BY-LAWS

                                       OF

                                 PHAR-MOR, INC.

                  Amended and Restated as of February 17, 1998


                                    ARTICLE I

                             Offices and Fiscal Year



         Section 1.1 Offices.  The  corporation  may have offices at such 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 1.2 Fiscal Year. The fiscal year of the  corporation  shall end
on the Saturday closest to June 30 of each year, or such other date as the Board
of Directors of the corporation shall from time to time determine.

                                   ARTICLE II

                     Notice, Waivers and Meetings Generally

         Section 2.1                Manner of Giving Notice.

         2.1.1 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 of incorporation  of the corporation or these by-laws,  it may be given
to the person  either  personally  or by sending a copy  thereof by any class of
mail  permitted  under the Business  Corporation  Law,  postage  prepaid,  or by
telegram  (with  messenger  service  specified),  or  courier  service,  charges
prepaid, or by telecopier (with appropriate answer-back),  to the address (or to
the telecopier 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 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 telecopier,  when
transmitted.  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 of  incorporation of the corporation or
these by-laws.




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         2.1.2 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
of Directors fixes a new record date for the adjourned meeting.

         Section  2.2  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)
or 48 hours (in the case of notice by telecopier,  telegram,  courier service or
express  mail) or three days (in the case of notice by mail)  before the time at
which the meeting is to be held.  Every such notice  shall state the date,  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 of Directors need to be
specified in a notice of the meeting.

         Section 2.3                Notice of Meetings of Shareholders.
                                    ----------------------------------

         2.3.1 General Rule. Written notice of every meeting of the shareholders
shall be given by, or at the direction of, the Secretary to each  shareholder of
record  entitled to vote at the meeting at least ten business  days prior to the
day named for a meeting called to consider any matter. If the Secretary neglects
or refuses  to give  notice of a meeting,  the  person or  persons  calling  the
meeting  may do so.  Such  written  notice  shall  specify  the  business  to be
transacted at such meeting.

         2.3.2  Notice of  Shareholder  Business.  Except as provided in Section
3.13 of these by-laws,  at any annual or special meeting of  shareholders,  only
such business shall be conducted as shall have been properly  brought before the
meeting.  Business  must be (a)  specified  in the  notice  of  meeting  (or any
supplement thereto) given by or at the direction of the Board of Directors,  (b)
properly  brought  before  the  meeting by or at the  direction  of the Board of
Directors,  or (c) properly  brought  before an annual meeting by a shareholder,
and, if and only if the notice of a special meeting  provides for business to be
brought before the special meeting by shareholders,  properly brought before the
special meeting by a shareholder.  For business to be properly  brought before a
meeting by a shareholder,  the shareholder must have given timely notice thereof
in writing to the Secretary of the  corporation.  To be timely,  a shareholder's
notice must be delivered to or mailed and  received at the  principal  executive
offices of the corporation not less than 50 days prior to the meeting; provided,
however,  that if less than 60 days'  notice of the date of the meeting is given
or made to  shareholders,  notice by the  shareholder  to be  timely  must be so
received not later than the close of business on the tenth day following the day
on which such  notice of the date of the meeting  was  mailed.  A  shareholder's
notice  to the  Secretary  shall  set forth as to each  matter  the  shareholder
proposes to bring  before the meeting (i) a brief  description  of the  business
desired to be brought  before the meeting and the  reasons for  conducting  such
business  at the  meeting,  (ii) the name and  address,  as they  appear  on the
corporation's books, of the shareholder proposing such business, (iii) the class
and number of shares of the corporation

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which are  beneficially  owned by the  shareholder  and (iv) any interest of the
shareholder in such business.  Notwithstanding  anything in these by-laws to the
contrary,  no business shall be conducted at any meeting of shareholders  except
in accordance with the procedures set forth in this  paragraph.  The chairman of
the meeting shall,  if the facts  warrant,  determine and declare to the meeting
that business was not properly brought before the meeting and in accordance with
the  provisions of this  paragraph,  and if he or she should so  determine,  the
chairman of the meeting  shall so declare  that any such  business  shall not be
transacted.

         2.3.3  Notice of Action by  Shareholders  on  By-laws  or  Articles  of
Incorporation.  In the case of a meeting of shareholders  that has as one of its
purposes action on the by-laws or articles of  incorporation of the corporation,
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 by-laws or articles of incorporation of the corporation.  In addition, 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.

