SECOND AMENDMENT AND WAIVER TO CREDIT AGREEMENT

     This is the second  amendment and waiver  (the  "Amendment")  dated  as  of
September  14,  1999,  to the  Credit  Agreement  dated as of March 26,  1998 as
amended by the First Amendment and Waiver to Credit  Agreement dated as of March
23, 1999 (the "Credit Agreement") between Lechters, Inc., (the "Borrower"),  The
Chase  Manhattan  Bank as agent and issuing  bank (the  "Agent"),  and the Banks
listed  on  the  signature  pages  thereof  (individually,  each a  "Bank",  and
collectively, the "Banks").

                                    RECITALS

     A. The Borrower and the  Corporate  Guarantors  have (i) asked the Banks to
waive  certain  defaults that have arisen under the Credit  Agreement,  and (ii)
requested certain amendments to the Credit Agreement.

     B. The Banks are willing to waive such  defaults  and make such  amendments
subject to the terms and conditions set forth herein.

     C. The Borrower,  the Agent and The Chase  Manhattan Bank as custodian (the
"Custodian")  have entered into a Collateral and Account Control  Agreement,  as
defined  herein,  whereby the Custodian  will hold and have control over certain
assets of the Borrower.

     NOW,  THEREFORE,  in  consideration  of the  agreement  of  the  parties
contained herein, and intending to be legally bound, the parties hereto agree as
follows:

     1.     Definitions.

     Capitalized   terms  used  herein and not defined  shall have the  meanings
assigned to them in the Credit Agreement.

     2.     Amendments to Article 1 of the Credit Agreement.

     Subsection 1.02(a) is replaced with the following:

            The  Borrower  shall  give  the   Agent  notice   (which   shall  be
     irrevocable)  no later than  10:00 a.m.  (New York time) on, in the case of
     Prime  Rate  Loans, the Business Day,  and, in the case of LIBO Rate Loans,
     the third Eurodollar Business Day,  before  the  requested   date  for  the
     making of such Loans.  Each  such  notice  shall be in the form of Schedule
     1.02 and shall  specify  (i)  the  requested   date  for  the making of the
     requested Loans,  which shall be,  in  the  case  of  Prime  Rate  Loans, a
     Business Day and, in the case of  LIBO  Rate  Loans,  a Eurodollar Business
     Day,  (ii) the Type or Types of Loans  requested,  (iii) the amount of each
     such Type of Loan, the aggregate of which  amounts  for (A) all Prime  Rate
     Loans  requested  shall be $500,000 or  a  greater  integral   multiple  of
     $100,000 or the aggregate amount of the unused Loan Commitments and (B) all
     Types of LIBO Rate Loans shall be $2,000,000 or a greater integral multiple
     of $500,000,  and (iv) the difference  between  (A) the aggregate  Margined
     Value of all Collateral as of the Business Day  before such notice, and (B)
     the sum of the aggregate of the (1) Loan Exposures of all of the Banks, and
     (2) LC Exposures of all of the Banks  (in  each case after giving effect to
     any  outstanding  requests  for  Loans,  Letters  of  Credit  or  Steamship
     Indemnities).  Upon  receipt of any such notice,  the Agent shall  promptly
     notify each Bank of the contents thereof and of the amount and Type of each
     Loan to be made  by  such  Bank on the  requested  date  specified therein.

<PAGE>

     3.     Amendments to Article 2 of the Credit Agreement.

     The  last  sentence  of  Section  2.02  is  deleted  and  replaced with the
     following:

            (e)  Collateral Coverage

            The  Margined  Value  of  the  Collateral  is at  least equal to the
     greater of  (i)  $15,000,000  or (ii)  the sum  of the aggregate of the (A)
     Loan  Exposures of  all  of the Banks,  and (B)  the LC Exposures of all of
     the  Banks  (in each case  after  giving  effect  to the  requested  Credit
     Extension  and  any  other  outstanding  requests  for  Loans,   Letters of
     Credit or Steamship Indemnities).   If  the aggregate of the Loan  Exposure
     and  LC  Exposure of all  of the Banks is reduced at any time  to less than
     $15,000,000,  the  Agent  shall  release  upon the request  of the Borrower
     the amount  of  Collateral  in  excess of a Margined Value  of $15,000,000.

            The  Borrower  shall be  deemed  to have made a  representation  and
     warranty  as of the   time of  the  requested  Credit  Extension  that  the
     conditions  specified   in  clauses   (b),   (c) and (e)  above  have  been
     fulfilled as of such time.

     4.     Amendments to Article 5 of the Credit Agreement.

            a.  Section 5.04 is deleted and replaced with the following:

            (i) Declare or pay any dividends, either in cash or property, on any
     shares  of  its  capital  stock  of any class  (except  dividends  or other
     distributions payable solely in shares of common stock  of  the  Borrower);
     or (ii) directly or indirectly,  purchase,  redeem or retire any shares  of
     its  capital  stock  of  any  class or any  warrants,  rights or options to
     purchase or  acquire  any shares of its  capital  stock;  or (iii) make any
     other payment or distribution, either directly or indirectly, in respect of
     capital stock of the  Borrower;  or (iv) make, directly or indirectly,  any
     Restricted Investment;  it being specifically understood  that the Borrower
     and  any  Subsidiary  will  enter  into a joint venture only with the prior
     written  consent of all the Banks;  except the Borrower may (x) declare and
     pay preferred dividends not to exceed  6%  per  annum in  respect  of   the
     Perpetual  Convertible  Preferred  Stock,  and (y)  during  such time as no
     Default or Event of Default has occurred and  is  continuing  and  provided
     that no Default or  Event  of  Default  shall be caused thereby,  purchase,
     redeem  or  retire  after  March 26, 1998 up  to  1,000,000  shares  in the
     aggregate of the  Borrower's common  stock  subsequent to the Closing Date,
     provided that the aggregate price for all such shares  purchased,  redeemed
     or retired  after March 26, 1998 shall not exceed $2,500,000.

