land contains a building of approximately 1,000,000 square feet. The Company estimates that, by operating multiple shifts, it would have the ability to service over 2,000 stores from this distribution center. For Catherine's Plus Sizes stores, the Company operates a 213,000 square foot distribution center in Memphis, Tennessee, which is designed to handle up to approximately 800 stores. The majority of merchandise purchased by the Company is received at the Greencastle and Memphis facilities, where it is prepared for distribution to the stores. The functions performed at these central facilities include quality control inspection, receiving, ticketing, packing, and shipping. The Company's automated sorting systems in these distribution centers enhance the flow of merchandise from receipt to shipment. Merchandise is shipped to each store by trucks operated principally by common carriers. The Company uses computerized automated distribution models that enhance the efficiency of the distribution operations. These models enable the distribution operations to build various customer profiles into each store's plan. These profiles determine not only the number of units, but also the type of unit to be distributed to each store. The Company's merchandise and purchasing strategy, and enhancements to the Company's inventory management, facilitate the timely and orderly purchase and flow of merchandise. This enables the Company's stores to offer fresh product assortments on a regular basis. Stores The Company's stores feature wall and selling-floor displays that coordinate merchandise in order to promote multiple sales. The stores, which the Company believes must present a fresh, contemporary shopping environment, are redecorated or remodeled as necessary. The Company is constantly testing and implementing new store designs and fixture packages aimed at providing an effective merchandise presentation. The Company emphasizes customer service, including the presence of salespeople in the stores, rather than self-service; lay-away plans; and acceptance of merchandise returns for cash or credit within a reasonable time period. The Company's real estate strategy for Fashion Bug, Catherine's Plus Sizes, and The Answer/Added Dimensions stores is focused on locating stores in strip shopping centers. The Company's 1,754 stores (as of February 3, 2001) are primarily located in suburban areas and small towns. Approximately 85% of these stores are located in strip shopping centers, while the balance are located in community and regional malls. The Company believes that its low to moderate customer base visits strip shopping centers more frequently than malls for their shopping needs as a result of the mix of the tenants in, and the convenience of, strip shopping centers. In addition, the Company benefits from substantially lower occupancy costs as compared to store occupancy costs in malls. Typically, stores are open seven days per week, eleven hours per day Monday through Saturday, and seven hours on Sunday. The Company's Fashion Bug stores range in size, generally, from 5,000 square feet to 15,000 square feet, averaging approximately 8,900 square feet. The Company's Catherine's Plus Sizes and The Answer/Added Dimensions stores range in size, generally, from 2,000 square feet to 6,000 square feet, averaging approximately 3,900 square feet. Total leased space was 13,067,000 square feet as of the end of Fiscal 2001, as compared to 12,911,000 square feet as of the end of the fiscal year ended January 29, 2000 ("Fiscal 2000"). The Company has developed new store designs for each of its store concepts. During the fiscal year ended January 30, 1999, the Fashion Bug store design was elevated to a brighter, well-defined, easier-to-shop format. By the end of Fiscal Year 2001, 27% of the Company's 1,230 Fashion Bug stores were in the new format. New, remodeled, and relocated stores will use the new design. The Company has also developed new store designs for the Catherine's Plus Sizes and The Answer/Added Dimensions concepts. The new Catherine's Plus Sizes store design was introduced in August 2000, and the updated The Answer/Added Dimensions format was introduced during February 2001. Going forward, new, remodeled, and relocated Added Dimensions stores will operate under The Answer tradename. The Company's real estate strategy for Monsoon and Accessorize stores is focused on locating stores in better-rated mall locations, street fronts and life-style strip centers. The Company plans to open 110-120 new stores, remodel approximately 45-50 stores, and relocate approximately 75-80 stores during Fiscal 2002. The Company continues to seek new locations that meet its financial and operational objectives. During Fiscal 2001, the Company opened 94, closed 49, and relocated 18 Fashion Bug stores. The Company opened 11, closed 7, and relocated 9 Catherine's Stores and converted 87 Modern Woman stores to the Catherine's Plus Sizes and Added Dimension/The Answer formats. As a result of the integration of Modern Woman stores into the Catherines Stores Corporation, 35 Modern Woman stores were closed during Fiscal 2001. The Company's store openings and closings over the past five fiscal years are set forth in the following table:
Year Ended Feb. 3, Jan. 29, Jan. 30, Jan. 31, Feb. 1, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- Number of stores Open at beginning of period.............. 1,740 1,135 1,135 1,134 1,301 Opened during period..... 105 75 65 25 5 Acquired during period... 0 572 0 0 0 Closed or combined during period.......... (91)(1) (42) (65) (24) (172) ----- ----- ----- ----- ----- 1,754 1,740 1,135 1,135 1,134 ===== ===== ===== ===== ===== Store Type Fashion Bug and Fashion Bug Plus............... 1,230 1,185 1,135 1,135 1,134 Catherine's Plus Sizes, The Answer, and Added Dimensions............. 524 555(2) 0 0 0 ----- ----- ----- ----- ----- 1,754 1,740 1,135 1,135 1,134 ===== ===== ===== ===== =====
- -------------------- [FN] (1) Includes 35 Modern Woman stores that were closed as a result of the consolidation of Modern Woman stores into the Catherine's Plus Sizes/The Answer/Added Dimensions formats during the year ended February 3, 2001. (2) Includes 122 Modern Woman stores that were closed or converted to the Catherine's Plus Sizes/The Answer/Added Dimensions formats during the year ended February 3, 2001. Store Management and Employees All stores are operated under the direct management of the Company. Each store has a manager and an assistant manager, who are in daily operational control. The Company has district managers, who travel to all stores in their district on a frequent basis, to supervise store operations. Each district manager has responsibility for an average of approximately 11 stores. Regional managers, who report to a Director of Stores, supervise the district managers. Generally, store managers are appointed from the group of assistant managers, and district managers are appointed from the group of store managers. The Company's policy is to motivate its store personnel through promotion from within, with competitive wages and various incentive, medical, and retirement plans. Store operational and purchasing policies are developed centrally, leaving individual store management with the principal duties of display, selling, and reporting through point-of- sale terminals. As of the end of Fiscal 2001, the Company employed approximately 19,750 people, which included approximately 13,800 part-time employees. In addition, a number of temporary employees are hired during the Christmas season. Approximately 36 of the Company's Memphis, Tennessee distribution center employees are represented by the Upholstery and Allied Industries Division of the United Steelworkers of America. The Company and the union have ratified their contract, which expires in November 2001. There have been no material effects on the Company's operations to date as a result of the union representation. Trademarks and Servicemarks The Company owns, or is in the process of obtaining, all rights to the trademarks and trade names it believes are necessary to conduct its business as presently operated. "FASHION BUG"(R), "FASHION BUG PLUS"(R), "L.A. BLUES"(R), "CATHERINE'S"(R), "CATHERINE'S PLUS SIZES"(R), "ADDED DIMENSIONS"(R), "THE ANSWER"(TM), "CST STUDIO"(R), "CST SPORT," "MAGGIE BARNES"(R), "KATHY WHITE"(R), "LIZ & ME"(R), "AD SPORT"(R), "GROVE AVENUE"(R), "JON LAWRENCE"(R), "CAPISTRANO"(R), "FITTING IMAGE"(R), and "MODERN WOMAN"(R) and several other trademarks and servicemarks of lesser importance to the Company have been registered or are in the process of being registered with the United States Patent and Trademark Office and in other countries. The Company is the owner of the following domain name registrations: charming.com, charmingshoppes.com, fashionbug.com, fashionbugplus.com, catherines.com, and others of lesser importance. Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 The Company has made in this report, and from time to time may otherwise make, forward-looking statements concerning the Company's operations, performance, and financial condition. This report includes, in particular, forward-looking statements regarding the Company's growth strategy, future performance following its acquisitions, joint ventures, restructurings, and expense reduction initiatives, and the expected benefits thereof. In addition, the information contained herein includes certain forward-looking statements regarding earnings, sales performance, store openings and closings, cost savings, capital requirements, the Company's exposure to fluctuations in interest rates, and other matters. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those currently anticipated due to a number of factors, including those identified below. Dependence on Key Management The Company's success and its ability to successfully execute its business strategy depends largely on the efforts and abilities of Dorrit J. Bern, the Company's Chairman of the Board, President and Chief Executive Officer, and her management team. The loss of the services of one or more of such key personnel could have a material adverse effect on the Company's business and financial results. The Company does not maintain key-man insurance policies with respect to any of its employees. Other Factors Actual results could also differ materially from those currently anticipated due to (i) rapid changes in or miscalculation of fashion trends, (ii) extreme or unseasonable weather conditions, (iii) economic downturns, a weakness in overall consumer demand, inflation, and cyclical variations in the retail market for women's fashion apparel, (iv) a further increase in the Federal (or State) Minimum Wage, (v) an acceleration in the rate of business failures in the retail industry, (vi) the loss of certain or all of the collateral pledged under the Company's credit facilities, (vii) the availability and/or cost of receivables securitization arrangements, (viii) an increase in the rate of bad debt expense among the Company's proprietary credit card customers, (ix) the risks attendant to the sourcing of the Company's merchandise needs abroad, including exchange rate fluctuations, political instability, trade sanctions or restrictions, changes in quota and duty regulations, delays in shipping, or increased costs of transportation, (x) the interruption of merchandise flow to the Company's retail stores from its centralized distribution facilities, (xi) the availability and cost of external financing, (xii) competitive pressures, (xiii) failure to realize merger-related synergies, (xiv) the imposition of more onerous payment terms for merchandise purchases, (xv) the ability to hire and train associates, (xvi) the availability of suitable store locations on appropriate terms, and (xvii) failure to achieve the expected benefits of the plus-size growth strategy. In addition, the market price of the Company's Common Stock, which is quoted on the Nasdaq National Market, may be subject to significant fluctuation in response to quarter-to-quarter variations in the Company's revenues and earnings, variations in monthly sales figures, and general stock market volatility unrelated to the Company's operating performance. Item 2. Properties The Company leases all store premises, with the exception of 6 stores, which the Company owns. Typically, store leases have initial terms of 5 to 20 years and contain provisions for renewal options, additional rental charges based on sales performance, and payment of real estate taxes and common area charges. With respect to leased stores open as of February 3, 2001, the following table shows the number of store leases expiring during the periods indicated, assuming the exercise of the Company's renewal options:
Number of Leases Period Expiring ------ -------- 2001 65 2002 - 2006 341 2007 - 2011 324 2012 - 2016 307 2017 - 2021 350 2022 - 2026 306 Thereafter 61
The Company owns a 1,000,000 square foot distribution center in Greencastle, Indiana that services the Company's Fashion Bug, Fashion Bug Plus, and The Answer/Added Dimensions stores and a 213,000 square foot distribution center in Memphis, Tennessee that services the Company's Catherine's Plus Sizes stores. The Company leases 91,000 square feet of office space in Bensalem, Pennsylvania, which houses the Company's corporate headquarters, and owns approximately 22 acres in Bensalem with a 145,000 square foot office building housing the Company's data processing facility and additional administrative offices. In addition, the Company owns a 99,000 square foot facility in Memphis, Tennessee, which houses the Catherine's Stores corporate headquarters, data processing facility, and administrative offices. Spirit of America National Bank, the Company's wholly owned credit card bank subsidiary, occupies 30,000 square feet of leased office space in Miami Township, Ohio. The Company also maintains a buying office in New York City that occupies 13,000 square feet of leased space. The Company owns or leases a total of 43,000 square feet of office and warehouse space in Asia. Item 3. Legal Proceedings There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. Item 4a. Executive Officers of the Registrant The following list contains certain information relative to Executive Officers of the Company as of April 17, 2001. There are no family relationships among any Executive Officers. The term of each Executive Officer expires at the next annual meeting of the Board of Directors following the Annual Meeting of Shareholders scheduled to be held during June 2001, or until their successors are duly elected and qualified. Dorrit J. Bern, 50, has served as Chairman of the Board of Directors since January 1997. Prior to that, she served as Vice Chairman of the Board of Directors from September 1995 to January 1997. She has also served as President and Chief Executive Officer since September 1995. Ms. Bern's term as a Director expires in 2002. Anthony A. DeSabato, 52, has served as Executive Vice President and Corporate Director of Human Resources for more than five years. Eric M. Specter, 43, has served as Executive Vice President - Chief Financial Officer since January 1997. He also served as Treasurer from February 1998 to March 2000. Prior to that he served as Vice President - Chief Financial Officer from December 1995 to January 1997. Colin D. Stern, 52, has served as Executive Vice President and General Counsel for more than five years. He has also served as Secretary since February 1998. Elizabeth Williams, 47, was appointed President of Fashion Bug in December 1999. Prior to that, she served as Executive Vice President - Merchandising from October 1995 to December 1999. Prior to that, she served as Divisional Vice President - Misses Sportswear and Special Sizes for Sears, Roebuck & Co. from February 1994 to October 1995. Erna Zint, 57, has served as Executive Vice President - Sourcing since January 1996. Carmen Monaco, 54, has served as Vice President - Marketing since May 1997. Prior to that he served as Senior Vice President - Marketing/Advertising for Goody's Family Clothing Inc. from August 1992 to May 1997. John J. Sullivan, 54, has served as Vice President - Corporate Controller since October 1998. Prior to that, he served as Senior Vice President and Chief Financial Officer for National Media Corp. from January 1998 to October 1998 and from September 1991 to April 1995, and as Senior Vice President of Administration from April 1995 to January 1998. Jeffery A. Warzel, 44, has served as Senior Vice President - Infrastructure Operations and Strategic Planning since January 2000. Prior to that, he served as Vice President - Operations Support and Business Development for Western Auto, a subsidiary of Sears Roebuck & Co. from August 1996 to December 1999. Prior to that, he served as Vice President - Process Improvement for Melville Corporation from 1992 to 1996. Jonathon Graub, 42, has served as Senior Vice President - Real Estate, since December 1999. Prior to that, he served as Vice President - Real Estate for more than five years. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters (a) Principal Market: The Company's Common Stock is traded on the over- the-counter market and quoted on the Nasdaq National Market under the symbol CHRS. (b) The following table sets forth the high and low sale prices for the Company's Common Stock during the indicated periods, as reported by Nasdaq.
Fiscal 2001 Fiscal 2000 High Low High Low ---- --- ---- --- 1st Quarter.... $8 $4 15/16 $4 5/8 $2 13/16 2nd Quarter.... 7 1/32 4 5/8 7 1/16 3 9/16 3rd Quarter.... 6 3/16 4 7/8 6 13/16 4 9/16 4th Quarter.... 7 1/8 5 3/8 8 1/4 5
On October 2, 1995, the Company's Board of Directors announced an indefinite suspension of dividends on the Company's Common Stock. On November 30, 1995, the Company entered into borrowing agreements that require, among other things, that the Company not pay dividends on its Common Stock (see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Debt" below). (c) Approximate Number of Holders of Common Stock: The approximate number of holders of record of the Company's Common Stock as of April 16, 2001 was 2,240. This number excludes individual stockholders holding stock under nominee security position listings. (d) Recent Sales of Unregistered Securities Not applicable. Item 6. Selected Financial Data The following table presents selected financial data for the Company for each of the five fiscal years ended as of February 1, 1997 through February 3, 2001. All of the selected financial data are extracted from the Company's audited financial statements and should be read in conjunction with the financial statements and the notes thereto included under "Item 8. Financial Statements and Supplementary Data" of this Form 10-K.
CHARMING SHOPPES, INC. AND SUBSIDIARIES FIVE-YEAR COMPARATIVE SUMMARY Year Ended (in thousands, except Feb. 3, Jan. 29, Jan. 30, Jan. 31, Feb. 1, per share amounts) 2001(1)(2) 2000(1) 1999 1998 1997 ---------- ------- ---- ---- ---- Net sales.............. $1,607,079 $1,196,529 $1,035,160 $1,016,537 $1,016,297 Restructuring charge (credit)............ 0 (3,471)(3) 54,246(4) 0 0 Non-recurring gain from demutualization of insurance company.... 0 6,700(5) 0 0 0 Non-recurring gain from asset securitization. 0 0 0 13,018(6) 0 Extraordinary gain on early retirement of debt, net of tax.. 0 1,232 0 0 0 Cumulative effect of accounting change, net of tax........... (540)(7) 0 0 0 0 Net income (loss)...... 51,098 45,059 (20,135) 19,334 (7,237) Basic net income (loss) per share............ .50 .46 (.20) .18 (.07) Net income (loss) per share, assuming dilution............. .48 .43 (.20) .18 (.07) Dividends(8)........... .00 .00 .00 .00 .00 At year end: Total assets........... $852,767 $784,796 $684,649 $709,738 $710,397 Current portion - long-term debt....... 4,954 1,920 16 16 16 Long-term debt......... 113,540 105,213 119,475 138,116 138,128 Working capital........ 208,389 161,376 192,274 163,208 224,144 Stockholders' equity... 493,269 436,263 383,572 416,810 421,035
- -------------------- [FN] (1) Results for the fiscal years ended February 3, 2001 ("Fiscal 2001") and January 29, 2000 ("Fiscal 2000") include the results of Catherines Stores Corporation, acquired January 7, 2000, and Modern Woman Holdings, Inc., acquired August 2, 1999, from the dates of their respective acquisitions (See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Acquisitions" below.) (2) The fiscal year ended February 3, 2001 consisted of 53 weeks. (3) During Fiscal 2000, the Company revised its estimates of costs recognized during the fiscal year ended January 30, 1999 ("Fiscal 1999") relating to the closing of the Company's Bensalem distribution center and elimination of the Company's men's business (see note (4) below). As a result, the Company recognized pre-tax restructuring credits of $2,834,000 relating to the closing of the distribution center and $2,096,000 relating to the elimination of the men's business. In addition, the Company recognized a pre-tax restructuring charge of $1,459,000 in Fiscal 2000 in conjunction with the consolidation of the Modern Woman chain of stores into the Catherine's Stores chain. (See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations; Results of Operations; Restructuring Charge (Credit)" and "Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Restructuring Charge (Credit)" below.) (4) During Fiscal 1999, the Company's Board of Directors approved a restructuring plan in conjunction with the elimination of the Company's men's business, which resulted in a pre-tax charge of $34,000,000. In addition, the Company's Board of Directors approved a restructuring plan in conjunction with the decision to consolidate the Company's distribution center operations, which resulted in a pre-tax charge of $20,246,000. (See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations; Results of Operations; Restructuring Charge (Credit)" and "Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Restructuring Charge (Credit)" below.) (5) During Fiscal 2000, the Company received a stock distribution from one of its mutual insurance carriers in connection with the carrier's conversion to a publicly held corporation (demutualization). The Company recorded the distribution at its fair value and recognized the resulting non-recurring gain in income from continuing operations (see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations; Results of Operations; Non-recurring Gain from Demutualization of Insurance Company" and "Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Non-recurring Gain from Demutualization of Insurance Company" below). (6) During the fiscal year ended January 31, 1998, the Company adopted SFAS No. 125, which included the valuing of an "I/O Strip" consisting of excess finance charges and past-due fees over the sum of the return paid to certificate holders and credit losses. As a result, the Company eliminated its loss reserve related to its retained interest and related recourse provisions of its credit card certificates, and recognized a non-recurring gain of $13,018,000. (See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations; Results of Operations; Non-recurring Gain from Asset Securitization" and "Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Asset Securitization" below). (7) The Company changed its method of accounting for sales returns and layaway sales in accordance with the provisions of Securities and Exchange Commission Staff Accounting Bulletin No. 101 ("SAB 101") effective as of January 30, 2000. The cumulative effect of the change as of January 30, 2000 was a reduction in income of $540,000, net of a tax benefit of $334,000. (8) On October 2, 1995, the Company's Board of Directors announced an indefinite suspension of dividends on the Company's Common Stock. In addition, the Company's revolving credit facility requires that the Company not pay dividends on its Common Stock. (See "Item 5. Market for the Registrant's Common Equity and Related Stockholders' Matters" above). Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and the notes thereto included under "Item 8. Financial Statements and Supplementary Data" of this Form 10-K. FORWARD-LOOKING STATEMENTS This Management's Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking statements concerning the Company's operations, performance, and financial condition. In particular, it includes forward-looking statements regarding the Company's growth strategy, future performance following its acquisitions, joint ventures, restructurings, and expense reduction initiatives, and the expected benefits thereof. In addition, the information contained herein includes certain forward-looking statements regarding earnings, sales performance, store openings and closings, cost savings, capital requirements, the Company's exposure to fluctuations in interest rates, and other matters. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements. Such risks and uncertainties may include, but are not limited to, (i) rapid changes in, or miscalculation of, fashion trends, (ii) extreme or unseasonable weather conditions, (iii) economic downturns, a weakness in overall consumer demand, inflation, and cyclical variations in the retail market for women's fashion apparel, (iv) the risks attendant to the sourcing of the Company's merchandise needs abroad, including exchange rate fluctuations, political instability, trade sanctions or restrictions, changes in quota and duty regulations, delays in shipping, or increased costs of transportation, (v) the interruption of merchandise flow to the Company's retail stores from its centralized distribution facilities, (vi) competitive pressures, and (vii) failure to realize merger-related synergies. These, and other risks and uncertainties are detailed further in this Item 7, in "Part I, Item 1 - Business: Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995," and in the Company's reports filed with the Securities and Exchange Commission from time to time. RESULTS OF OPERATIONS In January 2000, the Company acquired Catherines Stores Corporation ("Catherine's Stores"). Catherine's Stores operated 436 retail apparel stores in 40 states and the District of Columbia, specializing in large- size women's apparel. In August 1999, the Company acquired Modern Woman Holdings, Inc. ("Modern Woman"). Modern Woman operated 136 retail apparel stores in 24 states, specializing in large-size women's apparel. The Company has converted the Modern Woman stores into Catherine's Stores. The acquisitions have been accounted for under the purchase method of accounting, and the results of operations of the acquired companies are included in the Company's results of operations from their dates of acquisition. Prior-period results have not been restated. Assets acquired and liabilities assumed have been recorded at their estimated fair values. In connection with the Catherine's Stores acquisition, the purchase price exceeded the fair value of identifiable net assets acquired. The excess purchase price, approximately $97.7 million, has been accounted for as goodwill, and is being amortized over a 20-year period. The results of operations for the fiscal year ended February 3, 2001 ("Fiscal 2001") include $4.9 million of goodwill amortization. Financial Summary The following table sets forth certain financial data expressed as a percentage of net sales and on a comparative basis:
Percentage Increase (Decrease) Percentage of Net Sales From Prior Year Fiscal Fiscal Fiscal Fiscal Fiscal 2001 2000 1999 2001-2000 2000-1999 ---- ---- ---- --------- --------- Net sales.............. 100.0% 100.0% 100.0% 34.3% 15.6% Other income........... 0.6 0.8 1.5 12.2 (43.8) Cost of goods sold, buying, and occupancy 70.6 71.4 74.5 32.7 10.9 Selling, general, and administrative....... 23.9 23.6 23.8 35.8 14.7 Non-recurring gain from demutualization of insurance company.... -- 0.6 -- ** ** Restructuring charge (credit)............. -- (0.3) 5.2 ** (106.4) Amortization of goodwill............. 0.3 -- -- ** -- Interest expense....... 0.5 0.6 1.0 21.7 (27.3) Income tax provision (benefit)............ 2.1 2.2 (1.0) 22.9 ** Income (loss) before extraordinary item and cumulative effect of accounting change. 3.2 3.7 (1.9) 17.8 ** Gain on early retirement of debt, net of taxes......... -- 0.1 -- ** ** Net income (loss)...... 3.2 3.8 (1.9) 13.4 **
- -------------------- [FN] ** Not meaningful Net Sales The following table sets forth certain information related to the Company's net sales:
Year Ended Year Ended February 3, 2001 January 29, 2000 ---------------- ---------------- Fiscal Fourth Fiscal Fourth Year Quarter Year Quarter ---- ------- ---- ------- Increase (decrease) in comparable Fashion Bug store sales (1)(2)..... 0.5% (0.9%) 8.7% 11.1% Sales from new Fashion Bug stores as a percentage of total prior-period sales (2).......................... 7.6 7.1 5.2 7.3 Increase in sales from Catherine's and Modern Woman stores as a percentage of total prior-period sales (2)(3)....................... 27.6 14.2 5.6 13.8 Prior-period sales from closed Fashion Bug stores as a percentage of total prior-period sales (2).... (3.2) (3.1) (3.6) (3.7) Increase in sales from additional week in Fiscal 2001................ 2.0 7.5 -- -- Increase in total sales.............. 34.3% 24.8% 15.6% 28.0%
- -------------------- [FN] (1) Sales from stores in operation during both periods. Stores are added to the comparable store base after 13 full months of operation. (2) Based on comparable 52-week fiscal years and 13-week fiscal quarters. (3) Sales from Catherine's Stores acquired in January 2000 and Modern Woman stores acquired in August 1999. Net sales for the fiscal year ended February 3, 2001 ("Fiscal 2001") totaled $1,607.1 million as compared to net sales of $1,196.5 million for the fiscal year ended January 29, 2000 ("Fiscal 2000") and net sales of $1,035.2 million for the fiscal year ended January 30, 1999 ("Fiscal 1999"). Net sales for Fiscal 2001 include $394.0 million of sales from Catherine's Stores, including Modern Woman stores, which have been converted into Catherine's Stores. Net sales for Fiscal 2000 include $58.2 million of sales from Catherine's and Modern Woman stores. Net sales for the fourth quarter of Fiscal 2001 totaled $434.7 million as compared to net sales of $348.4 million for the fourth quarter of Fiscal 2000 and net sales of $272.2 million for the fourth quarter of Fiscal 1999. Net sales for the fourth quarter of Fiscal 2001 include $93.9 million of sales from Catherine's and Modern Woman stores. Net sales for the fourth quarter of Fiscal 2000 include $37.6 million of sales from Catherine's and Modern Woman stores. The Company adopted the provisions of Securities and Exchange Commission Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements," effective as of the beginning of Fiscal 2001. As a result of the adoption of SAB 101, the Company established a reserve for estimated future sales returns based on an analysis of actual returns received subsequent to the end of each fiscal period, and deferred recognition of layaway sales to the date of delivery. The effect of the adoption of SAB 101 on net sales for Fiscal 2001 was immaterial. Due to the seasonal nature of the Company's business, the pro forma effect of adoption of SAB 101 on net sales for the fourth quarter of Fiscal 2000 would have been an increase of $2.0 million. The pro forma effect of the adoption of SAB 101 on net sales for Fiscal 2000 would have been immaterial. During Fiscal 2001, increases in Fashion Bug comparable store sales of junior and plus-size sportswear, coats, intimate apparel, and footwear were offset by decreases in sales of dresses, accessories, and girls. In January 2001, the Company announced plans to support growth in large-size apparel and eliminate girls apparel from Fashion Bug stores, effective at the end of the 2000-2001 winter season. Sales of Fashion Bug girls apparel were approximately $38.0 million during Fiscal 2001. Store space and inventory previously committed to girls will primarily be redirected to the expansion of the large-size apparel offerings. During Fiscal 2000, increases in comparable Fashion Bug store sales were achieved in sportswear, coats, intimate apparel, accessories, and girls, as customers responded favorably to the Company's merchandise offerings throughout the year. The number of retail stores in operation was 1,754 at the end of Fiscal 2001 and 1,740 at the end of Fiscal 2000 (including Catherine's and Modern Woman stores), and 1,135 at the end of Fiscal 1999. Other Income Other income increased 12.2% in Fiscal 2001 as compared to Fiscal 2000, primarily as a result of a decrease in net realized losses on sales of available-for-sale securities in Fiscal 2001 as compared to Fiscal 2000. During the second half of Fiscal 2000, the Company incurred realized losses from sales of available-for-sale securities to finance the Catherine's Stores and Modern Woman acquisitions. Interest income decreased as a result of reduced levels of available-for-sale securities during Fiscal 2001 as compared to Fiscal 2000. Other income expressed as a percentage of sales decreased 0.7% in Fiscal 2000 as compared to Fiscal 1999, primarily as a result of a decrease in interest income from the Company's available- for-sale securities and realized losses from sales of available-for-sale securities. The decrease in interest income and the realized losses on sales of available-for-sale securities during Fiscal 2000 were a result of the sales of securities during the second half of Fiscal 2000 to finance the Catherine's Stores and Modern Woman acquisitions. In addition to the sales of available-for-sale securities for the acquisitions of Modern Woman and Catherine's Stores, the Company sold available-for-sale securities to finance the repurchase of portions of the Company's convertible notes and Common Stock during Fiscal 1999 and the first half of Fiscal 2000. The decrease in other income resulting from these sales was partially offset by the decrease in interest expense that resulted from the repurchases of the convertible notes. Cost of Goods Sold, Buying, and Occupancy Cost of goods sold, buying, and occupancy expenses, expressed as a percentage of sales, decreased 0.8% in Fiscal 2001 as compared to Fiscal 2000. Cost of goods sold as a percentage of sales decreased 1.2% in Fiscal 2001 as compared to Fiscal 2000. The improvement in merchandise margins was primarily a result of the effect of relatively higher gross margins for the Company's Catherine's Stores. Cost of goods sold for the Company's Fashion Bug stores decreased 0.2% as a percentage of sales in Fiscal 2001 as compared to Fiscal 2000. Cost of goods sold includes merchandise costs, net of discounts and allowances, freight, and inventory shrinkage. Net merchandise costs and freight are capitalized as inventory costs. Buying and occupancy expenses, expressed as a percentage of sales, increased 0.4% in Fiscal 2001 as compared to Fiscal 2000. The increase in buying and occupancy expenses was primarily a result of increased utilities expenses and relatively higher occupancy expenses for new and relocated stores as compared to the Company's existing stores. Buying expenses include payroll, payroll related costs, and operating expenses for the Company's buying departments and warehouses. Occupancy expenses include rent, real estate taxes, insurance, common area maintenance, utilities, maintenance, and depreciation for the Company's stores and warehouse facilities and equipment. Buying and occupancy costs are treated as period costs and are not capitalized as part of inventory. Cost of goods sold, buying, and occupancy expenses, expressed as a percentage of sales, decreased 0.5% in the fourth quarter of Fiscal 2001 as compared to the corresponding period of Fiscal 2000. Cost of goods sold, as a percentage of sales, decreased 1.5% in the fourth quarter of Fiscal 2001 as compared to the fourth quarter of Fiscal 2000. The improvement in merchandise margins was primarily a result of the effect of relatively higher gross margins for the Company's Catherine's Stores, and, to a lesser extent, an improvement in gross margins at the Company's Fashion Bug stores. Cost of goods sold for the Fashion Bug stores, as a percentage of sales, decreased 0.3% in the fourth quarter of Fiscal 2001 as compared to the fourth quarter of Fiscal 2000. Buying and occupancy expenses, expressed as a percentage of sales, increased 1.0% in the fourth quarter of Fiscal 2001 as compared to the fourth quarter of Fiscal 2000. The increase in buying and occupancy expenses was primarily a result of increased utilities expenses and relatively higher occupancy expenses for new and relocated stores as compared to the Company's existing stores. Cost of goods sold, buying, and occupancy expenses, expressed as a percentage of sales, decreased 3.1% in Fiscal 2000 as compared to Fiscal 1999. Cost of goods sold as a percentage of sales decreased 1.7% in Fiscal 2000 as compared to Fiscal 1999. The improvement in merchandise margins was primarily a result of reduced levels of markdowns and reductions in store-wide promotions in Fiscal 2000. Merchandise margins also benefited from a reduction in inventory shrinkage costs. Buying and occupancy expenses as a percentage of sales decreased 1.4% in Fiscal 2000 as compared to the prior year, primarily as a result of cost savings from consolidation of the Company's distribution centers and the leveraging effect of increased sales volume on relatively fixed store occupancy and buying expenses. Cost of goods sold, buying, and occupancy expenses for Fiscal 2000 include the results of Catherine's Stores and Modern Woman from the dates of their acquisitions. Cost of goods sold, buying, and occupancy expenses, expressed as a percentage of sales, decreased 2.6% in the fourth quarter of Fiscal 2000 as compared to the corresponding period of Fiscal 1999. Cost of goods sold as a percentage of sales decreased 1.5% in the fourth quarter of Fiscal 2000 as compared to the fourth quarter of Fiscal 1999. This decrease was primarily attributable to improvements in gross margins as a result of reduced levels of markdowns as compared to the prior year and a reduction in inventory shrinkage costs. Buying and occupancy expenses, expressed as a percentage of sales, decreased 1.1% in the fourth quarter of Fiscal 2000 as compared to the fourth quarter of Fiscal 1999. The decrease was a result of the leveraging effect of increased sales volume on relatively fixed store occupancy and buying expenses. Cost of goods sold, buying, and occupancy expenses for the fourth quarter of Fiscal 2000 include the results of Catherine's Stores and Modern Woman from the dates of their respective acquisitions. Selling, General, and Administrative Selling, general, and administrative expenses expressed as a percentage of sales increased 0.3% in Fiscal 2001 as compared to Fiscal 2000. The increase reflects relatively higher expenses for Catherine's Stores as a percentage of sales. Selling, general, and administrative expenses for the Fashion Bug stores were relatively unchanged as a percentage of sales. Selling expenses were constant as a percentage of sales. Increases in payroll costs were offset by lower marketing expenses as a percentage of sales and a reduction in the cost of the Company's proprietary credit card program. General and administrative expenses increased 0.3% as a percentage of sales in Fiscal 2001, primarily as a result of the lack of sales leverage and relatively higher expenses for Catherine's Stores, which have been partially offset by improvements arising from the integration and consolidation of Catherine's Stores. Selling, general, and administrative expenses for the fourth quarter of Fiscal 2001 increased 0.8% as a percentage of sales as compared to the fourth quarter of Fiscal 2000. Improvements in selling expense as a result of lower marketing expenses in relation to sales and a reduction in the cost of the Company's proprietary credit card program were offset by an increase in general and administrative expenses, primarily as a result of relatively higher expenses for Catherine's Stores as a percentage of sales. Selling, general, and administrative expenses expressed as a percentage of sales decreased 0.2% in Fiscal 2000 as compared to Fiscal 1999. This decrease was primarily attributable to the leveraging effect of the increase in sales volume on relatively fixed general and administrative expenses. Selling expenses were constant as a percentage of sales. Increases in payroll costs, store incentive programs, and certain volume- related expenses, and inclusion of expenses incurred by Modern Woman, were offset by the leveraging effect of increased sales volume. Selling, general, and administrative expenses for the fourth quarter of Fiscal 2000 increased 0.2% as a percentage of sales as compared to the fourth quarter of Fiscal 1999, primarily as a result of the inclusion of expenses incurred by Modern Woman and Catherine's Stores. Restructuring Charge (Credit) STORE RESTRUCTURING AND ELIMINATION OF MEN'S MERCHANDISE FROM THE COMPANY'S FASHION BUG STORES On March 5, 1998, the Company's Board of Directors approved a restructuring plan that resulted in a pre-tax charge of $34,000,000. The plan was approved in conjunction with the decision to eliminate men's merchandise from the Company's Fashion Bug stores. To date, 72 stores have been closed in connection with the plan and 100 stores have been downsized. Elimination of the men's merchandise from the stores was completed in October 1998, the balance of the men's inventory has been sold, and the selling space used for men's merchandise has been re-merchandised. In Fiscal 2000, the Company determined that 21 of the stores originally included in the plan would remain open as a result of negotiations with landlords and changes in economic conditions. As a result, the Company reversed reserves related to these stores and recognized a pre-tax restructuring credit of $2,096,000. As of February 3, 2001, this restructuring plan has been completed, and there are no remaining restructure accruals relating to this plan. The restructuring charge included a $10,000,000 write-off of the carrying value of fixtures and improvements in the stores to be reduced in size or closed. The fixtures and improvements had no alternative use or salvage value, and were expected to be scrapped at the time of the closing or downsizing of the stores. The restructuring charge also included accruals for anticipated payments to landlords for the early termination of existing store leases of $19,700,000, severance payments of $320,000, costs to remove store signs and entrances of $3,300,000, costs of supplies to be scrapped of $400,000, and legal and architectural fees of $280,000. The accrual for severance payments was for 650 store employees expected to be terminated as a result of the store closings. The number of employees actually terminated was reduced to 590 as a result of the 21 stores that remained open, as discussed above, and the excess severance accrual was reversed as part of the restructuring credit of $2,096,000 recognized in Fiscal 2000. During Fiscal 2001, the Company closed 1 store and completed the downsizing of 28 stores in connection with the plan. DISTRIBUTION CENTER RESTRUCTURING On December 10, 1998, the Company's Board of Directors approved a plan to close the Company's Bensalem, Pennsylvania distribution center and sell the facility. The plan was approved in conjunction with the decision to consolidate the Company's distribution center operations in the Company's Greencastle, Indiana distribution center. The plan resulted in a pre-tax restructuring charge of $20,246,000 during Fiscal 1999. The restructuring charge included a $17,969,000 write-down of the cost of the Bensalem facilities from a carrying value of $23,631,000 to a net realizable value of $5,662,000, based on an independent appraisal. The restructuring charge also included an accrual of $1,556,000 for severance costs resulting from the termination of 90 warehouse and distribution personnel and 11 management employees. In addition, the restructuring charge included an accrual of $721,000 for incremental warehouse handling costs, outplacement services for terminated employees, legal fees related to the sale of the facility, and other non-recurring costs relating to the closure. The Bensalem distribution center closed on December 10, 1998, and the Company completed the sale of the Bensalem facility during Fiscal 2000. Upon completion of the sale of the facility, the Company recognized a pre- tax restructuring credit of $2,834,000 in Fiscal 2000, which primarily represented sales proceeds in excess of the estimated net realizable value of the Bensalem facility. As of February 3, 2001, this restructuring plan has been completed, and there are no remaining restructure accruals relating to this plan. CLOSING OF MODERN WOMAN STORES During the fourth quarter of Fiscal 2000, the Company recorded a restructuring charge of $1,459,000 in connection with the Company's acquisitions of Modern Woman and Catherine's Stores. At the time of the Catherine's Stores acquisition, the Company planned to consolidate Modern Woman stores into the Catherine's Stores division. The restructuring charge was primarily for lease termination costs related to the closing of 11 Modern Woman stores that geographically overlapped Catherine's Stores. During Fiscal 2001, the Company closed 10 of the 11 stores, and lease termination costs of $1,086,000 related to the closed stores were paid. As of February 3, 2001, $373,000 of accrued restructuring charges related to the remaining store were unpaid. Non-recurring Gain From Demutualization of Insurance Company During Fiscal 2000, the Company received a stock distribution from one of its mutual insurance carriers in connection with the carrier's conversion to a publicly-held corporation (demutualization). In accordance with the consensus reached in Emerging Issues Task Force Issue No. 99-4, "Accounting for Stock Received from the Demutualization of A Mutual Insurance Company," the Company recorded the distribution at its fair value and recognized the resulting non-recurring gain in income from continuing operations, and subsequently sold the securities received. Interest Expense Interest expense increased in Fiscal 2001 as compared to Fiscal 2000 as a result of an increase in long-term lease financing. During Fiscal 2001, the Company acquired $14.9 million of point-of-sale equipment for its stores under long-term capital leases. Interest expense decreased in Fiscal 2000 as compared to Fiscal 1999 as a result of the Company's repurchases during Fiscal 2000 of $23.3 million aggregate principal amount of its 7.5% Convertible Subordinated Notes due 2006. Income Tax Provision (Benefit) The income tax provision for Fiscal 2001 was $33.0 million, resulting in a 39% effective tax rate, as compared to an income tax provision for Fiscal 2000 of $26.9 million, resulting in a 38% effective tax rate. Included in the Fiscal 2001 and Fiscal 2000 tax provisions are $3.5 million and $2.0 million, respectively, related to one of the Company's employee insurance programs. The increase in the effective tax rate from Fiscal 2000 to Fiscal 2001 is primarily a result of the non-deductibility for tax purposes of goodwill related to the Catherine's Stores acquisition. The income tax benefit for Fiscal 1999 was $10.9 million, resulting in a (35%) effective tax rate. The change in the effective tax rate from Fiscal 1999 to Fiscal 2000 is primarily attributable to the $2.0 million provision in Fiscal 2000 related to one of the Company's employee insurance programs. Gain on Early Retirement of Debt During Fiscal 2000, the Company repurchased $23.3 million aggregate principal amount of its 7.5% Convertible Subordinated Notes due 2006 at a total cost of $21.0 million. The notes had an aggregate carrying value of $22.9 million as of the repurchase dates. The repurchases resulted in an extraordinary gain of $1.2 million, net of income taxes of $0.7 million. Performance Analysis The following ratios measure the Company's overall performance as shown by the return on average stockholders' equity and return on average total assets.
Fiscal Fiscal Fiscal 2001 2000 1999 ---- ---- ---- Including restructuring charge (credit) and non-recurring items: Net return on average stockholders' equity.. 11.0% 11.0% (5.0)% Net return on average total assets.......... 6.2 6.1 (2.9) Excluding restructuring charge (credit) and non-recurring items: Net return on average stockholders' equity.. 10.6 8.6 3.7 Net return on average total assets.......... 6.2 5.3 2.2
FINANCIAL CONDITION Liquidity and Capital Resources The Company's primary sources of working capital are cash flow from operations, its proprietary credit card receivables securitization agreements, its investment portfolio, and its credit facilities described below. The following table highlights certain information related to the Company's liquidity and capital resources:
Fiscal Fiscal Fiscal (dollars in thousands) 2001 2000 1999 ---- ---- ---- Working capital................ $208,389 $161,376 $192,274 Cash and cash equivalents...... 56,544 34,299 43,789 Available-for-sale securities.. 125,278 115,829 246,625 Cash provided by operating activities......... 93,269 57,894 63,371 Current ratio.................. 1.9 1.7 2.1 Long-term debt to equity ratio. 23.0% 24.1% 31.2%
The Company's cash flow from operations increased $35.4 million in Fiscal 2001 as compared to Fiscal 2000. Earnings before interest, taxes, depreciation, and amortization ("EBITDA") and excluding non-recurring gains increased by $39.7 million from Fiscal 2000 to Fiscal 2001. This increase was primarily attributable to the acquisitions of Catherine's Stores and Modern Woman in Fiscal 2000. EBITDA excluding non-recurring gains for Fashion Bug stores increased by $1.7 million from Fiscal 2000 to Fiscal 2001. A reduced level of growth in inventories from Fiscal 2000 to Fiscal 2001 was substantially offset by increased payments of prepaid and accrued expenses. The Company's cash flow from operations decreased $5.5 million in Fiscal 2000 as compared to Fiscal 1999. The decrease resulted primarily from payments related to restructurings (see "Results of Operations; Restructuring Charge (Credit)" above) and an increase in inventories, net of accounts payable, partially offset by an increase in net income. On August 2, 1999, the Company completed the acquisition of 100% of the outstanding stock of Modern Woman Holdings, Inc. ("Modern Woman") for $8.7 million, net of cash acquired of $1.1 million. On January 7, 2000, the Company completed the acquisition of 100% of the outstanding stock of Catherines Stores Corporation ("Catherine's Stores") for $21 per share. The total cost of the acquisition was approximately $136.6 million, net of cash acquired of $18.3 million. The Company also assumed $11.2 million of short-term and long-term debt and capital lease obligations. These acquisitions were accounted for under the purchase method of accounting and were funded from the Company's existing cash and available-for-sale securities. Assets and liabilities of the acquired companies are included in the Company's consolidated balance sheets at February 3, 2001 and January 29, 2000. In July 1996, the Company completed a public offering of $138 million aggregate principal amount of 7.5% Convertible Subordinated Notes due 2006 (the "Notes"). The Notes are convertible into shares of the Company's Common Stock at a conversion price of $7.46 per share. The Notes are redeemable, at the Company's option, at 103.125% of principal through July 14, 2001 and at declining prices thereafter, decreasing to 100% on or after July 15, 2005. Holders of the Notes may require the Company to repurchase some or all of the Notes under certain circumstances involving a change in control of the Company. There is no sinking fund for the Notes. During Fiscal 1999, the Company repurchased $18.6 million aggregate principal amount of the Notes, which had a net carrying value of $18.3 million as of the date of purchase, at a total cost of $17.8 million. During Fiscal 2000, the Company repurchased an additional $23.3 million aggregate principal amount of the Notes, which had a net carrying value of $22.9 million as of the date of purchase, at a total cost of $21.0 million. The Company will continue to evaluate market conditions to determine if additional Notes will be repurchased during Fiscal 2002. As part of the acquisition of Catherine's Stores, the Company assumed a 7.5% Mortgage Note (the "Mortgage Note") and certain capital lease obligations. The mortgage financing agreement provides for a $6.9 million mortgage facility with a seven-year term and annual payments based on a 20- year amortization period. The Mortgage Note is secured by land and buildings at the Memphis, Tennessee office of Catherine's Stores. The capital leases are for data processing and point-of-sale ("POS") equipment. At the end of the initial lease term, the Company has the option of purchasing the equipment at fair market value (or at $1 in the case of the POS equipment), renewing the leases, or returning the equipment to the lessor. During Fiscal 2001, pursuant to a program to replace its existing POS equipment, the Company acquired $14.9 million of POS equipment for its Fashion Bug and Catherine's Stores under capital leases. These leases generally have an initial lease term of 60 months and contain a bargain purchase option. The Company anticipates acquiring additional POS equipment at a total cost of approximately $15.0 million over the next 12- 18 months which will be financed through additional capital leases. The Company has debt maturity payments of approximately $5.0 million in Fiscal 2002, which are primarily for amounts due under the Company's capital lease obligations and the Catherine's Stores Mortgage Note. The Company has an agreement with a commercial finance company to provide a revolving credit facility with a maximum availability of $150 million, subject to limitations based upon eligible inventory. The facility, which expires June 30, 2004, enables the Company to issue letters of credit for overseas purchases of merchandise and provides for seasonal cash borrowings, if necessary. The facility is secured by merchandise inventory, furniture and fixtures at the Fashion Bug retail stores, and certain other Company assets. The interest rate on borrowings is 0.5% above the Prime rate. There is a fee of .25% on the unused portion of the first $105 million of the facility, and an annual servicing fee of $100 thousand. As of the end of Fiscal 2001, the availability under the facility was approximately $131.4 million, against which the Company had outstanding letters of credit of $48.4 million. There were no cash borrowings outstanding under the agreement as of the end of Fiscal 2001. The agreement requires that, among other things, the Company maintain a minimum net worth of $350 million and not pay dividends on its Common Stock. As a result of the Catherine's acquisition, the Company has an agreement with a bank to provide a revolving credit facility with a maximum availability of $20 million. The facility, which expires June 29, 2001, enables the Company to issue letters of credit for overseas purchases of merchandise and provides for seasonal cash borrowings, if necessary, by utilizing a $5 million swingline credit facility. The agreement is secured by inventory, general intangibles, patents, trademarks, and proceeds of the foregoing. The interest rate on borrowings is equal to the agent bank's prime rate. At February 3, 2001, the combined availability under the working capital and swingline facilities was $20 million, against which the Company had outstanding letters of credit of $284 thousand. The Company is currently negotiating the extension of this agreement. As a result of the acquisition of Modern Woman, the Company also has an agreement with a bank to provide a revolving credit facility with a maximum availability of $10 million. As of February 3, 2001, $5 million was available under this agreement, against which the Company had outstanding letters of credit of $139 thousand. In exchange for the bank's release of its security interest in all of the assets of Modern Woman, the Company pledged $5 million of available-for-sale securities as security for the line of credit. The Company's Board of Directors has approved the repurchase of up to 20,000,000 shares of the Company's Common Stock. Shares repurchased will be held as treasury stock available for use under the Company's employee benefits program or for other corporate purposes. As of the end of Fiscal 2001, the Company has repurchased an aggregate total of 9,105,000 shares at an aggregate cost of $41.5 million. The Company will continue to evaluate market conditions to determine if additional shares will be repurchased during Fiscal 2002. The Company has formed a trust to which the Company's credit card bank has transferred, at face value, its interest in receivables created under the Company's Fashion Bug proprietary credit card program. The Company, together with the trust, has entered into various agreements whereby it can sell, on a revolving basis, interests in these receivables for a specified term. When the revolving period terminates, an amortization period begins whereby the principal payments are made to the party with whom the trust has entered into the securitization agreement. If such securitization agreements were to become unavailable to the Company or prohibitively expensive, this could have a material adverse effect on the Company's results of operations and financial position. The Company receives loan servicing proceeds from the Charming Shoppes Master Trust representing income from credit card finance charge income and fees in excess of interest paid to certificate holders, credit losses, and other expenses. As a result, although the Company's securitization agreements provide for the Company to continue to service the credit card receivables and control credit policy, a significant decrease in loan servicing proceeds could have a material adverse effect on the Company's results of operations. A significant decrease in loan servicing proceeds could result from increases in interest paid to certificate holders, credit losses, or other expenses. The Company securitized $437.7 million and $398.6 million of credit card receivables in Fiscal 2001 and Fiscal 2000, respectively, and had $301.7 million of credit card receivables under securitizations outstanding as of February 3, 2001. The Company had retained interests in its securitizations of $47.7 million as of the end of Fiscal 2001, which were generally subordinated in right of payment to certificates issued by the trust to third-party investors. The Company's obligation to repurchase receivables sold to the trust is limited to those receivables that, at the time of their transfer, fail to meet the trust's eligibility standards under normal representations and warranties. To-date, the amount of receivables repurchased pursuant to this obligation has been immaterial (see "Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Asset Securitization" below). During Fiscal 2000, the Company, through the trust, completed an offering of $150 million of asset-backed certificates with a five-year term to replace its five-year facility that matured in April 1999. These securitization agreements improve the overall liquidity of the Company by providing short-term sources of funding. The agreements provide for the Company to continue to service the credit card receivables and control credit policies. This control allows the Company to fund continued credit card receivable growth and to provide the appropriate customer service and collection activities. Accordingly, its relationship with its credit card customers is not affected by these agreements. Charming Shoppes Receivables Corp. and Charming Shoppes Street, Inc., wholly owned indirect subsidiaries of the Company, are separate special purpose corporations. At February 3, 2001, Charming Shoppes Receivables Corp. had $36.8 million of Charming Shoppes Master Trust Certificates (included in the $47.7 million of retained interests, discussed above), and Charming Shoppes Street, Inc. had $1.1 million of cash. These assets will be available first and foremost to satisfy the claims of the respective creditors of these separate corporate entities, including certain claims of investors in the Charming Shoppes Master Trust. The providers of the credit enhancements and trust investors have no other recourse to the Company. The Company does not receive collateral from any party to the securitization, and the Company does not have any risk of counter-party non-performance. The Company has a non-recourse agreement to permit a third party to provide an accounts receivable proprietary credit card sales funding program for its Catherine's Stores, which expires in January 2005. Under this agreement, the third party reimburses the Company daily with respect to the proprietary credit card sales generated by the Catherine's Stores credit card accounts. The agreement may require the Company to repurchase receivables from the third party under certain conditions relating to a change in control of the Company. Net proceeds received from sales of Catherine's Stores receivables for Fiscal 2001 and for the month of January 2000 (the period subsequent to the Company's acquisition of Catherine's Stores), were approximately $121.1 million and $6.6 million, respectively. The net balance of accounts receivable held by the third party was approximately $99.6 million and $93.6 million at February 3, 2001 and January 29, 2000, respectively. Capital expenditures amounted to $57.9 million, $39.2 million, and $32.4 million in Fiscal 2001, 2000, and 1999, respectively. These expenditures were primarily for the construction, remodeling, and fixturing of new and existing retail stores, loss-prevention equipment, and systems technology. Fiscal 2000 expenditures included approximately $6.1 million for expansion of the Company's Greencastle, Indiana distribution center. During Fiscal 2002, the Company anticipates capital expenditures of approximately $60-$65 million. These expenditures will primarily be for construction and fixturing of new stores, remodeling and fixturing of existing retail stores, investments in management information systems technology, and improvements to the Company's corporate offices and distribution centers. In addition to these capital expenditures, the Company anticipates entering into additional capital leases for new point- of-sale equipment. The total commitment under capital leases, including leases already incurred, is expected to be approximately $30 million. Each of the capital leases is expected to have a five-year term. It is anticipated that the funds required for capital expenditures will be financed principally through internally generated funds. The Company plans to open approximately 110-120 new stores, remodel approximately 45-50 stores, and relocate approximately 75-80 stores during Fiscal 2002. The following table sets forth information with respect to store activity for Fiscal 2001:
Fashion Catherine's Modern Bug Stores Woman Total --- ------ ----- ----- Stores at January 29, 2000...... 1,185 433 122 1,740 ----- --- --- ----- Stores opened................... 94 11 0 105 Stores converted................ 0 87 (87) 0 Stores closed................... (49) (7) (35) (91) ----- --- --- ----- Net change in stores............ 45 91 (122) 14 ----- --- --- ----- Stores at February 3, 2001...... 1,230 524 0 1,754 ===== === === ===== Stores relocated during period.. 18 9 0 27 Stores remodeled during period.. 69 11 0 80
During Fiscal 1999, the Company recorded total restructuring charges of $54.2 million. During Fiscal 2000, the Company recognized credits of $4.9 million for revisions of the estimated charges recorded in 1999, and recognized a restructuring charge of $1.4 million. All of these restructuring costs had been paid or incurred as of February 3, 2001, except for $373 thousand of costs which are expected to be incurred in Fiscal 2002. See "Results of Operations: Restructuring Charge (Credit)" above, and "Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements: Restructuring Charge (Credit)" below. On October 26, 2000, the Company announced the signing of a joint venture agreement with Monsoon Plc. Monsoon Plc operates 321 stores, primarily in the United Kingdom, offering women's clothing and accessories under the "MONSOON" and "ACCESSORIZE" brand names. The joint venture will be a separate consolidated operating unit of the Company. During the first full year of operation, the joint venture plans to open as many as 20 "MONSOON" and/or "ACCESSORIZE" stores in the United States. The Company invested $4.0 million, or 80% of the initial capital in the joint venture, during Fiscal 2001 and plans to invest an additional $4.0 million over the next three years. The joint venture did not have a material impact on the Company's earnings for Fiscal 2001 and is not expected to have a material impact on earnings for Fiscal 2002. The Company has not paid cash dividends since Fiscal 1996. On October 2, 1995, the Company's Board of Directors announced an indefinite suspension of dividends on the Company's Common Stock. In addition, the Company's $150 million revolving credit facility (discussed above) requires that the Company not pay dividends on its Common Stock during the term of such agreement. The Company believes that cash flow from operations, its proprietary credit card receivables securitization agreements, its investment portfolio, and its revolving credit facilities are sufficient to support current operations. MARKET RISK The Company manages its Fashion Bug proprietary credit card program through various operating entities that are wholly owned by the Company. The primary activity of these entities is to service the proprietary credit card portfolio, the balances of which are sold under a credit card securitization program. Under the securitization program, the Company can be exposed to fluctuations in interest rates to the extent that interest rates charged to its customers vary from the rates paid on certificates issued by the trust. Until November 2000, the credit card program billed finance charges based on a fixed rate. As of November 2000, finance charges on all accounts are billed using a floating rate index (the Prime lending rate), subject to a floor and limited by legal maximums. The floating rate index on all of the certificates is either one-month LIBOR or the commercial paper rate, depending on the issue. Consequently, the Company has reduced its exposure to fluctuations in interest rates. However, the Company has exposure in the movement of basis risk between the floating rate index on the certificates and the Prime rate. As of February 3, 2001, the floating-rate finance charge rate was below the contractual floor rate, thus exposing the Company to a portion of interest-rate risk. To the extent that short-term interest rates were to increase by one percentage point by the end of Fiscal 2002, an increase of approximately $500 thousand in selling, general, and administrative expenses would result. In Fiscal 2000, the Company had entered into an interest rate swap, with a notional value of $50 million, that limited the Company's exposure to rising interest rates should interest rates increase to a rate above the agreement's specified rate of 6.51%. The swap agreement required the Company to pledge certain assets if the market value of the interest rate swap fell below an amount set forth in the agreement. As of January 29, 2000, there were no pledged amounts required under the terms of the agreement. During Fiscal 2001, the Company terminated the swap agreement, and, in Fiscal 2002, the deferred loss related to this termination will be recognized in comprehensive income and amortized to selling, general, and administrative expenses over 44 months (the remaining life of the original swap period) in accordance with SFAS No. 133. The Company is not subject to material foreign exchange risk, as the Company's foreign transactions are primarily U. S. Dollar-denominated and the Company's foreign operations do not constitute a material part of its business. Item 7a. Quantitative and Qualitative Disclosures About Market Risk See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Market Risk," above. Item 8. Financial Statements and Supplementary Data REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Stockholders and Board of Directors Charming Shoppes, Inc. We have audited the accompanying consolidated balance sheets of Charming Shoppes, Inc. and subsidiaries as of February 3, 2001 and January 29, 2000, and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity, and cash flows for each of the three fiscal years in the period ended February 3, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Charming Shoppes, Inc. and subsidiaries at February 3, 2001 and January 29, 2000, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended February 3, 2001, in conformity with accounting principles generally accepted in the United States. As discussed in Notes to Consolidated Financial Statements; Summary of Significant Accounting Policies; Revenue Recognition, in the fiscal year ended February 3, 2001, the Company changed its method of accounting for sales returns and allowances and layaway sales. ERNST & YOUNG LLP Philadelphia, Pennsylvania March 12, 2001 CHARMING SHOPPES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
February 3, January 29, (dollars in thousands) 2001 2000 ---- ---- ASSETS Current assets Cash and cash equivalents........................... $ 56,544 $ 34,299 Available-for-sale securities, including fair value adjustments of $3 as of February 3, 2001 and $0 as of January 29, 2000................ 48,817 41,339 Merchandise inventories............................. 259,127 260,792 Deferred taxes...................................... 10,678 10,801 Prepayments and other............................... 56,748 47,090 -------- -------- Total current assets................................ 431,914 394,321 -------- -------- Property, equipment, and leasehold improvements - at cost............................ 504,071 450,401 Less accumulated depreciation and amortization...... 286,208 259,477 -------- -------- Net property, equipment, and leasehold improvements. 217,863 190,924 -------- -------- Available-for-sale securities, including fair value adjustments of $77 as of February 3, 2001 and ($2,222) as of January 29, 2000............... 76,461 74,490 Goodwill............................................ 92,520 97,405 Other assets........................................ 34,009 27,656 -------- -------- Total assets........................................ $852,767 $784,796 ======== ========
[FN] See Notes to Consolidated Financial Statements. CHARMING SHOPPES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued)
February 3, January 29, (dollars in thousands, except per share amounts) 2001 2000 ---- ---- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable.................................... $ 94,881 $ 88,721 Accrued expenses.................................... 123,317 134,033 Accrued restructuring expenses...................... 373 8,271 Current portion -- long-term debt................... 4,954 1,920 -------- -------- Total current liabilities........................... 223,525 232,945 -------- -------- Deferred taxes...................................... 21,433 10,375 Long-term debt...................................... 113,540 105,213 Minority interest in consolidated subsidiary....... 1,000 0 Stockholders' equity Common Stock $.10 par value Authorized - 300,000,000 shares Issued - 110,731,483 shares and 109,639,425 shares 11,073 10,964 Additional paid-in capital.......................... 80,977 76,125 Treasury stock at cost - 9,105,000 shares and 8,955,000 shares................................. (41,537) (40,824) Deferred employee compensation...................... (1,629) (1,792) Accumulated other comprehensive income (loss)....... 74 (1,423) Retained earnings................................... 444,311 393,213 -------- -------- Total stockholders' equity.......................... 493,269 436,263 -------- -------- Total liabilities and stockholders' equity.......... $852,767 $784,796 ======== ========
[FN] See Notes to Consolidated Financial Statements. CHARMING SHOPPES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Year Ended (in thousands, except February 3, January 29, January 30, per share amounts) 2001 2000 1999 ---- ---- ---- Net sales........................................... $1,607,079 $1,196,529 $1,035,160 Other income........................................ 10,094 8,993 16,003 ---------- ---------- ---------- Total revenue....................................... 1,617,173 1,205,522 1,051,163 ---------- ---------- ---------- Cost of goods sold, buying, and occupancy expenses.. 1,134,554 854,774 771,107 Selling, general, and administrative expenses....... 384,188 282,932 246,747 Amortization of goodwill............................ 4,885 0 0 Restructuring charge (credit)....................... 0 (3,471) 54,246 Non-recurring gain from demutualization of insurance company................................. 0 (6,700) 0 Interest expense.................................... 8,894 7,308 10,052 ---------- ---------- ---------- Total expenses...................................... 1,532,521 1,134,843 1,082,152 ---------- ---------- ---------- Income (loss) before income taxes, extraordinary item, and cumulative effect of accounting change.. 84,652 70,679 (30,989) Income tax provision (benefit)...................... 33,014 26,852 (10,854) ---------- ---------- ---------- Income (loss) before extraordinary item and cumulative effect of accounting change............ 51,638 43,827 (20,135) Extraordinary item - gain on early retirement of debt, net of income taxes of $664................. 0 1,232 0 ---------- ---------- ---------- Income (loss) before cumulative effect of accounting change................................. 51,638 45,059 (20,135) Cumulative effect of accounting change, net of income tax benefit of $334........................ (540) 0 0 ---------- ---------- ---------- Net income (loss)................................... 51,098 45,059 (20,135) ---------- ---------- ---------- Other comprehensive income (loss), net of tax: Unrealized gains (losses) on available-for-sale securities, net of income tax (expense) benefit of ($718) in 2001, $214 in 2000, and ($86) in 1999... 1,335 (343) 164 Reclassification of realized losses (gains) on available-for-sale securities included in net income, net of income tax (benefit) expense of ($87) in 2001, $726 in 2000 and $124 in 1999...... 162 (1,347) (229) ---------- ---------- ---------- Total other comprehensive income (loss)............. 1,497 (1,690) (65) ---------- ---------- ---------- Comprehensive income (loss)......................... $ 52,595 $ 43,369 $ (20,200) ========== ========== ========== Basic net income (loss) per share: Before extraordinary item and cumulative effect of accounting change............................ $ .51 $ .45 $(.20) Extraordinary item................................ .00 .01 .00 Cumulative effect of accounting change............ (.01) .00 .00 ----- ----- ----- Net income (loss)................................. $ .50 $ .46 $(.20) ===== ===== ===== Diluted net income (loss) per share: Before extraordinary item and cumulative effect of accounting change............................ $ .49 $ .42 $(.20) Extraordinary item................................ .00 .01 .00 Cumulative effect of accounting change............ (.01) .00 .00 ----- ----- ----- Net income (loss)................................. $ .48 $ .43 $(.20) ===== ===== =====
[FN] See Notes to Consolidated Financial Statements. CHARMING SHOPPES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Additional Common Stock Paid-in Treasury Stock (dollars in thousands) Shares Amount Capital Shares Amount ------ ------ ------- ------ ------ Balance, January 31, 1998... 106,249,385 $10,625 $64,019 (5,580,000) $(25,382) Issued to employees......... 109,928 11 876 Exercise of stock options... 475,061 47 434 Shares withheld for payment of employee payroll taxes due on shares issued under employee stock plans...... (3,778) (16) Purchases of treasury stock. (3,130,000) (14,023) Tax expense - employee stock programs.................. (389) ----------- ------- ------- --------- -------- Balance, January 30, 1999... 106,830,596 10,683 64,924 (8,710,000) (39,405) Issued to employees......... 354,620 36 1,575 Exercise of stock options... 3,364,058 336 13,952 Shares received in payment of stock option exercises. (909,849) (91) (6,374) Purchases of treasury stock. (245,000) (1,419) Tax benefit - employee stock programs.................. 2,048 ----------- ------- ------- --------- -------- Balance, January 29, 2000... 109,639,425 10,964 76,125 (8,955,000) (40,824) Issued to employees......... 224,141 22 1,020 Exercise of stock options... 906,701 91 3,831 Shares withheld for payment of employee payroll taxes due on shares issued under employee stock plans...... (38,784) (4) (214) Purchases of treasury stock. (150,000) (713) Tax benefit - employee stock programs.................. 215 ----------- ------- ------- --------- -------- Balance, February 3, 2001... 110,731,483 $11,073 $80,977 (9,105,000) $(41,537) =========== ======= ======= ========= ========
Accumulated Deferred Other Employee Comprehensive Retained (in thousands) Compensation Income (Loss) Earnings ------------ ------------- -------- Balance, January 31, 1998... $(1,073) $ 332 $368,289 Issued to employees......... (688) Amortization................ 710 Unrealized losses, net of tax benefit of $38........ (65) Net loss.................... (20,135) ------- ------- -------- Balance, January 30, 1999... (1,051) 267 348,154 Issued to employees......... (1,488) Amortization................ 747 Unrealized losses, net of tax benefit of $940....... (1,690) Net income.................. 45,059 ------- ------- -------- Balance, January 29, 2000... (1,792) (1,423) 393,213 Issued to employees......... (785) Amortization................ 948 Unrealized gains, net of income taxes of $805...... 1,497 Net income.................. 51,098 ------- ------- -------- Balance, February 3, 2001... $(1,629) $ 74 $444,311 ======= ======= ========
[FN] See Notes to Consolidated Financial Statements. CHARMING SHOPPES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended February 3, January 29, January 30, (in thousands) 2001 2000 1999 ---- ---- ---- Operating activities Net income (loss)................................... $ 51,098 $ 45,059 $ (20,135) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization..................... 43,397 32,650 35,091 Amortization of goodwill.......................... 4,885 302 0 Deferred income taxes, net of acquisitions........ 10,375 18,250 (14,099) Non-recurring gain from demutualization of insurance company............................... 0 (6,700) 0 Write-down of capital assets due to restructuring. 0 0 27,969 Net (gain) loss from disposition of capital assets 2,587 (1,469) 3,139 Tax benefit (expense) related to stock plans...... 215 2,048 (389) Net (gain) loss on sale of available-for-sale securities...................................... 249 4,627 (353) Net gain on repurchase of notes................... 0 (1,896) (466) Changes in operating assets and liabilities, net of acquisitions: Merchandise inventories......................... 1,665 (29,703) 4,458 Accounts payable................................ 6,160 (1,797) 8,183 Prepayments and other........................... (8,841) (5,097) 1,563 Accrued expenses................................ (10,716) 16,349 1,533 Income taxes payable............................ 0 (4,552) (1,571) Accrued restructuring expenses.................. (7,805) (10,177) 18,448 --------- --------- --------- Net cash provided by operating activities........... 93,269 57,894 63,371 --------- --------- --------- Investing activities Gross purchases of available-for-sale securities.... (102,228) (393,393) (406,651) Proceeds from sales of available-for-sale securities 94,840 523,545 452,263 Acquisitions of Catherine's Stores and Modern Woman, net of cash acquired.............................. 0 (145,309) 0 Investment in capital assets........................ (57,921) (39,211) (32,369) Proceeds from sales of capital assets............... 833 10,556 368 Increase in other assets............................ (6,444) (4,927) (14,302) --------- --------- --------- Net cash used in investing activities............... (70,920) (48,739) (691) --------- --------- --------- Financing activities Reduction of long-term borrowings................... (3,535) (21,237) (17,806) Proceeds from short-term borrowings................. 0 30,600 0 Reduction of short-term borrowings.................. 0 (34,393) 0 Purchases of treasury stock......................... (713) (1,419) (14,023) Proceeds from exercise of stock options............. 3,144 7,804 589 Minority shareholder investment in joint venture.... 1,000 0 0 --------- --------- --------- Net cash used in financing activities............... (104) (18,645) (31,240) --------- --------- --------- Increase (decrease) in cash and cash equivalents.... 22,245 (9,490) 31,440 Cash and cash equivalents, beginning of year........ 34,299 43,789 12,349 --------- --------- --------- Cash and cash equivalents, end of year.............. $ 56,544 $ 34,299 $ 43,789 ========= ========= ========= Non-cash transactions Purchases of assets under capital leases............ $ 14,896 $ 0 $ 0 ========= ========= =========
[FN] See Notes to Consolidated Financial Statements. CHARMING SHOPPES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED FEBRUARY 3, 2001 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business The Company operates retail specialty stores located throughout the continental United States that merchandise large-size, misses, and junior sportswear, dresses, coats, and lingerie, as well as accessories and casual footwear at a wide range of prices. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany accounts and transactions are eliminated. The parent and its subsidiaries have a 52-53 week fiscal year ending on the Saturday nearest to January 31. The fiscal year ended February 3, 2001 consisted of 53 weeks. As used herein, the terms "Fiscal 2001," "Fiscal 2000," and "Fiscal 1999" refer to the fiscal years ended February 3, 2001, January 29, 2000, and January 30, 1999, respectively. On October 26, 2000, the Company announced the signing of a joint venture agreement with Monsoon Plc. The joint venture will be a separate consolidated operating unit of the Company. The Company invested $4.0 million, or 80% of the initial capital in the joint venture, during Fiscal 2001. The impact of the joint venture on the Company's earnings for Fiscal 2001 was immaterial. Foreign Operations The Company uses a December 31 fiscal year for all foreign subsidiaries in order to expedite the year-end closing. There were no intervening events or transactions with respect to the Company's foreign subsidiaries during the period from January 1, 2001 to February 3, 2001 that would have a material effect on the Company's financial position or results of operations. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash Equivalents The Company considers all highly-liquid investments with a maturity of three months or less when purchased to be cash equivalents. These amounts are stated at cost, which approximates market value. Investments The Company's investments are classified as available-for-sale. Securities traded on an established market are carried at fair value and unrealized gains and losses are reported in a separate component of stockholders' equity. The cost of investments is adjusted for amortization of premiums and the accretion of discounts to maturity. Such amortization is included in other income. Realized gains and losses and interest from investments are also included in other income. The cost of securities sold is based on the specific identification method. Short-term investments include investments with an original maturity of greater than three months and a remaining maturity of less than one year. Long-term investments have an original maturity of greater than one year, but are available on an as- needed basis to support working capital needs. Inventories Merchandise inventories are valued at the lower of cost or market as determined by the retail method (average cost basis). Property and Depreciation For financial reporting purposes, depreciation and amortization are principally computed using the straight-line method over the estimated useful lives of the assets, or in the case of leasehold improvements, over the lives of the respective leases. Accelerated depreciation methods are used for income tax reporting purposes. Depreciation expense was $38,066,000, $30,483,000, and $32,323,000 in Fiscal 2001, 2000, and 1999, respectively. Amortization of Goodwill Goodwill is amortized on a straight-line basis over 20 years. The Company periodically evaluates goodwill to determine if a revision to the remaining estimated useful life is required, or if a reduction in the carrying value is required because of an impairment of the asset. Asset Securitizations The Company adopted the disclosure provisions of SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" (a replacement of SFAS No. 125), as of Fiscal 2001. Transaction expenses related to securitizations are deferred and amortized over the reinvestment period of the transaction. Net securitization income is included as a reduction of selling, general, and administrative expenses in the accompanying consolidated statements of operations. Common Stock Plans The Company accounts for stock-based compensation in accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and its related interpretations. Deferred compensation expense attributable to stock awards and stock options having an exercise price less than the market price on the date of grant is amortized over the vesting period. No compensation expense is recognized for option plans having an exercise price equal to the market price on the date of grant or for the Company's Employee Stock Purchase Plan. The Company has adopted the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation." Revenue Recognition Revenues from merchandise sales are net of returns and allowances, and exclude sales tax. The Company adopted the provisions of Securities and Exchange Commission Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements," effective as of the beginning of Fiscal 2001. As a result of adoption of SAB 101, the Company established a reserve for estimated future sales returns based on an analysis of actual returns received subsequent to the end of each fiscal period, and deferred recognition of layaway sales to the date of delivery. The cumulative effect of the adoption of SAB 101 as of January 30, 2000 was a decrease in income, net of taxes, of $540,000. The effect of adoption of SAB 101 on the results of operations for Fiscal 2001 was immaterial. The pro forma effect of adoption of SAB 101 for Fiscal 2000 and Fiscal 1999 was immaterial. Cost of Goods Sold, Buying, and Occupancy Expenses Cost of goods sold includes merchandise costs, net of discounts and allowances, freight, and inventory shrinkage. Net merchandise costs and freight are capitalized as inventory costs. Buying expenses include payroll, payroll related costs, and operating expenses for the Company's buying departments and warehouses. Occupancy expenses include rent, real estate taxes, insurance, common area maintenance, utilities, maintenance, and depreciation for the Company's stores and warehouse facilities and equipment. Buying and occupancy costs are treated as period costs. Advertising Costs The Company expenses advertising costs as incurred. Advertising costs charged to expense were $39,529,000, $28,876,000, and $29,442,000 in Fiscal 2001, 2000, and 1999, respectively. Income Taxes The Company uses the liability method of accounting for income taxes as prescribed by SFAS No. 109, "Accounting for Income Taxes." Under the liability method, deferred tax assets and liabilities are adjusted to reflect the effect of changes in enacted tax rates on expected reversals of financial statement and income tax basis differences. U.S. income taxes have not been provided on undistributed earnings of foreign subsidiaries accumulated prior to February 3, 2001 because the Company intends to reinvest such undistributed earnings in foreign operations. Presently, income taxes would not be significantly increased if such earnings were remitted because of available foreign tax credits. Net Income (Loss) Per Share Net income (loss) per share is based on the weighted-average number of common shares outstanding during each fiscal year. Net income per share assuming dilution is based on the weighted-average number of common shares and share equivalents outstanding. Common share equivalents include the effect of dilutive stock options and stock awards, using the treasury stock method. Common share equivalents also include the effect of assumed conversion of the Company's 7.5% Convertible Subordinated Notes Due 2006, using the "if-converted" method, when the effect of such assumed conversion is dilutive. Share equivalents are not included in the weighted-average shares outstanding for determining net loss per share, as the result would be antidilutive. Comprehensive Income (Loss) The consolidated statements of operations and comprehensive income (loss) include transactions from non-owner sources that affect stockholders' equity. Unrealized gains and losses recognized in comprehensive income are reclassified to net income (loss) upon their realization. Business Segments and Related Disclosures The Company's Fashion Bug and Catherine's Stores operate within a single segment -- retail sales of women's apparel, and within a single geographic area -- the continental United States. The Company's foreign sourcing operations do not constitute a material geographic segment. Costs of Computer Software Developed or Obtained for Internal Use The Company adopted the provisions of American Institute of Certified Public Accountants ("AICPA") Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," effective as of January 31, 1999. Costs related to the development of internal-use software, other than those incurred during the application development stage, are expensed as incurred. Costs incurred during the application development stage are capitalized and amortized over the estimated useful life of the software. The adoption of SOP 98-1 did not have a material effect on the Company's consolidated financial statements. Impact of Recent Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires the recognition of all derivative instruments as either assets or liabilities in the statement of financial position, and the measurement of those instruments at fair value. SFAS No. 133 also specifies the conditions under which derivative instruments qualify as hedging activities, and the accounting for changes in the fair value of derivatives designated as hedges. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133." SFAS No. 137 defers the effective date of SFAS No. 133 to all fiscal quarters of fiscal years beginning after June 15, 2000. The Company will adopt the provisions of SFAS No. 133 as of the beginning of the fiscal year ending February 2, 2002. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities." This statement amends the accounting and reporting standards of SFAS No. 133 for certain derivative instruments and hedging activities. Prior to the end of Fiscal 2001, the Company terminated its interest rate swap agreement, which was used to limit the Company's interest rate risk on assets related to the management of its proprietary credit card program. The Company expects that adoption of SFAS No. 133 and SFAS No. 138 will not have a material effect on its financial position, results of operations, or comprehensive income. In September 2000, The FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," a replacement of SFAS No. 125. SFAS No. 140 carries over most of the provisions of SFAS No. 125, but revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures. Under SFAS No. 140, the accounting and reporting standards are based on application of a financial-components approach that focuses on control. Under this approach, after a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and the liabilities it has incurred, de-recognizes financial assets when control has been surrendered, and de-recognizes liabilities when extinguished. SFAS No. 140 also requires disclosures about securitizations entered into during the period and retained interests in securitized financial assets at the balance sheet date, accounting policies, sensitivity information relating to retained interests, and cash flows distributed to the transferor. SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001, and is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. The Company has adopted the disclosure provisions of SFAS No. 140 as of Fiscal 2001, and will adopt the accounting requirements of SFAS No. 140 to the extent that it issues new beneficial interests after March 31, 2001. Management is currently assessing the effect that SFAS No. 140 will have on the Company's results of operations and financial position. ACQUISITIONS In August 1999, the Company acquired 100% of the outstanding stock of Modern Woman Holdings, Inc. ("Modern Woman") for $9,773,000 ($8,709,000 net of cash acquired). Modern Woman operated 136 retail apparel stores in 24 states, specializing in large-size women's apparel. In January 2000, the Company acquired 100% of the outstanding stock of Catherines Stores Corporation ("Catherine's Stores") for $154,884,000 ($136,600,000 net of cash acquired). Catherine's Stores operated 436 retail apparel stores in 40 states and the District of Columbia, specializing in large-size women's apparel. The Company has converted the Modern Woman stores into Catherine's Stores. The acquisitions have been accounted for under the purchase method of accounting, and the results of operations of the acquired companies are included in the Company's results of operations from their dates of acquisition. Prior-period results have not been restated. Assets acquired and liabilities assumed have been recorded at their estimated fair values. In connection with the Catherine's Stores acquisition, the purchase price exceeded the fair value of identifiable net assets acquired. The excess purchase price, approximately $97,707,000, has been accounted for as goodwill, and is being amortized over a 20-year period. In connection with the Modern Woman acquisition, the fair value of the net assets acquired exceeded the purchase price, and the excess was applied to reduce the fair value of non-current assets. The acquisitions were financed through the use of internally-generated funds. The following unaudited pro forma information is based on historical data, and gives effect to the Company's acquisition of Catherine's Stores as if the acquisition had occurred on January 31, 1999. Pro forma adjustments primarily represent a reduction in interest income from the use of investments and amortization of goodwill resulting from the acquisition. The pro forma information does not include the acquisition of Modern Woman, as the effect would have been immaterial.