         Section 2.4                Waiver of Notice.

         2.4.1  Written  Waiver.  Whenever any written  notice is required to be
given under the  provision  of the  Business  Corporation  Law,  the articles of
incorporation of the corporation or these by-laws,  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.
Except as  otherwise  required by this  subsection,  neither the  business to be
transacted  at, nor the purpose of, a meeting need be specified in the waiver of
notice of the meeting.  In the case of a special  meeting of  shareholders,  the
waiver of  notice  shall  specify  the  general  nature  of the  business  to be
transacted.

         2.4.2 Waiver by Attendance.  Attendance of a person,  whether in person
or by proxy,  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 (i)
at the beginning of the meeting,  to the transaction of any business because the
meeting was not lawfully  called or  convened,  or (ii) prior to the vote on any
matter,  because such matter was not  identified as a matter to be considered at
such meeting in the written notice of such meeting.

         Section 2.5 Use of Conference  Telephone and Similar Equipment.  One or
more persons may  participate in a meeting of the Board of Directors,  and if so
specified by a resolution of the Board of Directors with respect to 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.




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<PAGE>



                                   ARTICLE III

                                  Shareholders

         Section 3.1 Place of Meetings.  All meetings of the shareholders of the
corporation  shall be held at the principal place of business of the corporation
unless  another  place has been  designated by the Board of Directors and is set
forth in the notice of such meeting.

         Section  3.2  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 of  Directors,  the
meeting for any calendar  year after 1995 shall be held on the third  Tuesday of
November 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,  at ten
o'clock a.m., and except as otherwise provided in Section 5.6 of the articles of
incorporation of the corporation, 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.  In addition to any rights  provided by
applicable law, if the annual meeting shall not have been called and held within
six months after the  designated  time,  shareholders  entitled to cast at least
one-third  of the  votes  that all  shareholders  are  entitled  to cast at such
meeting may call the meeting at any time thereafter.

         Section 3.3 Special Meetings.  Special meetings of the shareholders may
be called at any time by shareholders entitled to cast at least one-third of the
votes  that  all  shareholders  are  entitled  to cast at  such  meeting,  or by
resolution of the Board of Directors,  which may fix the date, time and place of
the meeting.  If the Board of Directors does not fix the date,  time or place of
the meeting, 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 of Directors calling the special meeting.

         Section 3.4                Quorum and Adjournment.

         3.4.1 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.  Except as otherwise required by the Business Corporation Law or by the
articles of incorporation of the corporation, the presence in person or by proxy
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.



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         3.4.2  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.

         3.4.3  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 of absence of a quorum,  may be adjourned  for such
period and to such place as the  shareholders  present in person or by proxy and
entitled to vote shall determine,  but in the case of any meeting called for the
election of Directors  such meeting may be adjourned only from day to day or for
such longer periods not exceeding fifteen days each as the holders of a majority
of the shares present in person or by proxy shall direct.

         3.4.4  Electing  Directors at  Adjourned  Meeting.  Those  shareholders
entitled  to vote who  attend a meeting  in person  or by proxy  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.

         3.4.5 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 3.5 Action by Shareholders. Except as otherwise provided in the
Business  Corporation Law or the articles of incorporation of the corporation or
these  by-laws,  whenever  any  corporate  action  is to be taken by vote of the
shareholders  of the  corporation,  it shall be  authorized by a majority of the
votes cast at a duly organized  meeting of shareholders by the holders of shares
entitled to vote  thereon.  Except when acting by unanimous  consent to remove a
Director or Directors,  the  shareholders  of the  corporation may act only at a
duly organized meeting.

         Section 3.6  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  officers present in
the order stated: the Chief Executive  Officer,  the Vice Chairman of the Board,
if there be one, the President, the Vice Presidents,  in their order of rank and
seniority,  or a  Chairman  chosen by the Board of  Directors  or, if none is so
chosen,  by  vote  of the  shareholders  present,  shall  act as  Chairman.  The
Secretary,  or, in the absence of the Secretary,  an Assistant Secretary,  or in
the  absence  of both the  Secretary  and every  Assistant  Secretary,  a person
appointed by the Chairman shall act as Secretary.



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         Section 3.7 Voting Rights of Shareholders. Unless otherwise provided in
the Business Corporation Law or the articles of incorporation of the corporation
or these by-laws,  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 3.8      Determination of Shareholders of Record.