                                       2
<PAGE>

            b.  Section 5.11 is deleted and replaced with the following:

            (i) Prepay, redeem,  purchase,  defease, retire or otherwise satisfy
     in  any  manner prior  to  the  scheduled  maturity  thereof  any  of   its
     Indebtedness,  other than the  Indebtedness  under  this  Agreement or (ii)
     amend,  modify or change in  any  manner  any  term   or  condition  of its
     Indebtedness  other  than   to  prepay  any  Indebtedness  payable  by  any
     Subsidiary to the Borrower.

     5.     Amendments to Article 6 of the Credit Agreement.

            a.  Section 6.02 is deleted and replaced with the following:

            Permit the  ratio  of (i)  Consolidated  EBITDAR minus  Consolidated
     Capital Expenditures to (ii) Consolidated Fixed Charges as determined as of
     the last day of each fiscal quarter for the period of the four  consecutive
     preceding  fiscal  quarters  ending  on  such  day, to be less than 1.00 to
     1.00;  provided,  however, for the period  ending  on  the  last day of the
     third  quarter  of  fiscal  year  1999, such ratio may be less than 1.00 to
     1.00,  but shall not be less than 0.95 to 1.00.

            b.  Section 6.03 is deleted and replaced with the following:

                Permit  the  ratio  of  (i)  Consolidated  Funded  Debt  to (ii)
     Consolidated  EBITDA  as   determined  as  of  the last day of each  fiscal
     quarter for  the  period of  the four consecutive preceding fiscal quarters
     ending on such day to  be  greater  than or equal to 3.00 to 1.00 as of the
     end  of  the  first  quarter of fiscal  year 2000 and as of the end of each
     fiscal quarter thereafter.

            c.  Section 6.05 is deleted in its entirety.

            d.  Section 6.06 is deleted and replaced with the following:

            6.06   Minimum Tangible Net Worth.

            Have a Tangible  Net Worth of less than (i)  $140,000,000  as of the
     end of the third quarter of fiscal year 1999,  and (ii)  $145,000,000 as of
     the end of the fourth quarter of fiscal year 1999 and quarterly thereafter.

            e.  A new Section 6.07 is added to the Credit Agreement as follows:

                                       3
<PAGE>

            6.07   Quick Ratio

                   Have, at any time after  the second  quarter  of  fiscal year
     1999, a Quick Ratio of less than 1.0 to 1.0.

     A new Section 6.08 is added to the Credit Agreement as follows:

            6.08   Collateral Coverage

                   Permit  the  Collateral  Account  to have a Margined Value of
     less  than   the   greater   of (i)  $15,000,000  or  (ii)  the  sum of the
     aggregate of the (A)  Loan  Exposures  of all of the Banks,  and (B) the LC
     Exposures  of  all  of the Banks (in each case after  giving  effect to the
     requested  Credit  Extension  and any other outstanding requests for Loans,
     Letters of Credit or Steamship Indemnities).

     6.     Amendments to Article 7 of the Credit Agreement.

            a.  Subsection  7.01(b)(iii) is amended to delete from the last line
     "6.01, 6.02, 6.03, 6.04 and 6.05" and replace it with  "6.01,  6.02,  6.03,
     6.04, 6.06, 6.07 and 6.08".

            b.  Subsection 7.01(e) is deleted and replaced with the following:

            (e) Projections.

                   (i)  No later than 30 days following the start of each fiscal
            year an annual budget or forecast  including a projected  profit and
            loss statement,  balance sheet and cash flow  statements  along with
            a calculation of all covenants on a quarterly basis.

                   (ii) No later than 30 days  following  the end of each fiscal
            month of the  Borrower  beginning  at  the  end of August of 1999, a
            forecast of cash flows for the period  beginning  at the end of such
            month and ending March 1, 2001.

     7.     Amendment to Article 8 of the Credit Agreement.

            a.  A new Subsection  8.01(k)  is  added  to the Credit Agreement as
            follows:

            (k)    Material Adverse Change.

            From   and   after   the  effectiveness  hereof,  there  shall  be a
            material  adverse   change  in  the business,  assets,  liabilities,
            financial  condition,  results  of  operation  or business prospects
            of  the  Borrower and its Subsidiaries taken as a whole.

            b.  A  new  Subsection  8.01(l)  is added to the Credit Agreement as
            follows:

            (l)    Delivery of Resolutions

            The   Borrower  shall  fail  to  deliver  by the dates  provided  in
            Section  17  of  this  Second   Amendment   and   Waiver  to  Credit
            Agreement  resolutions  of  the  Board  of  Directors of each of the
            Borrower and  Corporate   Guarantors  authorizing  the due execution
            and delivery of this Agreement.

                                       4
<PAGE>

     8.     Amendments to Article 12 of the Credit Agreement.

            a.  A new defined term "Collateral" is added as follows:

            "Collateral" has the meaning assigned to that term in the Collateral
     and Account Control Agreement.

            b.  A new defined term "Collateral Account" is added as follows:

            "Collateral  Account"  has  the meaning assigned to that term in the
     Collateral and Account Control Agreement.

            c.  A  new  defined  term "Collateral and Account Control Agreement"
     is added as follows:

            "Collateral and Account Control Agreement"  means the Collateral and
     Account Control Agreement between the Borrower, the Agent and the Custodian
     dated as of September 14, 1999.

            d.  A  new  defined  term  "Custody  Account  Agreement" is added as
     follows:

            "Custody Account Agreement" has the meaning assigned to that term in
     the Collateral and Account Control Agreement.

            e.  A new defined term "Fair Market Value" is added as follows:

            "Fair Market  Value"  means  the  value of the Permitted  Collateral
     based  on  the  price  per  share  or  unit of any of the securities,  debt
     instruments,  mutual funds, financial assets or other  investment  property
     which is a part of the Permitted Collateral as set forth  on the  New  York
     Stock Exchange, other exchanges, markets, or  asset  value  listings  where
     such securities, debt instruments, mutual funds, financial assets, or other
     investment property may be traded or the  value  quoted  as  stated  in The
     Wall  Street Journal, or other customary  publication  of such  information
     if not available in The Wall Street Journal, at the  close of the  business
     day, plus the face  value  (including accrued interest) of any certificates
     of deposit,  cash,  or other  financial  assets  comprising  the  Permitted
     Collateral.

            f.  The   term  "Loan Documents" is  deleted  in  its  entirety  and
     replaced with the following:

            "Loan   Documents"   means  (a)  this   Agreement,  the  Notes,  the
     Subsidiary Guaranty, any Subsidiary Guaranty Supplement, the Collateral and
     Account Control Agreement, the Letters of Credit, the Steamship Indemnities
     and the Applications and (b)all other agreements, documents and instruments
     relating  to,  arising  out  of,  or  in  any  way  connected  with (i) any
     agreement,  document  or  instrument referred  to in clause  (a),  (ii) any
     other  agreement,  document or  instrument referred  to  in this clause (b)
     or (iii) any of the transactions  contemplated by any  agreement,  document
     or  instrument  referred  to in clause (a) or in this clause (b).