(in thousands except per share amounts) 2000 ---- Net sales......................................... $1,487,053 Income before extraordinary items................. 45,693 Net income........................................ 46,925 Net income per share: Basic........................................... $0.48 Diluted......................................... 0.45
The unaudited pro forma information is not necessarily indicative of the actual results of operations that would have occurred if the acquisition had occurred as of January 31, 1999, and is not necessarily indicative of results that may be achieved in the future. The unaudited pro forma information does not reflect adjustments for operating synergies that the Company may realize as the result of the acquisition. No assurances can be made as to the amount and timing of any financial benefits that the Company may realize as the result of the acquisition. PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS
Lives (in thousands) (Years) 2001 2000 ----- ---- ---- Land.......................... $ 1,757 $ 1,757 Buildings and improvements.... 10 to 40 54,232 52,543 Store fixtures................ 5 to 10 108,069 141,331 Equipment..................... 3 to 10 166,906 134,099 Leasehold improvements........ 10 to 20 173,107 120,671 -------- -------- Total at cost................. 504,071 450,401 Less accumulated depreciation and amortization............ 286,208 259,477 -------- -------- $217,863 $190,924 ======== ========
AVAILABLE-FOR-SALE SECURITIES
Unrealized Estimated (in thousands) Cost Gains Losses Fair Value ---- ----- ------ ---------- February 3, 2001 U. S. Treasury and government agency bonds........................ $ 69,192 $ 99 $ (19) $ 69,272 Charming Shoppes Master Trust retained interest................... 47,724 0 0 47,724 Low income housing partnerships....... 7,952 0 0 7,952 Other................................. 330 0 0 330 -------- ---- ------- -------- $125,198 $ 99 $ (19) $125,278 ======== ==== ======= ======== January 29, 2000 U. S. Treasury and government agency bonds........................ $ 68,520 $ 4 $(2,226) $ 66,298 Charming Shoppes Master Trust retained interest................... 41,245 0 0 41,245 Low income housing partnerships....... 7,952 0 0 7,952 Other................................. 334 0 0 334 -------- ---- ------- -------- $118,051 $ 4 $(2,226) $115,829 ======== ==== ======= ========
Gross realized gains and (losses) on available-for-sale securities were $43,000 and ($292,000), respectively, during Fiscal 2001. Gross realized gains and (losses) were $6,910,000 and ($4,837,000), respectively, during Fiscal 2000. Contractual maturities of available-for-sale securities at February 3, 2001 were:
Estimated (in thousands) Cost Fair Value ---- ---------- Due in one year or less................ $ 48,814 $ 48,817 Due after one year through five years.. 68,432 68,509 -------- -------- 117,246 117,326 Equity securities...................... 7,952 7,952 -------- -------- $125,198 $125,278 ======== ========
INCOME TAXES Income (loss) before income taxes, extraordinary item, and cumulative effect of accounting change:
(in thousands) 2001 2000 1999 ---- ---- ---- Domestic........ $79,716 $65,615 $(34,479) Foreign......... 4,936 5,064 3,490 ------- ------- -------- $84,652 $70,679 $(30,989) ======= ======= ========
Income tax provision (benefit):
(in thousands) 2001 2000 1999 ---- ---- ---- Current: Federal....... $ 17,345 $ 5,431 $ 4,321 State......... 1,683 1,158 692 Foreign....... 883 514 192 -------- ------- -------- 19,911 7,103 5,205 Deferred(1)..... 13,103 19,749 (16,059) -------- ------- -------- $ 33,014 $26,852 $(10,854) ======== ======= ========
[FN] (1) Primarily Federal The Company made income tax payments of $20,041,000, $9,692,000, and $5,982,000 during Fiscal 2001, 2000, and 1999, respectively. Included in "Prepayments and other" in the accompanying consolidated balance sheet as of January 29, 2000 is an income tax receivable of $6,808,000. Reconciliation of the effective tax rate with the statutory Federal income tax rate:
2001 2000 1999 ---- ---- ---- Statutory Federal income tax (benefit) rate................ 35.0% 35.0% (35.0)% State income tax, net of Federal income tax......... 1.9 1.0 1.5 Foreign income.................. (1.0) (1.7) (3.4) Employee benefits............... 2.5 3.1 1.4 Amortization of goodwill........ 2.0 -- -- Other, net...................... (1.4) 0.6 0.5 ---- ---- ---- 39.0% 38.0% (35.0)% ==== ==== ====
Components of deferred tax assets and liabilities:
Net Current Net Long-Term Assets Assets (in thousands) (Liabilities) (Liabilities) ----------- ----------- February 3, 2001 Property, equipment, and leasehold improvements........................... $ (208) Accrued expenses......................... $ 9,990 Inventory................................ (1,853) Deferred compensation.................... 2,729 Prepaid employee benefits................ 3,406 Investments.............................. (6,907) Deferred rent............................ 2,099 Employee insurance program............... (11,100) Other.................................... (2,964) (5,947) ------- -------- $10,678 $(21,433) ======= ========
Net Current Net Long-Term Assets Assets (in thousands) (Liabilities) (Liabilities) ----------- ----------- January 29, 2000 Property, equipment, and leasehold improvements........................... $ (2,112) Tax net operating losses and credit carryforwards............... 8,467 Accrued expenses......................... $10,461 Inventory................................ (3,317) Deferred compensation.................... 1,585 Prepaid employee benefits................ 2,233 Investments.............................. (6,184) Deferred rent............................ 2,059 Employee insurance program............... (7,600) Other.................................... (635) (4,531) ------- -------- $10,801 $(10,375) ======= ========
[FN] Certain prior period amounts have been reclassified to conform to the current presentation. The Company's Federal tax returns for the fiscal years ended January 1994 through January 1997 are currently under audit. The Company anticipates that the outcome of these audits will not have a material adverse effect on its financial condition or results of operations. DEBT Long-term debt at year end:
(in thousands) 2001 2000 ---- ---- 7.5% Convertible Subordinated Notes Due 2006............................. $ 96,047 $ 96,047 Capital lease obligations.............. 15,890 4,332 7.5% mortgage note..................... 6,449 6,652 Other.................................. 108 102 -------- -------- Total long-term debt................... 118,494 107,133 Less current portion................... 4,954 1,920 -------- -------- $113,540 $105,213 ======== ========
The 7.5% Convertible Subordinated Notes (the "Notes") are convertible at any time prior to maturity into shares of Common Stock of the Company at a conversion price of $7.46 per share. The Notes are redeemable at the Company's option, in whole or in part, at 103.125% of principal through July 14, 2001 and at declining prices thereafter, decreasing to 100% on or after July 15, 2005. Under certain circumstances involving a change in control of the Company, holders of the Notes may require the Company to repurchase all or a portion of the Notes at 100% of the principal amount plus accrued and unpaid interest, if any. There is no sinking fund for the Notes. During Fiscal 2000, the Company repurchased $23,316,000 aggregate principal amount of the Notes, which had a net carrying value of $22,927,000 as of the dates of purchase, at a total cost of $21,031,000. The repurchases resulted in an extraordinary gain of $1,232,000, net of income taxes of $664,000, for Fiscal 2000. During Fiscal 1999, the Company repurchased $18,637,000 aggregate principal amount of the Notes, which had a net carrying value of $18,268,000 as of the dates of purchase, at a total cost of $17,802,000. The net gain on the repurchases of the Notes during Fiscal 1999 was not material. During Fiscal 2001, pursuant to its program to replace its existing point- of-sale ("POS") equipment, the Company acquired $14,896,000 of POS equipment for its Fashion Bug and Catherine's Stores under capital leases. These leases generally have an initial lease term of 60 months and contain a bargain purchase option. The 7.5% Mortgage Note (the "Mortgage Note") and $2,753,000 of capital lease obligations were assumed in January 2000 in connection with the acquisition of Catherine's Stores. The mortgage financing agreement provides for a $6,919,000 mortgage facility with a seven-year term and payments based on a 20-year amortization period. The mortgage includes a final payment of $5,585,000 in April 2005. The Mortgage Note is secured by land and buildings at Catherine's office in Memphis, Tennessee. The capital leases are for data processing and point-of-sale equipment. At the end of the initial lease term, the Company has the option of purchasing the equipment at fair market value (or at $1 in the case of the point-of-sale equipment), renewing the leases, or returning the equipment to the lessor. The Company has an agreement with a commercial finance company to provide a revolving credit facility with a maximum availability of $150,000,000, subject to limitations based upon eligible inventory. The facility, which expires June 30, 2004, enables the Company to issue letters of credit for overseas purchases of merchandise and provides for seasonal cash borrowings, if necessary. The facility is secured by merchandise inventory, furniture and fixtures at the Fashion Bug retail stores, and certain other Company assets. The interest rate on borrowings is 0.5% above the Prime rate. There is a fee of .25% on the unused portion of the first $105,000,000 of the facility, and an annual servicing fee of $100,000. As of February 3, 2001, the availability under the facility was approximately $131,424,000, against which the Company had outstanding letters of credit of $48,381,000. There were no cash borrowings outstanding under the agreement as of February 3, 2001. The agreement requires that, among other things, the Company maintain a minimum net worth of $350,000,000 and not pay dividends on its Common Stock. As a result of the Catherine's Stores acquisition, the Company has an agreement with a bank to provide a revolving credit facility with a maximum availability of $20,000,000. The facility, which expires June 29, 2001, enables the Company to issue letters of credit for overseas purchases of merchandise and provides for seasonal cash borrowings, if necessary, by utilizing a $5,000,000 swingline credit facility. The agreement is secured by inventory, general intangibles, patents, trademarks, and proceeds of the foregoing. The interest rate on borrowings is equal to the agent bank's prime rate. At February 3, 2001, the combined availability under the working capital and swingline facilities was $20,000,000, against which the Company had outstanding letters of credit of $284,000. The Company is currently negotiating the extension of this agreement. As a result of the acquisition of Modern Woman, the Company also has an agreement with a bank to provide a revolving credit facility with a maximum availability of $10,000,000. As of February 3, 2001, $5,000,000 was available under this agreement, against which the Company had outstanding letters of credit of $139,000. In exchange for the bank's release of its security interest in all of the assets of Modern Woman, the Company pledged $5,000,000 of available-for-sale securities as security for the line of credit. During Fiscal 2001, 2000, and 1999, the Company made interest payments of $8,712,000, $7,519,000, and $9,756,000, respectively. Aggregate maturities of long-term debt principal during the next five fiscal years are:
7.5% Capital Mortgage (in thousands) Leases Note Other Total ------ ---- ----- ----- 2002 $4,741 $188 $25 $4,954 2003 3,626 203 24 3,853 2004 3,360 199 19 3,578 2005 2,868 234 16 3,118 2006 1,295 5,625 16 6,936
STOCKHOLDERS' EQUITY The Company's capital consists of 1,000,000 shares of Series Participating Preferred Stock, $1.00 par value, of which 500,000 shares of Participating Series A Junior Preferred Stock, $1.00 par value, have been authorized; and 300,000,000 shares of Common Stock, $.10 par value. In November 1997, the Company's Board of Directors ("the Board") authorized the repurchase of up to 10,000,000 shares of the Company's Common Stock. In March 1999, the Board authorized the repurchase of an additional 10,000,000 shares of Common Stock. Shares repurchased will be held as treasury stock available for use under the Company's employee benefits program or for other corporate purposes. As of February 3, 2001, the Company has repurchased an aggregate total of 9,105,000 shares of its Common Stock at an aggregate cost of $41,537,000. STOCK OPTION AND STOCK INCENTIVE PLANS At February 3, 2001, the Company had various stock-based compensation plans, which are described below. The Company applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for its stock plans. Accordingly, no compensation has been recognized in the financial statements for options issued under such plans with an exercise price equal to the market price of the Company's Common Stock at the date of grant. In addition, no compensation expense has been recognized for shares of stock issued under the Company's Employee Stock Purchase Plan. Compensation cost recognized in the financial statements for discounted stock options, restricted stock awards and performance share awards granted was $948,000, $747,000, and $710,000 in Fiscal 2001, 2000, and 1999, respectively. SFAS No. 123, "Accounting for Stock-Based Compensation," requires pro forma disclosures of the effect of using fair values at the dates of grant to determine compensation cost for awards under stock-based compensation plans. Using the method prescribed under SFAS No. 123 to determine compensation cost for the Company's plans, the Company's net income (loss) and net income (loss) per share would have changed to the pro forma amounts shown below:
(in thousands, except per-share data) 2001 2000 1999 ---- ---- ---- Pro forma net income (loss).......... $49,185 $43,102 $(21,629) Pro forma net income (loss) per share Basic net income (loss) per share.. $.49 $.44 $(.22) Diluted net income (loss) per share $.47 $.41 $(.22)
For purposes of determining the pro forma disclosures, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. In applying the Black-Scholes model, the following assumptions were used: dividend yield of 0%; expected stock price volatility of 37.6%; expected lives of 3 months for the Employee Stock Purchase Plan, 1 to 3 years for stock award plans, and 6 to 7 years for stock option and stock incentive plans; and the following risk-free interest rates:
2001 2000 1999 ---- ---- ---- Employee stock purchase plan..... 4.9% 5.4% 4.7% Stock award plans................ 4.8 6.5 5.1 Stock option and incentive plans. 5.1 6.6 5.2
In accordance with the transition provisions of SFAS No. 123, the pro forma disclosures presented above reflect the statement's application only to option grants and stock awards dated on or after January 29, 1995. Option grants and awards generally vest over several years and the Company expects to grant additional awards in the future. Therefore, the pro forma results should not be considered to be representative of the effects on reported results for future years. The Company's Board of Directors adopted the 2000 Associates' Stock Incentive Plan on January 27, 2000. The plan provides for the grant of options, stock appreciation rights, restricted stock awards, deferred stock, or other stock-based awards to purchase up to 5,000,000 shares of the Company's Common Stock. The form of the grants, exercise price, and maximum term, where applicable, are at the discretion of the Board of Directors and the Stock Option Committee of the Board of Directors. As of February 3, 2001, 177,690 options were exercisable under this plan. The Company's Amended and Restated Non-Employee Directors Program was adopted by the Board of Directors on July 1, 1999. This program provides for the automatic annual grant of options to purchase 20,000 shares of Common Stock to each non-employee director. The options vest in equal installments over five years. The exercise price of such options shall be equal to the fair market value of the stock on the date of grant. As of February 3, 2001 and January 29, 2000, 28,000 options and 0 options, respectively, were exercisable under this plan. The program also provides for a one-time grant of 10,000 shares of Restricted Common Stock to each newly elected non-employee director. The grants vest in equal amounts over three years. During Fiscal 2001 and Fiscal 2000, 10,000 shares and 20,000 shares, respectively, were granted and issued as one-time grants under this program. The weighted average market value at date of grant for shares granted in Fiscal 2001 and Fiscal 2000 was $5.13 and $6.21, respectively. The Company's Board of Directors adopted the 1999 Associates' Stock Incentive Plan in February 1999. The plan provides for the grant of options to purchase up to 1,000,000 shares of the Company's Common Stock. The exercise price of such options may not be less than the fair market value at the date of grant. The maximum term of options issued under the plan is ten years. As of February 3, 2001 and January 29, 2000, 127,500 options and 0 options, respectively, were exercisable under this plan. The Company's 1993 Employees' Stock Incentive Plan provides for the grant of options to purchase up to 9,000,000 shares of Common Stock plus 9% of shares issued by the Company after the effective date of the plan and any shares available but unissued under the 1990 Plan described below. The form of the grants and exercise price, where applicable, are at the discretion of the Board of Directors and the Stock Option Committee of the Board of Directors. The maximum term of options issued under the plan is ten years. As of February 3, 2001, January 29, 2000, and January 30, 1999, 4,380,640 options, 3,415,250 options, and 2,465,230 options, respectively, were exercisable under this plan. During Fiscal 2001 and Fiscal 2000, 88,000 shares and 306,307 shares, respectively, were granted as restricted stock awards under this plan. The weighted average market value at date of grant for the Fiscal 2001 and Fiscal 2000 awards was $6.81 per share and $4.61 per share, respectively. During Fiscal 2001, 38,308 shares granted as restricted stock awards under this plan were issued and awards totaling 10,300 shares were cancelled. As of February 3, 2001, restricted stock awards totaling 345,699 shares were outstanding under this plan. The Company's 1990 Employees' Stock Incentive Plan provides for the grant of options to purchase Common Stock to key employees of the Company. The exercise price of such options may not be less than the fair market value at the date of grant. As a result of adoption of the 1993 Employees' Stock Incentive Plan, the Company no longer intends to issue options under this Plan. As of February 3, 2001, January 29, 2000, and January 30, 1999, 144,000 options, 483,800 options, and 3,522,142 options, respectively, were exercisable under this plan. The Company's 1989 Non-Employee Director Stock Option Plan provides for the grant of options to purchase up to 30,000 shares of Common Stock to each member of the Board of Directors who is not an employee of the Company. The exercise price of such options shall be equal to the fair market value of the stock on the date of grant. As of February 3, 2001, January 29, 2000, and January 30, 1999, 66,000 options, 78,000 options, and 90,000 options, respectively, were exercisable under this plan. As a result of the adoption of the Amended and Restated Non-Employee Directors Program on July 1, 1999, the Company no longer intends to issue options under this plan. The Company's 1988 Key Employee Stock Option Plan provides for the grant of options to purchase up to 3,000,000 shares of Common Stock to key employees of the Company. The exercise price of options granted under this plan is $1.00 per share. As of February 3, 2001, January 29, 2000, and January 30, 1999, 92,937 options, 205,330 options, and 412,245 options, respectively, were exercisable under this plan. The table below summarizes the activity in all Stock Option Plans:
Average Option Option Option Prices Shares Price Per Share ------ ----- --------- Outstanding at January 31, 1998...... 10,612,111 $5.512 $ .222-17.000 Granted-option price equal to market. 1,551,722 4.306 3.594- 5.250 Granted-option price less than market 18,500 1.000 1.000- 1.000 Canceled/forfeited................... (1,279,938) 7.797 .500-17.000 Exercised............................ (475,061) 1.013 .222- 5.375 ---------- ------ ------------- Outstanding at January 30, 1999...... 10,427,334 5.249 .500-16.875 Granted-option price equal to market. 1,794,970 4.077 3.625- 6.625 Granted-option price less than market 16,000 1.000 1.000- 1.000 Canceled/forfeited................... (417,387) 5.068 .500-15.750 Exercised............................ (3,364,058) 4.247 .500- 6.188 ---------- ------ ------------- Outstanding at January 29, 2000...... 8,456,859 5.400 .500-16.875 Granted-option price equal to market. 2,192,050 6.633 5.000- 6.813 Granted-option price less than market 37,700 1.000 1.000- 1.000 Canceled/forfeited................... (682,035) 6.225 1.000-16.875 Exercised............................ (906,701) 4.326 .500- 6.188 ---------- ------ ------------- Outstanding at February 3, 2001...... 9,097,873 $5.724 $ .500-15.813 ========== ====== =============
Weighted average grant date fair value for options granted, using Black- Scholes model and assumptions described above:
2001 2000 1999 ---- ---- ---- Option price equals market price............$2.35 $1.92 $1.94 Option price less than market price......... 5.32 2.96 3.59
The table below summarizes information regarding weighted average exercise price and weighted average remaining contractual life in years for options outstanding and options exercisable as of February 3, 2001 for the ranges of exercise prices shown:
Weighted Weighted Average Average Option Option Remaining Ranges of Option Prices Shares Price Life - ----------------------- ------ ----- ---- $0.50-$1.00: Options outstanding........ 170,023 $.855 4.8 Options exercisable........ 92,937 .735 $1.01-$5.00: Options outstanding........ 4,478,400 $4.015 6.2 Options exercisable........ 2,750,600 4.083 $5.01-$10.00: Options outstanding........ 3,593,000 $6.347 7.4 Options exercisable........ 1,382,180 6.209 $10.01-$15.81: Options outstanding........ 856,450 $13.011 2.3 Options exercisable........ 791,050 13.032
At February 3, 2001, 1,031,050 shares were available for grant under the 2000 Associates' Stock Incentive Plan, 248,327 shares were available for grant under the Amended and Restated Non-employee Directors Program, 249,900 shares were available for grant under the 1999 Associates' Stock Incentive Plan, 2,356,324 shares were available for future grant under the 1993 Employees' Stock Incentive plan, and 184,549 shares were available for grant under the 1988 Key Employee Stock Option Plan. The Company's 1998 Restricted Stock Award Program provides for the grant of rights to receive shares of the Company's Common Stock subject to attainment of specified performance goals for Fiscal 2000. During Fiscal 2001, 77,450 shares were issued under this plan and rights to receive 33,605 shares were cancelled. During Fiscal 2000, rights to receive 4,591 shares were granted and rights to receive 7,768 shares were cancelled. During Fiscal 1999, rights to receive 114,232 shares were granted. The weighted average market value at date of grant for awards granted in Fiscal 2000 and Fiscal 1999 was $4.03 per share and $4.31 per share, respectively. Associates pay no cash consideration for shares received under the plan. The Company's Non-Employee Director Compensation Program and the Compensation Program for the Non-Employee Chairman of the Board of Directors were adopted on August 21, 1996 and approved by shareholders on June 19, 1997. These programs stipulate that, effective June 27, 1996, 60% of Non-Employee Director and 50% of Non-Employee Chairman compensation shall be paid in Common Stock of the Company. During Fiscal 2000, 1,500 rights were granted under this plan, and 1,500 shares were issued. During Fiscal 1999, 41,904 rights were granted under this plan, and 41,904 shares were issued. The weighted average market value at date of grant for awards granted in Fiscal 2000 and Fiscal 1999 was $4.00 per share and $4.80 per share, respectively. Awards under this program were discontinued as of July 1, 1999 as a result of adoption of the Amended and Restated Non- Employee Directors Program. The Company's Board of Directors adopted the Restricted Stock Award Plan for Associates on January 26, 1995. The plan provides for discretionary awards of rights to receive up to 200,000 shares of restricted Common Stock to associates who are not directors or executive officers of the Company. Associates will pay no cash consideration for restricted stock received under an award. During Fiscal 2001, 5,500 shares were issued under this plan. During Fiscal 2000, 5,500 rights were granted under this plan, and 5,500 shares were issued. During Fiscal 1999, 5,500 rights were granted under this plan, and 12,783 shares were issued. The weighted average market value at date of grant for awards granted in Fiscal 2000 and Fiscal 1999 was $3.63 per share and $4.31 per share, respectively. The shares issued and options granted under the above plans are subject to forfeiture if the employees do not remain employed by the Company for a specified period of time. Under the 1989 Non-Employee Director Stock Option Plan, the Non-Employee Director Compensation Program, the Compensation Program for the Non-Employee Chairman of the Board of Directors, and the Amended and Restated Non-Employee Directors Program, shares issued and options granted are subject to forfeiture if the individual ceases to remain a Director of the Company except, under certain circumstances, in the case of retirement. EMPLOYEE STOCK PURCHASE PLAN The Company's 1994 Employee Stock Purchase Plan permits employees to purchase shares during each quarterly offering period at a price equal to 85% of the market price of the Company's Common Stock on either the first day of the offering period or the fifth business day after the end of the offering period, whichever is lower. The shares are purchased through the accumulation of payroll deductions of up to 10% of each participating employee's compensation during such offering period. Under this plan, 2,000,000 shares have been reserved for grant. During Fiscal 2001 and Fiscal 2000, 57,527 shares and 31,343 shares, respectively, were purchased under the plan. The weighted average grant date market value for shares purchased during Fiscal 2001 and Fiscal 2000 was $5.41 per share and $4.84 per share, respectively. At February 3, 2001, 1,673,964 shares were available for future purchase under this plan. SHAREHOLDER RIGHTS PLAN In February 1999, the Company's Board of Directors adopted a Shareholder Rights Plan to replace the existing Shareholder Rights Plan with effect from April 26, 1999, when the existing Shareholder Rights Plan expired. The Board of Directors also increased the authorized shares of Participating Series A Junior Preferred Stock, $1.00 par value, from 300,000 shares to 500,000 shares, and declared a dividend of one Right for each outstanding share of Common Stock, payable as of the close of business on April 26, 1999 to shareholders of record as of the close of business on April 12, 1999. Such Rights only become exercisable or transferable apart from the Common Stock ten days after a person or group (Acquiring Person) acquires, or obtains the right to acquire, beneficial ownership of twenty percent (20%) or more of the Company's outstanding common shares. Each Right then may be exercised to acquire one three-hundredth of a share of newly created Series A Junior Participating Preferred Stock or a combination of securities and assets of equivalent value at a purchase price of $20, subject to adjustment. Upon the occurrence of certain events (for example, if the Company is a surviving corporation in a merger with an Acquiring Person), the Rights entitle holders other than the Acquiring Person to acquire Common Stock having a value of twice the exercise price of the Rights. Upon the occurrence of certain other events (for example, if the Company is acquired in a merger or other business combination transaction in which the Company is not the surviving corporation), the rights entitle holders other than the Acquiring Person to acquire Common Stock of the Acquiring Person having a value twice the exercise price of the Rights. The Rights may be redeemed by the Company at $.01 per Right at any time until the tenth day following public announcement that a twenty percent (20%) position has been acquired. Prior to February 1, 2001, redemption of the Rights by the Company required the approval of a majority of those directors who were members of the Board of Directors at the time of execution of the Rights Agreement (the "Continuing Directors") or any person who subsequently became a member of the Board of Directors if such director's election to the Board of Directors was recommended or approved by a majority of the Continuing Directors. On February 1, 2001, the Company's Board of Directors approved an amendment and restatement of the Rights Agreement dated as of April 26, 1999 that deletes the concept of Continuing Directors and provides that redemption of the Rights requires approval by the Board of Directors (regardless of whether such directors would have been Continuing Directors). The Rights will expire on April 25, 2009. NET INCOME (LOSS) PER SHARE
(in thousands) 2001 2000 1999 ---- ---- ---- Basic weighted average common shares outstanding.......................... 101,119 98,609 99,441 Dilutive effect of assumed conversion of convertible notes................. 12,875 16,001 0 Dilutive effect of stock options....... 1,033 1,278 0 ------- ------- ------ Diluted weighted average common shares and equivalents outstanding... 115,027 115,888 99,441 ======= ======= ====== Income (loss) before extraordinary item and cumulative effect of accounting change............................... $51,638 $43,827 $(20,135) Decrease in interest expense from assumed conversion of notes, net of income taxes......................... 4,455 4,708 0 ------- ------- -------- Income (loss) before extraordinary item and cumulative effect of accounting change used to determine diluted earnings per share................... 56,093 48,535 (20,135) Extraordinary item, net of income taxes 0 1,232 0 Cumulative effect of accounting change, net of income taxes.................. (540) 0 0 ------- ------- -------- Net income (loss) used to determine diluted earnings per share........... $55,553 $49,767 $(20,135) ======= ======= ======== Options with weighted average exercise price greater than market price, excluded from computation of diluted earnings per share: Number of shares (in thousands)..... 3,762 4,089 6,147 Weighted average exercise price..... $8.06 $6.95 $6.61
The effect of an assumed conversion of the Company's Convertible Notes into 18.5 million shares of Common Stock was excluded from the computation of diluted net loss per share for Fiscal 1999 because the effect would have been antidilutive. Options to purchase 0.7 million shares of Common Stock at January 30, 1999, with exercise prices below the average market price of the Company's Common Stock, were excluded from the calculation of diluted net loss per share because the effect would have been antidilutive. Grants of stock awards under the Company's restricted stock award programs generally require continuing employment for a specified period of time as a condition for vesting of the award. Grants that have not vested and are subject to a risk of forfeiture are included in the calculation of diluted earnings per share using the treasury stock method if the impact of the award is dilutive. Upon vesting, shares issued under these award programs are included in the calculation of basic earnings per share. EMPLOYEE RETIREMENT BENEFIT PLAN The Company provides a comprehensive retirement benefit program for its employees. This plan provides for a noncontributory profit-sharing contribution which covers substantially all full-time employees who meet age and service requirements. The contribution is completely discretionary and is determined by the Board of Directors on an annual basis. The program also includes a 401(k) employee savings plan, whereby eligible participating employees may elect to contribute up to 15% of their compensation to an investment trust. The 401(k) plan includes a matching Company contribution of 50% of the participant's elective contribution on up to 6% of the participant's compensation. Participating employees are immediately vested in their own contributions. Full vesting in the matching Company contribution occurs on the earlier of the participant's attainment of 6 years of service, retirement, death, or disability, as defined in the plan. The total expense for the above plans amounted to $2,137,000, $1,312,000, and $1,556,000 for Fiscal 2001, 2000, and 1999, respectively. As of the dates of their respective acquisitions, Catherine's Stores and Modern Woman provided retirement plans for its employees with benefits substantially the same as the Company's plan. The Catherine's Stores and Modern Woman plans have been merged into the Company's plan. Participants in the Catherine's and Modern Woman plans retain credited years of service earned under those plans. Also available to officers and certain key executives is a non-qualified deferred compensation plan. Under this plan, which was adopted January 1, 1998, participants may contribute up to 77% of their base compensation and 100% of bonus compensation. ASSET SECURITIZATION Asset securitization involves the transfer by the Company's credit card bank of Fashion Bug proprietary credit card receivables to a special purpose corporation, which in turn transfers the receivables to a single purpose trust (the "Trust") created for the securitization. Asset-backed certificates issued by the Trust represent undivided interests in those credit card receivables transferred into the Trust. Certificates issued by the Trust are sold to investors, with any remaining undivided interest retained by the Company. These asset-backed certificates issued to investors are generally credit-enhanced by a third party to provide various levels of an investment-grade credit rating at the time of issuance. The Company includes the remaining undivided interest and any other retained interest in investment securities available for sale in the accompanying consolidated balance sheet. The carrying value of these retained interests approximates their fair value. The Company records gains or losses on the securitization of Fashion Bug credit card receivables based on the estimated fair value of the assets retained and liabilities incurred in the sale. Gains represent the present value of the estimated cash flows that the Company has retained over the estimated outstanding period of the receivables. This excess cash flow essentially represents an "interest-only" ("I/O") strip, consisting of the excess finance charges and past due fees over the sum of the return paid to certificate holders and credit losses. During Fiscal Years 2001, 2000, and 1999, the Company recognized additions to the I/O strip of $11,973,000, $9,876,000, and $9,765,000, respectively, and of those balances, $10,979,000, $9,814,000, and $10,254,000 were amortized during each respective Fiscal Year. In addition, the Company recognized a servicing liability of $3,864,000, $2,744,000, and $2,370,000 in Fiscal Years 2001, 2000, and 1999, respectively, and of those balances, $3,260,000, $2,797,000, and $2,579,000 were amortized in each Fiscal Year, respectively. The Company amortizes additions to the I/O strip and servicing liability on a straight-line basis over the expected life of the credit card receivables, which is generally less than one year. The expected life is computed using the 12-month rolling average of principal payments as a percent of outstanding trust receivables sold. Proceeds from the sale of new loans to the Trust were approximately $437,697,000, $398,646,000, and $360,686,000 for Fiscal 2001, Fiscal 2000, and Fiscal 1999, respectively. At February 3, 2001 and January 29, 2000, approximately $301,704,000 and $285,782,000, respectively, of investor certificates remained outstanding. The investor certificates mature as follows: $66,500,000 in the fiscal year ending February 2, 2002 ("Fiscal 2002"), $85,204,000 in the fiscal year ending February 1, 2003 ("Fiscal 2003") and $150,000,000 in the fiscal year ending January 29, 2005 ("Fiscal 2005"). The Company's retained interests in its securitizations, which aggregated $47,724,000 and $41,245,000 at February 3, 2001 and January 29, 2000, respectively, are generally subordinated in right of payment to certificates issued by the Trust to third party investors. The Company's obligation to repurchase receivables sold to the Trust is limited to those receivables that, at the time of their transfer, fail to meet the Trust's eligibility standards under normal representations and warranties. To date, the amount of receivables repurchased pursuant to this obligation has been immaterial In September 2000, The FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," a replacement of SFAS No. 125. The Company has adopted the disclosure provisions of SFAS No. 140 as of Fiscal 2001, and will adopt the accounting requirements of SFAS No. 140 to the extent that it issues new beneficial interests after March 31, 2001. Management uses key valuation assumptions in determining the fair value of its I/O strip. Key valuation assumptions relate to the average lives of the receivables sold and anticipated credit losses, as well as the appropriate market discount rate. The Company estimates the average lives of the receivables and the anticipated credit losses using the rolling average of the past twelve months experience, adjusted as necessary for the future impact of these key assumptions. The key assumptions used for the following sensitivities are a loan payment rate of 13.5%, a discount rate of 14.0% and a credit loss percentage of 8.1%. The average life of the receivables sold is approximately 0.6 years. A 10% and 20% adverse change in the loan payment rate would impact the fair value of the I/O strip by $401,000 and $739,000, respectively. A 10% and 20% adverse change in the discount rate would impact the fair value of the I/O strip receivable by $14,000 and $32,000, respectively. A 10% and 20% adverse change in the credit loss percentage would impact the fair value of the I/O strip receivable by $442,000 and $885,000, respectively. These adverse changes are hypothetical in nature and are presented in accordance with SFAS No. 140. Collections reinvested in revolving-period securitizations for Fiscal 2001 were $445,576,000. Cash flows received on retained interests and servicing fees received for Fiscal 2001 were $34,963,000 and $5,708,000, respectively. The Company is the servicer of the Master Trust, and receives a servicing fee of approximately 2% of the investor interest. During Fiscal 2001, total net credit losses were $22,602,000, and credit card accounts that were 90 or more days delinquent at February 3,2001 were $9,153,000. Charming Shoppes Receivables Corp. and Charming Shoppes Street, Inc., wholly owned indirect subsidiaries of the Company, are separate special purpose corporations. At February 3, 2001, Charming Shoppes Receivables Corp. had $36,792,000 of Charming Shoppes Master Trust Certificates (which are included in the $47,724,000 of retained interests at February 3, 2001), and Charming Shoppes Street, Inc. had $1,127,000 of cash. These assets will be available first and foremost to satisfy the claims of the respective creditors of these separate corporate entities, including certain claims of investors in the Charming Shoppes Master Trust. The providers of the credit enhancements and trust investors have no other recourse to the Company. The Company does not receive collateral from any party to the securitization, and the Company does not have any risk of counterparty non-performance. The Company has a non-recourse agreement to permit a third party to provide an accounts receivable proprietary credit card sales funding program for its Catherine's Stores, which expires in January 2005. Under this agreement, the third party reimburses the Company daily with respect to the proprietary credit card sales generated by the Catherine's Stores credit card accounts. The agreement may require the Company to repurchase receivables from the third party under certain conditions relating to a change in control of the Company. Net proceeds received from sales of Catherine's receivables for Fiscal 2001 and for the month of January 2000 (the period subsequent to the Company's acquisition of Catherine's), were approximately $121,093,000 and $6,611,000, respectively. The net balance of accounts receivable held by the third party was approximately $99,571,000 and $93,648,000 at February 3, 2001 and January 29, 2000, respectively. DERIVATIVE FINANCIAL INSTRUMENTS HELD FOR PURPOSES OTHER THAN TRADING Although the Company securitizes credit card receivables from its Fashion Bug proprietary credit card program in a non-consolidated master trust, the Company is exposed to fluctuations in interest rates. On September 15, 1999, the Company entered into an interest rate swap transaction with a notional amount of $50,000,000 that limited the Company's exposure to rising interest rates should the one-month LIBOR rate increase to a rate above the agreement's specified rate of 6.51%. The swap agreement required the Company to pledge certain assets if the market value of the interest rate swap fell below an amount set forth in the agreement. As of January 29, 2000, there were no assets required to be pledged under the terms of the agreement. During Fiscal 2001, the Company terminated the swap agreement, and, in Fiscal 2002, the deferred loss related to this termination will be recognized in comprehensive income and amortized to selling, general, and administrative expenses over 44 months (the remaining life of the original swap period) in accordance with SFAS No. 133. LEASES The Company leases substantially all of its stores under non-cancelable operating lease agreements. Generally, these leases have initial periods of 5 to 20 years and contain provisions for renewal options, additional rentals based on a percentage of sales, and payment of certain real estate taxes. The Company also leases certain other buildings and equipment. Rental expense was:
(in thousands) 2001 2000 1999 ---- ---- ---- Minimum rental...... $117,824 $ 86,438 $80,058 Contingent rental... 18,901 15,399 13,399 -------- -------- ------- $136,725 $101,837 $93,457 ======== ======== =======
Minimum annual rental commitments for all non-cancelable leases for the next five fiscal years and thereafter are: 2002 - $125,995,000; 2003 - $108,404,000; 2004 - $89,170,000; 2005 - $66,241,000; 2006 - $42,573,000; Thereafter - $87,565,000. FAIR VALUE OF FINANCIAL INSTRUMENTS The following is a summary of the carrying amounts and estimated fair values of the Company's financial instruments:
February 3, 2001 January 29, 2000 Carrying Fair Carrying Fair (in thousands) Amount Value Amount Value ------ ----- ------ ----- Assets: Cash and cash equivalents.... $ 56,544 $ 56,544 $ 34,299 $ 34,299 Available-for-sale securities 125,278 125,278 115,829 115,829 Liabilities: 7.5% Convertible Subordinated Notes due 2006............. 96,047 93,012 96,047 98,448 7.5% mortgage note........... 6,449 6,449 6,652 6,652 Other long-term debt......... 108 108 102 102 Off-Balance-Sheet Financial Instruments: Interest rate caps........... 0 0 0 116 Interest rate swaps.......... 0 0 0 1,096
The fair value of cash and cash equivalents approximates their carrying amount because of the short maturities of such instruments. The fair value of available-for-sale securities is based on quoted market prices of the securities, except for certain equity securities that have no available bid/ask or sales prices as they are not traded in the open market. The carrying amount of these equity securities ($7,952,000 at February 3, 2001 and January 29, 2000) was used to approximate fair value. The fair value of the Company's 7.5% Convertible Subordinated Notes is based on quoted market prices for the securities. The fair values of the 7.5% Mortgage Note and other long-term debt approximate their carrying amounts based on estimated current interest rates that the Company could obtain on similar borrowings. The fair values of interest-rate caps and swaps were determined on the basis of valuation pricing models which take into account current market and contractual prices of the underlying instruments, as well as the time value and yield curve or volatility factors underlying the positions. RESTRUCTURING CHARGE (CREDIT) On March 5, 1998, the Company's Board of Directors approved a restructuring plan that resulted in a pre-tax charge of $34,000,000. The plan was approved in conjunction with the decision to eliminate men's merchandise from the Company's Fashion Bug stores. To-date, 72 stores have been closed in connection with the plan and 100 stores have been downsized. Elimination of the men's merchandise from the stores was completed in October 1998, the balance of the men's inventory has been sold, and the selling space used for men's merchandise has been re-merchandised. In Fiscal 2000, the Company determined that 21 of the stores originally included in the plan would remain open as a result of negotiations with landlords and changes in economic conditions. As a result, the Company reversed reserves related to these stores and recognized a pre-tax restructuring credit of $2,096,000. As of February 3, 2001, this restructuring plan has been completed, and there are no remaining restructure accruals relating to this plan. The restructuring charge included a $10,000,000 write-off of the carrying value of fixtures and improvements in the stores to be reduced in size or closed. The fixtures and improvements had no alternative use or salvage value, and were expected to be scrapped at the time of the closing or downsizing of the stores. The restructuring charge also included accruals for anticipated payments to landlords for the early termination of existing store leases of $19,700,000, severance payments of $320,000, costs to remove store signs and entrances of $3,300,000, costs of supplies to be scrapped of $400,000, and legal and architectural fees of $280,000. The accrual for severance payments was for 650 store employees expected to be terminated as a result of the store closings. The number of employees actually terminated was reduced to 590 as a result of the 21 stores that remained open, as discussed above, and the excess severance accrual was reversed as part of the restructuring credit of $2,096,000 recognized in Fiscal 2000. The following is a summary of other restructure charges accrued in connection with the plan to eliminate men's merchandise from the Company's Fashion Bug stores, and payments charged against the accrual:
Sign and Lease Entrance Termin- Removal Total ation and Other Sever- Accrued (in thousands) Costs Costs ance Costs ----- ----- ---- ----- Beginning accrual................. $19,700 $ 3,980 $ 320 $24,000 Fiscal 1999: Payments........................ (6,071) (551) (200) (6,822) ------- ------- ----- ------- Balance, January 30, 1999......... 13,629 3,429 120 17,178 Fiscal 2000: Payments........................ (6,955) (1,340) (90) (8,385) Revision of cost estimate....... (1,784) (282) (30) (2,096) ------- ------- ----- ------- Balance, January 29, 2000......... 4,890 1,807 0 6,697 Fiscal 2001: Payments........................ (4,890) (1,807) -- (6,697) ------- ------- ----- ------- Balance, February 3, 2001......... $ 0 $ 0 $ 0 $ 0 ======= ======= ===== =======
On December 10, 1998, the Company's Board of Directors approved a plan to close the Company's Bensalem, Pennsylvania distribution center and sell the facility. The plan was approved in conjunction with the decision to consolidate the Company's distribution center operations in the Company's Greencastle, Indiana distribution center. The plan resulted in a pre-tax restructuring charge of $20,246,000 during Fiscal 1999. The restructuring charge included a $17,969,000 write-down of the cost of the Bensalem facilities from a carrying value of $23,631,000 to a net realizable value of $5,662,000, based on an independent appraisal. The restructuring charge also included an accrual of $1,556,000 for severance costs resulting from the termination of 90 warehouse and distribution personnel and 11 management employees. In addition, the restructuring charge included an accrual of $721,000 for incremental warehouse handling costs, outplacement services for terminated employees, legal fees related to the sale of the facility, and other non-recurring costs relating to the closure. The Bensalem distribution center closed on December 10, 1998, and the Company completed the sale of the Bensalem facility during Fiscal 2000. Upon completion of the sale of the facility, the Company recognized a pre- tax restructuring credit of $2,834,000 in Fiscal 2000, which primarily represented sales proceeds in excess of the estimated net realizable value of the Bensalem facility. The following is a summary of other restructure charges accrued in connection with the closing of the Bensalem facility, and payments charged against the accrual:
Contractual Warehouse Handling Other Total (in thousands) Severance Costs Costs Costs --------- ----- ----- ----- Beginning accrual........ $1,556 $ 436 $ 285 $ 2,277 Fiscal 1999: Payments............... (981) (0) (26) (1,007) ------ ----- ----- ------- Balance, January 30, 1999 575 436 259 1,270 Fiscal 2000: Payments............... (575) (436) (144) (1,155) ------ ----- ----- ------- Balance, January 29, 2000 0 0 115 115 Fiscal 2001: Payments............... -- -- (115) (115) ------ ----- ----- ------- Balance, February 3, 2001 $ 0 $ 0 $ 0 $ 0 ====== ===== ===== =======
During the fourth quarter of Fiscal 2000, the Company recorded a restructuring charge of $1,459,000 in connection with the Company's acquisitions of Modern Woman and Catherine's Stores. At the time of the Catherine's Stores acquisition, the Company planned to consolidate Modern Woman stores into the Catherine's Stores division. The restructuring charge was primarily for lease termination costs related to the closing of 11 Modern Woman stores that geographically overlapped Catherine's Stores. There were no payments charged against this accrual as of January 29, 2000. During Fiscal 2001, the Company closed 10 of the 11 stores, and accrued restructuring charges of $1,086,000 related to the closed stores were paid. As of February 3, 2001, $373,000 of accrued restructuring charges related to the remaining store were unpaid. NON-RECURRING GAIN FROM DEMUTUALIZATION OF INSURANCE COMPANY During Fiscal 2000, the Company received a $6,700,000 stock distribution from one of its mutual insurance carriers in connection with the carrier's conversion to a publicly-held corporation (demutualization). In accordance with the consensus reached in Emerging Issues Task Force Issue No. 99-4, "Accounting for Stock Received from the Demutualization of A Mutual Insurance Company," the Company recorded the distribution at its fair value and recognized the resulting non-recurring gain in income from continuing operations, and subsequently sold the securities received. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(in thousands, except First Second Third Fourth (per share amounts) Quarter Quarter Quarter Quarter ------- ------- ------- ------- Fiscal 2001(1) Net sales........... $378,925 $429,658 $363,812 $434,684 Gross profit........ 107,409 133,128 108,236 123,752 Net income.......... 7,733(2) 26,841 7,377 9,147 Basic net income per share......... .08(2) .27 .07 .09 Diluted net income per share......... .08(2) .24 .07 .09 Fiscal 2000 Net sales........... $258,975 $311,743 $277,441 $348,370 Gross profit........ 68,913 96,971 78,264 97,607 Net income.......... 6,002(3) 22,225(4) 8,276(5) 8,556(6) Basic net income per share......... .06(3) .23 .08 .09 Diluted net income per share......... .06(3) .21 .08 .08
- -------------------- [FN] (1) In the fourth quarter of Fiscal 2001, the Company changed its method of accounting for sales returns and layaway sales, as required by Securities and Exchange Commission Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." The Company adopted SAB 101 effective as of the beginning of Fiscal 2001 and restated its results of operations for the first three quarters of Fiscal 2001. Quarterly financial data for the first three quarters of Fiscal 2001 as previously reported, prior to restatement for the adoption of SAB 101, are as follows: (in thousands, except First Second Third (per share amounts) Quarter Quarter Quarter ------- ------- ------- Net sales............................ $381,334 $428,229 $365,690 Gross profit......................... 108,493 132,485 109,081 Net income........................... 8,943 26,444 7,899 Basic net income per share........... .09 .26 .08 Diluted net income per share......... .09 .24 .08
(2) Includes cumulative effect of adoption of SAB 101 of ($540) (($.01) per share). (3) Net income includes an after-tax extraordinary gain from early retirement of debt of $1,232 ($.01 per share). (4) Net income includes an after-tax restructuring credit of $1,842. (5) Net income includes an after-tax non-recurring gain from demutualization of insurance company of $4,355. (6) Net income includes an after-tax restructuring credit of $1,362 and an after-tax restructuring charge of $948. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There are no matters that are required to be reported under this Item 9. PART III Item 10. Directors and Executive Officers of the Registrant Information regarding Directors of the Company is included under the caption "Election of Directors" of the Company's definitive proxy statement, which is incorporated herein by reference. Information regarding Executive Officers is included under "Item 4A. Executive Officers of the Registrant," in Part I of this Report. Item 11. Executive Compensation Information regarding executive compensation is included under the captions "Management Compensation" and "Report of the Compensation and Stock Option Committees of the Board of Directors on Executive Compensation" of the Company's definitive proxy statement, which is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management Information regarding the security ownership of certain beneficial owners and management is set forth under the caption "Principal Shareholders and Management Ownership" of the Company's definitive proxy statement, which is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Information regarding certain relationships and related transactions is set forth under the captions "Certain Relationships and Related Transactions" and "Compensation Committee Interlocks and Insider Participation" of the Company's definitive proxy statement, which is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a)(1) Financial Statements The following Consolidated Financial Statements of Charming Shoppes, Inc. and its subsidiaries are included in Part II, Item 8: Report of Independent Auditors Consolidated Balance Sheets - February 3, 2001 and January 29, 2000 Consolidated Statements of Operations and Comprehensive Income (Loss) - years ended February 3, 2001, January 29, 2000, and January 30, 1999 Consolidated Statements of Stockholders' Equity - years ended February 3, 2001, January 29, 2000, and January 30, 1999 Consolidated Statements of Cash Flows - years ended February 3, 2001, January 29, 2000, and January 30, 1999 Notes to Consolidated Financial Statements (a)(2) Financial Statement Schedules All schedules required by Rule 5-04 of Regulation S-X have been omitted as they are not applicable, not required, or the information is included in the consolidated financial statements or notes thereto included in Part II, Item 8 of this Report on Form 10-K. (b) Reports on Form 8-K No reports were filed during the quarter ended February 3, 2001. (c) Exhibits, including those incorporated by reference The following is a list of Exhibits filed as part of this Annual Report on Form 10-K. Where so indicated by footnote, Exhibits that were previously filed are incorporated by reference. For Exhibits incorporated by reference, the location of the Exhibit in the previous filing is indicated in parenthesis. Articles of Incorporation and By-Laws 3.1 Restated Articles of Incorporation, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 1994. (Exhibit 3.1). 3.2 By-Laws, as Amended and Restated, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 1999. (Exhibit 3.2). Instruments Defining the Rights of Security Holders, Including Indentures 4.1 Amended and Restated Rights Agreement, dated as of February 1, 2001, between Charming Shoppes, Inc. and American Stock Transfer & Trust Company, as Rights Agent. Material Contracts 10.1.1 Series 1997-1 Supplement dated as of November 25, 1997 to the Second Amended and Restated Pooling and Servicing Agreement dated as of November 25, 1997 by and among Charming Shoppes Receivables Corp., as Seller, Spirit of America National Bank, as Servicer and First Union National Bank, as Trustee on behalf of the Series 1997-1 Certificate Holders ($83,500,000 Charming Shoppes Master Trust Series 1997-1), incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 31, 1998. (Exhibit 10.1.9). 10.1.2 Release Agreement, dated as of February 28, 1997, among (a) Congress Financial Corporation (Lender) and (b) Charming Shoppes, Inc., Charming Shoppes of Delaware, Inc., CSI Industries, Inc. and FB Apparel, Inc. (collectively, the Borrowers), incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 1, 1997. (Exhibit 10.1.15). 10.1.3 Second Amended and Restated Loan and Security Agreement, Dated February 28, 1997, by and between (a) Congress Financial Corporation, as Lender, (b) Charming Shoppes, Inc., Charming Shoppes of Delaware, Inc., CSI Industries, Inc. and FB Apparel, Inc., as borrowers and (c) Charming Shoppes of Delaware, Inc., as Borrower's Agent, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 1, 1997. (Exhibit 10.1.16). 10.1.4 Amendment of Second Amended and Restated Loan and Security Agreement, dated February 28, 1997 among Charming Shoppes, Inc. (the "Company"), certain subsidiaries of the Company which are parties thereto, Borrowers' Agent and Congress Financial Corporation, dated as of May 1, 1998, incorporated by reference to Form 10-Q for the quarter ended May 2, 1998. (Exhibit 10.1). 10.1.5 Amendment No. 2 to Second Amended and Restated Loan and Security Agreement, dated February 28, 1997 (as amended and supplemented) among Charming Shoppes, Inc. (the "Company"), certain subsidiaries of the Company which are parties thereto, Borrowers' Agent and Congress Financial Corporation, dated as of December 21, 1998, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1999. (Exhibit 10.1.14). 10.1.6 Consent of Congress Financial Corporation, dated July 30, 1999, to the Modern Woman Acquisition, Re: Second Amended and Restated Loan and Security Agreement, dated February 28, 1997, as amended and supplemented, among Charming Shoppes, Inc. (the "Company"), certain subsidiaries of the Company which are parties thereto (collectively, with the Company, "Borrowers"), Borrower's Agent, and Congress Financial Corporation, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2000. (Exhibit 10.1.14). 10.1.7 Amendment, dated as of October 19, 1999, to Second Amended and Restated Loan and Security Agreement, by and among Congress Financial Corporation, as Lender, Charming Shoppes, Inc., Charming Shoppes of Delaware, Inc., CSI Industries, Inc., and FB Apparel, Inc., as Borrowers, and Charming Shoppes of Delaware, Inc., as Borrower's Agent, dated February 28, 1997, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2000. (Exhibit 10.1.15). 10.1.8 Consent of Congress Financial Corporation, dated November 1999, to Catherine Stores Merger Transaction, Re: Second Amended and Restated Loan and Security Agreement, dated February 28, 1997, as amended and supplemented, among Charming Shoppes, Inc. (the "Company"), certain subsidiaries of the Company which are parties thereto (collectively, with the Company, "Borrowers"), Borrower's Agent, and Congress Financial Corporation, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2000. (Exhibit 10.1.16). 10.1.9 Amendment No. 3, dated as of December 27, 1999, to Second Amended and Restated Loan and Security Agreement, dated February 28, 1997, as amended and supplemented, among Charming Shoppes, Inc. (the "Company"), certain subsidiaries of the Company which are parties thereto (collectively, with the Company, "Borrowers"), Borrower's Agent, and Congress Financial Corporation, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2000. (Exhibit 10.1.17). 10.1.10 Amendment No. 4, dated as of October 26, 2000, to Second Amended and Restated Loan and Security Agreement, dated February 28, 1997, as amended and supplemented, among Charming Shoppes, Inc. (the "Company"), certain subsidiaries of the Company which are parties thereto (collectively, with the Company, "Borrowers"), Borrower's Agent, and Congress Financial Corporation. 10.1.11 Amendment No. 5, dated as of January 31, 2001, to Second Amended and Restated Loan and Security Agreement, dated February 28, 1997, as amended and supplemented, among Charming Shoppes, Inc. (the "Company"), certain subsidiaries of the Company which are parties thereto (collectively, with the Company, "Borrowers"), Borrower's Agent, and Congress Financial Corporation. 10.1.12 Second Amended and Restated Pooling and Servicing Agreement, dated as of November 25, 1997, as amended on July 22, 1999, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and First Union National Bank as Trustee, incorporated by reference to Form 8-K of Charming Shoppes Receivables Corp., (No. 333-71757) dated July 22, 1999. (Exhibit No. 4.1). 10.1.13 Series 1999-1 Supplement, dated as of July 22, 1999, to Second Amended and Restated Pooling and Service Agreement, dated as of November 25, 1997, as amended on July 22, 1999, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and First Union National Bank, as Trustee, for $150,000,000 Charming Shoppes Master Trust Asset-Backed Certificates Series 1999-1, incorporated by reference to Form 8-K of Charming Shoppes Receivables Corp., (No. 333-71757) dated July 22, 1999. (Exhibit No. 4.2). 10.1.14 Receivables Purchase Agreement, dated as of May 28, 1999, among Charming Shoppes Street, Inc. as Seller, Spirit of America, Inc., as Servicer, Clipper Receivables Corporation, as Purchaser, State Street Capital Corporation, as Administrator, and State Street Bank & Trust Company, as Relationship Bank, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2000. (Exhibit 10.1.22). 10.1.15 Series 1999-2 Supplement, dated as of May 28, 1999, to Second Amended and Restated Pooling and Service Agreement, dated as of November 25, 1997, as amended on July 22, 1999, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and First Union National Bank, as Trustee, for $55,750,000 Charming Shoppes Master Trust Asset-Backed Certificates Series 1999-2, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2000. (Exhibit 10.1.23). 10.1.16 Series 2000-VFC Supplement, dated as of November 9, 2000, to Second Amended and Restated Pooling and Service Agreement, dated as of November 25, 1997, among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and First Union National Bank, as Trustee, on behalf of the Series 2000-VFC Certificateholders, for up to $60,122,700 Charming Shoppes Master Trust Series 2000-VFC. 10.1.17 Certificate Purchase Agreement, dates as of November 9, 2000, among Charming Shoppes Receivables Corp. as Seller and as the Class B Purchaser, Spirit of America, Inc. as Servicer, Monte Rosa Capital Corporation as the Conduit Purchaser, and ING Baring (U.S.) Capital Markets LLC as Administrator for the Conduit Purchaser. 10.1.18 Agreement and Plan of Merger, dated as of November 15, 1999, by and among Catherines Stores Corporation, Charming Shoppes, Inc., and Rose Merger Sub, Inc., incorporated by reference to Schedule 14(D)-1 of the Registrant filed November 19, 1999. (Item 11(c)(1)). 10.1.19 Merchant Services Agreement, between Hurley State Bank and Catherines, Inc., incorporated by reference to Form 10-Q of Catherines Stores Corp. (Commission File No. 000-19372) for the quarter ended May 1, 1999. (Item 6. (A)(1).) 10.1.20 Credit Agreement, Dated July 31, 2000, by and between Catherines, Inc., Catherines Stores Corporation, and their subsidiaries, as Borrowers, and Amsouth Bank and Hibernia National Bank, as Banks, and Amsouth Bank, as Agent, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 28, 2000. (Exhibit 10.1). Management Contracts and Compensatory Plans and Arrangements 10.2.1 The 1986 Employees' Stock Option Plan of Charming Shoppes, Inc., incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 1, 1992. (Exhibit 10.2.2, Pg. 240). 10.2.2 The 1988 Key Employee Stock Option Plan of Charming Shoppes, Inc., as amended, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1993. (Exhibit 10.2.3, Pg. 486). 10.2.3 The 1990 Employees' Stock Incentive Plan of Charming Shoppes, Inc., as amended, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1993. (Exhibit 10.2.4, Pg. 492). 10.2.4 The 1989 Non-Employee Director Stock Option Plan of Charming Shoppes, Inc., as amended, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1993. (Exhibit 10.2.5, Pg. 499). 10.2.5 Non-Employee Director Restricted Stock Plan of Charming Shoppes, Inc., as amended, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1993. (Exhibit 10.2.6, Pg. 503). 10.2.6 The Charming Shoppes, Inc. Non-Employee Directors Compensation Program, As Amended and Restated, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 1999. (Exhibit 10.1). 10.2.7 The Charming Shoppes, Inc. Non-Employee Directors Compensation Program Stock Option Agreement, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 1999. (Exhibit 10.2). 10.2.8 The Charming Shoppes, Inc. Non-Employee Directors Compensation Program Restricted Stock Agreement, incorporated by reference to Form 10-Q of the Registrant for the quarter ended July 31, 1999. (Exhibit 10.3). 10.2.9 Subplan and Summary Description of the Annual Incentive Plan of Charming Shoppes, Inc., incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 1, 1992. (Exhibit 10.2.13, Pg. 251). 10.2.10 The 1993 Employees' Stock Incentive Plan of Charming Shoppes, Inc., incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 1994. (Exhibit 10.2.10). 10.2.11 The 1993 Employees' Stock Incentive Plan Stock Option Agreement (regular vesting schedule) of Charming Shoppes, Inc., incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 1994. (Exhibit 10.2.11). 10.2.12 The 1993 Employees' Stock Incentive Plan Stock Option Agreement (accelerated vesting schedule) of Charming Shoppes, Inc., incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 1994. (Exhibit 10.2.12). 10.2.13 The Charming Shoppes, Inc. 1993 Employees' Stock Incentive Plan Restricted Stock Agreement, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1999. (Exhibit 10.2.10). 10.2.14 The Charming Shoppes, Inc. Employee Stock Purchase Plan, as amended, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 1996. (Exhibit 10.2.10). 10.2.15 The Charming Shoppes, Inc. Restricted Stock Award Plan for Associates, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 1996. (Exhibit 10.2.11). 10.2.16 The Charming Shoppes, Inc. 1996 Restricted Stock Award Program, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 1996. (Exhibit 10.2.12). 10.2.17 The Charming Shoppes, Inc. 1996 Restricted Stock Award Program Restricted Stock Agreement, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 1996. (Exhibit 10.2.13). 10.2.18 Employment Agreement, dated as of May 17, 1995, by and between Charming Shoppes, Inc., and David V. Wachs, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 1996. (Exhibit 10.2.14). 10.2.19 Employment Agreement, dated as of August 22, 1995 by and between Charming Shoppes, Inc., and Dorrit J. Bern, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 1996. (Exhibit 10.2.15). 10.2.20 Employment Agreement, dated as of October 12, 1999, by and between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 1999. (Exhibit 10.1). 10.2.21 1993 Employees' Stock Incentive Plan Stock Option Agreement, dated as of August 23, 1995, by and between Charming Shoppes, Inc., and Dorrit J. Bern, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 1996. (Exhibit 10.2.16). 10.2.22 1993 Employees' Stock Incentive Plan Restricted Stock and Stock Bonus Agreement, dated as of March 20, 1996, by and between Charming Shoppes, Inc., and Dorrit J. Bern, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 3, 1996. (Exhibit 10.2.17). 10.2.23 1993 Employees' Stock Incentive Plan Restricted Stock Agreement, dated as of October 12, 1999, by and between Charming Shoppes, Inc. and Dorrit J. Bern, incorporated by reference to Form 10-Q of the Registrant for the quarter ended October 30, 1999. (Exhibit 10.2). 10.2.24 The Charming Shoppes, Inc. Non-Employee Directors Compensation Program, incorporated by reference to Registration Statement on Form S-8 (Registration No. 333-22323), of the Registrant, dated February 25, 1997. (Exhibit 4.1). 10.2.25 The Charming Shoppes, Inc. Compensation Program for the Non- Employee Chairman of the Board of Directors, incorporated by reference to Registration Statement on Form S-8 (Registration No. 333-22323), of the Registrant, dated February 25, 1997. (Exhibit 4.2). 10.2.26 Charming Shoppes, Inc. 1998 Restricted Award Program, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 31, 1998. (Exhibit 10.2.22). 10.2.27 Charming Shoppes Inc. 1999 Associates' Stock Incentive Plan, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1999. (Exhibit 10.2.24). 10.2.28 Charming Shoppes, Inc. 1999 Associates' Stock Incentive Plan Stock Option Agreement, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1999. (Exhibit 10.2.25). 10.2.29 Charming Shoppes, Inc. Amended and Restated 2000 Associates' Stock Incentive Plan. 10.2.30 Charming Shoppes, Inc. 2000 Associates' Stock Incentive Plan Stock Option Agreement, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2000. (Exhibit 10.2.32). 10.2.31 Forms of Executive Severance Agreements by and between the Company, the named executive officers in the Company's Proxy Statement for the Annual Meeting to be held on June 15, 2000, and certain other Executive Officers of the Company, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 2000. (Exhibit 10.2.33). 10.2.32 Charming Shoppes, Inc. Employees' Retirement Savings Plan, as Amended and Restated, Effective January 1, 1998, Including Amendments Adopted Through August 1, 2001. Other Exhibits Exhibit 21 - Subsidiaries of Registrant Exhibit 23 - Consent of independent auditors SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Charming Shoppes, Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHARMING SHOPPES, INC. /S/ DORRIT J. BERN - ------------------------------------- By: Dorrit J. Bern Chairman of the Board President and Chief Executive Officer Date: April 26, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: /S/ DORRIT J. BERN /S/ ERIC M. SPECTER - ------------------------------------- ------------------------------------ Dorrit J. Bern, April 26, 2001 Eric M. Specter, April 26, 2001 Chairman of the Board Executive Vice President President and Chief Executive Officer Chief Financial Officer And Treasurer /S/ JOHN J. SULLIVAN /S/ JOSEPH L. CASTLE II - ------------------------------------- ------------------------------------ John J. Sullivan, April 26, 2001 Joseph L. Castle II, April 26, 2001 Vice President, Corporate Controller Director Chief Accounting Officer /S/ ALAN ROSSKAMM /S/ MARVIN L. SLOMOWITZ - ------------------------------------- ------------------------------------ Alan Rosskamm, April 26, 2001 Marvin L. Slomowitz, April 26, 2001 Director Director /S/ PAMELA S. LEWIS - ------------------------------------- ------------------------------------ Marjorie Margolies-Mezvinsky Pamela S. Lewis, April 26, 2001 Director Director /S/ CHARLES T. HOPKINS - ------------------------------------- ------------------------------------ Kenneth S. Olshan, Charles T. Hopkins, April 26, 2001 Director Director /S/ KATHERINE M. HUDSON - ------------------------------------- Katherine M. Hudson, April 26, 2001 Director EX-4 2 exh41.txt RIGHTS AGREEMENT EXHIBIT 4.1 Charming Shoppes, Inc. and American Stock Transfer & Trust Company as Rights Agent AMENDED AND RESTATED RIGHTS AGREEMENT Dated as of February 1, 2001 Table of Contents
Section Page Section 1. Certain Definitions -2- Section 2. Appointment of Rights Agent -5- Section 3. Issue of Rights Certificates -5- Section 4. Form of Rights Certificates -7- Section 5. Countersignature and Registration -8- Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates -9- Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights -10- Section 8. Cancellation and Destruction of Rights Certificates -12- Section 9. Reservation and Availability of Capital Stock; Registration of Securities -12- Section 10. Capital Stock Record Date -13- Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights -14- Section 12. Certificate of Adjusted Purchase Price or Number of Shares -23- Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power -23- Section 14. Fractional Rights and Fractional Shares -26- Section 15. Rights of Action -28- Section 16. Agreement of Rights Holders -28- Section 17. Rights Certificate Holder Not Deemed a Shareholder -29- Section 18. Concerning the Rights Agent -29- Section 19. Merger or Consolidation or Change of Name of Rights Agent -30- Section 20. Duties of Rights Agent -30- Section 21. Change of Rights Agent -32- Section 22. Issuance of New Rights Certificates -33- Section 23. Redemption and Termination -34- Section 24. Notice of Certain Events -35- Section 25. Notices -36- Section 26. Supplements and Amendments -36- Section 27. Successors -37- Section 28. Determinations and Actions by the Board of Directors, etc -37- Section 29. Benefits of this Agreement -37- Section 30. Severability -38- Section 31. Governing Law -38- Section 32. Counterparts -38- Section 33. Descriptive Headings -38-
