-----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, G7kzs96+b6Ru5OevPIqcZR8hY2sF4JuaCzlZ4v9VvTXA2ZEB+cXzj0ONbB3XE8NY LpSjHdkL0khKYIJH90NPAg== 0000019353-98-000042.txt : 19981216 0000019353-98-000042.hdr.sgml : 19981216 ACCESSION NUMBER: 0000019353-98-000042 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19981215 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-Q SEC ACT: SEC FILE NUMBER: 000-07258 FILM NUMBER: 98769317 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-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 1998 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 No. 0-7258 CHARMING SHOPPES, INC. (Exact name of registrant as specified in its charter) PENNSYLVANIA 23-1721355 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 450 WINKS LANE, BENSALEM, PA 19020 (Address of principal executive offices) (Zip Code) (215) 245-9100 (Registrant's telephone number, including Area Code) NOT APPLICABLE (Former name, former address, and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports re- quired to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES (X) NO ( ) The number of shares outstanding of the issuer's Common Stock, as of Octo- ber 31, 1998, was 97,839,448 shares. CHARMING SHOPPES, INC. AND SUBSIDIARIES INDEX
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets (Unaudited) October 31, 1998 and January 31, 1998.............................. 1-2 Condensed Consolidated Statements of Operations (Unaudited) Thirteen weeks ended October 31, 1998 and November 1, 1997......... 3 Condensed Consolidated Statements of Operations (Unaudited) Thirty-nine weeks ended October 31, 1998 and November 1, 1997...... 4 Condensed Consolidated Statements of Comprehensive Income (Unaudited) Thirty-nine weeks ended October 31, 1998 and November 1, 1997...... 5 Condensed Consolidated Statements of Cash Flows (Unaudited) Thirty-nine weeks ended October 31, 1998 and November 1, 1997...... 6 Notes to Condensed Consolidated Financial Statements (Unaudited)...... 7-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................11-21 PART II. OTHER INFORMATION Item 5. Other Information............................................ 22 Item 6. Exhibits and Reports on Form 8-K............................. 23
PART I. FINANCIAL INFORMATION Item 1. Financial Statements CHARMING SHOPPES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
October 31, January 31, (In thousands) 1998 1998 ---- ---- ASSETS Current assets Cash and cash equivalents............................$ 32,633 $ 12,349 Available-for-sale securities (including fair value adjustments of $(37) and $37, respectively).. 72,721 84,909 Merchandise inventories.............................. 217,000 175,785 Deferred taxes....................................... 6,587 863 Prepayments and other................................ 29,140 31,975 -------- -------- Total current assets................................. 358,081 305,881 Property, equipment, and leasehold improvements...... 439,071 443,017 Less: accumulated depreciation and amortization...... 266,648 257,013 -------- -------- Net property, equipment, and leasehold improvements.. 172,423 186,004 Available-for-sale securities (including fair value adjustments of $906 and $474, respectively).. 152,159 207,191 Other assets......................................... 24,414 10,662 -------- -------- Total assets.........................................$707,077 $709,738 ======== ======== See Notes to Condensed Consolidated Financial Statements
(1) CHARMING SHOPPES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
October 31, January 31, (In thousands) 1998 1998 ---- ---- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable.....................................$ 83,198 $ 53,623 Accrued expenses..................................... 77,377 82,911 Income taxes payable................................. 0 6,123 Accrued restructuring expenses....................... 19,031 0 Current portion -- long-term debt.................... 16 16 -------- -------- Total current liabilities............................ 179,622 142,673 Deferred taxes....................................... 12,139 12,139 Long-term debt....................................... 122,279 138,116 Stockholders' equity Common Stock $.10 par value Authorized -- 300,000,000 shares Issued -- 106,549,448 shares and 106,249,385 shares, respectively.................. 10,655 10,625 Additional paid-in capital........................... 65,170 64,019 Treasury stock at cost - 8,710,000 shares and 5,580,000 shares, respectively.................... (39,405) (25,382) Deferred employee compensation....................... (1,239) (1,073) Unrealized gains on available-for-sale securities (net of income tax expense of $304 and $179, respectively)...................... 565 332 Retained earnings.................................... 357,291 368,289 -------- -------- Total stockholders' equity........................... 393,037 416,810 -------- -------- Total liabilities and stockholders' equity...........$707,077 $709,738 ======== ======== See Notes to Condensed Consolidated Financial Statements
(2) CHARMING SHOPPES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Thirteen Weeks Ended October 31, November 1, (In thousands except per-share amounts) 1998 1997 ---- ---- Net sales...........................................$239,742 $236,203 Other income........................................ 3,921 4,423 -------- -------- Total revenue....................................... 243,663 240,626 -------- -------- Cost of goods sold, buying, and occupancy expenses.. 180,148 179,908 Selling, general, and administrative expenses....... 61,772 57,883 Non-recurring gain from asset securitization........ 0 (13,018) Interest expense.................................... 2,395 2,590 -------- -------- Total expenses...................................... 244,315 227,363 -------- -------- Income (loss) before income taxes................... (652) 13,263 Income tax provision (benefit)...................... (228) 4,637 -------- -------- Net income (loss)...................................$ (424) $ 8,626 ======== ======== Net income (loss) per share......................... $(0.00) $0.08 ====== ===== See Notes to Condensed Consolidated Financial Statements
(3) CHARMING SHOPPES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Thirty-nine Weeks Ended October 31, November 1, (In thousands except per-share amounts) 1998 1997 ---- ---- Net sales...........................................$762,931 $737,587 Other income........................................ 12,242 11,491 -------- -------- Total revenue....................................... 775,173 749,078 -------- -------- Cost of goods sold, buying, and occupancy expenses.. 568,045 561,181 Selling, general, and administrative expenses....... 182,413 173,149 Restructuring charge................................ 34,000 0 Non-recurring gain from asset securitization........ 0 (13,018) Interest expense.................................... 7,635 7,770 -------- -------- Total expenses...................................... 792,093 729,082 -------- -------- Income (loss) before income taxes................... (16,920) 19,996 Income tax provision (benefit)...................... (5,922) 6,859 -------- -------- Net income (loss)...................................$(10,998) $ 13,137 ======== ======== Net income (loss) per share......................... $(0.11) $ 0.12 ====== ====== See Notes to Condensed Consolidated Financial Statements
(4) CHARMING SHOPPES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
Thirty-nine Weeks Ended October 31, November 1, (In thousands) 1998 1997 ---- ---- Net income (loss).................................. $(10,998) $ 13,137 -------- -------- Other comprehensive income: Unrealized gains on available-for-sale securities, net of income tax expense of $210 and $192, respectively.......................... 390 356 Reclassification of realized gains on available-for-sale securities, net of income tax expense of $85 and $39, respectively........ (157) (73) -------- -------- Total other comprehensive income, net of taxes.. 233 283 -------- -------- Comprehensive income (loss)........................ $(10,765) $ 13,420 ======== ======== See Notes to Condensed Consolidated Financial Statements
(5) CHARMING SHOPPES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Thirty-nine Weeks Ended October 31, November 1, (In thousands) 1998 1997 ---- ---- Operating activities Net income (loss)....................................$(10,998) $ 13,137 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization..................... 25,502 29,996 Non-recurring gain from asset securitization...... 0 (13,018) Deferred income taxes............................. (5,849) 4,556 Amortization of deferred compensation expense..... 553 579 Write-down of capital assets due to restructuring. 10,000 0 Gain from disposition of capital assets........... (35) (107) Gain on sale of available-for-sale securities..... (242) (112) Changes in operating assets and liabilities: Income tax refund receivable................... 0 3,684 Prepayments and other.......................... 2,790 (3,636) Merchandise inventories........................ (41,215) (60,201) Accounts payable............................... 29,575 46,229 Accrued expenses............................... (5,534) 2,498 Income taxes payable........................... (6,123) 3,745 Accrued restructuring expenses................. 19,031 0 -------- -------- Net cash provided by operating activities............ 17,455 27,350 -------- -------- Investing activities Investment in capital assets......................... (20,418) (12,643) Proceeds from sales of capital assets................ 60 2,603 Proceeds from sales of available-for-sale securities. 326,762 173,921 Gross purchases of available-for-sale securities.....(258,993) (239,813) Increase in other assets............................. (15,229) (959) -------- -------- Net cash provided by (used in) investing activities.. 32,182 (76,891) -------- -------- Financing activities Purchases of treasury stock.......................... (14,023) 0 Reduction of long-term borrowings.................... (15,837) (8) Proceeds from exercise of stock options.............. 507 1,570 -------- -------- Net cash provided by (used in) financing activities.. (29,353) 1,562 -------- -------- Increase (Decrease) in cash and cash equivalents..... 20,284 (47,979) Cash and cash equivalents, beginning of period....... 12,349 78,979 -------- -------- Cash and cash equivalents, end of period.............$ 32,633 $ 31,000 ======== ======== Certain prior-year amounts have been reclassified to conform to current- year presentation See Notes to Condensed Consolidated Financial Statements
(6) CHARMING SHOPPES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Condensed Consolidated Financial Statements The condensed consolidated balance sheet as of October 31, 1998 and the condensed consolidated statements of operations, comprehensive income (loss), and cash flows for the thirteen and thirty-nine weeks ended October 31, 1998 and November 1, 1997 have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at October 31, 1998 and the results of operations and cash flows for the thirteen and thirty-nine weeks ended October 31, 1998 and November 1, 1997 have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted ac- counting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's January 31, 1998 Annual Report on Form 10-K. The results of operations for the thirteen and thirty-nine weeks ended October 31, 1998 and November 1, 1997 are not necessarily indicative of operating results for the full fiscal year. 2. Stockholders' Equity During the thirty-nine weeks ended October 31, 1998, stockholders' equity changed as a result of the following items: a decrease from a net loss of $10,998,000; an increase from net unrealized gains on available- for-sale securities of $233,000 (net of income taxes of $125,000); an in- crease in common stock and additional paid-in capital of $478,000 from the exercise of options for Common Stock; a decrease in paid-in capital of $16,000 from shares of Common Stock tendered by employees in payment of payroll taxes due from the exercise of stock options; a decrease from pur- chases of treasury stock of $14,023,000; and an increase from amortization of deferred compensation expense of $553,000. 3. Revolving Credit Facility 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. On May 1, 1998, the expiration date of this facility was extended from June 1, 1998 to June 1, 1999. (7) CHARMING SHOPPES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. Repurchases of Common Stock and Convertible Notes In November 1997, the Company's Board of Directors approved the repur- chase of up to 10,000,000 shares of the Company's Common Stock. During the thirteen weeks ended October 31, 1998, the Company repurchased 2,330,000 shares of its Common Stock at an aggregate cost of $10,243,000. During the thirty-nine weeks ended October 31, 1998, the Company repurchased 3,130,000 shares of its Common Stock at an aggregate cost of $14,023,000. During the thirteen weeks ended October 31, 1998, the Company repurchased $12,833,000 aggregate principal amount of its 7.5% Convertible Subordinated Notes due 2006 ("the Notes") at a total cost of $12,351,000. During the thirty-nine weeks ended October 31, 1998, the Company repur- chased $15,833,000 aggregate principal amount of the Notes at a total cost of $15,306,000. The gains or losses on the repurchases of the Notes were not material. 5. Restructuring Charge On March 5, 1998, the Company's Board of Directors approved a Restruc- turing Plan (the "Plan") that resulted in a pre-tax charge of $34,000,000 during the thirteen weeks ended May 2, 1998. The Plan includes the down- sizing of approximately 100 stores and the closing of approximately 65 under-performing stores. The Plan was approved in conjunction with the decision to eliminate men's merchandise from the Company's stores. The restructuring charge includes estimates of $10,000,000 for the write-down of store fixtures and improvements, $11,400,000 for the early termination and amendment of store leases, $8,300,000 for the cost of renovating vacated store space, and $4,300,000 for other costs, including severance benefits. The Company anticipates a workforce reduction of ap- proximately 650 store employees. During the thirty-nine weeks ended October 31, 1998, the Company closed 33 stores and reduced store employees by approximately 330. 6. Non-Recurring Gain from Asset Securitization In connection with the issuance in November 1997 of the Charming Shoppes Master Trust Series 1997-1 Floating Rate Class A Asset-Backed Certificates, the Company evaluated the fair value of its retained inter- ests and related recourse provisions. As a result of such evaluation, the Company recognized a non-recurring gain of $13,018,000 for the thirteen weeks and thirty-nine weeks ended November 1, 1997. (8) CHARMING SHOPPES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 7. Net Income (Loss) Per Share