                                       5
<PAGE>

            g   A new defined term "Margined Value" is added as follows:

            "Margined  Value" means for each item of Permitted Collateral on any
     date, the  fair  market  value  of such  item of  Permitted  Collateral  on
     such  date multiplied by a margin factor for such Permitted  Collateral  of
     0.90,  provided, however, that if any item of  Permitted  Collateral is (i)
     cash,  or (ii) time deposits and certificates of deposit having  maturities
     of not more than 90 days (from the date such  deposits or  certificates  of
     deposit are  acquired) of any domestic  commercial bank, the long-term debt
     of  which  is  rated  at  least A-2 or the equivalent thereof by Standard &
     Poor's Corporation or a-2 or the equivalent thereof  by  Moody's  Investors
     Service,  Inc.  and  having  capital and surplus in excess of $500,000,000,
     then the face value (including accrued interest) of such  item of Permitted
     Collateral on such date shall be multiplied by a margin factor of 1.00.

            h.  A new defined term "Permitted Collateral" is added as follows:

            "Permitted  Collateral": means (i) securities issued or directly and
     fully guaranteed  or  insured  by  the  United  States  Government  or  any
     agency  or instrumentality thereof  having  maturities of not more than two
     years from the date of  acquisition,  (ii) time  deposits and  certificates
     of deposit  having maturities of not  more than 90 days (from the date such
     deposits   or   certificates   of   deposit  are  acquired) of any domestic
     commercial  bank the long-term debt of which is rated at  least  A-2 or the
     equivalent  thereof  by  Standard  &  Poor's   Corporation  or  a-2  or the
     equivalent thereof by Moody's Investors Service,  Inc. and  having  capital
     and  surplus  in excess of  $500,000,000,  and (iii) repurchase obligations
     with  a  term  of not more than seven days for underlying securities of the
     types described  in clauses (i) and (ii) entered into with any bank meeting
     the qualifications specified in clause (ii) above.

            i.  A new defined term "Quick Ratio" is added as follows:

            "Quick  Ratio"  means  the  ratio  of (i) the  sum of the  value  of
cash, marketable  securities and accounts receivable  of the  Borrower,  to (ii)
the  current  liabilities  of the Borrower,  all as determined on a consolidated
basis pursuant to GAAP.

     9.     Amendment to Schedules to the Credit Agreement.

     Schedule 1.02 is deleted and replaced with Exhibit A to this Amendment.

     10.    Waiver.

     Provided that the Borrower is in  compliance  with the covenants as amended
herein on the  effective  date of this  Amendment,  the Banks  hereby  waive any
Default or Event of  Default  arising  out of a breach of Section  6.03 prior to
such section being amended herein.

                                       6
<PAGE>

     11.    General.

     This  Amendment is made pursuant to Section 11.06 of the Credit  Agreement,
and the parties hereto  acknowledge that all provisions of the Credit Agreement,
except as amended hereby, shall remain in full force and effect.

     12.    Definitions.

     Whenever  appearing in the Loan Agreement or any other Loan  Document,  the
term "Credit  Agreement" shall be deemed to mean the Credit Agreement as amended
hereby.

     13.    Representations and Warranties.

     The Borrower  hereby  represents  and warrants to the Banks that, as of the
effectiveness of this Amendment:  (a) each of the representations and warranties
contained in the Credit  Agreement are accurate,  (b) such  representations  and
warranties would continue to be accurate if, in each  representation or warranty
where  the  term  "Loan  Documents"  appears,  the  term  "Amendment"  was to be
substituted therefor,  (c) no Event of Default has occurred and is continuing or
will result from the execution by the Borrower of this  Amendment,  and (d) that
the Loan  Documents as amended herein are  enforceable in accordance  with their
terms without any offsets, counterclaims or defenses.

     14.    Amendment Fee.

     The  Borrower  shall  pay to the  Agent  for the  benefit  of the  Banks an
amendment fee of $50,000 (the "Amendment Fee") in connection with this Amendment
which fee shall be due and payable upon the signing of this Amendment.

     15.    Arrangement Fee.

     The Borrower shall pay an arrangement  fee to the Agent for the Agent's own
account, as agreed between the Borrower and the Agent.

     16.    Fees of Bank's Counsel.

     The  Borrower  shall pay the fees and  expenses  of  McCarter  & English in
connection  with the  preparation  and  negotiation  of this  Amendment  and all
related documents.

     17.    Conditions to Effectiveness.

     It shall be a condition to the  effectiveness  of this  Amendment  that the
Bank have received the following:

            a.  This Amendment, duly executed on behalf of the Borrower  and the
     Banks;

            b.  The  Collateral and Account Control Agreement attached hereto as
     Exhibit 17(b);

                                       7
<PAGE>

            c.  Collateral  comprised  of  Permitted  Collateral to be  held  in
     the Collateral  Account and  having an aggregate Margined Value of at least
     $15,000,000;

            d   Payment of the Amendment Fee;

            e.  Payment of the Arrangement Fee;

            f.  An   opinion   of   counsel  to   the  Borrower  and  Guarantors
     satisfactory to the Agent;

            g.  On or   before   September 14, 1999,   a   certificate  from the
     Secretary of the Borrower (i) stating that there have been no amendments to
     the Certificate of Incorporation or By-laws of such Borrower since the date
     of  the  Credit   Agreement,  (ii) to which is attached a resolution of the
     Board  of  Directors   authorizing the execution,  delivery and performance
     of  this  Amendment, and (iii)  setting forth the name and sample signature
     of  the  officers  of the Borrower  authorized  to execute and deliver this
     Amendment; and

            h.  By  no  later  than  September  17,  1999,   a   certificate  or
     certificates  from  the  Secretary  of  each  of  the Corporate  Guarantors
     (excluding  Harrison Investment,  Inc.,  which  shall deliver a certificate
     from  its  Secretary  by  no  later  than   September 24, 1999) to which is
     attached a resolution of its  Board of Directors authorizing the execution,
     delivery  and  performance  of   such Corporate Guarantor's consent to this
     Amendment.

