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                                 LECHTERS, INC.
                          1998 LONG-TERM INCENTIVE PLAN


Article 1.  Establishment, Purpose and Duration

     1.1  Establishment of the Plan.  Lechters,  Inc., a New
Jersey  corporation (hereinafter  referred to as the  "Company"),  
hereby  establishes an incentive compensation  plan to be known as 
the "Lechters,  Inc. 1998 Long-Term  Incentive Plan" (hereinafter  
referred to as the "Plan"),  as set forth in this document.
The Plan permits the grant of Nonqualified Stock Options (NQSO),
Incentive Stock Options (ISO), Stock  Appreciation  Rights (SAR),  
Restricted Stock,  Restricted Stock Units, Performance Units, 
Performance Shares and other awards.

     The Plan shall become  effective when approved by the
shareholders  at the Annual  Meeting on June 18, 1998 (the "Effective  
Date"),  and shall  remain in effect as provided in Section 1.3 herein. 

     1.2 Purpose of the Plan.  The purpose of the Plan is to promote  
the  success  and enhance the value of the Company by linking the 
personal interests of Participants to those of Company shareholders 
and customers.

     The Plan is further  intended to provide  flexibility to the
Company in its ability to motivate,  attract and retain the services of
Participants upon whose judgment,  interest and special effort the 
successful conduct of its operations is largely dependent.

     1.3 Duration of the Plan. The Plan shall commence on the
Effective Date, as described  in Section 1.1  herein, and shall remain 
in effect, subject to the right of the Board of Directors to terminate  
the Plan at any time  pursuant to Article 15 herein,  until all Shares  
subject to it shall have been purchased or acquired according to the 
Plan's provisions.

Article 2. Definitions

     Whenever used in the Plan, the following  terms shall have
the meanings set forth below and, when such meaning is intended, 
the initial letter of the word is capitalized:

     2.1 "Award" means, individually or collectively,  a grant
under the Plan of NQSOs, ISOs, SARs, Restricted Stock, Restricted 
Stock Units, Performance Units, Performance  Shares or any other 
type of award permitted under Article 10 of the Plan.


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     2.2 "Award  Agreement" means an agreement  entered into by
each Participant and the Company,  setting forth the terms and 
provisions applicable to an Award granted to a Participant under 
the Plan.

     2.3 "Base  Value" of an SAR shall have the meaning set forth
in Section 7.1 herein.

     2.4 "Board" or "Board of  Directors"  means the Board of
Directors  of the Company.

     2.5 "Change in Control" means the earliest of the following
to occur: (a) the acquisition  by any Person of beneficial ownership  
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) 
of 20% or more of the combined voting power of the then outstanding  
securities of the Company entitled to vote generally in the election  
of  directors ("Outstanding Company Voting Securities");  provided,  
however, that the following acquisitions  shall not constitute a Change 
of Control: (i) any acquisition directly from the Company, (ii) any  
acquisition  by the  Company  or any  subsidiary  thereof, (iii) any
acquisition  by any  employee  benefit  plan (or related  trust)
sponsored  or maintained by the Company or any  corporation controlled 
by the Company or (iv) any  acquisition  by any  corporation pursuant to
a  transaction described  in clauses (i), (ii) and (iii) of paragraph (c)
below; or (b) individuals who, as of January 1, 1998, constitute the Board 
(the "Incumbent  Board") cease for any reason to  constitute at least a 
majority of the Board;  provided, however that any individual becoming a 
director subsequent to January 1, 1998, whose election or nomination for 
election by the Company's  shareholders was approved by a vote of at least
a majority of the directors  then  comprising  the Incumbent  Board shall 
be considered as though such  individual  were a member of the Incumbent 
Board; or (c) the effective date of a reorganization, merger or 
consolidation of the Company (a "Business  Combination"),  in each case,  
unless, following such Business  Combination,  (i) all or  substantially  
all of the individuals and entities  who were the  beneficial  owners of  
the  Outstanding Company  Voting Securities  immediately  prior to such  
Business  Combination beneficially  own, directly or indirectly, more than 
80% of the combined  voting power of the then outstanding  securities  
entitled to vote generally in the election of directors of the corporation  
resulting from such Business Combination (including,  without limitation, 
a corporation which as a result of such transaction owns the Company 
through one or more  subsidiaries) in substantially the same proportion 
as their ownership,  immediately prior to such Business  Combination, of
the Outstanding Company Voting  Securities, (ii) no Person (excluding any
employee benefit plan (or  related  trust) of the  Company  or such  
corporation resulting  from such Business Combination) beneficially 
owns, directly or indirectly, 20% or more of the combined  voting power 
of the then  outstanding  voting securities  of such corporation  except 
to the  extent  that  such  ownership  existed prior to the Business 
Combination  and (iii) at least a majority of the members of the board of 
directors of the corporation  resulting from such Business Combination  
were members  of the  Incumbent  Board at the time of the  execution
of the  initial agreement,  or  of  the  action  of  the  Board,  
providing  for such  Business Combination;  or (d)  the  effective  date  
of  (i) a  complete liquidation  or dissolution  of the  Company  or 
(ii) the sale or  other disposition  of all or substantially  all of the 
assets of the  Company,  other than to a corporation, with respect to 
which following such sale or other disposition (A)80% of the