Thirteen Weeks Ended Thirty-nine Weeks Ended (In thousands except October 31, November 1, October 31, November 1, per-share amounts) 1998 1997 1998 1997 ---- ---- ---- ---- Basic net income (loss) per share Net income (loss)........... $ (424) $ 8,626 $(10,998) $ 13,137 Weighted average shares outstanding.............. 98,860 106,088 99,952 105,839 -------- -------- -------- -------- Basic net income (loss) per share................ $(.00) $ .08 $(.11) $ .12 ======== ======== ======== ======== Net income (loss) per share, assuming dilution Dilutive effect of assumed Exercise of stock options 0 1,675 0 1,585 -------- -------- -------- -------- Weighted average shares and share equivalents outstanding.............. 98,860 107,763 99,952 107,424 -------- -------- -------- -------- Net income (loss) per share, assuming dilution........ $(.00) $ .08 $ (.11) $ .12 ======== ======== ======== ========
Options to purchase 11.1 million shares of the Company's Common Stock at a weighted average exercise price of $5.25 per share, which were outstanding at October 31, 1998, were excluded from the computation of net loss per share assuming dilution for the periods ended October 31, 1998 because the effect would have been antidilutive. The assumed conversion of the 7.5% Convertible Subordinated Notes due 2006 was excluded from the computation of net income (loss) per share assuming dilution because the effect would have been antidilutive. 8. Impact of Recent Accounting Pronouncements In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The Company is required to adopt this statement as of the end of the fiscal year ending January 30, 1999. SFAS No. 131 requires disclosure of certain information about operating segments, products and services, geographic areas of operations, and major customers, and the factors used by management to determine reportable segments. Adoption of SFAS No. 131 will not affect the Company's financial position or results of (9) CHARMING SHOPPES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 8. Impact of Recent Accounting Pronouncements (continued) operations. Management has not completed its determination of the effect that this statement will have on the Company's financial statement disclo- sures. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Company is required to adopt this statement as of the beginning of the fiscal year ending February 3, 2001. 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. The statement 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. The Company currently manages a portion of its interest rate risk through the use of derivative instruments that cap a portion of the Company's interest rate risk. Management has not completed its determination of the effect that SFAS 133 will have on the Company's financial statements or financial statement disclosures. 9. Subsequent Event On December 10, 1998, the Company's Board of Directors approved a plan to record a one-time pre-tax charge of approximately $20,246,000 to account for the cost of closing the Company's Bensalem, Pennsylvania distribution center. This 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 charge is to be recorded during the fourth quarter ended January 30, 1999 in accordance with Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity," as the plan was approved subsequent to October 31, 1998. (10) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations FORWARD-LOOKING STATEMENTS This Management's Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking statements con- cerning the Company's operations, performance and financial condition. In particular, it includes certain forward-looking statements regarding sales performance, store openings and closings, capital requirements, the discus- sion of management's expectations for Year 2000 compliance, 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 due to a number of factors. Such factors may include, but are not limited to, the following: (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) risks attendant to the sourcing of the Company's merchandise needs abroad, including exchange rate fluctua- tions, political instability, trade sanctions or restrictions, changes in quota and duty regulations, delays in shipping, or increased costs of transportation; (v) competitive pressures; (vi) disruptions to operations as a result of Y2K compliance issues, and; (vii) other risks and uncer- tainties detailed in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1998 ("Fiscal 1998"). 1998 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 restruc- turing plan that resulted in a pre-tax charge of $34,000,000 during the quarter ended May 2, 1998 ("Fiscal 1999 First Quarter"). The plan includes the downsizing of approximately 100 stores and the closing of approximately 65 under-performing stores during the fiscal year ending January 30, 1999 ("Fiscal 1999"). The plan was approved in conjunction with the decision to eliminate men's merchandise from the Company's stores. In the fall of 1997, the Company eliminated men's merchandise from approximately 300 of its stores in order to refine its product assortments. As of October 31, 1998 the Company has closed 33 stores, and expects to complete the balance of the store closings by the end of Fiscal 1999. The Company anticipates completing approximately 50 of the planned store downsizings by the end of Fiscal 1999, with the remainder to be completed during the fiscal year ending January 29, 2000 ("Fiscal 2000"). The Company expects that the elimination of men's merchandise will allow for further development of product categories more closely related to its existing women's apparel business. The Company plans to focus on the development and expansion of its junior apparel, junior accessories, and footwear categories. These businesses are expected to yield improved sales (11) and gross margin productivity as compared to the men's merchandise. The Company ceased selling men's merchandise by the end of October 1998, and has repositioned the merchandise assortments in its stores. Net sales of men's merchandise for the quarter ended October 31, 1998 ("Fiscal 1999 Third Quarter") were $1,300,000, an 87% decrease from sales of $10,200,000 for the quarter ended November 1, 1997 ("Fiscal 1998 Third Quarter"). Net sales of men's merchandise for the nine months ended October 31, 1998 were $14,300,000, a 56% decrease from sales of $32,800,000 for the nine months ended November 1, 1997. The decline in sales of men's merchandise had a negative impact of 3.9% during the Fiscal 1999 Third Quarter and 2.7% during the first nine months of Fiscal 1999 on the overall decrease/increase in comparable store sales (sales generated by stores in operation during the same weeks of each period). The Company expects that the elimination of men's merchandise will have a negative impact of approximately 6% on overall comparable store sales for the quarter ended January 30, 1999 ("Fiscal 1999 Fourth Quarter"). 1998 DISTRIBUTION CENTER RESTRUCTURING On December 10, 1998, the Company's Board of Directors approved a plan to record a one-time pre-tax charge of approximately $20,246,000 to account for the cost of closing the Company's Bensalem, Pennsylvania distribution center. This 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 Company anticipates a workforce reduction of 99 employees. Subsequent to the restructuring, the Company plans to conduct its distribution center operations from the Greencastle, Indiana facility, and plans to offer the Bensalem, Pennsyl- vania facility for sale. The closing of the Bensalem distribution center is expected to result in annual operating cost savings of approximately $2,800,000. The charge is to be recorded during the fourth quarter ending January 30, 1999 in accordance with Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity," as the plan was approved subsequent to October 31, 1998. (12) RESULTS OF OPERATIONS The following table sets forth, as a percentage of net sales, certain items appearing in the Condensed Consolidated Statements of Operations:
Thirteen Weeks Ended Thirty-nine Weeks Ended October 31, November 1, October 31, November 1, 1998 1997 1998 1997 ---- ---- ---- ---- Net sales.................... 100.0% 100.0% 100.0% 100.0% Cost of goods sold, buying, and occupancy expenses.... 75.1 76.2 74.5 76.1 Selling, general, and administrative expenses... 25.8 24.5 23.9 23.5 Restructuring charge......... -- -- 4.5 -- Non-recurring gain from asset securitization...... -- 5.5 -- 1.8 Interest expense............. 1.0 1.1 1.0 1.1 Income tax provision (benefit) (0.1) 2.0 (0.8) 0.9 Net income (loss)............ (0.2) 3.7 (1.4) 1.8
Thirteen Weeks Ended October 31, 1998 and November 1, 1997 Net sales for the Fiscal 1999 Third Quarter were $239,742,000, a 1.5% increase from net sales of $236,203,000 for the Fiscal 1998 Third Quarter. The Company experienced a 0.8% decrease in comparable store sales in the Fiscal 1999 Third Quarter as compared to the Fiscal 1998 Third Quarter. In addition, sales from new stores (sales generated by stores in operation during the Fiscal 1999 Third Quarter that were not in operation during the corresponding weeks of the Fiscal 1998 Third Quarter) in the Fiscal 1999 Third Quarter equaled 4.5% of Fiscal 1998 Third Quarter sales. Sales for the Fiscal 1998 Third Quarter which were not comparable with sales for the Fiscal 1999 Third Quarter as a result of the closing of stores in Fiscal 1998 and Fiscal 1999 equaled 2.2% of Fiscal 1998 Third Quarter sales. The number of retail stores increased from 1,139 at November 1, 1997 to 1,156 at October 31, 1998. Excluding the decrease in comparable store sales of men's merchandise (see "1998 STORE RESTRUCTURING AND ELIMINATION OF MEN'S MERCHANDISE FROM THE COMPANY'S FASHION BUG STORES" above), comparable store sales for the Fiscal 1999 Third Quarter increased 3.1% as compared to the Fiscal 1998 Third Quarter. The increase in comparable store sales was achieved in the Company's core merchandising departments, including sportswear, dresses, intimate apparel, and girl's. Cost of goods sold, buying, and occupancy expenses expressed as a percentage of sales decreased 1.1% in the Fiscal 1999 Third Quarter as compared to the Fiscal 1998 Third Quarter. Cost of goods sold as a percentage of sales decreased 0.8% in the Fiscal 1999 Third Quarter as compared to the Fiscal 1998 Third Quarter. The decrease in cost of goods sold as a percentage of sales was primarily due to customer response to the (13) Fall merchandise offering, which resulted in lower overall merchandise markdowns as compared to the prior year. Increased markdowns on sales of the remaining men's merchandise had a slight negative effect on gross margin. Buying and occupancy expenses expressed as a percentage of sales decreased 0.3% in the Fiscal 1999 Third Quarter as compared to the Fiscal 1998 Third Quarter. The decrease in buying and occupancy expenses was due to a reduction in store occupancy expenses, primarily depreciation and utility costs. Selling, general and administrative expenses expressed as a percentage of sales increased 1.3% in the Fiscal 1999 Third Quarter as compared to the Fiscal 1998 Third Quarter. This was primarily attributable to an increase in advertising expenditures related to the Company's new television and radio campaign. Interest expense expressed as a percentage of sales decreased 0.1% in the Fiscal 1999 Third Quarter as compared to the Fiscal 1998 Third Quarter. The decrease in interest expense is the result of the Company's repurchase of $15.8 million of 7.5% Convertible Subordinated Notes due 2006 during the first three quarters of Fiscal 1999. The income tax benefit for the Fiscal 1999 Third Quarter was 35% of the Company's pre-tax loss, as compared to a provision of 35% of the pre- tax income for the Fiscal 1998 Third Quarter. In connection with the issuance in November 1997 of the Charming Shoppes Master Trust Series 1997-1 Floating Rate Class A Asset-Backed Certificates, the Company evaluated the fair value of its retained inter- ests and related recourse provisions. As a result of such evaluation, the Company recognized a non-recurring gain of $13,018,000 during the thirteen weeks ended November 1, 1997. Thirty-nine Weeks Ended October 31, 1998 and November 1, 1997 Net sales for the first nine months of Fiscal 1999 were $762,931,000, a 3.4% increase from net sales of $737,587,000 for the first nine months of Fiscal 1998. The Company experienced a 1.1% increase in comparable store sales in the first nine months of Fiscal 1999 as compared to the first nine months of Fiscal 1998. Increased sales of sportswear, dresses, footwear, intimate apparel, and girl's clothing were partially offset by decreases in sales of men's clothing and outerwear (see "1998 STORE RESTRUCTURING AND ELIMINATION OF MEN'S MERCHANDISE FROM THE COMPANY'S FASHION BUG STORES" above). Excluding the decrease in comparable store sales of men's mer- chandise, comparable store sales for the first nine months of Fiscal 1999 increased 3.8% as compared to the first nine months of Fiscal 1998. In addition, sales from new stores for the first nine months of Fiscal 1999 equaled 4.0% of sales for the first nine months of Fiscal 1998. Sales for the first nine months of Fiscal 1998 which were not comparable with sales for the first nine months of Fiscal 1999 as a result of the closing of stores in Fiscal 1998 and Fiscal 1999 equaled 1.7% of sales for the first nine months of fiscal 1998. (14) Cost of goods sold, buying, and occupancy expenses expressed as a percentage of sales decreased 1.6% in the first nine months of Fiscal 1999 as compared to the first nine months of Fiscal 1998. Cost of goods sold as a percentage of sales decreased 1.1% in the first nine months of Fiscal 1999 as compared to the first nine months of Fiscal 1998. The decrease in cost of goods sold as a percentage of sales was primarily due to customer response to the Company's merchandise offerings, which resulted in lower merchandise markdowns as compared to the prior year. Increased markdowns on sales of the remaining men's merchandise had a slight negative effect on gross margin. Buying and occupancy expenses expressed as a percentage of sales decreased 0.5% in the first nine months of Fiscal 1999 as compared to the first nine months of Fiscal 1998. The decrease in buying and occupancy expenses was due to a reduction in store occupancy expenses, primarily depreciation and utility costs. Selling, general and administrative expenses expressed as a percentage of sales increased 0.4% in the first nine months of Fiscal 1999 as compared to the first nine months of Fiscal 1998. This was primarily attributable to increased advertising expenditures related to the Company's television