     18.    Integration.

     This  Amendment   together   with  the  Credit  Agreement  and  other  Loan
Documents  constitute the entire agreement and  understanding  among the parties
relating to the subject  matter  hereof and  thereof  and  supersedes  all prior
proposals, negotiations,  agreements and understandings relating to such subject
matter. In the event of any conflict or inconsistency between this Agreement and
the Custody Account Agreement,  the provisions of this Agreement shall supersede
such inconsistent or conflicting provision of the Custody Account Agreement.

     19.    Severability.

     If any provision of this Amendment  shall be held invalid or  unenforceable
in  whole  or in part in any  jurisdiction,  such  provision  shall,  as to such
jurisdiction,  be ineffective to the extent of such invalidity or enforceability
without in any manner affecting the validity or enforceability of such provision
in any other  jurisdiction or the remaining  provisions of this Amendment in any
other jurisdiction.

                                       8
<PAGE>

     20.    No Defenses, Off-Sets or Counterclaims.

     By executing this Amendment,  Borrower confirms and acknowledges that as of
the  date  of  execution   hereof,   Borrower  has  no  defenses,   off-sets  or
counterclaims against any of Borrower's  obligations to the Banks under the Loan
Documents,  including the Credit Agreement (as amended hereby).  Borrower hereby
acknowledges  and agrees  that the  actual  amounts  outstanding  on the date of
execution hereof are owing the Banks without defense, offset or counterclaim.

     21.    Incorporation by Reference.

     This Amendment is incorporated  by reference into the Credit  Agreement and
the other Loan Documents.  Except as otherwise provided herein, all of the other
provisions  of the  Credit  Agreement  and the other Loan  Documents  are hereby
confirmed  and ratified and shall remain in full force and effect as of the date
of this Amendment.

     22.    Governing Law.

     This  Amendment  is  governed  by the laws of the  State of New York and is
binding  upon the  Borrower,  the Agent and Issuing Bank and the Banks and their
respective successors and/or assigns and/or heirs and executors, as the case may
be.

     23.    Counterparts.

     This  Amendment may be executed by one or more of the parties in any number
of separate  counterparts,  and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Amendment to be
executed by their respective  officers  thereunto duly  authorized,  on the date
first above written.

                                            LECHTERS, INC.


                                        By: ____________________________________
                                            Name:
                                            Title:

                                            THE CHASE MANHATTAN BANK,
                                            as Agent, Issuing Bank and as a Bank


                                        By: ____________________________________
                                            Andrea Johnson
                                            Vice President
                                            FLEET BANK, NATIONAL ASSOCIATION
                                            as Bank


                                        By: ____________________________________
                                            Craig W. Trautwein
                                            Vice President
                                            FIRST  UNION  NATIONAL  BANK
                                            as Bank


                                        By: ____________________________________
                                            Donald D. Mishler
                                            Senior Vice President and Director

                                       9
<PAGE>


The undersigned, as guarantors, consent to the foregoing amendment:
  LECHTERS ALABAMA, INC.
  LECHTERS ARIZONA, INC.
  LECTHERS ARKANSAS, INC.
  LECHTERS CALIFORNIA, INC.
  LECHTERS COLORADO, INC.
  LECHTERS CONNECTICUT, INC.
  LECHTERS DELAWARE, INC.
  LECHTERS FLORIDA, INC.
  LECHTERS GEORGIA, INC.
  LECHTERS IDAHO, INC.
  LECHTERS ILLINOIS, INC.
  LECHTERS INDIANA, INC.
  LECHTERS IOWA, INC.
  LECHTERS KANSAS, INC.
  LECHTERS KENTUCKY, INC.
  LECHTERS LOUISIANA, INC.
  LECHTERS MAINE, INC.
  LECHTERS BALTIMORE, INC.
  LECHTERS HOLYOKE, INC.
  LECHTERS MICHIGAN, INC.
  LECHTERS MINNESOTA, INC.
  LECHTERS MISSISSIPPI, INC.
  LECHTERS MISSOURI, INC.
  LECHTERS NEBRASKA, INC.
  LECHTERS NEVADA, INC.
  LECHTERS NEW HAMPSHIRE, INC.
  LECHTERS NEW JERSEY, INC.
  LECHTERS NEW MEXICO, INC.
  LECHTERS NEW YORK, INC.
  LECHTERS N.Y.C., INC.
  LECHTERS NORTH CAROLINA, INC.
  LECHTERS OHIO, INC.
  LECHTERS OKLAHOMA, INC.
  LECHTERS OREGON, INC.
  LECHTERS PENNSYLVANIA, INC.
  LECHTERS RHODE ISLAND, INC.
  LECHTERS SOUTH CAROLINA, INC.
  LECHTERS TENNESSEE, INC.
  LECHTERS TEXAS, INC.
  LECHTERS UTAH, INC.
  LECHTERS VERMONT, INC.
  LECHTERS SPRINGFIELD, INC.
  LECHTERS WASHINGTON, INC.
  LECHTERS WEST VIRGINIA, INC.
  LECHTERS WISCONSIN, INC.
  COOKS CLUB, INC.
  REGENT GALLERY, INC.
  SIMPLE SOLUTIONS OF NJ, INC.
  HARRISON INVESTMENT, INC.