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combined  voting power of the then  outstanding  securities of such  
corporation entitled to vote  generally in the  election of  directors 
is then beneficially owned,  directly or indirectly, by all or substantially  
all of the individuals and entities who were the beneficial  owners,  
respectively,  of the Outstanding Company Voting Securities  immediately 
prior to such sale or other disposition, in substantially  the same 
proportion as their ownership, immediately  prior to such sale or other  
disposition,  of the Outstanding  Company Voting Securities, (B) less 
than 20% of the combined  voting power of the then outstanding  voting 
securities  of such  corporation  entitled to vote  generally in the 
election of directors is then  beneficially  owned,  directly or  
indirectly, by any Person (excluding  any employee  benefit plan (or 
related trust) of the Company or such corporation),  except to the extent  
that such  Person  owned 20% or more of the Outstanding  Company Voting   
Securities prior to the sale or disposition and (C) at least a majority 
of the members of the board of directors of such corporation were members 
of the Incumbent  Board at the time of the execution of the initial 
agreement,  or of the  action  of the  Board,  providing  for such
sale or other disposition of assets of the Company or were elected,  
appointed or nominated by the Board.

     2.6 "Code" means the Internal Revenue Code of 1986, as amended from 
time to time.

     2.7 "Committee"  means the committee,  as specified in Article 3, 
appointed by the Board to administer the Plan with respect to Awards.

     2.8  "Company"  means  Lechters,  Inc.,  a New Jersey
corporation,  or any successor thereto as provided in Article 17 herein.

     2.9  "Director"  means  any  individual  who is a  member  of
the  Board of Directors of the Company.

     2.10  "Dividend  Equivalent"  means,  with respect to Shares
subject to an Award,  a right to be paid an amount  equal to  dividends
declared  on an equal number of outstanding Shares.

     2.11 "Eligible Person" means a Person who is eligible to
participate in the Plan, as set forth in Section 5.1 herein.

     2.12  "Employee"  means  any  full-time  or  regularly-scheduled  
part-time employee of the Company or of the Company's Subsidiaries,  who
is not covered by any  collective  bargaining  agreement  to  which  the  
Company or  any  of its Subsidiaries is a party.  For purposes of the Plan,  
transfer of employment of a Participant  between  the Company  and any one 
of its Subsidiaries  (or between Subsidiaries) shall not be deemed a 
termination of employment.

     2.13 "Exchange  Act" means the Securities  Exchange Act of
1934, as amended from time to time, or any successor act thereto.


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     2.14  "Exercise  Period"  means the period during which an
SAR or Option is exercisable, as set forth in the related Award Agreement.