and radio advertising campaign and the effect of Federal minimum wage legislation. On March 5, 1998, the Company's Board of Directors approved the Restructuring Plan that resulted in a pre-tax charge of $34,000,000 during the Fiscal 1999 First Quarter. The Plan includes the downsizing of approx- imately 100 stores and the closing of approximately 65 under-performing stores. The Plan was approved in conjunction with the decision to elimi- nate men's merchandise from the Company's stores. The restructuring charge includes estimates of $10,000,000 for the write-down of store fixtures and improvements, $11,400,000 for the early termination and amendment of store leases, $8,300,000 for the cost of renovating vacated store space, and $4,300,000 for other costs, including severance benefits. The Company anticipates a workforce reduction of approximately 650 store employees. During the first nine months of Fiscal 1999, the Company closed 33 stores and reduced store employees by approximately 330. Interest expense expressed as a percentage of sales decreased 0.1% in the first nine months of Fiscal 1999 as compared to the first nine months of Fiscal 1998. The decrease in interest expense is the result of the Company's repurchase of $15.8 million of 7.5% Convertible Subordinated Notes due 2006 during the first three quarters of Fiscal 1999. The income tax benefit for the first nine months of Fiscal 1999 was 35% of the Company's pre-tax loss, as compared to a provision of 34% of the pre-tax income for the first nine months of Fiscal 1998. The increase in the effective tax rate is primarily attributable to an increase in the benefit attributable to permanent differences as a percentage of the loss before income taxes. (15) LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of working capital are (i) cash flow from operations, (ii) proprietary credit card receivables securitization agreements, (iii) its long-term investment portfolio and (iv) its $150 mil- lion revolving credit facility. As of October 31, 1998, the Company had working capital of $178,459,000 as compared to $163,208,000 at January 31, 1998. Working capital at October 31, 1998 included $32,633,000 of cash and cash equivalents, compared to cash and cash equivalents of $12,349,000 at January 31, 1998. The ratio of current assets to current liabilities was 2.0 to 1 at October 31, 1998 and 2.1 to 1 at January 31, 1998. Net cash provided by operating activities was $17,455,000 for the first nine months of Fiscal 1999 as compared to net cash provided by operating activities of $27,350,000 for the first nine months of Fiscal 1998. The reasons for the $9,895,000 decrease in cash provided by opera- tions were (i) a decrease in the Company's net income of $24,135,000, which includes the negative non-cash impact of a $10,000,000 write-down of cap- ital assets due to restructuring, a $13,018,000 non-recurring gain from asset securitization, and a $19,031,000 accrual for restructuring expenses, and the positive non-cash impact of a $10,405,000 increase in current deferred income taxes and a $4,520,000 decrease in depreciation and amortization; (ii) a decrease of $2,332,000 in the Company's investment in merchandise inventories, net of accounts payable; (iii) a decrease of $13,552,000 in income taxes receivable/payable; and (iv) other net de- creases of $1,664,000. 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 primary purpose of this facility is to enable the Company to issue letters of credit for overseas purchases of merchandise as well as to provide for seasonal cash borrowings. During Fiscal 1999, the expiration date of this facility was extended from June 1, 1998 to June 1, 1999. This facility is secured by merchandise inventory, furniture and fixtures at the retail stores, and certain other Company assets. As of October 31, 1998 the availability under this facility was approximately $121,372,000, against which the Company had outstanding letters of credit of $27,325,000. There were no cash borrowings outstanding under this agreement as of October 31, 1998. This agreement requires that, among other things, the Company main- tain a minimum net worth of $350,000,000 and not pay dividends on its Common Stock. Capital expenditures of $20,418,000 during the first nine months of Fiscal 1999 were primarily for the construction and fixturing of new and existing retail stores. During Fiscal 1999, the Company anticipates in- curring capital expenditures of approximately $25 million, which are intended primarily for (i) remodeling and fixturing of existing retail stores; (ii) construction and fixturing of new stores; and (iii) investment in management information systems technology. The Company anticipates that (16) capital expenditures will be financed principally through internally- generated funds. The Company plans to open approximately 65 new stores during Fiscal 1999, including 28 stores which were acquired during January 1998 from a competitor which had closed such locations. During the first nine months of Fiscal 1999, the Company opened 54 new stores and closed 33 stores. In connection with the store restructuring plan (see "1998 STORE RESTRUCTURING AND ELIMINATION OF MEN'S MERCHANDISE FROM THE COMPANY'S FASHION BUG STORES" above), as of October 31, 1998, the Company had approx- imately $19,031,000 of accrued, unpaid restructuring costs. The Company expects to pay the majority of these costs within twelve months, and has included them in current liabilities. In November 1997, the Company's Board of Directors approved the repur- chase of up to 10,000,000 shares of the Company's Common Stock. During the thirteen weeks ended October 31, 1998, the Company repurchased 2,330,000 shares of its Common Stock at an aggregate cost of $10,243,000. During the thirty-nine weeks ended October 31, 1998, the Company repurchased 3,130,000 shares of its Common Stock at an aggregate cost of $14,023,000. During the thirteen weeks ended October 31, 1998, the Company repur- chased $12,833,000 aggregate principal amount of its 7.5% Convertible Subordinated Notes due 2006 ("the Notes") at a total cost of $12,351,000. During the thirty-nine weeks ended October 31, 1998, the Company repur- chased $15,833,000 aggregate principal amount of the Notes at a total cost of $15,306,000. The gains or losses on the repurchases of the Notes were not material. The repurchases of the Notes will result in a reduction of $1,187,000 in annual interest expense. On October 2, 1995 the Company's Board of Directors announced an in- definite suspension of dividends on the Company's Common Stock. In addition, the Company's revolving credit facility requires the Company to refrain from paying dividends on its Common Stock during the term of such agreement. IMPACT OF YEAR 2000 For many years, dates have been stored in computer systems with two digit rather than four digit years to save costly computer space. The Year 2000 computer problem is caused by the inability of computer systems to properly recognize and handle dates stored and processed with two digit years beyond 1999. Comparisons or calculations may inaccurately interpret a date stored in a format of "00" as the year 1900 rather than 2000, resulting in improper computations, execution of faulty logic, or outright computer system failure. Affected systems must be remediated and tested in order to minimize the potential for failure caused by the Year 2000 ("Y2K") computer calculation. (17) The Company uses computer equipment and software in its retailing operations to supply stores with products for sale, process customer transactions, including credit transactions, and to record and report its financial condition and results of operations. Since 1997 the Company has been implementing a comprehensive program which is intended to ensure that the Company's computer systems, equipment, facilities, and suppliers of merchandise and services will be Y2K compliant. An Executive Oversight Committee ("EOC") made up of the Company's General Counsel, Corporate Director of Human Resources and Chief Financial Officer, oversees the Company's overall Y2K initiatives. The EOC is imple- menting a comprehensive Y2K Readiness Program, which has been adopted by all business units of the Company. Individual department heads have assigned resources to this program to coordinate and manage Y2K readiness within and among the Company's departments and to evaluate the state of Y2K readiness of outside vendors and suppliers. The Company's Corporate Audit Department facilitates the implementation of the Y2K Readiness Program by identifying and reporting outstanding issues to the EOC for resolution, administering the Company's Y2K vendor compliance program, and monitoring the progress of each business unit. The Company's Y2K Readiness Program is currently on schedule. Internal resources and outside consultants are being used to implement the Y2K Readiness Program. The Y2K Readiness Program consists of five phases: (a) Standard- ization: The Management Information Systems ("MIS") Department has developed a set of policies, guidelines and standards to be used during the Company's Y2K Readiness Program. Examples of these include standard date routines to be used in computer programs, standard test plans to be used for testing all systems, and guidelines for migrating a tested system into the production environment. These policies, guidelines, and standards are designed to ensure that a consistent approach is followed by all personnel in effectuating the Y2K Readiness Program; (b) Evaluation: This phase in- cludes the identification and evaluation of all of the Company's business systems so as to determine the method to be used to insure that these systems will be Y2K compliant. All such systems are prioritized for attention based on usage of dates, the extent to which they are critical to the Company's business, and the likelihood of failure; (c) Remediation: A Y2K remediation strategy has been developed and is being implemented for each system. Strategies include system replacement, remediation of exist- ing systems, and coordination with the supplying vendor to provide a version that is Y2K compliant; (d) End-to-End Testing: A testing strategy and test plan for each system has been developed and is being implemented. Testing is designed to cover all significant transition dates, and includes testing within and among systems, as well as data communications with critical vendors; and (e) Contingency Planning: This phase includes the development of contingency plans in the event that the Company does not successfully complete significant portions of its Y2K Readiness Program or in the event that critical vendors are not Y2K compliant in a timely manner. (18) Corporate Business Systems The Company has been implementing its Y2K Readiness Program for corporate business systems since 1997. These systems include all mainframe and non-mainframe systems and software, the corporate computing infrastruc- ture and network of hardware and software, desktop equipment and software, and external and internal communication software and equipment. Third- party software, along with in-house developed systems, are included within the scope of the Company's Y2K Readiness Program. These corporate business systems are located at the Company's headquarters in Bensalem, Pennsyl- vania, its distribution center in Greencastle, Indiana, and its private label credit card operations in Milford, Ohio. They are also located in the Company's approximately 1,160 stores located in 44 states, its factory operations in the Dominican Republic, and its international operations in Hong Kong, Singapore, and Shanghai. The standardization and evaluation phases with respect to these cor- porate business systems have been completed. The remediation and end-to- end testing phases are currently being implemented. The remediation phase for the Company's mainframe systems is approximately 95% complete and is scheduled for completion by the end of Fiscal 1999. The remediation phase for the Company's non-mainframe systems is approximately 40% complete and is scheduled for completion during the quarter ending May 1, 1999 ("Fiscal 2000 First Quarter"). The remediation phase of the Company's in-store systems has been completed. Comprehensive test plans are being established for each corporate business system. The end-to-end testing phase will commence during the quarter ending January 30, 1999 ("Fiscal 1999 Fourth Quarter") and is scheduled for completion in the quarter ending July 31, 1999 ("Fiscal 2000 Second Quarter"). The Company's private label credit card organization is monitored and regulated by the office of the Comptroller of the Currency ("OCC"). The OCC has performed quarterly Y2K reviews of this organization since the quarter ended April 30, 1998 and is scheduled to do so through the year 2000. This organization has two separate system components, namely, internal credit systems and a third-party credit card processing system used for all primary functions of the private label credit card program. The standardization and evaluation phases have been completed with respect to the internal credit systems. The remediation phase with respect to these systems is scheduled to be completed during the Fiscal 2000 First Quarter. The end-to-end testing phase is scheduled to commence during the Fiscal 2000 First Quarter and is scheduled for completion during the Fiscal 2000 Second Quarter. The Company is regularly monitoring the progress of its third-party credit processor in achieving Y2K compliance. Based on information provided to the Company by that third-party processor, the standardization and evaluation phases with respect to the third-party credit card processing system has been completed and the remediation phase is substantially complete, with full completion anticipated by the third- party processor during the Company's Fiscal 2000 First Quarter. Similarly, testing of the third-party credit card processing system has commenced and is scheduled for completion during the Fiscal 2000 Second Quarter. (19) Embedded Technologies Embedded technologies refer to any equipment or machinery that relies on a computer chip or microprocessor in order to operate. Examples include office systems, such as fax machines and photocopiers; building systems such as elevators, lighting, security systems, and environmental control units; and business communication systems such as data switching equipment and telephone exchange equipment. Certain microprocessors within such equipment may fail if they cannot properly recognize dates into the year 2000. The Company uses various technologies and computer controlled equip- ment in the operation of its corporate and stores facilities. Such equipment includes security monitoring systems; primary and back-up power supply systems; energy management systems; elevators, and office equipment. Some of this equipment may contain embedded