         3.8.1 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
in advance 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 of  Directors  fixes a new
record date for the adjourned meeting.

         3.8.2  Determination  When No Record Date Fixed If a record date is not
fixed:

                  (a) 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 immediately preceding the day on which notice is
         given.

                  (b) 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.

         3.8.3  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 3.9                Voting and Other Action by Proxy.
                                    --------------------------------

         3.9.1             General Rule.

                  (a)  Every  shareholder  entitled  to  vote  at a  meeting  of
         shareholders may authorize another person to act for the shareholder by
         proxy.

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                  (b) 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.

                  (c) 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 matter
         of voting the shares, the voting of the shares shall be divided equally
         among those persons.

         3.9.2 Minimum Requirements. 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 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.

         3.9.3 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 of  Directors,
including solicitation by professional proxy solicitors and otherwise.

         Section 3.10               Voting by Entities.

         3.10.1  Voting  by   Non-Individual   Shareholders.   Any  corporation,
partnership,  limited liability company or other entity that is a shareholder of
record  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 governing body
of the other entity or a provision of its  organizational  documents,  a copy of
which resolution or provision  certified to be correct by one of its officers or
authorized   representatives   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.

         3.10.2 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.


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         Section 3.11               Voting Lists.

         3.11.1 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, except as otherwise  provided by law, 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  required  therein
available at the meeting by any other means.

         3.11.2 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 3.12               Judges of Election.

         3.12.1  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.

         3.12.2  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.

         3.12.3  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,  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 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.



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         3.12.4 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 3.13               Nominations for Director.

         A nomination for election of a Director may be made by any  shareholder
entitled to vote for the election of Directors if, and only if,  written  notice
(the  "Notice")  of such  shareholder's  intent to  nominate a  Director  at the
meeting  is  given by the  shareholder  and  received  by the  Secretary  of the
corporation in the manner and within the time specified herein. The Notice shall
be delivered to the Secretary of the  corporation not less than 90 days prior to
the  date  fixed  by these  by-laws  for the  annual  meeting  of  shareholders;
provided,  however,  that if Directors are to be elected by the  shareholders at
any time other than the annual  meeting,  the Notice  shall be  delivered to the
Secretary of the  corporation  not later than the tenth day following the day on
which notice of the meeting was first given to shareholders. In lieu of delivery
to the Secretary of the corporation, the Notice may be mailed to the corporation
by certified mail,  return receipt  requested,  but shall be deemed to have been
given only upon actual receipt by the Secretary of the corporation.

         The Notice shall be in writing and shall contain or be accompanied by:

         (a) the name and residence of such shareholder and of each person to be
 nominated;

         (b) a representation  that the shareholder is a holder of record of the
corporation's voting stock entitled to vote for the election of directors on the
date of such  notice and  intends to appear in person or by proxy at the meeting
to nominate the person or persons specified in the Notice;

         (c) such information regarding each nominee as would have been required
to be included in a proxy  statement  filed  pursuant to  Regulation  14A of the
rules and  regulations  established by the  Securities  Exchange Act of 1934 (or
pursuant to any successor act or  regulation)  had proxies been  solicited  with
respect  to  such  nominee  by the  management  or  Board  of  Directors  of the
corporation;

         (d) a  description  of all  arrangements  or  understandings  among the
shareholder and each nominee and any other person or persons (naming such person
or persons)  pursuant to which such  nomination or nominations are to be made by
the shareholder; and



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(e)      the consent of each nominee to serve as Director of the  corporation if
so elected.

         The Chairman of the meeting may, if the facts  warrant,  determine  and
declare to the meeting that any  nomination  made at the meeting was not made in
accordance  with the foregoing  procedures  and, in such event,  the  nomination
shall be disregarded.

         The Board of  Directors  shall  determine  in good  faith  whether  the
proposed  nominee  meets the  qualifications  for Director as set forth in these
by-laws or in a resolution  approved by the Board of Directors or the  committee
of the Board of Directors responsible for identifying candidates for Director.


                                   ARTICLE IV

                               Board of Directors

         Section 4.1                Powers; Personal Liability.

         4.1.1  General  Rule.   Unless  otherwise   provided  by  the  Business
Corporation Law, 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.