     2.15 "Fair  Market  Value" of the  Company's  common stock on
a Trading Day shall mean the last  reported  sale  price for common  stock 
or, in case no such reported  sale takes place on such  Trading  Day, the  
average of the closing bid and asked  prices for the common  stock for such  
Trading Day, in either case on the principal national  securities  exchange 
on which the common stock is listed or  admitted  to  trading,  or if the 
common  stock is not listed or admitted to trading   on  any   national   
securities   exchange,   but is traded  in  the over-the-counter  market,  
the closing  sale price of the common stock or, if no sale is publicly  
reported,  the average of the closing bid and asked quotations for the 
common  stock,  as reported by the National  Association of  Securities 
Dealers  Automated  Quotation System  ("NASDAQ") or any comparable
system or, if the common  stock is not listed on NASDAQ or a  comparable
system,  the closing sale price of the common stock or, if no sale is 
publicly reported,  the average of the closing bid and asked prices, as 
furnished by two members of the National Association of Securities Dealers,
Inc. who make a market in the common stock selected  from time to time by 
the Company for that  purpose.  In addition,  for purposes of this definition, 
a "Trading Day" shall mean, if the common stock is listed on any  national  
securities  exchange,  a business day during which such exchange  was open 
for  trading  and at least  one  trade of common  stock  was effected on 
such  exchange on such  business day, or, if the common stock is not listed 
on any national securities exchange but is traded in the over-the-counter 
market,  a business  day during which the  over-the-counter market was open 
for trading and at least one "eligible dealer" quoted both a bid and
asked price for the  common  stock.  An  "eligible   dealer"  for  any  
day  shall include  any broker-dealer  who quoted both a bid and asked 
price for such day, but shall not include any  broker-dealer who quoted 
only a bid or only an asked price for such day. In the event the Company's  
common stock is not publicly traded,  the Fair Market Value of such common 
stock shall be  determined  by the Committee in good faith. 

     2.16 "Freestanding  SAR" means an SAR that is granted independently of 
any Option.

     2.17 "Incentive  Stock Option" or "ISO" means an option to purchase 
Shares, granted under Article 6 herein, which is designated as an Incentive 
Stock Option and satisfies the requirements of Section 422 of the Code.

     2.18  "Nonqualified  Stock  Option" or "NQSO"  means an option to  
purchase Shares, granted under Article 6 herein, which is not intended to 
be an Incentive Stock Option under Section 422 of the Code.

     2.19  "Option"  means an  Incentive  Stock Option or a Nonqualified 
Stock Option.
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     2.20  "Option  Exercise  Price"  means  the  price at which a
Share  may be purchased by a Participant pursuant to an Option, as 
determined by the Committee and set forth in the Option Award Agreement.

     2.21  "Participant"  means an Eligible  Person who has
outstanding an Award granted under the Plan.

     2.22  "Performance  Period" means the time period during
which  Performance Unit/Performance Shares performance goals much be met

     2.23 "Performance Share" means an Award described in Article
9 herein.


     2.24 "Performance Unit" means an Award described in Article 9
herein.


     2.25 "Period of Restriction"  means the period during which
the transfer of Restricted Stock is limited in some way, as provided 
in Article 8 herein.

     2.26  "Person"  shall  have the  meaning  ascribed  to such
term in Section 3(a)(9)  of the  Exchange  Act,  as used in  Sections  
13(d) and 14(d)  thereof, including usage in the definition of a "group" 
in Section 13(d) thereof.

     2.27 "Plan" means the Lechters, Inc. 1998 Long-Term Incentive Plan.

     2.28 "Restricted Stock" means an Award described in Article 8 herein.

     2.29 "Restricted Stock Unit" means an Award described in Article 8 
herein.

     2.30  "Shares"  means the  shares of common  stock,  no par value,  
of the Company.

     2.31 "Stock Appreciation Right" or "SAR" means a right, granted alone 
or in connection with a related Option,  designated as an SAR, to
receive a payment on the day the right is exercised,  pursuant to the terms 
of Article 7 herein. Each SAR shall be denominated in terms of one Share.

     2.32 "Subsidiary" means any corporation that is a "subsidiary
corporation" of the Company as that term is defined in Section 424(f) of the
Code.

     2.33 "Tandem SAR" means an SAR that is granted in connection
with a related Option,  the exercise of which shall require forfeiture of 
the right to purchase a Share  under  the  related  Option  (and when a 
Share is purchased  under the Option, the Tandem SAR shall be similarly 
canceled).

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Article 3.  Administration

     3.1 The  Committee.  The Plan shall be  administered  by a committee  
(the "Committee")  consisting solely of two or more members of the Board. 
The members of the Committee shall be appointed from time to time by, and
shall serve at the discretion of, the Board of Directors.
 
     3.2 Authority of the Committee.  The Committee shall have full power 
except as limited by law, the Articles of Incorporation  and the Bylaws
of the Company, subject to such other restricting limitations or directions 
as may be imposed by the Board and  subject to the  provisions  herein,  
to  determine the  Eligible Persons  to  receive  Awards;  to  determine  
the size and types of  Awards;  to determine the terms and conditions of 
such Awards; to construe and interpret the Plan and any agreement or 
instrument  entered into under the Plan; to establish, amend or waive 
rules and regulations for the Plan's administration; and (subject to the 
provisions of Article 15 herein) to amend the terms and conditions of any 
outstanding Award.  Further,  the Committee shall make all other 
determinations which may be necessary  or  advisable  for the  
administration of the Plan.  As permitted by law, the  Committee  may 
delegate  its  authorities as  identified hereunder.