chip technology that may be affected by the Y2K issue. The Company has taken an inventory of all such equipment and commenced communication with vendors who supply and/or support such technology and equipment to assess the sensitivity of such systems and equipment to the Y2K issue. In conjunction with the Corporate Audit department's program of auditing vendor preparedness for Y2K, the Company will be obtaining assurances from such vendors and, to the extent possible, testing these systems to ensure Y2K compliance. Private Branch Exchanges ("PBX's") at the Company's Bensalem, Pennsylvania corporate facilities are Y2K compliant. Telecommunication software at the Company's corporate headquarters is in the process of being upgraded and is scheduled for completion in the Fiscal 1999 Fourth Quarter. Distribution Center ("DC") Computer Systems The Company's Distribution Center, located in Greencastle, Indiana, uses a variety of computer systems and embedded technology equipment for its day-to-day operations. Shop floor machinery, interacting with complex computer systems, monitors, processes, and controls plant processes and material movement. Automated equipment includes conveyor systems, palle- tizers, sorters, scales, and radio frequency devices. Software and equip- ment provided by vendors has been heavily customized for the Company's DC configuration. The Company is working with appropriate DC system vendors to perform all necessary Y2K remediation and testing services. The stan- dardization and evaluation phases with respect to the DC systems have been completed. The remediation phase is currently being implemented, and it is anticipated that the Company's vendors will deliver Y2K compliant systems to the Company in several stages between the Fiscal 2000 First Quarter and the quarter ending October 30, 1999 ("Fiscal 2000 Third Quarter"). (20) Vendors and Suppliers The Company has initiated a formal communication program with signif- icant vendors who evaluate Y2K compliance, and will be assessing their responses to the Company's Y2K readiness questionnaire. Comprehensive mailings are scheduled during the Fiscal 1999 Fourth Quarter. Question- naires may be followed up with telephone interviews, and where necessary, audits are being performed by the Company's Corporate Audit Department. The Company cannot assure timely compliance of vendors and may be adversely affected by the failure of a significant vendor to supply merchandise or services due to Y2K compliance failures. Although the Company values its relationship with significant vendors, it may use an alternative vendor if it determines that a particular vendor is unlikely to be Y2K compliant. Costs The total cost of the Company's Y2K Readiness Program is estimated at $6.6 million. To-date, $1.7 million of Y2K costs have been incurred, of which $1.4 million have been incurred in the current fiscal year. Esti- mated costs for Fiscal 2000 total $4.9 million, which the Company expects to fund by operating cash flows. The Company does not anticipate delaying any significant information technology project as a result of the Company's Y2K compliance effort. Estimated future expenditures are not expected to have a material adverse effect on the Company's financial position, results of operations, or cash flows. Y2K Risk Assessment and Y2K Contingency Planning The Company is a retailer of women's apparel, and does not rely on a single customer for any significant amount of sales. The Company does not sell products which use computer systems, embedded chip technology, or other devices that may be sensitive to dates. Should the Company not complete a significant portion of its Y2K Readiness Program in a timely fashion, its financial condition may be materially adversely impacted; however, management does not consider the possibility of such an occurrence to be likely at the present time. The Company anticipates that the most reasonably likely worst case scenarios include, but are not limited to, loss of communications to the stores, loss of utilities, and the inability to process customer transactions or engage in normal business activity. The Company is in the initial stages of developing a Y2K contingency plan, which is scheduled for completion in the Fiscal 2000 Third Quarter. Despite such contingency plans, the Company may be adversely affected by the failure of a significant third-party vendor to become Y2K compliant. Projected completion dates and the estimated costs of the Company's Y2K Readiness Program are based on management's best estimates for future events and are forward-looking statements that may be updated as additional information becomes available. Readers are cautioned that forward-looking statements contained herein should be read in conjunction with the Com- pany's disclosures under the heading "FORWARD-LOOKING STATEMENTS" preceding this disclosure. (21) PART II. OTHER INFORMATION Item 5. Other Information Business to be Brought Before Shareholders' Meetings: Section 3.16 of the Company' Bylaws, as amended, imposes certain limitations on the manner in which business may be brought before an annual or special meeting of shareholders. The Bylaws, as amended through September 22, 1998, are filed as an exhibit to this Form 10-Q. In general, business may be brought before a shareholders' meeting (i) if the matter was specified in the written notice of the meeting given by the Company; (ii) if raised by the Board of Directors; (iii) if raised by the presiding officer at the meeting, unless a majority of the Board of Directors objects; or (iv) at an annual meeting, if raised by or on behalf of a shareholder entitled to vote at the meeting if a "Shareholder Notice" has been given in accordance with the Bylaws. The presiding officer at a meeting may refuse to permit business to be discussed or voted upon at a meeting if not brought before the meeting in conformity with these require- ments. For a Shareholder Notice to be valid, it must be delivered to the Com- pany's principal executive offices, addressed to the President, not earlier than 90 days nor later than 60 days before the anniversary date of the pre- vious annual meeting, except that, if the upcoming annual meeting is called for a date that is not within 30 days of the anniversary of the previous annual meeting, the deadline for such delivery is not earlier than 90 days nor later than ten days after the day on which notice of the annual meeting date was mailed or, if earlier, publicly disclosed by the Company. The Shareholder Notice relating to a proposal must state or describe (i) the name and address of the shareholder of record who intends to make the proposal (the "Proposing Shareholder"); (ii) the name and address of the beneficial owner of the shares, if different from the Proposing Shareholder (the Proposing Shareholder and such beneficial owner being "Proponents"); (iii) the number of shares owned of record and beneficially by the Proponents; (iv) any financial or other interest the Proponents may have in the proposal; (v) any arrangement or understanding among the Proponents and other persons regarding the proposal; (vi) the business the Proposing Shareholder seeks to bring before the annual meeting, the reason for doing so and the text of any resolution proposed to be adopted; and (vii) a representation that the Proposing Shareholder is then, will be (or was) on the record date for the annual meeting, and will be on the meeting date a holder of record of shares entitled to vote at such meeting, and intends to appear in person or by proxy at the meeting to bring the proposal before the meeting. Any shareholder proposal which is to be presented at the Company's 1999 Annual Meeting of Shareholders will be considered untimely for pur- poses of Rules 14a-4 and 14a-5 if notice thereof has not been received by the Company in a manner that would be deemed timely for purposes of the Shareholder Notice requirement set forth in the Company's Bylaws, as described above. (22) Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The following is a list of Exhibits filed as part of this Quarterly Report on Form 10-Q. 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 indi- cated in parenthesis. 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 Bylaws, as Amended and Restated 10.1 Amendment of Second Amended and Restated Loan and Security Agreement, dated February 28, 1997 among Charming Shoppes, Inc., certain subsid- iaries of the Company which are parties thereto, Borrower's 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) 27 Financial Data Schedule. (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the quarter ended October 31, 1998. (23) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CHARMING SHOPPES, INC. ------------------------------------- (Registrant) Date: December 14, 1998 DORRIT J. BERN ----------------- ------------------------------------- Dorrit J. Bern Chairman of the Board President and Chief Executive Officer Date: December 14, 1998 ERIC M. SPECTER ----------------- ------------------------------------- Eric M. Specter Executive Vice President Chief Financial Officer (24)
EX-3 2 EXHIBIT 3.2 BYLAWS OF CHARMING SHOPPES, INC. (AS AMENDED THROUGH SEPTEMBER 22, 1998) B Y L A W S OF CHARMING SHOPPES, INC. (a Pennsylvania Registered Corporation) ARTICLE I Offices and Fiscal Year Section 1.01. Registered Office. The registered office of the corporation in the Commonwealth of Pennsylvania shall be at 450 Winks Lane, Bensalem, Pennsylvania 19020, until otherwise established by an amendment of the articles of incorporation (the "articles") or by the board of directors and a record of such change is filed with the Department of State in the manner provided by law. Section 1.02. Other Offices. The corporation may also have offices at such other places within or without the Commonwealth of Pennsylvania as the board of directors may from time to time appoint or the business of the corporation may require. Section 1.03. Fiscal Year. The fiscal year of the corporation shall end on the Saturday nearest January 31 in each year. ARTICLE II Notice - Waivers - Meetings Generally Section 2.01. Manner of Giving Notice. (a) General Rule -- Whenever written notice is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws, it may be given to the person either personally or by sending a copy thereof by first class or express mail, postage prepaid, or by telegram (with messenger service specified), telex or TWX (with answerback received) or courier service, charges prepaid, or by facsimile transmission, to the address (or to the telex, TWX, facsimile or telephone number) of the person appearing on the books of the corporation or, in the case of directors, supplied by the director to the corporation for the purpose of notice. If the corporation has more than 30 shareholders, notice of any regular or special meeting of the shareholders, or any other notice required by the Business Corporation Law or by the articles or these bylaws to be given to all shareholders or to all holders of a class or series of shares, may be given by any class of postpaid mail if the notice is deposited in the United States mail at least 20 days prior to the day named for the meeting or any corporate or shareholder action specified in the notice. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched or, in the case of facsimile transmission, when received. A notice of meeting shall specify the place, day and hour of the meeting and any other information required by any other provision of the Business Corporation Law, the articles or these bylaws. (b) Adjourned Shareholder Meetings -- When a meeting of shareholders is adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the board fixes a new record date for the adjourned meeting in which event notice shall be given in accordance with Section 2.03. Section 2.02. Notice of Meetings of Board of Directors. Notice of a regular meeting of the board of directors need not be given. Notice of every special meeting of the board of directors shall be given to each director by telephone or in writing at least 24 hours (in the case of notice by telephone, telex, TWX or facsimile transmission) or 48 hours (in the case of notice by telegraph, courier service or express mail) or five days (in the case of notice by first class mail) before the time at which the meeting is to be held. Every such notice shall state the time and place of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board need be specified in a notice of the meeting. Section 2.03. Notice of Meetings of Shareholders. (a) General Rule -- Written notice of every meeting of the shareholders shall be given by, or at the direction of, the secretary or other authorized person to each shareholder of record entitled to vote at the meeting at least (1) ten days prior to the day named for a meeting (and, in case of a meeting called to consider a merger, consolidation, share exchange or division, to each shareholder of record not entitled to vote at the meeting) called to consider a fundamental change under 15 Pa.C.S. Chapter 19 or (2) five days prior to the day named for the meeting in any other case. If the secretary neglects or refuses to give notice of a meeting, the person or persons calling the meeting may do so. In the case of a special meeting of shareholders, the notice shall specify the general nature of the business to be transacted. (b) Notice of Action by Shareholders on Bylaws -- In the case of a meeting of shareholders that has as one of its purposes action on the bylaws, written notice shall be given to each shareholder that the purpose, or one of the purposes, of the meeting is to consider the adoption, amendment or repeal of the bylaws. There shall be included in, or enclosed with, the notice a copy of the proposed amendment or a summary of the changes to be effected thereby. (c) Notice of Action by Shareholders on Fundamental Change -- In the case of a meeting of the shareholders that has as one of its purposes action with respect to any fundamental change under 15 Pa.C.S. Chapter 19, each shareholder shall be given, together with written notice of the meeting, a copy or summary of the amendment or plan to be considered at the meeting in compliance with the provisions of Chapter 19. (d) Notice of Action by Shareholders Giving Rise to Dissenters Rights -- In the case of a meeting of the shareholders that has as one of its purposes action that would give rise to dissenters rights under the provisions of 15 Pa.C.S. Subchapter 15D, each shareholder shall be given, together with written notice of the meeting: (1) a statement that the shareholders have a right to dissent and obtain payment of the fair value of their shares by complying with the provisions of Subchapter 15D (relating to dissenters rights); and (2) a copy of Subchapter 15D. Section 2.04. Waiver of Notice. (a) Written Waiver -- Whenever any written notice is required to be