  By: _____________________________



                                       10
<PAGE>


                                    Exhibit A
                               to Second Amendment
                         and Waiver to Credit Agreement

                                  Schedule 1.02

                               NOTICE OF BORROWING

The Chase Manhattan Bank
East 36 Midland Avenue
Paramus, NJ 07657

Date: [insert]

Gentlemen:

Reference is made to the Credit Agreement, dated as of March 26, 1998 as amended
among  Lechters,  Inc., the Banks listed on the signature  pages thereof and The
Chase Manhattan Bank, as Agent (the "Credit Agreement").  The undersigned hereby
gives notice pursuant to Section 1.02 of the Credit  Agreement of its request to
have the following Loans made to it on [insert requested date of borrowing]:

                Type of Loan (1)                                          Amount

            ____                                                         ____

            ____                                                         ____

            ____                                                         ____

[Please  disburse the  proceeds of  the  Loans by  [insert  requested  method of
disbursement] .](2)

The undersigned  represents and warrants that (a) the borrowing requested hereby
complies with the requirements of Section 1.02 of the Credit Agreement, (b) each
Representation and Warranty is true and correct at and as of the date hereof and
will be true and correct at and as of the time the Loans are made,  in each case
both with and  without  giving  effect to the Loans and the  application  of the
proceeds  thereof,  (c) no Default has occurred and is continuing as of the date
hereof or would result from the making of the Loans or from the  application  of
the proceeds  thereof if the Loans were made on the date hereof,  and no Default
will have  occurred  and be  continuing  at the time the Loans are to be made or
would  result  from the  making  of the  Loans or from  the  application  of the
proceeds  thereof,  and (d) (i) the Margined Value of the  Collateral,  (ii) the
aggregate  Loan  Exposures,  and the (iii) the  aggregate  LC  Exposures  are as
follows:

                -------------------------------- -------------------------------
                Margined Value of Collateral:

(1)  Be sure to specify the duration  of the Interest  Period  in  the  case  of
Eurodollar Rate Loans (e.g., one-month Eurodollar Rate).

(2)  Include  and  complete   this   sentence if the  proceeds of the  requested
Loans are to be  disbursed in a manner other than by credit to an account of the
Borrower at the Agent's Office.


                -------------------------------- -------------------------------
                -------------------------------- -------------------------------
                Aggregate Loan Exposures:

                -------------------------------- -------------------------------
                -------------------------------- -------------------------------
                Aggregate LC Exposures:
                -------------------------------- -------------------------------


                                                   LECHTERS, INC.

                                                   By __________________________
                                                      Name:
                                                      Title:

                                       11

<PAGE>


                                  Exhibit 17(b)
                               to Second Amendment
                         and Waiver to Credit Agreement



                    COLLATERAL AND ACCOUNT CONTROL AGREEMENT

     This is a COLLATERAL AND ACCOUNT CONTROL  AGREEMENT,  dated as of September
14, 1999 between  Lechters,  Inc. (the  "Pledgor") with an address at 1 Cape May
Street,  Harrison,  New Jersey 07029,  The Chase Manhattan  Bank,  individually,
having an  address  at One Chase  Manhattan  Plaza,  New  York,  New York  10081
("Chase"),  and Chase, as agent under that certain Credit  Agreement dated March
26, 1998 (the "Credit Agreement")  between the Pledgor,  Chase and the financial
institutions  listed on the signature pages thereof (Chase or any successor,  in
its  capacity  as agent  under  such  agreement,  is  referred  to herein as the
"Agent"), with an address at East 36 Midland Avenue, Paramus, New Jersey 07652.

                              W I T N E S S E T H:

     WHEREAS,  the Pledgor has requested  that the Agent and the Banks which are
party to the Credit  Agreement  enter into a Second  Amendment and Waiver to the
Credit Agreement;

     WHEREAS, it is a condition to the effectiveness of the Second Amendment and
Waiver to the  Credit  Agreement  that the  Pledgor  execute  and  deliver  this
Collateral and Account Control Agreement; and

     WHEREAS,  the  Pledgor  has  established  Account  No.  8106980  with Chase
pursuant to a Custody  Account  Agreement  dated  September  3, 1999 between the
Pledgor and Chase (the "Custody Account Agreement");

     NOW, THEREFORE, in consideration of the premises, the Pledgor hereby agrees
with the Agent as follows:

     1      Defined Terms.

            a.  Unless otherwise  defined  herein,  terms  defined in the Credit
     Agreement and used herein shall have the meanings given to them therein.

            b.  The following terms shall have the following meanings:

     "Agreement": this Collateral and Account Control Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.

     "Collateral": the collective reference to: (i) the Collateral Account; (ii)
all cash,  instruments,  securities,  security  entitlements,  financial  assets
(including certificates of deposit) and funds deposited from time to time in the
Collateral Account; (iii) all investments of funds in the Collateral Account and
all  instruments  and  securities  evidencing  such  investments;  and  (iv) all
interest,  dividends,  cash,  instruments,  securities,  security  entitlements,
financial assets (including certificates of deposit) and other property received
in respect of, or as proceeds of, or in substitution or exchange for, any of the
foregoing.

<PAGE>

     "Collateral  Account":  Account  No.  8106980  established  with  Chase and
designated "Lechters, Inc. - Collateral Account".

     "Collateral  Account  Agreement":  that certain Custody  Account  Agreement
dated  September  3, 1999  between the  Pledgor and Chase  pursuant to which the
Collateral Account has been established, and any successor agreement thereto.

     "Code":  the  Uniform  Commercial  Code  from time to time in effect in the
State of New York.

     "Contractual  Obligation":  as to any Person, any provision of any security
issued by such Person or of any  agreement,  instrument or other  undertaking to
which such Person is a party or by which it or any of its property is bound.

     "Governmental  Authority":  any  nation or  government,  any state of other
political subdivision thereof and any entity exercising executive,  legislative,
judicial, regulatory or administrative functions of or pertaining to government.

     "Obligations":  the  obligations  and liabilities of the Pledgor to (i) the
Banks,  the Agent,  the Issuing Bank under the Credit  Agreement  including  the
Agent in such  capacities,  and (ii) the Agent under this Agreement  (including,
without limitation,  any interest payable in respect thereof, including interest
accruing after the filing of any petition in bankruptcy,  or the commencement of
any  insolvency,  reorganization  or like  proceeding,  relating to the Pledgor,
whether or not a claim for post-filing or  post-petition  interest is allowed in
such proceeding) whether direct or indirect,  absolute or contingent,  due or to
become due, or now existing or hereafter incurred.