     3.3  Restrictions  on  Distribution  of Shares  and Share 
Transferability.  Notwithstanding  any other  provision  of the Plan,  
the  Company shall have no liability to deliver any Shares or benefits   
under the Plan unless such delivery would  comply with all  applicable  
laws  (including,  without limitation,  the Securities Act of 1933) and 
applicable  requirements of any securities  exchange or  similar  entity  
and  unless the  Participant's  tax obligations  have been satisfied as 
set forth in Article 16. The Committee may impose such restrictions on 
any  Shares  acquired  pursuant  to  Awards  under  the  Plan as it may  
deem advisable, including, without limitation, restrictions to comply
with applicable Federal  securities  laws, with the requirements of 
any stock exchange or market upon which such  Shares are then listed  
and/or  traded and with any blue sky or state securities laws applicable 
to such Shares.

     3.4  Decisions  Binding.  All  determinations  and  decisions
made  by the Committee  pursuant  to the  provisions  of the Plan and all
related  orders or resolutions of the Board shall be final,  conclusive and 
binding on all persons, including  the  Company, its  shareholders, 
Eligible Persons, Employees, Participants and their estates and beneficiaries.

     3.5 Costs. The Company shall pay all costs of administration
of the Plan.

Article 4. Shares Subject to the Plan

     4.1 Number of Shares.  Subject to Section 4.2 herein, the
maximum number of Shares  available  for grant  under the Plan shall 
be one  million (1,000,000). Shares  underlying  lapsed or forfeited  
Awards,  or Awards that are not paid in Shares, may be reused for other 
Awards; if the Option Exercise Price is

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satisfied  by  tendering  Shares,  only the  number of Shares issued net 
of the Shares  tendered  shall be deemed issued under the Plan.  The
maximum  number of shares that may be issued for Options shall be one 
million (1,000,000)  Shares. Shares granted pursuant to the Plan may be 
(i) authorized but unissued Shares of Common Stock, (ii) Treasury Shares 
or (iii) Shares purchased on the open market.

     4.2  Adjustments  in  Authorized  Shares  and  Awards.  In the event 
of any merger,  reorganization,  consolidation,  recapitalization, 
liquidation,  stock dividend, split-up, spin-off, share combination,  
share exchange or other change in the  corporate  structure of the Company  
affecting the Awards of the Shares, such adjustment shall be made in the 
outstanding Awards, the number and class of Shares  which may be delivered  
under the Plan,  and in the number and class of and/or price of Shares 
subject to outstanding  Awards granted under the Plan, as may be determined 
to be appropriate and equitable by the Committee,  in its sole discretion,  
to prevent dilution or enlargement of rights.  Notwithstanding  the 
foregoing,  (i) each such  adjustment  with respect to an Incentive Stock 
Option shall  comply with the rules of Section  424(a) of the Code and 
(ii) in no event shall any  adjustment  be made which would  render any  
Incentive Stock  Option granted  hereunder  to be other than an  incentive  
stock option for purposes of Section 422 of the Code.


Article 5.  Eligibility and Participation

     5.1  Eligibility.  Persons  eligible to participate in the Plan  
("Eligible Persons")  include all officers,  key employees and directors of 
the Company and its  Subsidiaries,  consultants and advisors to the Company 
and its Subsidiaries and other persons or entities providing goods or 
services to the Company and its Subsidiaries, in each case as determined by 
the Committee.

     5.2  Actual  Participation.  Subject  to the  provisions  of the Plan,  
the Committee may, from time to time, select from all Eligible Persons those 
to whom Awards shall be granted.

Article 6. Stock Options

     6.1 Grant of  Options.  Subject  to the terms and  conditions of the 
Plan, Options may be granted to an Eligible  Person at any time and from 
time to time, as shall be determined by the Committee.

     The Committee  shall have complete  discretion in determining the 
number of Shares subject to Options  granted to each Eligible Person 
(subject to Article 4 herein) and,  consistent  with the  provisions of
the Plan, in determining  the terms and conditions  pertaining to such 
Options.  The Committee may grant ISOs, NQSOs or a combination thereof.