given under the provisions of the Business Corporation Law, the articles or these bylaws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. (b) Waiver by Attendance -- Attendance of a person at any meeting shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Section 2.05. Modification of Proposal Contained in Notice. Whenever the language of a proposed resolution is included in a written notice of a meeting required to be given under the provisions of the Business Corporation Law or the articles or these bylaws, the meeting considering the resolution may without further notice adopt it with such clarifying or other amendments as do not enlarge its original purpose. Section 2.06. Exception to Requirement of Notice. (a) General Rule -- Whenever any notice or communication is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws or by the terms of any agreement or other instrument or as a condition precedent to taking any corporate action and communication with that person is then unlawful, the giving of the notice or communication to that person shall not be required. (b) Shareholders Without Forwarding Addresses -- Notice or other communications need not be sent to any shareholder with whom the corporation has been unable to communicate for more than 24 consecutive months because communications to the shareholder are returned unclaimed or the shareholder has otherwise failed to provide the corporation with a current address. Whenever the shareholder provides the corporation with a current address, the corporation shall commence sending notices and other communications to the shareholder in the same manner as to other shareholders. Section 2.07. Use of Conference Telephone and Similar Equipment. Any director may participate in any meeting of the board of directors, and the board of directors may provide by resolution with respect to a specific meeting or with respect to a class of meetings that one or more persons may participate in a meeting of the shareholders of the corporation, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this section shall constitute presence in person at the meeting. ARTICLE III Shareholders Section 3.01. Place of Meeting. All meetings of the shareholders of the corporation shall be held at the registered office of the corporation unless another place is designated by the board of directors in the notice of a meeting. Section 3.02. Annual Meeting. The board of directors may fix and designate the date and time of the annual meeting of the shareholders, but if no such date and time is fixed and designated by the board, the meeting for any calendar year shall be held on the second Wednesday in June in such year, if not a legal holiday under the laws of Pennsylvania, and, if a legal holiday, then on the next succeeding business day, not a Saturday, at 10:00 o'clock A.M., and at said meeting the shareholders then entitled to vote shall elect directors and shall transact such other business as may properly be brought before the meeting. If the annual meeting shall not have been called and held within six months after the designated time, any shareholder may call the meeting at any time thereafter. Section 3.03. Special Meetings. Special meetings of the shareholders may be called at any time by the chairman of the board or the president or by resolution of the board of directors. The person or resolution calling the meeting may fix the date, time and place of the meeting, but if they are not so fixed, it shall be the duty of the secretary to do so. A date fixed by the secretary shall not be more than 60 days after the date of the adoption of the resolution of the board calling the special meeting. Section 3.04. Quorum and Adjournment. (a) General Rule -- A meeting of shareholders of the corporation duly called shall not be organized for the transaction of business unless a quorum is present. The presence of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast on a particular matter to be acted upon at the meeting shall constitute a quorum for the purposes of consideration and action on the matter. Shares of the corporation owned, directly or indirectly, by it and controlled, directly or indirectly, by the board of directors of this corporation, as such, shall not be counted in determining the total number of outstanding shares for quorum purposes at any given time. (b) Withdrawal of a Quorum -- The shareholders present at a duly organized meeting can continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum. (c) Adjournments Generally -- Any regular or special meeting of the shareholders, including one at which directors are to be elected and one which cannot be organized because a quorum has not attended, may be adjourned for such period and to such place as the shareholders present and entitled to vote shall direct. (d) Electing Directors at Adjourned Meeting -- Those shareholders entitled to vote who attend a meeting called for the election of directors that has been previously adjourned for lack of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of electing directors. (e) Other Action in Absence of Quorum -- Those shareholders entitled to vote who attend a meeting of shareholders that has been previously adjourned for one or more periods aggregating at least 15 days because of an absence of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if the notice states that those shareholders who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter. Section 3.05. Action by Shareholders. Except as otherwise provided in the Business Corporation Law or the articles or these bylaws, whenever any corporate action is to be taken by vote of the shareholders of the corporation, it shall be authorized upon receiving the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon and, if any shareholders are entitled to vote thereon as a class, upon receiving the affirmative vote of a majority of the votes cast by the shareholders entitled to vote as a class. Section 3.06. Organization. At every meeting of the shareholders, the chairman of the board, if there be one, or, in the case of vacancy in office or absence of the chairman of the board, one of the following persons present in the order stated: the vice chairman of the board, if there be one, the president, the vice presidents in their order of rank and seniority, or a person chosen by vote of the shareholders present, shall act as chairman of the meeting. The secretary or, in the absence of the secretary, an assistant secretary, or, in the absence of both the secretary and assistant secretaries, a person appointed by the chairman of the meeting, shall act as secretary of the meeting. Section 3.07. Voting Rights of Shareholders. Unless otherwise provided in the articles, every shareholder of the corporation shall be entitled to one vote for every share standing in the name of the shareholder on the books of the corporation. Section 3.08. Voting and Other Action by Proxy. (a) General Rule -- (1) Every shareholder entitled to vote at a meeting of shareholders may authorize another person to act for the shareholder by proxy. (2) The presence of, or vote or other action at a meeting of shareholders by a proxy of a shareholder shall constitute the presence of, or vote or action by the shareholder. (3) Where two or more proxies of a shareholder are present, the corporation shall, unless otherwise expressly provided in the proxy, accept as the vote of all shares represented thereby the vote cast by a majority of them and, if a majority of the proxies cannot agree whether the shares represented shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among those persons. (b) Execution and Filing -- Every proxy shall be executed in writing by the shareholder or by the duly authorized attorney-in- fact of the shareholder and filed with the secretary of the corporation. A telegram, telex, cablegram, datagram or similar transmission from a shareholder or attorney-in-fact, or a photographic, facsimile or similar reproduction of a writing executed by a shareholder or attorney-in-fact: (1) may be treated as properly executed for purposes of this subsection; and (2) shall be so treated if it sets forth a confidential and unique identification number or other mark furnished by the corporation to the shareholder for the purposes of a particular meeting or transaction. (c) Revocation -- A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until written notice thereof has been given to the secretary of the corporation. An unrevoked proxy shall not be valid after three years from the date of its execution unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of the death or incapacity is given to the secretary of the corporation. (d) Expenses -- The corporation shall pay the reasonable expenses of solicitation of votes, proxies or consents of shareholders by or on behalf of the board of directors or its nominees for election to the board, including solicitation by professional proxy solicitors and otherwise. Section 3.09. Voting by Fiduciaries and Pledgees. Shares of the corporation standing in the name of a trustee or other fiduciary and shares held by an assignee for the benefit of creditors or by a receiver may be voted by the trustee, fiduciary, assignee or receiver. A shareholder whose shares are pledged shall be entitled to vote the shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee, but nothing in this section shall affect the validity of a proxy given to a pledgee or nominee. Section 3.10. Voting by Joint Holders of Shares. (a) General Rule -- Where shares of the corporation are held jointly or as tenants in common by two or more persons, as fiduciaries or otherwise: (1) if only one or more of such persons is present in person or by proxy, all of the shares standing in the names of such persons shall be deemed to be represented for the purpose of determining a quorum and the corporation shall accept as the vote of all the shares the vote cast by a joint owner or a majority of them; and (2) if the persons are equally divided upon whether the shares held by them shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among the persons without prejudice to the rights of the joint owners or the beneficial owners thereof among themselves. (b) Exception -- If there has been filed with the secretary of the corporation a copy, certified by an attorney at law to be correct, of the relevant portions of the agreement under which the shares are held or the instrument by which the trust or estate was created or the order of court appointing them or of an order of court directing the voting of the shares, the persons specified as having such voting power in the document latest in date of operative effect so filed, and only those persons, shall be entitled to vote the shares but only in accordance therewith. Section 3.11. Voting by Corporations. (a) Voting by Corporate Shareholders -- Any corporation that is a shareholder of this corporation may vote at meetings of shareholders of this corporation by any of its officers or agents, or by proxy appointed by any officer or agent, unless some other person, by resolution of the board of directors of the other corporation or a provision of its articles or bylaws, a copy of which resolution or provision certified to be correct by one of its officers has been filed with the secretary of this corporation, is appointed its general or special proxy in which case that person shall be entitled to vote the shares. (b) Controlled Shares -- Shares of this corporation owned, directly or indirectly, by it and controlled, directly or indirectly, by the board of directors of this corporation, as such, shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares for voting purposes at any given time. Section 3.12. Determination of Shareholders of Record. (a) Fixing Record Date -- The board of directors may fix a time prior to the date of any meeting of shareholders as a record date for the determination of the shareholders entitled to notice of, or to vote at, the meeting, which time, except in the case of an adjourned meeting, shall be not more than 90 days prior to the date of the meeting of shareholders. Only shareholders of record on the date fixed shall be so entitled notwithstanding any transfer of shares on the books of the corporation after any record date fixed as provided in this subsection. The board of directors may similarly fix a record date for the determination of shareholders of record for any other purpose. When a determination of shareholders of record has been made as provided in this section for purposes of a meeting, the determination shall apply to any adjournment thereof unless the board fixes a new record date for the adjourned meeting. (b) Determination When a Record Date is Not Fixed -- If a record date is not fixed: (1) the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given. (2) the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. (c) Certification by Nominee -- The board of directors may adopt a procedure whereby a shareholder of the corporation may certify in writing to the corporation that all or a portion of the shares registered in the name of the shareholder are held for the account of a specified person or persons. Upon receipt by the corporation of a certification complying with the procedure, the persons specified in the certification shall be deemed, for the purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the shareholder making the certification. Section 3.13. Voting Lists. (a) General Rule -- The officer or agent having charge of the transfer books for shares of the corporation shall make a complete list of the shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order, with the address of and the number of shares held by each. The list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof except that, if the corporation has 5,000 or more shareholders, in lieu of the making of the list the corporation may make the information therein available at the meeting by any other means. (b) Effect of List -- Failure to comply with the requirements of this section shall not affect the validity of any action taken at a meeting prior to a demand at the meeting by any shareholder entitled to vote thereat to examine the list. The original share register or transfer book, or a duplicate thereof kept in the Commonwealth of Pennsylvania, shall be prima facie evidence as to who are the shareholders entitled to examine the list or share register or transfer book or to vote at any meeting of shareholders. Section 3.14. Judges of Election. (a) Appointment -- In advance of any meeting of shareholders of the corporation, the board of directors may appoint judges of election, who need not be shareholders, to act at the meeting or any adjournment thereof. If judges of election are not so appointed, the presiding officer of the meeting may, and on the request of any shareholder shall, appoint judges of election at the