     "Person": an individual,  partnership,  corporation,  business trust, joint
stock company, trust,  unincorporated association,  joint venture,  Governmental
Authority or other entity of whatever nature.

     "Requirement of Law": as to any Person,  the  Certificate of  Incorporation
and By-Laws or other  organizational or governing  documents of such Person, and
any law, treaty, rule or regulation or determination of an arbitrator or a court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its  property or to which such Person or any of its property is
subject.

            c.  The   words   "hereof,"  "herein"  and  "hereunder" and words of
     similar import when used in this Agreement shall refer to this Agreement as
     a whole and not to any  particular   provision   of   this  Agreement,  and
     section and paragraph references are  to  this  Agreement  unless otherwise
     specified.

                                       2
<PAGE>

            d.  The meanings given to terms defined  herein  shall  be   equally
     applicable to both the singular and plural forms of such terms.

     2.     Grant  of  Security  Interest; Collateral Assignment.  As collateral
security for the prompt and complete  payment and performance  when due (whether
at the stated maturity,  by acceleration or otherwise) of the  Obligations,  the
Pledgor  hereby grants to the Agent for the benefit of the Banks,  the Agent and
the Issuing  Bank,  a  collateral  assignment  of and  security  interest in the
Collateral.

     3.     Control; Maintenance of Collateral Account.

            a.  The Collateral Account shall be maintained until the Obligations
     have been paid and performed in full.

            b.  The Agent shall have such rights with respect to the  Collateral
     as are set forth in this Agreement,  and shall  hold  and   administer  the
     Collateral  subject  to  the terms and conditions of this Agreement.  Chase
     agrees with the Agent and the Pledgor that it will comply with  entitlement
     orders originated  by the Agent concerning  the Collateral Account  without
     further  consent of the Pledgor.   The   Pledgor  shall  have  no  right of
     withdrawal  from the  Collateral Account  nor any other right or power with
     respect   to   the   Collateral,   except  as  expressly  provided  herein.
     Subject to paragraphs   6  and  7,  Chase  shall make trades  of  financial
     assets held in the  Collateral Account at the direction  of  the   Pledgor,
     or  its  authorized  representative,  and  comply  with  entitlement orders
     concerning  the  Collateral  Account from  the  Pledgor,  or its authorized
     representative,  until such time as the Agent  delivers  a  written  notice
     to Chase that the Agent is  thereby exercising  exclusive  control over the
     Collateral Account.  Such   notice may be referred to herein as the "Notice
     of  Exclusive Control."   After  Chase  receives  the  Notice  of Exclusive
     Control,  it will immediately cease  complying  with  entitlement orders or
     other directions concerning the Account originated  by the  Pledgor or  its
     representatives,  until such time as the Agent withdraws such notice.

            c.  In the event the  Fair Market Value of  the Collateral  shall be
     less than  the Margined Value  of the Collateral  required under the Credit
     Agreement,  then  the  Pledgor  shall,  within one  business day  following
     notice  from  the  Agent,  provide  or  cause  additional  property  to  be
     transferred  to the  Collateral Accounts such that the Fair Market Value of
     the Collateral  shall be equal to or greater  than  the  Margined  Value of
     the   Collateral  required  under  the Credit Agreement.   If  any  of  the
     Collateral  is not  subject  to  determination  of a verifiable Fair Market
     Value, then such Collateral  shall have at all times a value as  reasonably
     determined  by the  Agent.  If the aggregate  of the Loan Exposure  and the
     LC  Exposure  of  all  the  Banks  is  reduced  at  any  time  to less than
     $15,000,000,  the Agent shall  release upon the request of the Pledgor  the
     amount of Collateral in excess of a Margined Value of $15,000,000.


     4.     Representations and  Warranties. The Pledgor represents and warrants
to the Agent and Chase that:

            a.  The  Pledgor has the corporate power and authority and the legal
     right  to  execute  and  deliver,  to perform its obligations under, and to
     grant the security interest in the Collateral  pursuant to,  this Agreement
     and  has  taken   all   necessary   corporate   action   to  authorize  its
     execution, delivery and performance of, and grant of the security  interest
     in the Collateral pursuant to, this Agreement.

            b.  This Agreement constitutes a legal, valid and binding obligation
     of the Pledgor  enforceable  in  accordance  with its terms and creates  in
     favor of the Agent  a  perfected,   first  priority  security  interest  in
     the  Collateral, enforceable in accordance with its terms.

            c.  The execution, delivery and performance of this Agreement by the
     Pledgor will  not  violate  any  provision  of any  Requirement  of  Law or
     Contractual Obligation  of the Pledgor and will not result in the  creation
     or  imposition of any Lien on any  of  the  properties  or revenues  of the
     Pledgor  pursuant to any  Requirement  of  Law  or  Contractual  Obligation
     of  the  Pledgor,  except  as contemplated hereby.

            d . No  consent  or  authorization  of,  filing  with,  or other act
     by  or  in  respect  of,  any  arbitrator  or Governmental Authority and no
     consent  of   any   other   Person   (including,  without  limitation,  any
     stockholder  or  creditor of the Pledgor), is  required  in connection with
     the execution,  delivery or performance of this  Agreement  by the Pledgor,
     or the  validity or  enforceability  of this Agreement against the Pledgor.

            e.  No litigation,  investigation  or proceeding  of  or  before any
     arbitrator or  Governmental  Authority  is pending   or,  to the  knowledge
     of the  Pledgor, threatened  by or  against   the  Pledgor  or against  any
     of its  properties or revenues with respect to this Agreement or any of the
     transactions  contemplated hereby.