     6.2 Option  Award  Agreement.  Each Option  grant shall be evidenced 
by an Option Award Agreement that shall specify the Option Exercise
Price, the term of 
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<PAGE>  8

the  Option,  the number of Shares to which the Option  pertains,
the  Exercise Period and such other provisions as the Committee 
shall determine,including but not limited to any rights to Dividend 
Equivalents.  The Option Award  Agreement shall also specify whether 
the Option is intended to be an ISO or a NQSO.

     The Option Exercise Price for each Share  purchasable under
any ISO granted hereunder  shall be such amount as the Committee  shall,  
in its best  judgment, determine  to be not less than one  hundred  percent  
(100%) of the Fair  Market Value per Share at the date the Option is 
granted; and provided, further,  that in the case of an ISO  granted to a 
person who, at the time such ISO is granted, owns shares of stock of the 
Company or of any Subsidiary which possess more than ten percent (10%) of 
the total combined voting power of all classes of shares of stock of the 
Company or of any  Subsidiary,  the Option  Exercise Price for each Share  
shall  be such  amount  as the  Committee,  in its best judgment,  shall 
determine to be not less than one hundred ten percent  (110%) of
the Fair Market Value per Share at the date the Option is  granted.  
The Option Exercise  Price will be subject to adjustment in accordance 
with the  provisions of Section 4.2 of the Plan.

     No ISO by its terms shall be  exercisable  after the expiration of 
ten (10) years from the date of grant of the Option; provided, however,
in the case of an ISO granted to a person who, at the time such Option is 
granted, owns shares of stock of the Company or of any Subsidiary possessing
more than ten percent (10%) of the total  combined  voting  power of all 
classes  of shares of stock of the Company or of any  Subsidiary,  such 
Option shall not be exercisable  after the expiration of five (5) years 
from the date such Option is granted.

     No ISO may be granted after the  expiration of ten (10) years from the 
date the Plan is adopted, or the date the Plan is approved by the 
shareholders of the Company, whichever is earlier

     6.3 Exercise of and Payment for  Options.  Options  granted under the 
Plan shall be exercisable at such times and shall be subject to such 
restrictions and conditions as the Committee shall in each instance approve.

     A  Participant  may  exercise  an Option at any time  during the  
Exercise Period.  Options  shall be  exercised  by the  delivery  of a 
written  notice of exercise to the  Company,  setting  forth the number 
of Shares with  respect to which the Option is to be exercised, accompanied  
by provision for full payment for the Shares.

     The Option Exercise Price shall be payable:  (a) in cash or its 
equivalent, (b) by tendering  previously  acquired  Shares  having an 
aggregate  Fair Market Value at the time of exercise equal to the total 
Option Exercise Price (provided that the Shares which are tendered must 
have been held by the Participant for at least six (6)  months  prior to 
their  tender to  satisfy  the Option  Exercise Price), (c) by 
broker-assisted cashless exercise or (d) by a combination of (a), (b) 
and/or (c).
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     As soon as practicable after receipt of a written notification of 
exercise of an Option and provision for full payment  therefor,  there 
shall be delivered to  the  Participant,  in  the  Participant's  name,  
Share certificates  in an appropriate  amount  based  upon  the  number  
of  Shares purchased  under  the Option(s).

     6.4 Termination.  Each Option Award Agreement shall set forth the 
extent to which the  Participant  shall have the right to  exercise  the 
Option  following termination of the  Participant's  employment with,  
service on the Board of, or other relationship with the Company and its 
Subsidiaries.  Such provisions shall be  determined in the sole  discretion  
of the Committee  (subject to applicable law),  shall be  included  in the  
Option  Award  Agreement entered  into  with Participants, need not be 
uniform among all Options granted pursuant to the Plan or among  
Participants  and may  reflect  distinctions  based on the reasons for
termination.

     6.5  Transferability  of Options.  Except as  otherwise determined  
by the Committee,  all  Options  granted  to a  Participant  under  the 
Plan  shall be exercisable  during his or her lifetime only by such  
Participant and no Option granted under the Plan may be sold, transferred, 
pledged, assigned, or otherwise alienated  or  hypothecated,  other than 
by will or by the laws of descent  and distribution. ISOs are not 
transferable.