         4.1.2 Personal  Liability of Directors.  To the fullest extent that the
laws of the Commonwealth of Pennsylvania permit the elimination or limitation of
the liability of Directors,  no Director of the corporation  shall be personally
liable for monetary damages as such for any action taken, or any failure to take
any action, as a Director.  The provisions of this subsection shall be deemed to
be a contract  with each Director of the  corporation  who serves as such at any
time while such provisions are in effect, and each such Director shall be deemed
to be serving as such in reliance on such provisions. Any amendment to or repeal
of  this  subsection  or  adoption  of  any  article  or  other  by-law  of  the
corporation, which has the effect of increasing director liability shall operate
prospectively  only and shall not have effect with respect to any action  taken,
or any failure to act, by a Director prior thereto.

         4.1.3.  Notation of Dissent.  A Director who is present at a meeting of
the Board of Directors,  or of a committee of the Board of  Directors,  at which
action on any  corporate  matter is taken 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 a 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


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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 4.2                Qualifications and Selection of Directors.
                                    ------------------------------------------

         4.2.1  Qualifications.  No  person  shall  be  eligible  to  serve as a
Director unless he or she is a natural person of full age.

         4.2.2  Selection.  Except  as  otherwise  provided  in  these  by-laws,
Directors  of the  corporation  shall be  elected  by the  shareholders.  At any
meeting of shareholders at which Directors are to be elected which is held prior
to the annual  meeting  of  shareholders  to be held in 1997,  the  election  of
Directors  shall occur as provided in Paragraph  7.G of the Third  Amended Joint
Plan of  Reorganization  of Phar-Mor,  Inc. et al. under chapter 11 of title 11,
United  States  Code  dated  May 25,  1995,  as  modified.  If prior to any such
election the Chairman or the Secretary shall receive notice that any person, who
is listed as a nominee for the office of Director in the proxy statement that is
mailed to the  shareholders in connection with such meeting,  has for any reason
become unable or unwilling to serve as a Director, the number of Directors to be
elected at such  meeting  shall  automatically  be reduced by the number of such
persons,  but  without  limiting  the  authority  of the Board of  Directors  to
increase or further  decrease the number of Directors either prior or subsequent
to such meeting.

         Section 4.3                Number and Term of Office.
                                    -------------------------

         4.3.1 Number. The initial Board of Directors shall consist of seven (7)
Directors.  Prior to March  11,  1997,  any  change in the  number of  Directors
constituting  the  Board  of  Directors  shall be  subject  to  approval  by the
shareholders.  From and after such date, the Board of Directors shall consist of
such number of Directors as may be determined from time to time by resolution of
the Board of Directors.

         4.3.2 Term of Office. The directors shall be divided into classes,  and
hold  office for the terms as  provided  in  Article  Tenth of the  Articles  of
Incorporation  and shall  continue  to serve  until  their  successors  shall be
elected and shall qualify or until their 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.

         4.3.3  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.



                                                        11

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         Section 4.4 Vacancies.  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 of Directors  though
less than a quorum, or by a sole remaining Director,  and each person so elected
shall be a Director to serve for the balance of the  unexpired  term and until a
successor  has been  elected and  qualified  or until his or her earlier  death,
resignation or removal.

         Section 4.5                Removal of Directors.

         4.5.1 Removal by the Shareholders.  Unless otherwise prohibited by law,
the entire  Board of Directors  or any  individual  Director may be removed from
office by vote of the  shareholders  entitled to elect Directors only for cause.
In case the Board of Directors or any one or more Directors are so removed,  new
Directors may be elected at the same meeting.

         4.5.2 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 4.6 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 4.7 Organization of Meetings.  At every meeting of the Board of
Directors,  the Chairman of the Board, if there be one, in the case of a vacancy
in the office or absence of the  Chairman of the Board,  any other  officer then
serving as Chief Executive Officer,  that Vice Chairman of the Board who is most
senior in his or her service as a Director and is present,  the President,  that
Vice  President  who is most senior in his or her  service as a Director  and is
present,  or a Chairman  chosen by a majority of the  Directors  present,  shall
preside.  The  Secretary,  or, in the  absence of the  Secretary,  an  Assistant
Secretary, or in the absence of the Secretary and every Assistant Secretary, any
person appointed by the Chairman of the meeting, shall act as Secretary.

         Section  4.8  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  resolution of the Board of Directors or by the Chairman of the Board
in a notice given in accordance  with these  by-laws.  The Chairman of the Board
may postpone any regular meeting by giving notice.