     5.     Covenants. The Pledgor covenants and agrees with the Agent that:

            a.  The Pledgor will not (1) sell,  assign,  transfer,  exchange, or
     otherwise dispose of, or grant  any option with respect to, the Collateral,
     or (2) create, incur or  permit  to exist  any Lien or  option in favor of,
     or any claim of any Person with  respect to, any of the Collateral,  or any
     interest  therein,  except  for  the  security  interest  created  by  this
     Agreement and the security  interest created  in  favor  of Chase  pursuant
     to  Section  12 of the  Custody  Account Agreement.

            b.  The   Pledgor   will  maintain  the  security  interest  created
     by this Agreement as  a  first priority,  perfected  security interest  and
     will  defend  the  right,  title  and  interest  of the Agent in and to the
     Collateral against the claims and demands of all Persons whomsoever. At any
     time and from time to time, upon the written  request of the Agent,  and at
     the sole expense of the Pledgor, the Pledgor will promptly and duly execute
     and deliver such further  instruments and  documents  and take such further
     actions as the Agent  reasonably may request for the purposes  of obtaining
     or preserving  the full  benefits  of  this Agreement and of the rights and
     powers  herein  granted,   including,   without  limitation,  of  financing
     statements under the Code.

                                       3
<PAGE>

     6.     Management of Collateral; Fees.

            a.  Upon the occurrence and during the continuation  of any Event of
     Default,  (i)  the  Agent  shall  have  the  right  to  deliver a Notice of
     Exclusive  Control to Chase, with the effect set forth in  paragraph  3.b.,
     and  (ii)  until  the  Agent  withdraws  such  Notice of Exclusive Control,
     Pledgor  shall  have  no  authority  to, directly  or  indirectly,  provide
     investment  direction  with  respect  to the Collateral.

            b.  Chase   hereby   subordinates  any  lien  with  respect  to  the
     Collateral which it may  have  as securities intermediary or bank by law or
     pursuant to the Custody Account Agreement to the security  interest granted
     in this  Agreement to the Agent for the benefit of the Agent and the Banks.

            c.  The Agent  shall have no  responsibility  to the Pledgor for any
     loss or liability  arising in respect of any  investments of the Collateral
     (including, without  limitation,  as a  result  of the  liquidation  of any
     thereof before maturity), except to the extent that such loss or  liability
     arises  from the Agent's gross negligence or willful misconduct.

            d.  The  Pledgor  will pay or  reimburse  the Agent  for any and all
     costs,  expenses  and  liabilities of the Agent incurred in connection with
     this   Agreement  (including   enforcement  hereof),  the  maintenance  and
     operation  of  the Collateral Account and the investment of the Collateral,
     including,  without  limitation,  any  investment,  brokerage  or placement
     commissions   and   fees   incurred   by  the  Agent in connection with the
     investment  or  reinvestment of  Collateral, and any investment charges  or
     other fees of the Agent in  connection with  maintenance  of the Collateral
     Account.

     7.     Remedies.

            a.  Upon  the  occurrence  of an Event of  Default,  and while  such
     Event of Default  continues:   Agent  may,  without  notice  of  any  kind,
     except for notices required by law which  may  not be waived, deal with any
     and all of the Collateral as it deems  fit,  and/or  may  liquidate  all or
     a portion  of the  Collateral, applying the proceeds in any manner it deems
     appropriate. Such rights include, but are not limited to, the right, at the
     Agent's option, to:(i) deduct all costs and expenses of every kind incurred
     in respect  thereof or  incidental to the care or  safekeeping  of  any  of
     the  Collateral  or  in any way relating to the Collateral or the rights of
     the Agent hereunder,(including,  without limitation, reasonable  attorneys'
     fees and disbursements of counsel to the Agent), (ii) apply such Collateral
     or the proceeds thereof to the payment of such Obligations in such order as
     the Agent in its sole  discretion  may elect,  (iii) notify any third party
     to terminate  immediately any trading,  other rights or  entitlements  with
     respect to the Collateral and any distributions  from the Collateral;  (iv)
     transfer  into Agent's  name or the name of its nominee, all or any part of
     the Collateral or proceeds thereof; (v) receive all  interest,   dividends,
     and other proceeds of the Collateral;  (vi) notify any person  obligated on
     any Collateral of the  security   interest  of Agent  therein  and  require
     such person to make payment  directly  to Agent;   (vii)  demand,  sue for,
     collect or  receive  the Collateral and any proceeds thereof,  and/or  make
     any settlement or compromise as Agent deems  desirable  with respect to any
     Collateral;   and  (viii) exercise any voting,  conversion,   registration,
     purchase or other rights of an owner, holder or entitlement  holder  of the
     Collateral.  Pledgor  agrees  that Agent may exercise its rights under this
     Agreement  without  regard for the actual or potential tax consequences  to
     Pledgor  under federal or state law and without  regard to any instructions
     or directives given Agent by Pledgor.

                                        4

<PAGE>

            b.  Pledgor acknowledges  that some of the Collateral may be subject
     to rapid decline in value and is  customarily  sold in recognized  markets,
     and upon the occurrence of an Event of Default,   Agent may dispose of such
     Collateral in its recognized market without providing notice of sale.

            c.  Upon the occurrence of an Event of Default, at Agent's  request,
     Pledgor will, at its own expense do or cause to be done all other acts  and
     things  as  may  be  necessary  to  make  the sale of the Collateral valid,
     binding and in compliance with applicable law.

            d.  Any  Collateral  remaining  after  application of  Collateral by
     Agent in accordance  with the  provisions  hereof shall continue to be held
     as Collateral pursuant to this Agreement for such of the Obligations as are
     not then due and payable.   Only after the termination or expiration of all
     Letters of Credit, the payment  in  full of all  Obligations  and after the
     payment by the Agent of any other amount  required by any provision of law,
     inducing,  without  limitation, Section 9-504(1)(c) of the Code,  must  the
     Agent account for the surplus, if any, to  the Pledgor.  In addition to the
     rights,  powers and  remedies granted to it under this Agreement and in any
     other agreement securing, evidencing or relating to the  Obligations,   the
     Agent shall  have all the rights,  powers and  remedies available  at  law,
     including, without  limitation,  the rights and remedies of a secured party
     under the Code.   To  the  extent  permitted  by  law,  the  Pledgor waives
     presentment, demand, protest  and  all  notices of any kind and all claims,
     damages and demands it  may  acquire  against  the Agent arising out of the
     exercise by them of any rights hereunder.

            e.  The Pledgor  shall  remain   liable  for any  deficiency  if the
     proceeds  of  any  sale  or  other  disposition  of   the  Collateral   are
     insufficient to pay the Obligations and any costs  and  expenses  of  Agent
     in  connection  therewith (including,   without  limitation,  any  fees and
     disbursements   of  any  attorneys  employed  by  the Agent to collect such
     deficiency).