Article 7. Stock Appreciation Rights

     7.1 Grant of SARs.  Subject to the terms and conditions of the Plan, 
an SAR may be granted to an Eligible  Person at any time and from time to
time as shall be determined by the  Committee.  The  Committee  may grant 
Freestanding  SARs, Tandem SARs or any combination of these forms of SARs.

     The Committee  shall have complete  discretion in determining the 
number of SARs  granted  to each  Eligible  Person  (subject  to 
Article 4 herein)  and, consistent  with the  provisions  of the  Plan,  
in  determining the  terms and conditions pertaining to such SARs.

     The Base Value of a Freestanding SAR shall equal the Fair Market 
Value of a Share on the date of grant of the SAR. The Base Value of 
Tandem SARs shall equal the Option Exercise Price of the related Option.

     7.2 SAR Award Agreement.  Each SAR grant shall be evidenced by an 
SAR Award Agreement  that shall  specify the number of SARs granted,  
the Base Value,  the term of the SAR, the Exercise Period and such other  
provisions as the Committee shall determine.

     7.3 Exercise and Payment of SARs.  Tandem SARs may be exercised  
for all or part of the Shares subject to the related Option upon the 
surrender of the right

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<PAGE>  10

to exercise the equivalent  portion of the related  Option.  A Tandem 
SAR may be exercised  only with respect to the Shares for which its 
related Option is then exercisable.

     Notwithstanding  any  other  provision  of the Plan to the contrary, 
with respect to a Tandem SAR granted in  connection  with an ISO:  (i) the
Tandem SAR will expire no later than the expiration of the  underlying ISO; 
(ii) the value of the payout with respect to the Tandem SAR may be for no 
more than one hundred percent  (100%) of the  difference  between  the  
Option  Exercise Price of the underlying ISO and the Fair Market Value of 
the Shares subject to the underlying ISO at the time the  Tandem  SAR is  
exercised;  and (iii) the Tandem SAR may be exercised  only when the Fair  
Market  Value of the  Shares subject  to the ISO exceeds the Option 
Exercise Price of the ISO.

     Freestanding  SARs may be exercised  upon whatever terms and conditions 
the Committee, in its sole discretion, imposes upon them.

     A Participant  may exercise an SAR at any time during the Exercise  
Period.  SARs shall be exercised  by the delivery of a written  notice of 
exercise to the Company,  setting forth the number of SARs being exercised.  
Upon exercise of an SAR, a Participant  shall be entitled to receive  
payment from the Company in an amount equal to the product of:

     (a)  the  excess  of (i) the  Fair  Market  Value of a Share on the 
          date of exercise over (ii) the Base Value multiplied by 

     (b)  the number of Shares with respect to which the SAR is exercised.

     At the sole  discretion of the  Committee,  the payment to the  
Participant upon SAR  exercise  may be in cash,  in  Shares of  equivalent 
value or in some combination thereof.

     7.4  Termination.  Each SAR Award  Agreement  shall set forth the 
extent to which  the  Participant  shall  have the  right to  exercise  
the SAR  following termination of the  Participant's  employment with,  
service on the Board of, or other relationship with the Company and its 
Subsidiaries.  Such provisions shall be determined in the sole discretion 
of the Committee,  shall be included in the SAR Award Agreement  entered 
into with  Participants,  need not be uniform among all SARs  granted  
pursuant  to the Plan or among  Participants and may reflect distinctions 
based on the reasons for termination.

     7.5  Transferability  of  SARs.  Except  as  otherwise determined  by  
the Committee, all SARs granted to a Participant under the Plan shall be 
exercisable during  his or  her  lifetime  only  by  such  Participant  
or his or her  legal representative  and no SAR  granted  under  the Plan  
may be sold, transferred, pledged, assigned, or otherwise alienated or 
hypothecated, other than by will or by the laws of descent and distribution.

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<PAGE>  11




Article 8. Restricted Stock and Restricted Stock Units

     8.1 Grant of Restricted  Stock and Restricted  Stock Units. Subject to 
the terms and conditions of the Plan, Restricted Stock and/or Restricted 
Stock Units may be granted to an Eligible Person at any time and from time 
to time, as shall be determined by the Committee.

     The Committee  shall have complete  discretion in determining the 
number of shares of  Restricted  Stock  and/or  Restricted  Stock  Units 
granted  to each Eligible  Person  (subject  to  Article  4  herein)  and, 
consistent  with  the provisions of the Plan, in determining  the terms 
and  conditions pertaining to such Awards.