RIGHTS AGREEMENT AMENDED AND RESTATED RIGHTS AGREEMENT, dated as February 1, 2001 (the "Agreement"), between CHARMING SHOPPES, INC., a Pennsylvania corporation (the Company), and American Stock Transfer & Trust Company (the "Rights Agent"). W I T N E S S E T H WHEREAS, on April 27, 1989, the Mellon Bank (East) National Association (as the rights agent) and the Company entered into a Rights Agreement (the "Original Rights Agreement") dated as of April 27, 1989. WHEREAS, on April 27, 1989, the Board of Directors of the Company authorized and declared a dividend distribution of one Right (as defined in the Original Rights Agreement) for each share of common stock of the Company outstanding at the close of business on May 11, 1989 and authorized the issuance of one Right (as defined in the Original Rights Agreement), with each Right (as defined in the Original Rights Agreement) initially representing the right to purchase one three-hundredth of a Preferred Share (as defined in the Original Rights Agreement) of the Company having the rights, powers and preferences set forth in the form of a resolution of the Board of Directors; and WHEREAS, the Original Rights Agreement and all Rights outstanding thereunder expired in accordance with the terms of the Original Rights Agreement at the close of business on April 26, 1999; and WHEREAS, the Board of Directors of the Company authorized and declared a dividend distribution payable effective immediately following the close of business on April 26, 1999 (the "Rights Dividend Declaration Date") of one Right (defined below) for each Common Share (as hereinafter defined) of the Company outstanding at the close of business on April 12, 1999 (the "Record Date") with each Right initially representing the right-to purchase one three-hundredth of a Preferred Share (as hereinafter defined) of the Company having the rights, powers and preferences set forth in the form of the Resolution of the Board of Directors attached hereto as Exhibit A, upon the terms and subject to the conditions hereinafter set forth (the "Rights"); and WHEREAS, the Rights will be held by the Rights Agent under this Agreement as trustee for the shareholders of the Company until the Distribution Date; and WHEREAS, the Board of Directors of the Company has considered whether approval of this Agreement and the distribution of the Rights is in the best interests of the Company and all other pertinent factors; and WHEREAS, the Board of Directors of the Company has concluded that approval of this Agreement and the distribution of the Rights is in the best interests of the Company because the existence of the Rights will help (i) reduce the risk of coercive two-tiered, front-end loaded or partial offers that may not offer fair value to all shareholders, (ii) mitigate against market accumulators who through open market and/or private purchases may achieve a position of substantial influence or control without paying to selling or remaining shareholders a fair control premium, (iii) deter market accumulators who are simply interested in putting the Company into "play" (iv) restrict self- dealing by a substantial shareholder, and (v) preserve the Board of Directors' bargaining power and flexibility to deal with third- party acquirors and to otherwise seek to maximize values for all shareholders. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, and intending to be legally bound hereby, the parties hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: (1) "Acquiring Person" shall mean any Person who or which together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 20% or more of the Common Shares then outstanding but shall not include the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan. (2) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended and in effect on the date hereof (the "Exchange Act"). (3) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially own" any securities: (1) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; Provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," (A) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for payment, purchase or exchange, or (B) securities issuable upon exercise of Rights at any time prior to the occurrence of a Triggering Event, or (C) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event which Rights were acquired by such Person or any of such Person's Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the "Original Rights') or pursuant to Section 11(i) hereof in connection with an adjustment made with respect to any Original Rights; (2) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial" ownerships of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including without limitation pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own" any security under this subparagraph (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (3) that are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subparagraph (ii) of this paragraph (c)) or disposing of any voting securities of the Company, provided, however, that nothing in this paragraph (c) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of, or to "beneficially own" any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (4) "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. (5) "Close of business" an any given date shall mean 5:00 P.M., New York, New York time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., New York, New York time, on the next succeeding Business Day. (6) "Common Share" shall mean the shares of Common Stock, par value $.10 per share, of the Company and, to the extent that there are not a sufficient number of Common Shares authorized to permit the full exercise of the Rights, shares of any other class or series of the Company designated for such purpose containing terms substantially similar to the terms of the Common Shares, except that "Common Share" when used with reference to any Person other than the Company shall mean the shares of capital stock of such Person with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person. (7) Intentionally left blank. (8) "Distribution Date" shall have the meaning set forth in Section 3 hereof. (9) "Expiration Date" shall have the meaning set forth in Section 7(a). (10) "Person" shall mean any individual, firm, corporation, partnership or other entity. (11) "Preferred Share" shall mean a share of Series A Junior Participating Preferred Stock, par value $1.00 per share, of the Company and, to the extent that there are not a sufficient number of Series A Junior Participating Preferred Stock authorized to permit the full exercise of the Rights, shares of any other series of Series Preferred Stock of the Company designated for such purpose containing terms substantially similar to the terms of the Series A Junior Participating Preferred Stock. (12) "Preferred Share Fraction" shall mean one three-hundredth of a Preferred Share. (13) "Section 11(a)(ii) Event" shall mean any event described in Section 11(a)(ii) (A), (B) or (C) hereof. (14) "Section 13 Event" shall mean any event described in clauses (x), (y) or (z) of Section 13(a) hereof. (15) "Stock Acquisition Date" shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such. (16) "Subsidiary" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (17) "Trading Day" shall have the meaning set forth-in Section 11(d)(i) hereof. (1) (18) "Triggering Event" shall mean any Section 11(a)(ii) Event or any Section 13 Event. Unless otherwise specified, where reference is made in this Agreement to sections of, and the General Rules and Regulations under, the Exchange Act, such reference shall mean such sections and rules as amended from time to time and any successor provisions thereto. Section 2. Appointment of Rights Agent. (1) The Company hereby appoints the Rights Agent to act as agent for the Company and trustee for the beneficial owners of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the Common Shares) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable. (2) On the Record Date, the Company will deliver a Rights Certificate to the Rights Agent, registered in the name of the Rights Agent as trustee for the beneficial owners of the Rights represented thereby, for that number of Rights equal to the number of Common Shares issued and outstanding on the Record Date, and the Rights Agent shall hold the Rights represented thereby in trust for the beneficial owners in accordance with the provisions of this Agreement. Section 3. Issue of Rights Certificates. (1) Until the earlier of (i) the close of business on the tenth day after a Stock Acquisition Date involving an Acquiring Person that has become such in a transaction as to which the Board of Directors has not made the determination referred to in Section 11(a)(ii)(B) hereof, or (ii) the close of business on such date as may be fixed by the Board of Directors of the Company by notice to the Rights Agent and publicly announced by the Company, which date shall not be later than 65 days after the date that a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon consummation thereof, such Person would be the "Beneficial Owner" of 20% or more of the Common Shares then outstanding (the earlier of (i) and (ii) being herein referred to as the "Distribution Date"), (x) beneficial interests in the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for the Common Shares registered in the names of the holders of the Common Shares (which certificates for Common Shares shall be deemed also to be certificates for beneficial interests in the Rights) and not by separate certificates, and (y) the Rights and beneficial interests therein will be transferable only in connection with the transfer of the underlying Common Shares (including a transfer to the Company). As soon as practicable after the Distribution Date, the Rights Agent will send by first-class, insured, postage prepaid mail, to each record holder of the Common Shares as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, one or more rights certificates, in substantially the form of Exhibit B hereto (the "Rights Certificates"), evidencing one Right for each Common Share so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per Common Share has been made pursuant to Section 11(p) hereof, at the time of distribution of the Rights certificates, the Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates. Upon the distribution of the Rights Certificates as provided in this subsection (a), the trust created hereby shall cease. (2) As promptly as practicable following the Record Date the Company will send a copy of a Summary of Rights, in substantially the form of Exhibit C hereto (the "Summary of Rights"), by first- class, postage prepaid mail, to each record holder of the Common Shares as of the close of business on the Record Date, at the address of such holder shown on the records of the Company. With respect to certificates for the Common Shares outstanding as of the Record Date, until the Distribution Date, beneficial interests in the Rights will be evidenced by such certificates for the Common Shares and the registered holders of the Common Shares shall also be the registered holders of the beneficial interests in the associated Rights. Until the earlier of the Distribution Date or the Expiration Date (as such term is defined in Section 7 hereof), the transfer of any certificates representing Common Shares in respect of which Rights have been issued shall also constitute the transfer of the Rights associated with such Common Shares. Certificates issued after the Record Date upon the transfer of Common Shares outstanding on the Record Date shall bear the legend set forth in subsection (c). (3) Except as provided in Section 22 hereof, Rights shall be issued in respect of all Common Shares that are issued (whether originally issued or delivered from the Company's treasury) after the Record Date but prior to the earlier of the Distribution Date or the Expiration Date. Certificates representing such Common Shares shall also be deemed to be certificates for beneficial interests in the associated Rights, and shall bear the following legend: "This certificate also evidences a beneficial interest in and entitles the holder hereof to certain rights as set forth in the Rights Agreement between Charming Shoppes, Inc. (the "Company") and American Stock Transfer & Trust Company (the "Rights Agent") dated as of April 26, 1999 (the "Rights Agreement"), and as the same may be amended from time to time, the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and beneficial interests therein will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes-an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void." With respect to such certificates containing the foregoing legend, until the earlier of (i) the Distribution Date or (ii) the Expiration Date, beneficial interests in the Rights associated with the Common Shares represented by such certificates shall be evidenced by such certificates alone and registered holders of Common Shares shall also be the registered holders of beneficial interests in the associated Rights, and the transfer of any of such certificates shall also constitute the transfer of beneficial interests in the Rights associated with the Common Shares represented by such certificates. Section 4. Form of Rights Certificates. (1) The Rights Certificates (and the forms of election to purchase and of assignment to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall entitle the holders thereof to purchase such number of Preferred Share Fractions as shall be set forth therein at the price set forth therein (such exercise price per Preferred Share Fraction, the "Purchase Price"), but the amount of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein. (2) Any Rights Certificate issued pursuant to Section 3(a) or Section 22 hereof that represents Rights that the Company knows are beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing oral or written plan, agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer that the Board of Directors of the Company has determined is part of an oral or written plan, agreement, arrangement or understanding that has as a primary purpose or effect avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend: "The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of such Agreement." Section 5. Countersignature and Registration. (1) The Rights Certificates shall-be executed on behalf of the Company by its Chairman of the Board, its President or any Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company's seal or a facsimile thereof which shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Rights Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the Person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any Person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Agreement any such Person was not such an officer. (2) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office or offices designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates, the Certificate number and the date of each of the Rights Certificates. Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. (1) Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the Expiration Date, any Rights Certificate or Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of Preferred Share Fractions (or, following a Triggering Event, Common Shares or other securities, cash or other assets, as the case may be, as the Rights Certificate or Certificates surrendered then entitled such holder or former holder in the case of a transfer). Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Certificate shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged at the principal office or offices of the Rights Agent designated for such Purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates. (2) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated. Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (1) Subject to subsection (e), the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at the principal office or offices of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price (except as provided in Section 11(q) hereof) with respect to the total number of Preferred Share Fractions (or Common Shares, other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then exercisable (except as provided in Section 11(q) hereof), at or prior to the earliest of (i) the close of business on April 25, 2009 (the "Final Expiration Date"), (ii) the consummation of a transaction contemplated by Section 13(d) hereof, or (iii) the time at which the Rights are redeemed or terminated as provided in Section 23 hereof (the earlier of (i), (ii) and (iii) being herein referred to as the "Expiration Date"). (2) The Purchase Price for each Preferred Share Fraction pursuant to the exercise of a Right shall initially be $20.00, and shall be subject to adjustment from time to time as provided in Sections 11 and 13(a) hereof and shall be payable in accordance with subsection (c). (3) Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price per Preferred Share Fraction (or Common Shares, other securities, cash or other assets, as the case may be) to be purchased as set forth below and an amount equal to any applicable transfer tax, the Rights Agent shall, subject to Section 20(k) and Section 14(b) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares (or make available, if the Rights Agent is the transfer agent for such Shares) certificates for the total number of Preferred Shares to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if the Company shall have elected to deposit some or all of the total number of Preferred Shares issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of Preferred Share Fractions as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company will direct the depositary agent to comply with such request, (ii) requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon the order of the registered holder of such Rights Certificate. The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof) may be made, at the election of the holder of the Rights Certificate, (x) in cash or by certified bank check or money order payable to the order of the Company, or (y) by delivery of Rights if and to the extent authorized by Section 11(q) hereof. In the event that the Company is obligated to issue other securities of the Company (including Common Shares) pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if, and when appropriate. (4) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 14 hereof. (5) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing oral or written plan, agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of them Company has determined is part of an oral or written plan, agreement, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise; provided, however, that the Rights held by an Acquiring Person, an Affiliate or Associate of an Acquiring Person or the transferees of such Persons referred to above shall not be voided unless the Acquiring Person in question or an Affiliate or Associate of such Acquiring Person shall be involved in the transaction giving rise to the Section 11(a)(ii) Event. The Company shall use all reasonable efforts to insure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Rights Certificates' or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder. (6) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on-the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Section 8. Cancellation and Destruction of Rights Certificates. All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Reservation and Availability of Capital Stock; Registration of Securities. (1) The Company covenants and agrees that it will cause to be reserved and kept available for issuance upon the exercise of outstanding Rights as many of its authorized and unissued Preferred Shares (and, following the occurrence of a Triggering Event, out of its authorized and unissued Common Shares and/or other securities or out of its authorized and issued shares held in its treasury), which together shall at all times after the Distribution Date be sufficient to permit the exercise in full of all outstanding Rights. (2) So long as the Preferred Shares (and, following the occurrence of a Triggering Event, Common Shares or other securities) issuable and deliverable upon the exercise of the Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares and other securities reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. (3) The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a)(iii) hereof, or as soon as is required by law following the Distribution Date, as the case may be, a registration statement or statements under the Securities Act of 1933 (the "Act"), with respect to the securities purchasable upon exercise of the Rights on an appropriate form or forms, (ii) cause such registration statement or statements to become effective as soon as practicable after such filing, and (iii) cause such registration statement or statements to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the date of the expiration of the Rights. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or "blue sky" laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this subsection (c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to- become effective. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualification in such jurisdiction shall have been obtained. (4) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares (and, following a Triggering Event, Common Shares or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares or other securities (subject to payment of the Purchase Price), be duly and validly authorized and issued and, with respect to Preferred Shares, Common Shares or other shares of capital stock, fully paid and nonassessable. (5) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges that may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates for a number of Preferred Share Fractions (or Common Shares or other securities, as the case may be) upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax that may be payable in respect of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or delivery of a number of Preferred Share Fractions (or Common Shares or other securities, as the case may be) in respect of a name other than that of the registered holder of the Rights Certificates evidencing Rights surrendered for exercise or to issue or deliver any certificates for a number of Preferred Share Fractions (or Common Shares or other securities, as the case may be) in a name other than that of the registered holder upon the exercise of any Rights until such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. Section 10. Capital Stock Record Date. Each Person in whose name any certificate for a number of Preferred Share Fractions (or Common Shares or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such Preferred Share Fractions (or Common Shares or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and all applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the applicable transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (fractional or otherwise) on, and such certificate shall be dated, the next succeeding Business Day on which the applicable transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a shareholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights. The Purchase Price, the number and kind of shares and other securities covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (1) (i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on any security of the Company payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of shares, or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of Preferred Shares or capital stock, as the case may be, issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive, upon payment of the adjusted Purchase Price, the aggregate number and kind of Preferred Shares or capital stock, as the case may be, that, if such Right had been exercised immediately prior to such date and at a time when the Preferred Share transfer books were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof. (ii) In the event: (1) any Acquiring Person or any Associate or Affiliate of any Acquiring Person, at any time after the Stock Acquisition Date, directly or indirectly, (1) shall merge into the Company or otherwise combine with the Company and the Company shall be the continuing or surviving corporation of such merger or combination and the Common Shares of the Company or other equity securities of the Company shall remain outstanding, (2) shall, in one transaction or a series of transactions, transfer any assets to the Company or to any of its Subsidiaries in exchange (in whole or in part) for Common Shares, for shares of other equity securities of the Company, or for securities exercisable for or convertible into shares of equity securities of the Company (Common Shares or otherwise) or otherwise obtain from the Company, with or without consideration, any additional shares of such equity securities or securities exercisable for or convertible into shares of such equity securities (other than pursuant to a pro rata distribution to all holders of Common Shares), (3) shall sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise acquire or dispose of assets in one transaction or a series of transactions, to, from or with (as the case may be) the Company or any of its Subsidiaries, on terms and conditions less favorable to the Company than the Company would be able to obtain in arm's-length negotiation with an unaffiliated third party, other than pursuant to a Section 13 Event, (4) shall sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise acquire or dispose of assets having an aggregate fair market value of more than $5,000,000 in one transaction or a series of transactions, to, from or with (as the case may be) the Company or any of the Company's Subsidiaries (other than incidental to the lines of business, if any, engaged in as of the date hereof between the Company and such Acquiring Person or Associate or Affiliate), other than pursuant to a Section 13 Event, (5) shall receive any compensation from the Company or any of the Company's Subsidiaries other than compensation for full-time employment as a regular employee at rates in accordance with the Company's (or its Subsidiaries') past practices, or (6) shall receive the benefit, directly or indirectly (except proportionately as a shareholder and except if resulting from a requirement of law or governmental regulation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantage provided by the Company or any of its Subsidiaries, or (2) any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan), alone or together with its Affiliates and Associates, shall, at any time after the Rights Dividend Declaration Date become the Beneficial Owner of 20% or more of the Common Shares then outstanding, unless the event causing the 20% threshold to be crossed is a Section 13 Event, or is an acquisition of Common Shares pursuant to a tender offer or an exchange offer for all outstanding Common Shares at a price and on terms that provide fair value to all shareholders, as determined by at least a majority of the Board of Directors of the Company, after taking into consideration all factors that such members of the Board of Directors deem relevant, including, without limitation, the long-term prospects and value of the Company and the prices and terms that such members of the Board of Directors believe, in good faith, could reasonably be achieved if the Company or its assets were sold on an orderly basis designed to realize maximum value, or (3) during such time as there is an Acquiring Person, there shall be any reclassification of securities (including any reverse stock split), or recapitalization of the Company, or any merger or consolidation of the Company with any of its Subsidiaries or any other transaction or series of transactions involving the Company or any of its Subsidiaries, other than a Section 13 Event or series of such Events (whether or not with or into or otherwise involving an Acquiring Person) that has the effect, directly or indirectly, of increasing by more than its proportionate share, the outstanding shares of any class of equity securities of the Company or any of the Company's Subsidiaries that is directly or indirectly beneficially owned by any Acquiring Person or any Associate or Affiliate of any Acquiring Person, then, promptly following the first occurrence of a Section 11(a)(ii) Event, proper provision shall be made so that each holder of a Right (except as provided below and in Section 7(e) hereof) shall thereafter have the right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, in lieu of a number of Preferred Share Fractions, such number of Common Shares of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of Preferred Share Fractions for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (y) dividing that product (which, following such first occurrence, shall thereafter be referred to as the "Purchase Price" for each Right and for all purposes of this Agreement) by 50% of the current market price (determined pursuant to Section 11(d) hereof) per Common Share on the date of such first occurrence (such number of shares, the "Adjustment Shares"). (iii) In the event that the number of Common Shares that are authorized by the Company's Articles but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company shall: (A) determine the excess of the value of the Adjustment Shares issuable upon the exercise of a Right (the "Current Value") over the Purchase Price (such excess, the "Spread"), and (B) with respect to each Right, make adequate provision to substitute for the Adjustment Shares, upon payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Shares of the same or a different class or other equity securities of the Company (including, without limitation, preferred shares or units of preferred shares that a majority of the Board of Directors of the Company in office at the time has deemed (based, among other things, on the dividend and liquidation rights of such preferred shares) to have substantially the same economic value as Common Shares (such preferred shares, hereinafter referred to as "common share equivalents"), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by a majority of the Board of Directors of the Company in office at the time after considering the advice of a nationally recognized investment banking firm selected by the Board of Directors of the Company; provided, however, if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company's right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, Common Shares (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If the Board of Directors of the Company shall determine in good faith that it is likely that sufficient additional Common Shares could be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek shareholder approval for the authorization of such additional shares (such period, as it may be extended, the "Substitution Period"). To the extent that the Company determines that some action need be taken pursuant to the first and/or second sentences of this Section 11(a)(iii), the Company shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights, and may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. The Company shall make a public announcement when the exercisability of the Rights has been temporarily suspended, and again when such suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of the Common Shares shall be the current market price (as determined pursuant to Section 11(d) hereof) per Common Share on the Section 11(a)(ii) Trigger Date and the value of any common share equivalent shall be deemed to have the same value as the Common Shares on such date. (2) In case the Company shall fix a record date for the issuance of rights, options or warrants to holders of any security of the Company entitling them to subscribe for or purchase (for a period expiring within forty-five (45) calendar days after such record date) Preferred Shares (or shares having the same rights, privileges and preferences as the Preferred Shares ("equivalent preferred shares")) or securities convertible into Preferred Shares or equivalent preferred shares at a price per Preferred Share or per equivalent preferred share (or having a conversion price per share, if a security convertible into Preferred Shares or equivalent preferred shares) less than the current market price (as determined pursuant to Section 11(d) hereof) per Preferred Share on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares outstanding on such record date, plus the number of Preferred Shares that the aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price, and the denominator of which shall be the number of Preferred Shares outstanding on such record date, plus the number of additional Preferred Shares and/or equivalent preferred shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid by delivery of consideration part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Company, the Rights Agent and the holders of the Rights. Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price that would then be in effect if such record date had not been fixed. (3) In case the Company shall fix a record date for a distribution to all holders of Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness, cash (other than a regular quarterly dividend out of the earnings or retained earnings of the Company), assets (other than a regular quarterly dividend referred to above or dividend payable in Preferred Shares, but including any dividend payable in stock other than Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current market price (as determined pursuant to Section 11(d) hereof) per Preferred Share on such record date, less the then fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a Preferred Share and the denominator of which shall be such current market price (as determined pursuant to Section 11(d) hereof) per Preferred Share. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would have been in effect if such record date had not been fixed. (4) (i) For the purpose of any computation hereunder, other than computations made pursuant to section 11(a)(iii) hereof, the "current market price" per Common Share on any date shall be deemed to be the average of the daily closing prices per Common Share for the thirty (30) consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date, and for purposes of computations made pursuant to section 11(a)(iii) hereof, the "current market price" per Common Share on any date shall be deemed to be the average of the daily closing prices per Common Share for the ten (10) consecutive Trading Days immediately following such date; provided, however, that in the event that the current market price per Common Share is determined during a period following the announcement by the issuer of such Common Share of (A) a dividend or distribution on such Common Share payable in Common shares or securities convertible into Common Shares (other than the Rights), or (B) any subdivision, combination or reclassification of such Common Shares, and prior to the expiration of the requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth above, after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current market price shall be properly adjusted to take into account ex-dividend trading. The closing price for each Trading Day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Common Shares are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Shares are listed or admitted to trading or, if the Common Shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use, or, if on any such date the Common Shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Shares selected by the Board of Directors of the Company. If on any such date no market maker is making a market in the Common Shares, the fair value of such shares on such date as determined in good faith by the Board of Directors of the Company shall be used. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Shares are listed or admitted to trading is open for the transaction of business or, if the Common Shares are not listed or admitted to trading on any national securities exchange, a Business Day. If the Common Shares are not publicly held or not so listed or traded, "current market price" per share shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. (ii) For the purpose of any computation hereunder, the "current market price" per Preferred Share shall be determined in the same manner as set forth above for the Common Shares in clause (i) of this Section 11(d) (other than the last sentence thereof). If the current market price per Preferred Share cannot be determined in the manner provided above or if the Preferred Shares are not publicly held or listed or traded in a manner described in clause (i) of this Section 11(d), the "current market price" per Preferred Share shall be conclusively deemed to be an amount equal to 300 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common Shares occurring after the date of this Agreement) multiplied by the current market price per Common Share. If neither the Common Shares nor the Preferred Shares are publicly held or so listed or traded, "current market price" per Preferred Share shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. For all purposes of this Agreement, the "current market price" of a Preferred Share Fraction shall be equal to the current market price of one Preferred Share divided by 300. (5) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a Common Share or one-millionth of a Preferred Share, as the case may be. Notwithstanding the first sentence of this subsection (e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three (3) years from the date of the transaction that mandates such adjustment, or (ii) the Expiration Date. (6) If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be Subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k), (m) and (q), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Shares shall apply on like terms to any such other shares. (7) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of Preferred Share Fractions purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (8) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in subsections (b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of Preferred Share Fractions (calculated to the nearest one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number of Preferred Share Fractions covered by a Right immediately prior to this adjustment, by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price, and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (9) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of Preferred Share Fractions purchasable upon the exercise of a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of Preferred Share Fractions for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest ten-thousandth of a Preferred Share) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. The record date for the adjustment may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement. (10) Irrespective of any adjustment or change in the Purchase Price or the number of Preferred Share Fractions issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per Preferred Share Fraction and the number of Preferred Share Fractions that were expressed in the initial Rights Certificates issued hereunder. (11) Before taking any action that would cause an adjustment reducing the Purchase Price below the then stated or par value, if any, of the number of Preferred Share Fractions issuable upon exercise of the Rights, the Company shall take any corporate action that may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue such number of fully paid and nonassessable Preferred Share Fractions at such adjusted Purchase Price. (12) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of Preferred Share Fractions and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of Preferred Share Fractions and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment. (13) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that in their good faith judgment the Board of Directors of the Company shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Shares, (ii) issuance wholly for cash of any Preferred Shares at less than the current market price, (iii) issuance wholly for cash or Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, (iv) stock dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Preferred Shares shall not be taxable to such shareholders. (14) The Company covenants and agrees that it shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), if (x) at the time of or immediately after such consolidation, merger or sale there are any rights, warrants or other instruments or securities outstanding or agreements in effect that would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the shareholders of the Person who constitutes, or would constitute, the "Principal Party" for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates. (15) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or Section 26 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights. (16) Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the Rights Dividend Declaration Date and prior to the Distribution Date (i) declare a dividend on the outstanding Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine the outstanding Common Shares into a smaller number of shares, the number of Rights associated with each Common Share then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each Common Share following any such event shall equal the result obtained by multiplying the number of Rights associated with each Common Share immediately prior to such event by a fraction the numerator of which shall be the total number of Common Shares outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of Common Shares outstanding immediately following the occurrence of such event. (17) In the event that the Rights become exercisable following a Section 11(a)(ii) Event, the Company, by action of a majority of the Board of Directors of the Company in office at the time, may permit the Rights, subject to Section 7(e) hereof, to be exercised for 50% of the Common Shares (or cash or other securities or assets to be substituted for the Adjustment Shares pursuant to subsection (a)(iii)) that would otherwise be purchasable under subsection (a), in consideration of the surrender to the Company of the Rights so exercised and without other payment of the Purchase Price. Rights exercised under this subsection (g) shall be deemed to have been exercised in full and shall be canceled. Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 and Section 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent, and with each transfer agent for the Preferred Shares and the Common Shares, a copy of such certificate, and (c) mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the Distribution Date, to each holder of a certificate representing Common Shares) in accordance with Section 25 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to have knowledge of any adjustment unless and until it shall have received such certificate. Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. (1) In the event that, following the Stock Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof) shall consolidate with, or merge with or into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or merger, all or part of the outstanding Common Shares shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons (other than the Company or any Subsidiary of the Company in one or more transactions each of which complies with Section 11(o) hereof), then, and in each such case and except as contemplated by subsection (d), proper provision shall be made so that: (1) each holder of a Right, except as provided in Section 7(e) hereof or subsection (e), shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, such number of validly authorized and issued, fully paid, non assessable and freely tradeable Common Shares of the Principal Party (as such term is hereinafter defined), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of Preferred Share Fractions for which a Right is exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such shares for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence), and dividing that product (which, following the first occurrence of a Section 13 Event, shall be referred to as the "Purchase Price" for each Right and for all purposes of this Agreement) by (2) 50% of the current market price (determined pursuant to Section 11(d)(i) hereof) per Common Share of such Principal Party on the date of consummation of such Section 13 Event, (2) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (3) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; (4) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of its Common Shares) in connection with the consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its Common Shares thereafter deliverable upon the exercise of the Rights; and (5) the provisions of Section 11(a)(ii) hereof shall be of no effect following the first occurrence of any Section 13 Event. (2) "Principal Party" shall mean (1) in the case of any transaction described in clause (x) or (y) of the first sentence of subsection (a), the Person that is the issuer of any securities into which Common Shares of the Company are converted in such merger or consolidation, and if no securities are so issued, the Person that is the other party to such merger or consolidation; and (2) in the case of any transaction described in clause (z) of the first sentence of subsection (a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions; provided, however, that in any such case, (1) if the Common Shares of such Person are not at such time and have not been continuously over the preceding twelve (12) month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common Shares of which are and have been so registered, "Principal Party" shall refer to such other Person, and (2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Shares of two or more of which are and have been so registered, "Principal Party" shall refer to whichever of such Persons is the issuer of the Common Shares having the greatest aggregate market value. (3) The Company shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have a sufficient number-of authorized shares of its Common Shares that have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this section 13 and further providing that, as soon as practicable after the date of any Section 13 event, the Principal Party will (1) (1) prepare and file a registration statement under the Act, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, and will use its best efforts to cause such registration statement to (A) become effective as soon as practicable after such filing and (B) remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date; and (2) will deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates that comply in all respects with the requirements for registration on Form 10 under the Exchange Act. The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights that have not theretofore been exercised shall thereafter become exercisable solely in the manner described in Section 13(a). (4) Notwithstanding anything in this Agreement to the contrary, Section 13 (other than this subsection (d)) shall not be applicable to, and the term "Section 13 Event" shall not include, a transaction described in subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is consummated with a Person, or Persons who acquired Common Shares pursuant to a tender offer or exchange offer for all outstanding Common Shares that complies with the, provisions of Section 11(a)(ii)(B) hereof (or a wholly owned Subsidiary of any such Person or Persons), (ii) the price per Common Share offered in such transaction is not less than the price per Common Share paid to all holders of Common Shares whose shares were purchased pursuant to such tender offer or exchange offer and (iii) the form of consideration being offered to the remaining holders of Common Shares pursuant to such transaction is the same as the form of consideration paid pursuant to such tender or exchange offer. Upon consummation of any such transaction contemplated by this subsection (d), all Rights hereunder shall expire (5) In the event that the Rights become exercisable under subsection (a) (except as provided in subsection (d)), the Company, by action of a majority of the Board of Directors of the Company in office at the time, may agree with the Principal Party that the Principal Party shall permit the Rights to be exercised for 50% of the Common Shares of the Principal Party that would otherwise be purchasable under subsection (a), in consideration of the surrender to the Principal Party, as the successor to the Company under subsection (a) (ii), of the Rights so exercised and without other payment of the Purchase Price. Rights exercised under this subsection (e) shall be deemed to have been exercised in full and shall be canceled. Section 14. Fractional Rights and Fractional Shares. (1) The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(p) hereof, or to distribute Rights Certificates that evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For purposes of this subsection (a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading, or if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used. (2) The Company shall not be required to issue fractions of Preferred Shares upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares, except in each case for fractions which are integral multiples of Preferred Shares. In lieu of fractional Preferred Shares that are not integral multiples of Preferred Shares, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of a Preferred Share. For purposes of this subsection (b), the current market value of one Preferred Share shall be the closing price of a Preferred Share (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise. (3) Following the occurrence of a Triggering Event, the Company shall not be required to issue fractions of Common Shares upon exercise of the Rights or to distribute certificates that evidence fractional Common Shares. In lieu of fractional Common Shares, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Common Share. For purposes of this subsection (c), the current market value of one Common Share shall be the closing price of one Common Share (as determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise. (4) The holder of a Right or a beneficial interest in a Right by the acceptance thereof expressly waives his right to receive any fractional Rights or any fractional Common Shares upon exercise of a Right, except as permitted by this Section 14. Section 15. Rights of Action. All rights of action in respect of this Agreement other than those vested in the Rights Agent in Section 18, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Shares), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights or beneficial interests therein, it is specifically acknowledged that the holders of Rights or beneficial interests therein would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement. Section 16. Agreement of Rights Holders. Every holder of a Right or a beneficial interest in a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other such holder that: (1) prior to the Distribution Date, beneficial interests in the Rights will be transferable only in connection with the transfer of Common Shares; (2) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office or Offices of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed; (3) subject to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the Person in whose name a Rights Certificate (or, prior to the Distribution Date the associated Common Share certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Share certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be required to be affected by any notice to the contrary; and (4) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or a beneficial interest in a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. Section 17. Rights Certificate Holder Not Deemed a Shareholder. No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of Preferred Share Fractions or any other securities of the Company (including the Common Shares) that may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 24 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof. Section 18. Concerning the Rights Agent. (1) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. (2) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Rights Certificate or certificate for Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons. Section 19. Merger or Consolidation or Change of Name of Rights Agent. (1) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust or stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, however, that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency and trust created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. (2) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates or beneficial interests in the Rights, by their acceptance thereof, shall be bound: (1) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the written opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (2) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of the current market price) be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (3) The Rights Agent shall be liable hereunder only for its own negligence, bad faith or willful misconduct. (4) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates or be required to verify the same (except as to its countersignature on such Rights Certificates), but all such statements and recitals are and shall be deemed to have been made by the Company only. (5) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11 or Section 13 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after receipt of a Certificate furnished pursuant to Section 12, describing any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Common Shares to be issued pursuant to this Agreement or any Rights Certificate or as to whether any Common Shares or Preferred Shares will, when so issued, be validly authorized and issued, fully paid and nonassessable: (6) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (7) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Rights Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted. (8) The Rights Agent and any shareholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Rights Agent under this Agreement, and none of such actions shall constitute a breach of trust. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (9) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct; provided, however, reasonable care was exercised in the selection and continued employment thereof. (10) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (11) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company. Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' prior written notice mailed to the Company and to each transfer agent of the Common Shares and Preferred Shares by registered or certified mail, and to the holders of the Rights Certificates by first- class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days' prior written notice mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares and Preferred Shares, by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized, doing business and in good standing under the laws of the United States or of any state, having a principal office in the State of New York or the Commonwealth of Pennsylvania, that is authorized by law to exercise corporate trust and stock transfer powers and is subject to supervision or examination by federal or state authority and that has at the time of its-appointment as Rights Agent a combined capital and surplus adequate in the judgment of a majority of the Board of Directors of the Company in office at the time to assure the performance of its duties hereunder and the protection of the interests of the Company and the holders of Rights or beneficial interests therein, or (b) an Affiliate of a corporation described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares and Preferred Shares and mail a notice thereof in writing to the registered holders of the Rights Certificates or, prior to the Distribution Date, to the registered holders of the Common Shares. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance, sale or delivery of Common Shares following the Distribution Date and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to Common Shares so issued, sold or delivered pursuant to the exercise of stock options, stock appreciation rights grants or awards outstanding on the Distribution Date under any benefit plan or arrangement for employees or directors, or upon the exercise, conversion or exchange of securities outstanding on the Record Date or hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. Section 23. Redemption and Termination. (1) The Board of Directors of the Company may, at its option, at any time prior to the earlier of (i) the close of business on the tenth day following a Stock Acquisition Date (or, if the Stock Acquisition Date shall have occurred prior to the Record Date, the close of business on the tenth day following the Record Date), or (ii) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a redemption price of $.01 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price") and the Company may, at its option, pay the Redemption Price either in Common Shares (based on the "current market price", as defined in Section 11(d)(i) hereof, of the Common Shares at the time of redemption) or cash. Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the Company's right of redemption hereunder has expired. (2) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, evidence of which shall have been filed with the Rights Agent and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held. Promptly after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder's last address as it appears upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the Transfer Agent for the Common Shares. Any notice that is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. (3) In deciding whether or not to exercise the Company's right of redemption hereunder, the directors of the Company shall act in good faith, in a manner they reasonably believe to be in the best interests of the Company and with such care, including reasonable inquiry, skill and diligence, as a Person of ordinary prudence would use under similar circumstances. Section 24. Notice of Certain Events. Section 1. (1) In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in stock of any class to the holders of Preferred Shares or to make any other distribution to the holders of Preferred Shares (other than a regular quarterly dividend out of earnings or retained earnings of the Company), or (ii) to offer to the holders of Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, or (iii) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), or (iv) to effect any consolidation or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one transaction or a series of related transactions, of more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 25 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least twenty (20) days prior to the record date for determining holders of Preferred Shares for purposes of such action, and in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Preferred Shares, whichever shall be the earlier. (2) Upon the occurrence of a Section 11(a)(ii) Event, (i) the Company shall as soon as practicable thereafter give to each holder of a Right, to the extent feasible and in accordance with Section 25 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to Preferred Shares shall be deemed thereafter to refer to Common Shares and/or, if appropriate, other securities. Section 25. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: Charming Shoppes, Inc. 450 Winks Lane Bensalem, Pennsylvania 19020 Attention: Corporate Secretary Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: American Stock Transfer & Trust Company 40 Wall Street New York, NY 10005 Attention: Corporate Trust Department Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, if prior to the Distribution Date to the holder of certificates representing Common Shares) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Section 26. Supplements and Amendments. (1) Prior to the Distribution Date the Company may, and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of Common Shares. From and after the Distribution Date the Company may, and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder or (iv) to change or supplement the provisions hereunder in any manner that the Company may deem necessary or desirable and that shall not adversely affect the interests of the holders of Rights Certificates; provided, this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable, or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon the delivery of a certificate from an appropriate officer of the Company that states that the proposed supplement or amendment is in compliance with the terms of this Section 26, the Rights Agent shall execute such supplement or amendment. Prior to the Distribution Date, the interests of the beneficial owners of Rights shall be deemed coincident with the interests of the holders of Common Shares. (2) In deciding whether or not to supplement or amend this Agreement, the directors of the Company shall act in good faith, in a manner they reasonably believe to be in the best interests of the Company and with such care, including reasonable inquiry, skill and diligence, as a Person of ordinary prudence would use under similar circumstances, and they may consider the effects of any action upon employees, suppliers and customers of the Company and upon communities in which offices or other establishments of the Company are located, and all other pertinent factors. Section 27. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 28. Determinations and Actions by the Board of Directors, etc. For all purposes of this Agreement, any calculation of the number of Common Shares outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding Common Shares of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend or supplement the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) that are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board to any liability to the holders of the Rights. Section 29. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Shares). Section 30. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent Jurisdiction or other Authority to be invalid, void or unenforceable for any purpose or under any set of circumstances or as applied to any Person, such invalid, void or unenforceable term, provision, covenant or restriction shall continue in effect to the maximum extent possible for all other purposes, under all other circumstances and as applied to all other Persons; and the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such Court or authority to be invalid, void or unenforceable and the Board of Directors of the Company determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the close of business on the tenth day following the date of such determination by the Board of Directors. Section 31. Governing Law. This Agreement, each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the Commonwealth of Pennsylvania and for all purposes shall be governed by and construed in accordance with the laws of such jurisdiction applicable to contracts made and to be performed entirely within such jurisdiction. Section 32. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 33. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. CHARMING SHOPPES, INC. By_________________________________ Name: Dorrit J. Bern Title: Chief Executive Officer AMERICAN STOCK TRANSFER & TRUST COMPANY By_________________________________ Name:______________________________ Title:_____________________________ EX-10 3 exh10110.txt AMENDMENT NO. 4 EXHIBIT 10.1.10 October 26, 2000 Charming Shoppes, Inc. 450 Winks Lane Bensalem, Pennsylvania 19020 Re: Amendment No. 4 to Second Amended and Restated Loan and Security Agreement, dated February 28, 1997 (as amended and supplemented, the "Loan Agreement") among Charming Shoppes, Inc. (the "Company"), certain subsidiaries of the Company which are parties thereto (collectively, with the Company, "Borrowers"), Borrowers' Agent and Congress Financial Corporation ("Congress") Ladies and Gentlemen: The Company has advised Congress that (a) the Company has organized Charming J.V. Inc., a Delaware corporation, ("New Subsidiary") and all of the issued and outstanding stock of New Subsidiary is owned by the Company, (b) New Subsidiary has entered into or is about to enter into a joint venture agreement, dated on or about the date hereof, with Monsoon Accessorize, Ltd. (the "ER Joint Venture Agreement") to form M and A Joint Venture LLC (the "EJV") for the sale of casual to better wear garments and accessories ("ER Joint Venture"), pursuant to which the Company has approved an $8,000,000 equity commitment. Capitalized terms used herein which are defined in the Loan Agreement shall have the respective meanings ascribed to such terms in the Loan Agreement. This will confirm that Congress consents to (a) the organization of New Subsidiary and (b) the equity investments in the EJV, provided, that: (i) no Event of Default exists at the time of the formation (or after giving effect thereto) of the ER Joint Venture; and (ii) ER Joint Venture is consummated on or before November 15, 2000. Borrowers hereby confirm, that after giving effect to the transactions contemplated by the ER Joint Venture Agreement, Borrowers and Obligors shall only be permitted, pursuant to the terms of the Loan Agreement, to make additional cash investments in joint ventures including, without limitation, the EJV, in an amount not to exceed $2,000,000, provided, that, all of the other conditions set forth in Section 9.10 of the Loan Agreement and otherwise are satisfied with respect to any such investment. This will also confirm that Congress agrees that New Subsidiary, EJV and any subsidiary of EJV, shall each be deemed to be an Excluded Subsidiary. Notwithstanding anything to the contrary set forth in Sections 9.9 and 9.10 of the Loan Agreement, this will also confirm that Congress agrees that the Company may execute guaranties in favor of lessors of retail stores with respect to the obligations of EJV, and subsidiaries of EJV, as the case may be, to make rental payments to such lessors with respect to retail stores operated by EJV and subsidiaries of EJV after the date hereof (collectively, the AEJV Store Leases@), provided, that, after giving effect to each such guarantee each of the following conditions is satisfied: (a) the aggregate amount guaranteed under all such EJV Store Leases does not exceed $16,000,000 in the aggregate at any time, (b) there does not exist any Event of Default or condition which with notice or passage of time or both, would constitute an Event of Default at the time such guarantee is made, and (c) such guarantee is unsecured indebtedness of the Company. The Company shall, at the request of Lender, deliver to Lender true and correct copies of any or all of the EJV Store Leases and related guarantees. Except as expressly set forth herein, no existing defaults or Events of Default and no rights or remedies of Congress have been or are being waived hereby and no changes in the Financing Agreements have been or are being made or intended hereby, and in all other respects, the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the date hereof. The foregoing shall be effective, as of the date hereof, upon execution of this letter by Borrowers and the other entities listed below. Very truly yours, CONGRESS FINANCIAL CORPORATION By:___________________________ Title:________________________ [SIGNATURES CONTINUE ON NEXT PAGE] [SIGNATURES CONTINUED FROM PRECEDING PAGE] AGREED AND ACCEPTED: CHARMING SHOPPES, INC. By:_________________________ Title:______________________ CHARMING SHOPPES OF DELAWARE, INC. By:_________________________ Title:______________________ CSI INDUSTRIES, INC. By:_________________________ Title:______________________ FB APPAREL, INC, By:_________________________ Title:______________________ BORROWERS' AGENT CHARMING SHOPPES OF DELAWARE, INC., BORROWERS' AGENT By:_________________________ Title:______________________ [SIGNATURES CONTINUE ON NEXT PAGE] [SIGNATURES CONTINUED FROM PRECEDING PAGE] CONSENTED TO: By Each of the Obligors on Exhibit A Annexed Hereto ____________________________ Its:________________________ By Each of the Obligors on Exhibit B Annexed Hereto ____________________________ Its:________________________ EXHIBIT "A" TO CONGRESS FINANCIAL CONSENT Obligors on behalf of which Colin D. Stern has signed as Vice President: C.S.A.C., Inc. C.S.F., Corp. EXHIBIT "B" TO CONGRESS FINANCIAL CONSENT Obligors on behalf of which Eric M. Specter has signed in the capacity noted below: C.S.I.C., Inc. -President Charm-Fin Stores, Inc. -Vice President Fashion Bug of California -Vice President FB Clothing, Inc. -Vice President International Apparel, Inc. -Vice President Operating Retail Stores -Vice President EX-10 4 exh10111.txt AMENDMENT NO. 5 EXHIBIT 10.1.11 As of January 31, 2001 Charming Shoppes, Inc. 450 Winks Lane Bensalem, Pennsylvania 19020 Re: Amendment No. 5 to Financing Agreements (this "Amendment") Ladies and Gentlemen: In consideration of the mutual agreements contained herein and other good and valuable consideration, each of the parties to the Loan Agreement (as hereinafter defined) agree as follows: 1. Capitalized terms used herein shall have the meanings ascribed thereto in the Second Amended and Restated Loan and Security Agreement, dated February 28, 1997, by and among Charming Shoppes, Inc. (the "Company"), certain subsidiaries of the Company which are parties thereto (collectively, with the Company, "Borrowers"), Congress Financial Corporation ("Congress") and Charming Shoppes of Delaware, Inc. ("Borrowers' Agent"), as the same now exists or may hereafter be further amended, modified, supplemented, extended, renewed, restated or replaced (the "Loan Agreement"), unless otherwise defined herein. 2. (a) Subject to the terms and conditions hereof, Congress consents to the formation of a new wholly-owned subsidiary of the Company, CSIM, Inc, a Delaware corporation ("CSIM"); provided, that: (i) such formation occurs prior to February 28, 2001; and (ii) as of the date of such formation and after giving effect thereto, no Event of Default, or act condition or event which with notice or passage of time or both would constitute an Event of Default exists or has occurred. (b) In consideration for Congress' consent as set forth in Section 2(a) above, Borrowers and Obligors jointly and severally agree and covenant that: (i) upon the formation of the CSIM, true and correct copies of the formation documents of CSIM and written evidence of updates to Borrowers' certificates of insurance to add CSIM as a named insured under such policies and certificates of such updated insurance policy or policies and/or endorsements naming Congress as loss payee, shall be promptly delivered to Congress, (ii) no Borrower nor any Obligor shall, directly or indirectly, make any loans or advance money or property to CSIM, or invest in (by capital contribution, dividend or otherwise) CSIM or make any other payment to CSIM or transfer any assets or properties to or on behalf of or for the benefit of CSIM, guarantee or otherwise become liable in any respect for any obligations of CSIM; except that any Borrower or Obligor may make loans or advance money or property to, or invest by capital contribution in CSIM so long as: (aa) the total amount of any loans, investments or advances by Borrowers and Obligors to CSIM at any time outstanding shall not exceed $1,000 and (bb) Congress shall receive a monthly report in form and substance satisfactory to Congress of the amount of Borrowers= or any Obligors loans, investments or advances in CSIM and such other information with respect thereto as Congress may reasonably request, and (iii) no Borrower nor any Obligor, shall permit CSIM to, directly or indirectly: (aa) create, incur, assume or permit to exist any mortgage, pledge, security interest, lien or encumbrance of any kind upon any of the assets or properties of CSIM, whether now owned or hereafter acquired or (bb) sell, assign, lease, transfer, abandon or otherwise dispose of any stock or indebtedness of CSIM to any other person or any properties or assets of CSIM to any other person except in favor of Congress. 3. The Loan Agreement shall be and is amended, effective as of the date hereof, as follows: (a) Section 9.13 of the Loan Agreement is amended by deleting the reference to "$300,000,000" set forth therein and inserting "$350,000,000" in its stead; (b) Section 12.1(a) of the Loan Agreement is amended by deleting the date of "June 30, 2001" set forth therein and inserting "June 30, 2004" in its stead; (c) Section 12.1(c) of the Loan Agreement is amended by deleting the text of such Section in its entirety and inserting "Intentionally Deleted" in its stead; and (d) The existing Omnibus Schedule 2 to the Loan Agreement entitled "Eligible Inventory Locations" is hereby amended by adding to Section A.4. thereof: "Los Angeles, California". 4. In consideration of the amendments set forth herein, Borrowers shall on the date hereof, pay to Congress, and Congress may, at its option, charge the account of Borrowers maintained by Congress, a fee in the amount of $562,500, which fee shall constitute part of the Obligations and is fully earned as of the date hereof. 5. In addition to the representations, warranties and covenants heretofore or hereafter made by the Company and the other Borrowers to Congress pursuant to the Loan Agreement and the other Financing Agreements, each of the Borrowers hereby represents, warrants and covenants to and with Congress as follows (which representations, warranties and covenants are continuing and shall survive the execution and delivery of this letter and shall be incorporated into and made a part of the Financing Agreements): (a) No Event of Default exists or has occurred and is continuing on the date hereof; (b) Borrowers hereby agrees that, in addition to all other terms, conditions and provisions set forth in the other Financing Agreements, Borrowers shall deliver or cause to be delivered to Congress, as soon as possible, but in no event later than March 2, 2001, a UCC-1 financing statement by and between CSI, as debtor and Congress, as secured party with rider for filing with the Secretary of State of California, duly authorized, executed and delivered by CSI; and (c) this Amendment has been duly authorized, executed and delivered by the Company and each of the other Borrowers, has been consented to by each of the other Obligors and is in full force and effect on the date hereof. 6. This Amendment shall be effective, as of the date hereof, upon receipt by Congress of Congress shall have received: (a) this Amendment, duly authorized, executed and delivered by the Company and each of the other Borrowers and Obligors, and (b) the fee referred to in Section 4 hereof. 7. This Amendment contains the entire agreement of the parties with respect to the subject matter hereof and supersedes all correspondence, memoranda, communications, discussions and negotiations with respect thereto. Except as expressly set forth above, no existing defaults or Events of Default and no rights or remedies of Congress have been or are being waived hereby and no changes or modifications to the Financing Agreements have been or are being made or are intended hereby and in all other respects the Financing Agreements shall continue in full force and effect. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 8. This Amendment may be executed and delivered in counterparts, all of which together shall constitute a complete agreement. Very truly yours, CONGRESS FINANCIAL CORPORATION By:__________________________ Title:_________________________ AGREED AND ACCEPTED: CHARMING SHOPPES, INC. By:________________________ Title:_______________________ [SIGNATURES CONTINUE ON NEXT PAGE] [SIGNATURES CONTINUED FROM PRECEDING PAGE] CHARMING SHOPPES OF DELAWARE, INC. By:_________________________ Title:_______________________ CSI INDUSTRIES, INC. By:_________________________ Title:_______________________ FB APPAREL, INC, By:_________________________ Title:_______________________ BORROWERS' AGENT CHARMING SHOPPES OF DELAWARE, INC., BORROWERS' AGENT By:_________________________ Title:_______________________ [SIGNATURES CONTINUE ON NEXT PAGE] [SIGNATURES CONTINUED FROM PRECEDING PAGE] CONSENTED TO: By Each of the Obligors on Exhibit A Annexed Hereto ____________________________ Its:_________________________ By Each of the Obligors on Exhibit B Annexed Hereto ____________________________ Its:_________________________ EXHIBIT "A" TO AMENDMENT NO. 5 Obligors on behalf of which Colin D. Stern has signed as Vice President: C.S.A.C., Inc., C.S.F., Corp. EXHIBIT "B" TO AMENDMENT NO. 5 Obligors on behalf of which Eric M. Specter has signed in the capacity noted below: C.S.I.C., Inc. - President Charm-Fin Stores, Inc. - Vice President Fashion Bug of California - Vice President FB Clothing, Inc. - Vice President International Apparel, Inc. - Vice President Operating Retail Stores - Vice President EX-10 5 exh10116.txt 2000 VFC SUPPLEMENT EXHIBIT 10.1.16 CHARMING SHOPPES RECEIVABLES CORP. Seller SPIRIT OF AMERICA, INC. Servicer and FIRST UNION NATIONAL BANK Trustee on behalf of the Series 2000-VFC Certificateholders SERIES 2000-VFC SUPPLEMENT Dated as of November 9, 2000 to SECOND AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT Dated as of November 25, 1997 up to $60,122,700 CHARMING SHOPPES MASTER TRUST SERIES 2000-VFC SERIES 2000-VFC 2SUPPLEMENT, dated as of November 9, 2000 (this "Supplement"), by and among CHARMING SHOPPES RECEIVABLES CORP., a Delaware corporation, as Seller (the "Seller"), SPIRIT OF AMERICA, INC., as Servicer (the "Servicer"), and FIRST UNION NATIONAL BANK, as Trustee (the "Trustee") under the Second Amended and Restated Pooling and Servicing Agreement dated as of November 25, 1997 among the Seller, the Servicer and the Trustee (as amended from time to time, the "Agreement"). Section 6.9 of the Agreement provides, among other things, that the Seller, the Servicer and the Trustee may at any time and from time to time enter into a supplement to the Agreement for the purpose of authorizing the delivery by the Trustee to the Seller for the execution and redelivery to the Trustee for authentication of one or more Series of Certificates. Pursuant to this Supplement, the Seller and the Trustee shall create a new Series of Investor Certificates and shall specify the Principal Terms thereof. SECTION 1. Designation. (a) There is hereby created a Series of Investor Certificates to be issued in two classes pursuant to the Agreement and this Series Supplement and to be known together as the "Series 2000- VFC Certificates." The two classes shall be designated the Class A Floating Rate Asset Backed Certificates, Series 2000-VFC (the "Class A Certificates") and the Class B Floating Rate Asset Backed Certificates, Series 2000-VFC (the "Class B Certificates"). The Class A Certificates and the Class B Certificate shall be substantially in the form of Exhibits A-1 and A-2, hereto, respectively. (b) Series 2000-VFC shall be included in Group One. Series 2000- VFC shall not be subordinated to any other Series. SECTION 2. Definitions. In the event that any term or provision contained herein shall conflict with or be inconsistent with any provision contained in the Agreement, the terms and provisions of this Supplement shall govern with respect to this Series. All Article, Section or subsection references herein shall mean Article, Section or subsections of the Agreement, except as otherwise provided herein. All capitalized terms not otherwise defined herein are defined in the Agreement. Each capitalized term defined herein shall relate only to the Series 2000-VFC Certificates and no other Series of Certificates or Receivables Purchase Series issued by the Trust. "Accrued Costs" means, with respect to any Distribution Date, the sum of (i) the Class A Monthly Interest for such Distribution Date, plus (ii) the Class A Additional Amounts, if any, for such Distribution Date. "Adjusted Excess Yield Percentage" shall mean, with respect to any Distribution Date, the excess, if any, of (i) the Portfolio Yield for the related Due Period over (ii) the Base Rate for such Distribution Date. "Administrator" shall mean ING Baring (U.S.) Capital Markets LLC, as administrator for the initial Class A Purchaser. "Agent" is defined in Section 18. "Amortization Period" shall mean, unless an Early Amortization Event shall have occurred prior thereto, the period commencing at the close of business on the Purchase Expiration Date (or such later date as shall have been agreed to by the Seller and each Series 2000-VFC Certificateholder) and ending on the earlier to occur of (a) the commencement of the Early Amortization Period, and (b) the Series 2000-VFC Termination Date, provided that the Seller may, by written notice to the Trustee and each Series 2000-VFC Certificateholder (and so long as the Early Amortization Period has not begun), cause the Amortization Period to begin on any date earlier than the one otherwise specified above. "Available Funds" shall mean, with respect to any Distribution Date, an amount equal to the sum (without duplication) of (i) all Collections of Finance Charge Receivables received during the related Due Period and allocated to the Series 2000-VFC Certificates, (ii) the interest and earnings on funds on deposit in the Series Cash Collateral Account and the Spread Account for such Due Period deposited into the Collection Account pursuant to Sections 4.16 and 4.17 on the related Distribution Date and (iii) the amount of any Cap Payment with respect to such Distribution Date and the amount of any payments due from the Cap Provider but not paid with respect to any prior date (to the extent received by the Trustee). "Available Principal Collections" shall mean, (i) with respect to any Optional Amortization Date that is not also a Distribution Date, all Collections of Principal Receivables previously allocated to the Series 2000-VFC Certificateholders pursuant to Section 4.5(a)(ii), (a)(iii), (b)(ii) and (b)(iii) then on deposit in the Collection Account and (ii) with respect to any Distribution Date, the sum of (a) the Principal Allocation Percentage of all Collections of Principal Receivables for the related Due Period minus any such Collections of Principal Receivables used to make an Optional Amortization, minus the amount of Reallocated Class B Principal Collections with respect to such Due Period which pursuant to Section 4.12 are required to fund the Class A Required Amount, (b) any Shared Principal Collections with respect to other Series in Group One that are allocated to Series 2000-VFC in accordance with Section 4.15 for such Distribution Date, and (c) any other amounts which pursuant to Section 4.9(a) (v), (vi), (vii) and (viii) or Section 4.11 (to the extent allocable to the Class A Investor Loss Amount or the Class A Dilution Amount) for such Due Period (other than such amounts paid from Reallocated Class B Principal Collections) are to be treated as Available Principal Collections for such Distribution Date. "Available Series Cash Collateral Amount" shall mean with respect to any date, the amount on deposit in the Series Cash Collateral Account on such date (such amount calculated before giving effect to any deposit to, or withdrawal from, the Series Cash Collateral Account to be made with respect to such date). "Available Shared Principal Collections" shall mean, with respect to any date, the amount of Shared Principal Collections available for distribution in connection with an Optional Amortization. "Average Class A Funded Amount" shall mean, with respect to any Interest Period, the quotient of (a) the sum of the Class A Funded Amount as of each day in such Interest Period, divided by (b) the number of days in such Interest Period. "Average Class B Funded Amount" shall mean, with respect to any Interest Period, the quotient of (a) the sum of the Class B Funded Amount as of each day in such Interest Period, divided by (b) the number of days in such Interest Period. "Average Maximum Class A Funded Amount" shall mean, with respect to any Interest Period, the quotient of (a) the sum of the Maximum Class A Funded Amount as of each day in such Interest Period, divided by (b) the number of days in such Interest Period. "Average Maximum Class B Funded Amount" shall mean, with respect to any Interest Period, the quotient of (a) the sum of the Maximum Class B Funded Amount as of each day in such Interest Period, divided by (b) the number of days in such Interest Period. "Base Rate" means, with respect to any Distribution Date, twelve times the percentage equivalent of a fraction, the numerator of which is the sum of (i) the Accrued Costs for such Distribution Date, plus (ii) the Investor Monthly Servicing Fee for the related Due Period plus (iii) the Class B Monthly Interest and Class B Additional Amounts payable on the Class B Certificates, in each case, for such Distribution Date, and the denominator of which is the Weighted Average Investor Interest for the related Due Period. "Breakage Payment" is defined in Section 4.6(c). "Calculation Date" shall mean the date of any Class A Incremental Funding and each Distribution Date, in each case, occurring after the second Distribution Date occurring after the Closing Date. "Cap Agreement" shall mean the interest rate cap agreement dated on or prior to the initial Incremental Funding between Fashion Service Corp. and the Cap Provider and assigned to the Trust for the benefit of the Series 2000-VFC Certificateholders in substantially the form attached hereto as Exhibit E, or any Replacement Interest Rate Cap therefor. "Cap Payment" shall mean, with respect to a Distribution Date, the payment, if any, received from the Cap Provider on the day preceding such Distribution Date, as determined pursuant to the Cap Agreement. "Cap Provider" shall mean the initial counterparty under the Cap Agreement, or any successor or assign thereto appointed as provided in the Cap Agreement, in its individual capacity pursuant to the Cap Agreement, or if any Replacement Interest Rate Cap is obtained therefor pursuant to Section 4.18, such replacement cap provider, it being understood that the initial counterparty and any replacement cap provider shall be required to have short-term debt obligations which are rated at least A-1 by Standard & Poor's and P-1 by Moody's. "Cap Replacement Event" shall mean (i) (x) any Cap Provider shall fail to make any payment required to be made by it pursuant to the Cap Agreement and such failure shall continue for three Business Days, (y) the withdrawal of or reduction below A-1 in the senior unsecured, unguaranteed, short-term debt rating of a Cap Provider by Standard & Poor's or a withdrawal of or reduction below P-1 of the unsecured, unguaranteed, short-term debt rating of a Cap Provider by Moody's, or (z) any Cap Agreement shall terminate or shall not be extended in connection with the extension of the Purchase Expiration Date and (ii) the Servicer shall fail to enter into a Replacement Interest Rate Cap within 30 days of the occurrence of any event described in clause (i). "Certificate Purchase Agreement" shall mean the Certificate Purchase Agreement among Seller, Servicer, the Conduit Purchaser, the Administrator and the Class B Certificateholder, as supplemented by the Fee Letter referred to (and defined) therein and as the same may be amended or otherwise modified from time to time. The Certificate Purchase Agreement is hereby designated a "Transaction Document" for all purposes of the Agreement and this Supplement. "Change in Control" means (a) as to Seller, Servicer or Originator, any person or group of related persons (excluding Charming Shoppes and its Affiliates) gains beneficial ownership of a majority in voting interest of the outstanding voting stock of Seller, Servicer or Originator or has caused to be elected a majority of the Board of Directors of Seller, Servicer or Originator; and (b) as to Charming Shoppes, any Person, or two or more Persons acting in concert, shall acquire beneficial ownership (within the meaning of Rule 13D-3 of the Securities and Exchange Commission) of 25% or more of the outstanding voting shares of Charming Shoppes. "Class A Additional Amounts" is defined in Section 4.6(b). "Class A Certificate Rate" shall mean, for any Interest Period, a per annum interest rate which if multiplied by the Class A Investor Interest as of the last day of such Interest Period would produce, on the basis of a 360 day year (based on actual days elapsed), as the case may be, an amount equal to the Cost of Funds (as defined in the Certificate Purchase Agreement) for such Interest Period. "Class A Certificateholder" shall mean each Person in whose name a Class A Certificate is registered in the Certificate Register. "Class A Certificates" shall mean any of the certificates executed by the Seller and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A-1 hereto. "Class A Fixed Allocation Percentage" shall mean, for any Due Period during the Fixed Allocation Period, the percentage equivalent (which percentage shall never exceed 100%) of a fraction, (a) the numerator of which is the Class A Investor Interest as of the close of business on the last day of the Revolving Period and (b) the denominator of which is equal to the Investor Interest as of the close of business on the last day of the Revolving Period. "Class A Floating Allocation Percentage" shall mean, for any Due Period, the percentage equivalent (which percentage shall never exceed 100%) of a fraction: (a) the numerator of which is the Class A Investor Interest as of the close of business on the last day of the preceding Due Period; and (b) the denominator of which is equal to the Investor Interest as of the close of business on the last day of the preceding Due Period; provided that with respect to any Due Period in which an Incremental Funding occurs: (x) the numerator determined pursuant to clause (a) shall be (1) the Class A Investor Interest as of the close of business on the later of the last day of the prior Due Period or the preceding Reset Date, for the period from and including the first day of the current Due Period or the preceding Reset Date, as applicable, to but excluding the related Reset Date and (2) the Class A Investor Interest as of the close of business on such Reset Date, for the period from and including such Reset Date to the earlier of the last day of such Due Period (in which case such period shall include such day) or the next succeeding Reset Date (in which case such period shall not include such succeeding Reset Date); and (y) the denominator determined pursuant to clause (b) shall be (1) the Investor Interest as of the close of business on the later of the last day of the prior Due Period or the preceding Reset Date, for the period from and including the first day of the current Due Period or preceding Reset Date, as applicable, to but excluding the related Reset Date and (2) the Investor Interest as of the close of business on such Reset Date, for the period from and including such Reset Date to the earlier of the last day of such Due Period (in which case such period shall include such day) or the next succeeding Reset Date (in which case such period shall not include such succeeding Reset Date); provided further that, with respect to the first Due Period, the Closing Date shall be treated as the last day of the preceding Due Period. "Class A Funded Amount" shall mean, with respect to any date of determination, an amount equal to the result of (a) the Class A Initial Investor Interest, plus (b) the aggregate amount of all Class A Incremental Funded Amounts for all Class A Incremental Fundings occurring on or prior to such date, minus (c) the aggregate amount of principal payments made on the Class A Certificates prior to such date. As applied to any particular Class A Certificate, the "Class A Funded Amount" means the portion of the overall Class A Funded Amount represented by that Certificate. "Class A Incremental Funded Amount" shall mean the amount of the increase in the Class A Funded Amount occurring as a result of any Class A Incremental Funding, which amount shall equal the aggregate amount of the purchase price paid by the Conduit Purchaser with respect to that Class A Incremental Funding pursuant to the Certificate Purchase Agreement and Section 4 hereof. "Class A Incremental Funding" shall mean any increase in the Class A Funded Amount during the Revolving Period made pursuant to the Certificate Purchase Agreement. "Class A Initial Investor Interest" shall mean the aggregate initial principal amount of the Class A Certificates, which is $0. "Class A Investor Allocation" shall mean, with respect to any Due Period or any date during any Due Period, as applicable, (a) with respect to Loss Amounts and the Series 2000-VFC Investor Dilution Amount, the Weighted Average Class A Floating Allocation Percentage, (b) with respect to Collections of Finance Charge Receivables at any time and Collections of Principal Receivables during the Revolving Period, the Class A Floating Allocation Percentage and (c) with respect to Collections of Principal Receivables during the Fixed Allocation Period, the Class A Fixed Allocation Percentage. "Class A Investor Charge-Offs" is defined in subsection 4.10(a). "Class A Investor Dilution Amount" shall mean, for any Distribution Date, an amount equal to the product of (a) the Series 2000-VFC Investor Dilution Amount for such Distribution Date and (b) the Weighted Average Class A Floating Allocation for the related Due Period. "Class A Investor Interest" shall mean, on any date of determination, an amount equal to (a) the Class A Funded Amount on that date, minus (b) the excess, if any, of the aggregate amount of Class A Investor Charge-Offs pursuant to Section 4.10(a) over Class A Investor Charge-Offs reimbursed pursuant to Section 4.9(a)(vi), 4.11 or 4.16 prior to such date of determination; provided that the Class A Investor Interest may not be reduced below zero. "Class A Investor Loss Amount" shall mean, with respect to each Distribution Date, an amount equal to the product of (a) the Investor Loss Amount for the related Due Period and (b) the Weighted Average Class A Floating Allocation Percentage applicable for the related Due Period. "Class A Monthly Interest" shall mean the monthly interest distributable in respect of the Class A Certificates as calculated in accordance with subsection 4.6(a). "Class A Monthly Principal" shall mean the monthly principal distributable in respect of the Class A Certificates as calculated in accordance with subsection 4.7(a). "Class A Non-Use Fee" is defined in Section 4.6(b). "Class A Optional Amortization" is defined in Section 4(b). "Class A Optional Amortization Amount" is defined in Section 4(b). "Class A Required Amount" is defined in subsection 4.8(a). "Class A Scheduled Final Payment Date" shall mean the twelfth Distribution Date following the Purchase Expiration Date (as defined in the Certificate Purchase Agreement). "Class B Additional Amounts" is defined in Section 4.6(e). "Class B Certificate Rate" shall mean, for any Interest Period, the rate specified in the Certificate Purchase Agreement as the Class B Certificate Rate for such Interest Period. "Class B Certificateholder" shall mean each Person in whose name a Class B Certificate is registered in the Certificate Register. "Class B Certificates" shall mean any of the certificates executed by the Seller and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A-2 hereto. "Class B Fixed Allocation Percentage" shall mean, with respect to any Due Period during a Fixed Allocation Period, the excess (if any) of 100% over the Class A Fixed Allocation Percentage for such Due Period. "Class B Floating Allocation Percentage" shall mean, with respect to any Due Period, the excess (if any) of 100% over the Class A Floating Allocation Percentage for such Due Period. "Class B Funded Amount" shall mean, with respect to any date of determination, an amount equal to the result of (a) the Class B Initial Investor Interest, plus (b) the aggregate amount of all Class B Incremental Funded Amounts for all Class B Incremental Fundings occurring on or prior to such date, minus (c) the aggregate amount of principal payments made to the Class B Certificateholders prior to such date. As applied to any particular Class B Certificate, the "Class B Funded Amount" means the portion of the overall Class B Funded Amount represented by that Certificate. "Class B Incremental Funded Amount" shall mean the amount of each increase in the Class B Funded Amount occurring as a result of any Class B Incremental Funding, which amount shall equal the aggregate amount of the purchase price paid by the Class B Certificateholders with respect to that Class B Incremental Funding pursuant to the Certificate Purchase Agreement and Section 4 hereof. "Class B Incremental Funding" shall mean any increase in the Class B Funded Amount during the Revolving Period made pursuant to the Certificate Purchase Agreement and Section 4 hereof. "Class B Initial Investor Interest" shall mean the aggregate initial principal amount of the Class B Certificates, which is $0. "Class B Investor Allocation" shall mean, with respect to any Due Period or any date during any Due Period, as applicable, (a) with respect to Loss Amounts and the Series 2000-VFC Investor Dilution Amount, the Weighted Average Class B Floating Allocation Percentage, (b) with respect to Collections of Finance Charge Receivables at any time and Collections of Principal Receivables during the Revolving Period, the Class B Floating Allocation Percentage and (c) with respect to Collections of Principal Receivables during the Fixed Allocation Period, the Class B Fixed Allocation Percentage. "Class B Investor Charge-Offs" is defined in subsection 4.10(b). "Class B Investor Dilution Amount" shall mean, for any Distribution Date, an amount equal to the product of (a) the Series 2000-VFC Investor Dilution Amount for such Distribution Date and (b) the Weighted Average Class B Floating Allocation for the related Due Period. "Class B Investor Interest" shall mean, on any date of determination, an amount equal to (a) the Class B Funded Amount on such date, minus (b) the aggregate amount of Class B Investor Charge-Offs for all prior Distribution Dates pursuant to subsection 4.10(b), minus (c) the aggregate amount of Reallocated Class B Principal Collections allocated pursuant to subsection 4.12 on all prior Distribution Dates, minus (d) an amount equal to the amount by which the Class B Investor Interest has been reduced on all prior Distribution Dates pursuant to subsection 4.10(a) and plus (e) the aggregate amount of Available Funds and Shared Excess Finance Charge Collections allocated and available on all prior Distribution Dates pursuant to subsections 4.9 and 4.11 for the purpose of reimbursing amounts deducted pursuant to the foregoing clauses (b), (c) and (d); provided, however, that the Class B Investor Interest may not be reduced below