          Section  4.9  Special  Meetings.  Special  meetings  of the  Board  of
Directors  shall be held whenever called by the Chairman or by a majority of the
Directors.



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<PAGE>



         Section 4.10               Quorum of and Action by Directors.
                                    ---------------------------------

         4.10.1  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.

         4.10.2 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 if office is filed with the Secretary of the corporation.

         Section 4.11               Committees of the Board.

         4.11.1  Establishment  and  Powers.  The  Board of  Directors  may,  by
resolution  adopted by a majority of the  Directors in office,  establish one or
more committees (including audit and compensation  committees) to consist of one
or more Directors of the  corporation.  Subject to the direction of the Board of
Directors,  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:

                  (a)      The declaration of dividends or other distribution on
         any equity securities of the corporation.

                  (b) The  adoption  of  resolutions  establishing  the  rights,
         preferences and privileges of any series of preferred stock.

                  (c) The  submission to  shareholders  of any action  requiring
         approval of shareholders under the Business Corporation Law.

                  (d) The  creation  of  filling  of  vacancies  in the Board of
Directors.

                  (e) The adoption, amendment or repeal of these by-laws.

                  (f) The amendment or repeal of any  resolution of the Board of
         Directors  unless by its terms it is  amendable or  repealable  by such
         committee.

                  (g) Action on matters  committed by a resolution  of the Board
         of Directors to another committee of the Board of Directors.



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<PAGE>



          4.11.2 Term.  Each committee of the Board of Directors  shall serve at
the pleasure of the Board of Directors.

         4.11.3 Committee Procedures. The term "Board of Directors" when used in
any provision of these by-laws  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 any committee of the Board of Directors.

          Section  4.12  Compensation.  The Board of  Directors  shall  have the
authority to fix the reasonable  compensation of Directors for their services as
Directors and the  reimbursement of all reasonable  expenses incurred by them in
attending Board of Directors meetings. Any Director may be a salaried officer of
the corporation.

         Section 4.13  Exercise of Fiduciary  Duty. In taking action in the best
interests  of the  corporation,  the  Board  of  Directors  shall  consider  the
long-term  interests  of  shareholders,  in  addition to  considering  any other
factors that may be pertinent,  and shall always endeavor to take such action in
a manner that enhances the long-term interests of shareholders.


                                    ARTICLE V

                                    Officers

         Section 5.1                Officers Generally.

         5.1.1  Number,  Qualifications  and  Designation.  The  officers of the
corporation  shall be Chairman of the Board, a President  and/or Chief Executive
Officer,  one or more Vice  Presidents (of whom, if there are more than one, one
or more may be an Executive Vice President,  Vice President and Group Executive,
Senior  Vice  President,  or bear such other title as may be  designated  by the
Board of  Directors),  a  Secretary,  a Treasurer,  a Controller  and such other
officers as may be elected in  accordance  with the  provisions  of Section 5.3.
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. Any number of offices may be held by
the same  person,  except  that the  same  person  shall  not be  Treasurer  and
Controller.

         5.1.2 Bonding. The corporation may secure the fidelity of any or all of
its officers by bond or otherwise.

         Section 5.2                Election, Term of Office and Resignations.
                                    -----------------------------------------


                                                        14

<PAGE>



         5.2.1  Election and Term of Office.  The  officers of the  corporation,
except those appointed by delegated  authority pursuant to Section 5.3, shall be
elected  annually by the Board of  Directors,  and each such officer  shall hold
office  until the meeting of the Board of  Directors  following  the next annual
meeting of shareholders  and until a successor has been elected and qualified or
until his or her earlier death, resignation or removal.

         5.2.2  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 5.3 Subordinate  Officers,  Committees and Agents. The Board of
Directors  may from time to time  appoint  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  by-laws,  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 appoint  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 5.4 Removal of Officers  and Agents.  Any  officer,  committee,
employee or agent of the corporation  may be removed,  with or without cause, by
the Board of Directors  and, if appointed by an officer or committee  given such
power by Section 5.3, by such officer or committee. The removal shall be without
prejudice to the contract rights, if any, of any person so removed.  Election or
appointment  of an  officer,  committee,  employee  or agent shall not of itself
create contract rights.

         Section  5.5  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 5.3, as the case may be, and
if the office is one for which these by-laws  prescribe a term,  shall be filled
for the unexpired portion of the term.