     8.2 Restricted  Stock/Restricted Stock Unit Award Agreement.  Each 
grant of Restricted  Stock  and/or  Restricted  Stock Units grant shall 
be evidenced by a Restricted Stock and/or Restricted Stock Unit Award 
Agreement that shall specify the number of shares of Restricted Stock 
and/or  Restricted Stock Units granted, the initial value (if  applicable), 
the Period or Periods of Restriction,  and such other provisions as the 
Committee shall determine. 

     8.3  Transferability.  Restricted  Stock and Restricted Stock Units 
granted hereunder  may  not  be  sold,  transferred,  pledged,  assigned, 
or  otherwise alienated or hypothecated  until the end of the applicable 
Period of Restriction established  by the Committee and specified in the 
Award Agreement.  All rights with respect to the  Restricted  Stock and  
Restricted  Stock Units granted to a Participant under the Plan shall be 
available during his or her lifetime only to such Participant or his or 
her legal representative.

     8.4 Certificate  Legend.  Each  certificate  representing Restricted 
Stock granted pursuant to the Plan may bear a legend substantially as
follows:

         "The sale or other transfer of the shares of stock represented 
         by this certificate,  whether voluntary, involuntary or by 
         operation of law, is subject to certain  restrictions on transfer
         as set forth in Lechters, Inc. 1998 Incentive Plan and in a 
         Restricted Stock Award Agreement.  A copy of such Plan and such  
         Agreement  may be obtained from  Lechters, Inc."

     The Company  shall have the right to retain the  certificates 
representing Restricted Stock in the Company's possession until such time 
as all restrictions applicable to such Shares have been satisfied. 

     8.5  Removal  of   Restrictions.   Restricted  Stock  shall become  
freely transferable by the Participant  after the last day of the Period 
of Restriction applicable thereto. Once Restricted Stock is released from 
the restrictions, the Participant  shall be  entitled  to have any legend  
referred  to in Section 8.4 removed from the Participant's stock certificate. 
Payment of Restricted Stock 
                                      -11-

<PAGE>  12

Units shall be made after the last date of the period of Restriction  
applicable thereto. The Committee,  in its sole discretion,  may pay 
Restricted Stock Units in cash or in shares (or in a combination thereof), 
which have an aggregate Fair Market Value equal to the value of the 
Restricted Stock Units. 

     8.6 Voting Rights.  During the Period of Restriction, Participants 
holding Restricted Stock may exercise full voting rights with respect to 
those Shares.

     8.7 Dividends and Other Distributions.  Subject to the Committee's 
right to determine  otherwise  at the time of grant,  during the  Period 
of Restriction, Participants  holding  Restricted Stock shall receive all 
regular cash dividends paid with respect to all Shares while they are so 
held. All other distributions paid with  respect to such  Restricted Stock 
shall be credited to Participants subject to the same restrictions on  
transferability  and forfeitability as the Restricted  Stock with  respect 
to which they were paid and shall be paid to the Participant promptly after 
the full vesting of the Restricted Stock with respect to which such 
distributions were made.

     Rights, if any, to Dividend  Equivalents on Restricted Stock Units 
shall be established  by the  Committee  at the time of grant  and set 
forth in the Award Agreement.

     8.8  Termination.   Each  Restricted   Stock/Restricted Stock  Unit  
Award Agreement  shall set forth the  extent to which the  Participant 
shall have the right to  receive  Restricted  Stock  and/or a  Restricted  
Stock Unit  payment following termination of the Participant's employment 
with, service on the Board of, or other relationship with the Company and 
its Subsidiaries. Such provisions shall be determined in the sole  
discretion of the Committee, shall be included in the Award Agreement 
entered into with Participants, need not be uniform among all grants of 
Restricted  Stock/Restricted Stock Units or among Participants and
may reflect distinctions based on the reasons for termination.


Article 9. Performance Units and Performance Shares

     9.1 Grant of Performance Units and Performance Shares.  Subject to 
the terms and conditions of the Plan,  Performance Units and/or  Performance 
Shares may be granted  to an  Eligible  Person at any time and from time 
to time,  as shall be determined by the Committee.

     The Committee  shall have complete  discretion in determining the 
number of Performance  Units and/or  Performance  Shares  granted to 
each Eligible  Person (subject to Article 4 herein) and,  consistent  
with the provisions of the Plan, in determining the terms and conditions 
pertaining to such Awards.