zero. "Class B Investor Loss Amount" shall mean, with respect to each Distribution Date, an amount equal to the product of (a) the Investor Loss Amount for the related Due Period and (b) the Weighted Average Class B Floating Allocation Percentage applicable for the related Due Period. "Class B Monthly Interest" shall mean the monthly interest distributable in respect of the Class B Certificates as calculated in accordance with subsection 4.6(d). "Class B Monthly Principal" shall mean the monthly principal distributable in respect of the Class B Certificates as calculated in accordance with subsection 4.7(b). "Class B Non-Use Fee" is defined in Section 4.6(e). "Class B Optional Amortization" is defined in Section 4(e). "Class B Optional Amortization Amount" is defined in Section 4(e). "Closing Date" shall mean November 9, 2000. "Conduit Purchaser" shall mean Monte Rosa Capital Corporation, a Delaware Corporation. "Controlled Amortization Amount" shall mean for any Distribution Date with respect to the Amortization Period prior to the payment in full of the Class A Investor Interest, the Class A Investor Interest as of the close of business on the last day of the Revolving Period divided by twelve. "Controlled Amortization Shortfall" initially shall mean zero and thereafter shall mean, with respect to any Due Period during the Amortization Period, the excess, if any, of the Controlled Payment Amount for the previous Due Period over the amounts distributed pursuant to Section 4.9(c)(i) with respect to the Class A Certificates for the previous Due Period. "Controlled Payment Amount" shall mean, with respect to any Distribution Date, the sum of (a) the Controlled Amortization Amount for such Distribution Date and (b) any existing Controlled Amortization Shortfall; provided that (a) Seller may designate any amount greater than the foregoing as the Controlled Payment Amount upon five Business Days' notice to the Series 2000-VFC Certificateholders prior to the related Distribution Date and (b) in no event will the Controlled Payment Amount exceed the Class A Investor Interest. "Controlling Certificateholders" shall mean (a) on any date of determination on which the Class A Investor Interest is greater than zero, Class A Certificateholders owning Class A Certificates evidencing more than 50% of the sum of the Class A Investor Interest, and (b) thereafter, Class B Certificateholders owning Class B Certificates evidencing more than 50% of the Class B Investor Interest. "Cumulative Principal Shortfall" shall mean the sum of the Principal Shortfalls (as such term is defined in each of the related Supplements or Receivables Purchase Agreement) for each Series in Group One that are Principal Sharing Series. "Early Amortization Period" shall mean the period commencing at the close of business on the Business Day immediately preceding the day on which an Early Amortization Event with respect to Series 2000-VFC is deemed to have occurred, and ending on the Series 2000-VFC Termination Date. "Enhancement" shall mean with respect to the Class A Certificates, the subordination of the Class B Certificates, the Series Cash Collateral Account and the Spread Account. "Enhancement Provider" shall mean the Class B Certificateholders. "Enhancement Surplus" shall mean, with respect to any Distribution Date, the excess, if any, of (a) the Specified Enhancement Amount (after giving effect to any reductions made with respect to such date other than as the result of the existence of an Enhancement Surplus) over (b) the Required Enhancement Amount. "Finance Charge Shortfall" is defined in subsection 4.14(b). "Fixed Allocation Percentage" shall mean, with respect to any Due Period, the percentage equivalent of a fraction (a) the numerator of which is the Investor Interest as of the close of business on the last day of the Revolving Period and (b) the denominator of which is the greater of (i) the aggregate amount of Principal Receivables in the Trust determined as of the close of business on (A) if only one Series is outstanding the last day of the Revolving Period and (B) if more than one Series is outstanding, the last day of the prior Due Period and (ii) the sum of the numerators used to calculate the Investor Percentages for allocations with respect to Principal Receivables for all outstanding Series on such date of determination; provided that with respect to any Due Period in which a Reset Date occurs, (x) the denominator determined pursuant to subclause (b)(i) shall be (1) the aggregate amount of Principal Receivables in the Trust as of the close of business on the later of the last day of the prior Due Period or the preceding Reset Date, for the period from and including the first day of the current Due Period or the preceding Reset Date, as applicable, to but excluding such Reset Date and (2) the aggregate amount of Principal Receivables in the Trust as of the close of business on such Reset Date, for the period from and including such Reset Date to the later of the last day of such Due Period (in which case such period shall include such day) or the next succeeding Reset Date (in which case such period shall not include such succeeding Reset Date) and (y) the denominator determined pursuant to subclause (b)(ii) shall be (1) the sum of the numerators used to calculate the Investor Percentages for allocations with respect to Principal Receivables for all outstanding Series as of the close of business on the later of the last day of the prior Due Period or the preceding Reset Date, for the period from and including the first day of the current Due Period or the preceding Reset Date, as applicable, to but excluding such Reset Date and (2) the sum of the numerators used to calculate the Investor Percentages for allocations with respect to Principal Receivables for all outstanding Series as of the close of business on such Reset Date, for the period from and including such Reset Date to the earlier of the last day of such Due Period (in which case such period shall include such day) or the next succeeding Reset Date (in which case such period shall not include such succeeding Reset Date). "Fixed Allocation Period" shall mean the Amortization Period or the Early Amortization Period. "Fixed Period" is defined in Section 4.6(a). "Fixed Principal Allocation Date" shall mean the earlier of (a) the date on which an Early Amortization Event with respect to Series 2000-VFC is deemed to have occurred; and (b) the date on which the Amortization Period with respect to Series 2000-VFC commences. "Floating Allocation Percentage" shall mean, with respect to any Due Period, the percentage equivalent of a fraction: (a) the numerator of which is the Investor Interest as of the close of business on the last day of the preceding Due Period; and (b) the denominator of which is the greater of (i) the aggregate amount of Principal Receivables in the Trust as of the close of business on the last day of the preceding Due Period and (ii) the sum of the numerators used to calculate the Investor/Purchaser Percentages for such Due Period allocations with respect to Finance Charge Receivables, Series Dilution Amounts, Principal Receivables or Loss Amounts, as applicable, for all outstanding Series on such date of determination in subclause (b)(i); provided that with respect to any Due Period in which a Reset Date occurs: (x) if such Reset Date is the result of an Incremental Funding, the numerator determined pursuant to clause (a) shall be (1) the Investor Interest as of the close of business on the later of the last day of the preceding Due Period or the preceding Reset Date, for the period from and including the first day of the current Due Period or the preceding Reset Date, as applicable, to but excluding such Reset Date and (2) the Investor Interest as of the close of business on such Reset Date, for the period from and including such Reset Date to the earlier of the last day of such Due Period (in which case such period shall include such day) or the next succeeding Reset Date (in which case such period shall not include such succeeding Reset Date); (y) the denominator determined pursuant to subclause (b)(i) shall be (1) the aggregate amount of Principal Receivables in the Trust as of the close of business on the later of the last day of the preceding Due Period or the preceding Reset Date, for the period from and including the first day of the current Due Period or preceding Reset Date, as applicable, to but excluding such Reset Date and (2) the aggregate amount of Principal Receivables in the Trust as of the close of business on such Reset Date, for the period from and including such Reset Date to the earlier of the last day of such Due Period (in which case such period shall include such day) or the next succeeding Reset Date (in which case such period shall not include such succeeding Reset Date); and (z) the denominator determined pursuant to subclause (b)(ii) shall be (1) the sum of the numerators used to calculate the Investor/Purchaser Percentages for all outstanding Series for allocations with respect to Finance Charge Receivables, Loss Amounts or Principal Receivables, as applicable, for all such Series as of the close of business on the later of the last day of the preceding Due Period or the preceding Reset Date, for the period from and including the first day of the current Due Period or preceding Reset Date, as applicable, to but excluding such Reset Date and (2) the sum of the numerators used to calculate the Investor/Purchaser Percentages for all outstanding Series for allocations with respect to Finance Charge Receivables, Loss Amounts, Series Dilution Amounts or Principal Receivables, as applicable, for all such Series as the close of business on such Reset Date, for the period from and including such Reset Date to the earlier of the last day of such Due Period (in which case such period shall include such day) or the next succeeding Reset Date (in which case such period shall not include such succeeding Reset Date). provided further that with respect to the first Due Period, the Closing Date shall be treated as the last day of the preceding Due Period. "Funding Tranche" is defined in Section 4.6(a). "Group One" shall mean Series 2000-VFC and each other Series specified in the related Supplement or Receivables Purchase Agreement to be included in Group One. "Incremental Funding" shall mean a Class A Incremental Funding or a Class B Incremental Funding. "Initial Investor Interest" shall mean the sum of the Class A Initial Investor Interest and the Class B Initial Investor Interest. "Interest Period" shall mean, with respect to any Distribution Date, the period from and including the previous Distribution Date through the day preceding such Distribution Date, except that the initial Interest Period shall be the period from and including the Closing Date through the day preceding the initial Distribution Date. "Investor Interest" shall mean, with respect to any date of determination, an amount equal to the sum of (a) the Class A Investor Interest, and (b) the Class B Investor Interest for such date. "Investor Loss Amount" shall mean, with respect to any Distribution Date, an amount equal to the product of (a) the aggregate of the Loss Amounts for the related Due Period and (b) the Floating Allocation Percentage for such Due Period. "Investor Monthly Servicing Fee" is defined in Section 3 of this Supplement. "Investor/Purchaser Percentage" shall mean, with respect to Collections of Principal Receivables, the Principal Allocation Percentage, with respect to Collections of Finance Charge Receivables, the Floating Allocation Percentage, and with respect to Loss Amounts or Series Dilution Amounts, the Weighted Average Investor Floating Allocation Percentage. "Liquidity Purchaser" is defined in the Certificate Purchase Agreement. "Maximum Class A Funded Amount" shall mean, as of any day, $49,000,000, as such amount may be increased or decreased from time to time pursuant to Section 6 of this Supplement. As applied to any particular Class A Certificate, the "Maximum Class A Funded Amount" means the portion of the overall Maximum Class A Funded Amount represented by that Certificate. "Maximum Class B Funded Amount" shall mean, as of any day, (x) $11,122,700, as such amount may be increased or decreased from time to time pursuant to the Certificate Purchase Agreement. As applied to any particular Class B Certificate, the "Maximum Class B Funded Amount" means the portion of the overall Maximum Class B Funded Amount represented by that Certificate. "Minimum Seller Interest" shall mean, for Series 2000-VFC, zero. "Monthly Interest" shall mean, with respect to any Distribution Date, the sum of (a) the Class A Monthly Interest and (b) the Class B Monthly Interest, each with respect to such Distribution Date. "Optional Amortization" shall mean a Class A Optional Amortization or Class B Optional Amortization. "Optional Amortization Date" is defined in Section 4(b) of this Supplement. "Optional Amortization Notice" is defined in Section 4(b) of this Supplement. "Portfolio Yield" shall mean, with respect to any Due Period, the annualized percentage equivalent of a fraction, the numerator of which is an amount equal to the sum (without duplication) of (a) the Floating Allocation Percentage of Collections of Finance Charge Receivables for such Due Period, and (b) the amount of any interest and earnings on each of the Series Cash Collateral Account and the Spread Account deposited in the Collection Account pursuant to Sections 4.16 and 4.17 on the related Distribution Date, such sum to be calculated on a cash basis after subtracting the Investor Loss Amount for such Due Period, and the denominator of which is the Weighted Average Investor Interest for such Due Period. "Principal Allocation Percentage" shall mean, (a) with respect to any Due Period (including any day within such Due Period) occurring prior to the Fixed Principal Allocation Date, the Floating Allocation Percentage for such Due Period, and (b) with respect to any Due Period (including any day within such Due Period) occurring on or after the Fixed Principal Allocation Date, the Fixed Allocation Percentage for such Due Period. "Principal Shortfall" shall mean, as the context requires, any of the following: (a) on any Distribution Date with respect to the Amortization Period, the amount by which the Controlled Payment Amount for the prior Due Period exceeds the amount of Available Principal Collections for such Distribution Date (excluding any portion thereof attributable to Shared Principal Collections); and (b) on any Distribution Date with respect to the Early Amortization Period, the amount by which the sum of the Investor Interest exceeds the Available Principal Collections for such Distribution Date (excluding any portion thereof attributable to Shared Principal Collections). "Purchase Expiration Date" is defined in the Certificate Purchase Agreement. "Rating Agency Condition" shall mean for purposes of this Series 2000-VFC, with respect to any action, that each rating agency then rating the Commercial Paper (as defined in the Certificate Purchase Agreement) issued by the Conduit Purchaser shall have notified the Conduit Purchaser in writing that such action will not result in a reduction or withdrawal of its rating on the Commercial Paper; it being understood that the Administrator shall be deemed to be the "Rating Agency" solely for purposes of receiving notices of any proposed action that requires satisfaction of the Rating Agency Condition. "Reallocated Class B Principal Collections" shall mean, with respect to any Distribution Date, Collections of Principal Receivables allocated to the Class B Investor Interest applied in accordance with subsection 4.12 in an amount not to exceed the amount described in subsection 4.5(a)(ii) during the Revolving Period and subsection 4.5(b)(ii) during the Accumulation Period; provided, however, that such amount shall not exceed the Class B Investor Interest after giving effect to any Class B Investor Charge-Offs for such Distribution Date. "Record Date" shall mean, for purposes of Series 2000-VFC with respect to any Distribution Date or Optional Amortization Date, the date falling five Business Days prior to such date. "Refinancing Date" is defined in Section 4(c). "Replacement Interest Rate Cap" shall mean any replacement interest cap having substantially similar terms and conditions as the Cap Agreement that it replaces. "Required B Enhancement Multiplier" shall mean (i) if a Cap Replacement Event shall have occurred, until such time as a Replacement Interest Rate Cap shall have been entered into, 0.227, and (ii) otherwise 0.19. "Required CCA Enhancement Multiplier" shall mean (i) if a Cap Replacement Event shall have occurred, until such time as a Replacement Interest Rate Cap shall have been entered into, 0.185, and (ii) otherwise 0.160. "Required Class B Amount" shall mean, as of any date of determination, the result of the following calculation: (a) divide the Available Series Cash Collateral Amount by the Required CCA Enhancement Multiplier; (b) determine the excess, if any, of the Class A Investor Interest over the amount determined pursuant to clause (a); (c) multiply the amount determined pursuant to clause (b) by the Required B Enhancement Multiplier, the product of which multiplication shall be the Required Class B Amount. "Required Class B Floor Amount" shall mean, as of any date of determination, the result of the following calculation: (a) divide the Available Series Cash Collateral Amount by 0.01; (b) determine the excess, if any, of the Class A Investor Interest as of the close of business on the last day of the Revolving Period over the amount determined pursuant to clause (a); (c) multiply the amount determined pursuant to clause (b) by 0.03, the product of which multiplication shall be the Required Class B Floor Amount. "Required Draw Amount" is defined in Section 4.16 of this Supplement. "Required Enhancement Amount" shall mean, with respect to any date of determination, the greater of (i) the sum of (x) the Available Series Cash Collateral Amount, plus (y) the Required Class B Amount and (ii) the Required Enhancement Floor. "Required Enhancement Floor" shall mean, with respect to any date of determination occurring after the conclusion of the Revolving Period, an amount equal to the sum of (x) the Available Series Cash Collateral Amount and (y) the Required Class B Floor Amount. "Required Spread Account Amount" means (x) with respect to any Calculation Date on which the Class A Investor Interest is greater than zero, (i) the Spread Account Percentage times (ii) the Investor Interest as of the related Calculation Date (after giving effect to any Incremental Funding on such date), except that if the Spread Account Percentage under clause (i) and the Investor Interest under clause (ii) are calculated on any date after the conclusion of the Revolving Period, such percentage and amount shall be calculated as of the close of business on the last day of the Revolving Period, and (y) otherwise, zero. "Reset Date" shall mean the occurrence of (a) any Addition Date, (b) any Removal Date, (c) a date on which an Incremental Funding occurs, (d) any Optional Amortization Date or (e) any date on which a new Series is issued. "Revolving Period" shall mean the period from and including the Closing Date to, but not including, the earlier of (a) the day the Amortization Period commences or (b) the day the Early Amortization Period commences. "Series Account" means the Series Cash Collateral Account. "Series Cash Collateral Account" is defined in Section 4.16(a). "Series Investor Interest" shall mean, on any date of determination, an amount equal to the sum of (i) the Class A Investor Interest and (ii) the Class B Investor Interest. "Series 2000-VFC" shall mean the Series of the Charming Shoppes Master Trust represented by the Series 2000-VFC Certificates. "Series 2000-VFC Certificateholder" shall mean the Holder of record of any Series 2000-VFC Certificates. "Series 2000-VFC Certificates" shall mean the Class A Certificates and the Class B Certificates. "Series Early Amortization Event" is defined in Section 10 of this Supplement. "Series 2000-VFC Investor Dilution Amount" shall mean, with respect to any Distribution Date, an amount equal to the product of (a) the Series Percentage for the related Due Period and (b) any Series Dilution Amount remaining after giving effect to any addition of Accounts and other actions taken pursuant to Sections 4.3(d) and 2.6. "Series 2000-VFC Termination Date" shall mean the earliest to occur of (a) the first date following the end of the Revolving Period on which the Series 2000-VFC Certificates are paid in full, (b) the forty-second Distribution Date following the Class A Scheduled Final Payment Date, or (c) the date of termination of the Trust pursuant to Section 12.1. "Series 2000-VFC Unfunded Dilution Amount" shall mean, on any Distribution Date, an amount equal to any unfunded Series 2000-VFC Investor Dilution Amount remaining after application of Available Funds pursuant to subsection 4.9(a) and Shared Excess Finance Charge Collections in accordance with Section 4.11. "Series Servicing Fee Percentage" shall mean 2.0%. "Shared Excess Finance Charge Collections" shall mean, with respect to any Distribution Date, as the context requires, either (a) the aggregate amount of Collections of Finance Charge Receivables allocated to the Series 2000-VFC Certificates but available to cover Finance Charge Shortfalls for other Series in Group One, if any, or (b) the aggregate amount of Collections of Finance Charge Receivables and other amounts allocable to other Series in Group One in excess of the amounts necessary to make required payments with respect to such Series, if any, and available to cover any Finance Charge Shortfall with respect to the Series 2000-VFC Certificates as described in Section 4.14. "Shared Principal Collections" shall mean, as the context requires, either (a) the amount allocated to the Series 2000-VFC Certificates which may be applied to cover Principal Shortfalls with respect to other outstanding Series in Group One, or (b) the amounts allocated to the Investor Certificates of other Series in Group One that the applicable Supplements for such Series specify are to be treated as "Shared Principal Collections" and which may be applied to cover Principal Shortfalls with respect to the Series 2000-VFC Certificates pursuant to Section 4.15. "Specified Enhancement Amount" shall mean, at any time, the sum of the Available Series Cash Collateral Amount plus the Class B Investor Interest. "Spread Account" is defined in Section 4.17 of this Supplement. "Spread Account Amount" shall mean with respect to any date, the amount on deposit in the Spread Account on such date (such amount calculated before giving effect to any deposit to, or withdrawal from, the Spread Account to be made with respect to such date). "Spread Account Percentage" shall mean, with respect to any Calculation Date, the "Required Percentage" set forth in the right column of the table set forth below that corresponds to the applicable range for the Tested Percentage in effect for the preceding Distribution Date (or if such Calculation Date is also a Distribution Date, for such Distribution Date): Tested Percentage Required Percentage greater than 5.0% 0.0% greater than 4.0% but less than or equal to 5.0% 2.0% greater than 3.0% but less than or equal to 4.0% 3.0% greater than 2.0% but less than or equal to 3.0% 4.0% less than or equal to 2.0% 5.0% *If the "Required Percentage" is increased for any Distribution Date, the "Required Percentage" for any succeeding Distribution Date shall not be decreased until the applicable Tested Percentage falls within the range specified for a lower "Required Percentage" for three consecutive Distribution Periods; provided that the Required Percentage shall not be reduced if the Early Amortization Period shall have commenced. "Tested Percentage" means, with respect to any Calculation Date, the average of the Adjusted Excess Yield Percentages for the three most recent Distribution Dates (including such Calculation Date). "Weighted Average Class A Floating Allocation Percentage" shall mean, for any Due Period, the quotient of (a) the sum of the Class A Floating Allocation Percentage determined as of each day in that Due Period, divided by (b) the number of days in that Due Period. "Weighted Average Class A Investor Interest" shall mean, for any Due Period, the quotient of (a) the sum of the Class A Investor Interest determined as of each day in that Due Period, divided by (b) the number of days in that Due Period. "Weighted Average Class B Floating Allocation Percentage" shall mean, for any Due Period, the quotient of (a) the sum of the Class B Floating Allocation Percentage determined as of each day in that Due Period, divided by (b) the number of days in that Due Period. "Weighted Average Class B Investor Interest" shall mean, for any Due Period or Interest Period, as applicable, the quotient of (a) the sum of the Class B Investor Interest determined as of each day in that Due Period or Interest Period, as applicable, divided by (b) the number of days in that Due Period, or Interest Period, as applicable. "Weighted Average Investor Floating Allocation Percentage" shall mean, for any Due Period, the quotient of (a) the sum of the Floating Allocation Percentages determined as of each day in that Due Period, divided by (b) the number of days in that Due Period. "Weighted Average Investor Interest" shall mean, for any Due Period, the quotient of (a) the sum of the Investor Interest determined as of each day in that Due Period, divided by (b) the number of days in that Due Period. "Write Down Accrual" shall mean, for any Payment Date, an amount equal to the product of (x) the Class A Certificate Rate for the related Interest Period times (y) the Write Down Amount for the preceding Distribution Date times (z) a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360. "Write Down Amount" shall mean, for any Distribution Date, the amount, if any, by which the Class A Funded Amount exceeded the Class A Investor Interest as of such Distribution Date after giving effect to all payments and allocations of Class A Investor Charge-Offs on such Distribution Date. SECTION 3. Servicing Compensation. The share of the Monthly Servicing Fee allocable to Series 2000-VFC with respect to any Due Period (the "Investor Monthly Servicing Fee") shall be equal to one-twelfth of the product of (i) the Series Servicing Fee Percentage and (ii) the Weighted Average Investor Interest for such Due Period. The share of the Monthly Servicing Fee allocable to the Seller or the Certificateholders of other Series shall be paid from the cash flows of the Trust allocated to the Seller or Certificateholders of other Series (as provided in the related Supplements or Receivables Purchase Agreements) and in no other event shall the Trust, the Trustee or the Investor Certificateholders be liable therefor. The Investor Monthly Servicing Fee shall be payable to the Servicer solely to the extent amounts are available for distribution in respect thereof pursuant to subsections 4.9(a)(iv) and 4.11. SECTION 4. Variable Funding Mechanics. (a) Class A Incremental Fundings. From time to time during the Revolving Period, the Seller and the Servicer may notify the Agent and the Conduit Purchaser that a Class A Incremental Funding will occur, subject to the conditions of the Certificate Purchase Agreement, on the third or any later subsequent Business Day by delivering a Notice of Incremental Funding (as defined in the Certificate Purchase Agreement) executed by the Seller and the Servicer to the Administrator, specifying the amount of such Class A Incremental Funding (which shall be a minimum of $100,000 (or, in the case of the initial funding hereunder, $500,000)) or a higher integral multiple thereof, except that a Class A Incremental Funding may be requested in the entire remaining Maximum Class A Funded Amount) and the Business Day upon which such Class A Incremental Funding is to occur. Upon the occurrence of any Class A Incremental Funding, the Class A Floating Allocation Percentage, the Class A Investor Interest, the Floating Allocation Percentage, the Investor Interest and the Class A Funded Amount shall increase as provided herein. (b) Class A Optional Amortization. On any Business Day in the Revolving Period or the Amortization Period, the Seller may cause the Servicer to provide notice to the Trustee and the affected Holders (an "Optional Amortization Notice") at least three Business Days prior to any Business Day (the "Optional Amortization Date") stating its intention to cause a full or partial amortization of the Class A Certificates (a "Class A Optional Amortization") with Available Principal Collections and/or Available Shared Principal Collections on the Optional Amortization Date, in an amount (the "Class A Optional Amortization Amount") of not less than $100,000 or a higher integral multiple thereof, except that the Class A Optional Amortization Amount may equal the entire Class A Funded Amount. The Optional Amortization Notice shall state the Optional Amortization Date, the Class A Optional Amortization Amount and the allocation of such Class A Optional Amortization Amount among the various outstanding Funding Tranches. The Class A Optional Amortization Amount shall be paid from Available Principal Collections and/or Available Shared Principal Collections. Allocation of the Class A Optional Amortization Amount among the various outstanding Funding Tranches shall be at the discretion of the Seller, and accrued interest and any Class A Additional Amounts on the affected Funding Tranches shall be payable on the first Distribution Date on or after the related Optional Amortization Date. On the Business Day prior to each Optional Amortization Date, the Servicer shall instruct the Trustee in writing (which writing shall be substantially in the form of Exhibit B) to withdraw Available Principal Collections and/or Available Shared Principal Collections from the Collection Account in an aggregate amount sufficient to pay the Class A Optional Amortization Amount on that Optional Amortization Date and the Trustee, acting in accordance with such instructions, shall on such Optional Amortization Date distribute such Class A Optional Amortization Amount to the Class A Certificateholders pursuant to Section 5.1. Notwithstanding the foregoing, no Class A Optional Amortization shall be made during any Due Period if the effect of such Class A Optional Amortization would be to cause any portion of the Class A Required Amount to remain unfunded on the related Distribution Date after giving effect to all applications of funds on such Distribution Date. (c) Refinanced Optional Amortization. On any Business Day in the Revolving Period or the Amortization Period, the Seller may, with the consent of each affected Series 2000-VFC Certificateholder, cause the Servicer to provide notice to the Trustee and all Series 2000-VFC Certificateholders at least three Business Days prior to any Business Day (the "Refinancing Date") stating its intention to cause the Class A Investor Interest and/or the Class B Investor Interest to be prepaid in full or in part on the Refinancing Date by causing the Investor Interest, as applicable, to be conveyed to one or more Persons (who may be the Holders of a new Series issued substantially contemporaneously with such prepayment) for a cash purchase price in an amount equal to the sum of (i) the Investor Interest (or the portion thereof that is being conveyed), plus (ii) accrued and unpaid interest on the Investor Interest (or the portion thereof that is being conveyed) through the Refinancing Date, plus (iii) any accrued and unpaid Class A Non-Use Fees and Class A Additional Amounts in respect of the Class A Investor Interest (or portion thereof that is being conveyed) through the Refinancing Date, plus (iv) if any part of the Investor Interest attributable to the Class B Investor Interest is being conveyed, any accrued and unpaid Class B Non-Use Fees and Class B Additional Amounts in respect of the Class B Investor Interest (or portion thereof that is being conveyed) through the Refinancing Date. In the case of any such conveyance, the purchase price shall be deposited in the Collection Account and shall be distributed to the applicable Series 2000-VFC Holders on the Refinancing Date in accordance with the terms of this Supplement and the Agreement, except that any portion of such purchase price may be applied to reduce the Class B Investor Interest if and only to the extent that the Specified Enhancement Amount, after giving effect to such conveyance, other applications of the purchase price, and any concurrent reduction in the Class A Funded Amount, shall not be less than the Required Enhancement Amount). (d) Class B Incremental Fundings. From time to time during the Revolving Period, the Seller and the Servicer may notify the Class B Certificateholders that a Class B Incremental Funding will occur, subject to the conditions of the Certificate Purchase Agreement, on the next Distribution Date or on the date of any Class A Incremental Funding pursuant to paragraph (a) above by delivering a Notice of Incremental Funding (as defined in the Certificate Purchase Agreement) executed by the Seller and the Servicer to the Class B Certificateholders, specifying the amount of such Class B Incremental Funding and the Business Date upon which such Class B Incremental Funding is to occur. Upon the occurrence of any Class B Incremental Funding, the Class B Floating Allocation Percentage, the Class B Investor Interest, the Floating Allocation Percentage, the Class B Funded Amount and the Investor Interest shall increase as provided herein. (e) Class B Optional Amortization. If on any Optional Amortization Date, the Specified Enhancement Amount (after giving effect to any Class A Optional Amortization to occur on such date) will be greater than the Required Enhancement Amount, if so specified in any Optional Amortization Notice delivered to the Trustee pursuant to paragraph (b) above, the Seller may cause a full or partial amortization of the Class B Certificates (a "Class B Optional Amortization") up to (but not in excess of) the amount of such Enhancement Surplus with Available Principal Collections and/or Available Shared Principal Collections on the Optional Amortization Date, in an amount (the "Class B Optional Amortization Amount"), except that the Class B Optional Amortization Amount may equal the entire Class B Funded Amount if otherwise permitted pursuant to this sentence. The Optional Amortization Notice shall state the Optional Amortization Date and the Class B Optional Amortization Amount. The Class B Optional Amortization Amount shall be paid from Available Principal Collections and/or Available Shared Principal Collections. Accrued interest and any Class B Additional Amounts shall be payable on the first Distribution Date on or after the related Optional Amortization Date. On the Business Day prior to each Optional Amortization Date, the Servicer shall instruct the Trustee in writing (which writing shall be substantially in the form of Exhibit B) to withdraw Available Principal Collections and/or Available Shared Principal Collections from the Collection Account in an aggregate amount sufficient to pay the Class B Optional Amortization Amount on that Optional Amortization Date and the Trustee, acting in accordance with such instructions, shall on such Optional Amortization Date distribute such Class B Optional Amortization Amount to the applicable Investor Certificateholders pursuant to Section 5.1. Notwithstanding the foregoing, no Class B Optional Amortization shall be made during any Due Period if the effect of such Class B Optional Amortization would be to cause any portion of the Class A Required Amount to remain unfunded on the related Distribution Date after giving effect to all applications of funds on such Distribution Date. SECTION 5. Optional Repurchase; Reassignment and Termination Provisions. The Series 2000-VFC Certificates shall be subject to transfer to the Servicer at its option on any Distribution Date, on or after the Distribution Date on which the Investor Interest is permanently reduced to an amount less than or equal to 10% of the sum of the Maximum Class A Funded Amount plus the Maximum Class B Funded Amount by deposit into the Collection Account of a final distribution for application in accordance with Section 12.3 in an amount which shall be equal to the sum of (i) the Investor Interest, plus (ii) accrued and unpaid interest on the Series 2000-VFC Certificates through the day preceding the Distribution Date on which the purchase occurs, plus (iii) any accrued and unpaid Class A Non-Use Fees and Class A Additional Amounts in respect of the Class A Certificates through the day preceding the Distribution Date on which the repurchase occurs plus (iv) any accrued and unpaid Class B Non-Use Fees and Class B Additional Amounts in respect of the Class B Certificates through the day preceding the Distribution Date on which the repurchase occurs. Upon the tender of the outstanding Series 2000-VFC Certificates by the Holders, the Trustee shall distribute the amounts, to the Series 2000-VFC Holders on the next Distribution Date in repayment of the principal amount and accrued and unpaid interest and other amounts owing to the Series 2000-VFC Holders. Following payment of the aggregate purchase price as provided above, the Series 2000-VFC Holders shall have no further rights with respect to the Receivables. In the event that the Servicer fails for any reason to deposit in the Collection Account the aggregate purchase price for the Investor Certificates, payments shall continue to be made to the Series 2000-VFC Holders in accordance with the terms of the Agreement and this Supplement. The Servicer shall not be permitted to effect an optional repurchase pursuant to this Section 5 unless, after payment of the amount specified above, the Class A Funded Amount shall have been paid in full. SECTION 6. Maximum Funded Amounts. The initial Maximum Class A Funded Amount of each Class A Certificate is as set forth on the related Class A Certificate. The Maximum Class A Funded Amount of each Class A Certificate may be reduced or increased from time to time as provided in the Certificate Purchase Agreement. Increases and decreases in the overall Maximum Class A Funded Amount shall be made ratably among the various Class A Certificates. The Maximum Class B Funded Amount may be reduced or increased from time to time (with notice to the Administrator) as provided in the Certificate Purchase Agreement. SECTION 7. Delivery and Payment for the Series 2000-VFC Certificates. (a) The Seller shall execute and deliver the Series 2000-VFC Certificates (in definitive, fully registered form) to the Trustee for authentication in accordance with Section 6.1 of the Agreement. The Trustee shall deliver the Series 2000-VFC Certificates when authenticated in accordance with Section 6.2 of the Agreement. The Certificates shall be delivered as Definitive Certificates as provided in Sections 6.2 and 6.12. (b) The Agent shall record on the schedule attached to its Class A Certificate, the date and amount of each Class A Incremental Funding made under such Class A Certificate and each repayment thereof. The Class A Funded Amount so recorded shall be rebuttable presumptive evidence of the principal amount owing and unpaid on such Class A Certificate. The failure to so record any such amount or any error in so recording any such amount shall not, however, limit or otherwise affect the obligations of the Trust hereunder or under such Class A Certificate to repay the Class A Investor Interest evidenced by such Class A Certificate together with all interest and other amounts payable thereunder in accordance with the terms of this Supplement. SECTION 8. Article IV of Agreement. Sections 4.1, 4.2 and 4.3 of the Agreement shall be read in their entirety as provided in the Agreement. Article IV of the Agreement (except for Sections 4.1, 4.2 and 4.3 thereof) shall read in its entirety as follows and shall be applicable only to the Series 2000-VFC Certificates. ARTICLE IV. RIGHTS OF CERTIFICATEHOLDERS AND RECEIVABLES PURCHASERS AND ALLOCATION AND APPLICATION OF COLLECTIONS SECTION 4.1. SECTION 4.2. SECTION 4.3. SECTION 4.4. Rights of Series 2000-VFC Certificateholders. The Series 2000-VFC Certificates shall represent undivided interests in the Trust, consisting of the right to receive, to the extent necessary to make the required payments with respect to such Series 2000-VFC Certificates at the times and in the amounts specified in this Agreement, (a) the Floating Allocation Percentage and Principal Allocation Percentage (as applicable from time to time) of Collections received with respect to the Receivables and (b) funds on deposit in the Collection Account, the Series Cash Collateral Account and the Spread Account. The Class B Certificates shall be subordinated to the Class A Certificates to the extent described herein. The Exchangeable Seller Certificate shall not represent any interest in the Collection Account, the Series Cash Collateral Account or the Spread Account, except as specifically provided in this Article IV. SECTION 4.5. Allocations. (a) Allocations During the Revolving Period. During the Revolving Period, the Servicer shall, prior to the close of business on any day on which any Collections are deposited in the Collection Account, allocate the following amounts as set forth below: (i) allocate to the Series 2000-VFC Certificateholders an amount equal to the product of (A) the Floating Allocation Percentage on such date and (B) the aggregate amount of Collections processed in respect of Finance Charge Receivables on such date, to be applied in accordance with Section 4.9(a); (ii) allocate to the Series 2000-VFC Certificateholders an amount equal to the product of (A) the Class B Investor Allocation on such date, (B) the Investor/Purchaser Percentage on such date and (C) the aggregate amount of Collections processed in respect of Principal Receivables on such date, to be applied first on the related Distribution Date (to the extent not previously used to make an Optional Amortization Payment pursuant to Section 4.3 of the Supplement) in accordance with Section 4.12 and then in accordance with Section 4.9(b); and (iii) allocate to the Series 2000-VFC Certificateholders an amount equal to the product of (A) the Class A Investor Allocation on such date, (B) the Investor/Purchaser Percentage on such date and (C) the aggregate amount of Collections processed in respect of Principal Receivables on such date, to be applied on the related Distribution Date (to the extent not previously used to make an Optional Amortization Payment pursuant to Section 4.3 of the Supplement) in accordance with Section 4.9(b). (b) Allocations During the Amortization Period. During the Amortization Period, the Servicer shall, prior to the close of business on any day on which any Collections are deposited in the Collection Account, allocate the following amounts as set forth below: (i) allocate to the Series 2000-VFC Certificateholders an amount equal to the product of (A) the Floating Allocation Percentage on such date and (B) the aggregate amount of Collections processed in respect of Finance Charge Receivables on such date, to be applied in accordance with Section 4.9(a); (ii) allocate to the Series 2000-VFC Certificateholders an amount equal to the product of (A) the Class B Investor Allocation on such date, (B) the Investor/Purchaser Percentage on such date and (C) the aggregate amount of Collections processed in respect of Principal Receivables on such date, to be applied first on the related Distribution Date (to the extent not previously used to make an Optional Amortization Payment pursuant to Section 4.3 of the Supplement) in accordance with Section 4.12 and then in accordance with Section 4.9(c); and (iii) allocate to the Series 2000-VFC Certificateholders an amount equal to the product of (A) the Class A Investor Allocation on such date, (B) the Investor/Purchaser Percentage on such date and (C) the aggregate amount of Collections processed in respect of Principal Receivables on such date, to be applied on the related Distribution Date (to the extent not previously used to make an Optional Amortization Payment pursuant to Section 4.3 of the Supplement) in accordance with Section 4.9(c). (c) Allocations During the Early Amortization Period. During the Early Amortization Period, Servicer shall, prior to the close of business on any day on which any Collections are deposited in the Collection Account, allocate the following amounts as set forth below: (i) allocate to the Series 2000-VFC Certificateholders an amount equal to the product of (A) the Floating Allocation Percentage on such date and (B) the aggregate amount of Collections processed in respect of Finance Charge Receivables on such date, to be applied in accordance with Section 4.9(a); (ii) allocate to the Series 2000-VFC Certificateholders an amount equal to the product of (A) the Class B Investor Allocation on such date, (B) the Investor/Purchaser Percentage on such date and (C) the aggregate amount of Collections processed in respect of Principal Receivables on such date, to be applied first in accordance with Section 4.12 and then in accordance with Section 4.9(c); and (iii) allocate to the Series 2000-VFC Certificateholders an amount equal to the product of (A) the Class A Investor Allocation on such date, (B) the Investor/Purchaser Percentage on such date and (C) the aggregate amount of Collections processed in respect of Principal Receivables on such date, to be applied in accordance with Section 4.9(c). SECTION 4.6. Determination of Monthly Interest, Non-Use Fees and Breakage. (a) Pursuant to the Certificate Purchase Agreement, the Class A Certificates may from time to time be divided into one or more subdivisions (each, as further specified in the Certificate Purchase Agreement, a "Funding Tranche") which will accrue interest on different bases. For Funding Tranches that accrue interest by reference to a commercial paper rate or the London interbank offered rate, a specified period (each, a "Fixed Period") will be designated in the Certificate Purchase Agreement during which that Funding Tranche may accrue interest at a fixed rate. The "Class A Monthly Interest" for any Interest Period shall equal the sum of (i) the product of (A) the Class A Certificate Rate in effect for such Interest Period times (B) the Class A Investor Interest as of the last day of such Interest Period times (C) a fraction, the numerator of which is the actual number of days in such Interest Period and the denominator of which is 360 plus (ii) the amount of any accrued and unpaid Class A Monthly Interest for any prior Interest Period plus additional interest (to the extent permitted by law) on such unpaid interest amount at the Class A Certificate for the current Interest Period plus 2%, as such "Class A Monthly Interest" is adjusted for such Interest Period in accordance with Section 2.6 of the Certificate Purchase Agreement, all as determined by Servicer on the related Determination Date. For purposes of such determination, Servicer shall rely upon information provided by the Administrator pursuant to the Certificate Purchase Agreement. (b) In addition to Class A Monthly Interest, the Class A Certificateholders shall receive a monthly commitment fee (a "Class A Non-Use Fee") with respect to each Interest Period (or portion thereof) falling in the Revolving Period at a rate specified in the Fee Letter referred to in the Certificate Purchase Agreement based on its portion of the excess of the Average Maximum Class A Funded Amount over the Average Class A Funded Amount for such period and (ii) shall be entitled to receive certain other amounts identified as Class A Additional Amounts (such amounts, including Breakage Payments, being "Class A Additional Amounts") in the Certificate Purchase Agreement. The Class A Non-Use Fee shall accrue based upon the number of days in the related Interest Period (or the portion thereof falling in the Revolving Period) and a year of 360 days. (c) If any distribution of principal is made with respect to any Funding Tranche with a Fixed Period and a fixed interest rate other than on a Distribution Date or on the last day of that Fixed Period, or if the Class A Funded Amount or Class B Funded Amount is reduced by an Optional Amortization in an amount greater than the amount (if any) specified in the Certificate Purchase Agreement without the applicable number (as specified in the Certificate Purchase Agreement) of Business Days' prior notice to a Class A Certificateholder or Class B Certificateholder, as applicable, and in either case (i) the interest paid by such Certificateholder (or, in the case of the Class A Certificate held by the Administrator as agent for the Conduit Purchaser and each Liquidity Purchaser, by the Conduit Purchaser or such Liquidity Purchaser, as applicable) to providers of funds to it to fund that Funding Tranche exceeds (ii) returns earned by such Certificateholder (or, in the case of the Class A Certificate held by the Administrator as agent for the Conduit Purchaser and each Liquidity Purchaser, by the Conduit Purchaser or such Liquidity Purchaser, as applicable) through the last day of that Fixed Period by redeployment of such funds in highly rated short-term money market instruments, then, upon written notice (which notice shall be signed by an officer of such Certificateholder (or the Conduit Purchaser or such Liquidity Purchaser, by the Conduit Purchaser or such Liquidity Purchaser, as applicable) with knowledge of and responsibility for such matters and shall set forth in reasonable detail the basis for requesting the amounts) from such Certificateholder (or the Conduit Purchaser or Liquidity Purchaser) to the Servicer, such Certificateholder (or the Conduit Purchaser or Liquidity Purchaser) shall be entitled to receive additional amounts in the amount of such excess (each, a "Breakage Payment") on the Distribution Date on or after the date such distribution of principal is made with respect to that Funding Tranche, so long as such written notice is received not later than noon, New York City time, on the Determination Date related to such Distribution Date. For purposes of calculations under this paragraph, any payment received by a Certificateholder later than noon, New York City time, on any day shall be deemed to have been received on the next day. (d) The amount of monthly interest distributable to the Class B Certificateholders on each Distribution Date (the "Class B Monthly Interest") shall equal the sum of (i) product of (A) a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360, times (B) the Class B Certificate Rate in effect with respect to the related Interest Period, times (C) the Weighted Average Class B Investor Interest for the related Interest Period plus (ii) the amount of any accrued and unpaid Class B Monthly Interest for any prior Interest Period plus additional interest (to the extent permitted by law) on such unpaid interest amount at the Class B Certificate for the current Interest Period plus 2%. (e) In addition to Class B Monthly Interest, the Class B Certificateholders (i) shall receive a monthly commitment fee (a "Class B Non-Use Fee") with respect to each Interest Period (or portion thereof) falling in the Revolving Period at a rate specified in the Fee Letter referred to in the Certificate Purchase Agreement based on its portion of the excess of the Average Maximum Class B Funded Amount over the Average Class B Funded Amount for such period and (ii) shall be entitled to receive certain other amounts identified as Class B Additional Amounts (such amounts, including Breakage Payments, being "Class B Additional Amounts") in the Certificate Purchase Agreement. The Class B Non-Use Fee shall accrue based upon the number of days in the related Interest Period (or the portion thereof falling in the Revolving Period) and a year of 365 or 366 days, as applicable. SECTION 4.7. Determination of Monthly Principal. (a) The amount of monthly principal distributable from the Collection Account with respect to the Class A Certificates on each Distribution Date (the "Class A Monthly Principal"), beginning with the Distribution Date in the month following the month in which the Amortization Period or, if earlier, the Early Amortization Period, begins, shall be equal to the lesser of (i) the Available Principal Collections with respect to such Distribution Date and (ii) (a) for each Distribution Date with respect to the Amortization Period, the Controlled Payment Amount for such Distribution Date and (b) for each Distribution Date during the Early Amortization Period, the Class A Investor Interest on such Distribution Date (after taking into account any adjustments to be made on such Distribution Date pursuant to Section 4.10). (b) The amount of monthly principal distributable with respect to the Class B Certificates on each Distribution Date (the "Class B Monthly Principal") shall be (i) during the Revolving Period, an amount equal to the lesser of (1) the amount of any Enhancement Surplus or such lesser amount as designated by the Servicer on the related Determination Date and (2) the Available Principal Collections not required for any Class A Optional Amortization on such Distribution Date, (ii) during the Amortization Period, an amount equal to the lesser of (1) the amount of any Enhancement Surplus on such Distribution Date and (2) the Available Principal Collections not required for Class A Monthly Principal or any Class A Optional Amortization on such Distribution Date and (iii) during the Early Amortization Period on and after the date on which the Class A Investor Interest is paid in full, the Class B Investor Interest on such Distribution Date (after taking into account any adjustments to be made on such Distribution Date pursuant to Section 4.10 and Section 4.12). SECTION 4.8. Coverage of Class A Required Amount. (a) On or before each Distribution Date, Servicer shall determine the amount (the "Class A Required Amount"), if any, by which the sum of (i) the Class A Monthly Interest for such Distribution Date, plus (ii) the Class A Investor Loss Amount, if any, for the prior Due Period plus (iii) the Class A Investor Dilution Amount, if any, for such Distribution Date, (iv) the Investor Monthly Servicing Fee for the prior Due Period plus (v) any Class A Monthly Interest and Investor Monthly Servicing Fee included in the Class A Required Amount for any prior Distribution Date but not yet paid, exceeds the Available Funds for the related Due Period. (b) If the Class A Required Amount for any Distribution Date is greater than zero, (i) the Servicer shall give written notice to the Trustee of such positive Class A Required Amount on or before such Distribution Date and (ii) all or a portion of any Shared Excess Finance Charge Collections and any Required Draw Amount with respect to such Distribution Date in an amount equal to the Class A Required Amount, to the extent available, for such Distribution Date shall be distributed from the Collection Account or the Series Cash Collateral Account, as applicable, on such Distribution Date pursuant to Sections 4.9 and 4.16. If the Class A Required Amount for such Distribution Date exceeds the amount so allocated pursuant to the preceding sentence, an amount equal to such excess, to the extent available, for such Distribution Date shall be distributed from the Spread Account on such Distribution Date pursuant to Section 4.17. If the Class A Required Amount for such Distribution Date exceeds the amount so allocated pursuant to the two preceding sentences, the Collections of Principal Receivables allocable to the Class B Certificates with respect to the prior Due Period shall be applied as specified in Section 4.12. SECTION 4.9. Monthly Payments. On or before each Distribution Date, the Servicer shall instruct the Trustee in writing (which writing shall be substantially in the form of Exhibit C hereto) to withdraw and the Trustee, acting in accordance with such instructions, shall withdraw on such Distribution Date, to the extent of available funds, the amounts required to be withdrawn from the Collection Account as follows: (a) An amount equal to the Available Funds for the related Due Period will be distributed on each Distribution Date, to the extent available, in the following priority: (i) an amount equal to the unpaid Class A Monthly Interest shall be distributed to the Class A Certificateholders in accordance with Section 5.1; (ii) an amount equal to the unpaid Write Down Accrual, if any, for such Distribution Date plus any Write Down Accrual due but not paid on any prior Distribution Date shall be distributed to the Class A Certificateholders in accordance with Section 5.1; (iii) [reserved]; (iv) an amount equal to the Investor Monthly Servicing Fee for such Distribution Date plus any Investor Monthly Servicing Fee due but not paid to the Servicer on any prior Distribution Date shall be distributed to Servicer; (v) first, an amount equal to the Class A Investor Loss Amount, if any, and second, an amount equal to the Class A Investor Dilution Amount, if any, in either case, for the related Due Period shall be treated as a portion of Available Principal Collections on such Distribution Date; (vi) an amount equal to the aggregate amount of Class A Investor Charge-Offs which have not been previously reimbursed will be treated as a portion of Available Principal Collections on such Distribution Date; (vii) first, an amount equal to the Class B Investor Loss Amount, if any, and then, an amount equal to the Class B Investor Dilution Amount, if any, in either case, for the prior Due Period will be treated as a portion of Available Principal Collections on such Distribution Date; (viii) an amount equal to the aggregate amount by which the Class B Investor Interest has been reduced for reasons other than the payment of principal to the Class B Certificateholders (but not in excess of the aggregate amount of such reductions which have not been previously reimbursed) will be treated as a portion of Available Principal Collections on such Distribution Date; (ix) an amount up to the excess, if any of the Required Enhancement Amount (determined after all deposits, withdrawals, reductions, payments, and adjustments to be made with respect to such Distribution Date) over the Specified Enhancement Amount (determined after all deposits, withdrawals, reductions, payments and adjustments to be made with respect to such Distribution Date) shall be deposited in the Series Cash Collateral Account; (x) an amount up to the excess, if any of the Required Spread Account Amount (determined after all deposits, withdrawals, reductions, payments and adjustments to be made with respect to such Distribution Date) over the Spread Account Amount (determined after all deposits, withdrawals, reductions, payments and adjustments to be made with respect to such Distribution Date) shall be deposited in the Spread Account; (xi) an amount equal to the unpaid Class A Non-Use Fee, if any, for the related Interest Period plus any Class A Non-Use Fee due but not paid to the Class A Certificateholders on any prior Distribution Date shall be distributed to the Class A Certificateholders in accordance with Section 5.1; (xii) an amount equal to the Class A Additional Amounts, if any, for the related Interest Period plus any Class A Additional Amounts due but not paid to the Class A Certificateholders on any prior Distribution Date shall be distributed to the Class A Certificateholders in accordance with Section 5.1; (xiii) an amount equal to the Class B Monthly Interest will be paid to the Class B Certificateholders in accordance with the Certificate Purchase Agreement; (xiv) an amount equal to (i) any Class B Non-Use Fee payable to the Class B Certificateholders under the Certificate Purchase Agreement for such Distribution Date, plus (ii) any Class B Additional Amounts payable to the Class B Certificateholders under the Certificate Purchase Agreement for such Distribution Date, plus (iii) the amount of any past due Class B Non-Use Fee and Class B Additional Amounts payable to the Class B Certificateholders in accordance with the Certificate Purchase Agreement; and (xv) the balance, if any, after giving effect to the payments made pursuant to clauses (i) through (xiv) shall constitute "Excess Finance Charge Collections" to be applied with respect to other Series in accordance with Section 4.3 of the Agreement. (b) During the Revolving Period, an amount equal to the Available Principal Collections for the related Due Period will be distributed on each Distribution Date, to the extent available, in the following priority: (i) an amount equal to the Class B Monthly Principal for such Distribution Date shall be distributed to the Class B Certificateholders; (ii) an amount equal to the lesser of (A) Available Principal Collections for such Distribution Date after giving effect to the application specified in subsection 4.9(b)(i) above, and (B) the product of (1) a fraction, the numerator of which is equal to such Available Principal Collections and the denominator of which is equal to the sum of the Available Principal Collections available for sharing as specified in the related Supplement or Receivables Purchase Agreement for each Series (including this Series 2000-VFC) in Group One that are Principal Sharing Series and (2) the Cumulative Principal Shortfall, shall be treated as Shared Principal Collections and applied to Series in Group One that are Principal Sharing Series other than this Series 2000-VFC; and (iii) an amount equal to the excess, if any, of (A) the Available Principal Collections for such Distribution Date over (B) the applications specified in subsections 4.9(b)(i) and (ii) above shall be paid to the Holder of the Exchangeable Seller Certificate; provided, however, that in no event shall the amount payable to the Holder of the Exchangeable Seller Certificate pursuant to this subsection 4.9(b)(iii) be greater than the Seller Interest on such Distribution Date. (c) During a Fixed Allocation Period, an amount equal to the Available Principal Collections for the related Due Period plus any amounts in the Excess Funding Account allocable to Series 2000-VFC in accordance with Section 4.3(e) will be distributed on each Distribution Date, to the extent available, in the following priority: (i) an amount equal to the Class A Monthly Principal for such Distribution Date shall be distributed to the Class A Certificateholders in accordance with Section 5.1(a); (ii) an amount equal to Class B Monthly Principal shall be distributed to the Class B Certificateholders in accordance with Section 5.1(b); (iii) an amount equal to the lesser of (A) Available Principal Collections for such Distribution Date after giving effect to the application specified in clauses (i) and (ii) above and (B) the product of (1) a fraction, the numerator of which is equal to such Available Principal Collections and the denominator of which is equal to the sum of the Available Principal Collections available for sharing as specified in the related Supplement or Receivables Purchase Agreement for each Series (including this Series 2000-VFC) in Group One which is a Principal Sharing Series and (2) the Cumulative Principal Shortfall, shall be treated as Shared Principal Collections and applied to Series in Group One which are Principal Sharing Series other than this Series 2000-VFC; and (iv) an amount equal to the excess, if any, of (A) the Available Principal Collections over (B) the applications specified in clauses (i) through (iii) above shall be paid to the Holder of the Exchangeable Seller Certificate; provided, however, that in no event shall the amount payable to the Holder of the Exchangeable Seller Certificate pursuant to this subsection 4.9(c)(iv) be greater than the Seller Interest on such Distribution Date. SECTION 4.10. Investor Charge-Offs. (a) On or before each Distribution Date, the Servicer shall calculate the Class A Investor Loss Amount. If on any Distribution Date, the Class A Investor Loss Amount for the prior Due Period exceeds the sum of the amounts allocated with respect thereto pursuant to subsection 4.9(a)(v), Section 4.11 and Section 4.12 with respect to such Due Period, the Class B Investor Interest (after giving effect to reductions for any Class B Investor Charge-Offs and any Reallocated Class B Principal Collections on such Distribution Date) will be reduced by the amount of such excess. In the event that such reduction would cause the Class B Investor Interest to be a negative number, the Class B Investor Interest will be reduced to zero, and the Class A Investor Interest (after giving effect to reductions for any Class A Investor Charge-Offs on such Distribution Date) will be reduced by the amount by which the Class B Investor Interest would have been reduced below zero, but not by more than the Class A Investor Loss Amount for such Distribution Date. Additionally, the Class A Investor Interest shall be reduced by the amount of any Series 2000-VFC Unfunded Dilution Amount remaining after giving effect to any related Class B Investor Charge-Off but not by more than the Class A Investor Dilution Amount for such Distribution Date (collectively, a "Class A Investor Charge-Off"). If the Class A Investor Interest has been reduced by the amount of any Class A Investor Charge-Offs, it will be reimbursed on any Distribution Date (but not by an amount in excess of the aggregate Class A Investor Charge-Offs) by the amount of Available Funds allocated and available for such purpose pursuant to subsections 4.9(a) and 4.11. (b) On or before each Distribution Date, the Servicer shall calculate the Class B Investor Loss Amount. If on any Distribution Date, the Class B Investor Loss Amount for the prior Due Period exceeds the amounts allocated with respect thereto pursuant to subsections 4.9(a) and 4.11 with respect to such Due Period, the Class B Investor Interest (after giving effect to any Reallocated Class B Principal Collections on such Distribution Date) will be reduced by the amount of such excess. Additionally, the Class B Investor Interest shall be reduced, but not below zero, by the amount of any Series 2000-VFC Unfunded Dilution Amount (collectively, a "Class B Investor Charge-Off"). The Class B Investor Interest will also be reduced by the amount of Reallocated Class B Principal Collections pursuant to Section 4.12 and the amount of any portion of the Class B Investor Interest allocated to the Class A Certificates to avoid a reduction in the Class A Investor Interest pursuant to subsections 4.10(a) and 4.11. The Class B Investor Interest will thereafter be reimbursed (but not in excess of the aggregate amount of such reductions which have not been previously reimbursed) on any Distribution Date by the amount of Available Funds allocated and available for that purpose as described under subsection 4.9(a). SECTION 4.11. Shared Excess Finance Charge Collections Allocated to Series 2000-VFC. To the extent that on any Distribution Date funds are required to be distributed pursuant to any of Section 4.9(a)(i) through Section 4.9(a)(xiv), and the full amount to be distributed pursuant to any such section is not paid in full after the application of Available Funds for such Distribution Date, the Servicer shall instruct the Trustee in writing (which writing shall be substantially in the form of Exhibit C hereto) to apply Shared Excess Finance Charge Collections allocated to Series 2000-VFC as provided in Section 4.14(b) with respect to the related Due Period in the manner and priority specified for application of Available Funds in Section 4.9(a)(i) through Section 4.9(a)(xiv). SECTION 4.12. Reallocated Class B Principal Collections. On or before each Distribution Date, the Servicer shall instruct the Trustee in writing (which writing shall be substantially in the form of Exhibit B hereto) to apply Reallocated Class B Principal Collections in an amount equal to the excess, if any, of (i) the Class A Required Amount, if any, with respect to such Distribution Date over (ii) the sum of (A) the amount of Available Funds and Shared Excess Finance Charge Collections allocated to Series 2000-VFC with respect to the related Due Period plus (B) the Available Series Cash Collateral Amount for such Distribution Date, plus (C) amounts deposited in the Collection Account from the Spread Account Agreement for application in accordance with Section 4.17 on such Distribution Date, in accordance with, and in the priority set forth in, subsections 4.9(a)(i) through (vi). On each Distribution Date, the Class B Investor Interest shall be reduced by the amount of Reallocated Class B Principal Collections for such Distribution Date. SECTION 4.13. Seller's or Servicer's Failure to Make a Deposit or Payment. If the Servicer or the Seller fails to make, or give instructions to make, any payment or deposit required to be made or given by the Servicer or Seller, respectively, at the time specified in the Agreement (including applicable grace periods), the Trustee shall make such payment or deposit from the applicable account without instruction from the Servicer or Seller. Such funds or the proceeds of such withdrawal shall be applied by the Trustee. The Trustee only shall be required to make any such payment, deposit or withdrawal hereunder only to the extent that the Trustee has sufficient information to allow it to determine the amount thereof and only to the extent amounts on deposit in any applicable account are sufficient to make such payment, deposit or withdrawal. The Servicer shall, upon request of the Trustee, promptly provide the Trustee with all information necessary to allow the Trustee to make such payment, deposit or withdrawal. SECTION 4.14. Shared Excess Finance Charge Collections. (a) The balance of any Available Funds on deposit in the Collection Account after giving effect to subsections 4.9(a)(i) through (xiv) will constitute a portion of Shared Excess Finance Charge Collections and will be available for allocation to other Series in Group One or to the Holder of the Exchangeable Seller Certificate as described in Section 4.3(g). (b) Series 2000-VFC shall be included in Group One. Subject to subsection 4.3(g) of the Agreement, Shared Excess Finance Charge Collections with respect to the Series in Group One for any Distribution Date will be allocated to Series 2000-VFC in an amount equal to the product of (x) the aggregate amount of Shared Excess Finance Charge Collections with respect to all Series in Group One for such Distribution Date and (y) a fraction, the numerator of which is the Finance Charge Shortfall for Series 2000-VFC for such Distribution Date and the denominator of which is the aggregate amount of Finance Charge Shortfalls for all Series in Group One for such Distribution Date. The "Finance Charge Shortfall" for Series 2000-VFC for any Distribution Date will be equal to the excess, if any, of (a) the full amount required to be paid, without duplication, pursuant to subsections 4.9(a)(i) through (xiv) on such Distribution Date over (b) the Available Funds for such Distribution Date. SECTION 4.15. Shared Principal Collections. Subject to subsection 4.3(f) of the Agreement, Shared Principal Collections for any Distribution Date will be allocated to Series 2000-VFC in an amount equal to the product of (x) the aggregate amount of Shared Principal Collections with respect to all Series in Group One that are Principal Sharing Series for such Distribution Date and (y) a fraction, the numerator of which is the Principal Shortfall for Series 2000-VFC for such Distribution Date and the denominator of which is the Cumulative Principal Shortfall for such Distribution Date. SECTION 4.16. Series Cash Collateral Account. (a) The Servicer, for the benefit of the Class A Certificateholders, shall establish and maintain in the name of the Trustee, on behalf of the Trust, a segregated trust account with a Qualified Depository Institution bearing a designation clearly indicating that the funds deposited therein are held in the name of the Trustee for the benefit of the Class A Certificateholders (the "Series Cash Collateral Account"). The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Series Cash Collateral Account and in all proceeds thereof. The Series Cash Collateral Account shall be under the sole dominion and control of the Trustee for the benefit of the Class A Certificateholders. Except as expressly provided in this Agreement, the Servicer agrees that it shall have no right of setoff or banker's lien against, and no right to otherwise deduct from, any funds held in the Series Cash Collateral Account for any amount owed to it by the Trustee, the Trust, or any Class A Certificateholder. If, at any time, the Trustee is advised in writing by the Servicer that the institution holding the Series Cash Collateral Account ceases to be a Qualified Depository Institution, the Trustee upon receiving such notice by the Servicer (or the Servicer on its behalf) shall promptly (but in any event within 20 Business Days) establish a new Series Cash Collateral Account with a Qualified Depository Institution meeting the conditions specified above, transfer any cash or any investments to such new Series Cash Collateral Account and from the date such new Series Cash Collateral Account is established, it shall be the "Series Cash Collateral Account." (b) On the date of the initial funding hereunder, the Servicer shall deposit into the Series Cash Collateral Account an amount equal to the excess of the Required Enhancement Amount over the Class B Investor Interest as of such date. Funds on deposit in the Series Cash Collateral Account shall at the direction of the Servicer be invested by the Trustee in Permitted Investments selected by the Servicer. All such Permitted Investments shall be held by the Trustee for the benefit of the Class A Certificateholders. The Trustee shall maintain for the benefit of the Class A Certificateholders possession of the negotiable instruments or securities, if any, evidencing such Permitted Investments. Funds on deposit in the Series Cash Collateral Account on any date (after giving effect to any withdrawals from the Series Cash Collateral Account on such date) will be invested in Permitted Investments that will mature so that funds will be available for withdrawal on the Distribution Date following such date. On each Determination Date, the Servicer shall instruct the Trustee to withdraw on the related Distribution Date from the Series Cash Collateral Account and deposit in the Collection Account all interest and earnings on funds on deposit in the Series Cash Collateral Account, for application as Available Funds on such Distribution Date. (c) On each Determination Date, the Servicer shall calculate the amount (the "Required Draw Amount") by which the sum of the amounts specified in clauses (i) through (vi) of Section 4.9 with respect to the Distribution Date exceeds the amount of Available Funds and Shared Excess Finance Charge Collections allocated with respect to the related Distribution Date. In the event that any Distribution Date the Required Draw Amount is greater than zero, the Servicer shall give written notice to the Trustee of such positive Required Draw Amount on the related Determination Date. On the related Distribution Date, the Required Draw Amount, if any, up to the Available Series Cash Collateral Amount, shall be withdrawn from the Series Cash Collateral Account and distributed to fund any deficiency pursuant to subsections 4.9(a)(i) through (vi). (d) If, after giving effect to all deposits to and withdrawals from the Series Cash Collateral Account with respect to any Distribution Date, the Specified Enhancement Amount shall exceed the Required Enhancement Amount and the Class B Investor Interest shall have been reduced to zero, the Trustee, acting in accordance with the instructions of the Servicer, shall withdraw an amount equal to such excess from the Series Cash Collateral Account, and pay such amount to the Seller. (e) The Trustee, acting in accordance with the instructions of the Servicer, shall from time to time deposit in the Series Cash Collateral Account (i) a portion of the proceeds of any Incremental Funding under this Supplement, if necessary to cause the Specified Enhancement Amount to at least equal the Required Enhancement Amount on such date and (ii) funds otherwise required to be deposited in the Series Cash Collateral Account pursuant to Section 4.9(ix). SECTION 4.17. Spread Account. (a) The Servicer, for the benefit of the Class A Certificateholders, shall establish and maintain in the name of the Trustee, on behalf of the Trust, a segregated trust account with a Qualified Depository Institution bearing a designation clearly indicating that the funds deposited therein are held in the name of the Trustee for the benefit of the Class A Certificateholders (the "Spread Account"). The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Spread Account and in all proceeds thereof. The Spread Account shall be under the sole dominion and control of the Trustee for the benefit of the Class A Certificateholders. Except as expressly provided in this Agreement, the Servicer agrees that it shall have no right of setoff or banker's lien against, and no right to otherwise deduct from, any funds held in the Spread Account for any amount owed to it by the Trustee, the Trust, or any Class A Certificateholder. If, at any time, the Trustee is advised in writing by the Servicer that the institution holding the Spread Account ceases to be a Qualified Depository Institution, the Trustee upon receiving such notice by the Servicer (or the Servicer on its behalf) shall promptly (but in any event within 20 Business Days) establish a new Spread Account with a Qualified Depository Institution meeting the conditions specified above, transfer any cash or any investments to such new Spread Account and from the date such new Spread Account is established, it shall be the "Spread Account." (b) Funds on deposit in the Spread Account shall at the direction of the Servicer be invested by the Trustee in Permitted Investments selected by the Servicer. All such Permitted Investments shall be held by the Trustee for the benefit of the Class A Certificateholders. The Trustee shall maintain for the benefit of the Class A Certificateholders possession of the negotiable instruments or securities, if any, evidencing such Permitted Investments. Funds on deposit in the Spread Account on any date (after giving effect to any withdrawals from the Spread Account on such date) will be invested in Permitted Investments that will mature so that funds will be available for withdrawal on the Distribution Date following such date. On each Determination Date, the Servicer shall instruct the Trustee to withdraw on the related Distribution Date from the Spread Account and deposit in the Collection Account all interest and earnings on funds on deposit in the Spread Account, for application as Available Funds on such Distribution Date. (c) If on any Distribution Date, any Class A Required Amount remains unfunded after all amounts distributed with respect thereto pursuant to Sections 4.9, 4.11 and 4.16, the Servicer shall instruct the Trustee in writing to withdraw and the Trustee, acting in accordance with such instructions, shall withdraw, amounts deposited in the Spread Account on such date pursuant to the Spread Account Agreement to fund any such deficiency in accordance with and in the order of priority set forth in subsections 4.9(a)(i) through (vi). (d) If, after giving effect to all deposits to and withdrawals from the Spread Account with respect to any Distribution Date, the Spread Account Amount shall exceed the Required Spread Account Amount, the Trustee, acting in accordance with the instructions of the Servicer, shall withdraw an amount equal to such excess from the Spread Account, and pay such amount to the Seller. (e) The Trustee, acting in accordance with the instructions of the Servicer, shall from time to time deposit in the Spread Account (i) a portion of the proceeds of any Incremental Funding under this Supplement, if necessary to cause the Spread Account Amount to at least equal the Required Spread Account Amount on such date and (ii) funds otherwise required to be deposited in the Spread Account pursuant to Section 4.9(x). SECTION 4.18. Interest Rate Cap. (a) The Servicer hereby represents that Fashion Service Corp has obtained and assigned to the Trust the Cap Agreement in favor of the Trust for the benefit of the Certificateholders. The Cap Agreement shall entitle the Trust to receive monthly the Cap Payment, if any, as set forth in the Cap Agreement. (b) Upon the effectiveness of any Replacement Interest Rate Cap, the Cap Agreement being replaced shall terminate and the applicable Cap Provider shall be released of all future obligations thereunder, provided that such Cap Agreement shall not be released from any obligations which have previously accrued thereunder and shall continue to be obligated to perform such obligations. (c) The Trustee hereby appoints the Servicer to act as calculation agent under the Cap Agreement and the Servicer accepts such appointment. SECTION 9. Article V of the Agreement. Article V of the Agreement shall read in its entirety as follows and shall be applicable only to the Series 2000-VFC Certificates: ARTICLE V. DISTRIBUTIONS AND REPORTS TO INVESTOR CERTIFICATEHOLDERS SECTION 5.1. Distributions. (a) On each Distribution Date, the Trustee shall distribute (in accordance with the certificate delivered by the Servicer to the Trustee pursuant to subsection 3.4(b)) to each Class A Certificateholder of record on the immediately preceding Record Date (other than as provided in Section 12.3 respecting a final distribution) such Certificateholder's pro rata share (based on the aggregate Undivided Trust Interests represented by Class A Certificates held by such Certificateholder) of amounts on deposit in the Collection Account as are payable to the Class A Certificateholders pursuant to Section 4.9 in immediately available funds to each Class A Certificateholder (at such Certificateholder's address as it appears in the Certificate Register). (b) On each Distribution Date, the Trustee shall distribute (in accordance with the certificate delivered by the Servicer to the Trustee pursuant to subsection 3.4(b)) to each Class B Certificateholder of record on the immediately preceding Record Date (other than as provided in Section 12.3 respecting a final distribution) such Certificateholder's pro rata share (based on the aggregate Undivided Trust Interests represented by Class B Certificates held by such Certificateholder) of amounts on deposit in the Collection Account as are payable to the Class B Certificateholders pursuant to Section 4.9 in immediately available funds to each Class B Certificateholder (at such Certificateholder's address as it appears in the Certificate Register). (c) On each Optional Amortization Date, the Trustee shall distribute (in accordance with the instructions delivered to the Trustee pursuant to Section 4.2) to each Class A Certificateholder of record on the immediately preceding Record Date, such Certificateholder's pro rata share (based on the aggregate Undivided Trust Interests represented by the Class A Certificates held by such Certificateholder) of the Class A Optional Amortization Amount to be distributed on such date. (d) The Trustee shall promptly notify the Seller and the Servicer if it does not receive a payment under the Cap Agreement on the date on which such payment is due pursuant to the terms thereof. SECTION 5.2. Monthly Certificateholders' Statement. (a) On or before each Distribution Date, the Paying Agent shall forward to each Series 2000-VFC Certificateholder a statement substantially in the form of Exhibit D to this Supplement prepared by the Servicer setting forth, among other things, the following information (which, in the case of subclauses (i), (ii), (viii) and (ix) below, shall be stated on the basis of an original principal amount of $1,000 per Series 2000-VFC Certificate): (i) the amount of the current distribution allocable to Class A Monthly Principal and Class B Monthly Principal, respectively; (ii) the amount of the current distribution allocable to Class A Monthly Interest, the Class A Non-Use Fee, the Class B Non-Use Fee, Class A Additional Amounts, Class B Monthly Interest, and other amounts then owing to the Class B Certificateholders under the Certificate Purchase Agreement, respectively; (iii) the amount of Collections of Principal Receivables processed during the related Due Period and allocated in respect of the Class A Certificates and the Class B Certificates, respectively; (iv) the amount of Collections of Finance Charge Receivables processed during the related Due Period and allocated in respect of the Class A Certificates and the Class B Certificates, respectively; (v) the aggregate amount of Principal Receivables, the Series Investor Interest, the Class A Investor Interest, the Weighted Average Class A Investor Interest, the Class B Investor Interest, the Weighted Average Class B Investor Interest, the Floating Allocation Percentage, the Class A Floating Allocation Percentage, the Class B Floating Allocation Percentage, and the Principal Allocation Percentage, the Class A Fixed Allocation Percentage and the Class B Fixed Allocation Percentage, with respect to the Principal Receivables in the Trust as of the end of the day on the Record Date; (vi) the aggregate outstanding balance of Accounts which were 30 to 59, 60 to 89, 90 to 119 and 120 or more days delinquent as of the end of the day on the Record Date; (vii) the Investor Loss Amount, the Class A Investor Loss Amount and the Class B Investor Loss Amount for the related Due Period and the Dilution Amount, the Investor Dilution Amount, the Class A Investor Dilution Amount and the Class B Investor Dilution Amount; (viii) the aggregate amount of Class A Investor Charge-Offs and Class B Investor Charge-Offs for the related Due Period; (ix) the amount of the Investor Monthly Servicing Fee for the related Due Period; (x) the Portfolio Yield, the Adjusted Excess Yield Percentage and the Base Rate for the preceding Due Period; (xi) the amount of Reallocated Class B Principal Collections with respect to such Distribution Date; (xii) the Class A Investor Interest and the Class B Investor Interest as of the close of business on such Distribution Date; (xiii) the Class A Certificate Rate (and information with respect to each Fundings Tranche on which such rate is based) and Class B Certificate Rate, each with respect to the preceding Due Period; (xiv) the amount of Available Funds on deposit in the Collection Account on the related Distribution Date; (xv) the Series Cash Collateral Account Amount and the Spread Account Amount on the related Distribution Date; (xvi) the Series Cash Collateral Account Investment Proceeds transferred to the Collection Account on the related Distribution Date; (xvii) such other items as are set forth in Exhibit D to this Supplement. In addition, the Paying Agent shall forward to each Rating Agency a summary of the information specified above prepared by the Servicer in form and substance acceptable to the Rating Agencies. (b) Annual Certificateholders' Tax Statement. On or before January 31 of each calendar year, beginning with calendar year 2001, the Trustee shall distribute to each Person who at any time during the preceding calendar year was a Series 2000-VFC Certificateholder, a statement prepared by the Servicer containing the information required to be contained in the regular monthly report to Series 2000-VFC Certificateholders, as set forth in subclauses (i) and (ii) above, aggregated for such calendar year or the applicable portion thereof during which such Person was a Series 2000-VFC Certificateholder, together with such other customary information (consistent with the treatment of the Class A Certificates and the Class B Certificates as debt) as the Servicer deems necessary or desirable to enable the Series 2000-VFC Certificateholders to prepare their tax returns. The Servicer will provide such information to the Trustee as soon as possible after January 1 of each calendar year. Such obligations of the Trustee shall be deemed to have been satisfied to the extent that substantially comparable information shall be provided by the Trustee pursuant to any requirements of the Code as from time to time in effect. SECTION 10. Series Early Amortization Events. If any one of the following events shall occur with respect to the Investor Certificates: (a) failure on the part of the Seller, the Originator or, in the case of clause (i), Fashion Service Corp. (i) in the case of the Seller or Fashion Service Corp., to pay any Class A Non-Use Fee on any Distribution Date, (ii) to make any other payment or deposit required by the terms of the Agreement, this Supplement, the Certificate Purchase Agreement or the Purchase Agreement, on or before the date occurring five days after the date such payment or deposit is required to be made herein or (iii) to duly to observe or perform in any material respect any covenants or agreements of the Seller or Originator, as applicable, set forth in the Agreement, this Supplement, the Certificate Purchase Agreement or the Purchase Agreement, which failure has a material adverse effect on the Series 2000-VFC Certificateholders (which determination shall be made without reference to the amount of the Class B Investor Interest or the amount on deposit in the Spread Account or the Cash Collateral Account for such period) and which continues unremedied for a period of 35 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller by the Trustee, or to the Seller and the Trustee by the Controlling Certificateholders, and continues to affect materially and adversely the interests of the Series 2000-VFC Certificateholders for such period (which determination shall be made without reference to the amount of the Class B Investor Interest or the amount on deposit in the Spread Account or the Cash Collateral Account for such period); (b) any representation or warranty made by the Seller or the Originator in the Agreement, this Supplement, the Certificate Purchase Agreement or the Purchase Agreement, or any information contained in a computer file or microfiche or written list required to be delivered by the Seller pursuant to Section 2.1 or 2.6 or by the Originator pursuant to Section 1.1 or 2.4(e) of the Purchase Agreement, (i) shall prove to have been incorrect in any material respect when made or when delivered, which continues to be incorrect in any material respect for a period of 35 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller by the Trustee, or to the Seller and the Trustee by the Controlling Certificateholders, and (ii) as a result of which the interests of the Series 2000-VFC Certificateholders are materially and adversely affected (which determination shall be made without reference to the amount of the Class B Investor Interest) and continue to be materially and adversely affected for such period; provided, however, that a Series Early Amortization Event pursuant to this subsection 9(b) shall not be deemed to have occurred hereunder if the Seller has accepted reassignment of the related Receivable, or all of such Receivables, if applicable, during such period in accordance with the provisions of the Agreement; (c) the average Portfolio Yield for any three consecutive Due Periods is reduced to a rate which is less than the average Base Rate for such periods; (d) the Seller shall fail to convey Receivables arising under Additional Accounts to the Trust, as required by subsection 2.6(a); (e) any Servicer Default shall occur which would have a material adverse effect on the Class A Certificateholders; (f) the Class A Investor Interest shall not be paid in full on the Class A Scheduled Final Payment Date; (g) the Specified Enhancement Amount shall be less than the Required Enhancement Amount on any Distribution Date after giving effect to any deposits and payments on such date and such condition shall continue for ten days; or (h) the Seller, Servicer (if Servicer is the Originator or its Affiliate), any Originator or Charming Shoppes is subject to a Change in Control; then, in the case of any event described above (other than any event described in subparagraph (c), (d), (f) or (g)) after any applicable grace period set forth in such subparagraphs, either the Trustee or the Controlling Certificateholders by notice then given in writing to the Seller and the Servicer (and to the Trustee if given by the Certificateholders) may declare that an early amortization event (a "Series Early Amortization Event") has occurred as of the date of such notice. Upon the occurrence of any event described in subparagraph (c), (d), (f) or (g)) above, a Series Early Amortization Event will occur automatically. SECTION 11. Series 2000-VFC Termination. The right of the Series 2000-VFC Certificateholders to receive payments from the Trust will terminate on the first Business Day following the Series 2000-VFC Termination Date. SECTION 12. Ratification of Agreement. As supplemented by this Supplement, the Agreement is in all respects ratified and confirmed and the Agreement as so supplemented by this Supplement shall be read, taken, and construed as one and the same instrument. SECTION 13. Counterparts. This Supplement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument. SECTION 14. Governing Law. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 15. No Petition. (a) The Seller, the Servicer and the Trustee, by entering into this Supplement and each Series 2000-VFC Certificateholder, by accepting a Series 2000-VFC Certificate, hereby covenant and agree that they will not at any time institute against the Trust, or join in any institution against the Trust of, any bankruptcy proceedings under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Investor Certificates, the Agreement or this Supplement. (b) The Servicer and the Trustee, by entering into this Supplement and each Series 2000-VFC Certificateholder, by accepting a Series 2000-VFC Certificate, hereby covenant and agree that they will not at any time institute against the Seller, or join in any institution against the Seller of, any bankruptcy proceedings under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Investor Certificates, the Agreement or this Supplement. SECTION 16. Tax Representation and Covenant. Notwithstanding Section 6.3 of the Pooling and Servicing Agreement, Seller shall not execute, and the Transfer Agent and Registrar shall not register the transfer of, any Class B Certificate, if after giving effect to the execution or transfer of such Class B Certificate, there would be more than 5 Private Holders of Class B Certificates. For purposes of this Supplement and the Pooling Agreement, each Holder of a Class B Certificate shall be a "Private Holder." SECTION 17. Amendments. No amendment may be made to this Supplement without the consent of 100% of the Series 2000-VFC Certificateholders and without satisfaction of the Rating Agency Condition. SECTION 18. Agent as Class A Certificateholder. Notwithstanding anything to the contrary in this Supplement, the Trust shall issue, and shall cause the Trustee to authorize and deliver to the ING Baring (U.S.) Capital Markets LLC, in its capacity as agent for the Conduit Purchaser and the Liquidity Purchasers (in such capacity, the "Agent") the Class A Certificate issued on the Closing Date. The Agent shall hold the Class A Certificates on behalf of the Conduit Purchaser and the Liquidity Purchasers in accordance with the outstanding amounts funded thereunder by the Conduit Purchaser, on the one hand, and the Liquidity Purchasers, on the other hand. Payments made to the Agent as the Class A Certificateholder shall be distributed to the Conduit Purchaser and/or the Liquidity Purchasers in accordance with the Certificate Purchase Agreement and the agreement through which the Liquidity Purchasers have agreed to provide liquidity support to the Conduit Purchaser in connection with this transaction. IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have caused this Series 2000-VFC Supplement to be duly executed by their respective officers as of the day and year first above written. CHARMING SHOPPES RECEIVABLES CORP., Seller By: Name: Title: SPIRIT OF AMERICA, INC. Servicer By: Name: Title: FIRST UNION NATIONAL BANK, not in its individual capacity but solely as the Trustee for CHARMING SHOPPES MASTER TRUST By: Name: Title: EXHIBIT A-1 FORM OF CLASS A CERTIFICATE CLASS A CERTIFICATE THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). NEITHER THIS CERTIFICATE NOR ANY PORTION HEREOF MAY BE OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE PROVISIONS OF ANY STATE BLUE SKY OR SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS. THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN AND IN THE CERTIFICATE PURCHASE AGREEMENT, EACH REFERRED TO BELOW. No. [_______] Maximum Stated Amount $[___________] CHARMING SHOPPES MASTER TRUST FLOATING RATE ASSET BACKED CERTIFICATE, SERIES 2000-VFC, CLASS A Evidencing an Undivided Interest in a trust, the corpus of which consists of a portfolio of credit card receivables acquired by Charming Shoppes Receivables Corp. and other assets and interests constituting the Trust under the Pooling and Servicing Agreement described below. (Not an interest in or obligation of, Charming Shoppes Receivables Corp., Spirit of America National Bank, Spirit of America, Inc. Charming Shoppes, Inc. or any Affiliate thereof.) This certifies that ING Baring (U.S.) Capital Markets LLC, in its capacity as agent for the Conduit Purchaser and the Liquidity Purchasers(the "Class A Certificateholder") is the registered owner of the Undivided Interest in a trust (the "Trust"), the corpus of which consists of a portfolio of receivables (the "Receivables") now existing or hereafter created under credit card accounts (the "Accounts") of Spirit of America National Bank, a national banking association organized under the laws of the United States, all monies due or to become due in payment of the Receivables (including all Finance Charge Receivables) and the other assets and interests constituting the Trust pursuant to a Second Amended and Restated Pooling and Servicing Agreement dated as of November 25, 1997, as amended on July 22, 1999 (as further amended or otherwise modified from time to time, the "Pooling and Servicing Agreement") and as supplemented by the Series 2000-VFC Supplement, dated as of November 9, 2000 (as amended or otherwise modified from time to time, the "Series 2000-VFC Supplement"), each by and among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and First Union National Bank, as Trustee (the "Trustee"). To the extent not defined herein, capitalized terms used herein have the meanings assigned in the Pooling and Servicing Agreement as supplemented by the Series 2000-VFC Supplement (as so supplemented, the "Agreement"). The Class A Certificateholder is hereby authorized to record on the grid attached to this Certificate (or at such holder's option, in its internal books and records) the date and amount of each Class A Incremental Funding made by the Conduit Purchaser, the amount of each repayment of the principal amount represented by this Certificate and any reductions to the Maximum Class A Funded Amount of this Certificate made pursuant to the Certificate Purchase Agreement, dated as of November 9, 2000 among the Seller, the Servicer, the initial Class A Certificateholder, as the administrator for the Conduit Purchaser, the Conduit Purchaser and the initial Class B Certificateholder (as amended or otherwise modified from time to time, the "Certificate Purchase Agreement"); provided, however, that failure to make any such recordation on the grid or records or any error in the grid or records shall not adversely affect the Class A Certificateholder's rights with respect to its interest in the assets of the Trust and its right to receive monthly interest in respect of the outstanding principal amount of this Certificate. The Seller has structured the Agreement and the Class A Certificates with the intention that the Class A Certificates will qualify under applicable tax law as indebtedness, and the Seller, the Holder of the Exchangeable Seller Certificate, the Servicer and each Class A Certificateholder (or Certificate Owner with respect to a Class A Certificate (a "Class A Certificate Owner")) by acceptance of its Class A Certificate (or in the case of a Class A Certificate Owner, by virtue of such Class A Certificate Owner's acquisition of a beneficial interest therein), agrees to treat and to take no action inconsistent with the treatment of the Class A Certificates (or beneficial interest therein) for purposes of federal, state, local and foreign income or franchise taxes and any other tax imposed on or measured by income, as indebtedness. Each Class A Certificateholder agrees that it will cause any Class A Certificate Owner acquiring an interest in a Class A Certificate through it to comply with the Agreement as to treatment as indebtedness for certain tax purposes. This Class A Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement, as amended from time to time, the Class A Certificateholder by virtue of the acceptance hereof assents and by which the Class A Certificateholder is bound. This Class A Certificate does not represent an obligation of, or an interest in, the Seller, the Originator or the Servicer, and neither the Class A Certificates nor the Accounts or Receivables are insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. This Class A Certificate is limited in right of payment to certain collections respecting the Receivables, all as more specifically set forth in the Agreement and the Certificate Purchase Agreement. The transfer of this Class A Certificate shall be registered in the Certificate Register upon surrender of this Class A Certificate for registration of transfer at any office or agency maintained by the Transfer Agent and Registrar accompanied by a written instrument of transfer in a form satisfactory to the Trustee and the Transfer Agent and Registrar duly executed by the Class A Certificateholder or such Class A Certificateholder's attorney-in-fact duly authorized in writing, and thereupon one or more new Class A Certificates of authorized denominations and for the same aggregate Undivided Interests will be issued to the designated transferee or transferees. As provided in the Agreement and subject to certain limitations therein set forth, Class A Certificates are exchangeable for new Class A Certificates evidencing like aggregate Undivided Interests, as requested by the Class A Certificateholder surrendering such Class A Certificates. No service charge may be imposed for any such exchange but the Servicer or Transfer Agent and Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. The Servicer, the Trustee, the Paying Agent and the Transfer Agent and Registrar, and any agent of any of them, may treat the person in whose name this Class A Certificate is registered as the owner hereof for all purposes, and neither the Servicer, the Trustee, the Paying Agent, the Transfer Agent and Registrar, nor any agent of any of them or of any such agent shall be affected by notice to the contrary except in certain circumstances described in the Agreement. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Class A Certificate shall not be entitled to any benefit under the Agreement, or be valid for any purpose. IN WITNESS WHEREOF, Charming Shoppes Receivables Corp. has caused this Class A Certificate to be duly executed under its official seal. CHARMING SHOPPES RECEIVABLES CORP. By: Authorized Officer Attested to: By: Assistant Secretary Date: November 9, 2000 CERTIFICATE OF AUTHENTICATION This is one of the Class A Certificates referred to in the within-mentioned Agreement. FIRST UNION NATIONAL BANK, Trustee By: Authorized Officer CLASS A INCREMENTAL FUNDINGS AND REPAYMENTS Class A Principal Outstanding Maximum Incremental Amount Repaid Principal Class A Funded Amount Balance Funded Amount EXHIBIT A-2 FORM OF CLASS B CERTIFICATE THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). NEITHER THIS CERTIFICATE NOR ANY PORTION HEREOF MAY BE OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE PROVISIONS OF ANY STATE BLUE SKY OR SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS. THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN AND IN THE CERTIFICATE PURCHASE AGREEMENT, EACH REFERRED TO BELOW. No. [______] Maximum Stated Amount $[____________] CHARMING SHOPPES MASTER TRUST FLOATING RATE ASSET BACKED CERTIFICATE, SERIES 2000-VFC, CLASS B Evidencing an Undivided Interest in a trust, the corpus of which consists of a portfolio of credit card receivables acquired by Charming Shoppes Receivables Corp. and other assets and interests constituting the Trust under the Pooling and Servicing Agreement described below. (Not an interest in or obligation of, Charming Shoppes Receivables Corp., Spirit of America National Bank, Spirit of America, Inc. Charming Shoppes, Inc. or any Affiliate thereof.) This certifies that Charming Shoppes Receivables Corp., a Delaware corporation (the "Class B Certificateholder") is the registered owner of the Undivided Interest in a trust (the "Trust"), the corpus of which consists of a portfolio of receivables (the "Receivables") now existing or hereafter created under credit card accounts (the "Accounts") of Spirit of America National Bank, a national banking association organized under the laws of the United States, all monies due or to become due in payment of the Receivables (including all Finance Charge Receivables) and the other assets and interests constituting the Trust pursuant to a Second Amended and Restated Pooling and Servicing Agreement dated as of November 25, 1997, as amended on July 22, 1999 (as further amended or otherwise modified from time to time, the "Pooling and Servicing Agreement") and as supplemented by the Series 2000-VFC Supplement, dated as of November 9, 2000 (as amended or otherwise modified from time to time, the "Series 2000-VFC Supplement"), each by and among Charming Shoppes Receivables Corp., as Seller, Spirit of America, Inc., as Servicer, and First Union National Bank, as Trustee (the "Trustee"). To the extent not defined herein, capitalized terms used herein have the meanings assigned in the Pooling and Servicing Agreement as supplemented by the Series 2000-VFC Supplement (as so supplemented, the "Agreement") as supplemented by the Series 2000-VFC Supplement (as so supplemented, the "Agreement"). The Class B Certificateholder is hereby authorized to record on the grid attached to this Certificate (or at such holder's option, in its internal books and records) the date and amount of each Class B Incremental Funding made by it, the amount of each repayment of the principal amount represented by this Certificate and any reductions to the Maximum Class B Funded Amount of this Certificate made pursuant to the Certificate Purchase Agreement, dated as of November 9, 2000 among the Seller, the Servicer, the initial Class A Certificateholder, the administrator for the Conduit Purchaser, the Conduit Purchaser and the initial Class B Certificateholder (as amended or otherwise modified from time to time, the "Certificate Purchase Agreement"); provided, however, that failure to make any such recordation on the grid or records or any error in the grid or records shall not adversely affect the Class B Certificateholder's rights with respect to its interest in the assets of the Trust and its right to receive monthly interest in respect of the outstanding principal amount of this Certificate. This Class B Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement, as amended from time to time, the Class B Certificateholder by virtue of the acceptance hereof assents and by which the Class B Certificateholder is bound. This Class B Certificate does not represent an obligation of, or an interest in, the Seller, the Originator or the Servicer, and neither the Class B Certificates nor the Accounts or Receivables are insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. This Class B Certificate is limited in right of payment to certain collections respecting the Receivables, all as more specifically set forth in the Agreement and the Certificate Purchase Agreement. The transfer of this Class B Certificate shall be registered in the Certificate Register upon surrender of this Class B Certificate for registration of transfer at any office or agency maintained by the Transfer Agent and Registrar accompanied by a written instrument of transfer in a form satisfactory to the Trustee and the Transfer Agent and Registrar duly executed by the Class B Certificateholder or such Class B Certificateholder's attorney-in-fact duly authorized in writing, and thereupon one or more new Class B Certificates of authorized denominations and for the same aggregate Undivided Interests will be issued to the designated transferee or transferees. As provided in the Agreement and subject to certain limitations therein set forth, Class B Certificates are exchangeable for new Class B Certificates evidencing like aggregate Undivided Interests, as requested by the Class B Certificateholder surrendering such Class B Certificates. No service charge may be imposed for any such exchange but the Servicer or Transfer Agent and Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. The Servicer, the Trustee, the Paying Agent and the Transfer Agent and Registrar, and any agent of any of them, may treat the person in whose name this Class B Certificate is registered as the owner hereof for all purposes, and neither the Servicer, the Trustee, the Paying Agent, the Transfer Agent and Registrar, nor any agent of any of them or of any such agent shall be affected by notice to the contrary except in certain circumstances described in the Agreement. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Class B Certificate shall not be entitled to any benefit under the Agreement, or be valid for any purpose. IN WITNESS WHEREOF, Charming Shoppes Receivables Corp. has caused this Class B Certificate to be duly executed under its official seal. CHARMING SHOPPES RECEIVABLES CORP. By: Authorized Officer Attested to: By: Assistant Secretary Date: November 9, 2000 CERTIFICATE OF AUTHENTICATION This is one of the Class B Certificates referred to in the within-mentioned Agreement. FIRST UNION NATIONAL BANK, Trustee By: Authorized Officer CLASS B INCREMENTAL FUNDINGS AND REPAYMENTS Class B Principal Outstanding Maximum Incremental Amount Repaid Principal Class B Funded Amount Balance Funded Amount EXHIBIT B FORM OF OPTIONAL PAYMENT INSTRUCTIONS AND NOTIFICATION TO THE TRUSTEE EXHIBIT B Form of Optional Amortization Payment Instructions and Notification to Trustee Date of Notice: ____________ __, ____ The undersigned duly authorized representative of the Servicer hereby notifies the Trustee and the affected Holders that the Seller intends to cause a full or partial amortization of the Class A Certificates, pursuant to Section 4(b) of the Series 2000-VFC Supplement, dated as of November 9, 2000, among Charming Shoppes Receivables Corp. (the "Seller"), Spirit of America, Inc., (the "Servicer"), and First Union National Bank (the "Trustee") (the "2000-VFC Supplement"). Capitalized terms used herein, but not otherwise defined, shall have the meanings given such terms in the 2000-VFC Supplement. 1. Optional Amortization Date: 2. Optional Amortization Amount: 3. Outstanding Funding Tranches: (a) (b) (c) (d) 4. Amount of the Optional Amortization Amount allocated to each Outstanding Funding Tranche: (a) (b) (c) (d) The Trustee is hereby instructed to withdraw Available Principal Collections and/or Available Shared Principal Collections from the Collection Account in an amount sufficient to pay the Class A Optional Amortization Amount to the Class A Certificateholders. The Trustee is hereby instructed to pay this amount to the Certificateholders in accordance with Section 5.1 of the Series 2000-VFC Supplement. SPIRIT OF AMERICA, INC., as Servicer __________________________________ Name: EXHIBIT C FORM OF MONTHLY PAYMENT INSTRUCTIONS AND NOTIFICATION TO THE TRUSTEE SPIRIT OF AMERICA, INC. CHARMING SHOPPES MASTER TRUST SERIES 2000-VFC (A) DEFINITIONS The undersigned, a duly authorized representative of Spirit of America, Inc. ("Spirit"), as Servicer pursuant to the Second Amended and Restated Pooling and Servicing Agreement dated as of November 25, 1997, as amended on July 22, 1999 (as further amended or otherwise modified from time to time, the "Pooling and Servicing Agreement") by and among Charming Shoppes Receivables Corp., as Seller, and First Union National Bank, as trustee (the "Trustee"), does hereby certify as follows: (i) Capitalized terms used in this notice have their respective meanings set forth in the Pooling and Servicing Agreement; provided, that the "preceding Due Period" shall mean the Due Period immediately preceding the calendar month in which this notice is delivered. References herein to certain sections and subsections are references to the respective sections and subsections of the Pooling and Servicing Agreement. This notice is delivered pursuant to Section 4.9 of the Supplement. (ii) Spirit is the Servicer under the Pooling and Servicing Agreement. (iii) The undersigned is a Servicing Officer. (iv) The date of this notice is a Determination Date under the Pooling and Servicing Agreement. (b) INSTRUCTION TO MAKE A WITHDRAWAL The Servicer does hereby instruct the Trustee (i) to make withdrawals from the Collection Account on ______________ __, _____, which date is a Distribution Date under the Pooling and Servicing Agreement, in aggregate amounts set forth below in respect of the following amounts and (ii) to apply the proceeds of such withdrawals in accordance with Section 4.9 of the Series 2000-VFC Supplement, as applicable and Section 3 of the Pooling and Servicing Agreement, as applicable: (i) Pursuant to subsection 4.9(a)(i): Class A Monthly Interest at the Class A Certificate Rate as provided by the Administrator, on the Class A Investor Interest $_____________ (ii) Pursuant to subsection 4.9(a)(ii): $_____________ (1) Write Down Accrual for this Interest Period $_____________ (2) Write Down Accrual from prior Interest Periods $_____________ (iii) [reserved] (iv) Pursuant to subsection 4.9(a)(iv): (1) Investor Monthly Servicing Fee for this Interest Period $_____________ (2) Investor Monthly Servicing Fee for prior Interest Periods $_____________ (v) Pursuant to subsection 4.9(a)(v): (1) Class A Investor Loss Amount $_____________ (2) Class A Investor Dilution Amount $_____________ (vi) Pursuant to subsection 4.9(a)(vi): The amount equal to the aggregate amount of Class A Investor Charge-Offs which have not been previously reimbursed which will be treated as a portion of Available Principal Collections $_____________ (vii) Pursuant to subsection 4.9(a)(vii): (1) Class B Investor Loss Amount $_____________ (2) Class B Investor Dilution Amount $_____________ (viii) Pursuant to subsection 4.9(a)(viii): The amount equal to the aggregate amount by which the Class B Investor Interest has been reduced for reasons other than the payment of principal to the Class B Certificateholders (but not in excess of the aggregate amount of such reductions which have not been previously reimbursed) which will be treated as a portion of Available Principal Collections $_____________ (ix) Pursuant to subsection 4.9(a)(ix): an amount up to the excess, if any, of the Required Enhancement Amount (determined after all deposits, withdrawals, reductions, payments and adjustments to be made with respect to such Distribution Date) over the Specified Enhancement Amount (determined after all deposits, withdrawals, reductions, payments and adjustments to be made with respect to such Distribution Date) shall be deposited in the Series Cash Collateral Account $_____________ (x) Pursuant to subsection 4.9(a)(x): an amount up to the excess, if any, of the Required Spread Account Amount (determined after all deposits, withdrawals, reductions, payments and adjustments to be made with respect to such Distribution Date) over the Spread Account Amount (determined after all deposits, withdrawals, reductions, payments and adjustments to be made with respect to such Distribution Date) shall be deposited in the Spread Account $_____________ (xi) Pursuant to subsection 4.9(a)(xi): (1) Class A Non-Use Fee for this Interest Period $_____________ (2) Class A Non-Use Fee from prior Interest Periods $_____________ (xii) Pursuant to subsection 4.9(a)(xii): (1) Class A Additional Amounts for this Interest Period $_____________ (2) Class A Additional Amounts for prior Interest Periods $_____________ (xiii) Pursuant to subsection 4.9(a)(xiii): Class B Monthly Interest at the Class B Certificate Rate on the Weighted Average Class B Investor Interest $_____________ (xiv) Pursuant to subsection 4.9(a)(xiv): An amount equal to (i) any Class B Non-Use Fee payable to the Class B Certificateholders under the Certificate Purchase Agreement for such Distribution Date, plus (ii) any Class B Additional Amounts payable to the Class B Certificateholders under the Certificate Purchase Agreement for such Distribution Date, plus (iii) the amount of any past due Class B Non-Use Fee and Class B Additional Amounts payable will be paid to the Class B Certificateholders in accordance with the Certificate Purchase Agreement $_____________ (xv) Pursuant to subsection 4.9(a)(xv): The balance, if any, after giving effect to the payments made pursuant to subparagraphs (x) through (xiv) above to be applied as Excess Finance Charge Collections for such Distribution Date $_____________ (xvi) Pursuant to subsection 4.9(b)(i): Class B Monthly Principal $_____________ (xvii) Pursuant to subsection 4.9(b)(ii): An amount to be treated as Shared Principal Collections $_____________ (xviii) Pursuant to subsection 4.9(b)(iii): (1) An Amount to be paid to the Holder of the Exchangeable Seller Certificate $_____________ (2) The Seller Interest on this Distribution Date $_____________ (xix) Pursuant to subsection 4.9(c)(i): Class A Monthly Principal $_____________ (xx) Pursuant to subsection 4.9(c)(ii): Class B Monthly Principal $_____________ (xxi) Pursuant to subsection 4.9(c)(iii): Amount to be treated as Shared Principal Collections $_____________ (xxii) Pursuant to subsection 4.9(c)(iv): Amount to be paid to the Holder of the Exchangeable Seller's Certificate $_____________ (xxiii) Pursuant to Section 4.14: Amount of Shared Excess Finance Charge Collections to be withdrawn from the Collection Account to be allocated to Series 2000-VFC and distributed as provided in Section 4.11. $_____________ (c) INSTRUCTION TO MAKE CERTAIN PAYMENTS Pursuant to Section 4.9 of the Supplement, the Servicer does hereby instruct the Trustee to pay in accordance with Section 5.1 of the Supplement from the Collection Account on __________ __, ____, which date is a Distribution Date under the Pooling and Servicing Agreement: (i) Amount to be distributed to Class A Certificateholders $_____________ (ii) Amount to be distributed to Class B Certificateholders $_____________ (d) REALLOCATED CLASS B PRINCIPAL COLLECTIONS Pursuant to Section 4.12 of the Supplement, the Servicer does hereby instruct the Trustee to withdraw from the Collection Account and apply Reallocated Class B Principal Collections pursuant to Section 4.12 of the Supplement with respect to the related Due Period in the following amounts: Reallocated Class B Principal Collections $_____________ (e) ACCRUED AND UNPAID AMOUNTS After giving effect to the withdrawals and transfers to be made in accordance with this notice, the following amounts will be accrued and unpaid with respect to all Due Periods preceding the current calendar month [To specify accrued and unpaid amounts, if any, from any applicable priority in the waterfall for the related Distribution Date]. IN WITNESS WHEREOF, the undersigned has duly executed this certificate this __ day of _______, ____. SPIRIT OF AMERICA, INC. Servicer By:___________________________ Name: Title: EXHIBIT D FORM OF MONTHLY CERTIFICATEHOLDERS' STATEMENT Series 2000-VFC SPIRIT OF AMERICA, INC. CHARMING SHOPPES MASTER TRUST TO BE DELIVERED IN A FORM TO BE AGREED UPON BY THE TRUSTEE, SERVICER, AND SELLER PRIOR TO THE INITIAL FUNDING HEREUNDER. TABLE OF CONTENTS PAGE SECTION 1. Designation 1 SECTION 2. Definitions 1 SECTION 3. Servicing Compensation 17 SECTION 4. Variable Funding Mechanics 17 SECTION 5. Optional Repurchase; Reassignment and Termination Provisions 20 SECTION 6. Maximum Funded Amounts 20 SECTION 7. Delivery and Payment for the Series 2000-VFC Certificates 20 SECTION 8. Article IV of Agreement 21 SECTION 9. Article V of the Agreement 33 SECTION 10. Series Early Amortization Events 36 SECTION 11. Series 2000-VFC Termination 37 SECTION 12. Ratification of Agreement 37 SECTION 13. Counterparts 37 SECTION 14. Governing Law 38 SECTION 15. No Petition 38 SECTION 16. Tax Representation and Covenant 38 SECTION 17. Amendments 38 SECTION 18. Agent as Class A Certificateholder 38 TABLE OF CONTENTS (continued) EXHIBITS EXHIBIT A-1 Form of Class A Certificate EXHIBIT A-2 Form of Class B Certificate EXHIBIT B Form of Optional Amortization Payment Instructions and Notification to the Trustee EXHIBIT C Form of Monthly Payment Instructions and Notification to the Trustee EXHIBIT D Form of Monthly Certificateholders' Statement EXHIBIT E Form of Interest Rate Cap Agreement EX-10 6 exh10117.txt CERTIFICATE PURCHASE AGREEMENT EXHIBIT 10.1.17 CERTIFICATE PURCHASE AGREEMENT among CHARMING SHOPPES RECEIVABLES CORP. as Seller and as the Class B Purchaser, SPIRIT OF AMERICA, INC. as Servicer, MONTE ROSA CAPITAL CORPORATION, as the Conduit Purchaser, and ING BARING (U.S.) CAPITAL MARKETS LLC as Administrator for the Conduit Purchaser. dated as of November 9, 2000
TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.01 Certain Defined Terms 1 SECTION 1.02 Other Definitional Provisions 6 ARTICLE II PURCHASE AND SALE SECTION 2.01 Purchase and Sale of the Class A Certificates 7 SECTION 2.02 Class A Incremental Fundings 7 SECTION 2.03 Class B Incremental Fundings 9 SECTION 2.04 Reduction or Increase of Maximum Funded Amounts 9 SECTION 2.05 Calculation of the Certificate Rates 10 ARTICLE III CLOSING SECTION 3.01 Closing 11 SECTION 3.02 Transactions to be Effected at the Closing 11 ARTICLE IV CONDITIONS PRECEDENT TO PURCHASE ON THE CLOSING DATE SECTION 4.01 Performance by the Seller and Servicer 11 SECTION 4.02 Representations and Warranties 11 SECTION 4.03 Corporate Documents 11 SECTION 4.04 [reserved] 11 SECTION 4.05 Opinions of Counsel to the Trustee 11 SECTION 4.06 Financing Statements 11 SECTION 4.07 Ratings 12 SECTION 4.08 Documents 12 SECTION 4.09 No Actions or Proceedings 12 SECTION 4.10 Approvals and Consents 12 SECTION 4.11 Officer's Certificate 12 SECTION 4.12 Other Documents 12 SECTION 4.13 Fees 12 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER AND SERVICER SECTION 5.01 Representations and Warranties of the Seller 13 SECTION 5.02 Representations and Warranties of the Servicer 14 ARTICLE VI REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE PURCHASER SECTION 6.01 Organization 16 SECTION 6.02 Authority, etc 16 SECTION 6.03 Securities Act 16 SECTION 6.04 Investment Company Act 16 ARTICLE VII COVENANTS OF THE SELLER AND THE SERVICER SECTION 7.01 Rating of Class A Certificates or Notes 17 SECTION 7.02 Information 17 SECTION 7.03 Access to Information 18 SECTION 7.04 Security Interests; Further Assurances 18 SECTION 7.05 Covenants 18 SECTION 7.06 Amendments 18 ARTICLE VIII ADDITIONAL COVENANTS SECTION 8.01 Legal Conditions to Closing 19 SECTION 8.02 Transfer Restrictions 19 SECTION 8.03 Consents, etc 19 ARTICLE IX INDEMNIFICATION SECTION 9.01 Indemnification by the Seller 19 SECTION 9.02 Procedure 20 SECTION 9.03 Defense of Claims 20 SECTION 9.04 Increased Cost and Reduced Return 21 ARTICLE X MISCELLANEOUS SECTION 10.01 Amendments 23 SECTION 10.02 Notices 23 SECTION 10.03 No Waiver; Remedies 23 SECTION 10.04 Binding Effect; Assignability 23 SECTION 10.05 Provision of Documents and Information 23 SECTION 10.06 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL 24 SECTION 10.07 No Proceedings 24 SECTION 10.08 Execution in Counterparts 24 SECTION 10.09 No Recourse 24 SECTION 10.10 Survival 25 SECTION 10.11 Tax Characterization 25 EXHIBIT A Form of Notice of Incremental Funding EXHIBIT B Form of Investment Letter SCHEDULE I Addresses for Notices
This CERTIFICATE PURCHASE AGREEMENT (this "Agreement") dated as of November 9, 2000, is among CHARMING SHOPPES RECEIVABLES CORP., a Delaware corporation as seller, (in such capacity, the "Seller") and as Class B Purchaser, (in such capacity, the "Class B Purchaser"), SPIRIT OF AMERICA, INC., a Delaware corporation (the "Servicer"), MONTE ROSA CAPITAL CORPORATION, a Delaware corporation (the "Conduit Purchaser") and ING BARING (U.S.) CAPITAL MARKETS LLC, a Delaware limited liability company ("ING Baring"), as administrator for the Conduit Purchaser (in such capacity, the "Administrator"). The parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01 Certain Defined Terms. Capitalized terms used herein without definition shall have the meanings set forth in the Pooling and Servicing Agreement (as defined below) or the Supplement (as defined below), as applicable. If a term used herein is defined both in the Pooling and Servicing Agreement and the Supplement, it shall have the meaning set forth in the Supplement. Additionally, the following terms shall have the following meanings: "Act" means the Securities Act of 1933, as amended. "Administrator" is defined in the preamble. "Agreement" is defined in the preamble. "Applicable Margin" is defined in the Fee Letter. "Bank Rate" means, for any day falling in any Interest Period, an interest rate per annum equal to the Eurodollar Rate for that Interest Period plus the Applicable Margin, except that the Bank Rate shall equal the Base Rate plus the Applicable Margin (i) as to any Interest Period (or portion thereof) if the Administrator does not receive notice or determine, by no later than 12:00 noon (New York City time) on the third Business Day prior to the first day of such Interest Period (or, the first day of funding under the Liquidity Agreement), that such portion will be funded under the Liquidity Agreement, (ii) as to any Interest Period (or portion thereof), if the Administrator has determined that for any reason it is not legally permissible or commercially practicable for any Liquidity Purchaser to fund its investment in the Class A Certificates by purchasing dollar deposits in the London interbank market, (iii) as to any Interest Period (or portion thereof) to the extent that the portion of the Class A Funded Amount to be funded at the Bank Rate for such Interest Period (or portion thereof) is less than $1,000,000, or (iv) if elected by the Seller by notice delivered to the Administrator no later than 12:00 noon (New York City time) on the third Business Day prior to the first day of such Interest Period. "Base Rate" means the per annum rate equal to the higher of (a) the rate of interest from time to time announced by The Chase Manhattan Bank at its principal office located in New York, New York, as its prime commercial lending rate and (b) the sum of (i) the Federal Funds Rate and (ii) 0.50%. "Class A Additional Amounts" means all amounts owed by the Seller pursuant to Article IX hereof plus any Breakage Payments owed to any Purchasers pursuant to Section 4.6(c) of the Supplement. "Class A Certificates" means the Class A Floating Rate Asset Backed Certificates, Series 2000-VFC in the maximum aggregate principal amount of $50,000,000 to be issued by the Trust pursuant to the Pooling and Servicing Agreement and the Supplement, evidencing undivided beneficial interests in certain assets of the Trust. "Conduit Purchaser" is defined in the preamble. "Class B Certificate Rate" means, for each Interest Period, a per annum rate equal to 0.25% per annum in excess of the Eurodollar Rate for such Interest Period. "Class B Purchaser" is defined in the preamble. "Closing" is defined in Section 3.01. "Closing Date" is defined in Section 3.01. "Cost of Funds" means for any Interest Period, the sum, for each day falling in such period, of an amount equal to the product of (i) the Class A Investor Interest on such day times (ii) the Daily Conduit Purchaser Rate. "Commercial Paper" means the commercial paper promissory notes issued by the Conduit Purchaser in the commercial paper market. "CP Rate" means, for any day falling in any Interest Period, a rate per annum calculated by the Administrator equal to the sum of (a) the rate or, if more than one rate, the weighted average of the rates, determined by converting to an interest-bearing equivalent rate per annum the discount rate (or rates) at which Commercial Paper on such day during such Interest Period has been sold by the commercial paper placement agents selected by Administrator and allocated to the Class A Investor Interest (taking into consideration any incremental carrying costs associated with such Commercial Paper maturing other than on dates when the Conduit Purchaser receives funds), plus (b) to the extent not included in (a), the commissions and charges charged by such commercial paper placement agents with respect to such Commercial Paper, expressed as a percentage of such face amount and converted to an interest-bearing equivalent rate per annum plus (c) certain documentation and transaction costs in respect of such Commercial Paper plus (d) the cost of borrowings to fund small or odd dollar amounts that are not easily accommodated in the commercial paper market. "Daily Conduit Purchaser Rate" means: (a) as to any day on which the Conduit Purchaser funds the entire Class A Investor Interest with Commercial Paper, the CP Rate plus the Applicable Margin divided by 360; and (b) as to any day on which the Conduit Purchaser funds all or part of the Class A Investor Interest other than through the issuance of Commercial Paper, the weighted average of (x) the CP Rate plus the Applicable Margin divided by 360 (weighted on the basis of the portion of the Class A Investor Interest that was funded with Commercial Paper) and (y) the Bank Rate, divided by (i) 360 (to the extent that the Bank Rate is determined by reference to the Eurodollar Rate) and (ii) 365 or 366, as applicable (to the extent that the Bank Rate is determined by reference to the Base Rate) (weighted, in each case, on the basis of the portion of the Class A Investor Interest that was funded at such Bank Rate). "Eurodollar Business Day" means a day on which dealings in Dollars are carried on in the eurodollar interbank market. "Eurodollar Determination Date" means the second Eurodollar Business Day prior to the commencement of each Interest Period. "Eurodollar Rate" means, for any day falling in any Interest Period, the per annum rate of interest determined by the Administrator to be equal to the rate (rounded upwards, if necessary, to the nearest whole multiple of 1/100th of one percent per annum) for deposits in Dollars for a period approximating such Interest Period (or portion thereof wherein interest shall be calculated at the Eurodollar Rate) which appears on the Reuters Screen LIBO Page as of 11:00 A.M. (London time) on the second Eurodollar Business Day before (and for value on) the first day of such Interest Period (or the first day of the portion thereof wherein interest shall be calculated at the Eurodollar Rate) and if such rate shall not be so quoted, the rate per annum at which the Administrator is offered for such Dollar deposits at or about 11:00 a.m., New York City time, on such date by prime banks in the interbank eurodollar market where the eurodollar and foreign currency exchange operations in respect of the Incremental Fundings are then being conducted, divided by the remainder of one minus the Eurodollar Reserve Percentage (expressed as a decimal) applicable during such Interest Period. "Eurodollar Reserve Percentage" means, with respect to any Interest Period, the then applicable percentage (expressed as a decimal) prescribed by the Federal Reserve Board for determining reserve requirements applicable to "Eurocurrency Liabilities" pursuant to Regulation D. "Federal Bankruptcy Code" means the bankruptcy code of the United States of America codified in Title 11 of the United States Code. "Federal Funds Rate" means, for any day, an interest rate per annum equal to: (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of Boston; or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Administrator from three federal funds brokers of recognized standing selected by it. "Fee Letter" means the Fee Letter, dated as of the Closing Date, among the Seller and the Administrator setting forth certain fees payable by the Seller in connection with the purchase of the Class A Certificates by the Agent for the benefit of the Conduit Purchaser. "Foreign" means, with respect to any Funding Source that is an assignee or participant of the Conduit Purchaser hereunder, any Person not organized under the laws of the United States, one of the states thereof, or the District of Columbia. "Funding Agreement" means any agreement or instrument executed by any Funding Source with or for the benefit of the Conduit Purchaser. "Funding Source" means any insurance company, bank or other financial institution providing liquidity, credit enhancement or back-up purchase support or facilities to the Conduit Purchaser in respect of commercial paper issued by the Conduit Purchaser. "Governmental Actions" means any and all consents, approvals, permits, orders, authorizations, waivers, exceptions, variances, exemptions or licenses of, or registrations, declarations or filings with, any Governmental Authority required under any Requirement of Law. "Governmental Authority" means the United States of America, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and having jurisdiction over the applicable Person. "Incremental Funding" means an increase in the aggregate outstanding principal balance of the Class A Certificates in accordance with the provisions of Section 2.02 or an increase in the aggregate outstanding principal balance of the Class B Certificates in accordance with the provisions of Section 2.03. "Incremental Funding Date" means each date on which an Incremental Funding occurs. "Indemnified Party" means each Purchaser, the Administrator, each of the Funding Sources and any of their respective officers, directors, employees, agents, representatives, assignees or affiliates. "Investment Letter" is defined in Section 6.03. "Liquidity Agreement" means that certain Revolving Asset Purchase Agreement, dated as of November 9, 2000, among Monte Rosa Capital Corporation, ING Baring as Liquidity Agent and as Administrator and each of the Liquidity Purchasers, as amended from time to time. "Liquidity Purchaser" means each Person that may from time to time be party to the Liquidity Agreement as a "purchaser" thereunder. "Losses" is defined in Section 9.01. "Notice of Incremental Funding" means a written notice of an Incremental Funding in the form of Exhibit A. "Pooling and Servicing Agreement" means the Second Amended and Restated Pooling and Servicing Agreement dated as of November 25, 1997 and amended as of July 22, 1999 among the Seller, the Servicer, and First Union National Bank, as Trustee, as the same may be further amended, modified or supplemented. "Purchase Expiration Date" means the earlier of (i) the date which is 364 days from the date of this Agreement (or such later date as the Conduit Purchaser shall agree, provided that such date occurs on or before the then scheduled expiration of the commitments of the Liquidity Purchasers under the Liquidity Agreement; it being understood that the Administrator shall provide the rating agencies rating its Commercial Paper with at least five Business Days prior written notice of any extension of the Purchase Expiration Date) and (ii) the commencement of the Amortization Period. "Purchasers" mean the Conduit Purchaser and the Class B Purchaser. "Regulation D" means Regulation D of the Federal Reserve Board, or any other regulation of the Federal Reserve Board that prescribes reserve requirements applicable to nonpersonal time deposits or "Eurocurrency Liabilities" as presently defined in Regulation D, as in effect from time to time. "Regulatory Change" means, relative to any Funding Source (a) any change in (or the adoption, implementation, change in phase-in or commencement of effectiveness of) any (i) United States federal or state law or foreign law applicable to such Funding Source; (ii) regulation, interpretation, directive, requirement or request (whether or not having the force of law) applicable to such Funding Source of (A) any court, government authority charged with the interpretation or administration of any law referred to in clause (a)(i) or of (B) any fiscal, monetary or other authority having jurisdiction over such Funding Source; or (iii) generally accepted accounting principles or regulatory accounting principles applicable to such Funding Source and affecting the application to such Funding Source of any law, regulation, interpretation, directive, requirement or request referred to in clause (a)(i) or (a)(ii) above; or (b) any change in the application to such Funding Source of any existing law, regulation, interpretation, directive, requirement, request or accounting principles referred to in clause (a)(i), (a)(ii) or (a)(iii) above. "Securitization Entity" is defined in Section 10.09. "Seller" is defined in the preamble. "Series Documents" means the Pooling and Servicing Agreement, the Supplement and this Agreement. "Servicer" is defined in the preamble. "Supplement" means the Series 2000-VFC Supplement dated as of November 9, 2000, among the Seller, the Servicer, and First Union National Bank, as Trustee, supplementing the Pooling and Servicing Agreement and relating to the Series 2000-VFC Certificates, as the same may be amended, modified or supplemented. "Taxes" means, in the case of any Funding Source that is an assignee or participant of the Conduit Purchaser, taxes, levies, imposts, deductions, charges, withholdings and liabilities, now or hereafter imposed, levied, collected, withheld or assessed by any country (or any political subdivision thereof), excluding income or franchise taxes imposed on it by (i) the jurisdiction under the laws of which such Funding Source is organized (or by any political subdivision thereof), (ii) any jurisdiction in which an office of such Funding Source funding the Class A Funded Amount is located (or any political subdivision thereof), or (iii) any jurisdiction in which such Funding Source is already subject to tax. "Third Party Claim" is defined in Section 9.02. SECTION 1.02 Other Definitional Provisions. (a) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (b) As used herein and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in Section 1.01, and accounting terms partially defined in Section 1.01 to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms herein are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained herein shall control. (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, subsection, Schedule and Exhibit references contained in this Agreement are references to Sections, subsections, the Schedule and Exhibits in or to this Agreement unless otherwise specified. ARTICLE II PURCHASE AND SALE SECTION 2.01 Purchase and Sale of the Class A Certificates. (a) On the terms and subject to the conditions set forth in this Agreement, and in reliance on the covenants, representations, warranties and agreements herein set forth, the Seller shall sell to the Agent, for the benefit of the Conduit Purchaser and the Liquidity Purchasers, and the Agent, for the benefit of the Conduit Purchaser and the Liquidity Purchasers, shall purchase at the Closing, a Class A Certificate with an initial outstanding principal amount of zero and with a purchase limit equal to the Maximum Class A Funded Amount. (b) Purchase and Sale of the Class B Certificates. On the terms and subject to the conditions set forth in this Agreement, and in reliance on the covenants, representations, warranties and agreements herein set forth the Seller shall sell to the Class B Purchaser, and the Class B Purchaser shall purchase at the Closing, a Class B Certificate with an initial outstanding principal amount of [zero] and with a purchase limit equal to the Maximum Class B Funded Amount. SECTION 2.02 Class A Incremental Fundings. (a) The Conduit Purchaser will be obligated to make Class A Incremental Fundings from time to time during the Revolving Period upon satisfaction, as of the applicable Incremental Funding Date, of each of the following conditions: (i) the Administrator shall have received copies of all monthly statements and all reports required to be delivered by Servicer to the Trustee pursuant to Section 3.4 of the Pooling and Servicing Agreement; (ii) each of the representations and warranties of the Seller and the Servicer made in the Series Documents shall be true and correct in all material respects as of the applicable Incremental Funding Date immediately after giving effect to such Class A Incremental Funding (except to the extent they expressly relate to an earlier or later time); (iii) the Seller and the Servicer shall be in compliance in all material respects with all of their respective covenants contained in the Series Documents; (iv) both before and immediately after giving effect to such Class A Incremental Funding, no Early Amortization Event, Servicer Default or event which with the giving of notice or passage of time or both could become an Early Amortization Event or Servicer Default shall have occurred; (v) the Class B Investor Interest shall be at least equal to the Required Class B Amount (after giving effect to any Incremental Fundings on such date); (vi) no other Class A Incremental Fundings shall have occurred during the same calendar week; (vii) the Spread Account Amount shall be at least equal to the Required Spread Account Amount and the Specified Enhancement Amount shall be at least equal to the Required Enhancement Amount, in each case after giving effect to any deposits to, and withdrawals from, such accounts on such date and any Incremental Funding on such date; (viii) at least three Business Days prior to the Incremental Funding Date, the Administrator and the Conduit Purchaser shall have received a completed Notice of Incremental Funding; (ix) no event shall have occurred that results in the Conduit Purchaser being unable to access the United States commercial paper markets and the Liquidity Purchasers not being obligated to make a purchase under the Liquidity Agreement; and (x) both before and immediately after giving effect to such Class A Incremental Funding, the Seller Interest shall not be less than the Aggregate Minimum Seller Interest; and (xi) in the case of the initial Incremental Funding Date, prior to such date, the Administrator, the Conduit Purchaser and the Rating Agencies shall have received (i) fully executed counterparts of the Cap Agreement, which is Exhibit E to the Supplement, and the assignment of the rights of Fashion Service Corp. under such Cap Agreement to the Trust, each in substantially the form of the latest drafts received by the parties as of the Closing Date, (ii) a copy of the UCC-1 financing statements executed by Fashion Service Corp. in connection with the assignment referred to in clause (i) above, which financing statement shall, or concurrently with such Incremental Funding shall be, filed in the jurisdictions necessary to perfect such assignment, (iii) opinions of Mayer, Brown & Platt and Colin Stern, Executive Vice President and General Counsel to Charming Shoppes, Inc., each in substantially the form of the latest drafts reviewed by the parties as of the Closing Date and (iv) the form of the Monthly Settlement Report, which is Exhibit D to the Supplement, as agreed to by the parties. (b) Each Class A Incremental Funding shall be requested in an aggregate principal amount of $100,000 (except in the case of the initial funding, which shall be at least $500,000) and integral multiples of $100,000 in excess thereof; provided, that a Class A Incremental Funding may be requested in the entire remaining Maximum Class A Funded Amount. (c) The Conduit Purchaser shall not be required to make any Class A Incremental Funding if, after giving effect to such funding, the Class A Funded Amount would exceed the Maximum Class A Funded Amount. (d) The purchase price of each Class A Incremental Funding shall be equal to 100% of the amount of such Class A Incremental Funding and shall be paid not later than 3:00 p.m. New York City time on the Incremental Funding Date by wire transfer of immediately available funds to such account as may from time to time be specified by the Seller in a notice to the Administrator). SECTION 2.03 Class B Incremental Fundings. (a) The Class B Purchaser will be obligated to make Class B Incremental Fundings from time to time during the Revolving Period upon satisfaction, as of the applicable Incremental Funding Date, of each of the following conditions: (i) the Class B Purchaser shall have received copies of all monthly statements and all reports required to be delivered by Servicer to the Trustee pursuant to Section 3.4 of the Pooling and Servicing Agreement; (ii) each of the representations and warranties of the Seller and the Servicer made in the Series Documents shall be true and correct in all material respects as of the applicable Incremental Funding Date (except to the extent they expressly relate to an earlier or later time); (iii) the Seller and the Servicer shall be in compliance in all material respects with all of their respective covenants contained in the Series Documents; (iv) no Early Amortization Event, Servicer Default or event which with the giving of notice or passage of time or both could become an Early Amortization Event or Servicer Default shall have occurred; and (v) at least three Business Days prior to the Incremental Funding Date, the Class B Purchaser shall have received a completed Notice of Incremental Funding. (b) The Class B Purchaser shall not be required to make any Class B Incremental Funding if, after giving effect to such funding, the Class B Investor Interest would exceed the Maximum Class B Funded Amount. (c) The purchase price of each Class B Incremental Funding shall be equal to 100% of the amount of such Class B Incremental Funding and shall be paid not later than 1:00 p.m. New York City time on the Incremental Funding Date by wire transfer of immediately available funds to such account as may from time to time be specified by the Seller in a notice to the Class B Purchaser). SECTION 2.04 Reduction or Increase of Maximum Funded Amounts. (a) The Seller shall not reduce in whole or in part the Maximum Class A Funded Amount without the prior written consent of the Administrator. (b) The Seller may request an increase in the Class A Maximum Funded Amount by written notice to the Administrator at least 30 days before the date on which such increase is requested to become effective. No such increase will take effect unless (i) the Conduit Purchaser and Administrator agree thereto and (ii) the available commitments of the Funding Sources under the Funding Agreements for the commercial paper program of the Conduit Purchaser are increased as necessary to maintain the then- current ratings of the Conduit Purchaser's Commercial Paper. (c) The Seller may reduce in whole or in part the Maximum Class B Funded Amount (but not below the Class B Investor Interest or the Required Class B Amount) by giving the Class B Purchaser written notice thereof at least two Business Days before such reduction is to take place. The Seller shall pay the Class B Purchaser any accrued and unpaid Class B Non-Use Fee on the first Distribution Date following the date of such reduction with respect to the reduction amount. (d) The Seller may request an increase in the Maximum Class B Funded Amount by written notice to the Class B Purchaser at least 30 days before the date on which such increase is requested to become effective. No such increase will take effect unless the Class B Purchaser agrees thereto. SECTION 2.05 Calculation of the Certificate Rates. (a) On or before the fourth Business Day of each month, the Administrator shall calculate the Cost of Funds, the Class A Certificate Rate and the Class A Monthly Interest applicable to the Class A Certificates for the Interest Period related to the Distribution Date occurring during such Month and shall notify the Trustee, the Seller and the Servicer of such rates and amount (such Cost of Funds shall be calculated using an estimate of the CP Rate, if necessary, for the remaining days in such Interest Period; provided, however, that each such estimated amount shall be adjusted as provided in paragraph (c) below). (b) On or before the Business Day preceding each Distribution Date, the Servicer shall calculate the Class B Certificate Rate and the Class B Monthly Interest applicable to the Class B Certificates for the Interest Period ending on such Distribution Date and shall notify the Trustee and the Seller of such rates and amount. On any Distribution Date on which the Class B Funded Amount is reduced to zero and on the Series 2000-VFC Termination Date, Class B Monthly Interest shall include amounts which accrue from (and excluding) the last day of the preceding calendar month through (and including) such Distribution Date. (c) Except as provided in the next sentence, if the Administrator shall have used an estimate of the CP Rate to calculate the Cost of Funds pursuant to paragraph (a) with respect to any Interest Period, following the end of such Interest Period the Administrator shall compute the actual CP Rate for each day during such Interest Period, and (i) if the actual Cost of Funds computed using such actual CP Rate is greater than the estimated Cost of Funds for such Interest Period, the Cost of Funds for the next Interest Period shall be increased by the amount of such difference, and (ii) if the actual Cost of Funds so computed is less than the estimated Cost of Funds for such Interest Period, the Cost of Funds for the next Interest Period shall be decreased by the amount of such difference. If (i) a Class A Incremental Funding or a Class A Optional Amortization shall have occurred after the delivery of the estimate of the Cost of Funds under paragraph (a) above but before the related Distribution Date or (b) the Class A Funded Amount shall be reduced to zero or the Series 2000-VFC Termination Date shall occur, in either case, on the related Distribution Date, then on or before the Business Day preceding such Distribution Date, the Administrator shall recalculate the Cost of Funds and the CP Rate and shall notify the Trustee, the Seller and the Servicer of such recalculated rates and amounts and such recalculated rates and amounts shall be deemed to constitute such amounts and rates as required to be reported in paragraph (a). ARTICLE III CLOSING SECTION 3.01 Closing. The closing (the "Closing") of the purchase and sale of the Class A Certificates and Class B Certificates shall take place at the offices of Mayer, Brown & Platt, 190 South LaSalle Street, Chicago, Illinois 60603 on November 9, 2000, or if the conditions to closing set forth in Article IV of this Agreement shall not have been satisfied or waived by such date, as soon as practicable after such conditions shall have been satisfied or waived, or at such other time, date and place as the parties shall agree upon (the date of the Closing being referred to herein as the "Closing Date"). SECTION 3.02 Transactions to be Effected at the Closing. At the Closing (a) the Seller shall deliver a Class A Certificate to the Agent in consideration for the agreements of the Conduit Purchaser hereunder and (b) the Seller shall deliver a Class B Certificate to the Class B Purchaser in consideration for the agreements of the Class B Purchaser hereunder. ARTICLE IV CONDITIONS PRECEDENT TO PURCHASE ON THE CLOSING DATE The purchase of the Series 2000-VFC Certificates hereunder is subject to the satisfaction at the time of the Closing of the following conditions (any or all of which may be waived by the Conduit Purchaser and the Class B Purchaser in their sole discretion): SECTION 4.01 Performance by the Seller and Servicer. All the terms, covenants, agreements and conditions of the Series Documents to be complied with and performed by the Seller and the Servicer at or before the Closing shall have been complied with and performed in all material respects. SECTION 4.02 Representations and Warranties. Each of the representations and warranties of the Seller and the Servicer made in the Series Documents shall be true and correct in all material respects as of the time of the Closing (except to the extent they expressly relate to an earlier or later time). SECTION 4.03 Corporate Documents. The Administrator shall have received copies of the (i) certificate of incorporation, good standing certificate and by-laws of the Seller, (ii) Board of Directors resolutions of the Seller with respect to the Series Documents, and (iii) incumbency certificate of the Seller, each certified by appropriate corporate authorities. SECTION 4.04 [reserved]. SECTION 4.05 Opinions of Counsel to the Trustee. Counsel to the Trustee shall have delivered to the Administrator a favorable opinion, dated as of the Closing Date and reasonably satisfactory in form and substance to the Administrator and its counsel. SECTION 4.06 Financing Statements. (a) The Administrator shall have received evidence satisfactory to it of the completion of all recordings, registrations, and filings as may be necessary or, in the opinion of the Administrator, desirable to perfect or evidence the assignment by the Seller to the Trust of its ownership interest in the Receivables and the proceeds thereof and the security interest granted pursuant to the Pooling and Servicing Agreement, including: (b) Acknowledgment copies of all UCC financing statements and assignments (other than those referred to in Section 2.02(a)(xi)) that have been filed in the offices of the Secretary of State of the applicable states and in the appropriate office or offices of such other locations as may be specified in the opinions of counsel delivered pursuant to Section 4.04; and (c) Certified copies of requests for information (Form UCC-11) (or a similar search report certified by parties acceptable to the Administrator and their counsel) dated a date reasonably near the Closing Date and listing all effective financing statements which name the Seller, as seller, assignor or debtor and which are filed in all jurisdictions in which the filings were or will be made, together with copies of such financing statements. SECTION 4.07 Ratings. The Conduit Purchaser's Commercial Paper shall continue to be rated at least A-1+ by S&P and P-1 by Moody's. SECTION 4.08 Documents. The Administrator shall have received a duly executed counterpart of each of the Series Documents and each and every document or certification delivered by any party in connection with any of such agreements (other than those referred to in Section 2.02(a)(xi)), and each such document shall be in full force and effect. SECTION 4.09 No Actions or Proceedings. No action, suit, proceeding or investigation by or before any Governmental Authority shall have been instituted to restrain or prohibit the consummation of, or to invalidate, the transactions contemplated by the Series Documents and the documents related thereto in any material respect. SECTION 4.10 Approvals and Consents. All Governmental Actions of all Governmental Authorities required with respect to the transactions contemplated by the Series Documents and the other documents related thereto shall have been obtained or made. SECTION 4.11 Officer's Certificate. The Administrator shall have received an Officer's Certificate from the Seller in form and substance reasonably satisfactory to the Administrator and its counsel, dated as of the Closing Date, certifying as to the satisfaction of the conditions set forth in Sections 4.01 and 4.02. SECTION 4.12 Other Documents. The Seller shall have furnished to the Administrator such other information, certificates and documents as the Administrator may reasonably request. SECTION 4.13 Fees. The fees due on the Closing Date specified in the Fee Letter shall have been paid. ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER AND SERVICER SECTION 5.01 Representations and Warranties of the Seller. The Seller hereby represents and warrants to the Purchasers and the Administrator as of the Closing Date as follows: (a) Organization and Good Standing. The Seller is a corporation duly organized and validly existing under the laws of the State of Delaware and has full corporate power, authority and legal right to own its properties and conduct its business as such properties are presently owned and such business is presently conducted, and to execute, deliver and perform its obligations under this Agreement and each other Series Document to which it is a party. (b) Due Qualification. The Seller is duly qualified to do business and is in good standing (or is exempt from such requirement) in any state required in order to conduct its business, and has obtained all necessary licenses and approvals with respect to the Seller required under applicable law. (c) Due Authorization. The execution and delivery by the Seller of this Agreement and each other Series Document and the consummation of the transactions provided for hereunder and thereunder have been duly authorized by the Seller by all necessary corporate action on its part and this Agreement and each other Series Document will remain, from the time of its execution, an official record of the Seller. (d) Enforceability. Each of this Agreement and each other Series Document constitutes a legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by Debtor Relief Laws. (e) No Conflict. The execution and delivery of this Agreement and each other Series Document, the performance of the transactions contemplated hereunder and thereunder and the fulfillment of the terms hereof and thereof will not conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, any indenture, contract, agreement, mortgage, deed of trust, or other instrument to which the Seller is a party or by which it or any of its properties are bound. (f) No Violation. The execution and delivery of this Agreement and each other Series Document, the performance of the transactions contemplated hereunder and thereunder and the fulfillment of the terms hereof and thereof will not conflict with or violate in any material respect any Requirements of Law applicable to the Seller. (g) No Proceedings. There are no proceedings pending or, to the best knowledge of the Seller, threatened against the Seller before any Governmental Authority (i) asserting the invalidity of this Agreement or any other Series Document, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any other Series Document, (iii) seeking any determination or ruling that, in the reasonable judgment of the Seller, would materially and adversely affect the performance by the Seller of its obligations under this Agreement or any other Series Document, (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement or any other Series Document or (v) seeking to affect adversely the income tax attributes of the Trust. (h) All Consents Required. All appraisals, authorizations, consents, orders or other actions of any Person or of any Governmental Authority required in connection with the execution and delivery by the Seller of this Agreement and each other Series Document, the performance of the transactions contemplated hereunder and thereunder and the fulfillment of the terms hereof, have been obtained. (i) Incorporated Representations and Warranties. Its representations and warranties in Sections 2.3 and 2.4 of the Pooling and Servicing Agreement are true and correct in all material respects as of the dates they were so made. (j) Investment Company Act. Neither the Seller nor the Trust is required to be registered under the Investment Company Act of 1940, as amended. (k) No Early Amortization Event, Insolvency Event or Servicer Default. No Early Amortization Event with respect to the Series 2000-VFC Certificates, Insolvency Event or Servicer Default has occurred and is continuing, and no event, act or omission has occurred and is continuing which, with the lapse of time, the giving of notice or both, would constitute an Early Amortization Event, Insolvency Event or Servicer Default. (l) Series 2000-VFC Certificates. The Series 2000-VFC Certificates have been duly and validly authorized, and, when executed and authenticated in accordance with the terms of the Pooling and Servicing Agreement and the Supplement, and delivered to and paid for in accordance with this Agreement, will be duly and validly issued and outstanding and will be entitled to the benefits of the Pooling and Servicing Agreement and the Supplement. SECTION 5.02 Representations and Warranties of the Servicer. The Servicer hereby represents and warrants to the Purchasers and the Administrator as of the Closing Date as follows: (a) Organization and Good Standing. The Servicer is a corporation duly organized and validly existing under the laws of the State of Delaware and has full corporate power, authority and legal right to own its properties and conduct its business as such properties are presently owned and such business is presently conducted, and to execute, deliver and perform its obligations under this Agreement and each other Series Document to which it is a party. (b) Due Qualification. The Servicer is duly qualified to do business and is in good standing (or is exempt from such requirement) in any state required in order to conduct its business, and has obtained all necessary licenses and approvals with respect to the Servicer required under applicable law. (c) Due Authorization. The execution and delivery by the Servicer of this Agreement and each other Series Document to which it is a party and the consummation of the transactions provided for hereunder and thereunder have been duly authorized by the Servicer by all necessary corporate action on its part and this Agreement and each other Series Document to which it is a party will remain, from the time of its execution, an official record of the Servicer. (d) Enforceability. Each of this Agreement and each other Series Document to which the Servicer is a party constitutes a legal, valid and binding obligation of the Servicer, enforceable against the Servicer in accordance with its terms, except as such enforceability may be limited by Debtor Relief Laws. (e) No Conflict. The execution and delivery of this Agreement and each other Series Document to which the Servicer is a party, the performance of the transactions contemplated hereunder and thereunder and the fulfillment of the terms hereof and thereof will not conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, any indenture, contract, agreement, mortgage, deed of trust, or other instrument to which the Servicer is a party or by which it or any of its properties are bound. (f) No Violation. The execution and delivery of this Agreement and each other Series Document to which the Servicer is a party, the performance of the transactions contemplated hereunder and thereunder and the fulfillment of the terms hereof and thereof will not conflict with or violate in any material respect any Requirements of Law applicable to the Servicer. (g) No Proceedings. There are no proceedings pending or, to the best knowledge of the Servicer, threatened against the Servicer before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality (i) asserting the invalidity of this Agreement or any other Series Document to which it is a party, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any other Series Document, (iii) seeking any determination or ruling that, in the reasonable judgment of the Servicer, would materially and adversely affect the performance by the Servicer of its obligations under this Agreement or any other Series Document to which it is a party, (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement or any other Series Document or (v) seeking to affect adversely the income tax attributes of the Trust. (h) All Consents Required. All appraisals, authorizations, consents, orders or other actions of any Person or of any governmental body or official required in connection with the execution and delivery by the Servicer of this Agreement and each other Series Document to which it is a party, the performance of the transactions contemplated hereunder and thereunder and the fulfillment of the terms hereof, have been obtained. (i) Incorporated Representations and Warranties. Its representations and warranties in Section 3.3 of the Pooling and Servicing Agreement are true and correct in all material respects as of the dates they were so made. (j) No Early Amortization Event, Insolvency Event or Servicer Default. No Early Amortization Event with respect to the Series 2000-VFC Certificates, Insolvency Event or Servicer Default has occurred and is continuing, and no event, act or omission has occurred and is continuing which, with the lapse of time, the giving of notice or both, would constitute an Early Amortization Event, Insolvency Event or Servicer Default. ARTICLE VI REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE PURCHASER Each of the Purchasers hereby makes the following representations and warranties to the Seller on which the Seller shall rely in entering into this Agreement. SECTION 6.01 Organization. Such Purchaser has been duly organized and is validly existing and in good standing as a corporation under the laws of the state governing its formation, with power and authority to own its properties and to transact the business in which it is now engaged. SECTION 6.02 Authority, etc. Such Purchaser has all requisite power and authority to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby and thereby. The execution and delivery by such Purchaser of this Agreement and the consummation by such Purchaser of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate or partnership action on the part of such Purchaser. This Agreement has been duly and validly executed and delivered by such Purchaser and constitutes a legal, valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, subject as to enforcement to bankruptcy, reorganization, insolvency, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and to general principles of equity. Neither the execution and delivery by such Purchaser of this Agreement nor the consummation by such Purchaser of any of the transactions contemplated hereby, nor the fulfillment by such Purchaser of the terms hereof, will conflict with, or violate, result in a breach of or constitute a default under any term or provision of the certificate of incorporation or by-laws of such Purchaser or any Requirement of Law applicable to such Purchaser. SECTION 6.03 Securities Act. The Series 2000-VFC Certificate purchased by such Purchaser pursuant to this Agreement will be acquired for investment only and not with a view to any public distribution thereof, and such Purchaser will not offer to sell or otherwise dispose of its Series 2000-VFC Certificate so acquired by it (or any interest therein) in violation of any of the registration requirements of the Act or any applicable state or other securities laws. Such Purchaser acknowledges that it has no right to require the Seller to register under the Act or any other securities law the Series 2000-VFC Certificates to be acquired by such Purchaser pursuant to this Agreement. Such Purchaser agrees with the Seller that: (i) such Purchaser will execute and deliver to the Seller on or before the Closing Date a certain letter (the "Investment Letter"), in the form attached hereto as Exhibit B, with respect to the purchase of the Series 2000-VFC Certificates and (ii) all of the statements made by such Purchaser in the Investment Letter are true and correct in all material respects as of the date made. Each Purchaser understands and agrees that receipt by the Seller of a duly executed Investment Letter is a condition precedent to the Seller's obligations hereunder to sell the Series 2000-VFC Certificates. SECTION 6.04 Investment Company Act. Neither such Purchaser nor the Administrator is required to register as an "investment company" nor is such Purchaser or the Administrator controlled by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. ARTICLE VII COVENANTS OF THE SELLER AND THE SERVICER SECTION 7.01 Rating of Class A Certificates or Notes. To the extent that any rating provided with respect to the Class A Certificates or the Conduit Purchaser's Commercial Paper by any rating agency is conditional upon the furnishing of documents or the taking of any other action by the Seller, the Seller shall take all reasonable actions to furnish such documents and take any such other action. SECTION 7.02 Information. So long as the Class A Certificates remain outstanding, the Servicer and the Seller will furnish to the Conduit Purchaser and the Administrator: (a) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of Charming Shoppes, copies of the financial statements of Charming Shoppes and its Subsidiaries, prepared on a consolidated basis in conformity with generally accepted accounting principles, duly certified by the chief financial officer of Charming Shoppes; (b) as soon as available and in any event within 90 days after the end of each fiscal year of Charming Shoppes, copies of the financial statements of Charming Shoppes and its Subsidiaries, prepared on a consolidated basis in conformity with generally accepted accounting principles and duly certified by independent certified public accountants of recognized standing selected by Charming Shoppes; (c) as soon as possible and in any event within three Business Days of knowledge thereof, notice of (i) any litigation, investigation or proceeding which, in the Servicer's reasonable opinion, could have a material adverse effect on the Class A Certificateholders and (ii) any material adverse development in previously disclosed litigation; (d) prior to its effective date, notice of any material change in the Cardholder Guidelines which, in the Servicer's reasonable opinion, could have a material adverse effect on the Class A Certificateholders; (e) a copy of each certificate, opinion, report, statement, notice or other communication (other than investment instructions) furnished by or on behalf of the Seller to the Trustee or either Rating Agency under the Pooling and Servicing Agreement or the Supplement, concurrently therewith, and promptly after receipt thereof, a copy of each notice, demand or other communication received by or on behalf of the Seller under the Pooling and Servicing Agreement, the Purchase Agreement or the Supplement; (f) such other information (including financial information), documents, records or reports respecting the Trust, the Receivables, the Seller, the Originator or the Servicer as a Purchaser or the Administrator may from time to time reasonably request; and (g) as soon as possible and in any event within five Business Days after the occurrence thereof, notice of each Early Amortization Event, Servicer Default or event which with the giving of notice or the passage of time or both would constitute an Early Amortization Event or Servicer Default. SECTION 7.03 Access to Information. So long as the Class A Certificates remain outstanding, the Seller will and will cause the Originator to, at any time from time to time during regular business hours, or reasonable notice to the Seller, permit the Purchasers or the Administrator, or their agents or representatives to: (a) examine all books, records and documents (including computer tapes and disks) in the possession or under the control of the Seller, the Originator and the Servicer relating to the Receivables, and (b) visit the offices and property of the Seller, the Originator and the Servicer for the purpose of examining such materials described in clause (a); provided, that (x) so long as no Early Amortization Event or Servicer Default has occurred and is continuing no more than one such examination and visit shall be made by each Purchaser and the Administrator (or their respective agents and representatives) in any one year period and (y) the Purchasers and the Administrator shall use their reasonable efforts to coordinate any such examination and visit with any similar examination and visit to be made by any other Purchaser or the Administrator or other agents and representatives. Except as provided in Section 10.05, any information obtained by a Purchaser or the Administrator pursuant to this Section 7.03 shall be held in confidence by such Purchaser and the Administrator unless and to the extent such information (i) has become available to the public, (ii) is required or requested by any Governmental Authority or in any court proceeding or (iii) is required by any Requirement of Law. In the case of any disclosure permitted by clause (ii) or (iii), the Purchaser and the Administrator shall use commercially reasonable efforts to (x) provide the Seller with advance notice of any such disclosure and (y) cooperate with the Seller in limiting the extent or effect of any such disclosure. SECTION 7.04 Security Interests; Further Assurances. The Seller will take all action necessary to maintain the Trustee's first priority perfected ownership or security interest in the Receivables and the collateral granted pursuant the Pooling and Servicing Agreement. SECTION 7.05 Covenants. The Seller will duly observe and perform each of its covenants set forth in the Pooling and Servicing Agreement and the Supplement. SECTION 7.06 Amendments. The Seller will not make, or permit any Person to make, any material amendment, modification or change to, or provide any material waiver under the Pooling and Servicing Agreement or any Series Document without the prior written consent of the Administrator and without satisfaction of the Rating Agency Condition. ARTICLE VIII ADDITIONAL COVENANTS SECTION 8.01 Legal Conditions to Closing. The parties hereto will take all reasonable action necessary to obtain (and will cooperate with one another in obtaining) any consent, authorization, permit, license, franchise, order or approval of, or any exemption by, any Governmental Authority or any other Person, required to be obtained or made by it in connection with any of the transactions contemplated by this Agreement. SECTION 8.02 Transfer Restrictions. (a) Except as otherwise provided in Section 10.04, no Series 2000-VFC Certificate may be offered, sold or otherwise transferred to any Person (other than the Seller) unless the Seller shall have given its prior written approval to such offer, sale or transfer (which approval shall not be unreasonably withheld). Each Purchaser further agrees that it will not make any general solicitation or general advertising for the offer or sale of its Series 2000-VFC Certificate and will not transfer its Series 2000-VFC Certificate (or any portion thereof) to any Person except (a) to a Person within the United States which such Purchaser reasonably believes is a "qualified institutional buyer" (as defined in Rule 144A under the Act) that is purchasing (1) for its own account or (2) for the account of a "qualified institutional buyer" (as so defined) or (b) to a Person that is an institutional "accredited investor" within the meaning of Rule 501(a) (1), (2), (3) or (7) of Regulation D under the Act, that is, in either case, aware that such resale, pledge or transfer is being made in reliance on an exemption from registration under the Act, and, in either case, unless such Person shall have delivered to such Purchaser an Investment Letter. Each Purchaser further agrees to provide to any Person purchasing a Series 2000-VFC Certificate (or any portion thereof) from it a notice advising such purchaser that resales of the Series 2000-VFC Certificates are restricted as stated above. (b) Seller shall not execute, and (if given prior written notice by the Servicer of the inability of the Seller to execute any Subject Instrument by operation of this clause (b)) the Transfer Agent and Registrar shall not register the transfer of, any Class B Certificate unless (i) after giving effect to the execution or transfer of such Class B Certificate, there would be no more than 5 Private Holders of Class B Certificates and (ii) the other conditions to transfer set forth in Section 6.3 of the Pooling Agreement have been satisfied. SECTION 8.03 Consents, etc. Each Purchaser agrees not to unreasonably withhold or delay its consent to any amendment or other matter requiring consent of the Holders of the Series 2000- VFC Certificates under a provision of any Series Document to the extent that such provision specifies that such consent is not to be unreasonably withheld or delayed. ARTICLE IX INDEMNIFICATION SECTION 9.01 Indemnification by the Seller. The Seller agrees to indemnify and hold harmless each Indemnified Party against any and all losses, claims, damages, liabilities or expenses, including legal and accounting fees (collectively, "Losses"), as incurred (payable promptly upon written request), for or on account of or arising from or in connection with this Agreement, including any breach of any representation, warranty or covenant of the Seller in this Agreement or in any certificate or other written material delivered pursuant hereto; provided, however, that the Seller shall not be so required to indemnify any such Person or otherwise be liable to any such Person hereunder for any Losses (i) resulting from the performance of the Receivables, market fluctuations, a shortfall or failure to make payment under any Enhancement or other similar market or investment risks associated with ownership of the Class A Certificates, (ii) which would otherwise be covered in Sections 9.04 hereof, (iii) arising from such Person's gross negligence or willful misconduct or (iv) arising from a breach of any representation or warranty set forth in the Pooling and Servicing Agreement, a remedy for the breach of which is provided in Sections 2.4 of the Pooling and Servicing Agreement. SECTION 9.02 Procedure. In order for an Indemnified Party to be entitled to any indemnification provided for under this Agreement in respect of, arising out of, or involving a claim made by any Person against the Indemnified Party (a "Third Party Claim"), such Indemnified Party must notify the Seller in writing of the Third Party Claim within a reasonable time after receipt by such Indemnified Party of written notice of the Third Party Claim unless the Seller shall have previously obtained actual knowledge thereof. Thereafter, the Indemnified Party shall deliver to the Seller, within a reasonable time after the Indemnified Party's receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Third Party Claim. SECTION 9.03 Defense of Claims. If a Third Party Claim is made against an Indemnified Party, (a) the Seller will be entitled to participate in the defense thereof and, (b) if it so chooses, to assume the defense thereof with counsel selected by the Seller, provided that in connection with such assumption (i) such counsel is not reasonably objected to by the Indemnified Party and (ii) the Seller, subject to Section 10.09, first admits in writing its liability to indemnify the Indemnified Party with respect to all elements of such claim in full to the extent such claim is valid. Should the Seller so elect to assume the defense of a Third Party Claim, the Seller will not be liable to the Indemnified Party for any legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof. If the Seller elects to assume the defense of a Third Party Claim, the Indemnified Party will (i) cooperate in all reasonable respects with the Seller in connection with such defense and (ii) not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the Seller's prior written consent, as the case may be. If the Seller shall assume the defense of any Third Party Claim, the Indemnified Party shall be entitled to participate in (but not control) such defense with its own counsel at its own expense. If the Seller does not assume the defense of any such Third Party Claim, the Indemnified Party may defend the same in such manner as it may deem appropriate, including settling such claim or litigation after giving notice to the Seller of such terms and, subject to Section 10.09, the Seller will promptly reimburse the Indemnified Party upon written request. Anything contained in this Agreement to the contrary notwithstanding, the Seller shall not be entitled to assume the defense of any part of a Third Party Claim that seeks an order, injunction or other equitable relief or relief for other than money damages against the Indemnified Party. SECTION 9.04 Increased Cost and Reduced Return. (a) If (i) Regulation D or (ii) any Regulatory Change occurring after the date hereof (A) shall impose, modify or deem applicable any reserve (including, without limitation, any reserve imposed by the Federal Reserve Board, but excluding any reserve included in the determination of the Daily Conduit Purchaser Rate), special deposit or similar requirement against assets of any Funding Source, deposits or obligations with or for the account of any Funding Source or with or for the account of any affiliate (or entity deemed by the Federal Reserve Board to be an affiliate) of any Funding Source, or credit extended by any Funding Source under any Funding Agreement; or (B) shall change the amount of capital maintained or required or requested or directed to be maintained by any Funding Source; (C) shall impose any other condition affecting any Class A Certificates owned or funded in whole or in part by any Funding Source, or its obligations or rights, if any, to fund any Class A Incremental Fundings; or (D) shall change the rate for, or the manner in which the Federal Deposit Insurance Corporation (or a successor thereto) assesses, deposit insurance premiums or similar charges; and the result of any of the foregoing is or would be (x) to increase the cost to (or in the case of Regulation D referred to above, to impose a cost on) a Funding Source funding the Class A Funded Amount, any purchases, reinvestments, or loans or other extensions of credit under any Funding Agreement or any commitment of such Funding Source with respect to any of the foregoing, (y) to reduce the amount of any sum received or receivable by a Funding Source under any Funding Agreement with respect thereto, or (z) in the reasonable determination of such Funding Source, to reduce the rate of return on the capital of a Funding Source as a consequence of its obligations arising in connection herewith to a level below that which such Funding Source could otherwise have achieved but for Regulation D or such Regulatory Change, then within thirty days after demand by such Funding Source (which demand shall be accompanied by a statement setting forth the basis of such demand), the Seller shall pay to the Conduit Purchaser solely from amounts remitted to the Seller pursuant to Section 4.9(a)(xii) of the Supplement, for the benefit of such Funding Source, such amounts charged to such Funding Source or to compensate such Funding Source for such reduction. This Section 9.04(a) shall not apply to taxes. (b) Each Funding Source will promptly notify the Conduit Purchaser, the Seller and the Administrator of any event of which it has knowledge which will entitle such Funding Source to compensation pursuant to this Section 9.04; provided, however, no failure to give or delay in giving such notification shall adversely affect the rights of any Funding Source to such compensation. (c) In determining any amount provided for or referred to in this Section 9.04, a Funding Source may use any reasonable averaging and attribution methods that it (in its sole discretion) shall deem applicable. Any Funding Source when making a claim under this Section 9.04 shall submit to the Conduit Purchaser and the Seller a statement as to such increased cost or reduced return (including calculation thereof in reasonable detail), which statement shall, in the absence of demonstrable error, be conclusive and binding upon Seller. (d) The Conduit Purchaser agrees that it shall use its reasonable best efforts to take any action that will avoid the need to pay, or reduce the amount of, any increased amounts referred to in paragraph (a); provided that the Conduit Purchaser shall not be obligated to take any actions that would, in the reasonable opinion of the Conduit Purchaser, be disadvantageous to the Conduit Purchaser. (e) Subject to Section 9.04(g), any and all payments made under this Agreement shall be made free and clear of, and without deduction for, any and all present or future Taxes. If any amount of Taxes shall be required by law to be deducted from or in respect of any sum payable hereunder to any Foreign Funding Source that is an assignee or participant of the Conduit Purchaser, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 9.04(e)), such Foreign Funding Source receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Seller shall make such deductions and (iii) the Seller shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law solely from amounts remitted to the Seller pursuant to Section 4.9(a)(xii) of the Supplement. (f) Each Foreign Funding Source that is an assignee or participant of the Conduit Purchaser, on or prior to the date pursuant to which it becomes an assignee or participant of the Conduit Purchaser, and from time to time thereafter if requested in writing by the Seller (unless such Funding Source can no longer lawfully do so due to a change in law subsequent to the date it became an assignee or participant of Purchaser hereunder), shall provide Seller with such form(s) prescribed by the Internal Revenue Service, certifying that such Funding Source is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest to zero or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. (g) For any period with respect to which a Funding Source that is a Foreign assignee or participant of the Conduit Purchaser has failed to provide the Seller with the appropriate form described in Section 9.04(f) (other than if such failure is due to a change in law occurring subsequent to the date on which a form originally was required to be provided), such Funding Source shall not be entitled to payments of additional amounts under Section 9.04(e). ARTICLE X MISCELLANEOUS SECTION 10.01 Amendments. No amendment or waiver of any provision of this Agreement shall in any event be effective unless (x) the same shall be in writing and signed by all of the parties hereto, and (y) if such amendment or waiver could reasonably be expected to adversely affect the holders of Commercial Paper, the Rating Agency Condition shall have been satisfied and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 10.02 Notices. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including telecopies, telegraphic, telex or cable communication) and mailed, telecopied, telegraphed, cabled or delivered, as to each party hereto, at its address set forth in Schedule I hereto or at such other address as shall be designated by such party in a written notice to the other party hereto. All such notices and communications shall, when mailed, telecopied, telegraphed or cabled, be effective when deposited in the mails, confirmed by telephone, delivered to the telegraph company or delivered to the cable company, respectively. SECTION 10.03 No Waiver; Remedies. No failure on the part of any party hereto to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 10.04 Binding Effect; Assignability. (a) This Agreement shall be binding upon and inure to the benefit of the Seller, the Administrator and the Purchasers and their respective successors and assigns (including any subsequent holders of the Series 2000-VFC Certificates); provided, however, that the Seller shall not have the right to assign its rights hereunder or any interest herein (by operation of law or otherwise) without the prior written consent of the Administrator and the Purchasers, which consent shall not be unreasonably withheld. The Administrator and the Conduit Purchaser each agrees that it shall not transfer a Class A Certificate or any interest therein without the Seller's consent, unless such transfer is to a Liquidity Purchaser. The Seller agrees that it will not unreasonably withhold its consent to the transfer by the Administrator and the Conduit Purchaser of a Class A Certificate to a special purpose company which is administered by the Administrator and engages in activities substantially similar to the Conduit Purchaser. The Class B Purchaser agrees that it shall not transfer a Class B Certificate without the Administrator's consent, unless such transfer is to an affiliate of the Class B Purchaser. (b) This Agreement shall create and constitute the continuing obligation of the parties hereto in accordance with its terms, and shall remain in full force and effect until such time as all amounts payable with respect to the Series 2000-VFC Certificates shall have been paid in full. SECTION 10.05 Provision of Documents and Information. The Seller acknowledges and agrees that the Conduit Purchaser and the Administrator are permitted to provide to permitted assignees and participants, the placement agents for the Commercial Paper, the rating agencies with respect to the Commercial Paper and other liquidity and credit providers under their respective commercial paper programs, opinions, certificates, documents and other information relating to the Seller, the Originator, the Servicer and the Receivables delivered to the Purchasers or the Administrator pursuant to this Agreement. SECTION 10.06 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. (a) THIS CERTIFICATE PURCHASE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS. EACH OF THE PARTIES TO THIS CERTIFICATE PURCHASE AGREEMENT HEREBY AGREES TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY APPELLATE COURT HAVING JURISDICTION TO REVIEW THE JUDGMENTS THEREOF. EACH OF THE PARTIES HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. (b) EACH OF THE PARTIES HERETO WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY PARTY PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIPS ESTABLISHED HEREUNDER. SECTION 10.07 No Proceedings. (a) The Seller agrees that so long as Commercial Paper of the Conduit Purchaser shall be outstanding or there shall not have elapsed one year plus one day since the last day on which any Commercial Paper of the Conduit Purchaser shall have been outstanding, it shall not file, or join in the filing of, a petition against the Conduit Purchaser under any Debtor Relief Laws, or join in the commencement of any bankruptcy, reorganization, arrangement, insolvency, liquidation or other similar proceeding against the Conduit Purchaser. (b) Each Purchaser severally agrees that it shall not at any time file, or join in the filing of, a petition against the Trust or the Seller under any Debtor Relief Laws, or join in the commencement of any bankruptcy, reorganization, arrangement, insolvency, liquidation or other similar proceeding against the Seller or the Trust. SECTION 10.08 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. SECTION 10.09 No Recourse. The obligations of the Conduit Purchaser, the Servicer or the Seller (each , a "Securitization Entity") under this Agreement, or any other agreement, instrument, document or certificate executed and delivered by or issued by such Securitization Entity or any officer thereof are solely the corporate or partnership obligations of such Securitization Entity. No recourse shall be had for payment of any fee or other obligation or claim arising out of or relating to this Agreement or any other agreement, instrument, document or certificate executed and delivered or issued by such Securitization Entity, or any officer thereof in connection therewith, against any stockholder, limited partner, employee, officer, director or incorporator of such Securitization Entity, provided, however, that provisions of this section shall not relieve any of the foregoing persons from any liability arising from his, her or its intentional misrepresentation or willful misconduct. SECTION 10.10 Survival. All representations, warranties, covenants, guaranties and indemnifications contained in this Agreement and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the sale, transfer or repayment of the Series 2000-VFC Certificates. SECTION 10.11 Tax Characterization. Each party to this Agreement (a) acknowledges and agrees that it is the intent of the parties to this Agreement that, for federal, state and local income and franchise tax purposes only, the Class A Certificates will be treated as evidence of indebtedness secured by the Receivables and proceeds thereof and the Trust will not be characterized as an association (or publicly traded partnership) taxable as a corporation, (b) agrees to treat the Class A Certificates for federal, state and local income and franchise tax purposes as indebtedness and (c) agrees that the provisions of this Agreement and all related Series Documents shall be construed to further these intentions of the parties. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. CHARMING SHOPPES RECEIVABLES CORP., as Seller By: Name: Title: MONTE ROSA CAPITAL CORPORATION, as Conduit Purchaser By ING Baring (U.S.) Capital Markets LLC as attorney-in-fact By: Name: Title: ING BARING (U.S.) CAPITAL MARKETS LLC as Administrator By: Name: Title: CHARMING SHOPPES RECEIVABLES CORP., as Class B Purchaser By: Name: Title: SPIRIT OF AMERICA, INC., as Servicer By: Name: Title: EXHIBIT A
Form of Notice of Incremental Funding A. Proposed Incremental Funding Date: ___________ B. Amount of requested Class A Incremental Funding $_________ C. Purchase Price (100% of the related Class A $_________ Incremental Funding Amount) D. Remaining Maximum Class A Funded Amount (excluding $_________ the requested Class A Incremental Funding) E. Remaining Maximum Class A Funded Amount (after $_________ giving effect to the requested Class A Incremental Funding on the date hereof) F. Amount of requested Class B Incremental Funding $_________ G. Purchase Price (100% of the related Class B $_________ Incremental Funding Amount) H. Remaining Maximum Class B Funded Amount (excluding $_________ the requested Class B Incremental Funding) I. Remaining Maximum Class B Funded Amount (after $_________ giving effect to the requested Class B Incremental Funding on the date hereof)
F. Certifications: 1. The representations and warranties of Charming Shoppes Receivables Corp. ("CSRC") in the Second Amended Pooling and Servicing Agreement dated as of November 25, 1997 (as amended or otherwise modified, the "Pooling and Servicing Agreement"), among CSRC, as Seller, Spirit of America, Inc., as Servicer, and First Union National Bank, as trustee (the "Trustee"), and the Certificate Purchase Agreement dated as of November 9, 2000 (as amended or otherwise modified, the "Agreement"), among CSRC, the Conduit Purchaser, the Administrator, the Servicer and the Class B Purchaser are true and correct on the date hereof. 2. The applicable Incremental Funding Conditions specified in Section 2.02(a) of the Agreement, if a Class A Incremental Funding is requested hereby, and Section 2.04(a) of the Agreement, if a Class B Incremental Funding is requested hereby, have been satisfied and/or will be satisfied as of the applicable Incremental Funding Date. CHARMING SHOPPES RECEIVABLES CORP. By Authorized Officer Date of Notice: EXHIBIT B [Form of Investment Letter] November 9, 2000 First Union National Bank 123 South Broad Street, M.B.O., 18th Floor Philadelphia, PA 19109 Attn: Corporate Trust Administration Charming Shoppes Receivables Corp. c/o Charming Shoppes, Inc. 450 Winks Lane Bensalem, PA 19020 Re: Purchase of [Class A/Class B] Certificate Ladies and Gentlemen: This letter (the "Investment Letter") is delivered by ____________________ (the "Purchaser") and [____________________ ("__________"), as Administrator](1) pursuant to Section 6.03 of the Certificate Purchase Agreement dated as of November 9, 2000 (as amended or otherwise modified, the "Agreement") among Charming Shoppes Receivables Corp. ("CSRC"), Spirit of America, Inc., as Servicer, the Conduit Purchaser, the Class B Purchaser and the Administrator. Capitalized terms used herein without definition shall have the meanings set forth in the Agreement. The Purchaser represents to the Seller as follows: (a) the Purchaser is authorized to enter into the Agreement and to perform its obligations thereunder and to consummate the transactions contemplated thereby; (b) the Purchaser [and Administrator] have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the [Class A/Class B] Certificate and the Purchaser is able to bear the economic risk of such investment; (c) the Purchaser [and Administrator] have reviewed the Pooling and Servicing Agreement and the Supplement (including the schedules and exhibits thereto) and have had the opportunity to perform due diligence with respect thereto and to ask questions of and receive answers from the Seller and its representatives concerning the Seller, the Servicer, the Originator, the Trust and the [Class A/Class B] Certificates; (d) [Administrator is an agent on behalf of the Purchaser and the Purchaser is not acquiring the Class A Certificate as an agent or otherwise for any other person.] The Purchaser is a [____________________]; [Administrator is a [____________________]]; (e) Each of the Purchaser [and Administrator] is either (x) an "accredited investor" (as such term is defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated by the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended or (y) a qualified institutional buyer as defined in Rule 144A promulgated by the Commission under the Securities Act of 1933, as amended. Each of the Purchaser [and Administrator] understands that the offering and sale of the [Class A/Class B] Certificates have not been and will not be registered under the Securities Act of 1933, as amended, and have not and will not be registered or qualified under any applicable "blue sky" law, and that the offering and sale of the [Class A/Class B] Certificates have not been reviewed by, passed on or submitted to any federal or state agency or commission, securities exchange or other regulatory body; (f) The Purchaser[, through the Administrator], is acquiring the [Class A/Class B] Certificate without a view to any distribution, resale or other transfer thereof, except as contemplated by the following sentence. The Purchaser and Administrator will not resell or otherwise transfer the [Class A/Class B] Certificate or any portion thereof, except in accordance with Section 8.02 of the Agreement. (g) The Purchaser [and Administrator] understand that each [Class A/Class B] Certificate will bear a legend to substantially the following effect: THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), IN RELIANCE UPON EXEMPTIONS PROVIDED BY THE SECURITIES ACT. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE PROVISIONS UNDER STATE BLUE SKY OR SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH PROVISIONS. THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING AND SERVICING AGREEMENT, THE SUPPLEMENT AND THE CERTIFICATE PURCHASE AGREEMENT REFERRED TO HEREIN. NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE ACQUIRED BY (A) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE 1 OF ERISA, (B) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (C) ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY (EACH A "BENEFIT PLAN"). BY ACCEPTING AND HOLDING THIS CERTIFICATE OR ANY INTEREST HEREIN, THE HOLDER HEREOF OR ANY OWNER OF AN INTEREST HEREIN SHALL BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT A BENEFIT PLAN. (h) This Investment Letter has been duly authorized, executed and delivered and constitutes the legal, valid and binding obligations of the Purchaser [and the Administrator], enforceable against the Purchaser [and the Administrator] in accordance with its terms, except as such enforceability may be limited by receivership, conservatorship, bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and general principles of equity. (i) [Each of] the Purchaser and [the Administrator] represents and warrants that neither the Purchaser [nor the Administrator] is (i) an employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code, or (iii) an entity whose underlying assets include plan assets by reason of a plan's investment in such entity. Very truly yours, , as Purchaser By: Name: Title: , as Administrator By: Name: Title: SCHEDULE I Addresses for Notices Monte Rosa Capital Corporation c/o ING Baring (U.S.) Capital Markets LLC 55 E. 52nd Street New York, New York 10055 Attn: James F. Moore Fax: (212) 409-6489 Phone: (212) 409-5920 ING Baring (U.S.) Capital Markets LLC 55 E. 52nd Street New York, New York 10055 Attn: James F. Moore Fax: (212) 409-6489 Phone: (212) 409-5920 Spirit of America, Inc. c/o Spirit of American National Bank 1103 Allen Drive Milford, Ohio 45150 Attn: General Counsel Fax: (215) Phone: (215) Charming Shoppes Receivables Corp. c/o Fashion Service Corp. 450 Winks Lane Bensalem, Pennsylvania 19020 Attn: General Counsel Fax: Phone: _______________________________ (1) Bracketed language for conduit purchasers only. EX-10 7 exh10229.txt 2000 STOCK INCENTIVE PLAN EXHIBIT 10.2.29 CHARMING SHOPPES, INC. AMENDED AND RESTATED 2000 ASSOCIATES' STOCK INCENTIVE PLAN 1. PURPOSE The purpose of this 2000 Associates' Stock Incentive Plan is to assist Charming Shoppes, Inc. (the "Company") and its Subsidiaries and Affiliates in attracting, retaining, and rewarding associates other than executive officers, enabling such associates to acquire or increase a proprietary interest in the Company in order to promote a closer identity of interests between such associates and the Company's shareholders, and providing an increased incentive to expend their maximum efforts for the success of the Company's business. 2. DEFINITIONS For purposes of the Plan, the following terms shall be defined as set forth below: (a) "Affiliate" means any affiliate of the Company and its Subsidiaries that is designated by the Board as a participating employer under the Plan. (b) "Award" means any Option, SAR (including a Limited SAR), Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of other awards, Dividend Equivalent, or Other Stock-Based Award, or any other right or interest relating to Stock or cash, granted to a Participant under the Plan. (c) "Award Agreement" means any written agreement, contract, or other instrument or document evidencing an Award. (d) "Beneficiary" means any person or trust which has been designated by a Participant in his or her most recent written beneficiary designation filed with the Committee to receive the benefits specified under this Plan upon such Participant's death or, if there is no designated Beneficiary or surviving designated Beneficiary, then any person or trust entitled by will or the laws of descent and distribution to receive such benefits. (e) "Board" means the Board of Directors of the Company. (f) "Code" means the Internal Revenue Code of 1986, as amended from time to time. References to any provision of the Code shall be deemed to include successor provisions thereto and regulations thereunder. (g) "Committee" means the Stock Option Committee of the Board, or any committee of directors and/or officers of the Company as may be designated by the Board or the Stock Option Committee to administer the Plan. (h) "Company" means Charming Shoppes, Inc., a corporation organized under the laws of the Commonwealth of Pennsylvania, or any successor corporation. (i) "Deferred Stock" means a right, granted to a Participant under Section 6(e), to receive Stock at the end of a specified deferral period. (j) "Dividend Equivalent" means a right, granted to a Participant under Section 6(g), to receive cash, Stock, other Awards, or other property equal in value to dividends paid with respect to a specified number of shares of Stock, or other periodic payments. Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award, and may be paid currently or on a deferred basis. (k) "Fair Market Value" means, with respect to Stock, Awards, or other property, the fair market value of such Stock, Awards, or other property determined by such methods or procedures as shall be established from time to time by the Committee. Unless otherwise determined by the Committee, the Fair Market Value of Stock as of any given date shall mean the closing sale price of Stock reported on the Nasdaq National Market System (or, if Stock is then principally traded on a national securities exchange, in the table reporting "composite transactions" for such exchange) in the Wall Street Journal for such date, or, if no shares of Stock were traded on that date, on the next preceding day on which there was such a trade. (l) "Limited SAR" means a SAR exercisable only for cash upon a change in control or other event, as specified by the Committee. (m) "Option" means a right, granted to a Participant under Section 6(b), to purchase Stock, other Awards, or other property at a specified price during specified time periods. Each Option shall be a nonstatutory Option (i.e., an Option not intended to be an incentive stock option under Section 422 of the Code). (n) "Other Stock-Based Award" means a right, granted to a Participant under Section 6(h), that relates to or is valued by reference to Stock, other Awards relating to Stock, or other property. (o) "Participant" means a person who, as an associate of the Company, a Subsidiary, or an Affiliate, has been granted an Award under the Plan. (p) "Plan" means this Amended and Restated 2000 Associates' Stock Incentive Plan. (q) "Restricted Stock" means an award of shares of Stock to a Participant under Section 6(d) that may be subject to certain restrictions and to a risk of forfeiture. (r) "Stock" means the Common Stock, par value $.10 per share, of the Company and such other securities as may be substituted for Stock or such other securities pursuant to Section 4. (s) "SAR" or "Stock Appreciation Right" means the right, granted to a Participant under Section 6(c), to be paid an amount measured by the appreciation in the Fair Market Value of Stock from the date of grant to the date of exercise of the right, with payment to be made in cash, Stock, or other Awards as specified in the Award or determined by the Committee. (t) "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. 3. ADMINISTRATION (a) Authority of the Committee. The Plan shall be administered by the Committee. The Committee shall have full and final authority to take the following actions, in each case subject to and consistent with the provisions of the Plan: (i) to select Participants to whom Awards may be granted; (ii) to designate Affiliates; (iii) to determine the type or types of Awards to be granted to each Participant, and denominate such Award (for example, Deferred Stock or Other Stock-Based Awards subject to performance conditions may be denominated "performance shares" or "performance units" if deemed appropriate by the Committee); (iv) to determine the number of Awards to be granted, the number of shares of Stock to which an Award will relate, the terms and conditions of any Award granted under the Plan (including, but not limited to, any exercise price, grant price, or purchase price, any restriction or condition, any schedule for lapse of restrictions or conditions relating to transferability or forfeiture, exercisability, or settlement of an Award, and waivers or accelerations thereof, and waivers of or modifications to performance conditions relating to an Award, based in each case on such considerations as the Committee shall determine), and all other matters to be determined in connection with an Award; (v) to determine whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Stock, other Awards, or other property, or an Award may be cancelled, forfeited, or surrendered; (vi) to determine whether, to what extent, and under what circumstances cash, Stock, other Awards, or other property payable with respect to an Award will be deferred either automatically, at the election of the Committee, or at the election of the Participant; (vii) to prescribe the form of each Award Agreement, which need not be identical for each Participant; (viii) to adopt, amend, suspend, waive, and rescind such rules and regulations and appoint such agents as the Committee may deem necessary or advisable to administer the Plan; (ix) to correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and any Award, rules and regulations, Award Agreement, or other instrument hereunder; and (x) to make all other decisions and determinations as may be required under the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan. (b) Manner of Exercise of Committee Authority. Any action by the Committee with respect to the Plan shall be final, conclusive, and binding on all persons, including the Company, Subsidiaries, Affiliates, Participants, any person claiming any rights under the Plan from or through any Participant, and shareholders. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. A memorandum signed by all members of the Committee shall constitute the act of the Committee without the necessity, in such event, to hold a meeting. Authority may be delegated under the Plan to officers or managers of the Company or any Subsidiary or Affiliate, subject to such terms as the Committee shall determine, to perform such functions as the Committee may determine, to the extent consistent with applicable law. (c) Limitation of Liability. Each member of the Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him by any officer or other employee of the Company or any Subsidiary or Affiliate, the Company's independent certified public accountants, or any executive compensation consultant, legal counsel, or other professional retained by the Company to assist in the administration of the Plan. No member of the Committee, nor any officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation. 4. STOCK SUBJECT TO PLAN (a) Number of Shares Reserved. Subject to adjustment as hereinafter provided, the total number of shares of Stock reserved and available for issuance in connection with Awards under the Plan shall be 5,000,000. If any shares subject to an Award are forfeited or such Award is settled in cash or otherwise terminates without a distribution of shares to the Participant, any shares counted against the number of shares reserved and available under the Plan with respect to such Award shall, to the extent of any such forfeiture, settlement, or termination, again be available for Awards under the Plan; provided, however, that the Committee may adopt procedures for the counting of shares relating to any Award to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards), and provide for adjustments in any case in which the number of shares actually distributed differs from the number of shares previously counted in connection with such Award. (b) Type of Shares. Any shares of Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued shares or treasury shares. (c) Adjustments. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Stock, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Participants under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares of Stock which may thereafter be issued in connection with Awards, (ii) the number and kind of shares of Stock issued or issuable in respect of outstanding Awards, and (iii) the exercise price, grant price, or purchase price relating to any Award or, if deemed appropriate, make provision for a cash payment with respect to any outstanding Award. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or non-recurring events (including, without limitation, events described in the preceding sentence) affecting the Company or any Subsidiary or Affiliate or the financial statements of the Company or any Subsidiary or Affiliate, or in response to changes in applicable laws, regulations, or accounting principles. 5. ELIGIBILITY Associates of the Company and its Subsidiaries and Affiliates, other than an associate who is a director or officer of the Company, are eligible to be granted Awards under the Plan. For this purpose, the term "officer" shall have the same meaning under Nasdaq Marketplace Rule 4460(i)(1)(A). 6. SPECIFIC TERMS OF AWARDS (a) General. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 8(e)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of employment by the Participant; provided, however, that the Committee shall retain full power to accelerate or waive any such additional term or condition it may have previously imposed. (b) Options. The Committee is authorized to grant Options to Participants (including "reload" options automatically granted to offset specified exercises of options) on the following terms and conditions: (i) Exercise Price. The exercise price per share of Stock purchasable under an Option shall be determined by the Committee. (ii) Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, the methods by which such exercise price may be paid or deemed to be paid, the form of such payment, including, without limitation, cash, Stock, other Awards or awards issued under other Company plans, or other property (including notes or other contractual obligations of Participants to make payment on a deferred basis, such as through "cashless exercise" arrangements, to the extent permitted by applicable law), and the methods by which Stock will be delivered or deemed to be delivered to Participants. (c) Stock Appreciation Rights. The Committee is authorized to grant SARs to Participants on the following terms and conditions: (i) Right to Payment. A SAR shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise (or, if the Committee shall so determine, the Fair Market Value of one share at any time during a specified period before or after the date of exercise, or the Fair Market Value determined by reference to amounts paid or payable in connection with a change in control of the Company, as specified by the Committee), over (B) the grant price of the SAR as determined by the Committee as of the date of grant of the SAR, which, except as provided in Section 7(a), shall be not less than the Fair Market Value of one share of Stock on the date of grant. (ii) Other Terms. The Committee shall determine the time or times at which a SAR may be exercised in whole or in part, the method of exercise, method of settlement, form of consideration payable in settlement, method by which Stock will be delivered or deemed to be delivered to Participants, whether or not a SAR shall be in tandem with any other Award, and any other terms and conditions of any SAR. Limited SARs that may only be exercised in connection with a change in control or other event as specified by the Committee may be granted on such terms, not inconsistent with this Section 6(c), as the Committee may determine. Limited SARs may be either freestanding or in tandem with other Awards. (d) Restricted Stock. The Committee is authorized to grant Restricted Stock to Participants on the following terms and conditions: (i) Issuance and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions, if any, as the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, or otherwise, as the Committee may determine. Except to the extent restricted under the terms of the Plan and any Award Agreement relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a shareholder including, without limitation, the right to vote Restricted Stock or the right to receive dividends thereon. (ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of employment during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Company; provided, however, that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Restricted Stock. (iii) Certificates for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, such certificates shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, the Company shall retain physical possession of the certificate, and the Participant shall have delivered a stock power to the Company, endorsed in blank, relating to the Restricted Stock. (iv) Dividends. Dividends paid on Restricted Stock shall be either paid at the dividend payment date in cash or in shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends, or the payment of such dividends shall be deferred and/or the amount or value thereof automatically reinvested in additional Restricted Stock, other Awards, or other investment vehicles, as the Committee shall determine or permit the Participant to elect. Unless otherwise determined by the Committee, Stock distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed. (e) Deferred Stock. The Committee is authorized to grant Deferred Stock to Participants, subject to the following terms and conditions: (i) Award and Restrictions. Delivery of Stock will occur upon expiration of the deferral period specified for an Award of Deferred Stock by the Committee (or, if permitted by the Committee, as elected by the Participant). In addition, Deferred Stock shall be subject to such restrictions as the Committee may impose, if any, which restrictions may lapse at the expiration of the deferral period or at earlier specified times, separately or in combination, in installments, or otherwise, as the Committee may determine. (ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of employment (as determined under criteria established by the Committee) during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award Agreement evidencing the Deferred Stock), all Deferred Stock that is at that time subject to deferral (other than a deferral at the election of the Participant) shall be forfeited; provided, however, that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Deferred Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Deferred Stock. (f) Bonus Stock and Awards in Lieu of Cash Obligations. The Committee is authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of Company obligations to pay cash or deliver other property under other plans or compensatory arrangements. Stock or Awards granted hereunder shall be subject to such other terms as shall be determined by the Committee. (g) Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to Participants. The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Stock, Awards, or other investment vehicles as the Committee may specify. (h) Other Stock-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment contingent upon performance of the Company or any other factors designated by the Committee, and Awards valued by reference to the book value of Stock or the value of securities of or the performance of specified Subsidiaries or Affiliates. The Committee shall determine the terms and conditions of such Awards. Stock delivered pursuant to an Award in the nature of a purchase right granted under this Section 6(h) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Stock, other Awards, or other property, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under the Plan, shall also be authorized pursuant to this Section 6(h). 7. CERTAIN PROVISIONS APPLICABLE TO AWARDS (a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for, any other Award granted under the Plan or any award granted under any other plan of the Company, any Subsidiary or Affiliate, or any business entity to be acquired by the Company or a Subsidiary or Affiliate, or any other right of a Participant to receive payment from the Company or any Subsidiary or Affiliate. If an Award is granted in substitution for another Award or award, the Committee shall require the surrender of such other Award or award in consideration for the grant of the new Award. Awards granted in addition to or in tandem with other Awards or awards may be granted either as of the same time as or a different time from the grant of such other Awards or awards. The per share exercise price of any Option, grant price of any SAR, or purchase price of any other Award conferring a right to purchase Stock: (i) Granted in substitution for an outstanding Award or award shall be not less than the lesser of the Fair Market Value of a share of Stock at the date such substitute Award is granted or such Fair Market Value at that date reduced to reflect the Fair Market Value at that date of the Award or award required to be surrendered by the Participant as a condition to receipt of the substitute Award; or (ii) Retroactively granted in tandem with an outstanding Award or award shall be not less than the lesser of the Fair Market Value of a share of Stock at the date of grant of the later Award or at the date of grant of the earlier Award or award. (b) Exchange and Buy Out Provisions. The Committee may at any time offer to exchange or buy out any previously granted Award for a payment in cash, Stock, other Awards (subject to Section 7(a)), or other property based on such terms and conditions as the Committee shall determine and communicate to the Participant at the time that such offer is made. (c) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee. (d) Form of Payment Under Awards. Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or a Subsidiary or Affiliate upon the grant or exercise of an Award may be made in such forms as the Committee shall determine, including, without limitation, cash, Stock, other Awards, or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis. Such payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents in respect of installment or deferred payments denominated in Stock. (e) Loan Provisions. With the consent of the Committee, and subject at all times to, and only to the extent, if any, and in accordance with, laws and regulations and other binding obligations or provisions applicable to the Company (including applicable margin regulations), the Company may make, guarantee, or arrange for a loan or loans to a Participant with respect to the exercise of any Option or other payment in connection with any Award, including the payment by a Participant of any or all federal, state, or local income or other taxes due in connection with any Award. Subject to such limitations, the Committee shall have full authority to decide whether to make a loan or loans hereunder and to determine the amount, terms, and provisions of any such loan or loans, including the interest rate to be charged in respect of any such loan or loans, whether the loan or loans are to be with or without recourse against the borrower, the terms on which the loan is to be repaid and conditions, if any, under which the loan or loans may be forgiven. 8. GENERAL PROVISIONS (a) Compliance With Legal and Other Requirements. The Plan, the granting and exercising of Awards thereunder, and the other obligations of the Company under the Plan and any Award Agreement, shall be subject to all applicable federal and state laws, rules, and regulations, and to such approvals by any regulatory or governmental agency as may be required. The Company may, in its discretion, postpone the issuance or delivery of Stock under any Award until completion of such registration or qualification of such Stock or other required action under any federal or state law, rule, or regulation, listing or other required action with respect to any automated quotation system or stock exchange upon which the Stock or other Company securities are designated or listed, or compliance with any other contractual obligation of the Company, as the Company may consider appropriate, and may require any Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of Stock in compliance with applicable laws, rules, and regulations, designation or listing requirements, or other contractual obligations. (b) Limits on Encumbering Awards; Beneficiaries. No Award or right or interest of a Participant in any Award shall be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary or Affiliate, or shall be subject to any lien, obligation, or liability of such Participant to any party other than the Company or a Subsidiary or Affiliate. No Award or right or interest of a Participant in any Award shall be assignable or transferable otherwise than by will or the laws of descent and distribution except to the Company under the terms of the Plan, or shall be exercisable during the lifetime of the Participant by anyone other than the Participant; provided, however, that the Committee may permit an Award to be transferred, without consideration, to members of the Participant's immediate family (i.e., Participant, spouse, children, or grandchildren), to a trust for the benefit of such immediate family members or to a partnership in which such immediate family members are the only partners; provided further, that a Participant may, in the manner established by the Committee, designate a Beneficiary to exercise the rights of the Participant, and to receive any distribution, with respect to any Award, upon the death of the Participant. A Beneficiary, guardian, legal representative, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except to the extent the Plan and such Award Agreement or agreement otherwise provide with respect to such persons, and to any additional restrictions deemed necessary or appropriate by the Committee. (c) No Right to Continued Employment. Neither the Plan nor any action taken hereunder shall be construed as giving any associate the right to be retained in the employ of the Company or any of its Subsidiaries or Affiliates, nor shall it interfere in any way with the right of the Company or any of its Subsidiaries to terminate any employee's employment at any time. (d) Taxes. The Company or any Subsidiary or Affiliate is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Stock, or any payroll or other payment to a Participant, amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant's tax obligations, but any such withholding of Stock shall not exceed the amount necessary to withhold to meet mandatory tax withholding obligations. (e) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue, or terminate the Plan or the Committee's authority to grant Awards under the Plan without the consent of shareholders or Participants; provided, however, that, without the consent of an affected Participant, no amendment, alteration, suspension, discontinuation, or termination of the Plan may materially and adversely affect the rights of such Participant under any Award theretofore granted to him. The Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue, or terminate, any Award theretofore granted and any Award Agreement relating thereto; provided, however, that, without the consent of an affected Participant, no such amendment, alteration, suspension, discontinuation, or termination of any Award may materially and adversely affect the rights of such Participant under such Award. The foregoing notwithstanding, any performance condition specified in connection with an Award shall not be deemed a fixed contractual term, but shall remain subject to adjustment by the Committee, in its discretion, at any time in view of the Committee's assessment of the Company's strategy, performance of comparable companies, and other circumstances. (f) No Rights to Awards; No Shareholder Rights. No Participant or associate shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Participants and associates. No Award shall confer on any Participant any of the rights of a shareholder of the Company unless and until Stock is duly issued or transferred to the Participant in accordance with the terms of the Award. (g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant or obligation to issue Stock pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided, however, that the Committee may authorize the creation of trusts or make other arrangements to meet the Company's obligations under the Plan to deliver cash, Stock, other Awards, or other property pursuant to any Award, which trusts or other arrangements shall be consistent with the "unfunded" status of the Plan unless the Committee otherwise determines with the consent of each affected Participant. If and to the extent authorized by the Committee, the Company may deposit into such a trust Stock for delivery to the Participant in satisfaction of the Company's obligations under any Award. If so provided by the Committee, upon such a deposit of Stock or other assets for the benefit of a Participant, there shall be substituted for the rights of the Participant to receive delivery of Stock and other payments under this Agreement a right to receive the assets of the trust (to the extent that the deposited or other assets represented the full amount of the Company's obligation under the Award at the date of deposit). (h) Nonexclusivity of the Plan. The adoption of the Plan by the Board shall not be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases. (i) No Fractional Shares. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. (j) Governing Law. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan, and any Award Agreement shall be determined in accordance with the Pennsylvania Business Corporation Law, to the extent applicable, other laws (including those governing contracts) of the Commonwealth of Pennsylvania, without giving effect to principles of conflicts of laws, and applicable federal law. (k) Certain Limitations Relating to Accounting Treatment of Awards. Other provisions of the Plan notwithstanding, the Committee's authority and a Participant's rights under the Plan are limited to the extent necessary to ensure that any Option or other Award of a type that the Committee intended to be subject to fixed accounting, with a measurement date at the date of grant or the date performance conditions are satisfied under APB 25, shall not become subject to "variable" accounting solely due to the existence of such authority or right, unless the Committee specifically determines that the Award shall become subject to such "variable" accounting and remain outstanding thereafter. In addition, other provisions of the Plan notwithstanding, if any right under this Plan would cause a transaction to be ineligible for pooling-of-interests accounting that would, but for the right hereunder, be eligible for such accounting treatment, such right shall be automatically adjusted so that the pooling-in-interests accounting shall be available, including by substituting Stock or cash having a Fair Market Value equal to any cash or Stock otherwise payable in respect of any right which would cause the transaction to be ineligible for pooling-of-interests accounting. (l) Effective Date; Plan Termination. The Plan shall become effective as of January 1, 2000. The Plan shall terminate at such time as no Stock remains available for issuance pursuant to Section 4 and the Company has no further obligations with respect to any Award granted under the Plan. Adopted by the Board of Directors: January 27, 2000 Section 4(a) amended to increase the number of shares from 2,000,000 to 5,000,000 Approved by the Board of Directors: February 23, 2001 EX-10 8 exh10232.txt 401(K) PLAN EXHIBIT 10.2.32 CHARMING SHOPPES, INC. EMPLOYEES' RETIREMENT SAVINGS PLAN As Amended and Restated Effective January 1, 1998 Including Amendments Adopted Through August 1, 2001 SECTION 1 DEFINITIONS 1 SECTION 2 MEMBERSHIP IN THE PLAN 9 2.1 Current Members 9 2.2 Employees Under the Modern Woman and Catherine's Plans 9 2.3 M and A Joint Venture LLC Employees 9 2.4 New or Reemployed Members 9 2.5 Union Employees Excluded 9 2.6 Changes in Category 9 SECTION 3 CONTRIBUTIONS 10 3.1 Basic Contributions 10 3.2 Matching Contributions 10 3.3 Adjustments to Contribution Limits 10 3.4 Profit Sharing Contributions 10 3.5 Rollover Contributions 10 3.6 Adjustments to Contributions 11 3.7 Distribution of "Excess Elective Deferral" Amounts 11 3.8 Overall Limits on Contributions 12 3.9 Permitted Employer Refunds 13 3.10 Timing of Deposits 14 3.11 Deduction Limits 14 3.12 Allocation of Contributions 14 3.13 Contributions For Periods of Qualified Military Service 14 SECTION 4 MEMBER ACCOUNTS 16 4.1 Establishment of Accounts 16 4.2 Valuation of Accounts 16 4.3 Adjustment to Accounts 16 4.4 Directed Investments 17 4.5 Administration of Investments 17 4.6 Investments For Terminated Members 17 SECTION 5 VESTING AND FORFEITURES 18 5.1 Vesting Schedule 18 5.2 Vesting Schedule with Respect to Moder Woman Match Account 18 5.3 Forfeitures 19 5.4 Change in Vesting Schedule 19 SECTION 6 DISTRIBUTIONS 21 6.1 Distribution of Benefit 21 6.2 Election of Benefits 21 6.3 Optional Forms of Payment 21 6.4 Rehire Prior to Distribution of Benefit Distribution 23 6.5 Rehire Prior to Incurring Five Consecutive Breaks in Service 23 6.6 Death Prior to Distribution 23 6.7 Distribution Limitation 23 6.8 Mandatory Distributions 23 6.9 Earnings on Undistributed Benefits 24 6.10 Direct Rollovers 24 SECTION 7 WITHDRAWALS AND LOANS 25 7.1 Withdrawals 25 7.2 Loans 27 SECTION 8 ACTUAL DEFERRAL AND ACTUAL CONTRIBUTION PERCENTAGE TESTING 33 8.1 Actual Deferral Percentage Test 33 8.2 ADP Formula 33 8.3 Calculation and Correction of Excess Basic Contributions 34 8.4 Failure to Correct Excess Basic Contributions 34 8.5 Distribution of Excess Basic Contributions 34 8.6 Additional Basic and Matching Contributions 34 8.7 Matching Contributions 35 8.8 Actual Contribution Percentage Test 35 8.9 ACP Formula 35 8.10 Calculation and Correction of Excess Aggregate Contributions 36 8.11 Distribution of Excess Aggregate Contribution 37 8.12 Additional Contributions 37 8.13 Forfeitures 37 8.14 Aggregate Limit 37 8.15 Special Rules 38 SECTION 9 TOP-HEAVY PROVISIONS 39 9.1 Top-Heavy Preemption 39 9.2 Top-Heavy Definitions 39 9.3 Aggregation of Plans 41 9.4 Minimum Contribution Rate 41 9.5 Deposit of Minimum Contribution 41 9.6 Combined Defined Benefit and Defined Contribution Plans 41 SECTION 10 DESIGNATION OF BENEFICIARY 43 10.1 Named Beneficiary 43 10.2 No Named Beneficiary 43 SECTION 11 MANAGEMENT OF THE FUND 44 11.1 Contribution Deposited to Trust 44 11.2 No Reversion to Employer 44 SECTION 12 DISCONTINUANCE AND LIABILITIES 45 12.1 Termination 45 12.2 No Liability for Employer 45 12.3 Administrative Expenses 45 12.4 Nonforfeitability Due to Termination 45 12.5 Exclusive Benefit Rule 45 12.6 Mergers 46 12.7 Non-Allocated Trust Assets 46 SECTION 13 ADMINISTRATION 47 13.1 Appointment of Plan Administrator 47 13.2 Responsibilities and Duties 47 13.3 Claims Procedure 48 13.4 Trustee Has Authority to Invest 49 13.5 Indemnification 49 13.6 Removal For Personal Involvement 49 SECTION 14 AMENDMENTS 50 14.1 Amendment Restrictions 50 14.2 Amending the Plan 50 14.3 Retroactive Amendments 50 SECTION 15 MISCELLANEOUS 51 15.1 "Spendthrift" Provision 51 15.2 QDRO Exception 51 15.3 No Guarantee of Employment 51 15.4 Controlling Law 52
CHARMING SHOPPES, INC. EMPLOYEES' RETIREMENT SAVINGS PLAN WHEREAS CHARMING SHOPPES, INC. (the "Plan Sponsor") adopted the Charming Shoppes, Inc. Employees' Savings Plan effective May 1, 1983, and subsequently amended and restated the plan effective January 1, 1984; and WHEREAS the Plan Sponsor adopted the Charming Shoppes, Inc. Employees' Profit Sharing Plan effective February 1, 1982, and subsequently amended and restated the plan effective January 1, 1984; and WHEREAS the Plan Sponsor merged said plans and, as a result of the merger, the name of the merged plan is the Charming Shoppes, Inc. Employees' Retirement Savings Plan (the "Plan") effective January 1, 1989; WHEREAS, the Plan was amended and restated in its entirety to reflect the merger and to comply with the Tax Reform Act of 1986, effective January 1, 1989; and WHEREAS, the Plan was amended and restated in its entirety to comply with the Small Business Job Protection Act of 1996 and recent regulations and to make certain other desirable changes, effective January 1, 1997 (with certain amendments through January 1, 1998); and WHEREAS, the Plan was amended and restated in its entirety to comply with the Tax Reform Act of 1997, to incorporate loan provisions, to increase the employer matching contribution and to make certain other desirable changes, effective January 1, 1997 (with certain amendments adopted after September 10, 1997 and effective through March 25, 1998); and WHEREAS, the Plan Sponsor desires to amend and restate the Plan in its entirety to comply with the Internal Revenue Service Restructuring and Reform Act of 1998, effective January 1, 1998, and to remove optional forms of payment, as provided under recent Treasury regulations, effective August 1, 2001; and WHEREAS, the Plan Sponsor desires to amend and restate the Plan in its entirety to reflect the mergers of the Modern Woman, Inc. Savings and Profit Sharing Plan and the Catherine's Profit Sharing and Retirement Savings Plan into the Plan, effective February 1, 2000 and May 1, 2000, respectively; and to reflect the participation of eligible employees of M and A Joint Venture LLC in the Plan, effective February 3, 2001; NOW, THEREFORE, the Plan Sponsor adopts the following amended and restated Charming Shoppes, Inc. Employees' Retirement Savings Plan. Except where a different effective date is provided herein, the Plan as amended and restated shall apply only to an Employee who terminates employment on or after February 3, 2001. The rights and benefits, if any, of other employees shall be determined in accordance with the provisions of the Plan as it existed prior to such date. SECTION 1 DEFINITIONS The following words and phrases as used herein shall have the following meanings, unless a different meaning is plainly required by the context; and the following rules of interpretation shall apply in reading this instrument. Pronouns shall be interpreted so that the masculine pronoun shall include the feminine and the singular shall include the plural. The words "hereof," "herein" and other singular compounds shall refer to the Plan in its entirety and not to any particular provision or section, unless so limited by the text. All references herein to specific sections shall mean sections of this document unless otherwise qualified. 1.1 Accrued Benefit means the sum of the balance in the Member's Basic Contribution Account, Top-Heavy Contribution Account, Matching Contribution Account, Profit Sharing Contribution Account, Rollover Contribution Account, Modern Woman Match Account, and ARG Match and Profit Sharing Account. 1.2 Actual Contribution Ratio (ACR), with respect to any Member for a Plan Year, means a fraction the numerator of which equals the Matching Contributions paid to the Trust for a Plan Year on behalf of such Member and the denominator of which equals the Member's Compensation (as defined in Section 1.14.B.) for the Plan Year. 1.3 Actual Deferral Ratio (ADR), with respect to any Member for a Plan Year, means a fraction the numerator of which equals the Basic Contributions paid to the Trust for the Plan Year on behalf of such Member and the denominator of which equals the Member's Compensation (as defined in Section 1.14.B.) for the Plan Year. 1.4 Additional Basic Contribution means a qualified nonelective contribution as defined in Treasury regulation 1.401(k)- 1(g)(13)(ii). 1.5 Affiliated Company means the Employer and: A. any corporation which is a member of a controlled group of corporations within the meaning of section 1563(a) of the Code, determined without regard to sections 1563(a)(4) and (e)(3)(C); B. any organization under common control with the Employer within the meaning of section 414(c) of the Code; C. any organization which is included with the Employer in an affiliated service group within the meaning of section 414(m) of the Code; or D. any other entity required to be aggregated with the Employer pursuant to regulations under section 414(o) of the Code. 1.6 Annual Addition means the total for the Limitation Year of the items listed below allocated to the account of an Employee under all defined contribution plans sponsored by an Affiliated Company (except that, for the purpose of this Section, "more than 50%" shall be substituted for "80%" each place it appears in section 1563(a)(1) of the Code): A. employer contributions; B. forfeitures; C. employee contributions; and D. amounts described in section 415(l)(1) and 419A(d)(2) of the Code; E. except that, the Annual Addition for any Limitation Year beginning before January 1, 1987, shall not be recomputed to treat employee contributions as an Annual Addition. 1.7 ARG Match and Profit Sharing Account means an account established and maintained on behalf of a Member to which amounts that were previously transferred from the ARG Savings Plan into the Modern Woman Savings and Profit Sharing Plan are transferred under Section 4.1, including any gains or losses of the Trust attributable thereto. 1.8 Basic Contribution means an elective deferral made by a Member pursuant to Section 3.1 of the Plan. 1.9 Basic Contribution Account means an account established and maintained on behalf of a Member to which his Basic Contributions are allocated. 1.10 Beneficiary means the person, persons, or trust designated by written, revocable designation filed with the Plan Administrator by the Member to receive payments in the event of such Member's death. 1.11 Board means the Board of Directors of the Plan Sponsor and any committee duly appointed by the Board. 1.12 Break in Service means a Plan Year during which a Member is not credited with more than 500 Hours of Service. 1.13 Code means the Internal Revenue Code of 1986, and the same as may be amended from time to time. 1.14 Compensation means, A. except as hereafter specified, salary and wages, overtime pay, fees, tips, profits, bonuses and commissions paid by the Employer to an Employee, including the Basic Contribution made hereunder during the Plan Year and elective deferrals made pursuant to section 125 of the Code, and all other earnings reportable under sections 6041 and 6051 of the Code on Form W-2 received by an Employee from the Employer during the portion of the Plan Year in which the Employee is eligible to make contributions under Section 3.1, but excluding all other Employer contributions to benefit plans and all other forms of compensation such as that which is received due to the exercise of stock options. Compensation in excess of the dollar limitation in effect under section 401(a)(17) of the Code shall be disregarded. B. for purposes of the nondiscrimination tests set forth in Section 8, and except as provided in section 414(s) of the Code, Compensation means any income received by the Employee from the Employer in accordance with section 415(c)(3) of the Code, for the Plan Year for which compliance with the tests is being measured. C. for purposes of the limitations and requirements of section 415 of the Code as set forth in Section 3.8, Compensation means the amounts described in Section 1.14.A. received by the Employee for the entire Plan Year, but specifically excluding the following: (1) contributions made by an Affiliated Company to a deferred compensation plan which are not includible in the Employee's gross income for the taxable year in which contributed; (2) Affiliated Company contributions made on behalf of an Employee to a SEP prior to January 1, 1998 (to the extent deductible by the Employee under section 219(b)(2) of the Code); (3) distributions from a deferred compensation plan (other than from an unfunded nonqualified plan when includible in gross income); (4) amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by an Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (5) amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and (6) other amounts which receive special tax benefits, such as premiums for group term life insurance (to the extent excludable from gross income); Affiliated Company contributions applied toward the purchase of an annuity contract described in section 403(b) of the Code; or, prior to January 1, 1998, any amount which is contributed by the Affiliated Company pursuant to a salary reduction agreement and which is not includible in the gross income of the Employee pursuant to section 125 of the Code. 1.15 Disability means the inability of a Member to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of a long-continued and indefinite duration. The determination of the existence or non-existence of Disability shall be based solely upon the Member's eligibility for Social Security disability benefits. 1.16 Dollar Limit means the dollar limitation under section 402(g) of the Code in effect for a calendar year. 1.17 Early Retirement Date means the date on which a Member has attained age 55 and has completed at least six Years of Service. 1.18 Effective Date of this restated Plan means January 1, 1998. 1.19 Eligible Employee means any Employee of the Employer who satisfies the following conditions: A. he has attained at least age 21; B. he has been employed by the Employer for an Eligibility Computation Period during which he is credited with at least 1,000 Hours of Service; C. he is not an Employee covered under a collective bargaining agreement with respect to which retirement benefits were the subject of good faith negotiations unless the collective bargaining agreement otherwise provides; and D. he is not a leased employee within the meaning of section 414(n) of the Code. 1.20 Eligibility Computation Period means: A. the twelve-consecutive-month period commencing with the date an Employee first is credited with an Hour of Service; and B. thereafter any Plan Year commencing with the Plan Year in which occurs the first anniversary of the date an Employee first is credited with an Hour of Service after his hire or rehire, whichever is applicable. 1.21 Employee means an individual in the employ of an Affiliated Company and a leased employee within the meaning of section 414(n) of the Code. "Employee" shall not include any individual classified by an Employer or an Affiliated Company as an independent contractor or any other individual who is not classified by an Employer or an Affiliated Company as an employee for purposes of withholding federal employment taxes, regardless of any contrary governmental or judicial determination relating to such employment status or tax withholding obligation. If an individual in such a non-employee classification is subsequently reclassified as, or determined to be, an employee by the Internal Revenue Service, any other governmental agency or authority, or a court, or if an Employer or Affiliated Company is required to reclassify such an individual as an employee as a result of such reclassification or determination (including any reclassification by an Employer or Affiliated Company in settlement of any claim or action relating to such individual's employment status), such individual shall not become eligible to become a Participant in this Plan by reason of such reclassification or determination. 1.22 Employer means the Plan Sponsor and any other business organization which succeeds to its business and elects to continue this Plan, and any Affiliated Company which adopts this Plan with the consent of the Plan Sponsor. 1.23 Entry Date means the first day of each calendar quarter. 1.24 ERISA means the Employee Retirement Income Security Act of 1974, and the same as may be amended from time to time. 1.25 Fund means all assets of the Trust. 1.26 General Account means an account established and maintained in the Trust which is increased by amounts contributed by the Employer and investment earnings thereon, and is decreased to the extent that amounts are allocated to Members' accounts or applied to pay expenses, in accordance with the terms of the Plan and Section 1.6 of the Trust. 1.27 Highly Compensated Employee shall be defined in a manner consistent with section 414(q) of the Code and the regulations promulgated thereunder and means: A. any active Employee who, with respect to the Employer, performs service during the determination year and who (1) was at any time during the determination year or the look- back year a 5% owner (as defined in section 416(i)(1)(B)(i) of the Code); or (2) for the look-back year, received Compensation from the Employer in excess of $80,000, as adjusted by the Secretary in accordance with section 414(q) of the Code. B. The terms "determination year" and "look-back year" mean, respectively, the Plan Year and the twelve-month period immediately preceding the determination year. C. A Highly Compensated former Employee includes any Employee who separated or was deemed to have separated from service prior to the determination year, performs no service for the Employer during the determination year, and was an active Highly Compensated Employee for either the separation year or any determination year ending on or after the Employee's 55th birthday. D. "Compensation" for the purpose of this Section 1.27 is as defined in Section 1.14.C. 1.28 Hour of Service means each hour for which an Employee is directly or indirectly paid or entitled to be paid by an Affiliated Company for the performance of employment duties and each hour for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to by the Affiliated Company. These hours shall be credited to an Employee for the computation period during which his employment duties were performed or to which a back pay agreement or award pertains irrespective of when payment is made. No Employee shall be credited with duplicate Hours of Service as a result of a back pay agreement or award. An Employee shall also be credited with one Hour of Service for each hour for which the Employee is directly or indirectly paid, or entitled to payment, by an Affiliated Company on account of a period during which no duties are performed due to vacation, holiday, illness, incapacity, disability, layoff, jury duty or Leave of Absence; provided, however, that not more than 501 Hours of Service shall be credited to an Employee under this sentence on account of any single, continuous period during which the Employee performs no duties, and provided further that no credit shall be given if payment is made or due under a plan maintained solely for the purpose of complying with applicable workers' compensation, unemployment compensation or disability insurance laws, or is made solely to reimburse an Employee for medical or medically related expenses incurred by the Employee. A. For purposes of determining the number of Hours of Service completed in any applicable computation period, the Plan Administrator may maintain accurate records of actual hours completed for all Employees. The number of Hours of Service to be credited to an Employee for periods during which no employment duties are performed shall be determined in accordance with sections 2530.200b-2(b) and 2530.200b-2(c) of the Department of Labor regulations in Title 29 of the Code of Federal Regulations. B. If the Plan Administrator does not maintain records of actual Hours of Service, an Employee shall be credited with 45 Hours of Service for each week in which such Employee would otherwise be credited with at least one Hour of Service. C. Solely for the purpose of preventing a Break in Service, an Employee shall be credited with Hours of Service during an absence by reason of: (1) the pregnancy of the Employee; (2) the birth of a child of the Employee; (3) the placement of a child with the Employee in connection with the adoption of such child by the Employee; or (4) for purposes of caring for a child beginning immediately after such birth or placement; provided the Employee shall, during the period of his absence, be credited with the number of Hours of Service which would have been credited to him at his normal work rate but for such absence, or, if the number of Hours of Service based on a normal rate is indeterminable, the Employee shall be credited with eight Hours of Service per day of such absence. Notwithstanding the foregoing, the Employee shall be credited with no more than 501 Hours of Service during said absence. These hours shall be credited to the Break in Service computation period in which the absence began if necessary to avoid a Break in Service or, if not necessary, then to the following computation period. The Employee shall be responsible for reporting to the Plan Administrator any Hours of Service that are to be credited under this Section 1.28. Nothing contained in the Section shall be deemed to expand or extend any maternity or paternity leave policy of the Employer. D. Effective December 12, 1994, an Employee who is absent by reason of Qualified Military Service and who returns to employment within the time that his reemployment rights are protected by federal law shall be granted credit for Hours of Service during such period of Qualified Military Service. 1.29 Leave of Absence means any temporary absence from employment authorized by the Employer based on its normal practices. 1.30 Limitation Year means the Plan Year. 1.31 Matching Contribution means a contribution made by the Employer pursuant to Section 3.2 of the Plan. 1.32 Matching Contribution Account means an account established and maintained on behalf of a Member to which his Matching Contributions are allocated. 1.33 Member means any Eligible Employee included in the membership of the Plan as provided in Section 2 hereof, as well as any Employee who has made a Rollover Contribution to the Plan pursuant to Section 3.5. A Member shall continue to be a Member as long as he has an Accrued Benefit hereunder. 1.34 Modern Woman Match Account means an account established and maintained on behalf of a Member to which matching contributions that were previously contributed under the Modern Woman Savings and Profit Sharing Plan are transferred under Section 4.1, including any gains or losses of the Trust attributable thereto. 1.35 Non-Highly Compensated Employee means any Employee who is not a Highly Compensated Employee. 1.36 Normal Retirement Date means the Member's 65th birthday. 1.37 Plan means Charming Shoppes, Inc. Employees' Retirement Savings Plan as set forth herein and the same as may be amended from time to time. 1.38 Plan Administrator means the individual or committee appointed under Section 13.1 hereof. 1.39 Plan Sponsor means Charming Shoppes, Inc. or its successor. 1.40 Plan Year means the period from January 1 through December 31. 1.41 Profit Sharing Contribution means a contribution made by the Employer pursuant to Section 3.4 of the Plan. 1.42 Profit Sharing Contribution Account means an account established and maintained on behalf of a Member to which his Profit Sharing Contributions are allocated. 1.43 Qualified Military Service means service in the uniformed services (as defined in Chapter 43 of title 38, United States Code) by an Employee if such Employee is entitled to reemployment rights under such chapter with respect to such service. 1.44 Retirement means the termination of a Member's employment with the Employer on his Early Retirement Date or Normal Retirement Date or such later date on which he actually terminates employment. 1.45 Rollover Contribution means a contribution made by an Employee pursuant to Section 3.5 of the Plan. 1.46 Rollover Contribution Account means an account established and maintained on behalf of a Member to which his Rollover Contributions are allocated. 1.47 Spouse means the husband or wife of a Member on the earlier of the date on which payment of benefits under the Plan commences or the Member dies. However, if the Member should die prior to the date benefits under the Plan would have commenced to him, then the Spouse shall be the husband or wife to whom the Member had been married throughout the one-year period preceding the date of his death. 1.48 Top-Heavy Contribution means a contribution made by the Employer pursuant to Section 9 of the Plan. 1.49 Top-Heavy Contribution Account means an account established and maintained on behalf of a Member to which his Top-Heavy Contributions, if any, are allocated. 1.50 Trust means a trust, intended to qualify under section 501(a) of the Code, which constitutes the legal agreement between the Plan Sponsor and the Trustee fixing rights and liabilities with respect to managing and controlling the Fund for the purposes of the Plan. 1.51 Trustee means the individual or entity designated by the Board as trustee(s) of the Trust. 1.52 Valuation Date means each business day of the Plan Year or such other less frequent dates as may be selected by the Plan Administrator to accommodate the nature, management and administration of specified investment funds. 1.53 Year of Service means the period of service with an Affiliated Company used to determine vesting pursuant to Section 5 of the Plan as follows: A. for Years of Service prior to January 1, 1989, any period which was a year of service under such plan in effect on December 31, 1988, shall constitute a Year of Service hereunder; B. for Years of Service after January 1, 1989, except as provided in paragraph C. of this Section, each twelve-consecutive- month computation period during which the Member is credited with at least 1,000 Hours of Service. Except for eligibility purposes herein, the computation period shall be the Plan Year. For purposes of eligibility, such computation period shall be the Eligibility Computation Period: (1) If an Employee is rehired prior to incurring a Break in Service, his Years of Service shall be computed as though his service had not been severed. (2) Years of Service shall be determined as if all Affiliated Companies were a single employer, excluding, however, employment during periods when the employing entity was not a member of the group of Affiliated Companies. (3) If the Employer maintains the plan of a predecessor employer, service with such employer will be treated as service for the Employer. C. For purposes of eligibility and/or vesting under the Plan, all years of service with Modern Woman, Inc., Catherines Stores Corporation, Monsoon Twilight, Inc. and/or M and A Joint Venture LLC shall be treated as Years of Service with the Employer. D. Effective December 12, 1994, each period of Qualified Military Service served by an Employee is, upon reemployment by the Employer within the time during which the Employee's right to reemployment is protected by law, is deemed to constitute service with the Employer for purposes of determining an Employee's "Years of Service" under Section 5. E. If a Member incurs a Break in Service, his Years of Service before that Break in Service (and not disregarded by reason of any prior Break in Service) shall be taken into account only if following the Break in Service the Member completes one Year of Service, and: (1) before the Break in Service the Member had a vested interest in his Accrued Benefit; (2) effective for consecutive Breaks in Service ending before January 1, 1985, the aggregate number of the Member's Years of Service before the Break in Service (and not disregarded by reason of any prior Break in Service) equal or exceed the aggregate number of his consecutive Breaks in Service; or (3) effective for consecutive Breaks in Service ending on or after January 1, 1985, the aggregate number of the Member's consecutive Breaks in Service is less than five. SECTION 2 MEMBERSHIP IN THE PLAN 2.1 Current Members. Each Employee who was a Member on the date immediately preceding the Effective Date shall continue as a Member hereunder. Each other Employee who is an Eligible Employee as of the Effective Date shall become a Member of the Plan on such date. 2.2 Employees Under the Modern Woman and Catherine's Plans. Each Employee who was a participant in (a) the Modern Woman Savings and Profit Sharing Plan on January 31, 2000 and who was employed by the Employer on February 1, 2000, or (b) the Catherine's Profit Sharing and Retirement Savings Plan on April 30, 2000 and who was employed by the Employer on May 1, 2000, shall automatically be a Member under this Plan as of his date of employment with the Employer. Any Salary Reduction Agreement and any investment elections in effect under the Modern Woman Savings and Profit Sharing Plan or the Catherine's Profit Sharing and Retirement Savings Plan shall continue in effect. 2.3 M and A Joint Venture LLC Employees. Each Employee who was an employee of M and A Joint Venture LLC on February 2, 2001, and who was employed by the Employer on February 3, 2001 shall automatically be a Member under this Plan as of his date of employment with the Employer. 2.4 New or Reemployed Members. Each other Employee shall become a Member on the Entry Date coincident with or next following the date he qualifies as an Eligible Employee. A reemployed Employee shall become a Member on the next Entry Date following his date of reemployment if he had become eligible prior to his reemployment but had not yet become a Member. A reemployed Employee who was previously a Member shall be eligible to participate in the Plan as of the date of his reemployment. 2.5 Union Employees Excluded. An Eligible Employee whose terms and conditions of employment become subject to the terms of a collective bargaining agreement shall not become ineligible during the period between the selection of the union and the execution of the first collective bargaining agreement which covers him. However, an Eligible Employee covered by a collective bargaining agreement wherein retirement benefits, whether or not provided, were the subject of good faith bargaining between the representative of such Eligible Employee and the Employer shall not be eligible for continued participation unless the collective bargaining agreement provides for continued participation. 