         Section 5.6  Authority.  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 by-laws.

         Section 5.7 The Chief Executive Officer. The Chief Executive Officer of
the corporation shall have general  supervision over the business and operations
of the corporation,  subject however,  to the control of the Board of Directors.
The  Chief  Executive  Officer  shall  have  the  power  to  sign,  execute  and
acknowledge, in the name of the corporation, deeds,

                                                        15

<PAGE>



mortgages,  bonds,  contracts or other  instruments  authorized  by the Board of
Directors,  by such other corporate  action as shall be  appropriate,  except in
cases where the signing and execution  thereof  shall be expressly  delegated by
the Board of Directors,  or by these by-laws,  to some other officer or agent of
the  corporation;  and, in  general,  shall  perform all duties  incident to the
office of a president  of a  corporation  and such other  duties as from time to
time may be assigned by the Board of Directors.

         Section  5.8 The  President.  In the absence or  unavailability  of the
Chief Executive Officer, or if a Chief Executive Officer has not been elected by
the Board of  Directors,  the  President  shall  perform the duties of the Chief
Executive  Office and such other  duties as may from time to time be assigned by
the Board of Directors.

         Section 5.9 The Chairman and Vice  Chairman of the Board.  The Chairman
of the Board or in the absence of the Chairman,  the Vice 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 to be requested by
the Board of Directors.

         Section 5.10 The Vice Presidents.  In the absence or  unavailability of
the  Chief  Executive  Officer  or the  President,  if  there  be one,  the Vice
Presidents  shall  perform the duties of the  President and such other duties as
may from time to time be assigned to them by the Board of Directors or the Chief
Executive Officer.

         Section 5.11 The  Secretary.  The  Secretary or an Assistant  Secretary
shall attend all meetings of the  shareholders and of the Board of Directors and
shall record all the votes of the shareholders and of the Board of Directors and
the minutes of the  meetings of the  shareholders  and of the Board of Directors
and of  committees  of the Board of  Directors 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  Chief
Executive Officer.

         Section 5.12 The  Treasurer.  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  perform all duties  incident to the
office of  Treasurer  and such other duties as may from time to time be assigned
by the Board of Directors or the Chief Executive Officer.


                                                        16

<PAGE>



         Section 5.13 The  Controller.  The Controller  shall have charge of the
accounts of the  corporation and shall perform all duties incident to the office
of Controller  and such other duties as may from time to time be assigned by the
Board of Directors or the Chief Executive Officer.

         Section 5.14 Assistant  Officers.  Each Assistant Officer shall, in the
absence of disability  of his or her superior in office,  perform the duties and
exercise the powers of such superior as directed by such superior,  by the Chief
Executive Officer, or by the Board of Directors,  and shall also have such other
powers and shall  perform  such other duties as may be granted to or required of
him or her in accordance  with this Article or by his or her superior in office.
Performance  of any of the duties or the exercise of any of the powers of his or
her superior in office by any such Assistant Officer shall, as to third parties,
be conclusive evidence of his or her authority to act in such respect.

         Section 5.15  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  committee as may be designated by resolution of the Board of Directors.
The salaries or other  compensation of any other  officers,  employees and other
agents  shall be fixed from time to time by the  committee  or officer as may be
designated  by  resolution  of the  Board  of  Directors.  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  6.1  Share  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.  The share  record  books and blank share  certificates
shall be kept by the Treasurer or by any transfer agent or registrar  designated
by the Board of Directors for that purpose.

         Section 6.2 Issuance.  The share  certificates of the corporation shall
be  numbered  and  registered  in the share  ledger  and  transfer  books of the
corporation  as they are  issued.  They shall be signed by the  Chairman  of the
Board, a Vice Chairman of the Board, the Chief Executive Officer,  the President
or a Vice  President  and by the  Secretary  or an  Assistant  Secretary  or the
Treasurer or an Assistant  Treasurer,  and shall bear the corporate seal,  which
may be a facsimile, engraved or printed; but where such certificate is signed by
a transfer agent or a registrar the signature of any corporate officer upon such
certificate may be a facsimile, engraved or printed. In case any officer who has
signed, or whose facsimile  signature has been placed upon any share certificate
shall have ceased be such officer  because of death,  resignation  or otherwise,
before the

                                                        17

<PAGE>



certificate  is issued,  it may be issued with the same effect as if the officer
has not  ceased  to be such at the date of its  issue.  The  provisions  of this
Section 6.2 shall be subject to any  inconsistent  or contrary  agreement at the
time between the corporation and any transfer agent or registrar.