meeting. The number of judges shall be one or three. A person who is a candidate for an office to be filled at the meeting shall not act as a judge. (b) Vacancies -- In case any person appointed as a judge fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the board of directors in advance of the convening of the meeting or at the meeting by the presiding officer thereof. (c) Duties -- The judges of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with nominations by shareholders or the right to vote, count and tabulate all votes, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. The judges of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. (d) Report -- On request of the presiding officer of the meeting or of any shareholder, the judges shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated therein. Section 3.15. Minors as Security Holders. The corporation may treat a minor who holds shares or obligations of the corporation as having capacity to receive and to empower others to receive dividends, interest, principal and other payments or distributions, to vote or express consent or dissent and to make elections and exercise rights relating to such shares or obligations unless, in the case of payments or distributions on shares, the corporate officer responsible for maintaining the list of shareholders or the transfer agent of the corporation or, in the case of payments or distributions on obligations, the treasurer or paying officer or agent has received written notice that the holder is a minor. Section 3.16. Business at Meetings of Shareholders. (a) Except as otherwise provided by law, or the articles or in these bylaws, or except as permitted by the presiding officer of the meeting in the exercise of such officer's sole discretion in any specific instance, the business which shall be voted upon or discussed at any annual or special meeting of the shareholders (other than the nomination of directors which shall be governed by Section 4.02(b) of these bylaws) shall (i) have been specified in the written notice of the meeting (or any supplement thereto) given by the corporation, (ii) be brought before the meeting at the direction of the board of directors, (iii) be brought before the meeting by the presiding officer of the meeting unless a majority of the directors then in office object to such business being conducted at the meeting, or (iv) in the case of an annual meeting of shareholders have been specified in a written notice given to the corporation by or on behalf of any shareholder who shall have been a shareholder of record on the record date for such meeting and who shall continue to be entitled to vote thereat (the "Shareholder Notice"), in accordance with all of the requirements set forth below. (b) Each Shareholder Notice must be delivered to, or mailed and received at, the principal executive offices of the corporation addressed to the attention of the president (i) in the case of an annual meeting that is called for a date that is within 30 days before or after the anniversary date of the immediately preceding annual meeting of shareholders, not less than 60 days nor more than 90 days prior to such anniversary date, and (ii) in the case of an annual meeting that is called for a date that is not within 30 days before or after the anniversary date of the immediately preceding annual meeting, not earlier than 90 days prior to such annual meeting and not later than the close of business on the tenth day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure of the meeting date (which shall include disclosure of the meeting date given to the national securities exchange or the National Association of Securities Dealers) was made. Each such Shareholder Notice must set forth (A) the name and address of the shareholder who intends to bring the business before the annual meeting ("Proposing Shareholder"); (B) the name and address of the beneficial owner, if different than the Proposing Shareholder, of any of the shares owned of record by the Proposing Shareholder ("Beneficial Owner"); (C) the number of shares of each class and series of shares of the corporation which are owned of record and beneficially by the Proposing Shareholder and the number which are owned beneficially by any Beneficial Owner; (D) any interest (other than an interest solely as a shareholder) which the Proposing Shareholder or a Beneficial Owner has in the business being proposed by the Proposing Shareholder; (E) a description of all arrangements and understandings between the Proposing Shareholder and any Beneficial Owner and any other person or persons (naming such person or persons) pursuant to which the proposal in the Shareholder Notice is being made; (F) a description of the business which the Proposing Shareholder seeks to bring before the annual meeting, the reason for doing so and, if a specific action is to be proposed, the text of the resolution or resolutions which the Proposing Shareholder proposes that the corporation adopt; and (G) a representation that the Proposing Shareholder is at the time of giving the Shareholder Notice, was or will be on the record date for the meeting, and will be on the meeting date a holder of record of shares of the corporation entitled to vote at such meeting, and intends to appear in person or by proxy at the meeting to bring the business specified in the Shareholder Notice before the meeting. The presiding officer of the meeting may, in such officer's sole discretion, refuse to acknowledge any business proposed by a shareholder which the presiding officer determines is not made in compliance with the foregoing procedure. (The provisions of this section were adopted by the board of directors on September 22, 1998) ARTICLE IV Board of Directors Section 4.01. Powers; Personal Liability. (a) General Rule -- Unless otherwise provided by statute, all powers vested by law in the corporation shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the board of directors. (b) Personal Liability of Directors -- A director shall not be personally liable for monetary damages as such for any action taken, or any failure to take any action, on or after January 27, 1987 unless the director has breached or failed to perform the duties of his office under Section 8363 of the Pennsylvania Directors' Liability Act [now 15 Pa.C.S. Subch. 17B], and the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. The provisions of this subsection shall not apply to the responsibility or liability of a director pursuant to any criminal statute, or the liability of a director for the payment of taxes pursuant to local, state or Federal law. (The provisions of this subsection (b) were first adopted by the shareholders of the corporation on May 20, 1987.) (c) Notation of Dissent -- A director of the corporation who is present at a meeting of the board of directors, or of a committee of the board, at which action on any corporate matter is taken on which the director is generally competent to act, shall be presumed to have assented to the action taken unless his or her dissent is entered in the minutes of the meeting or unless the director files his or her written dissent to the action with the secretary of the meeting before the adjournment thereof or transmits the dissent in writing to the secretary of the corporation immediately after the adjournment of the meeting. The right to dissent shall not apply to a director who voted in favor of the action. Nothing in this section shall bar a director from asserting that minutes of the meeting incorrectly omitted his or her dissent if, promptly upon receipt of a copy of such minutes, the director notifies the secretary, in writing, of the asserted omission or inaccuracy. Section 4.02. Qualifications and Selection of Directors. (a) Qualifications -- Each director of the corporation shall be a natural person of full age who need not be a resident of the Commonwealth of Pennsylvania or a shareholder of the corporation. (b) Nomination of Candidates -- Nominations of candidates for election to the board of directors at a meeting of the shareholders may be made only by the board of directors or a proxy committee appointed by the board of directors or by any shareholder entitled to vote in such election. A nomination may be made by a shareholder only if written notice of the nomination has been given to the secretary of the corporation not later than the date on which a shareholder proposal would be required to be submitted to the corporation in order to be set forth in the corporation's proxy statement pursuant to the applicable proxy rules of the Securities and Exchange Commission. Each such notice shall set forth: (1) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (2) a representation that the shareholder is a holder of record of shares of the corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (3) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (4) such other information regarding each nominee proposed by the shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission if the nominee had been nominated by the board of directors; and (5) the written consent of each nominee, signed by such nominee, to serve as a director of the corporation if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person by a shareholder not made in compliance with the foregoing procedure. (c) Election of Directors -- In elections for directors, voting need not be by ballot, unless required by vote of the shareholders before the voting for the election of directors begins. The candidates receiving the highest number of votes from each class or group of classes, if any, entitled to elect directors separately up to the number of directors to be elected by the class or group of classes shall be elected. If at any meeting of shareholders, directors of more than one class are to be elected, each class of directors shall be elected in a separate election. (d) Alternate Directors -- A shareholder or group of shareholders entitled to elect, appoint, designate or otherwise select one or more directors may select an alternate for each director for a coextensive term. After the adoption of this subsection (d) and prior to the 1993 Annual Meeting of Shareholders, any director elected by the shareholders may resign from office and the board of directors may elect the former director as an alternate director, to serve until the 1993 Annual Meeting of Shareholders. An alternate director may attend all meetings of the board of directors. In the absence of a director from a meeting of the board, the director's alternate may execute a written consent and exercise at the meeting or in such consent all the powers of the absent director. When so exercising the powers of the absent director, the alternate shall be subject in all respects to the provisions of the Business Corporation Law, the articles and these bylaws relating to directors of the corporation, and the term "Director", when used in the Business Corporation Law, the articles or these bylaws shall be construed to include and refer to any alternate director, unless the context requires otherwise. (The provisions of this subsection (d) were first adopted by the board of directors of the corporation on January 21, 1993 and amended by the board of directors on June 29, 1993) Section 4.03. Number and Term of Office. (a) Number -- The board of directors shall consist of such number of directors, not less than six nor more than twelve, as may be determined from time to time by resolution of the board of directors. (b) Term of Office -- Each director shall hold office until the expiration of the term for which he or she was selected and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. A decrease in the number of directors shall not have the effect of shortening the term of any incumbent director. (c) Resignation -- Any director may resign at any time upon written notice to the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as shall be specified in the notice of resignation. (d) Classified Board of Directors -- The directors shall be classified in respect of the time for which they shall severally hold office as follows: (1) each class shall be as nearly equal in number as possible. (2) the term of office of at least one class shall expire in each year. (3) the members of each class shall be elected for a period of three years. Section 4.04. Vacancies. (a) General Rule -- Vacancies in the board of directors, including vacancies resulting from an increase in the number of directors, may be filled by a majority vote of the remaining members of the board though less than a quorum, or by a sole remaining director. In the case of a vacancy in the board of directors resulting from an increase in the number of directors, the person selected shall serve until the next annual meeting of shareholders and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. In any other case, each person so selected shall be a director to serve until the next selection of the class for which such director has been chosen, and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. When the number of directors is increased by the board and any newly created directorships are filled by the board, there shall be no classification of the additional directors until the next annual meeting of the shareholders. (b) Action by Resigned Directors -- When one or more directors resign from the board effective at a future date, the directors then in office, including those who have so resigned, shall have power by the applicable vote to fill the vacancies, the vote thereon to take effect when the resignations become effective. Section 4.05. Removal of Directors. (a) Removal by the Shareholders -- The entire board of directors, or any class of the board, or any individual director may be removed from office without assigning any cause only by the affirmative vote of the holders of not less than 80% of the combined voting power of the then outstanding shares of stock of all classes and series of the corporation entitled to vote generally in the election of directors, in each case voting as a single class in accordance with the articles. In case the board or a class of the board or any one or more directors are so removed, new directors may be elected at the same meeting. (b) Removal by the Board -- The board of directors may declare vacant the office of a director who has been judicially declared of unsound mind or who has been convicted of an offense punishable by imprisonment for a term of more than one year or if, within 60 days after notice of his or her selection, the director does not accept the office either in writing or by attending a meeting of the board of directors. Section 4.06. Place of Meetings. Meetings of the board of directors may be held at such place within or without the Commonwealth of Pennsylvania as the board of directors may from time to time appoint or as may be designated