2.6 Changes in Category. If an ineligible Employee's status changes to a category of eligibility, he shall become a Member on the date his status changes or, if later, the Entry Date on which he has satisfied the requirements of Section 1.19. If a Member's status changes to a category of ineligibility, he shall cease to participate in contributions under Section 3 as of such date. SECTION 3 CONTRIBUTIONS 3.1 Basic Contributions. Each Member who is an Eligible Employee may authorize the Employer to reduce his Compensation by any whole percentage up to 15% of such Compensation, subject to the Dollar Limit and limits of Section 3.8. Such amount shall be allocated as Basic Contributions hereunder to the Member's Basic Contribution Account. Each Eligible Employee shall file a written election form with the Plan Administrator specifying the portion of his Compensation that is to be contributed to the Plan as a Basic Contribution. The election of the Member shall remain in effect until the Member files a new election with the Plan Administrator. 3.2 Matching Contributions. The Employer shall make a Matching Contribution for each Member with respect to each pay period which shall equal $.50 for each $1.00 allocated to such Member's Basic Contribution Account for such pay period. The amount the Employer must contribute to the Plan under this Section 3.2 shall be reduced by any amounts forfeited under Sections 5.3, 8.7 and 8.13 hereof. The Matching Contribution shall be credited to the Member's Matching Contribution Account. Notwithstanding the preceding, no Matching Contributions shall be made with respect to a Member's Basic Contributions in excess of 6% of his Compensation. The amount of Employer Matching Contributions may be increased or decreased at the discretion of the Board, provided that reasonable notice is provided to Members giving them the opportunity to change their elective deferral percentages. 3.3 Adjustments to Contribution Limits. Notwithstanding Section 3.1, the Plan Administrator may limit the maximum Basic Contribution percentage for all or a class of Highly Compensated Employees as it determines is necessary or desirable to assure that the Plan satisfies the requirements of Section 8.1. 3.4 Profit Sharing Contributions. The Employer may, in its sole discretion, elect to make a Profit Sharing Contribution to the Plan. The Profit Sharing Contribution shall be allocated among all eligible Members who are Eligible Employees for such Plan Year in proportion to Compensation. For purposes of this Section only, an eligible Member shall be each Member who has completed at least 1,000 Hours of Service for the Employer and is an Employee of the Employer on the last day of the Plan Year. Effective January 1, 1994, the Profit Sharing Contribution shall be allocated based only on Compensation earned during the Plan Year by an Employee while he was a Member of the Plan. Such Member shall be eligible to receive an allocation hereunder whether or not the Member elects to defer a portion of his income to this or any other tax-qualified plan sponsored by the Employer. Each Member's share of the Profit Sharing Contribution shall be allocated to his Profit Sharing Contribution Account. 3.5 Rollover Contributions. An Employee who has been a member of another qualified plan may, with the consent of the Plan Administrator, transfer assets by rollover from said former plan to this Plan. Such transferred assets will be fully vested at all times. Only those assets accumulated in another qualified plan may be transferred to this Plan. Any such transferred assets shall be held in a Rollover Contribution Account in the name of the Employee and shall reflect the net earnings or net losses of the Trust attributable to such employees' Rollover Contribution Account. However, such assets may be commingled for investment purposes and invested in the same manner as other Trust assets. An Employee who makes a Rollover Contribution to this Plan shall not otherwise participate in the Plan until he qualifies as an Eligible Employee hereunder. 3.6 Adjustments to Contributions. A Member may increase the rate of Basic Contributions effective as of any Entry Date by submitting a new election to the Plan Administrator. A Member may decrease the rate of Basic Contributions effective as of the first day of any month. A Member may suspend Basic Contributions at any time by submitting written notice to the Plan Administrator. Suspensions during the Plan Year shall be effective as soon as practicable after the election to suspend is filed with the Plan Administrator. A Member may recommence Basic Contributions to the Plan effective as of any Entry Date by submitting a new written election to the Plan Administrator prior to such Entry Date. 3.7 Distribution of "Excess Elective Deferral" Amounts. Notwithstanding any other provision of the Plan, Excess Elective Deferrals as adjusted for income or losses thereon shall be distributed to Members who request a distribution in accordance with this Section. A. For purposes of this Section, the following definitions shall have the following meanings: (1) "Elective Deferrals" for a taxable year means the sum of all Employer contributions made on behalf of a Member pursuant to an election to defer under any qualified CODA as described in section 401(k) of the Code, any simplified employee pension cash or deferred arrangement as described in section 402(h)(1)(B) of the Code, any eligible deferred compensation plan under section 457 of the Code, any plan as described under section 501(c)(18) of the Code, and any Employer contributions made on the behalf of a Member for the purchase of an annuity contract under section 403(b) of the Code pursuant to a salary reduction agreement. (2) "Excess Elective Deferrals" means those Elective Deferrals that are includible in a Member's gross income under section 402(g) of the Code, because they exceed the Dollar Limit. Excess Elective Deferrals shall be treated as Annual Additions under the Plan. B. A Member may assign to this Plan any Excess Elective Deferrals made during the taxable year of the Member by filing a claim in writing with the Plan Administrator no later than March 1 following the year in which the Excess Elective Deferral was made. Said claim shall specify the Member's Excess Elective Deferral amount for the preceding calendar year; and shall be accompanied by the Member's written statement that if such amounts are not distributed, such Excess Elective Deferral amount, when added to amounts deferred under other plans or arrangements described in section 401(k), 408(k), 457, 501(c)(18) or 403(b) of the Code shall exceed the Dollar Limit for the year in which the deferral occurred. A Member shall be deemed to have given notification described above if the Excess Elective Deferral results from Elective Deferrals to this Plan or other plans of the Employer or Affiliated Companies. C. A Member who has an Excess Elective Deferral during a taxable year may receive a corrective distribution during the same year. Such a corrective distribution shall be made if: (1) the Member designates the distribution as an Excess Elective Deferral or is deemed to make the designation under paragraph B., above; (2) the corrective distribution is made after the date on which the Plan received the Excess Elective Deferral; and (3) the Plan Administrator designates the distribution as a distribution of an Excess Elective Deferral. D. The Excess Elective Deferral distributed to a Member with respect to a calendar year shall be adjusted to reflect income or loss in the Member's Basic Contribution Account for the taxable year allocable thereto. The income or loss allocable to such Excess Elective Deferral amount shall be determined by the method generally used under the Plan to allocate income or loss to a Member's account. E. Excess Elective Deferral amounts, as adjusted for income and losses, shall be distributed to a Member no later than April 15 of the year following the calendar year in which such Excess Elective Deferral was made. 3.8 Overall Limits on Contributions. Contributions made on behalf of any Member during any Plan Year shall be subject to the following: A. In no event shall the Annual Addition for a Member exceed the lesser of: (1) 25% of the Member's Compensation, under Section 1.14.C., for the Limitation Year; or (2) the "defined contribution dollar limitation," which shall mean $30,000, as adjusted by the Secretary in accordance with section 415(d) of the Code. B. Basic Contributions made on behalf of a Member during a payroll period which begins in one Plan Year but ends in the next succeeding Plan Year shall be deemed an Annual Addition for the next succeeding Plan Year. C. If the excess Annual Addition results from a contribution made under Section 3.1, the excess shall be distributed to the contributing Member to the extent permitted by Treasury regulation 1.415-6(b)(6). D. If the Annual Addition must be limited for any Member after application of paragraph C. in order to comply with section 415 of the Code, the excess amounts in the Member's account will be used to reduce Employer contributions for the next Limitation Year (and succeeding Limitation Years, as necessary) for that Member if that Member is covered by the Plan as of the end of the Limitation Year. However, if that Member is not covered by the Plan as of the end of the Limitation Year, then the excess amounts will be held unallocated in a suspense account for the Limitation Year and allocated and reallocated in the next Limitation Year to all of the remaining Members in the Plan. Furthermore, the excess amounts will be used to reduce Employer contributions for the next Limitation Year (and succeeding Limitation Years, as necessary) for all of the remaining Members in the Plan. Excess amounts may not be distributed to Members or former Members except as provided in paragraph C. E. For Limitation Years beginning prior to January 1, 2000, if an Employee is or was a Member in any defined benefit plan required to be taken into account for purposes of applying the combined plan limitations contained in section 415(e) of the Code, then for any Limitation Year the sum of the defined benefit plan fraction and the defined contribution plan fraction, as such terms are defined in section 415(e) of the Code, shall not exceed 1.0. If for any year the foregoing combined plan limitation would be exceeded, the benefit provided under the defined benefit plan shall be reduced to the extent necessary to meet that limitation. F. The limitations of this Section 3.8 shall be applied to this Plan before they are applied to any other defined contribution plan of any Affiliated Company. This Section 3.8 shall be satisfied prior to satisfying the ADP test. G. If the Plan satisfied the applicable requirements of section 415 of the Code as in effect for all Limitation Years beginning before January 1, 1987, an amount shall be subtracted from the numerator of the defined contribution plan fraction (not exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the defined benefit plan fraction and defined contribution plan fraction computed under section 415(e)(1) of the Code (as revised by this Section) does not exceed 1.0 for such Limitation Year. H. If an Affiliated Company maintains or maintained a defined benefit plan and the amount contributed to the Trust in respect of any Plan Year would cause the amount allocated to any Member under all defined contribution plans maintained by an Affiliated Company to exceed the maximum allocation as determined in paragraph D., then the allocation with respect to such Member shall be reduced by the amount of such excess. To the extent administratively feasible, the limitation of this paragraph shall be applied to the Member's benefit payable from the defined benefit plan prior to reduction of the Member's Annual Addition under this Plan. The excess allocation shall be treated in accordance with paragraph C. or D., as applicable. 3.9 Permitted Employer Refunds. Employer contributions hereunder shall be refunded to the Employer under the limited circumstances listed below. A. If initial qualification of the Plan under section 401 of the Code is denied by the Internal Revenue Service, Employer contributions shall be returned to the Employer within one year after the denial occurs provided the Employer has filed the application for the determination of qualification of this Plan with the Internal Revenue Service by the time prescribed by law for filing the Employer's federal income tax return for the taxable year in which this Plan was adopted, or by such later date as the Secretary of the Treasury may prescribe. B. Any contribution made by the Employer due to a mistake of fact shall be refunded to the Employer within one year of such contribution. C. Employer contributions are expressly conditioned on deductibility under section 404 of the Code. Any contribution that is disallowed as a deduction shall be refunded to the Employer within one year of such disallowance. D. Refunds of contributions due to a failure to initially qualify, disallowance of deduction or mistake of fact shall be governed by the following requirements: (1) earnings attributable to the amount being refunded due to disallowance or mistake shall remain in the Plan, but losses thereto must reduce the amount to be refunded; and (2) in no event may a refund be made that would cause the Accrued Benefit of any Member to be less than it would have been had a mistaken or disallowed amount not been contributed. 3.10 Timing of Deposits. The Employer shall make payment of the Basic Contribution to the Trust as soon as practicable but no later than the 15th business day of the month following the month in which such contributions were withheld from the Member's Compensation. All other Employer contributions under the Plan shall be deposited to the Trust on or before the due date for filing the Employer's federal income tax return for its taxable year in which the Plan Year ends, including any extension thereto. 3.11 Deduction Limits. No Employer contribution shall be made which exceeds the limitations of section 404(a) of the Code. The limitation of this Section shall apply before limiting contributions under any other qualified retirement plan sponsored by the Employer. 3.12 Allocation of Contributions. Any Basic Contributions which are deposited into the Trust in accordance with Section 3.10 above shall be credited to Members' accounts in accordance with Section 3.1 hereof as soon as practicable after such contribution is made in a manner determined by the Plan Administrator. Any Matching Contributions, Profit Sharing Contributions and Top- Heavy Contributions which are deposited into the Trust in accordance with Section 3.10 above shall be credited to Members' accounts in accordance with Sections 3.2, 3.4 and Section 9 hereof as of the last day of the Plan Year for which they are contributed in a manner determined by the Plan Administrator. Any Employer contributions remaining in the Trust which are not credited to Members' accounts in accordance with the preceding sentence, shall be applied as of the last day of the Plan Year as follows, under procedures determined by the Plan Administrator: A. To make restoration of prior forfeitures pursuant to Section 6.5; B. To defray administrative costs of the Plan as determined by the Plan Administrator; or C. As Top-Heavy Contributions, Additional Basic Contributions, or Additional Matching Contributions. 3.13 Contributions For Periods of Qualified Military Service. Notwithstanding any provision of this Plan to the contrary, effective December 12, 1994, all contributions with respect to periods of Qualified Military Service shall be provided in a manner consistent with section 414(u) of the Code, as follows: A. Basic Contributions. The Employer shall permit a reemployed Member to make additional Basic Contributions during the period which begins on the date of the reemployment of such Member and has the same length as the lesser of -- (1) the product of 3 and the period of Qualified Military Service which resulted in such rights, and (2) 5 years. The amount of additional Basic Contributions permitted under this Section 3.13.A. is the maximum amount of the Basic Contributions that the Member would have been permitted to make under the Plan during the period of Qualified Military Service if the Member had continued to be employed by the Employer during such period and received compensation as determined under Section 3.13.E. Proper adjustment shall be made to the amount determined under the preceding sentence for any Basic Contributions actually made during the period of such Qualified Military Service. B. Matching Contributions. The Employer shall make a Matching Contribution on behalf of a Member with respect to any additional Basic Contributions made by the Member pursuant to Section 3.13.A. on the same basis Matching Contributions would have been made under Section 3.2 had such Basic Contributions actually been made during the period of Qualified Military Service. C. Profit Sharing Contributions. The Employer shall make Profit Sharing Contributions on behalf of a reemployed Member pursuant to Section 3.4, based on the Hours of Service the Member would have received during such period if the Member were not in Qualified Military Service, determined based on the Member's average monthly Hours of Service during the 12-month period immediately preceding the Qualified Military Service (or, if shorter, the period of employment immediately preceding the Qualified Military Service). D. Limitation on Crediting of Earnings and Forfeitures. Nothing in this Section 3.13 shall be construed as requiring (i) any crediting of earnings to a Member with respect to any Basic Contribution or Matching Contribution before such contribution is actually made, or (ii) any allocation of any forfeiture with respect to the period of Qualified Military Service. E. Compensation. For purposes of this Section 3.13, a reemployed Member shall be treated as receiving compensation during a period of Qualified Military Service equal to -- (1) the compensation the Member would have received during such period if the Member were not in Qualified Military Service, determined based on the rate of pay the Member would have received from the Employer but for absence during the period of Qualified Military Service, or (2) if the compensation the Member would have received during such period was not reasonably certain, the Member's average Compensation during the 12-month period immediately preceding the Qualified Military Service (or, if shorter, the period of employment immediately preceding the Qualified Military Service). F. Inapplicability of Certain Limitations. If any contributions are made by a Member or the Employer in accordance with this Section 3.13: (1) any such contribution shall not be subject to any otherwise applicable limitation contained in, and the Plan shall not be treated as failing to meet the requirements of, Section 3.8, Section 8 or Section 9, and shall not be taken into account in applying such limitations to other contributions or benefits under the Plan with respect to the year in which the contribution is made; and (2) any such contribution shall be subject to the limitations referred to in Section 3.13.F.(1) with respect to the year to which the contribution relates (in accordance with rules prescribed by the Secretary of the Treasury). SECTION 4 MEMBER ACCOUNTS 4.1 Establishment of Accounts. A. A Basic Contribution Account, Top-Heavy Contribution Account, Matching Contribution Account, Profit Sharing Contribution Account and Rollover Contribution Account shall be established for each Member in accordance with Sections 3 and 9, as applicable. All contributions by or on behalf of a Member shall be deposited to the appropriate account in accordance with procedures adopted by the Plan Administrator. B. The account of each Employee who was a participant in (a) the Modern Woman Savings and Profit Sharing Plan on January 31, 2000 and who was employed by the Employer on February 1, 2000, or (b) the Catherine's Profit Sharing and Retirement Savings Plan on April 30, 2000 and who was employed by the Employer on May 1, 2000, shall be transferred from the Modern Woman Savings and Profit Sharing Plan or the Catherine's Profit Sharing and Retirement Savings Plan, as applicable, to the Plan at such time as may be prescribed by the Plan Administrator. No written request by the Employee shall be required in connection with this transfer. The Plan Administrator shall establish and maintain or cause to be established or maintained, as part of the Trust, an Account for the amounts transferred hereunder (including any subaccounts as may be necessary to account for different types of contributions being transferred), and all relevant data pertaining thereto. All such transferred amounts shall be held by the Trustee for the exclusive benefit of such Employee in accordance with the terms of this Plan, to be commingled, invested, and reinvested with the other assets of the Plan. 4.2 Valuation of Accounts. As of each Valuation Date, the accounts of each Member shall be adjusted to reflect any realized and unrealized gains or losses and income or expense of the Fund according to nondiscriminatory procedures uniformly applied based on the value of the Member's accounts as of the preceding Valuation Date, adjusted in accordance with Section 4.3. The fair market value of the Fund shall be determined by the Trustee and communicated to the Plan Administrator in writing on an annual basis. The Trustee's determination shall be final and conclusive for all purposes of this Plan. The valuation process shall be performed separately for each investment fund. Each Member shall be furnished with a statement as soon as practicable after each calendar quarter setting forth the value of his Accrued Benefit. Notwithstanding the foregoing, the amount of any realized and unrealized gains or losses or income or expense attributable to the General Account maintained under the Trust shall be credited or charged, as the case may be, to such General Account. 4.3 Adjustment to Accounts. When determining the value of a Member's account, any deposits due which have not been deposited to the Fund on behalf of the Member shall be added to his accounts; and any withdrawals or distributions made which have not been paid out shall be subtracted from the accounts according to nondiscriminatory procedures uniformly applied. Similarly, adjustment of accounts for appreciation or depreciation of an investment fund shall be deemed to have been made as of the Valuation Date on which the adjustment relates, notwithstanding that they are actually made as of a later date. 4.4 Directed Investments. A Member's Accrued Benefit shall be invested as directed by each Member in one or more investment funds selected by the Employer or Plan Administrator. The Member shall be solely responsible for the investment of the assets held in his accounts, and neither the Employer or its officials, the Trustee, the Plan Administrator or any other fiduciary of the Plan shall have any responsibility or liability whatsoever for a Member's choice of investment funds, the investment experience of any investment fund, or any loss which may result from the Member's exercise of control over the assets in his accounts. The Plan is intended to be a plan described in section 404(c) of ERISA and Title 29 of the Code of Federal Regulations section 2550.404c-1. The Member may select one or more investment funds in multiples of 5%. Elections with respect to monies already accumulated may be made in multiples of 5%. All elections shall be made in the manner and pursuant to the procedures prescribed by the Plan Administrator. The investment selection of a Member shall apply uniformly to all of the Member's accounts established in accordance with Section 4.1. 4.5 Administration of Investments. Contributions made by or on behalf of a Member shall be invested in the investment fund or funds selected by the Member until the effective date of a new designation which has been properly completed and filed with the Plan Administrator. If any Member fails to make an initial designation, he shall be deemed to have designated the Interest Income Fund. A designation filed by a Member changing his investment option shall apply to investment of future deposits and/or to amounts already accumulated in his accounts. A Member may change his investment option effective as of any Entry Date in the manner and pursuant to the procedures prescribed by the Plan Administrator at least 30 days prior to the Entry Date on which the change is to occur, or within such lesser period prior to the Entry Date which is acceptable to the Plan Administrator. Notwithstanding the foregoing, if a Member files a designation with the Plan Administrator which changes his investment selection with regard to amounts already accumulated in his accounts, the Plan Administrator shall effectuate the investment change as of the next Valuation Date. Notwithstanding the foregoing, amounts held in the General Account maintained under the Trust which have not been credited to Members' accounts shall be invested in the Interest Income Fund, in accordance with procedures adopted by the Trustee. 4.6 Investments For Terminated Members. Any Member who ceases to be an Employee shall continue to have the authority to direct the investment of his accounts in accordance with the provisions of Sections 4.4 and 4.5. SECTION 5 VESTING AND FORFEITURES 5.1 Vesting Schedule. A Member shall have a fully vested interest in his Basic Contribution Account, Rollover Contribution Account and ARG Match and Profit Sharing Account at all times. A Member's vested interest in his Matching Contribution Account and Profit Sharing Contribution Account shall be determined by the occurrence of the following events: A. full vesting shall occur upon the death or Disability of a Member; B. full vesting shall occur when a Member attains his Normal Retirement Date or his Early Retirement Date; and C. except as otherwise stated above, the Member's vested percentage in his Matching Contribution Account and his Profit Sharing Contribution Account shall be determined based on his Years of Service in accordance with the following schedule: Vested Years of Service Percentage Less than 2 years 0% After 2 years but less than 3 20% After 3 years but less than 4 40% After 4 years but less than 5 60% After 5 years but less than 6 80% After 6 or more years 100% D. Notwithstanding the vesting schedule above, the vested percentage of a Member's Accrued Benefit shall not be less than the vested percentage attained as of the later of the Effective Date or adoption date of this amendment and restatement. 5.2 Vesting Schedule with Respect to Modern Woman Match Account. A Member who has a Modern Woman Match Account attributable to his participation in the Modern Woman Savings and Profit Sharing Plan shall have a nonforfeitable interest in his Modern Woman Match Account in accordance with the following schedule: Vested Years of Service Percentage Less than 2 years 0% After 2 years but less than 3 40% After 3 years but less than 4 60% After 4 years but less than 5 80% After 5 or more years 100% 5.3 Forfeitures. A Member's vested Accrued Benefit shall be determined in accordance with Section 5.1 and/or Section 5.2, if applicable, as of the date he terminates employment. The nonvested portion shall be forfeited on the earlier of the date on which the Member: A. receives a distribution of his vested Accrued Benefit, if any, provided that such distribution is made no later than the close of the second Plan Year following the year in which the Member terminates participation in the Plan; or B. has five consecutive one-year Breaks in Service measured from the Plan Year in which the Member's date of termination occurs. Forfeitures of a Member's Matching Contribution Account and earnings on the Trust Fund which have not been credited to Members' accounts shall be applied as of the last day of the Plan Year in the manner indicated below, under procedures determined by the Plan Administrator: A. To make restoration of prior forfeitures pursuant to Section 6.5; B. To defray administrative costs of the Plan as determined by the Plan Administrator; or C. As Matching Contributions in lieu of Matching Contributions which otherwise would have been made. Forfeitures of a Member's Profit Sharing Contribution Account shall first be applied to make restoration of prior forfeitures pursuant to Section 6.5, and then shall be reallocated as additional Profit Sharing Contributions, in accordance with Section 3.4 hereof, to Members still employed on the last day of the Plan Year in which the forfeiture occurs. For purposes of the Plan, earnings on the Trust Fund which are credited to Members' accounts pursuant to this Section 5.3 shall be treated as forfeitures. For purposes of this Section 5.3, if the value of a Member's vested Accrued Benefit is zero, the Member shall be determined to have received a distribution of such vested Accrued Benefit on termination of employment. A Member's vested Accrued Benefit shall not include accumulated deductible Employee contributions within the meaning of Section 72(o)(5)(B) of the Code for Plan Years beginning prior to January 1, 1989. 5.4 Change in Vesting Schedule. A Member with at least three Years of Service as of the expiration date of the election period (as set forth below) may elect to have his nonforfeitable percentage computed under the Plan without regard to an amendment or restatement of the Plan which affects the vesting schedule. The Member's election period shall commence on the adoption date of the amendment and shall end 60 days after the latest of: A. the adoption date of the amendment; B. the effective date of the amendment; or C. the date the Member receives written notice of the amendment from the Employer or Plan Administrator. Any amendment to the vesting schedule shall be subject to the restrictions of Section 14.1. For purposes of this Section 5.4, a Member shall be considered to have completed three Years of Service, whether or not consecutive, without regard to the exceptions of section 411(a)(4) of the Code. SECTION 6 DISTRIBUTIONS 6.1 Distribution of Benefit. A Member who terminates employment for any reason other than death shall be entitled to receive his vested Accrued Benefit. A Member with a vested Accrued Benefit which does not exceed $3,500 (effective January 1, 1998, $5,000), and has never exceeded $3,500 (effective January 1, 1998, $5,000) at the time of any previous distribution, shall be paid under Option A. below. A Member with a vested Accrued Benefit over $3,500 (effective January 1, 1998, $5,000) who is entitled to payment under this Section may elect either Option A. or B.: Option A. A lump sum payment as soon as practicable following the Member's termination of employment. The amount payable shall be equal to the Member's vested Accrued Benefit determined as of the Valuation Date coincident with or immediately preceding the date on which payment is made. Option B. A lump sum payment after the Valuation Date specified under Option A. as the Member requests, but no later than the April 1 following the later of the calendar year in which the Member terminates employment or attains age 70-1/2. The amount payable shall be equal to the Member's vested Accrued Benefit determined as of the Valuation Date coincident with or immediately preceding the date payment is requested. All distributions required under this Section 6 shall be determined and made in accordance with the regulations under section 401(a)(9) of the Code, including the minimum distribution incidental benefit requirement of Treasury regulation 1.401(a)(9)-2. Notwithstanding any other provision of the Plan to the contrary, if a Member's employment is terminated for any reason, and at the time of this termination of employment an outstanding debt is owed to the Employer, said Member shall not receive a distribution from the Plan until the earlier of death, Disability, the attainment of Normal Retirement Date, or such time as the debt owed is repaid to the Employer. 6.2 Election of Benefits. The Member shall notify the Plan Administrator, in writing, of the form and timing of benefit option elected. An election may be revoked and a new written election may be filed with the Plan Administrator any time prior to the payment of benefits. Payment of benefits shall be made as soon as practicable under the option the Member has elected; provided, however, that payment shall generally not commence until 30 days after the Member has received all information regarding the elections that may be made. Notwithstanding the foregoing, a Member's benefit payment date may commence less than 30 days after such information has been supplied to the Member provided that, after the Member has received such information and has been advised of his right to a 30-day period to make a decision regarding the distribution, the Member affirmatively elects a distribution. Notwithstanding the preceding sentence, if a Member who is receiving or is entitled to receive payment of benefits pursuant to Section 6.1 is rehired by the Employer and again becomes an Employee, such benefit payments shall cease until such time as the Member is otherwise entitled to payment of his benefits pursuant to this Section 6. 6.3 Optional Forms of Payment. After August 1, 2001, no optional forms of payment shall be available under this Section 6.3. On or before August 1, 2001, a Member may elect to receive payment of his Accrued Benefit in the following optional forms: A. a single life annuity; B. a Joint and Survivor Annuity; or C. annual cash installment payments over a period not exceeding the lesser of (1) five years or (2) the life expectancy of the Member or the joint life expectancy of the Member and his Beneficiary; provided, however, that former participants in the Catherine's Profit Sharing and Retirement Savings Plan may elect to receive installment payments under this Section 6.3.C. on a monthly or quarterly basis. Each such installment shall be determined by dividing the nonforfeitable value of the Member's Accrued Benefit on the Valuation Date coinciding with or immediately preceding the date of payment by the number of installments remaining to be paid. A Member may elect to have such optional form distributed upon attainment of his Early Retirement Date or Normal Retirement Date. A Joint and Survivor Annuity shall be payable with respect to the Member and Surviving Spouse. If a married Member elects to have his or her benefit paid in the form of a single life annuity or in annual cash installments over the Member's life expectancy or the joint life expectancy of the Member and his non-Spouse Beneficiary, the Member must make a Qualified Election, in writing, in accordance with Section 6.3.C. The terms of any annuity contract purchased and distributed by the Plan to a Member or Beneficiary herein shall comply with the requirements of this Plan. Any annuity contract distributed herein shall be nontransferable. D. "Qualified Election" means a waiver of a Joint and Survivor Annuity during the relevant Election Period. The waiver must be in writing and must be consented to by the Member's Spouse. The waiver shall designate that the form of payment shall be a single life annuity and such designation shall not be changed without spousal consent (unless the spousal consent expressly permits designations by the Member without any further consents by the Spouse). The Spouse's consent shall acknowledge the effect of such election and must be witnessed by the Plan Administrator or a notary public. Notwithstanding this consent requirement, if the Member establishes to the satisfaction of a plan representative that such written consent may not be obtained because there is no Spouse or the Spouse cannot be located, a waiver shall be deemed a Qualified Election. Any consent necessary under this provision shall be valid only with respect to the Spouse who signs the consent, or in the event of a deemed Qualified Election, the designated "Spouse." Additionally, a revocation of a prior waiver may be made by a Member without the consent of the Spouse at any time before the commencement of benefits. The number of revocations shall not be limited. E. "Joint and Survivor Annuity" means an immediate annuity for the life of the Member with a survivor annuity for the life of the Spouse which is 50% of the amount of the annuity which is payable during the joint lives of the Member and the Spouse and which is the actuarial equivalent of the normal form of benefit or, if greater, any optional form of benefit. The Member may elect to receive a smaller annuity benefit with continuation of payments to the Spouse at a rate of 75% or 100% of the rate payable to the Member during his lifetime. F. In the case of a Joint and Survivor Annuity, the Plan Administrator must notify each Member of, in writing, and no less than 30 and no more than 90 days prior to the annuity starting date: (1) the terms and conditions of the Joint and Survivor Annuity; (2) the Member's right to make and the effect of an election to waive the Joint and Survivor Annuity form of benefit; (3) the rights of a Member's Spouse; and (4) the right to make and the effect of a revocation of a previous election to waive the Joint and Survivor Annuity. 6.4 Rehire Prior to Distribution of Benefit Distribution. If the Member terminates his employment, elects to receive payment of his Accrued Benefit, and is rehired by the Employer prior to the commencement of a distribution of the Member's Accrued Benefit in accordance with this Section 6, any distribution election made by the Member shall be disregarded. 6.5 Rehire Prior to Incurring Five Consecutive Breaks in Service. If the Member terminates his employment and is rehired by the Employer prior to the date that he would incur his fifth consecutive Break in Service, any amounts previously forfeited shall be restored by the Employer if the Member repays the entire amount which was distributed on or before the earlier of five years after the first date on which the Member is subsequently reemployed by the Employer, or the close of the first period of five consecutive one-year Breaks in Service after the distribution. Restoration shall be made from the forfeitures from Profit Sharing Contribution Accounts or, if not sufficient, from special Employer contributions. The Member's vested interest in such an instance shall be determined thereafter as if he did not have a break in employment. If the Member does not repay the amount which was distributed to him, new accounts shall be established upon his reentry into the Plan and the amount forfeited shall not be recovered. 6.6 Death Prior to Distribution. If a Member dies before his Accrued Benefit has been distributed to him, his Accrued Benefit shall be distributed in a lump sum as soon as practicable after the Valuation Date coincident with or next following his date of death. 6.7 Distribution Limitation. Unless a Member elects otherwise, his vested Accrued Benefit shall be distributed to him no later than 60 days after the close of the Plan Year in which occurs the latest of his Normal Retirement Date, the tenth anniversary of the year in which he commenced participation in the Plan or the date of his termination of employment. Notwithstanding the foregoing, the failure of a Member to consent to a distribution while a benefit is immediately distributable within the meaning of this Section shall be deemed to be an election to defer commencement of payment of any benefit sufficient to satisfy this Section. 6.8 Mandatory Distributions. Notwithstanding any provision of the Plan to the contrary, in the case of a Member who is a "5% owner" (as defined in section 416(i) of the Code) with respect to the calendar year in which the Member attained age 70-1/2, his benefits shall be distributed to him not later than April 1 of the calendar year following the calendar year in which the Member attains age 70-1/2. A Member described in the preceding sentence who has not terminated service with the Employer shall be required to withdraw during any Plan Year only the minimum amount required to satisfy section 401(a)(9) of the Code. The restrictions imposed by this Section shall not apply if a Member has, prior to January 1, 1984, made a written designation to have his retirement benefit paid in an alternative method acceptable under section 401(a) of the Code as in effect prior to the enactment of the Tax Equity and Fiscal Responsibility Act of 1982. Any such written designation made by a Member shall be binding upon the Plan Administrator. 6.9 Earnings on Undistributed Benefits. A Member's Accrued Benefit shall share in investment experience in accordance with the provisions of Section 4 until the Valuation Date coincident with or immediately preceding distribution. 6.10 Direct Rollovers. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this subsection, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. A. Definitions. (1) Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and, effective January 1, 1999, any hardship distribution described in section 401(k)(2)(B)(i)(IV) of the Code. (2) Eligible retirement plan: An eligible retirement plan is an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving Spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (3) Distributee: A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving Spouse and the Employee's or former Employee's Spouse or former Spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are distributees with regard to the interest of the Spouse or former Spouse. (4) Direct rollover: A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. SECTION 7 WITHDRAWALS AND LOANS 7.1 Withdrawals. A. Hardship Withdrawals. A Member may apply in writing to the Plan Administrator for a hardship withdrawal from his Basic Contribution Account and Rollover Account. The withdrawal must satisfy the criteria set forth below, the applicable provisions of Section 7.1.C. and may be approved or disapproved at the discretion of the Plan Administrator under nondiscriminatory standards uniformly applied. Hardship withdrawals from a Member's Basic Contribution Account are not permitted from income on a Member's Basic Contribution, except to the extent of earnings on or before December 31, 1988, nor are such withdrawals permitted to include Employer contributions which were treated as Basic Contributions as a result of the application of the special nondiscrimination requirements under rules prescribed by the Secretary of the Treasury for Employer contributions that are used to satisfy the nondiscrimination testing under Section 8 herein and are subject to the vesting and withdrawal restrictions for Basic Contributions. (1) General Rule. A hardship distribution may only be made on account of an immediate and heavy financial need of the Member and in an amount not to exceed the sum necessary to satisfy such financial need. (2) Immediate and Heavy Financial Need. The determination of whether a Member has an immediate and heavy financial need shall be made on the basis of whether a request satisfies the definition of "immediate and heavy financial need," including those deemed needs as set forth below. A financial need shall not fail to qualify as immediate and heavy merely because such need was reasonably foreseeable or voluntarily incurred by the Member. (3) Deemed Immediate and Heavy Financial Need. A distribution shall be deemed to be made on account of an immediate and heavy financial need of the Member if the distribution is on account of: (a) expenses for medical care (as described in section 213(d) of the Code) incurred by the Member, the Member's Spouse, or any dependents of the Member (as defined in section 152 of the Code) or necessary for these persons to obtain medical care described in section 213(d) of the Code; (b) costs directly related to the purchase (excluding mortgage payments) of a principal residence for the Member; (c) payment of tuition, related educational fees, and room and board expenses for the next twelve months of post-secondary education for the Member, his or her spouse, children or dependents (as defined in section 152 of the Code); (d) payments necessary to prevent the eviction of the Member from his principal residence or foreclosure on the mortgage of the Member's principal residence; or (e) such other needs as may be allowable under Treasury Regulations, revenue rulings, notices, and other documents of general applicability. (4) Distribution Necessary to Satisfy Financial Need (Certification Method). A distribution shall not be treated as necessary to satisfy an immediate and heavy financial need of a Member to the extent the amount of the distribution is in excess of the amount required to relieve the financial need plus anticipated federal, state and local income taxes and penalties on the distribution, or to the extent such need may be satisfied from other resources that are reasonably available to the Member actually known by the Employer. This determination is to be made on the basis of all relevant facts and circumstances and which will not increase the need. A distribution shall be treated as necessary to satisfy a financial need if the Employer reasonably relies upon the Member's representation and the Member certifies in writing that the need cannot be relieved: (a) through reimbursement or compensation by insurance or otherwise; (b) by reasonable liquidation of the Member's assets, to the extent such liquidation would not itself cause an immediate and heavy financial need; (c) by cessation of elective contributions or Member contributions under the Plan; or (d) by other distributions or nontaxable (at the time of the loan) loans from plans maintained by the Employer or by any other employer, or by borrowing from commercial sources on reasonable commercial terms. (5) For purposes of this Section, the Member's resources shall be deemed to include those assets of a Member's Spouse and minor children that are reasonably available to the Member. This provision shall be interpreted in a manner consistent with regulations issued by the Internal Revenue Service. (6) The determination of the existence of financial hardship and the amount required to be distributed to meet the need created by the hardship must be made in a uniform and nondiscriminatory manner. B. Withdrawals Permitted After Age 59-1/2. A Member may apply in writing to the Plan Administrator for a withdrawal of all or any portion of his vested Accrued Benefit any time after attaining age 59-1/2. Such withdrawals shall not be subject to the requirements set forth in Section 7.1.A. but are subject to the conditions set forth in Section 7.1.C. C. Conditions For Withdrawals. The following conditions apply to withdrawals made under Sections 7.1.A. and 7.1.B.: (1) a Member may make only one hardship withdrawal and one age 59-1/2 withdrawal in any twelve-month period; and (2) all withdrawals shall be based on the value of the Member's applicable accounts and vested Accrued Benefit as of the Valuation Date immediately preceding or next following the withdrawal request at the Member's request. All withdrawals which are based on the value of the Member's applicable accounts as of the Valuation Date immediately preceding the withdrawal request will be limited to 75% of the Member's vested Accrued Benefit. Notwithstanding the foregoing, the Plan Administrator, in its sole discretion, shall base a withdrawal under this Section on the value of a Member's vested Accrued Benefit as of the date of the withdrawal. 7.2 Loans. Effective January 1, 1998, loans shall be permitted in accordance with the provisions of this Section 7.2. A. In General. (1) Permissibility. Loans to Members who are parties in interest shall be allowed if, and only if, the Plan Administrator in its sole discretion determines that such loans are to be made. The Plan Administrator shall have the right to require any applicant for a Member loan to secure the written consent of any party for whose benefit there exists a QDRO with respect to the Member's interest under the Plan. (2) Application. Subject to such uniform and nondiscriminatory rules as may from time to time be adopted by the Plan Administrator, the Trustee, upon application by such Member on forms approved by the Plan Administrator, may make a loan or loans to such applicant. In no event shall a Member be permitted to have more than one loan outstanding at any one time. No loan shall be approved if the Member has previously obtained a loan within the 12-consecutive-month period preceding the date of the current loan application. No loan shall be approved that would require monthly payments in excess of 25% of the Member's monthly compensation as of the date the loan application would otherwise be approved. No loan shall be approved in an amount less than $1,000. A $100 loan initiation fee shall be deducted from the first of the Member's separate accounts used to satisfy the loan, as provided in Section 7.2.B.(4). (3) Limitation on Amount. Loans shall be permissible only from a Member's Basic Contribution Account, Rollover Account, ARG Match and Profit Sharing Account, and the vested portion of the Member's Matching Contribution Account, Profit Sharing Contribution Account and Modern Woman Match Account. In no event shall any loan (when added to the outstanding balance of all loans to the Member) exceed the lesser of (a) 50% of the balance credited to such Member's vested Accrued Benefit or (b) $50,000, less the excess (if any) of the highest outstanding balance of all loans during the 12 months prior to the time the new loan is to be made over the outstanding balance of loans from the Plan on the date on which such loan was made. Loans under any other qualified plan sponsored by the Employer shall be aggregated with loans under the Plan in determining whether or not the limitation stated herein has been exceeded. (4) Equality of Borrowing Opportunity. Loans shall be available to all Members who are parties in interest (as defined in ERISA) on a reasonably equivalent basis; provided, however, that (a) no loan shall be made if the Member cannot qualify for a minimum loan of at least $1,000 and (b) the Plan Administrator may make reasonable distinctions among prospective borrowers on the basis of creditworthiness. Loans shall not be made available to Members who are or were Highly Compensated Employees in an amount (when calculated as a percentage of the borrower's vested interest under the Plan) greater than the amount (similarly calculated) available to other Members. B. Loans as Fund Investments. All loans shall be considered as fixed income investments of a segregated account of the Fund directed by the borrower. Accordingly, the following conditions shall prevail with respect to each such loan: (1) Security. All loans shall be secured by the pledge of one- half of the Member's entire interest in the Fund, and by the pledge of such further collateral as the Plan Administrator, in its discretion, deems necessary to assure repayment of the borrowed amount and all interest to be accrued thereon in accordance with the terms of the loan. (2) Interest Rate. Interest shall be charged at a rate to be fixed by the Plan Administrator and, in determining the interest rate, the Plan Administrator shall take into consideration interest rates currently being charged on similar commercial loans by persons in the business of lending money. Interest shall be credited to the investment funds in the same manner as the Member directs for his current Plan contributions. (3) Loan Term. Loans shall be for terms of 1, 2, 3, 4 or 5 years, except that loans taken for the purpose of acquiring any dwelling unit which is to be used as a principal residence of the Member may be for periods of up to 15 years. Loans shall be non- renewable and non-extendable. (4) Investment Funds. Loans (and the related loan initiation fees) shall be made in the following order from the separate accounts comprising a Member's Accrued Benefit: Basic Contribution Account, Rollover Account, Matching Contribution Account, and Profit Sharing Contribution Account. Loans shall be withdrawn proportionately from each investment fund in which the affected separate account is invested. As the loan is repaid, each installment repayment will be allocated among the investment funds in which the Member has elected to have new contributions invested. (5) Default and Remedies. (a) Instances of Default. In the event that (i) a Member terminates employment and fails (or, in the case of a deceased Member, the Beneficiary fails) to repay the full unpaid balance of the loan plus applicable interest by the close of the grace period; (ii) the loan is not repaid by the time the promissory note matures; (iii)a Member revokes or attempts to revoke any payroll authorization for repayment of the loan without the consent of the Plan Administrator; (iv) a Member (other than a Member on a leave as described in subsection (9)) fails to pay any installment in full when due; (v) a Member fails to execute a revised promissory note pursuant to subsection (8); or (vi) distributions to a Member who has attained age 70-1/2 would require distribution of amounts allocated to the Member's loan, before a loan is repaid in full, the unpaid balance of the loan, with interest due thereon, shall become immediately due and payable. The phrase "close of the grace period" shall mean the date that is 60 days after the last day of the calendar month in which the Member's termination of employment occurs. Notwithstanding anything in this subparagraph (5)(a) to the contrary, a Member's loan shall become payable immediately upon the Member's termination of employment without regard to the grace period (i) if the term of the loan would otherwise expire prior to the end of the otherwise applicable grace period, or (ii) if permitting amounts due to remain unpaid to the end of the otherwise applicable grace period would, if the Member failed to make payment during that period, cause the amount due under the loan (principal and interest) to exceed the maximum loan amount described in subsection 7.2.A.(3). (b) Remedies. In the event that a loan becomes immediately due and payable (in "default") pursuant to subparagraph (5)(a), the Member (or his Beneficiary in the event of the Member's death) may satisfy the loan by paying the outstanding balance in full within 60 days. Otherwise, the Member's Accrued Benefit shall be reduced by the amount allocated to the loan before any benefit which is or becomes payable to the Member or his Beneficiary is distributed. The reduction described in the preceding sentence shall occur as soon as administratively practicable following a determination that a loan is in default, in accordance with the following rules: (i) If the Member has terminated employment or died, the Member's vested interest in his Basic Contribution Account, Rollover Account, Matching Contribution Account, and Profit Sharing Contribution Account, shall be reduced in such order and to the extent any such account is security for the loan, by the amount of the unpaid balance of the loan, with interest due thereon, and the Member's indebtedness shall thereupon be discharged. (ii) If the Member has not terminated employment or died, the Member's vested interest in his Basic Contribution Account (if the Member has attained age 59-1/2), Rollover Account, Matching Contribution Account (to the extent the assets of such account have been held by the Plan for at least 24 months or the Member has participated in the Plan for at least five (5) years), and Profit Sharing Contribution Account (to the extent the assets of such account have been held by the Plan for at least 24 months or the Member has participated in the Plan for at least five (5) years), shall be reduced in such order and to the extent any such account is security for the loan, by the amount of the unpaid balance of the loan, with interest due thereon, and the Member's indebtedness shall thereupon be discharged. (iii) If the Member has not terminated employment or died and any reduction pursuant to subparagraph (5)(b)(ii) is insufficient to discharge the Member's indebtedness, the Member's vested interest in his Basic Contribution Account, Matching Contribution Account, or Profit Sharing Contribution Account shall be reduced in the manner described in subsection B.(5)(b)(ii), as of the following dates: 1) with respect to the Member's vested interest in his Matching Contribution Account or Profit Sharing Contribution Account, as of the earliest of (A) the date the assets of such account have been held by the Plan for at least 24 months, (B) the date the Member has participated in the Plan for at least 5 years, or (C) the date the Member is entitled to a distribution under Section 6.1 or 6.5; and 2) with respect to the Member's Basic Contribution Account, as of the earlier of (A) the date the Member attains age 59-1/2, or (B) the date the Member is entitled to a distribution under Section 6.1 or 6.5 or a withdrawal from such account under Section 7.1. Any distribution pursuant to this subsection B.(5)(b) shall be deemed to have been distributed to the Member under the terms of the Plan. No action under this subsection B.(5)(b) shall operate as a waiver of the rights of the Employer, the Plan Administrator, the Trustee or the Plan under applicable law. The Plan Administrator also shall be entitled to take any and all other actions necessary and appropriate to foreclose upon any property other than the Member's Accrued Benefit pledged as security for the loan or to otherwise enforce collection of the outstanding balance of the loan. (6) Loan Statement. Every Member receiving a loan hereunder will receive a statement from the Plan Administrator clearly reflecting the charges involved in each transaction, including the dollar amount and annual interest rate of the finance charges. The statement will provide all information required to meet applicable "truth-in-lending" laws. Each Member receiving a loan hereunder shall be required to sign all documents that the Plan Administrator and the Trustee require before issuance of any loan (including documents evidencing the consent of a party for whose benefit there exists a QDRO, in accordance with subsection 7.2.A.(1)) and shall also be required to remit in cash the applicable fees and all reasonable expenses arising out of the loan transaction. (7) Restriction on Loans. The Plan Administrator will not approve any loan if it is the belief of the Plan Administrator that such loan, if made, would constitute a prohibited transaction (within the meaning of section 406 of ERISA or section 4975(c) of the Code), would constitute a distribution taxable for federal income tax purposes, or would imperil the status of the Plan or any part thereof under section 401(a) or 401(k) of the Code. (8) Promissory Note. Any loan made to a Member under this Section 7.2 shall be evidenced by a promissory note executed by the Member and, if applicable, consented to by a party for whose benefit there exists a QDRO, in accordance with subsection 7.2.A.(1). Such promissory note shall contain the irrevocable consent of the Member to the payroll withholding described in said promissory note. The Plan Administrator shall have the right to require the Member to execute a revised promissory note if the Plan Administrator determines it is necessary to comply with ERISA or the Code. In the event the Member does not execute such revised promissory note by the date prescribed by the Plan Administrator, the loan shall become due and payable as of such date. In the event that loans have previously been granted to a Member when there has already been an outstanding loan to that Member, all such loans shall be consolidated, and a promissory note shall be issued to reflect the aggregated amount of the loans. An amortization schedule shall be established and interest shall be charged for the consolidated loan at the interest rate determined by the Plan Administrator. (9) Repayment. Loans shall be repaid in level installments in each payroll period through payroll withholding; provided, however, that: (a) a Member who is not an Employee of an Employer but who is a party in interest; or (b) a Member who is an Employee of an Employer but for whom the Plan Administrator has determined that payroll withholding is not practicable, shall repay by personal check or in such other manner directed by the Plan Administrator. Loans may be prepaid in full, without penalty, on any installment payment date which occurs at least one year after the loan is made. Partial prepayment is not permitted. In the event of prepayment, the Member may not apply for a new loan until the six- month anniversary of the date on which the loan was prepaid. If a Member who is repaying a loan through payroll withholding is granted a leave of absence by an Employer and during which the Member's compensation is insufficient to pay the required loan installment, payment of the loan shall be made by personal check or in such other manner directed by the Plan Administrator during the leave of absence. Notwithstanding the foregoing, if such a Member is granted a leave of absence by an Employer that is for a period of not more than one year, the Plan Administrator may, in its sole discretion, waive repayment during the leave of absence and, upon the Member's return to active employment, (i) reamortize the loan and establish a new payment schedule pursuant to which the loan shall be repaid in full by the original maturity date of the promissory note or (ii) extend the term of the loan by the period of the leave of absence to the extent that such extension does not cause the term of the loan to exceed the maximum period described under Section 7.2.B.(3). If a Member who is repaying a loan through payroll withholding is absent during a period of Qualified Military Service, repayment shall be waived during such period and, upon the Member's reemployment by the Employer or an Affiliated Company within the time during which the Employee's right to reemployment is protected by applicable law, the loan payment schedule shall resume with the original maturity date of the promissory note adjusted to reflect the period of Qualified Military Service. SECTION 8 ACTUAL DEFERRAL AND ACTUAL CONTRIBUTION PERCENTAGE TESTING 8.1 Actual Deferral Percentage Test. The actual deferral percentage (ADP) of Basic Contributions allocated to Members who are Highly Compensated Employees for the Plan Year shall not exceed the greater of A. or B. as follows: A. the ADP of Members who are Non-Highly Compensated Employees for the preceding Plan Year times 1.25; or B. the ADP of Members who are Non-Highly Compensated Employees for the preceding Plan Year times 2.0, but not to exceed the ADP of Members who are Non-Highly Compensated Employees by more than 2 percentage points. In accordance with Treasury regulations, the Employer may elect to apply the tests of this Section 8.1 based upon the Average Deferral Percentage for Non-Highly Compensated Employees for the current Plan Year rather than the preceding Plan Year. 8.2 ADP Formula. A. The ADP for a specified group of Members for a Plan Year shall be the average of the Actual Deferral Ratios (ADR) calculated separately for each Member in such group. The Plan Administrator shall determine as soon as practicable after the end of the Plan Year whether the ADP for Highly Compensated Employees satisfies either of the tests contained in Section 8.1. In the event neither test is satisfied, the Employer may elect either of the following: (1) to reduce the allowable Basic Contribution for Highly Compensated Employees as provided in Sections 8.3 and 8.5; or (2) to make an Additional Basic Contribution (subject to the requirements of Section 8.6) for all or a portion of Non-Highly Compensated Employees eligible to make contributions under Section 3.1 in a level dollar amount or a uniform percentage of Compensation, as the Employer shall elect, within the time period required by any applicable law or regulation. B. The Plan shall take into account the ADRs of all Eligible Employees for purposes of the ADP test. For this purpose, an Eligible Employee is any Employee who is directly or indirectly eligible to make a Basic Contribution under the Plan for all or a portion of a Plan Year, including an Employee who would be eligible but for his failure to make required contributions and an Employee whose eligibility to make Basic Contributions has been suspended because of an election to take a hardship distribution. In the case of an Eligible Employee who makes no elective contributions, the ADR that is to be included in determining the ADP is zero. C. A Basic Contribution shall be taken into account for purposes of determining a Member's ADP for a Plan Year only if it relates to Compensation that either would have been received by the Employee in that Plan Year (but for the deferral election) or is attributable to services performed by the Employee in that Plan Year and would have been received by the Employee within 2-1/2 months after the close of that Plan Year (but for the deferral election). D. A Basic Contribution shall be taken into account under the ADP test for a Plan Year only if it is contributed to the Trust before the last day of the twelve-month period immediately following the Plan Year to which the contribution relates and is allocated within the Plan Year to which the contribution relates. A Basic Contribution is considered allocated as of a date within a Plan Year if the allocation is not contingent on participation or performance of services after such date. E. The ADR and ADP shall be calculated to the nearest .01%. 8.3 Calculation and Correction of Excess Basic Contributions. Should the nondiscrimination tests of Section 8.1 not be satisfied with respect to Basic Contributions for any Plan Year, the Plan Administrator shall (1) determine the amount by which the ADP for the Highly Compensated Employee or Employees with the highest ADP for the Plan Year would need to be reduced to comply with the limit in Section 8.1, (2) convert the excess percentage amount determined under clause (1) into a dollar amount, and (3) reduce the Basic Contributions of the Highly Compensated Employee or Employees with the greatest dollar amount of Basic Contributions by the lesser of (A) the amount by which the Highly Compensated Employee's Basic Contributions exceeds the Basic Contributions of the Highly Compensated Employee with the next highest dollar amount of Basic Contributions, or (B) the amount of the excess dollar amount determined under clause (2). This process shall be repeated until the Basic Contributions of Highly Compensated Employees have been reduced by an amount equal to the excess dollar amount determined under clause (2). The Basic Contributions of any Highly Compensated Employee which must be reduced pursuant to this Section 8.3 shall be reduced (i) first, by distributing Basic Contributions not taken into account in determining Matching Contributions under Section 3.2, and (ii) then, by distributing Basic Contributions not described in (i), within 12 months of the close of the Plan Year with respect to which the reduction applies, and the provisions of Section 5.3 regarding the forfeiture of related Matching Contributions will apply. For purposes of determining the necessary reduction, Basic Contributions previously distributed pursuant to Section 3.7 will be treated as distributed under this Section 8.3. 8.4 Failure to Correct Excess Basic Contributions. Failure to correct excess Basic Contributions by the close of the Plan Year following the Plan Year for which they were made shall cause the cash or deferred arrangement to fail to satisfy the requirements of section 401(k)(3) of the Code for the Plan Year for which the excess Basic Contributions were made and for all subsequent years they remain in the Trust. Also, the Employer shall be liable for a 10% excise tax on the amount of excess Basic Contributions unless corrected by distribution or recharacterization of excess Basic Contributions within 2-1/2 months after the close of the Plan Year for which they were made. 8.5 Distribution of Excess Basic Contributions. Excess Basic Contributions shall be distributed to Members on whose behalf such excess Basic Contributions were made no later than the last day of the Plan Year following the Plan Year for which they were made. Excess Basic Contributions shall be adjusted in the manner utilized under Sections 4.2 and 4.3 to reflect income earned and losses incurred for the Plan Year on the Member's Basic Contributions Account. 8.6 Additional Basic and Matching Contributions. Additional Basic Contributions and Matching Contributions may be treated as Basic Contributions for purposes of the ADP test only if such contributions are nonforfeitable when made and subject to the same distribution restrictions that apply to elective contributions. Additional Basic Contributions and Matching Contributions which may be treated as Basic Contributions must satisfy these requirements without regard to whether they are actually taken into account as Basic Contributions for purposes of satisfying the ADP tests. Additional Basic Contributions and/or Matching Contributions may be treated as Basic Contributions only if the conditions described in section 1.401(k)-1(b)(5) of the Treasury regulations are satisfied. The amount of the Additional Basic Contribution for Non- Highly Compensated Employees, or the reduction in the allowable Basic Contribution deferral percentage for Highly Compensated Employees shall be such that at least one of the tests contained in Section 8.1 is satisfied. 8.7 Matching Contributions. Any Matching Contributions (and earnings thereon) made on account of an Excess Contribution or deferral in excess of the Dollar Limit shall be forfeited and shall be used to reduce Matching Contributions for the year of forfeiture. 8.8 Actual Contribution Percentage Test. The actual contribution percentage (ACP) of contributions deposited to the Plan for Members who are Highly Compensated Employees shall not exceed the greater of A. or B. as follows: A. the ACP of Members who are Non-Highly Compensated Employees for the preceding Plan Year times 1.25; or B. the ACP of Members who are Non-Highly Compensated Employees for the preceding Plan Year times 2.0, but not to exceed the ACP of Members who are Non-Highly Compensated Employees by more than 2 percentage points. In accordance with Treasury regulations, the Employer may elect to apply the tests of Section 8.8 based upon the ACP for Non-Highly Compensated Employees for the current Plan Year rather than the preceding Plan Year. 8.9 ACP Formula. A. The ACP for a specified group of Members for a Plan Year shall be the average of the Actual Contribution Ratios (ACR) calculated separately for each Member in such group. The Plan Administrator shall determine as soon as practicable after the end of the Plan Year whether the ACP for Highly Compensated Employees satisfies either of the tests contained in Section 8.8. In the event neither test is satisfied, the Employer may elect either of the following: (1) to reduce the allowable Matching Contribution for Highly Compensated Employees as provided in Sections 8.10 and 8.11; or (2) to make an additional contribution for all or a portion of Non-Highly Compensated Employees eligible to make contributions under Section 3.1 in a level dollar amount or a uniform percentage of Compensation, as the Employer shall elect, within the time period required by any applicable law or regulation. B. The Plan shall take into account the ACRs of all Eligible Employees for purposes of the ACP test. For this purpose, an Eligible Employee is any Employee who is directly or indirectly eligible to receive an allocation of Matching Contributions, including an Employee who would be eligible but for his failure to make required contributions and an Employee whose right to receive Matching Contributions has been suspended because of an election not to participate. In the case of an Eligible Employee who receives no Matching Contributions, the ACR that is to be included in determining the ACP is zero. C. A Matching Contribution shall be taken into account under the ACP test for a Plan Year only if it is made on account of the Eligible Employee's Basic Contributions for the Plan Year contributed to the Trust before the last day of the twelve-month period immediately following the Plan Year to which the contributions relate and is allocated within the Plan Year to which the contributions relate. Qualified Matching Contributions which are used to meet the requirements of section 401(k)(3)(A) of the Code are not taken into account. D. The ACR and ACP shall be calculated to the nearest .01%. E. Additional Basic Contributions may be treated as Matching Contributions for purposes of the ACP test of section 401(m) of the Code only if such contributions are nonforfeitable when made and distributable only under the following circumstances: (1) the Employee's Retirement, death, Disability or separation from service; (2) the termination of the Plan without establishment of a successor plan; (3) the Employee's attainment of age 59-1/2; (4) the sale or other disposition by a corporation to an unrelated corporation, which does not maintain the Plan, of substantially all of the assets used in a trade or business, but only with respect to Employees who continue employment with the acquiring corporation; and (5) the sale or other disposition by a corporation of its interest in a subsidiary to an unrelated entity which does not maintain the Plan, but only with respect to Employees who continue employment with the subsidiary. Additional Basic Contributions which may be treated as Matching Contributions must satisfy these requirements without regard to whether they are actually taken into account as Matching Contributions. 8.10 Calculation and Correction of Excess Aggregate Contributions. Should the nondiscrimination tests of Section 8.8 not be satisfied with respect to Matching Contributions for any Plan Year, the Plan Administrator shall (1) determine the amount by which the ACP for the Highly Compensated Employee or Employees with the highest ACP for the Plan Year would need to be reduced to comply with the limit in Section 8.8, (2) convert the excess percentage amount determined under clause (1) into a dollar amount, and (3) reduce the excess contributions of the Highly Compensated Employee or Employees with the greatest dollar amount of Matching Contributions by the lesser of (A) the amount by which the dollar amount of the affected Highly Compensated Employees' Matching Contributions exceeds the dollar amount of the Matching Contributions of the Highly Compensated Employee with the next highest dollar amount of Matching Contributions, or (B) the amount of the excess dollar amount determined under clause (2). This process will be repeated until the Matching Contributions of the Highly Compensated Employees has been reduced by an amount equal to the excess dollar amount determined under clause (2). The amount of Excess Aggregate Contributions for a Plan Year shall be determined only after first determining the excess contributions that are treated as Employee after-tax contributions (if any) due to recharacterization of such contributions made to another plan, aggregated with this Plan under Section 8.15, for the Plan Year. 8.11 Distribution of Excess Aggregate Contribution. Excess Aggregate Contributions shall be distributed to Members on whose behalf such Excess Aggregate Contributions were made, to the extent vested, no later than the last day of the Plan Year following the Plan Year for which they were made. Nonvested Excess Aggregate Contributions shall be applied as provided in Section 8.13. Excess Aggregate Contributions shall be adjusted in the manner utilized under Sections 4.2 and 4.3 to reflect income earned or loss as incurred for the Plan Year on the Member's Matching Contribution Account. 8.12 Additional Contributions. Basic Contributions and/or Additional Basic Contributions may be treated as Matching Contributions only if the conditions described in Treasury Regulation section 1.401(m)-1(b)(5) are satisfied. 8.13 Forfeitures. Amounts forfeited by Highly Compensated Employees under Section 8.11 shall be treated as an Annual Addition under the Plan and shall be applied to reduce future Employer Matching Contributions. No forfeiture arising under this Section shall be allocated to the account of any Highly Compensated Employee. 8.14 Aggregate Limit. The sum of the ADP and ACP for Highly Compensated Employees, determined after any corrections required to meet the ADP test or ACP test, shall not exceed the Aggregate Limit as defined herein. If the limit is exceeded, then either the ADR or ACR, as the Plan Administrator shall elect, for all affected Highly Compensated Employees, shall be reduced in accordance with Section 8.3. or 8.10., as applicable. The amounts of the reduction for each Highly Compensated Employee shall be treated as an Excess Contribution or Excess Aggregate Contribution, as appropriate. "Aggregate Limit" means the greater of A. or B. below: A. the sum of (1) 125% of the greater of the ADP for eligible Non-Highly Compensated Employees or the ACP for eligible Non-Highly Compensated Employees for the applicable Plan Year; and (2) two plus the lesser of such ADP or ACP, but not greater than 200% of the lesser amount; or B. the sum of (1) 125% of the lesser of the ADP for the eligible Non-Highly Compensated Employees or the ACP for the eligible Non-Highly Compensated Employees for the applicable Plan Year; and (2) two plus the greater of such ADP or ACP, but not greater than 200% of the greater amount. 8.15 Special Rules. A. The ADR and ACR for any Member who is a Highly Compensated Employee for the Plan Year and who is eligible to make Basic Contributions, or to have Matching Contributions allocated to his account, or to make after-tax contributions under two or more plans that are maintained by an Affiliated Company shall be determined as if all such contributions were made under a single plan. B. In the event that this Plan satisfies the requirements of sections 410(b) and 401(a)(4) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of sections 410(b) and 401(a)(4) of the Code only if aggregated with this Plan, then the contribution percentages and deferral percentages of Members shall be determined as if all such plans were a single plan. C. The determination and treatment of the contribution percentage of any Member shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. SECTION 9 TOP-HEAVY PROVISIONS 9.1 Top-Heavy Preemption. During any Plan Year in which this Plan is Top-Heavy, as defined in Section 9.2 below, the Plan shall be governed in accordance with this Section, which shall control over other provisions. 9.2 Top-Heavy Definitions. For purposes of this Section, the following definitions shall apply: A. "Compensation" means Compensation as defined in Section 1.14.C. for an entire Plan Year but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the Employee's gross income under section 125, 402(a)(8), 402(h) or 403(b) of the Code. B. "Contribution Rate" means the sum of contributions made by the Employer under this Plan, excluding salary deferral contributions made under this or any other plan maintained by the Employer on behalf of Non-Key Employees, plus forfeitures allocated to the Member's accounts for the Plan Year, divided by his Compensation for the Plan Year. To determine the Contribution Rate, the Plan Administrator shall consider all qualified defined contribution plans (within the meaning of the Code) maintained by the Employer as a single plan. C. "Determination Date" means the last day of the preceding Plan Year, except that in the initial Plan Year, Determination Date means the last day of such Plan Year. For purposes of testing the Top-Heavy status of Required and Permissive Aggregation Groups, Determination Date means the last day of each respective plan's Plan Year which occurs in the calendar year coincident with the Determination Date of this Plan. D. "Key Employee" means any Employee or former Employee (and the Beneficiaries of such Employee) who at any time during the "Determination Period" was an officer of the Employer if such individual's annual Compensation exceeds 50% of the dollar limitation under section 415(b)(1)(A) of the Code, an owner (or considered an owner under section 318 of the Code) of one of the ten largest interests in the employer if such individual's compensation exceeds 100% of the dollar limitation under section 415(c)(1)(A) of the Code, a 5% owner of the Employer, or a 1% owner of the Employer who has an annual compensation of more than $150,000. The "Determination Period" is the Plan Year containing the determination date and the four preceding Plan Years. The determination of who is a Key Employee will be made in accordance with section 416(i)(1) of the Code and the regulations thereunder. E. "Non-Key Employee" means any Employee currently eligible to participate in the Plan who is not a Key Employee. F. "Permissive Aggregation Group" means the Required Aggregation Group plus any other qualified plans maintained by the Affiliated Companies, but only if such resultant group would satisfy, in the aggregate, the requirements of sections 401(a)(4) and 410 of the Code. The Plan Administrator shall determine which plans to take into account in determining the Permissive Aggregation Group. G. "Required Aggregation Group" means: (1) each qualified plan of the Affiliated Companies (including any terminated or frozen plan that covered a Key Employee and was maintained within the five-year period ending on the Determination Date) in which at least one Key Employee participates during the Plan Year containing the Determination Date or any of the four preceding Plan Years; and (2) any other qualified plan of the Affiliated Companies which enables a plan described in (1) above, to meet the requirements of sections 401(a)(4) or 410 of the Code. H. "Top-Heavy" shall describe the status of the Plan in any Plan Year if the "Top-Heavy Ratio" as of the Determination Date exceeds 60%. (1) "Top-Heavy Ratio" is a fraction as of the Determination Date, as follows: Accrued Benefit of all Key Employees ------------------------------------ Accrued Benefits of all Employees (2) Notwithstanding (1) above, the Top-Heavy Ratio shall be computed pursuant to section 416(g) of the Code, and any regulations issued thereunder. (3) Solely for the purpose of determining if the Plan, or any other plan included in a Required Aggregation Group of which this Plan is a part, is Top-Heavy (within the meaning of section 416(g) of the Code), the accrued benefit of an Employee other than a Key Employee (within the meaning of section 416(i)(1) of the Code) shall be determined (a) under the method, if any, that uniformly applies for accrual purposes under all plans maintained by Affiliated Companies or, if there is no such method, then (b) as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rule of section 411(b)(1)(C) of the Code. (4) If an individual is not a Key Employee but was a Key Employee in a prior year or if any individual has not performed services for the Employer at any time during the five-year period ending on the Determination Date, any Accrued Benefit for such individual shall not be taken into account in determining the Top-Heavy status of the Plan. (5) The value of account balances and the present value of Accrued Benefits will be determined as of the most recent Valuation Date that falls within or ends with the twelve-month period ending on the Determination Date, except as provided in section 416 of the Code and the regulations thereunder for the first and second plan years of a defined benefit plan. (6) The Accrued Benefit shall include any part of any account balance distributed in the five-year period ending on the Determination Date. (7) The present value shall be based only on the interest rate and mortality rates specified in the defined benefit plan. (8) Rollover Contributions initiated by an Employee and accepted by this Plan will not be considered part of a Member's Accrued Benefit for purposes of computing the Top-Heavy Ratio if the Rollover Contribution came from a plan not maintained by the Employer or an Affiliated Company. 9.3 Aggregation of Plans. All Required Aggregation Groups shall be considered (pursuant to section 416(g) of the Code) with this Plan in determining whether this Plan is Top-Heavy. A. If such aggregation constitutes a Top-Heavy group, each plan so aggregated shall be considered Top-Heavy. B. If such aggregation does not constitute a Top-Heavy group, none of the plans so aggregated shall be considered Top-Heavy. At the direction of the Plan Administrator and subject to the restrictions of sections 401(a)(4) and 410 of the Code, Permissive Aggregation Groups may be considered with this Plan plus any Required Aggregation Groups to determine whether such group is Top-Heavy. If such aggregation does not constitute a Top-Heavy group, none of the plans so aggregated shall be considered Top-Heavy. 9.4 Minimum Contribution Rate. Subject to Section 9.6 below, for any Plan Year in which this Plan is Top-Heavy, a minimum contribution shall be made for each Non-Key Employee as of the last day of the Plan Year which shall equal the lesser of: A. 3% of Compensation; or B. the highest Contribution Rate received by a Key Employee in that Plan Year. This Top-Heavy Contribution shall be made irrespective of such Non-Key Employee's Hours of Service, Compensation or failure to make contributions, as applicable hereunder. 9.5 Deposit of Minimum Contribution. The Plan Administrator shall deposit any minimum contribution made under this Section to a "Top-Heavy Contribution Account" for each Non-Key Employee. Such account shall become part of his Accrued Benefit and shall vest pursuant to Section 5.1. 