         Section 6.3 Transfer. Transfers of shares shall be made on the books of
the corporation  upon surrender of the  certificates  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. ss.ss. 8101 et seq., and its amendments and
supplements.

         Section 6.4 Recordholder 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 6.5 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 the 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.


                                   ARTICLE VII

                   Indemnification of Directors, Officers and
                        Other Authorized Representatives

          Section  7.1  Indemnification  of  Authorized   Representatives.   The
corporation shall indemnify such persons and to such extent as shall be provided
in the articles of incorporation.


                                  ARTICLE VIII

                          Interested Party Transactions

         Section  8.1  Interested  Party  Transactions.  Any  contract  or other
transaction between the corporation and (a) any Director, officer or Significant
Shareholder  (as  defined  below),   or  (b)  any  corporation,   unincorporated
association,   business  trust,  estate,  partnership,   trust,  joint  venture,
individual or other legal entity ("Legal Entity") in which such Director,

                                                        18

<PAGE>



officer  of  Significant  Shareholder  is  a  director,   officer,   controlling
shareholder or trustee (collectively, a "Conflict Transaction"),  shall be valid
if the  material  facts of the  Conflict  Transaction  and the exact  nature and
extent of the interest of such Director, officer or Significant Shareholder were
disclosed  in writing or known to the Board of  Directors,  a  committee  of the
Board of Directors with authority to act thereon,  or the shareholders  entitled
to vote thereon, and

the  Board  of  Directors,  such  committee,  or such  shareholders  authorized,
approved, or ratified the Conflict Transaction.

         (A) A Conflict Transaction is authorized, approved or ratified:

                  (x) by the  Board  of  Directors  or  such  committee,  if the
         Conflict Transaction receives the affirmative vote of a majority of the
         Directors   who  have  no   interest  in  the   Conflict   Transaction,
         notwithstanding the fact that such majority may not constitute a quorum
         or a majority of the Board of Directors or such committee or a majority
         of the  Directors  present  at the  meeting,  and  notwithstanding  the
         presence or vote of any Director who does have such an interest; or

                  (y) by the  shareholders of the  corporation,  if the Conflict
         Transaction  receives the affirmative  vote of a majority of the voting
         securities  voting  thereon,  in which vote  securities  owned or voted
         under the control of such Director,  officer of Significant Shareholder
         who, or of any Legal  Entity  that,  has an  interest  in the  Conflict
         Transaction  may not be counted for any purpose other than  determining
         the presence of a quorum.

         (B) A Significant Shareholder is the person who is the beneficial owner
or registered  holder of, or the person  entitled to vote, a number of shares of
voting  securities of the  corporation  representing  not less than five percent
(5%) of the issued an outstanding voting securities of the corporation  entitled
to be voted for the election of Directors of the corporation.


                                   ARTICLE IX

                                                            Miscellaneous

         Section 9.1  Execution of  Instruments.  All checks,  drafts,  bills of
exchange,   acceptances,   notes  and  other   obligations   and   evidences  of
indebtedness,   deeds,  conveyances,   bills  of  sale,  assignments  and  other
instruments  of transfer and all other  instruments  and documents in writing of
any nature, may be signed, executed, accepted, endorsed, verified,  acknowledged
or delivered on behalf of the  corporation  by such officer or officers or other
person or persons as the Board of Directors may from time to time designate. The
Board of Directors at its discretion


                                                        19

<PAGE>


may authorized the use of an appropriate facsimile signature of any such officer
or person in lieu of his or her manual signature.

         Section  9.2  Amendment  of  By-laws.  These  by-laws may be amended or
repealed, or new by-laws may be adopted,  either (a) by vote of the shareholders
at any duly organized annual or special meeting of  shareholders,  or (b) except
with  respect to (i) Section  4.3.1  hereof and (ii) those  maters  which are by
statute  committed  expressly  to the  shareholders,  regardless  of whether the
shareholders  have  previously  adopted or approved the by-law being  amended or
repealed,  by a vote of a majority of the Board of Directors of the  corporation
in office at any regular or special meeting of the Board of Directors.





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<PAGE>