in the notice of the meeting. Section 4.07. Organization of Meetings. At every meeting of the board of directors, the chairman of the board, if there be one, or, in the case of a vacancy in the office or absence of the chairman of the board, one of the following officers present in the order stated: the vice chairman of the board, if there be one, the president, the vice presidents in their order of rank and seniority, or a person chosen by a majority of the directors present, shall act as chairman of the meeting. The secretary or, in the absence of the secretary, an assistant secretary, or, in the absence of the secretary and the assistant secretaries, any person appointed by the chairman of the meeting, shall act as secretary of the meeting. Section 4.08. Regular Meetings. Regular meetings of the board of directors shall be held at such time and place as shall be designated from time to time by a majority of the board of directors or by the chairman or the president. Section 4.09. Special Meetings. Special meetings of the board of directors shall be held whenever called by a majority of the board of directors or by the chairman or the president. Section 4.10. Quorum of and Action by Directors. (a) General Rule -- A majority of the directors in office of the corporation shall be necessary to constitute a quorum for the transaction of business and the acts of a majority of the directors present and voting at a meeting at which a quorum is present shall be the acts of the board of directors. (b) Action by Written Consent -- Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the directors in office is filed with the secretary of the corporation. Section 4.11. Executive and Other Committees. (a) Establishment and Powers -- The board of directors may, by resolution adopted by a majority of the directors in office, establish an Executive Committee and one or more other committees to consist of one or more directors of the corporation. Any committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all of the powers and authority of the board of directors except that a committee shall not have any power or authority as to the following: (1) the submission to shareholders of any action requiring approval of shareholders under the Business Corporation Law. (2) the creation or filling of vacancies in the board of directors. (3) the adoption, amendment or repeal of these bylaws. (4) the amendment or repeal of any resolution of the board that by its terms is amendable or repealable only by the board. (5) action on matters committed by a resolution of the board of directors to another committee of the board. (b) Alternate Committee Members -- The board may designate one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee or for the purposes of any written action by the committee. In the absence or disqualification of a member and alternate member or members of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another director to act at the meeting in the place of the absent or disqualified member. (c) Term -- Each committee of the board shall serve at the pleasure of the board. (d) Committee Procedures -- The term "board of directors" or "board," when used in any provision of these bylaws relating to the organization or procedures of or the manner of taking action by the board of directors, shall be construed to include and refer to the Executive Committee or any other committee of the board, except that a meeting of the Executive Committee may be called at any time by any member. Section 4.12. Compensation. The board of directors shall have the authority to fix the compensation of directors for their services as directors and a director may be a salaried officer of the corporation. ARTICLE V Officers Section 5.01. Officers Generally. (a) Number, Qualifications and Designation -- The officers of the corporation shall be a president, one or more vice presidents, a secretary, a treasurer, and such other officers as may be elected in accordance with the provisions of Section 5.03. Officers may but need not be directors or shareholders of the corporation. The president and secretary shall be natural persons of full age. The treasurer may be a corporation, but if a natural person shall be of full age. The board of directors may elect from among the members of the board a chairman of the board and one or more vice chairmen of the board who shall be officers of the corporation. Any number of offices may be held by the same person. (b) Bonding -- The corporation may secure the fidelity of any or all of its officers by bond or otherwise. (c) Standard of Care -- In lieu of the standards of conduct otherwise provided by law, officers of the corporation shall be subject to the same standards of conduct, including standards of care and loyalty and rights of justifiable reliance, as shall at the time be applicable to directors of the corporation. An officer of the corporation shall not be personally liable, as such, to the corporation or its shareholders for monetary damages for any action taken, or any failure to take any action, unless the officer has breached or failed to perform the duties of his or her office under the articles of incorporation, these bylaws, or the applicable provisions of law and the breach or failure to perform constitutes self- dealing, willful misconduct or recklessness. The provisions of this subsection shall not apply to the responsibility or liability of an officer pursuant to any criminal statute or for the payment of taxes pursuant to local, state or federal law. Section 5.02. Election, Term of Office and Resignations. (a) Election and Term of Office -- The officers of the corporation, except those elected by delegated authority pursuant to Section 5.03, shall be elected annually by the board of directors, and each such officer shall hold office for a term of one year and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. (b) Resignations -- Any officer may resign at any time upon written notice to the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as may be specified in the notice of resignation. Section 5.03. Subordinate Officers, Committees and Agents. The board of directors may from time to time elect such other officers and appoint such committees, employees or other agents as the business of the corporation may require, including one or more assistant secretaries, and one or more assistant treasurers, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws, or as the board of directors may from time to time determine. The board of directors may delegate to any officer or committee the power to elect subordinate officers and to retain or appoint employees or other agents, or committees thereof, and to prescribe the authority and duties of such subordinate officers, committees, employees or other agents. Section 5.04. Removal of Officers and Agents. Any officer or agent of the corporation may be removed by the board of directors with or without cause. The removal shall be without prejudice to the contract rights, if any, of any person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Section 5.05. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or any other cause, may be filled by the board of directors or by the officer or committee to which the power to fill such office has been delegated pursuant to Section 5.03, as the case may be, and if the office is one for which these bylaws prescribe a term, shall be filled for the unexpired portion of the term. Section 5.06. Authority. (a) General Rule -- All officers of the corporation, as between themselves and the corporation, shall have such authority and perform such duties in the management of the corporation as may be provided by or pursuant to resolutions or orders of the board of directors or, in the absence of controlling provisions in the resolutions or orders of the board of directors, as may be determined by or pursuant to these bylaws. (b) Voting and Acting with Securities Owned by the Corporation -- Each of the chairman of the board and the president shall have the power and authority to vote and act with respect to all stock and other securities in any other corporation held by this corporation, unless the board of directors confers such authority, which may be general or specific, upon some other person. Any person so authorized to vote securities shall have the power to appoint an attorney or attorneys, with general power of substitution, as proxies for this corporation, with full power to vote and act in behalf of this corporation with respect to such stock and other securities. (The provisions of this subsection (c) were amended by the board of directors August 22, 1995) Section 5.07. The Chairman of the Board. The chairman of the board shall preside at all meetings of the shareholders and of the board of directors and shall perform such other duties as may from time to time be requested by the board of directors. (The provisions of this section were amended by the board of directors on August 22, 1995) Section 5.08. Vice Chairmen of the Board of Directors. The vice chairmen of the board, in their order of seniority as designated by the board if there be more than one, shall preside during the temporary absence of the chairman of the board at all meetings of the shareholders and of the board of directors and shall perform such other duties as may from time to time be requested by the chairman or the board of directors. (The provisions of this section were amended by the board of directors on August 22, 1995) Section 5.09. The Chief Executive Officer. The chairman of the board or the president, as designated from time to time by the board of directors, shall be the chief executive officer of the corporation. The chief executive officer shall have general executive power to manage, control and supervise the property, business and affairs of the corporation, subject, however, to the control of the board of directors. The chief executive officer shall sign, execute, and acknowledge, in the name of the corporation, deeds, mortgages, bonds, contracts or other instruments, authorized by the board of directors, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors, or by these bylaws, to some other officer or agent of the corporation. (The provisions of this section were adopted by the board of directors on August 22, 1995) Section 5.10. The President. The president shall perform such duties as from time to time may be assigned by the board of directors or the chief executive officer (unless the president shall be the chief executive officer, in which case the president's duties shall be those specified in Section 5.09). (The provisions of this section were amended by the board of directors on August 22, 1995) Section 5.11. The Chief Operating Officer. The chief operating officer shall perform such duties as from time to time may be assigned by the board of directors or the chief executive officer. (The provisions of this section were amended by the board of directors on October 13, 1995) Section 5.12. The Vice Presidents. The vice presidents, one or more of whom may be designated executive, senior, group or administrative vice president or given other descriptive titles, shall perform all duties as may from time to time be assigned by the board of directors, the chairman of the board or the president. Section 5.13. The Secretary. The secretary or an assistant secretary shall attend all meetings of the shareholders and of the board of directors and all committees thereof and shall record all the votes of the shareholders and of the directors and the minutes of the meetings of the shareholders and of the board of directors and of committees of the board in a book or books to be kept for that purpose; shall see that notices are given and records and reports properly kept and filed by the corporation as required by law; shall be the custodian of the seal of the corporation and see that it is affixed to all documents to be executed on behalf of the corporation under its seal; and, in general, shall perform all duties incident to the office of secretary, and such other duties as may from time to time be assigned by the board of directors or the chairman of the board. Section 5.14. The Treasurer. The treasurer shall be the principal officer in charge of tax and financial matters of the corporation. The treasurer or an assistant treasurer shall have or provide for the custody of the funds or other property of the corporation; shall collect and receive or provide for the collection and receipt of moneys earned by or in any manner due to or received by the corporation; shall deposit all funds in his or her custody as treasurer in such banks or other places of deposit as the board of directors may from time to time designate; shall, whenever so required by the board of directors, render an account showing all transactions as treasurer, and the financial condition of the corporation; and, in general, shall discharge such other duties as may from time to time be assigned by the board of directors or the chairman of the board. Section 5.15. Delegation of Duties. In the absence of any officer or for any other reason deemed sufficient by the board of directors or the chairman of the board, the board of directors or the chairman of the board may delegate, for the time being, any of the powers and duties of such officer to any other officer or director or other person. Section 5.16. Salaries. The salaries of the officers elected by the board of directors shall be fixed from time to time by the board of directors or by such officer or committee of the board as may be designated by resolution of the board. The salaries or other compensation of any other officers, employees and other agents shall be fixed from time to time by the officer or committee to which the power to elect such officers or to retain or appoint such employees or other agents has been delegated pursuant to Section 5.03. No officer shall be prevented from receiving such salary or other compensation by reason of the fact that the officer is also a director of the corporation. ARTICLE VI Certificates of Stock, Transfer, Etc. Section 6.01. Share Certificates. (a) Form of Certificates -- Certificates for shares of the corporation shall be in such form as approved by the board of directors, and shall state that the corporation is incorporated under the laws of the Commonwealth of Pennsylvania, the name of the person to whom issued, and the number and class of shares and the designation of the series (if any) that the certificate represents. If the corporation is authorized to issue shares of more than one class or series, certificates for shares of the corporation shall set forth upon the face or back of the certificate (or shall state on the face or back of the certificate that the corporation will furnish to any shareholder upon request and without charge), a full or summary statement of the designations, voting