9.6 Combined Defined Benefit and Defined Contribution Plans. Effective prior to January 1, 2000, in the event that the Employer maintains a defined benefit and a defined contribution plan, A. and the defined benefit plan benefits a Key Employee and depends on this Plan to satisfy sections 401(a)(4) and 410 of the Code, the minimum Contribution Rate for Non-Key Employees hereunder shall be 5% irrespective of the Contribution Rate for Key Employees (unless the Employee provides for the minimum required Top-Heavy benefit accrual for the Plan Year under the defined benefit plan); and B. the figure "1.0" shall be substituted for the figure "1.25" as it applies in Section 3.8.E. if: (1) the Top-Heavy Ratio exceeds 90%, or (2) the Plan is Top-Heavy for the Plan Year, and the Contribution Rate under Section 9.4 is less than 7-1/2% (unless the Employer provides for the minimum required Top-Heavy benefit accrual for the Plan Year under the defined benefit plan). SECTION 10 DESIGNATION OF BENEFICIARY 10.1 Named Beneficiary. Each Member may designate on a form filed with the Plan Administrator a Beneficiary to whom, in the event of the Member's death, all benefits or any unpaid balance of benefits shall be payable. However, each married Member who designates a Beneficiary other than his Spouse must provide the Plan Administrator with a spousal consent to the designation of such other Beneficiary. Such spousal consent shall set forth the effects of such waiver and must be either notarized or witnessed by a Plan representative. Subject to such spousal consent, the Beneficiary so designated may be changed by the Member at any time. Notwithstanding the foregoing, if the Member establishes to the satisfaction of a Plan representative that such written consent may not be obtained because there is no Spouse or the Spouse cannot be located, the designation shall be valid. The facts as shown by the records of the Plan Administrator at the time of death shall be conclusive as to the identity of the proper payee and the amount properly payable and payment made in accordance with such facts shall constitute a complete discharge of any and all obligations hereunder. 10.2 No Named Beneficiary. If no beneficiary designation is on file with the Plan Administrator at the time of death of the Member, or if such designation is not effective for any reason, then such death benefit shall be payable to the deceased Member's Spouse, if living. If such Spouse is not living, payment shall be made to the deceased Member's estate. SECTION 11 MANAGEMENT OF THE FUND 11.1 Contribution Deposited to Trust. All contributions to the Plan by the Employer and Employees shall be committed in trust to the Trustee selected by the Plan Sponsor subject to the terms of the Trust created by the Trust Agreement, to be held, managed, and disposed of by the Trustee in accordance with the terms of the Trust and this Plan. The Trustee selected may be changed from time to time by the Plan Sponsor. 11.2 No Reversion to Employer. The Trust shall contain such provisions as shall render it impossible, except as is provided under Sections 3.9 and 12.3, for any part of the corpus of the Trust or income thereon to be at any time used for, or diverted to, purposes other than for the exclusive benefit of Members or their Beneficiaries. SECTION 12 DISCONTINUANCE AND LIABILITIES 12.1 Termination. The Plan may be terminated, in whole or in part, at any time and for any reason by the Plan Sponsor, but only upon condition that such action is taken under the Trust Agreement or otherwise, as shall render it impossible at any time under the Trust for any part of the corpus of the Trust or income thereon to be at any time used for, or diverted to purposes other than for the exclusive benefit of, active and retired employees, except as is provided under Sections 3.9 and 12.3. If the Plan is terminated the Fund shall be held for distribution by the Trustee, who shall distribute to the Members then participating in the Fund the full amount standing to their credit on the date of such termination, less the administrative costs to the Trustee for such distribution, in accordance with the methods specified under Section 6. Whole or partial termination of the Plan shall result in full and immediate vesting in each affected Member of his entire Accrued Benefit, and there shall not thereafter be any forfeitures with respect to any such affected Member for any reason. Termination of the Plan shall be effective as of the date specified by a written instrument of termination executed by the Board or its delegates. In the event that the Employer sponsors any other defined contribution plan, if a Member does not consent to a distribution upon termination of this Plan, that Member's Accrued Benefit shall be transferred to the other aforesaid defined contribution plan. Notwithstanding the foregoing, if the Employer sponsors any other defined contribution plan, all salary deferral contributions will be transferred to said plan upon the termination of this Plan. 12.2 No Liability for Employer. The Employer shall have no liability with respect to the payment of benefits or otherwise under the Plan, except to pay over to the Trustee as provided in the Plan such contributions as are made by the Employer and any and all contributions made by the Members. Further, the Employer shall have no liability with respect to the administration of the Trust or of the Fund held by the Trustee, and each Member and/or Beneficiary shall look solely to the Fund for any payments or benefits under the Plan. 12.3 Administrative Expenses. The Employer may elect to pay all administrative expenses of the Plan, including compensation of the Trustee, consultants, auditor and counsel, but the Employer shall not be obliged to pay such expenses. If Employer elects not to pay such expenses, they shall be paid from the Trust. Any expenses directly relating to the investments of the Trust, such as taxes, commissions, and registration charges, shall be paid from the Trust. 12.4 Nonforfeitability Due to Termination. Upon termination, partial termination or upon complete discontinuance of contributions under the Plan, the rights of all affected Employees to their Accrued Benefits accrued to the date of such termination, partial termination or discontinuance, shall become nonforfeitable. 12.5 Exclusive Benefit Rule. This Plan and Trust are for the exclusive benefits of the Members and their Beneficiaries. This Plan shall be interpreted in a manner consistent with this intent and with the intention of the Employer that the Trust satisfy those provisions of the Code relating to employees' trusts. 12.6 Mergers. In the case of any merger or consolidation of the Plan with, or transfer of Plan assets or liabilities to, any other plan, provisions shall be made so that each Member in the Plan on the date thereof (if the Plan then terminated) would receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately prior to the merger, consolidation or transfer (if the Plan had then terminated). 12.7 Non-Allocated Trust Assets. Any portion of the Fund which is unallocated at the time of termination of the Plan shall be allocated among Members of the Plan in a nondiscriminatory manner selected by the Plan Administrator. SECTION 13 ADMINISTRATION 13.1 Appointment of Plan Administrator. The Board may appoint an individual or committee to act as Plan Administrator. The Plan Administrator may be removed by the Board at any time and may resign at any time by submitting a written resignation to the Board. A new Plan Administrator shall be appointed as soon as practicable in the event that the Plan Administrator is removed or resigns from his position. If no Plan Administrator is appointed, the Plan Sponsor shall act as Plan Administrator through its officers and employees. 13.2 Responsibilities and Duties. The Plan Administrator shall report annually to the Board concerning the performance of the Trustee. The Plan Administrator shall administer the Plan for the exclusive benefit of the Employees, Members and their Beneficiaries and shall have full discretionary power and authority to make factual determinations, to interpret the Plan, to make benefit eligibility determinations, and to determine all questions arising in the administration, interpretation and application of the Plan. The Plan Administrator shall correct any defect, reconcile any inconsistency, or supply any omission with respect to the Plan. Any such corrections, reconciliations, interpretations, determinations and completions of the Plan provisions by the Plan Administrator shall be final, binding and conclusive upon all parties, including the Employer, the Employees, their families, dependents and any alternate payees. The Plan Administrator shall have such powers and duties as may be necessary to discharge its duties hereunder, including, but not limited to, the power and duty to: A. Determine all questions relating to the eligibility of Employees to participate or remain a Member hereunder; B. Make and enforce such rules and regulations as it shall deem necessary or proper for the efficient administration of the Plan; C. Make certain ministerial, administrative or technical amendments to the Plan; D. Interpret the Plan and to decide any and all matters arising hereunder, including the right to remedy possible ambiguities, inconsistencies, or omissions; provided, however, that all such interpretations and decisions shall be applied in a uniform manner to all Employees similarly situated; E. Compute or cause to be computed the amount of benefit which shall be payable to any Member or Beneficiary in accordance with the provisions of the Plan; F. Authorize disbursements from the Trust, provided, however, that any instructions of the Plan Administrator to the Trustee shall be evidenced in writing and signed by two members of the Plan Administrator delegated with such authority by a majority of the Plan Administrator; G. Employ such advisors (including but not limited to attorneys and independent public accountants) and such other technical and clerical personnel as may be required in the Plan Administrator's discretion for the proper administration of the Plan; H. Designate, by written instrument maintained in the Company's files, persons to carry out all or part of the responsibilities of the Plan Administrator. Such persons shall have such authority as may be delegated to them in such instruments; I. Maintain all necessary records for the administration of the Plan; J. Prepare and file, or cause to be prepared and filed, all information and reports to the Internal Revenue Service and the Department of Labor, and to supply such information and notices to Members, Beneficiaries, and others as may be required by applicable federal and state law; K. Assist any Member regarding his rights, benefits, or elections available under the Plan; and L. Review the activities of any person designated to carry out the powers or duties of the Plan Administrator and to report to the Board at least once each year on the overall administration of the Plan. 13.3 Claims Procedure. Each Member or Beneficiary must claim any benefit to which he believes he is entitled under this Plan by a written notification to the Plan Administrator. The Plan Administrator shall decide a claim within 90 days of the date on which the claim is filed, unless special circumstances require a longer period for adjudication and the claimant is notified in writing of the reasons for an extension of time; provided, however, that no extensions shall be permitted beyond 90 days after the date on which the claimant received notice of the extension of time from the Plan Administrator. If the Plan Administrator fails to notify the claimant of his decision to grant or deny such claim within the time specified by this paragraph, such claim shall be deemed to have been denied by the Plan Administrator and the review procedure described below shall become available to the claimant. If a claim is denied, it must be denied within a reasonable period of time, and be contained in a written notice stating the following: A. the specific reason for the denial; B. a specific reference to the Plan provision on which the denial is based; C. a description of additional information necessary for the claimant to perfect his claim, and an explanation of why such material is necessary; and D. an explanation of the Plan's claim review procedure. The claimant shall have 60 days to request a review of the denial of his claim by the Plan Administrator who shall provide a full and fair review. The request for review must be written and submitted to the same person who handles initial claims. The claimant may review pertinent documents, and he may submit issues and comments in writing. The decision by the Plan Administrator with respect to the review must be given within 60 days after receipt of the request, unless special circumstances require an extension (such as for a hearing). In no event shall the decision be delayed beyond 120 days after receipt of the request for review. The decision shall be written in a manner calculated to be understood by the claimant, and it shall include specific reasons and refer to specific Plan provisions as to its effect. 13.4 Trustee Has Authority to Invest. All Funds of the Plan shall be invested by the Trustee in accordance with the provisions of the Plan and Trust Agreement. To the extent that individual Members are permitted to direct investment of their account balances, and to the extent a Member exercises such right to direct investment, the Trustee shall be relieved from any liability therefor. 13.5 Indemnification. The Plan Sponsor shall indemnify any individual who is serving as Plan Administrator or who is acting on behalf of the Plan Sponsor in this capacity from any and all liability that may arise by reason of his action or failure to act concerning this Plan, excepting any willful misconduct or criminal acts. 13.6 Removal For Personal Involvement. No individual may participate in the consideration of any matter of or question concerning the Plan which specifically and uniquely relates to him because of his participation under the Plan. SECTION 14 AMENDMENTS 14.1 Amendment Restrictions. The provisions of this Plan may be amended at any time and from time to time by written instrument of amendment executed by the Board on behalf of the Plan Sponsor or by any representative so authorized pursuant to this Section 14, provided that: A. no such amendment shall be effective unless this Plan, as so amended, shall be for the exclusive benefit of persons in, or formerly in, the employ of Employer, or their Beneficiaries; B. no such amendment shall operate to deprive a Member of any rights or benefits irrevocably vested in him under the Plan prior to the later of the date such amendment is adopted or becomes effective; C. no such amendment shall be effective to the extent that it decreases a Member's Accrued Benefit. For purposes of this Section 14, a Plan amendment which has the effect of decreasing a Member's Accrued Benefit or eliminating an optional form of benefit, with respect to benefits attributable to service before the amendment, shall be treated as reducing an Accrued Benefit. If any amendment shall be necessary or desirable to conform to the provisions and requirements of the Code or any amendment thereto, or any regulation issued pursuant thereto, no such amendment shall be considered prejudicial to the interest of a Member or his Beneficiary, or a diversion of any part of Fund to a purpose other than for their exclusive benefit. 14.2 Amending the Plan. The Board may amend the Plan at any time by resolution or by such other action permitted by the Plan Sponsor's charter, by-laws, or such other method permitted by the laws of the state of incorporation of the Plan Sponsor. A copy of any such amendment shall be provided to the Trustee and the Plan Administrator. 14.3 Retroactive Amendments. Any modification or amendment of the Plan may be made retroactive if such retroactivity is deemed to be necessary in order for the Plan to conform to or satisfy the conditions of any law, governmental regulations or ruling, or to meet the requirements of applicable sections of the Code or the corresponding regulations. SECTION 15 MISCELLANEOUS 15.1 "Spendthrift" Provision. Except with respect to a federal tax levy under section 6331 of the Code, federal income tax withholding, withdrawals and loans under Section 7, and, effective August 5, 1997, offsets for judgments and settlements described in section 401(a)(13)(C) of the Code, no benefit under the Plan shall be subject in any manner to anticipation, pledge, encumbrance, alienation, levy or assignment, nor to seizure, attachment or other legal process for the debts of any Employee, Member or Beneficiary, unless required by law. 15.2 QDRO Exception. Notwithstanding Section 15.1, in the event that a domestic relations order (as defined by section 414(p) of the Code) is issued with respect to any Member, the Plan Administrator shall notify the Member and the alternate payee(s) of the order received and shall separately account for the alternate payee's interest, in the name and for the benefit of, the alternate payee as if the order received were a Qualified Domestic Relations Order ("QDRO") (as defined by section 414(p) of the Code). Upon receipt of the domestic relations order, the Plan Administrator shall review such order, in accordance with written administrative procedures, to determine if such order is a QDRO. Within 18 months of the receipt of the order, the Plan Administrator shall proceed with either A. or B. as follows: A. if the order is determined to be a QDRO, the Plan Administrator shall pay the alternate payee(s), notwithstanding Section 6, (i) at the time specified in such order or, if the order permits, (ii) as soon after the Plan Administrator approves the order as is administratively feasible provided such distribution is permitted under applicable provisions of the Code; or B. if the order is determined not to be a QDRO, or the issue remains undetermined, the Plan Administrator shall reinstate the portions of the Member's Accrued Benefit segregated in accordance with the above and, if appropriate under Section 6 of the Plan, pay such amounts to the Member or Beneficiary(ies) who are otherwise entitled to such benefit. If, 18 months after issuance of the order, a determination is made that the order is a QDRO, the determination shall be applied prospectively only. 15.3 No Guarantee of Employment. Nothing contained in this Plan or the Trust shall be held or construed to create any liability upon the Employer to retain any Employee in its employ. The Employer reserves the right to discontinue the services of any Employee without any liability except for salary or wages that may be due and unpaid whenever, in its judgment, its best interests so require. 15.4 Controlling Law. The Plan shall be construed, administered and governed in all respects in accordance with the laws of the Commonwealth of Pennsylvania to the extent such laws are not superseded by federal law. If any provision herein is held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. CHARMING SHOPPES, INC. ATTEST: DATE:_________________________ _______________________ By:_____________________________ Secretary Authorized Officer EX-21 9 exh21.txt SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF REGISTRANT The following are the Company's subsidiaries, each of which is directly and wholly owned by its immediate parent, Charming Shoppes, Inc. All subsidiaries are included in the consolidated financial statements of Charming Shoppes, Inc., and subsidiaries, except as noted.
State or Jurisdiction Of Name Organization - ---- ------------ ADDED DIMENSIONS #5542, INC. (1) (2) VA C.S.A.C., INC. (2) DE C.S.F., CORP. (2) DE C.S.I.C., INC. (2) DE CATHERINES #5118, INC. (1) (2) VA CATHERINES #5173, INC. (1) (2) GA CATHERINES #5179, INC. (1) (2) SC CATHERINES #5210, INC. (1) (2) GA CATHERINES #5267, INC. (1) (2) AZ CATHERINES #5268, INC. (1) (2) AZ CATHERINES #5339, INC. (1) (2) SC CATHERINES #5340, INC. (1) (2) PA CATHERINES #5342, INC. PA CATHERINES #5343, INC. (1) (2) RI CATHERINES #5345 OF COLONIAL HEIGHTS, INC. VA CATHERINES #5346, INC. (1) (2) LA CATHERINES #5349, INC. (1) (2) TN CATHERINES #5350, INC. (1) MD CATHERINES #5351, INC. (1) (2) MO CATHERINES #5352, INC. (1) (2) GA CATHERINES #5353, INC. (1) (2) GA CATHERINES #5355, INC. (1) (2) PA CATHERINES #5356, INC. VA CATHERINES #5357, INC. PA CATHERINES #5358, INC. (1) (2) CA CATHERINES #5359, INC. (1) SC CATHERINES #5360, INC. (1) (2) MD CATHERINES #5361, INC. (1) (2) MA CATHERINES #5362, INC. (1) (2) IL CATHERINES #5363, INC. (1) AL CATHERINES #5364 OF BUFFALO, INC. (1) (2) NY CATHERINES #5365, INC. (1) (2) CO CATHERINES #5366, INC. (1) (2) SC CATHERINES #5367 OF MIDDLETOWN, INC. (1) (2) NY CATHERINES #5368, INC. (1) (2) ND CATHERINES #5369, INC. (1) (2) MD CATHERINES #5370, INC. (1) (2) IL CATHERINES #5371, INC. (1) (2) OH CATHERINES #5372, INC. (1) (2) IA CATHERINES #5373, INC. (1) (2) OH CATHERINES #5374, INC. (1) (2) NJ CATHERINES #5375, INC. (1) (2) CA CATHERINES #5376, INC. (1) (2) NC CATHERINES #5379, INC. (1) (2) CT CATHERINES #5380, INC. (1) (2) OR CATHERINES #5381, INC. (1) (2) MO CATHERINES #5382 OF VESTAL, INC. (1) (2) NY CATHERINES #5383, INC. (1) (2) MA CATHERINES #5384, INC. (1) (2) CA CATHERINES #5386, INC. (1) (2) LA CATHERINES #5387, INC. (1) (2) SC CATHERINES #5388, INC. (1) (2) FL CATHERINES #5391, INC. (1) (2) MI CATHERINES #5394, INC. (1) (2) KY CATHERINES #5395, INC. (1) (2) FL CATHERINES #5396, INC. (1) LA CATHERINES #5397, INC. (1) (2) SC CATHERINES #5398, INC. (1) (2) LA CATHERINES #5796 OF POUGHKEEPSIE, INC. (1) (2) NY CATHERINES #5843, INC. (1) (2) NC CATHERINES #5844 OF BAYSHORE, INC. (1) (2) NY CATHERINES #5845, INC. (1) (2) NC CATHERINES #5846, INC. (1) (2) CA CATHERINES #5847, INC. (1) (2) CA CATHERINES #5848, INC. (1) (2) AR CATHERINES #5849, INC. (1) (2) WI CATHERINES #5850 OF SYRACUSE, INC. (1) (2) NY CATHERINES #5852, INC. (1) (2) PA CATHERINES #5854, INC. (1) (2) CO CATHERINES #5855, INC. (1) (2) WI CATHERINES #5856, INC. (1) (2) NJ CATHERINES #5857, INC. (1) (2) GA CATHERINES #5858, INC. (1) (2) IA CATHERINES #5859, INC. (1) (2) NC CATHERINES C.S.A.C., INC. (2) DE CATHERINES C.S.I.C., INC. (2) DE CATHERINES OF CALIFORNIA, INC. CA CATHERINES OF NEVADA, INC. NV CATHERINES OF PENNSYLVANIA, INC. TN CATHERINES PARTNERS - INDIANA, L.P. IN CATHERINES PARTNERS, L.P. TN CATHERINES STORES CORPORATION TN CATHERINES STORES OF INDIANA, INC. IN CATHERINES STORES OF TEXAS, INC. TX CATHERINES, INC. DE CATHERINES.COM, INC. (2) DE CATHERINES.COM, INC. (2) TN CHARM-FIN STORES, INC. (2) DE CHARMING J V, INC. (2) DE CHARMING SHOPPES OF CHESTER, INC. (2) PA CHARMING SHOPPES OF COLONIAL PARK, INC. PA CHARMING SHOPPES OF CUMBERLAND, INC. (2) PA CHARMING SHOPPES OF DELAWARE, INC. (2) PA CHARMING SHOPPES OF ECHELON, INC. NJ CHARMING SHOPPES OF NORRISTOWN, INC. (2) PA CHARMING SHOPPES OF TRENTON, INC. NJ CHARMING SHOPPES OF WOODBURY, INC (2) NJ CHARMING SHOPPES RECEIVABLES CORP. (2) DE CHARMING SHOPPES SELLER, INC. (2) DE CHARMING SHOPPES STREET, INC. (2) DE CHARMING SHOPPES, INC. (2) PA CHARMING SHOPPES/FASHION BUG OF OLEAN, INC. (2) PA COLUMBIA #2589 DEVOLPMENT CO, INC. TN COLUMBIA #3054 DEVELOPMENT CO., INC. (1) (2) SC COLUMBIA DEVELOPMENT CO., INC. (1) (2) TN CS INSURANCE LTD. (2) BERMUDA CS INVESTMENT COMPANY (2) DE CSBC, INC. (2) DE CSD ACQUISITION CORP. (2) DE CSHC, INC. (2) DE CSI CHARITIES, INC. (2) PA CSI INDUSTRIES, INC. (2) DE CSI INDUSTRIES, INC. (2) PA CSI-DR, INC. (2) DOM. REP. CSIM, INC. (2) DE DIVERSIFIED FASHIONS, INC. (2) PA ERICOOL CO LTD. (2) HONG KONG EVATONE TRADING LTD. (2) HONG KONG F.B. PLUS WOMEN'S APPAREL OF JOHNSON CITY, INC. (2) PA F.B. PLUS WOMEN'S APPAREL OF KINGSTON, INC. PA F.B. PLUS WOMEN'S APPAREL OF PINE PLAZA, INC. (2) PA F.B. PLUS WOMEN'S APPAREL OF RIVERSIDE, INC. (2) PA F.B. PLUS WOMEN'S APPAREL OF RIVERSIDE, INC. (2) NY F.B. PLUS WOMEN'S APPAREL OF WEST SENECA, INC. (2) NY F.B. WOMEN'S APPAREL #2481 OF RIVERSIDE, INC. (2) PA F.B. WOMEN'S APPAREL #3097 OF NEW HARTFORD, INC. (1) (2) NY F.B. WOMEN'S APPAREL OF CLAY, INC. (2) PA F.B. WOMEN'S APPAREL OF DELMAR, INC. PA F.B. WOMEN'S APPAREL OF DEPEW, INC. PA F.B. WOMEN'S APPAREL OF ONEONTA, INC. PA F.B. WOMEN'S APPAREL OF PANORAMA PLAZA, INC. NY F.B. WOMEN'S APPAREL OF YORKTOWN HEIGHTS, INC. (2) PA FASHION ACCEPTANCE CORP (2) DE FASHION BUG #108, INC. MI FASHION BUG #123, INC. (2) NJ FASHION BUG #138, INC. (2) IN FASHION BUG #139, INC. IN FASHION BUG #141, INC. NJ FASHION BUG #144, INC. IN FASHION BUG #157, INC. OH FASHION BUG #168, INC. (2) IN FASHION BUG #2003, INC. OH FASHION BUG #2004, INC. MI FASHION BUG #2006, INC. KY FASHION BUG #2007, INC. (1) (2) LA FASHION BUG #2008, INC. (2) PA FASHION BUG #2009, INC. PA FASHION BUG #2010, INC. MI FASHION BUG #2011, INC. MD FASHION BUG #2014, INC. MI FASHION BUG #2015, INC. IN FASHION BUG #2018, INC. MI FASHION BUG #2019, INC. (2) ND FASHION BUG #2020, INC. VA FASHION BUG #2021, INC. OH FASHION BUG #2022, INC. IN FASHION BUG #2023, INC. PA FASHION BUG #2026, INC. (2) PA FASHION BUG #2027, INC. NE FASHION BUG #2028, INC. GA FASHION BUG #2029, INC. NH FASHION BUG #2030, INC. PA FASHION BUG #2031, INC. KS FASHION BUG #2032, INC. MI FASHION BUG #2034, INC. MO FASHION BUG #2036, INC. OH FASHION BUG #2037, INC. MI FASHION BUG #2038, INC. (1) (2) KY FASHION BUG #2039, INC. OH FASHION BUG #2040, INC. KY FASHION BUG #2040, INC. (1) (2) OH FASHION BUG #2043, INC. IN FASHION BUG #2044, INC. NC FASHION BUG #2045 OF EAST GREENBUSH, INC. NY FASHION BUG #2047, INC. MA FASHION BUG #2048, INC. (2) KY FASHION BUG #2049, INC. MD FASHION BUG #2050 OF MASSENA, INC. NY FASHION BUG #2051, INC. IL FASHION BUG #2052, INC. MN FASHION BUG #2053, INC. MO FASHION BUG #2055, INC. (1) (2) MA FASHION BUG #2056, INC. (1) (2) OH FASHION BUG #2057, INC. CT FASHION BUG #2058, INC. MA FASHION BUG #2063, INC. KS FASHION BUG #2064, INC. (2) OH FASHION BUG #2064, INC. (1) (2) KY FASHION BUG #2065, INC. GA FASHION BUG #2067, INC. TN FASHION BUG #2068, INC. ME FASHION BUG #2069, INC. AR FASHION BUG #2070 OF BROOKLYN, INC. NY FASHION BUG #2072 OF ISLANDIA, INC. NY FASHION BUG #2074, INC. KY FASHION BUG #2075, INC. IL FASHION BUG #2077, INC. MI FASHION BUG #2078, INC. MI FASHION BUG #2079, INC, OH FASHION BUG #2080, INC. OH FASHION BUG #2081 OF OGDENSBURG, INC. NY FASHION BUG #2082, INC. NJ FASHION BUG #2084, INC. OH FASHION BUG #2085, INC. KS FASHION BUG #2086, INC. IL FASHION BUG #2088, INC. CT FASHION BUG #2090, INC. FL FASHION BUG #2091, INC. FL FASHION BUG #2092, INC. WI FASHION BUG #2093, INC. IL FASHION BUG #2095, INC. OH FASHION BUG #2096, INC. MI FASHION BUG #2097, INC. NJ FASHION BUG #210, INC. (1) (2) KY FASHION BUG #2100 OF BATAVIA, INC. NY FASHION BUG #2101, INC. PA FASHION BUG #2102, INC. WA FASHION BUG #2103, INC. WA FASHION BUG #2104, INC. (1) (2) MI FASHION BUG #2105, INC. (2) NH FASHION BUG #2106 OF DEPEW, INC. NY FASHION BUG #2109, INC. GA FASHION BUG #2111, INC. (2) NJ FASHION BUG #2112, INC. FL FASHION BUG #2113, INC. GA FASHION BUG #2114, INC. (2) MO FASHION BUG #2115, INC. WI FASHION BUG #2117, INC. (1) (2) OH FASHION BUG #2118 OF NEWBURGH, INC. NY FASHION BUG #2119, INC. OH FASHION BUG #2120, INC. OH FASHION BUG #2121, INC. IN FASHION BUG #2123, INC. VA FASHION BUG #2124, INC. PA FASHION BUG #2125, INC. WA FASHION BUG #2126, INC. MI FASHION BUG #2127, INC. MI FASHION BUG #2128, INC. CT FASHION BUG #2129, INC. OH FASHION BUG #2130, INC. IL FASHION BUG #2131, INC. WI FASHION BUG #2132, INC. MO FASHION BUG #2133, INC. WI FASHION BUG #2134, INC. IL FASHION BUG #2135, INC. VT FASHION BUG #2136, INC. (1) (2) FL FASHION BUG #2137, INC. IN FASHION BUG #2138, INC. OH FASHION BUG #2139, INC. OR FASHION BUG #2140, INC. (2) VA FASHION BUG #2141, INC. MI FASHION BUG #2143, INC. NE FASHION BUG #2144, INC. (2) VA FASHION BUG #2145, INC. MI FASHION BUG #2147, INC. WI FASHION BUG #2148, INC. WI FASHION BUG #2149, INC. MA FASHION BUG #2150, INC. NH FASHION BUG #2151, INC. NH FASHION BUG #2152, INC. (2) VA FASHION BUG #2153, INC. (2) TN FASHION BUG #2154, INC. WI FASHION BUG #2155, INC. OH FASHION BUG #2156, INC. RI FASHION BUG #2157 OF ONEIDA, INC. NY FASHION BUG #2158, INC. MO FASHION BUG #2159, INC. (2) FL FASHION BUG #2161, INC. (1) (2) NE FASHION BUG #2162, INC. NC FASHION BUG #2163, INC. NC FASHION BUG #2164, INC. (2) FL FASHION BUG #2165, INC. (2) FL FASHION BUG #2166, INC. IA FASHION BUG #2167, INC. WA FASHION BUG #2169, INC. WA FASHION BUG #2170, INC. WA FASHION BUG #2171, INC. PA FASHION BUG #2172, INC. (2) KY FASHION BUG #2173, INC. IN FASHION BUG #2174, INC. MI FASHION BUG #2175, INC. CA FASHION BUG #2177, INC. (2) PA FASHION BUG #2180, INC. (2) FL FASHION BUG #2181, INC. CA FASHION BUG #2182, INC. CA FASHION BUG #2183, INC. OH FASHION BUG #2184 of WEBSTER, INC. NY FASHION BUG #2185, INC. OH FASHION BUG #2186, INC. OR FASHION BUG #2187, INC. MN FASHION BUG #2189, INC. IN FASHION BUG #2190, INC. WI FASHION BUG #2192, INC. OH FASHION BUG #2193, INC. MA FASHION BUG #2194, INC. WI FASHION BUG #2195, INC. WV FASHION BUG #2196 OF NEWARK, INC. NY FASHION BUG #2197, INC. (2) OH FASHION BUG #2198, INC. IN FASHION BUG #2199, INC. MD FASHION BUG #2201, INC. (2) WA FASHION BUG #2202, INC. (2) CA FASHION BUG #2203, INC. ME FASHION BUG #2204 OF HORNELL, INC. NY FASHION BUG #2204, INC. (1) (2) WI FASHION BUG #2206, INC. NH FASHION BUG #2208, INC. (2) VA FASHION BUG #2209, INC. IL FASHION BUG #2210 OF KINGSTON, INC. NY FASHION BUG #2211, INC. (2) MD FASHION BUG #2212, INC. WI FASHION BUG #2214, INC. MN FASHION BUG #2215, INC. FL FASHION BUG #2215, INC. (1) (2) MA FASHION BUG #2217, INC. ID FASHION BUG #2218, INC. MN FASHION BUG #2219, INC. (2) WA FASHION BUG #2220, INC. OH FASHION BUG #2221, INC. OH FASHION BUG #2222, INC. KY FASHION BUG #2223, INC. (2) ID FASHION BUG #2224, INC. WA FASHION BUG #2226, INC. MI FASHION BUG #2227, INC. MI FASHION BUG #2228, INC. WI FASHION BUG #2229, INC. MI FASHION BUG #2230, INC. MI FASHION BUG #2231, INC. MI FASHION BUG #2232, INC. MI FASHION BUG #2233, INC. ME FASHION BUG #2235, INC. IN FASHION BUG #2236, INC. (2) MN FASHION BUG #2237, INC. PA FASHION BUG #2238, INC. MA FASHION BUG #2239, INC. OR FASHION BUG #2240, INC. ID FASHION BUG #2242, INC. PA FASHION BUG #2243, INC. WA FASHION BUG #2244 OF CANANDAIGUA, INC. NY FASHION BUG #2245, INC. MD FASHION BUG #2246, INC. (2) MD FASHION BUG #2247, INC. OH FASHION BUG #2248, INC. (2) MN FASHION BUG #2249, INC. OH FASHION BUG #2250, INC. OH FASHION BUG #2251, INC. (2) CA FASHION BUG #2252 OF BAYSHORE, INC. (2) NY FASHION BUG #2253, INC. (2) CA FASHION BUG #2254, INC. WI FASHION BUG #2255, INC. MD FASHION BUG #2256, INC. (2) CA FASHION BUG #2257, INC. IL FASHION BUG #2258, INC. IL FASHION BUG #2259, INC. IL FASHION BUG #2260, INC. IL FASHION BUG #2262, INC. (2) WV FASHION BUG #2263, INC. IN FASHION BUG #2264, INC. OH FASHION BUG #2266, INC. IL FASHION BUG #2270, INC. (2) OR FASHION BUG #2271, INC. (1) (2) TX FASHION BUG #2272, INC. (1) (2) TX FASHION BUG #2273, INC. (1) (2) TX FASHION BUG #2274, INC. (2) CA FASHION BUG #2275, INC. MI FASHION BUG #2276, INC. MI FASHION BUG #2277, INC. (1) (2) VA FASHION BUG #2278, INC. NC FASHION BUG #2279, INC. WI FASHION BUG #2280, INC. WI FASHION BUG #2281, INC. OH FASHION BUG #2283, INC. (2) OH FASHION BUG #2284, INC. OH FASHION BUG #2285, INC. CA FASHION BUG #2286, INC. (2) WI FASHION BUG #2288, INC. (2) WA FASHION BUG #2289 OF GARDEN CITY, INC. NY FASHION BUG #229, INC. (2) MD FASHION BUG #2290, INC. RI FASHION BUG #2291, INC. IN FASHION BUG #2292, INC. MI FASHION BUG #2293, INC. OH FASHION BUG #2295, INC. WI FASHION BUG #2296, INC. MA FASHION BUG #2297, INC. MI FASHION BUG #2298, INC. (1) (2) WV FASHION BUG #2299, INC. WV FASHION BUG #2300, INC. (2) FL FASHION BUG #2301, INC. FL FASHION BUG #2302, INC. NC FASHION BUG #2303, INC. (1) (2) NJ FASHION BUG #2304, INC. VA FASHION BUG #2305, INC. PA FASHION BUG #2306, INC. (2) CA FASHION BUG #2309, INC. IN FASHION BUG #2310, INC. (1) (2) CA FASHION BUG #2311, INC. (2) GA FASHION BUG #2313, INC. WA FASHION BUG #2314, INC. IN FASHION BUG #2315, INC. WI FASHION BUG #2318, INC. (2) DE FASHION BUG #2320, INC. (2) TN FASHION BUG #2322, INC. ME FASHION BUG #2325, INC. MI FASHION BUG #2326, INC. PA FASHION BUG #2328, INC. MN FASHION BUG #2329, INC. (2) CA FASHION BUG #2330, INC. PA FASHION BUG #2332, INC. VA FASHION BUG #2334, INC. (2) CA FASHION BUG #2335, INC. CA FASHION BUG #2337, INC. OH FASHION BUG #2338, INC. WI FASHION BUG #2339, INC. RI FASHION BUG #2340, INC. MI FASHION BUG #2343, INC. WI FASHION BUG #2345, INC. PA FASHION BUG #2346, INC. CT FASHION BUG #2347, INC. NH FASHION BUG #2348, INC. WA FASHION BUG #2349, INC. IN FASHION BUG #2350, INC. NH FASHION BUG #2351, INC. MN FASHION BUG #2352, INC. WV FASHION BUG #2353, INC. MI FASHION BUG #2354, INC. CA FASHION BUG #2355, INC. PA FASHION BUG #2356, INC. (2) GA FASHION BUG #2357, INC. MI FASHION BUG #2358, INC. ME FASHION BUG #2359, INC. PA FASHION BUG #2360, INC. PA FASHION BUG #2362, INC. PA FASHION BUG #2364 OF NORTH TONAWANDA, INC. NY FASHION BUG #2366, INC. (2) NV FASHION BUG #2368, INC. (2) PA FASHION BUG #2369, INC. SC FASHION BUG #2370 OF MALONE, INC. NY FASHION BUG #2371 OF POUGHKEEPSIE, INC. (2) NY FASHION BUG #2373, INC. (2) ME FASHION BUG #2374, INC. WI FASHION BUG #2375, INC. PA FASHION BUG #2376, INC. IL FASHION BUG #2377, INC. NH FASHION BUG #2378, INC. NV FASHION BUG #2379, INC. MA FASHION BUG #2380, INC. NC FASHION BUG #2382, INC. TN FASHION BUG #2384 OF ROCHESTER, INC. NY FASHION BUG #2385, INC. ME FASHION BUG #2387, INC. (2) PA FASHION BUG #2388, INC. OR FASHION BUG #2389, INC. PA FASHION BUG #2390, INC. ND FASHION BUG #2391, INC. VA FASHION BUG #2392, INC. (2) NJ FASHION BUG #2393, INC. VT FASHION BUG #2394, INC. IN FASHION BUG #2395, INC. MD FASHION BUG #2396 OF BIG FLATS, INC. NY FASHION BUG #2397, INC. CT FASHION BUG #2398, INC. NH FASHION BUG #2399, INC. MI FASHION BUG #2403, INC. CT FASHION BUG #2404, INC. MD FASHION BUG #2405, INC. (2) NC FASHION BUG #2406, INC. MO FASHION BUG #2407, INC. NH FASHION BUG #2409, INC. PA FASHION BUG #2411, INC. MA FASHION BUG #2412, INC. MA FASHION BUG #2413, INC. (2) CT FASHION BUG #2414, INC. GA FASHION BUG #2415, INC. PA FASHION BUG #2416, INC. MA FASHION BUG #2418, INC. (2) SC FASHION BUG #2419, INC. (2) NJ FASHION BUG #2420, INC. MO FASHION BUG #2421, INC. NV FASHION BUG #2422, INC. WA FASHION BUG #2423, INC. MA FASHION BUG #2424, INC. MN FASHION BUG #2425, INC. CT FASHION BUG #2426 OF EAST AURORA, INC. NY FASHION BUG #2428, INC. (2) KY FASHION BUG #2429, INC. IN FASHION BUG #2430, INC. (2) MN FASHION BUG #2431, INC. (2) SD FASHION BUG #2432, INC. PA FASHION BUG #2435, INC. OH FASHION BUG #2436, INC. ME FASHION BUG #2437, INC. PA FASHION BUG #2439, INC. MA FASHION BUG #2440, INC. PA FASHION BUG #2443, INC. (2) MN FASHION BUG #2444, INC. (2) MN FASHION BUG #2446, INC. PA FASHION BUG #2448, INC. OH FASHION BUG #2449, INC. NV FASHION BUG #2450, INC. AL FASHION BUG #2452, INC. CT FASHION BUG #2453, INC. PA FASHION BUG #2454 OF SCHENECTADY, INC. (2) NY FASHION BUG #2455 OF WILTON, INC. NY FASHION BUG #2457, INC. (2) VA FASHION BUG #2458, INC. NH FASHION BUG #2459, INC. PA FASHION BUG #2460, INC. MA FASHION BUG #2461, INC. (2) SC FASHION BUG #2461, INC. (2) SC FASHION BUG #2461, INC. (1) (2) GA FASHION BUG #2462, INC. OR FASHION BUG #2466, INC. PA FASHION BUG #2467, INC. (2) KY FASHION BUG #2468 OF BATH, INC. NY FASHION BUG #2469, INC. (1) (2) IN FASHION BUG #2470 OF BINGHAMPTON, INC. NY FASHION BUG #2472, INC. CT FASHION BUG #2473, INC. MI FASHION BUG #2474, INC. OH FASHION BUG #2475, INC. (2) MN FASHION BUG #2476 OF MIDDLE ISLAND, INC. NY FASHION BUG #2477, INC. MI FASHION BUG #2478, INC. GA FASHION BUG #2479, INC. IA FASHION BUG #2483, INC. (2) PA FASHION BUG #2484, INC. (2) WA FASHION BUG #2485, INC. MD FASHION BUG #2486, INC. (2) IA FASHION BUG #2487, INC. (2) IN FASHION BUG #2488, INC. MN FASHION BUG #2492, INC. PA FASHION BUG #2493, INC. PA FASHION BUG #2497, INC. MA FASHION BUG #2501, INC. (2) MI FASHION BUG #2502, INC. WI FASHION BUG #2503, INC. (2) PA FASHION BUG #2505 OF HUDSON, INC. NY FASHION BUG #2508, INC. MO FASHION BUG #2509, INC. (1) (2) NJ FASHION BUG #2510, INC. OH FASHION BUG #2511, INC. IN FASHION BUG #2512, INC. NH FASHION BUG #2513, INC. ME FASHION BUG #2516, INC. (2) NJ FASHION BUG #2517, INC. (1) (2) CT FASHION BUG #2518, INC. NH FASHION BUG #2519 OF FULTON, INC. NY FASHION BUG #2520, INC. (2) MA FASHION BUG #2521, INC. (2) GA FASHION BUG #2523, INC. FL FASHION BUG #2524, INC. CA FASHION BUG #2528, INC. (1) (2) AZ FASHION BUG #2529, INC. AZ FASHION BUG #2530, INC. AZ FASHION BUG #2531, INC. GA FASHION BUG #2531, INC. (1) (2) FL FASHION BUG #2533, INC. NJ FASHION BUG #2534, INC. NJ FASHION BUG #2536, INC. PA FASHION BUG #2537, INC. KY FASHION BUG #2538, INC. VA FASHION BUG #2539, INC. (1) (2) FL FASHION BUG #2540, INC. FL FASHION BUG #2541, INC. NC FASHION BUG #2542, INC. PA FASHION BUG #2543, INC. CT FASHION BUG #2547, INC. VA FASHION BUG #2548, INC. (2) PA FASHION BUG #2549, INC. (2) NE FASHION BUG #255, INC. ME FASHION BUG #2550, INC. VA FASHION BUG #2551 OF CLAY, INC. NY FASHION BUG #2553, INC. OH FASHION BUG #2554, INC. PA FASHION BUG #2555, INC. ME FASHION BUG #2556, INC. OH FASHION BUG #2557, INC. UT FASHION BUG #2558, INC. (2) UT FASHION BUG #2559, INC. UT FASHION BUG #2560, INC. UT FASHION BUG #2561, INC. OH FASHION BUG #2562, INC. OH FASHION BUG #2564, INC. (2) KY FASHION BUG #2565, INC. (2) KY FASHION BUG #2568, INC. FL FASHION BUG #2571, INC. OH FASHION BUG #2572, INC. (1) (2) PA FASHION BUG #2573, INC. WI FASHION BUG #2574, INC. NH FASHION BUG #2575, INC. TN FASHION BUG #2577, INC. KY FASHION BUG #2578, INC. OH FASHION BUG #2579, INC. PA FASHION BUG #258, INC. TN FASHION BUG #2580, INC. OH FASHION BUG #2581, INC. (2) NE FASHION BUG #2582, INC. SC FASHION BUG #2583, INC. (1) (2) WV FASHION BUG #2584 OF CORTLAND, INC. NY FASHION BUG #2585, INC MD FASHION BUG #2586, INC. OH FASHION BUG #2587, INC. OH FASHION BUG #2588, INC. PA FASHION BUG #2589, INC. TN FASHION BUG #2593, INC. AZ FASHION BUG #2594, INC. CA FASHION BUG #2597 OF COLONIE, INC. NY FASHION BUG #2601, INC. IN FASHION BUG #2603, INC. KY FASHION BUG #2604 OF VESTAL, INC. NY FASHION BUG #2605, INC. MD FASHION BUG #2606, INC. (2) OH FASHION BUG #2607, INC. (2) NJ FASHION BUG #2608, INC. WI FASHION BUG #2609, INC. WI FASHION BUG #2610, INC. MI FASHION BUG #2612, INC. (2) AL FASHION BUG #2613, INC. (1) (2) WV FASHION BUG #2614, INC. (2) MS FASHION BUG #2615, INC. (1) (2) CT FASHION BUG #2616, INC. MA FASHION BUG #2617, INC. WA FASHION BUG #2618, INC. (2) VA FASHION BUG #2619, INC. IL FASHION BUG #2620, INC. (2) GA FASHION BUG #2621, INC. PA FASHION BUG #2623, INC. (2) ID FASHION BUG #2626, INC. (2) IL FASHION BUG #2627 OF WEST SENECA, INC. NY FASHION BUG #2629, INC. MI FASHION BUG #263, INC. OH FASHION BUG #2631, INC. (2) TN FASHION BUG #2635 OF GENESEO, INC. NY FASHION BUG #2636, INC. NH FASHION BUG #2637, INC. IA FASHION BUG #2638, INC. (2) RI FASHION BUG #2639, INC. AZ FASHION BUG #2643, INC. OH FASHION BUG #2644, INC. (2) UT FASHION BUG #2646, INC. (2) CA FASHION BUG #2647, INC. (2) CA FASHION BUG #2649, INC. NM FASHION BUG #265, INC. ME FASHION BUG #2650, INC. IA FASHION BUG #2650, INC. (1) (2) IA FASHION BUG #2651, INC. (2) MN FASHION BUG #2658, INC. PA FASHION BUG #2659, INC VT FASHION BUG #2661 OF LAKEWOOD, INC. NY FASHION BUG #2662, INC. (1) (2) NJ FASHION BUG #2663, INC. PA FASHION BUG #2665, INC. WI FASHION BUG #2666, INC. (2) VA FASHION BUG #2667, INC. (DUE TO TORNATO) (2) VA FASHION BUG #2667, INC. (REOPENED) VA FASHION BUG #2670, INC. (2) MD FASHION BUG #2671, INC. MI FASHION BUG #2673, INC. NC FASHION BUG #2674, INC. (2) MA FASHION BUG #2675, INC. (2) CO FASHION BUG #2676, INC. OH FASHION BUG #2677, INC. IL FASHION BUG #2679, INC. CA FASHION BUG #2680,INC. IA FASHION BUG #2681, INC. (2) OH FASHION BUG #2682, INC. CO FASHION BUG #2684, INC. (2) UT FASHION BUG #2685, INC. MO FASHION BUG #2688, INC. KY FASHION BUG #2689, INC. UT FASHION BUG #2690, INC. DE FASHION BUG #2692, INC. (2) OH FASHION BUG #2694, INC. (2) CT FASHION BUG #2695, INC. PA FASHION BUG #2696, INC. (2) CA FASHION BUG #2697, INC. MA FASHION BUG #2698, INC. (1) (2) MA FASHION BUG #2699, INC. MA FASHION BUG #2700 OF PORT JEFFERSON, INC. NY FASHION BUG #2701, INC. CA FASHION BUG #2702, INC. (2) IN FASHION BUG #2703, INC. (1) (2) KY FASHION BUG #2705, INC. OH FASHION BUG #2707, INC. MD FASHION BUG #2708, INC. OH FASHION BUG #2709, INC. OH FASHION BUG #2711, INC. MI FASHION BUG #2713, INC. (2) IA FASHION BUG #2714, INC. (2) GA FASHION BUG #2715 OF SYRACUSE, INC. (2) NY FASHION BUG #2716, INC. IN FASHION BUG #2717, INC. WI FASHION BUG #2718, INC. (2) GA FASHION BUG #2719, INC. IA FASHION BUG #2720, INC. WV FASHION BUG #2721, INC. PA FASHION BUG #2722, INC. IN FASHION BUG #2724, INC. IN FASHION BUG #2727, INC. CA FASHION BUG #2729, INC. WI FASHION BUG #2730, INC. DE FASHION BUG #2731, INC. DE FASHION BUG #2732, INC. (2) GA FASHION BUG #2733, INC. MO FASHION BUG #2736, INC. MO FASHION BUG #2737, INC. MI FASHION BUG #2738, INC. KY FASHION BUG #2739 OF ROTTERDAM, INC. NY FASHION BUG #2740, INC KS FASHION BUG #2741, INC. OH FASHION BUG #2744, INC. (2) MA FASHION BUG #2748, INC. (1) (2) IL FASHION BUG #2749, INC. MN FASHION BUG #2750, INC. PA FASHION BUG #2751, INC. IN FASHION BUG #2752, INC. (2) AL FASHION BUG #2753, INC. (2) MS FASHION BUG #2754, INC. (2) TN FASHION BUG #2755, INC. (1) (2) MO FASHION BUG #2755, INC. (1) (2) MO FASHION BUG #2756, INC. (2) ME FASHION BUG #2757, INC. (2) SC FASHION BUG #2758, INC. (2) GA FASHION BUG #2759, INC. PA FASHION BUG #2760, INC. (2) NC FASHION BUG #2761, INC. (2) KY FASHION BUG #2762, INC. (2) NJ FASHION BUG #2763, INC. PA FASHION BUG #2766, INC. PA FASHION BUG #2767, INC. PA FASHION BUG #2768, INC. IN FASHION BUG #2769, INC. WY FASHION BUG #2770, INC. (2) UT FASHION BUG #2772, INC. (1) (2) OR FASHION BUG #2773, INC. ID FASHION BUG #2775, INC. IN FASHION BUG #2777, INC. (1) (2) MI FASHION BUG #2778, INC. (1) (2) GA FASHION BUG #2779, INC. OH FASHION BUG #2780, INC. (1) (2) MI FASHION BUG #2781, INC. NC FASHION BUG #2783, INC. (2) MN FASHION BUG #2786, INC. (2) NH FASHION BUG #2787, INC. ME FASHION BUG #2789, INC. VA FASHION BUG #279, INC. PA FASHION BUG #2790, INC. (2) WA FASHION BUG #2791, INC. OH FASHION BUG #2792, INC. (2) CA FASHION BUG #2793, INC. (2) CA FASHION BUG #2794, INC. NV FASHION BUG #2795, INC. WI FASHION BUG #2796 OF COBLESKILL, INC. NY FASHION BUG #2797, INC. NJ FASHION BUG #2798, INC. (2) FL FASHION BUG #2799, INC. (1) (2) FL FASHION BUG #2800, INC. (1) (2) NC FASHION BUG #2802, INC. PA FASHION BUG #2803, INC. (2) TX FASHION BUG #2804, INC. (2) TX FASHION BUG #2805, INC. (2) TX FASHION BUG #2807, INC. IN FASHION BUG #2807, INC. (1) (2) IN FASHION BUG #2808, INC. (2) KS FASHION BUG #2809, INC. IN FASHION BUG #2810, INC. (2) OH FASHION BUG #2811, INC. PA FASHION BUG #2814, INC. (2) WY FASHION BUG #2815, INC. (1) (2) FL FASHION BUG #2816, INC. MA FASHION BUG #2817, INC. (1) (2) MO FASHION BUG #2818, INC. (2) IL FASHION BUG #2820, INC. CT FASHION BUG #2821, INC. VA FASHION BUG #2822, INC. MI FASHION BUG #2825, INC. (1) (2) CT FASHION BUG #2826, INC. RI FASHION BUG #2827, INC. (1) (2) KY FASHION BUG #2828, INC. OH FASHION BUG #2829, INC. OH FASHION BUG #2830, INC. (2) WA FASHION BUG #2833, INC. (2) IA FASHION BUG #2836, INC. (2) UT FASHION BUG #2836, INC. (1) (2) UT FASHION BUG #2837, INC. (1) (2) GA FASHION BUG #2838, INC. OR FASHION BUG #2841, INC. IN FASHION BUG #2842, INC. IL FASHION BUG #2844, INC. PA FASHION BUG #2845, INC. (2) CA FASHION BUG #2850, INC. MI FASHION BUG #2851, INC. NJ FASHION BUG #2852, INC. CO FASHION BUG #2853 OF ROME, INC. NY FASHION BUG #2855, INC. IL FASHION BUG #2856, INC. (2) WI FASHION BUG #2857, INC. OH FASHION BUG #2858, INC. CA FASHION BUG #2861, INC. (2) AL FASHION BUG #2863, INC. MA FASHION BUG #2864, INC. OH FASHION BUG #2868, INC. AZ FASHION BUG #2869, INC. MD FASHION BUG #2871 OF ALBANY, INC. NY FASHION BUG #2872, INC. WI FASHION BUG #2874, INC. IN FASHION BUG #2877, INC. AL FASHION BUG #2879, INC. OR FASHION BUG #2880, INC. (2) CA FASHION BUG #2881, INC. NH FASHION BUG #2882, INC. (1) (2) NH FASHION BUG #2883, INC. (1) (2) WV FASHION BUG #2886, INC. IL FASHION BUG #2891, INC. (2) TX FASHION BUG #2892, INC. (2) ID FASHION BUG #2893, INC. (2) MT FASHION BUG #2894, INC. IL FASHION BUG #2895, INC. (2) TN FASHION BUG #2896, INC. (1) (2) UT FASHION BUG #2898, INC. CA FASHION BUG #2899, INC. (2) WA FASHION BUG #2902, INC. IA FASHION BUG #2903, INC. (2) NE FASHION BUG #2905, INC. IN FASHION BUG #2906, INC. IN FASHION BUG #2907, INC. IL FASHION BUG #2909, INC. PA FASHION BUG #2911, INC. TN FASHION BUG #2912 OF VICTOR, INC. (2) NY FASHION BUG #2913, INC. PA FASHION BUG #2915, INC. MA FASHION BUG #2919, INC. (2) FL FASHION BUG #2920, INC. WA FASHION BUG #2922, INC. PA FASHION BUG #2923 OF AMSTERDAM, INC. NY FASHION BUG #2924, INC. WI FASHION BUG #2926, INC. (2) KS FASHION BUG #2927, INC. (2) NJ FASHION BUG #2928, INC. RI FASHION BUG #2930, INC. IL FASHION BUG #2932, INC. MA FASHION BUG #2934, INC. CA FASHION BUG #2937, INC. (2) GA FASHION BUG #2941, INC. DE FASHION BUG #2942, INC. (2) UT FASHION BUG #2943, INC. (1) (2) UT FASHION BUG #2944, INC. CA FASHION BUG #2945 OF MEDIA, INC. NY FASHION BUG #2948, INC. (2) FL FASHION BUG #2951, INC. NC FASHION BUG #2952, INC. OH FASHION BUG #2954, INC. MI FASHION BUG #2956, INC. MI FASHION BUG #2957, INC. (2) MA FASHION BUG #2958, INC. MI FASHION BUG #2959 OF BUFFALO, INC. NY FASHION BUG #2968, INC. (2) OR FASHION BUG #2969, INC. WY FASHION BUG #2974, INC. MI FASHION BUG #2975, INC. (1) (2) MO FASHION BUG #2978, INC. OH FASHION BUG #2980, INC. (2) FL FASHION BUG #2982, INC. VT FASHION BUG #2983, INC. ME FASHION BUG #2987, INC. (2) IN FASHION BUG #2988, INC. IN FASHION BUG #2989, INC. IN FASHION BUG #2990, INC. WI FASHION BUG #2992, INC. (2) CO FASHION BUG #2994, INC. (2) VA FASHION BUG #2995, INC. OH FASHION BUG #2998, INC. PA FASHION BUG #2999, INC. (2) NC FASHION BUG #3000, INC. (2) KS FASHION BUG #3001, INC. VA FASHION BUG #3003, INC. (2) MT FASHION BUG #3005, INC. OH FASHION BUG #3006, INC. AZ FASHION BUG #3008, INC. MA FASHION BUG #3009, INC. WI FASHION BUG #3011, INC. PA FASHION BUG #3016, INC. OH FASHION BUG #3018, INC. WV FASHION BUG #3022, INC. IL FASHION BUG #3023, INC. WI FASHION BUG #3026, INC. (2) WV FASHION BUG #3027, INC. (1) (2) UT FASHION BUG #3030, INC. AZ FASHION BUG #3033, INC. NH FASHION BUG #3034, INC. MO FASHION BUG #3038, INC. (2) VT FASHION BUG #3040, INC. MO FASHION BUG #3042, INC. IN FASHION BUG #3044, INC. GA FASHION BUG #3046, INC. GA FASHION BUG #3047, INC. TN FASHION BUG #3048 OF WELLSVILLE, INC. NY FASHION BUG #3049, INC. CT FASHION BUG #3050, INC. MA FASHION BUG #3052, INC. MO FASHION BUG #3054, INC. IL FASHION BUG #3056, INC. GA FASHION BUG #3057, INC. PA FASHION BUG #3058, INC. CT FASHION BUG #3060, INC. (2) SD FASHION BUG #3061, INC. DE FASHION BUG #3062, INC. GA FASHION BUG #3063, INC. (1) (2) VA FASHION BUG #3064, INC. (1) (2) MI FASHION BUG #3065, INC. (1) (2) TN FASHION BUG #3066, INC. (1) (2) MI FASHION BUG #3067, INC. (1) (2) TX FASHION BUG #3068, INC. (1) (2) MN FASHION BUG #3069, INC. NJ FASHION BUG #3070, INC. (1) (2) MO FASHION BUG #3071, INC. (1) (2) WA FASHION BUG #3072, INC. (1) (2) AR FASHION BUG #3073, INC. (1) (2) WA FASHION BUG #3078, INC. IL FASHION BUG #3079, INC. MO FASHION BUG #3080, INC. (1) (2) ME FASHION BUG #3081, INC. PA FASHION BUG #3082, INC. (1) (2) CT FASHION BUG #3082, INC. (1) (2) IN FASHION BUG #3088, INC. (1) (2) WA FASHION BUG #3091, INC. PA FASHION BUG #3092, INC. WI FASHION BUG #3093, INC. (1) (2) MA FASHION BUG #3094, INC. ME FASHION BUG #3097, INC. (1) (2) NJ FASHION BUG #3099, INC. MD FASHION BUG #3100, INC. OH FASHION BUG #3101, INC. MO FASHION BUG #3102, INC. WV FASHION BUG #3103, INC. IL FASHION BUG #3104, INC. (2) GA FASHION BUG #3105 OF WILLIAMSVILLE, INC. (2) NY FASHION BUG #3106, INC. IN FASHION BUG #3107, INC. PA FASHION BUG #3108, INC. KY FASHION BUG #3109, INC. (2) CT FASHION BUG #3110, INC. IL FASHION BUG #3111, INC. (2) IL FASHION BUG #3112, INC. OH FASHION BUG #3113, INC. FL FASHION BUG #3114, INC. AZ FASHION BUG #3115, INC. MI FASHION BUG #3116, INC. MO FASHION BUG #3117, INC. FL FASHION BUG #3118, INC. CO FASHION BUG #3119, INC. (1) (2) CT FASHION BUG #3120, INC. AZ FASHION BUG #3121, INC PA FASHION BUG #3122, INC PA FASHION BUG #3123, INC. MO FASHION BUG #3124, INC. PA FASHION BUG #3125, INC. MD FASHION BUG #3126, INC. MA FASHION BUG #3127, INC. MO FASHION BUG #3128, INC. (1) (2) MD FASHION BUG #3130, INC. NJ FASHION BUG #3131, INC. OH FASHION BUG #3132, INC. (1) (2) DE FASHION BUG #3133, INC. CA FASHION BUG #3134, INC. IL FASHION BUG #3135 OF CORTLANDT, INC. NY FASHION BUG #3136, INC. GA FASHION BUG #3137, INC. (1) (2) PA FASHION BUG #3138, INC. CA FASHION BUG #3139, INC. OH FASHION BUG #3140, INC. CA FASHION BUG #3141, INC. (1) (2) VA FASHION BUG #3142, INC. (1) (2) CA FASHION BUG #3143 OF NORWICH, INC. NY FASHION BUG #3144, INC. AZ FASHION BUG #3145, INC. (1) (2) DE FASHION BUG #3146, INC. (2) FL FASHION BUG #3147, INC. (2) GA FASHION BUG #3148, INC. IL FASHION BUG #3149, INC. OH FASHION BUG #3150, INC. CA FASHION BUG #3151, INC. (2) LA FASHION BUG #3152, INC. (2) LA FASHION BUG #3153, INC. (2) LA FASHION BUG #3154, INC. MD FASHION BUG #3155, INC. AZ FASHION BUG #3156, INC. MD FASHION BUG #3157, INC. (2) MD FASHION BUG #3158, INC. (2) MD FASHION BUG #3159, INC. NM FASHION BUG #3160, INC. MI FASHION BUG #3161, INC. (2) NC FASHION BUG #3162, INC. NC FASHION BUG #3163, INC. NJ FASHION BUG #3164, INC. NJ FASHION BUG #3165, INC. (2) NJ FASHION BUG #3166, INC. NJ FASHION BUG #3169, INC. PA FASHION BUG #3170, INC. TX FASHION BUG #3171, INC. TX FASHION BUG #3172, INC. TX FASHION BUG #3173, INC. TX FASHION BUG #3174, INC. VA FASHION BUG #3175, INC. VA FASHION BUG #3176, INC. VA FASHION BUG #3177, INC. DE FASHION BUG #3178, INC. (1) (2) CO FASHION BUG #3179, INC. VA FASHION BUG #3180, INC. VA FASHION BUG #3181 OF SYRACUSE, INC. (2) WA FASHION BUG #3182, INC. (1) (2) NM FASHION BUG #3183, INC. MA FASHION BUG #3184, INC. MI FASHION BUG #3185, INC. NM FASHION BUG #3186, INC. (1) (2) CO FASHION BUG #3187, INC. KS FASHION BUG #3188, INC. LA FASHION BUG #3189, INC. TX FASHION BUG #3190, INC. UT FASHION BUG #3191, INC. LA FASHION BUG #3192, INC. (2) MD FASHION BUG #3193, INC. PA FASHION BUG #3194, INC. MI FASHION BUG #3195, INC. MD FASHION BUG #3196, INC. CA FASHION BUG #3197, INC. (1) (2) MI FASHION BUG #3198, INC. MO FASHION BUG #3199, INC. MO FASHION BUG #3200, INC. MI FASHION BUG #3201, INC. PA FASHION BUG #3202, INC. PA FASHION BUG #3203, INC. TN FASHION BUG #3204, INC. WI FASHION BUG #3205, INC. WI FASHION BUG #3206, INC. OH FASHION BUG #3207, INC. (2) SC FASHION BUG #3208, INC. (1) (2) AL FASHION BUG #3209, INC. IA FASHION BUG #3210, INC. CA FASHION BUG #3211, INC. GA FASHION BUG #3212, INC. TN FASHION BUG #3213, INC. PA FASHION BUG #3214, INC. LA FASHION BUG #3215, INC. MI FASHION BUG #3216, INC. CA FASHION BUG #3217, INC. MI FASHION BUG #3218, INC. IL FASHION BUG #3219, INC. MN FASHION BUG #3220, INC. IL FASHION BUG #3221, INC. (1) (2) AL FASHION BUG #3222, INC. (1) (2) WI FASHION BUG #3223, INC. WI FASHION BUG #3224, INC. NJ FASHION BUG #3225, INC. PA FASHION BUG #3226 OF AUBURN, INC. NY FASHION BUG #3227, INC. CA FASHION BUG #3228, INC. CA FASHION BUG #3229, INC. CA FASHION BUG #3230, INC. (1) (2) TX FASHION BUG #3231, INC. WA FASHION BUG #3232, INC. IN FASHION BUG #3233, INC. PA FASHION BUG #3234, INC. WI FASHION BUG #3235, INC. IN FASHION BUG #3236, INC. PA FASHION BUG #3237, INC. IL FASHION BUG #3238, INC. TX FASHION BUG #3239, INC. NJ FASHION BUG #3240, INC. (1) (2) NJ FASHION BUG #3241, INC. GA FASHION BUG #3242, INC. (1) (2) CA FASHION BUG #3243, INC. WI FASHION BUG #3244, INC. NC FASHION BUG #3245, INC. WI FASHION BUG #3246, INC. PA FASHION BUG #3247, INC. MD FASHION BUG #3248, INC. FL FASHION BUG #3249, INC. GA FASHION BUG #3250, INC. GA FASHION BUG #3251, INC. FL FASHION BUG #3252, INC. (1) (2) NV FASHION BUG #3253, INC. IA FASHION BUG #3254, INC. (1) (2) MD FASHION BUG #3255, INC. NE FASHION BUG #3256, INC. CA FASHION BUG #3258, INC. FL FASHION BUG #3259, INC. FL FASHION BUG #3260, INC. IL FASHION BUG #3261, INC. TX FASHION BUG #3263, INC. NC FASHION BUG #3264, INC. NC FASHION BUG #3265, INC. MN FASHION BUG #3266, INC. NV FASHION BUG #3267, INC. CA FASHION BUG #3268, INC. (1) (2) CA FASHION BUG #3269, INC. (1) (2) CA FASHION BUG #3270, INC. (1) (2) IN FASHION BUG #3271, INC. MN FASHION BUG #3272, INC. TN FASHION BUG #3273, INC. (1) (2) GA FASHION BUG #3274, INC. CA FASHION BUG #3276, INC. (1) (2) IA FASHION BUG #3277, INC. (1) (2) IL FASHION BUG #3278, INC. FL FASHION BUG #3279, INC. (1) (2) OR FASHION BUG #3280, INC. TX FASHION BUG #3281 OF SYRACUSE, INC. NY FASHION BUG #3282, INC. (1) (2) FL FASHION BUG #3283, INC. MO FASHION BUG #3284 OF POUGHKEEPSIE, INC. NY FASHION BUG #3285, INC. TN FASHION BUG #3286, INC. WV FASHION BUG #3287, INC. FL FASHION BUG #3288, INC. MI FASHION BUG #3289, INC. CA FASHION BUG #3290, INC. OR FASHION BUG #3291, INC. CA FASHION BUG #3292, INC. MI FASHION BUG #3293, INC. (1) (2) MI FASHION BUG #3294, INC. TX FASHION BUG #3295, INC. (1) (2) TX FASHION BUG #3296, INC. MN FASHION BUG #3297, INC. NJ FASHION BUG #3298, INC. (1) (2) PA FASHION BUG #3299, INC. (1) PA FASHION BUG #3300, INC. PA FASHION BUG #3301, INC. WA FASHION BUG #3302, INC. VA FASHION BUG #3303, INC. IA FASHION BUG #3304, INC. MN FASHION BUG #3305, INC. CA FASHION BUG #3306, INC. CA FASHION BUG #3307, INC. AL FASHION BUG #3308, INC. (1) (2) IL FASHION BUG #3309, INC. GA FASHION BUG #3310, INC. CA FASHION BUG #3311, INC. KY FASHION BUG #3312, INC. OH FASHION BUG #3314, INC. (1) (2) MD FASHION BUG #3315, INC. VT FASHION BUG #3316, INC. CT FASHION BUG #3317, INC. IL FASHION BUG #3318, INC. WA FASHION BUG #3319, INC. IN FASHION BUG #3320, INC. (1) (2) IL FASHION BUG #3321, INC. CA FASHION BUG #3322, INC. CA FASHION BUG #3323, INC. WA FASHION BUG #3324, INC. TN FASHION BUG #3325, INC. GA FASHION BUG #3326, INC. NM FASHION BUG #3327, INC. SC FASHION BUG #3328, INC. TN FASHION BUG #3329, INC. SC FASHION BUG #3330, INC. MN FASHION BUG #3331, INC. ID FASHION BUG #3332, INC. FL FASHION BUG #3333, INC. MI FASHION BUG #3335, INC. (1) (2) WI FASHION BUG #3336, INC. TX FASHION BUG #3337, INC. MN FASHION BUG #3338, INC. MI FASHION BUG #3339, INC. OH FASHION BUG #3340, INC. TX FASHION BUG #3341 OF LOCKPORT, INC. NY FASHION BUG #3342, INC. NJ FASHION BUG #3343, INC. OH FASHION BUG #3344, INC. (1) (2) NJ FASHION BUG #3345, INC. IA FASHION BUG #3346, INC. IL FASHION BUG #3347, INC. CA FASHION BUG #3348, INC. WA FASHION BUG #3349, INC. OR FASHION BUG #3350, INC. TX FASHION BUG #3351 OF ROCHESTER, INC. (1) (2) NY FASHION BUG #3352, INC. TX FASHION BUG #3353, INC. NJ FASHION BUG #3354, INC. (1) (2) ME FASHION BUG #3356, INC. FL FASHION BUG #3357, INC. (1) (2) MS FASHION BUG #3358, INC. IN FASHION BUG #3359, INC. CT FASHION BUG #336, INC. IN FASHION BUG #3360, INC. (1) (2) CA FASHION BUG #3361, INC. IA FASHION BUG #3362, INC. OK FASHION BUG #3363, INC. (1) (2) TX FASHION BUG #3364, INC. WA FASHION BUG #3365, INC. (1) AL FASHION BUG #3366, INC. TX FASHION BUG #3367, INC. CT FASHION BUG #3368, INC. GA FASHION BUG #3369, INC. KY FASHION BUG #3370, INC. WA FASHION BUG #3371, INC. (1) (2) SC FASHION BUG #3372, INC. CT FASHION BUG #3373, INC. (1) (2) IL FASHION BUG #3374, INC. (1) (2) VA FASHION BUG #3375, INC. (1) (2) WA FASHION BUG #3377, INC. FL FASHION BUG #3378, INC. DE FASHION BUG #3379, INC. PA FASHION BUG #3380, INC. MI FASHION BUG #3381, INC. PA FASHION BUG #3382, INC. MN FASHION BUG #3383, INC. PA FASHION BUG #3384, INC. IL FASHION BUG #3385, INC. MO FASHION BUG #3386, INC. OH FASHION BUG #3387, INC. (1) (2) TX FASHION BUG #3389, INC. FL FASHION BUG #3390, INC. MS FASHION BUG #3391, INC. (1) TN FASHION BUG #3392, INC. (1) MS FASHION BUG #3393, INC. (1) (2) CA FASHION BUG #3394, INC. (1) (2) AL FASHION BUG #3395, INC. (1) (2) ME FASHION BUG #3396, INC. MA FASHION BUG #3397, INC. (1) (2) CA FASHION BUG #3398, INC. (1) (2) NV FASHION BUG #3399, INC. SC FASHION BUG #3400, INC. (1) (2) TX FASHION BUG #3401, INC. LA FASHION BUG #3402, INC. (1) (2) TX FASHION BUG #3403, INC. (1) (2) MI FASHION BUG #3404, INC. WV FASHION BUG #3405 OF RIVERHEAD, INC. NY FASHION BUG #3406, INC. (1) (2) TX FASHION BUG #3407, INC. MO FASHION BUG #3408 OF HAMBURG, INC. (1) (2) NY FASHION BUG #3409, INC. (1) (2) PA FASHION BUG #3410, INC. (1) (2) CA FASHION BUG #3411, INC. (1) (2) NJ FASHION BUG #3412, INC. (1) (2) NM FASHION BUG #3413, INC. TX FASHION BUG #3414, INC. (1) (2) OK FASHION BUG #3415, INC. OK FASHION BUG #3416, INC. OK FASHION BUG #3418, INC. NC FASHION BUG #3419, INC. AL FASHION BUG #3420, INC. NJ FASHION BUG #3421, INC. TX FASHION BUG #3422, INC. NJ FASHION BUG #3423, INC. IN FASHION BUG #3424, INC. IN FASHION BUG #3425, INC. IN FASHION BUG #3427, INC. (1) FL FASHION BUG #3428, INC. (1) (2) CA FASHION BUG #3429, INC. (1) (2) WI FASHION BUG #3430, INC. KS FASHION BUG #3431, INC. VA FASHION BUG #3432, INC. NC FASHION BUG #3433, INC. CA FASHION BUG #3434, INC. TX FASHION BUG #3435, INC. (1) TX FASHION BUG #3436, INC. (1) (2) IL FASHION BUG #3437, INC. WA FASHION BUG #3438, INC. WA FASHION BUG #3439, INC. MI FASHION BUG #3440, INC. (1) (2) MS FASHION BUG #3441, INC. (1) (2) OH FASHION BUG #3442 OF STATEN ISLAND, INC. NY FASHION BUG #3443, INC. IL FASHION BUG #3444, INC. VA FASHION BUG #3445, INC. OK FASHION BUG #3446, INC. (1) (2) AZ FASHION BUG #3447, INC. (1) (2) NJ FASHION BUG #3448, INC. (1) VT FASHION BUG #3449, INC. (1) (2) FL FASHION BUG #3450, INC. (1) (2) MS FASHION BUG #3451, INC. IN FASHION BUG #3452, INC. NC FASHION BUG #3453, INC. TX FASHION BUG #3454, INC. AR FASHION BUG #3455, INC. (1) (2) TX FASHION BUG #3456, INC. (1) (2) OH FASHION BUG #3457, INC. (1) NM FASHION BUG #3458, INC. (1) (2) AZ FASHION BUG #3459, INC. (1) (2) NC FASHION BUG #3460, INC. (1) (2) LA FASHION BUG #3461, INC. TX FASHION BUG #3462, INC. (1) (2) VA FASHION BUG #3463, INC. OH FASHION BUG #3464, INC. MI FASHION BUG #3465, INC. (1) (2) TX FASHION BUG #3466, INC. (1) (2) OR FASHION BUG #3467, INC. (1) (2) LA FASHION BUG #3468, INC. (1) (2) TX FASHION BUG #3469, INC. (1) (2) TX FASHION BUG #3470, INC. IN FASHION BUG #3471, INC. ID FASHION BUG #3472, INC. (1) PA FASHION BUG #3473, INC. (1) (2) IL FASHION BUG #3474, INC. (1) (2) KY FASHION BUG #3475, INC. (1) (2) KY FASHION BUG #3476, INC. FL FASHION BUG #3477, INC. (1) (2) ID FASHION BUG #3478, INC. (1) (2) MO FASHION BUG #3479, INC. AR FASHION BUG #3480, INC. AL FASHION BUG #3481, INC. GA FASHION BUG #3482, INC. (1) (2) TX FASHION BUG #3483, INC. TX FASHION BUG #3484, INC. (1) (2) MD FASHION BUG #3485, INC. (1) (2) DE FASHION BUG #3486, INC. (1) (2) PA FASHION BUG #3487, INC. (1) (2) NC FASHION BUG #3488, INC. (1) (2) WA FASHION BUG #3489, INC. (1) (2) UT FASHION BUG #3490, INC. (1) (2) OR FASHION BUG #3491 OF CHEEKTOWAGA, INC. NY FASHION BUG #3492, INC. PA FASHION BUG #3493, INC. (1) KY FASHION BUG #3494, INC. (1) GA FASHION BUG #3495, INC. (1) (2) OR FASHION BUG #3496, INC. (1) IL FASHION BUG #3497, INC. AL FASHION BUG #3498, INC. (1) (2) TN FASHION BUG #3499, INC. (1) (2) PA FASHION BUG #3500, INC. (1) (2) PA FASHION BUG #3501 OF MIDDLETOWN, INC. (1) (2) NY FASHION BUG #3502, INC. (1) (2) NJ FASHION BUG #3503, INC. (1) (2) NJ FASHION BUG #3504, INC. (1) (2) VA FASHION BUG #3506, INC. (1) (2) NV FASHION BUG #3507, INC. (1) (2) AR FASHION BUG #3508, INC. (1) (2) TX FASHION BUG #3509, INC. (1) (2) LA FASHION BUG #3510, INC. (1) (2) TX FASHION BUG #3511, INC. (1) (2) TX FASHION BUG #3512, INC. (1) (2) NJ FASHION BUG #3513, INC. (1) (2) KY FASHION BUG #3514, INC. (1) (2) CA FASHION BUG #3515, INC. (1) (2) IL FASHION BUG #3516, INC. (1) (2) IN FASHION BUG #3518, INC. (1) (2) RI FASHION BUG #3519, INC. (1) (2) CA FASHION BUG #3520, INC. (1) (2) CO FASHION BUG #3521, INC. (1) (2) CA FASHION BUG #3522 OF WILLIAMSVILLE, INC. (1) NY FASHION BUG #3523, INC. (1) (2) ND FASHION BUG #3524, INC. (1) (2) VA FASHION BUG #3525, INC. (1) (2) OH FASHION BUG #3526, INC. (1) (2) KY FASHION BUG #3527, INC. (1) (2) OH FASHION BUG #3528, INC. (1) (2) FL FASHION BUG #3529, INC. (1) (2) SC FASHION BUG #3530, INC. (1) GA FASHION BUG #3531, INC. (1) (2) IL FASHION BUG #3532, INC. (1) (2) WI FASHION BUG #3533, INC. (1) (2) TX FASHION BUG #3534, INC. (1) (2) TX FASHION BUG #3535, INC. (1) (2) OH FASHION BUG #3536, INC. (1) (2) TN FASHION BUG #3537, INC. (1) (2) NC FASHION BUG #3538, INC. (1) (2) VA FASHION BUG #3539, INC. (1) (2) MO FASHION BUG #3540, INC. (1) (2) SD FASHION BUG #3542, INC. (1) (2) WI FASHION BUG #3543, INC. (1) (2) MI FASHION BUG #3544, INC. (1) (2) MI FASHION BUG #3545, INC. (1) (2) OH FASHION BUG #3547, INC. (1) (2) WA FASHION BUG #3548, INC. (1) (2) CA FASHION BUG #3549, INC. (1) (2) MO FASHION BUG #3550, INC. (1) (2) MN FASHION BUG #3551 OF ITHACA, INC. (1) (2) NY FASHION BUG #3553, INC. (1) (2) KY FASHION BUG #3554, INC. (1) (2) FL FASHION BUG #3555, INC. (1) (2) NC FASHION BUG #3556, INC. (1) (2) OR FASHION BUG #3557, INC. (1) (2) AZ FASHION BUG #3558, INC. (1) (2) KY FASHION BUG #3559, INC. (1) (2) TX FASHION BUG #3560, INC. (1) (2) FL FASHION BUG #3561, INC. (1) (2) FL FASHION BUG #3562, INC. (1) (2) NC FASHION BUG #3563, INC. (1) (2) MO FASHION BUG #3564, INC. (1) (2) MO FASHION BUG #3565, INC. (1) (2) MI FASHION BUG #3566, INC. (1) (2) IL FASHION BUG #3567, INC. (1) (2) TX FASHION BUG #3568, INC. (1) (2) CA FASHION BUG #3569, INC. (1) (2) AL FASHION BUG #3570, INC. (1) (2) MO FASHION BUG #3571, INC. (1) (2) OH FASHION BUG #3572, INC. (1) (2) OH FASHION BUG #3906, INC. (1) (2) NJ FASHION BUG #3907, INC. (1) (2) NJ FASHION BUG #4001, INC. (2) NJ FASHION BUG #4002, INC. CT FASHION BUG #4004, INC. NJ FASHION BUG #4005, INC. MA FASHION BUG #4006, INC. PA FASHION BUG #4007, INC. PA FASHION BUG #4008, INC. NJ FASHION BUG #4009, INC. RI FASHION BUG #4010, INC. MA FASHION BUG #4011, INC. NH FASHION BUG #4012 OF BAYSHORE, INC. NY FASHION BUG #4013, INC. NJ FASHION BUG #418, INC. NJ FASHION BUG #42, INC. (1) (2) MO FASHION BUG #44, INC. PA FASHION BUG #47, INC. IN FASHION BUG #471, INC. MN FASHION BUG #508, INC. PA FASHION BUG #519, INC. WV FASHION BUG #520, INC. MA FASHION BUG #527, INC. KS FASHION BUG #529 OF HAMBURG, INC. NY FASHION BUG #534, INC. IN FASHION BUG #538, INC. ME FASHION BUG #545, INC. VT FASHION BUG #548, INC. ME FASHION BUG #554, INC. (2) PA FASHION BUG #558, INC. (2) TN FASHION BUG #560 OF GLOVERSVILLE, INC. NY FASHION BUG #561, INC. FL FASHION BUG #562, INC. NJ FASHION BUG #564, INC. MO FASHION BUG #565, INC. MI FASHION BUG #566, INC. IN FASHION BUG #567, INC. IL FASHION BUG #571, INC. (2) TN FASHION BUG #572, INC. (2) LA FASHION BUG #573, INC. PA FASHION BUG #574 OF SYRACUSE, INC. NY FASHION BUG #575, INC. MN FASHION BUG #576, INC. NJ FASHION BUG #580, INC. ME FASHION BUG #581, INC. NH FASHION BUG #583, INC. KY FASHION BUG #584 OF YONKERS, INC. NY FASHION BUG #585, INC. NJ FASHION BUG #586, INC. NJ FASHION BUG #588, INC. IL FASHION BUG #589, INC. (2) IL FASHION BUG #591, INC. (2) MO FASHION BUG #592, INC. (2) IL FASHION BUG #593 OF SELDEN, INC. NY FASHION BUG #594, INC. KS FASHION BUG #595, INC. IN FASHION BUG #596, INC. CT FASHION BUG #597, INC. MN FASHION BUG #600 ,INC. (2) PA FASHION BUG #601, INC. SC FASHION BUG #602, INC. PA FASHION BUG #603 OF HUDSON AVENUE, INC. (1) (2) NY FASHION BUG #605, INC. (2) MI FASHION BUG #606, INC. (2) MI FASHION BUG #607, INC. MI FASHION BUG #610, INC. (1) (2) RI FASHION BUG #611, INC. (1) (2) AL FASHION BUG #612, INC. OH FASHION BUG #614, INC. (2) MA FASHION BUG #615, INC. PA FASHION BUG #617, INC. MA FASHION BUG #618, INC. (2) SC FASHION BUG #620, INC. (1) (2) IL FASHION BUG #622, INC. WI FASHION BUG #624, INC. MO FASHION BUG #626, INC. (2) MD FASHION BUG #627, INC. OH FASHION BUG #629, INC. NJ FASHION BUG #630, INC. (2) IN FASHION BUG #631, INC. (2) PA FASHION BUG #636, INC. IL FASHION BUG #638, INC. MI FASHION BUG #640, INC. (1) (2) NJ FASHION BUG #641, INC. (2) NJ FASHION BUG #642, INC. PA FASHION BUG #643, INC. PA FASHION BUG #644, INC. (2) GA FASHION BUG #645, INC. MI FASHION BUG #646, INC. (2) OH FASHION BUG #647, INC. ME FASHION BUG #649, INC. PA FASHION BUG #650, INC. (2) VA FASHION BUG #651, INC. MI FASHION BUG #653, INC. NJ FASHION BUG #654, INC. AL FASHION BUG #656, INC. FL FASHION BUG #657, INC. MO FASHION BUG #658, INC. MA FASHION BUG #660 OF ALBANY, INC. (2) NY FASHION BUG #661, INC. WV FASHION BUG #662, INC. PA FASHION BUG #663, INC. PA FASHION BUG #664, INC. CO FASHION BUG #666, INC. (1) (2) MI FASHION BUG #667, INC. MI FASHION BUG #668 OF SHIRLEY, INC. NY FASHION BUG #670, INC. MA FASHION BUG #671, INC. (1) (2) VA FASHION BUG #672, INC. (2) MI FASHION BUG #673, INC. KY FASHION BUG #674, INC. IL FASHION BUG #675, INC. (2) LA FASHION BUG #676 OF OZONE PARK, INC. NY FASHION BUG #678, INC. OH FASHION BUG #679 OF WATERTOWN, INC. NY FASHION BUG #680, INC. (2) PA FASHION BUG #681, INC. IN FASHION BUG #683, INC. (2) WI FASHION BUG #684, INC. NC FASHION BUG #686, INC. (2) IL FASHION BUG #687, INC. IL FASHION BUG #689, INC. PA FASHION BUG #691, INC. MD FASHION BUG #692, INC. (2) MO FASHION BUG #693, INC. MI FASHION BUG #694, INC. MI FASHION BUG #697, INC. OH FASHION BUG #698, INC. OH FASHION BUG #712, INC. (2) IA FASHION BUG #716, INC. (2) RI FASHION BUG #719, INC. OH FASHION BUG #720 OF OSWEGO, INC. NY FASHION BUG #721, INC. MA FASHION BUG #723, INC. (2) AL FASHION BUG #724, INC. NH FASHION BUG #725, INC. (1) (2) FL FASHION BUG #727, INC. ME FASHION BUG #729, INC. MI FASHION BUG #730, INC. (2) OH FASHION BUG #731, INC. IL FASHION BUG #732, INC. MI FASHION BUG #733, INC. IN FASHION BUG #734 OF DUNKIRK, INC. NY FASHION BUG #736, INC. (2) MO FASHION BUG #737, INC. MA FASHION BUG #738, INC. (2) NC FASHION BUG #739, INC. (2) OH FASHION BUG #740, INC. WI FASHION BUG #741, INC. OH FASHION BUG #742, INC. OH FASHION BUG #743, INC. (2) OH FASHION BUG #744, INC. (1) (2) FL FASHION BUG #745, INC. PA FASHION BUG #748, INC. OH FASHION BUG #751, INC. MI FASHION BUG #752, INC. VT FASHION BUG #754, INC. (2) PA FASHION BUG #755, INC. ME FASHION BUG #756, INC. CT FASHION BUG #757 OF BROCKPORT, INC. NY FASHION BUG #758, INC. WI FASHION BUG #759, INC. MI FASHION BUG #760 OF PINE PLAZA, INC. PA FASHION BUG #761, INC. (2) MO FASHION BUG #762, INC. MO FASHION BUG #763, INC. MO FASHION BUG #764, INC. (2) IL FASHION BUG #766, INC. OH FASHION BUG #767, INC. (2) WV FASHION BUG #768, INC. VA FASHION BUG #769, INC. OH FASHION BUG #770, INC. (1) (2) MI FASHION BUG #771, INC. MI FASHION BUG #772 OF MIDDLETOWN, INC. NY FASHION BUG #773, INC. TN FASHION BUG #774, INC. PA FASHION BUG #775, INC. VT FASHION BUG #776, INC. KY FASHION BUG #778, INC. PA FASHION BUG #779, INC. KY FASHION BUG #781, INC. OH FASHION BUG #784, INC. VA FASHION BUG #785, INC. MI FASHION BUG #786, INC. CT FASHION BUG #787, INC. RI FASHION BUG #788, INC. MA FASHION BUG #790, INC. (2) OH FASHION BUG #792, INC. NC FASHION BUG #793, INC. VA FASHION BUG #795, INC. MI FASHION BUG #797, INC. KS FASHION BUG #799, INC. VA FASHION BUG #84 OF QUEENS, INC. NY FASHION BUG #863, INC. IN FASHION BUG #95, INC.(907) (2) MD FASHION BUG & FASHION BUG PLUS #2179, INC. (2) FL FASHION BUG 33388, INC. (1) (2) FL FASHION BUG ACQUISITION CORP (2) DE FASHION BUG OF 640 PLAZA, INC. TN FASHION BUG OF ALEXANDRIA, INC. (2) VA FASHION BUG OF ALLENTOWN, INC. PA FASHION BUG OF ALLIANCE, INC. PA FASHION BUG OF ALPENA, INC. PA FASHION BUG OF ALTOONA, INC. PA FASHION BUG OF AMHERST, INC. NY FASHION BUG OF ANDORRA, INC. PA FASHION BUG OF APPLE VALLEY SQUARE, INC. PA FASHION BUG OF ASBURY PARK, INC. (2) PA FASHION BUG OF AUDUBON, INC. NJ FASHION BUG OF AURORA, INC. PA FASHION BUG OF BARBERTON, INC. PA FASHION BUG OF BEAVER FALLS, INC. (2) PA FASHION BUG OF BECKLEY, INC. (2) PA FASHION BUG OF BELLEVILLE, INC. PA FASHION BUG OF BELMONT, INC. (2) PA FASHION BUG OF BELVEDERE PLAZA, INC. (2) GA FASHION BUG OF BETHLEHEM, INC. PA FASHION BUG OF BIRMINGHAM, INC. AL FASHION BUG OF BLOOMSBURG, INC. (2) PA FASHION BUG OF BLUE ASH, INC. (2) PA FASHION BUG OF BLUEFIELD, INC. PA FASHION BUG OF BOLINGBROOK, INC. IL FASHION BUG OF BOND, INC. PA FASHION BUG OF BORDENTOWN, INC. PA FASHION BUG OF BRADFORD, INC. PA FASHION BUG OF BRICKTOWN PLAZA, INC. PA FASHION BUG OF BRIDGEVIEW, INC. PA FASHION BUG OF BRIDGEVILLE, INC. (2) PA FASHION BUG OF BRISTOL, CT, INC. CT FASHION BUG OF BRISTOL, INC. PA FASHION BUG OF BRUNSWICK, INC. PA FASHION BUG OF BUCYRUS, INC. PA FASHION BUG OF CALIFORNIA, INC. (2) CA FASHION BUG OF CAMBRIDGE, INC. MD FASHION BUG OF CAPE MAY, INC. PA FASHION BUG OF CARLISLE, INC. PA FASHION BUG OF CASSELBERRY, INC. FL FASHION BUG OF CASTOR AVENUE, INC. (2) PA FASHION BUG OF CENTURY III MALL (2) PA FASHION BUG OF CHARLOTTESVILLE, INC. VA FASHION BUG OF CHESTERTOWN, INC. PA FASHION BUG OF CHICOPEE, INC. (2) PA FASHION BUG OF CHILLICOTHE, INC. PA FASHION BUG OF CLARION, INC. PA FASHION BUG OF CLARKSBURG, INC. (2) PA FASHION BUG OF CLEARFIELD, INC. (2) PA FASHION BUG OF CLEARVIEW MALL, INC. PA FASHION BUG OF CLEVELAND, INC. OH FASHION BUG OF COCKEYSVILLE, INC. (2) PA FASHION BUG OF COLLEGE SQUARE, INC. PA FASHION BUG OF CORBIN, INC. (2) PA FASHION BUG OF COTTMAN, INC. PA FASHION BUG OF COUNTRYSIDE, INC. (2) PA FASHION BUG OF CRANBERRY, INC. PA FASHION BUG OF CREST HILL, INC. (2) PA FASHION BUG OF CROMWELL FIELD, INC. MD FASHION BUG OF CRYSTAL LAKE, INC. (2) PA FASHION BUG OF CULPEPPER, INC. VA FASHION BUG OF CUMBERLAND MALL, INC. (2) GA FASHION BUG OF CUYAHOGA FALLS, INC. PA FASHION BUG OF DANBURY, INC. PA FASHION BUG OF DANVILLE, INC. PA FASHION BUG OF DAYTON MALL, INC. (2) PA FASHION BUG OF DEARBORN, INC. PA FASHION BUG OF DEKALB, INC. (2) IL FASHION BUG OF DES PLAINES, INC. PA FASHION BUG OF DEVON, INC. PA FASHION BUG OF DOVER PLAZA, INC. PA FASHION BUG OF DUBOIS, INC. PA FASHION BUG OF DUNBAR, INC. PA FASHION BUG OF EAST HARTFORD, INC. CT FASHION BUG OF EAST MANSFIELD, INC. PA FASHION BUG OF EAST PARK, INC. PA FASHION BUG OF EAST WINDSOR, INC. (2) PA FASHION BUG OF EASTSIDE PLAZA, INC. PA FASHION BUG OF EASTWOOD MALL, INC. PA FASHION BUG OF EDGEWOOD, INC. PA FASHION BUG OF EDWARDSVILLE, INC. PA FASHION BUG OF EGG HARBOR, INC. (2) PA FASHION BUG OF ELDERSBURG, INC. PA FASHION BUG OF ELKTON, INC. PA FASHION BUG OF ELWOOD CITY, INC. PA FASHION BUG OF EVANSVILLE, INC. IN FASHION BUG OF FAIRFIELD, INC. PA FASHION BUG OF FAIRMONT, INC. PA FASHION BUG OF FALL RIVER, INC. PA FASHION BUG OF FALLS CHURCH, INC. (2) VA FASHION BUG OF FLEMINGTON, INC. (2) PA FASHION BUG OF FLINT, INC. (2) PA FASHION BUG OF FOREST PARK MALL, INC. (2) PA FASHION BUG OF FOREST PLAZA, INC. IL FASHION BUG OF FORT SAGINAW, INC. (2) MI FASHION BUG OF FOSTORIA, INC. (2) PA FASHION BUG OF FRACKVILLE, INC. PA FASHION BUG OF FRANKFORT, INC. PA FASHION BUG OF FRANKLIN COUNTY, INC. PA FASHION BUG OF FRANKLIN, INC. PA FASHION BUG OF FREDERICKSBURG, INC. PA FASHION BUG OF FREEHOLD, INC. NJ FASHION BUG OF FRONT ROYAL, INC. VA FASHION BUG OF FT. FINDLAY, INC. PA FASHION BUG OF FT. MYERS, INC. (2) FL FASHION BUG OF FULLERTON, INC. PA FASHION BUG OF GARFIELD HEIGHTS, INC. PA FASHION BUG OF GEORIA SQUARE, INC. (2) GA FASHION BUG OF GIBBSTOWN, INC. NJ FASHION BUG OF GLEN BURNIE, INC. PA FASHION BUG OF GLEN ELLYN, INC. IL FASHION BUG OF GORHAM, INC. NH FASHION BUG OF GREENVILLE PLAZA, INC. (2) PA FASHION BUG OF GROVE CITY, INC. PA FASHION BUG OF HACKENSACK, INC. (2) PA FASHION BUG OF HACKETTSTOWN, INC. (2) PA FASHION BUG OF HAGERSTOWN, INC. PA FASHION BUG OF HAMILTON SQUARE, INC. PA FASHION BUG OF HAMPTON, INC. (2) PA FASHION BUG OF HANNIBAL, INC. MO FASHION BUG OF HANOVER, INC. PA FASHION BUG OF HARRISBURG, INC. PA FASHION BUG OF HAZELTON, INC. PA FASHION BUG OF HAZLET, INC. (2) NJ FASHION BUG OF HERSHEY, INC. (2) PA FASHION BUG OF HIGHLAND RIDGE, INC. OH FASHION BUG OF HINESVILLE, INC. (2) GA FASHION BUG OF HOLYOKE, INC. MA FASHION BUG OF HOMEWOOD, INC. (2) PA FASHION BUG OF HONESDALE, INC. PA FASHION BUG OF HOUGHTON, INC. PA FASHION BUG OF HOWELL, INC. PA FASHION BUG OF HUNTINGTON PLAZA, INC. IN FASHION BUG OF HUNTINGTON, INC. (2) PA FASHION BUG OF IROQUOIS MANOR, INC. PA FASHION BUG OF JASPER, INC. (2) IN FASHION BUG OF JERSEY CITY, INC. (2) NJ FASHION BUG OF JOHNSTON, INC. RI FASHION BUG OF JOHNSTOWN, INC. (2) PA FASHION BUG OF JOLIET, INC. IL FASHION BUG OF KEDZIE, INC. PA FASHION BUG OF KENT, INC. PA FASHION BUG OF KUTZTOWN, INC. PA FASHION BUG OF LAKELAND, INC. (2) FL FASHION BUG OF LAKEMORE PLAZA, INC. PA FASHION BUG OF LANCASTER, INC. PA FASHION BUG OF LANGLEY PARK, INC. (2) PA FASHION BUG OF LANSING, INC. PA FASHION BUG OF LAUREL, INC. (2) PA FASHION BUG OF LAVALE, INC. PA FASHION BUG OF LAWRENCEVILLE, INC. (2) NJ FASHION BUG OF LEBANON, INC. PA FASHION BUG OF LEDGEWOOD, INC. PA FASHION BUG OF LENOX SQUARE, INC. (2) GA FASHION BUG OF LEWISBURG, INC. PA FASHION BUG OF LEWISTON, INC. ME FASHION BUG OF LEXINGTON, INC. (2) PA FASHION BUG OF LIVONIA, INC. PA FASHION BUG OF LOCKPORT, INC. (2) NY FASHION BUG OF LOGAN, INC. PA FASHION BUG OF LORAIN, INC. OH FASHION BUG OF LOUISVILLE, INC. PA FASHION BUG OF LOWER BURRELL, INC. PA FASHION BUG OF LYNCHBURG, INC. VA FASHION BUG OF LYNN, INC. MA FASHION BUG OF MACDADE, INC. PA FASHION BUG OF MANAHAWKIN, INC. PA FASHION BUG OF MANCHESTER, N.H., INC. NH FASHION BUG OF MAPLE HEIGHTS, INC. PA FASHION BUG OF MARQUETTE, INC. MI FASHION BUG OF MARTIN PLAZA, INC. (2) PA FASHION BUG OF MASON CITY, INC. IA FASHION BUG OF MASSILLON, INC. (2) OH FASHION BUG OF MATTESON, INC. (2) PA FASHION BUG OF MAULDIN, INC. (2) PA FASHION BUG OF MAYFAIR, INC. PA FASHION BUG OF MAYFIELD HEIGHTS, INC. (2) OH FASHION BUG OF MCKEESPORT (2) PA FASHION BUG OF MEADVILLE, INC. (2) PA FASHION BUG OF MEDFORD, INC. PA FASHION BUG OF MELROSE PARK, INC. (2) PA FASHION BUG OF MERRITT ISLAND, INC. FL FASHION BUG OF MIDDLESBORO, INC. PA FASHION BUG OF MIDDLETOWN PLAZA, INC. PA FASHION BUG OF MIDLAND PLAZA, INC. MI FASHION BUG OF MIDWAY, INC. MN FASHION BUG OF MONROE, INC. PA FASHION BUG OF MONROEVILLE (2) PA FASHION BUG OF MONROEVILLE, INC. PA FASHION BUG OF MONTGOMERYVILLE, INC. (2) PA FASHION BUG OF MONTPELIER, INC. VT FASHION BUG OF MOORESTOWN MALL, INC. (2) PA FASHION BUG OF MOOSIC, INC. (2) PA FASHION BUG OF MOREHEAD, INC. PA FASHION BUG OF MORRIS COUNTY, INC. PA FASHION BUG OF MOUNT PLEASANT, INC. PA FASHION BUG OF MOUNT VERNON, INC. PA FASHION BUG OF MT. CLEMENS, INC. PA FASHION BUG OF MURRAY, INC. (2) PA FASHION BUG OF N. ROANOKE, INC. VA FASHION BUG OF NANTICOKE, INC. (2) PA FASHION BUG OF NASHVILLE, INC. TN FASHION BUG OF NATRONA, INC. (2) PA FASHION BUG OF NEW BRITIAN, INC. CT FASHION BUG OF NEW CASTLE, INC. (2) PA FASHION BUG OF NEW HOLLAND, INC. PA FASHION BUG OF NEW LONDON, INC. PA FASHION BUG OF NEW PHILADELPHIA, INC. PA FASHION BUG OF NORTH ADAMS, INC. PA FASHION BUG OF NORTH AVENUE, INC. (2) PA FASHION BUG OF NORTH BRUNSWICK, INC. PA FASHION BUG OF NORTH EAST, INC. PA FASHION BUG OF NORTH POINT, INC. PA FASHION BUG OF NORWELL, INC. PA FASHION BUG OF NORWIN, INC. PA FASHION BUG OF OAK RIDGE, INC. (2) PA FASHION BUG OF OIL CITY, INC. (2) PA FASHION BUG OF OLEAN, INC. PA FASHION BUG OF PADUCAH, INC. (2) PA FASHION BUG OF PAINTSVILLE, INC. PA FASHION BUG OF PAKA PLAZA, INC. MI FASHION BUG OF PALM HARBOR, INC. FL FASHION BUG OF PANAMA CITY, INC. FL FASHION BUG OF PARKERSBURG, INC. PA FASHION BUG OF PARKSIDE, INC. (2) PA FASHION BUG OF PARLIN, INC. (2) PA FASHION BUG OF PATCHOQUE, INC. NY FASHION BUG OF PENNSVILLE, INC. PA FASHION BUG OF PEORIA, INC. PA FASHION BUG OF PERIMETER MALL, INC. (2) GA FASHION BUG OF PERRING, INC. PA FASHION BUG OF PHILLIPSBURG, INC. PA FASHION BUG OF PIKEVILLE, INC. PA FASHION BUG OF PITTSTON, INC. (2) PA FASHION BUG OF PORTSMOUTH, INC. PA FASHION BUG OF POTTSVILLE, INC. PA FASHION BUG OF RAVENSWOOD, INC. PA FASHION BUG OF RAYNHAM, INC. MA FASHION BUG OF REISTERTOWN, INC. PA FASHION BUG OF REVERE, INC. MA FASHION BUG OF REYNOLDSBURG, INC. OH FASHION BUG OF RISING SUN, INC. PA FASHION BUG OF RIVERHEAD, INC. (2) NY FASHION BUG OF RIVERSIDE SQUARE, INC. IL FASHION BUG OF RIVERTOWNE COMMONS, INC. MD FASHION BUG OF ROANOKE RAPIDS, INC. (2) PA FASHION BUG OF ROGERS PLAZA, INC. PA FASHION BUG OF ROYAL OAK, INC. (2) PA FASHION BUG OF RUMFORD, INC. (2) RI FASHION BUG OF SAGINAW, INC. PA FASHION BUG OF SALEM, INC. MA FASHION BUG OF SAUGUS, INC. (2) MA FASHION BUG OF SCRANTON, INC. PA FASHION BUG OF SEAFORD, INC. (2) PA FASHION BUG OF SECURITY, INC. (2) PA FASHION BUG OF SHARON, INC. PA FASHION BUG OF SHARONVILLE, INC. PA FASHION BUG OF SMYRNA, INC. (2) GA FASHION BUG OF SOLON, INC. OH FASHION BUG OF SOMERS POINT, INC. NJ FASHION BUG OF SOMERSET, INC. (2) PA FASHION BUG OF SOUTH FLINT, INC. PA FASHION BUG OF SOUTH HILLS VILLAGE (2) PA FASHION BUG OF SOUTH PLAINFIELD, INC. NJ FASHION BUG OF SOUTHFIELD, INC. (2) MI FASHION BUG OF SOUTHGATE, INC. (2) MI FASHION BUG OF SOUTHLAKE MALL, INC. (2) GA FASHION BUG OF SPEEDWAY SHOPPING CENTER, INC. IN FASHION BUG OF SPOTSYLVANIA, INC. (2) PA FASHION BUG OF SPRINGFIELD PLAZA, INC. MA FASHION BUG OF SPRINGFIELD, INC. (2) PA FASHION BUG OF ST. ALBANS, INC. PA FASHION BUG OF ST. CLAIR SHORES, INC. MI FASHION BUG OF STATE COLLEGE, INC. PA FASHION BUG OF STRATFORD, INC. CT FASHION BUG OF STROUDSBURG, INC. PA FASHION BUG OF STRUTHERS, INC. OH FASHION BUG OF STURGIS, INC. MI FASHION BUG OF TAYLOR, INC. MI FASHION BUG OF TECH PLAZA, INC. PA FASHION BUG OF THE MARKET PLACE, INC. (2) TN FASHION BUG OF THORNDALE, INC. PA FASHION BUG OF TIFFIN, INC. (2) PA FASHION BUG OF TOMS RIVER, INC. PA FASHION BUG OF TOPSHAM, INC. (2) ME FASHION BUG OF TOTOWA, INC. NJ FASHION BUG OF TOWN & COUNTRY, INC. (2) PA FASHION BUG OF TROY, INC. NY FASHION BUG OF TRUMBULL PLAZA, INC. PA FASHION BUG OF TUNKHANNOCK, INC. PA FASHION BUG OF UNION, INC. PA FASHION BUG OF UNIONTOWN, INC. PA FASHION BUG OF UNIVERSITY MALL, INC. OH FASHION BUG OF UNIVERSITY PLAZA, INC. TN FASHION BUG OF VALLEY PLAZA, INC. PA FASHION BUG OF VAN BUREN, INC. (2) PA FASHION BUG OF VINELAND, INC. NJ FASHION BUG OF VIRGINIA BEACH, INC. VA FASHION BUG OF WALNUTPORT, INC. PA FASHION BUG OF WARREN PLAZA, INC. OH FASHION BUG OF WARREN, INC. PA FASHION BUG OF WARRENTON, INC. PA FASHION BUG OF WARSAW, INC. IN FASHION BUG OF WATERBURY, INC. (2) PA FASHION BUG OF WAUKEGAN, INC. IL FASHION BUG OF WAYNESBURG, INC. PA FASHION BUG OF WEBSTER, INC. MA FASHION BUG OF WEIRTON, INC. PA FASHION BUG OF WEST FRANKFORT, INC. PA FASHION BUG OF WEST MANCHESTER, INC. PA FASHION BUG OF WEST MIFFLIN, INC. PA FASHION BUG OF WEST SPRINGFIELD, INC. (2) MA FASHION BUG OF WHARTON SQUARE, INC. PA FASHION BUG OF WHITMAN PLAZA, INC. PA FASHION BUG OF WILKES BARRE, INC. PA FASHION BUG OF WILLIAMSON, INC. PA FASHION BUG OF WILLIAMSPORT, INC. PA FASHION BUG OF WILLIAMSTOWN, INC. NJ FASHION BUG OF WILMINGTON, INC. MA FASHION BUG OF WISCONSIN RAPIDS, INC. (2) WI FASHION BUG OF WOODBRIDGE, INC. PA FASHION BUG OF WOODLYN, INC. PA FASHION BUG OF XENIA, INC. (2) PA FASHION BUG OF YOUNGSTOWN, INC. PA FASHION BUG OF ZANESVILLE, INC. PA FASHION BUG PLUS #8005, INC. (2) NJ FASHION BUG PLUS #8006, INC. (2) NJ FASHION BUG PLUS #8008, INC. (2) PA FASHION BUG PLUS #8009, INC. (2) ME FASHION BUG PLUS #8010 OF ROCKY POINT, INC. NY FASHION BUG PLUS #8013, INC. (2) IN FASHION BUG PLUS #8014, INC. PA FASHION BUG PLUS #8016, INC. (2) MN FASHION BUG PLUS #8017 OF RIVERHEAD, INC. (2) NY FASHION BUG PLUS #8019, INC. PA FASHION BUG PLUS #8023, INC. (2) VA FASHION BUG PLUS #8024, INC. (2) NJ FASHION BUG PLUS #8025, INC. (2) IA FASHION BUG PLUS #8027, INC. (1) (2) OH FASHION BUG PLUS #8028, INC. (2) CT FASHION BUG PLUS #8030, INC. (2) PA FASHION BUG PLUS #8031, INC. (2) MI FASHION BUG PLUS #8032, INC. (2) PA FASHION BUG PLUS #8034, INC. PA FASHION BUG PLUS #8036, INC. (1) (2) NJ FASHION BUG PLUS #8038, INC. (2) MD FASHION BUG PLUS #8039, INC. (1) (2) OH FASHION BUG PLUS #8040, INC. PA FASHION BUG PLUS #8041, INC. CA FASHION BUG PLUS #8043, INC. NJ FASHION BUG PLUS #8044, INC. MA FASHION BUG PLUS #8045, INC. NJ FASHION BUG PLUS #8046, INC. KS FASHION BUG PLUS #8047, INC. TX FASHION BUG PLUS #8048,INC. TX FASHION BUG PLUS #8049, INC. TX FASHION BUG PLUS #8050, INC. TX FASHION BUG PLUS #8051, INC. CA FASHION BUG PLUS #8052 OF AMHERST, INC. (1) (2) NY FASHION BUG PLUS #8053, INC. (1) (2) NC FASHION BUG PLUS #8054, INC. (1) (2) IN FASHION BUG PLUS #8055, INC. (1) (2) TX FASHION BUG PLUS #8056, INC. (1) (2) MN FASHION BUG PLUS #8057, INC. (1) (2) NJ FASHION BUG PLUS #8058, INC. (1) (2) TX FASHION BUG PLUS #8060, INC. (1) (2) PA FASHION BUG PLUS #8061, INC. (1) (2) MN FASHION BUG PLUS #8062, INC. (1) (2) FL FASHION BUG PLUS #8063, INC. (1) (2) FL FASHION BUG PLUS #8064, INC. (1) (2) FL FASHION BUG PLUS #811, INC. MI FASHION BUG PLUS #818 OF AUBURN, INC. (2) NY FASHION BUG PLUS #881, INC. (2) MI FASHION BUG PLUS #904, INC. FL FASHION BUG PLUS #932, INC. KY FASHION BUG PLUS #950, INC. (2) MN FASHION BUG PLUS #955 OF FLUSHING, INC. (1) (2) NY FASHION BUG PLUS #957, INC. (2) PA FASHION BUG PLUS #958, INC. (2) SD FASHION BUG PLUS #960, INC. (2) IA FASHION BUG PLUS #961, INC. (1) (2) IN FASHION BUG PLUS #962, INC. (2) WV FASHION BUG PLUS #963, INC. (2) MI FASHION BUG PLUS #964, INC. OH FASHION BUG PLUS #966, INC. WV FASHION BUG PLUS #969, INC. (2) MN FASHION BUG PLUS #970, INC. GA FASHION BUG PLUS #971, INC. (2) NJ FASHION BUG PLUS #972, INC. (2) IL FASHION BUG PLUS #973, INC. (2) WI FASHION BUG PLUS #975 OF HORSEHEADS, INC. NY FASHION BUG PLUS #976, INC. (2) WI FASHION BUG PLUS #977, INC. (2) CT FASHION BUG PLUS #978, INC. (2) MN FASHION BUG PLUS #979, INC. (2) MO FASHION BUG PLUS #980, INC. ME FASHION BUG PLUS #981, INC. PA FASHION BUG PLUS #982, INC. (2) KY FASHION BUG PLUS #983, INC. (2) NJ FASHION BUG PLUS #984, INC. (2) IA FASHION BUG PLUS #985, INC. MN FASHION BUG PLUS #986, INC. (2) SD FASHION BUG PLUS #987, INC. PA FASHION BUG PLUS #990, INC. (2) MD FASHION BUG PLUS #991, INC. IA FASHION BUG PLUS #993, INC. (1) (2) NJ FASHION BUG PLUS OF ADRIAN, INC. (2) PA FASHION BUG PLUS OF AMERICAN MALL, INC. (2) PA FASHION BUG PLUS OF APPLETON, INC. PA FASHION BUG PLUS OF BALTIMORE, INC. MD FASHION BUG PLUS OF BEAVER VALLEY, INC. (2) PA FASHION BUG PLUS OF BELOIT, INC. (2) WI FASHION BUG PLUS OF BRICKTOWN, INC. (2) PA FASHION BUG PLUS OF CAPITAL HEIGHTS, INC. (2) MD FASHION BUG PLUS OF CAPITAL PLAZA, INC. (2) MD FASHION BUG PLUS OF CHAMPAIGN, INC. (2) IL FASHION BUG PLUS OF CHARLESTON, INC. (2) PA FASHION BUG PLUS OF CLEVELAND HEIGHTS, INC. (2) PA FASHION BUG PLUS OF COCOA, INC. (2) FL FASHION BUG PLUS OF COLLEGE PLAZA, INC. (2) OH FASHION BUG PLUS OF DEFIANCE, INC. (2) OH FASHION BUG PLUS OF DERBY, INC. (2) CT FASHION BUG PLUS OF DUBOIS, INC. PA FASHION BUG PLUS OF ERIE, INC. PA FASHION BUG PLUS OF ESSEXVILLE, INC. (2) PA FASHION BUG PLUS OF FLINT, INC. (2) MI FASHION BUG PLUS OF FORESTVILLE, INC. (2) MD FASHION BUG PLUS OF FORT WAYNE, INC. (2) PA FASHION BUG PLUS OF FREDERICK, INC. PA FASHION BUG PLUS OF GREENFIELD, INC. (2) PA FASHION BUG PLUS OF HADLEY, INC. (2) PA FASHION BUG PLUS OF HAGERSTOWN, INC. (2) PA FASHION BUG PLUS OF HARRISBURG, INC. (2) PA FASHION BUG PLUS OF HARVARD SQUARE, INC. MI FASHION BUG PLUS OF HICKORY POINT, INC. (2) PA FASHION BUG PLUS OF HIGHLAND RIDGE, INC. (2) OH FASHION BUG PLUS OF HUNTINGTON, INC. (2) NY FASHION BUG PLUS OF HUTCHINSON, INC. (2) MN FASHION BUG PLUS OF HYATTSVILLE, INC. (2) PA FASHION BUG PLUS OF JANESVILLE, INC. (2) PA FASHION BUG PLUS OF LANCASTER PLAZA, INC. (2) PA FASHION BUG PLUS OF LAWNSIDE, INC. NJ FASHION BUG PLUS OF LINCOLN MALL, INC. (2) PA FASHION BUG PLUS OF LIVONIA MALL, INC. (2) PA FASHION BUG PLUS OF MANITOWOC, INC. (2) WI FASHION BUG PLUS OF MARION, INC. (2) PA FASHION BUG PLUS OF MARTIN PLAZA, INC. (2) PA FASHION BUG PLUS OF MELROSE PARK, INC. (2) IL FASHION BUG PLUS OF MEMPHIS, INC. (2) TN FASHION BUG PLUS OF MONROEVILLE, INC. (2) PA FASHION BUG PLUS OF MT. GREENWOOD, INC. IL FASHION BUG PLUS OF MUNCIE, INC. (2) PA FASHION BUG PLUS OF NEW BEDFORD, INC. (2) MA FASHION BUG PLUS OF NORTH FT MYERS, INC. FL FASHION BUG PLUS OF NORTHWEST PLAZA, INC. (2) PA FASHION BUG PLUS OF ORLANDO, INC. (2) FL FASHION BUG PLUS OF OWENSBORO, INC. (2) KY FASHION BUG PLUS OF PEKIN, INC, PA FASHION BUG PLUS OF PERU, INC. (2) PA FASHION BUG PLUS OF PONTIAC, INC. (2) MI FASHION BUG PLUS OF RAINBOW CENTRE, INC. (2) NY FASHION BUG PLUS OF RANDOLPH, INC. (2) PA FASHION BUG PLUS OF ROSEVILLE, INC. (2) PA FASHION BUG PLUS OF SANDUSKY, INC. (2) PA FASHION BUG PLUS OF SHARON HILL, INC. PA FASHION BUG PLUS OF SHEBOYGAN, INC. WI FASHION BUG PLUS OF SOUTH ATTLEBORO, INC. (2) PA FASHION BUG PLUS OF SOUTH MALL, INC. (2) PA FASHION BUG PLUS OF SOUTHINGTON, INC. (2) CT FASHION BUG PLUS OF SPRINGFIELD, INC. (2) MA FASHION BUG PLUS OF ST AUGUSTINE, INC. (2) FL FASHION BUG PLUS OF ST CLAIRSVILLE, INC. (2) PA FASHION BUG PLUS OF TURFLAND MALL, INC. PA FASHION BUG PLUS OF WALLKILL, INC. NY FASHION BUG PLUS OF WESTWOOD PLAZA, INC. (2) PA FASHION BUG PLUS OF WHITEHAVEN, INC. (2) TN FASHION BUG PLUS OF WORCESTER, INC. (2) PA FASHION BUG PLUS OF YOUNGSTOWN, INC. (2) OH FASHION SERVICE CORP. (2) DE FASHION SERVICE FULFILLMENT CORPORATION (2) DE FB APPAREL, INC. (2) IN FB CLOTHING, INC. (2) IN FB DISTRO, INC. (2) IN FESTUS #2733 DEVELOPMENT CO., INC. MO FESTUS DEVELOPMENT CO., INC. (1) (2) MO FSC SERVICE CORP. (2) PA FSHC, INC. (2) DE I.E. WAREHOUSE #4001, INC. (2) NJ I.E. WAREHOUSE #4002, INC. (2) CT I.E. WAREHOUSE #4004, INC. (2) NJ I.E. WAREHOUSE #4005, INC. (2) MA I.E. WAREHOUSE #4006, INC. (2) PA I.E. WAREHOUSE #4007, INC. (2) PA I.E. WAREHOUSE #4008, INC. (2) NJ I.E. WAREHOUSE #4009, INC. (2) RI I.E. WAREHOUSE #4010, INC. (2) MA I.E. WAREHOUSE #4011, INC. (2) NH I.E. WAREHOUSE #4012, INC. (2) NY I.E. WAREHOUSE #4013, INC. (2) NJ INTERNATIONAL APPAREL, INC. (2) PA J.M. BALTER CO. (1) (2) PA J.P.A. CLOTHING COMPANY (2) GA J.P.A. SERVICE CO. PA KAFCO DEVELOPMENT CO., INC. (2) PA KIRKSTONE LTD (2) HONG KONG KS INVESTMENTS LTD. (2) BERMUDA M AND A JOINT VENTURES, LLC (2) DE MACOMB #2619 DEVELOPMENT CO., INC. IL MODERN WOMAN #6001, INC. (1) (2) IN MODERN WOMAN #6002, INC. (1) (2) IL MODERN WOMAN CLOTHING, INC. (2) IN MODERN WOMAN HOLDINGS, INC. (2) DE MODERN WOMAN NAME HOLDING, INC. (2) DE MODERN WOMAN SPECIALTY, INC. (2) CA MODERN WOMAN, INC. (DE) DE MODERN WOMAN, INC. (MI) MI ORLE (2) DE PRESQUE ISLE #2756 DEVELOPMENT CO., INC. (2) ME PRICE APPEAL #5001 OF STATEN ISLAND, INC. (1) (2) NY PRICE APPEAL #5002, INC. (2) PA PRICE APPEAL #5003, INC. (2) DE PRICE APPEAL #5004, INC. (2) NJ PRICE APPEAL #5005, INC. (2) PA PRICE APPEAL #5009, INC. (2) VA PRICE APPEAL #5013, INC. (2) PA PRICE APPEAL #5014, INC. (2) CT PRICE APPEAL #5015, INC. (1) (2) NJ PRICE APPEAL #5020, INC. (1) (2) OH PRICE APPEAL #5024, INC. (1) (2) NJ PRICE APPEAL #5044, INC. (2) MD PRICE APPEAL #5045, INC. (2) OH PRICE APPEAL #5050, INC. (2) MI PRICE APPEAL #5059, INC. (2) OH PRICE APPEAL #5060, INC. (1) (2) MI P'ZAZZ FASHIONS OF BARBOURSVILLE, INC. (2) WV P'ZAZZ FASHIONS OF HAGERSTOWN, INC. (2) MD P'ZAZZ FASHIONS OF KALAMAZOO, INC. (2) MI P'ZAZZ FASHIONS OF OZONE, INC. (2) NY P'ZAZZ FASHIONS OF UNIONTOWN, INC. (2) PA ROLLA #2685 DEVELOPMENT CO., INC. MO ROLLA DEVELOPMENT CO., INC. (1) (2) MO ROSE MERGE SUB, INC. (2) TN S A FUNDING, INC. (2) DE SALINA #2926 DEVELOPMENT CO., INC. (2) KS SAN ANGELO #2973 DEVELOPMENT CO., INC. (2) TX SENTANI TRADING LTD. (2) HONG KONG SIKESTON #2736 DEVELOPMENT CO., INC. MO SOURCE NET, INC. (2) DE SPECIALTY FIXTURES, INC. (2) DE SPECIALTY FIXTURES, INC. (2) PA SPIRIT OF AMERICA NATIONAL BANK (2) OH SPIRIT OF AMERICA PROMOTIONS, INC. (2) OH SPIRIT OF AMERICA, INC. (2) DE THE ANSWER #5454, INC. (1) (2) GA THE ANSWER #5469, INC. (1) (2) TN THE ANSWER #5542, INC. (1) (2) VA THE ANSWER #5543, INC. (1) (2) GA THE ANSWER #5544, INC. (1) (2) CA THE ANSWER #5603, INC. (1) (2) IL THE ANSWER #5640, INC. (1) (2) GA THE ANSWER #5641, INC. (1) (2) VA THE ANSWER #5642, INC. (1) (2) LA VICTORIA #2972 DEVELOPMENT CO., INC. (2) TX W.L. DISTRIBUTORS, INC. (2) PA WINKS LANE, INC. (2) PA YARDARM TRADING LTD. (2) HONG KONG YUCCA #2524 DEVELOPMENT CO., INC. CA
- -------------------- [FN] (1) These companies are not included in the consolidated financial statements for the fiscal year ended February 3, 2001, as they had not then commenced operations and the original capitalization was not then paid in. (2) These companies do not currently operate stores. EX-23 10 exh23.txt CONSENT EXHIBIT 23 Consent Of Independent Auditors We consent to the incorporation by reference in the Registration Statements No. 333-45750, 333-88899, 333-43117, 333-22323, 33-56145, 33-56147, 33-39558, and 2-92975 on Form S-8 of Charming Shoppes, Inc., of our report dated March 12, 2001, with respect to the consolidated financial statements of Charming Shoppes, Inc. included in this Annual Report (Form 10-K) for the year ended February 3, 2001. ERNST & YOUNG, LLP Philadelphia, Pennsylvania May 1, 2001 -----END PRIVACY-ENHANCED MESSAGE-----