     8.     Agent's Appointment as Attorney-in Fact.

            a.  The Pledgor  hereby  irrevocably  constitutes  and  appoints the
     Agent   and   any   officer   or   agent  of  the Agent, with full power of
     substitution,   as   its   true   and   lawful  attorney-in-fact  with full
     irrevocable  power and authority in the place and stead of the  Pledgor and
     in the name of the Pledgor or in the Agent's own name,  from  time  to time
     in the Agent's  discretion,  for the  purpose  of carrying out the terms of
     this Agreement,  to  take any and all appropriate action and to execute any
     and all documents and  instruments  which may be necessary  or desirable to
     accomplish the purposes of this Agreement,  including,  without limitation,
     any financing statements, endorsements,  assignments  or  other instruments
     of transfer.

            b.  The  Pledgor  hereby   ratifies   all  that said attorneys shall
     lawfully do or cause to be done  pursuant to the power of attorney  granted
     in  paragraph 8(a).   All powers,  authorizations and agencies contained in
     this Agreement are coupled with an interest and are irrevocable  until this
     Agreement  is  terminated  and   the  security interests created hereby are
     released.

     9.     Duty of Agent.  The Agent's sole duty with respect  to the  custody,
safekeeping and physical preservation of the Collateral in its possession, under
Section  9-207 of the Code or  otherwise,  shall be to comply with the  specific
duties and  responsibilities set forth herein. The powers conferred on the Agent
in this Agreement are solely for the protection of the Agent's  interests in the
Collateral  and shall not  impose any duty upon the Agent to  exercise  any such
powers.  Neither  the Agent nor any of its  directors,  officers,  employees  or
agents shall be liable for any action  lawfully  taken or omitted to be taken by
any of them under or in connection with the Collateral or this Agreement, except
for its or their gross negligence or willful misconduct.

                                       5
<PAGE>

     10.    Execution of Financing  Statements. Pursuant to Section 9-402 of the
Code, the Pledgor authorizes the Agent to file financing statements with respect
to the Collateral  without the signature of the Pledgor in such form and in such
filing  offices as the Agent  reasonably  determines  appropriate to perfect the
security interests of the Agent under this Agreement. A carbon,  photographic or
other  reproduction  of  this  Agreement  shall  be  sufficient  as a  financing
statement for filing in any jurisdiction.

     11.    Notices.   All  notices,  requests and  demands to or upon the Agent
or the Pledgor  to  be  effective  shall be in writing (including fax or similar
electronic  transfer)  and  shall  be deemed to have been duly given or made (a)
when delivered  by hand or (b) if given by mail,  when deposited in the mails by
certified mail, return receipt requested, or (c) if by fax or similar electronic
transfer, when sent and receipt has been confirmed, to the Pledgor or the Agent,
as the case may be, at its address or transmission  number for notices set forth
under its signature  below.   The   Pledgor   and  the  Agent  may change  their
addresses  and  transmission   numbers   for   notices  by notice in the  manner
provided  in this paragraph.

     12.    Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.

     13.    Integration; Interpretation. This Agreement represents the agreement
of  the  Pledgor  with  respect  to  the subject  matter hereof and there are no
promises or  representations  by  the  Agent   relative  to the  subject  matter
hereof not reflected  herein. If any  provision  of this Collateral  and Account
Control Agreement  shall  conflict with, or be inconsistent  with, any provision
of the Custody  Account  Agreement,   then such provision of this Collateral and
Account Control  Agreement  shall  supersede  such  inconsistent  or conflicting
provision of the Custody Account Agreement.

     14.    Amendments in Writing; No Waiver; Cumulative Remedies.

            a.  None  of  the  terms  or  provisions  of this  Agreement  may be
     waived, amended,  supplemented  or  otherwise modified  except by a written
     instrument executed by the Pledgor, the Agent and Chase.

            b.  The Agent  shall not  by any act (except by a written instrument
     pursuant  to  paragraph  14(a)  hereof),  delay,  indulgence,  omission  or
     otherwise be deemed to have waived any right or remedy hereunder or to have
     acquiesced  in  any  breach  of any of the terms and conditions hereof.  No
     failure to exercise, nor any delay in exercising, on the part of the Agent,
     any right, power or privilege hereunder shall operate  as a waiver thereof.
     No single or partial  exercise of any right, power or  privilege  hereunder
     shall  preclude  any other or  further  exercise thereof or the exercise of
     any other right, power or privilege.  A waiver by the Agent  of  any  right
     or  remedy  hereunder  on any one  occasion  shall  not be construed  as  a
     bar to any right or remedy which the Agent would  otherwise   have  on  any
     future occasion.

            c.  The rights and remedies herein provided are cumulative,  may  be
     exercised  singly or  concurrently  and  are  not  exclusive  of any  other
     rights or remedies provided by law.

     15.    Section Headings.  The  section headings  used in this Agreement are
for convenience of reference only and are not to affect the  construction hereof
or be taken into consideration in the interpretation hereof.

     16.    Successors and Assigns.  This  Agreement  shall be binding  upon the
successors  and assigns of the  Pledgor,  the Agent and Chase and shall inure to
the benefit of their respective successors and assigns.

     17.  Governing Law. This Agreement  shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York.

     IN WITNESS  WHEREOF,  the  Pledgor,  Chase and the Agent have  caused  this
Collateral and Account Control Agreement to be duly executed and delivered as of
the date first above written.

                            Lechters, Inc.

                            By:____________________
                               Name:
                               Title:
                               Fax:

                            The Chase Manhattan Bank, as agent

                            By:_____________________
                               Andrea Johnson
                               Vice President
                               Fax: 201-599-6755

                            The Chase Manhattan Bank


                            By:______________________
                                 Robert Lockwood
                                 Vice President
                                Fax: 212-552-6400



                                       6