rights, preferences, limitations and special rights of the shares of each class or series authorized to be issued so far as they have been fixed and determined and the authority of the board of directors to fix and determine the designations, voting rights, preferences, limitations and special rights of the classes and series of shares of the corporation. (b) Share Register -- The share register or transfer books and blank share certificates shall be kept by the secretary or by any transfer agent or registrar designated by the board of directors for that purpose. Section 6.02. Issuance. The share certificates of the corporation shall be numbered and registered in the share register or transfer books of the corporation as they are issued. They shall be executed in such manner as the board of directors shall determine. Section 6.03. Transfer. Transfers of shares shall be made on the share register or transfer books of the corporation upon surrender of the certificate therefor, endorsed by the person named in the certificate or by an attorney lawfully constituted in writing. No transfer shall be made inconsistent with the provisions of the Uniform Commercial Code, 13 Pa.C.S. 8101 et seq., and its amendments and supplements. Section 6.04. Record Holder of Shares. The corporation shall be entitled to treat the person in whose name any share or shares of the corporation stand on the books of the corporation as the absolute owner thereof, and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person. Section 6.05. Lost, Destroyed or Mutilated Certificates. The holder of any shares of the corporation shall immediately notify the corporation of any loss, destruction or mutilation of the certificate therefor, and the board of directors may, in its discretion, cause a new certificate or certificates to be issued to such holder, in case of mutilation of the certificate, upon the surrender of the mutilated certificate or, in case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction and, if the board of directors shall so determine, the deposit of a bond in such form and in such sum, and with such surety or sureties, as it may direct. Section 6.06. Rights. Rights issued pursuant to the Rights Agreement, dated April 27, 1989, between the corporation and Mellon Bank (East) N.A. (the "Rights Agreement") may be transferred by an Acquiring Person or an Associate or Affiliate of an Acquiring Person (as such capitalized terms are defined in the Rights Agreement) only in accordance with the terms of, and subject to the restrictions contained in, the Rights Agreement. ARTICLE VII Indemnification of Directors, Officers and Other Authorized Representatives (The provisions of this Article VII were first adopted by the shareholders of the corporation on May 20, 1987.) Section 7.01. General Rule. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, and whether brought by or in the right of the corporation or otherwise, by reason of the fact that he was a director, officer or employee of the corporation (and may indemnify any person who was an agent of the corporation), or a person serving at the request of the corporation as a director, officer, partner, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, to the fullest extent permitted by law, including without limitation indemnification against expenses (including attorneys' fees and disbursements), damages, punitive damages, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such proceeding unless the act or failure to act giving rise to the claim for indemnification is finally determined by a court to have constituted willful misconduct or recklessness. Section 7.02. Advancing Expenses. The corporation shall pay the expenses (including attorneys' fees and disbursements) actually and reasonably incurred in defending a civil or criminal action, suit or proceeding on behalf of any person entitled to indemnification under Section 7.01 in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation, and may pay such expenses in advance on behalf of any agent on receipt of a similar undertaking. The financial ability of such person to make such repayment shall not be prerequisite to the making of an advance. Section 7.03. Definitions. For the purposes of this Article: (1) the corporation shall be deemed to have requested an officer, director, employee or agent to serve as fiduciary with respect to an employee benefit plan where the performance by such person of duties to the corporation also imposes duties on, or otherwise involves services by, such person as a fiduciary with respect to the plan; (2) excise taxes assessed with respect to any transaction with an employee benefit plan shall be deemed "fines"; and (3) action taken or omitted by such person with respect to an employee benefit plan in the performance of duties for a purpose reasonably believed to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the corporation. Section 7.04. Securing of Indemnification Obligations. To further effect, satisfy or secure the indemnification obligations provided herein or otherwise, the corporation may maintain insurance, obtain a letter of credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the board of directors shall deem appropriate. Section 7.05. Contract Rights; Amendment or Repeal. All rights of indemnification under this Article shall be deemed a contract between the corporation and the person entitled to indemnification under this Article pursuant to which the corporation and each such person intend to be legally bound. Any repeal, amendment or modification hereof shall be prospective only and shall not limit, but may expand, any rights or obligations in respect of any proceeding whether commenced prior to or after such change to the extent such proceeding pertains to actions or failures to act occurring prior to such change. Section 7.06. Scope of Article. The indemnification, as authorized by this Article, shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in any other capacity while holding such office. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall continue as to a person who has ceased to be an officer, director, employee or agent in respect of matters arising prior to such time, and shall inure to the benefit of the heirs, executors and administrators of such person. ARTICLE VIII Miscellaneous Section 8.01. Corporate Seal. The corporation shall have a corporate seal in the form of a circle containing the name of the corporation, the year of incorporation and such other details as may be approved by the board of directors. The affixation of the corporate seal shall not be necessary to the valid execution, assignment or endorsement by the corporation of any instrument or other document. Section 8.02. Checks and Other Instruments. All properly authorized checks, notes, bonds, drafts, bills of exchange or other similar orders, and all evidences of indebtedness of the corporation whatsoever, and all properly authorized deeds, mortgages and other instruments requiring execution by the corporation may be executed and delivered by the president or any vice president or the treasurer of the corporation. The authority to sign any such orders or instruments, which may be general or confined to specific instances, may be conferred by the board of directors upon any other person or persons, subject to such requirements as to countersignature or other conditions as the board of directors from time to time may determine. Facsimile signatures on checks, notes, bonds and other instruments may be used if authorized by the board of directors. Any person having authority to sign on behalf of the corporation may delegate, from time to time, by instrument in writing, all or part of such authority to any person or persons if authorized to do so by the board of directors. Section 8.03. Contracts. Except as otherwise provided in the Business Corporation Law in the case of transactions that require action by the shareholders, the board of directors may authorize any officer or agent to enter into any contract or to execute or deliver any instrument on behalf of the corporation, and such authority may be general or confined to specific instances. Section 8.04. Interested Directors or Officers; Quorum. (a) General Rule -- A contract or transaction between the corporation and one or more of its directors or officers or between the corporation and another corporation, partnership, joint venture, trust or other enterprise in which one or more of its directors or officers are directors or officers or have a financial or other interest, shall not be void or voidable solely for that reason, or solely because the director or officer is present at or participates in the meeting of the board of directors that authorizes the contract or transaction, or solely because his, her or their votes are counted for that purpose, if: (1) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors and the board authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors even though the disinterested directors are less than a quorum; (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of those shareholders; or (3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the board of directors or the shareholders. (b) Quorum -- Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board which authorizes a contract or transaction specified in subsection (a). Section 8.05. Deposits. All funds of the corporation shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the board of directors may approve or designate, and all such funds shall be withdrawn only upon checks signed by such one or more officers or employees of the corporation as the board of directors shall from time to time designate. Section 8.06. Corporate Records. (a) Required Records -- The corporation shall keep complete and accurate books and records of account, minutes of the proceedings of the incorporators, shareholders and directors and a share register giving the names and addresses of all shareholders and the number and class of shares held by each. The share register shall be kept at either the registered office of the corporation in the Commonwealth of Pennsylvania or at its principal place of business wherever situated or at the office of its registrar or transfer agent. Any books, minutes or other records may be in written form or any other form capable of being converted into written form within a reasonable time. (b) Right of Inspection -- Every shareholder shall, upon written verified demand stating the purpose thereof, have a right to examine, in person or by agent or attorney, during the usual hours for business for any proper purpose, the share register, books and records of account, and records of the proceedings of the incorporators, shareholders and directors and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to the interest of the person as a shareholder. In every instance where an attorney or other agent is the person who seeks the right of inspection, the demand shall be accompanied by a verified power of attorney or other writing that authorizes the attorney or other agent to so act on behalf of the shareholder. The demand shall be directed to the corporation at its registered office in the Commonwealth of Pennsylvania or at its principal place of business wherever situated. Section 8.07. Control Transactions. Pursuant to a resolution of the board of directors adopted on February 23, 1984, the corporation's bylaws were amended (such amendment hereby incorporated in the current amendment and restatement of these bylaws), in pertinent part, as follows: "Section 910 [now 15 Pa.C.S. Subch. 25E] of the Pennsylvania Business Corporation Law, entitled 'Right of Shareholders to Receive Payment for Shares Following a Control Transaction' [now Control Transactions] shall not be applicable to the Company." Section 8.08. Control-Share Acquisitions. Subchapter 25G (relating to control-share acquisitions) of 15 Pa.C.S. or any corresponding provision of succeeding law shall not be applicable to the corporation. (The provisions of this section were adopted by the board of directors on July 12, 1990.) Section 8.09. Disgorgement. Subchapter 25H (relating to disgorgement by certain controlling shareholders following attempts to acquire control) of 15 Pa.C.S. or any corresponding provision of succeeding law shall not be applicable to the corporation. (The provisions of this section were adopted by the board of directors on July 12, 1990.) Section 8.10. Amendment of Bylaws. These bylaws may be amended or repealed, or new bylaws may be adopted, either (i) by vote of the shareholders at any duly organized annual or special meeting of shareholders, or (ii) with respect to those matters that are not by statute committed expressly to the shareholders and regardless of whether the shareholders have previously adopted or approved the bylaw being amended or repealed, by vote of a majority of the board of directors of the corporation in office at any regular or special meeting of directors. Any change in these bylaws shall take effect when adopted unless otherwise provided in the resolution effecting the change PENNSYLVANIA BUSINESS CORPORATION BYLAW DERIVATION TABLE
Bus. Corp. Law BYLAW SECTION 1.01 1507 1.02 1502(a)(15) 1.03 1554 2.01 1702 2.02 1703(b) 2.03(a) 1704(b) and (c) (b) 1504(a) (c) 1906(c), 1913(a), 1923(a), 1952(c), 1962(b), 1973 (d) 1571(d) 2.04 1705 2.05 1706 2.06 1707 2.07 1708 3.01 1704(a) 3.02 1755(a) 3.03 1755(b), 2521 3.04(a) 1756(a)(1), 1762(c) (b) 1756(a)(2) (c) 1755(c), 1756(a)(3), 2522 (d) 1756(b)(1) (e) 1756(b)(2) 3.05 1726(a)(4), 1757(a), 1766(a) 3.06 none 3.07 1758(a) 3.08(a) 1759(a) (b) 1759(b) (c) 1757(c) (d) 1759(e) 3.09 1760 3.10 1761 3.11 1762(a), (c) 3.12 1763 3.13 1764 3.14 1765 3.15 1769(a) 3.16 1504(a)
BCL BYLAW SECTION 4.01(a) 1721 (b) 1712 (c) 1715 4.02(a) 1722 (b) 1758(b) (c) 1725(a) (d) 1725(c) 4.03(a) 1723 (b) 1724(a) (c) 1724(a) (d) 1724(b); Articles of Incorporation, Section 7(a) 4.04 1725(b); Articles of Incorporation, Section 7(a) 4.05 1726; Articles of Incorporation, Section 7(b) 4.06 1703(a) 4.07 none 4.08 none 4.09 none 4.10 1727 4.11 1731 4.12 1730 5.01 1732(a), 1712 5.02 1732(a) 5.03 1732(a) 5.04 1733 5.05 1732(a) 5.06 1732(b) 5.07 none 5.08 none 5.09 none 5.10 none 5.11 none 5.12 none 5.13 none 6.01(a) 1528(c), (d) (b) 1508(a), 1732(b) 6.02 none 6.03 1529(a) 6.04 1103 (shareholder), 1764(b) 6.05 none
BCL BYLAW SECTION 6.06 none 7.01 1746 7.02 1746 7.03 1746 7.04 1746 7.05 1746 7.06 1746 8.01 1502(a)(3); cf. 1109 and 1506(b) 8.02 1504 8.03 1504 8.04 1728 8.05 1504 8.06 1508(a), (b) 8.07 Subch. 25E 8.08 Subch. 25G 8.09 Subch. 25H 8.10 1504
EX-27 3
5 1,000 9-MOS JAN-30-1999 OCT-31-1998 32,633 72,721 0 0 217,000 358,081 439,071 266,648 707,077 179,622 122,279 0 0 10,655 382,382 707,077 762,931 762,931 568,045 568,045 0 0 7,635 (16,920) (5,922) (10,998) 0 0 0 (10,998) (0.11) (0.11)
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