     9.2  Performance  Unit/Performance  Share  Award  Agreement. Each 
grant of Performance Units and/or  Performance Shares shall be evidenced 
by a Performance

                                      -12-

<PAGE>  13

Unit and/or  Performance  Share Award Agreement that shall specify the 
number of Performance  Units and/or  Performance  Shares  granted,  the 
initial  value (if applicable),  the  Performance  Period,  the  performance 
goals and such  other provisions as the Committee  shall  determine,  
including but not limited to any rights to Dividend Equivalents. 

     9.3 Value of Performance  Units/Performance  Shares.  Each Performance 
Unit shall have an initial value that is  established by the Committee at 
the time of grant. The value of a Performance  Share shall be equal to the 
Fair Market Value of a Share. The Committee shall set performance  goals in 
its discretion  which, depending on the extent to which they are met, will  
determine the number and/or value  of  Performance  Units/Performance  
Shares  that  will be paid out to the Participants.

     9.4 Earning of Performance  Units/Performance  Shares. After the 
applicable Performance  Period has ended,  the  Participant  shall be 
entitled to receive a payout with respect to the  Performance  
Units/Performance  Shares earned by the Participant over the Performance  
Period,  to be determined as a function of the extent to which the 
corresponding performance goals have been achieved.

     9.5 Form and  Timing of Payment of  Performance Units/Performance  
Shares.  Payment of earned Performance  Units/Performance  Shares shall 
be made following the close of the  applicable  Performance  Period.  
The Committee,  in its sole discretion,  may pay earned Performance 
Units/Shares in cash or in Shares (or in a combination  thereof),  which 
have an aggregate Fair Market Value equal to the value of the  earned  
Performance  Units/Shares  at the close of the  applicable Performance  
Period.  Such  Shares  may be granted  subject to any restrictions
deemed appropriate by the Committee.

     9.6 Termination.  Each Performance  Unit/Performance  Share Award 
Agreement shall set forth the  extent  to which the  Participant  shall 
have the right to receive a Performance  Unit/Performance  Share payment 
following termination of the  Participant's   employment  with,   service  
on  the  Board of,  or  other relationship with the Company and its 
Subsidiaries  during a Performance Period.  Such  provisions  shall be
determined in the sole  discretion of the  Committee, shall be included in 
the Award Agreement  entered into with Participants,  need not be uniform 
among all grants of Performance Units/Performance Shares or among
Participants and may reflect distinctions based on reasons for termination.

     9.7  Transferability.  Except as otherwise  determined by the 
Committee,  a Participant's  rights  with  respect  to  Performance 
Units/Performance  Shares granted under the Plan shall be available during 
the Participant's lifetime only to such Participant or the Participant's  
legal  representative and Performance Units/Performance  Shares may not be 
sold,  transferred,  pledged, assigned  or otherwise  alienated  or 
hypothecated,  other  than by  will or by the  laws of descent and
distribution.


                                      -13-



<PAGE>  14



Article 10. Other Awards

     The Committee shall have the right to grant other Awards which may 
include, without limitation, the grant of Shares based on certain 
conditions, the payment of Shares in lieu of cash or cash based on 
performance  criteria established by the  Committee,  and the payment of 
Shares in lieu of cash under other  Company incentive bonus  programs.  
Payment under or settlement of any such Awards shall be made in such 
manner and at such times as the Committee may determine.


Article 11. Beneficiary Designation

     Each  Participant  under  the  Plan  may,  from  time  to time,  
name  any beneficiary or beneficiaries  (who may be named contingently or 
successively) to whom any benefit under the Plan is to be paid in case of 
the Participant's death before  the  Participant  receives  any  or  all  
of  such benefit.  Each  such designation shall revoke all prior  
designations by the same Participant,  shall be in a form  prescribed by 
the Company and will be effective only when filed by the Participant in 
writing with the Company during the Participant's  lifetime. In the  
absence  of any  such  designation,  benefits  remaining unpaid  at the
Participant's death shall be paid to the Participant's estate.

     The  spouse of a married  Participant  domiciled  in a community  
property jurisdiction shall join in any designation of beneficiary or 
beneficiaries other than the spouse.


Article 12.  Deferrals

     The Committee may permit a Participant to defer the Participant's  
receipt of the payment of cash or the delivery of Shares that would 
otherwise be due to such Participant under the Plan. If any such deferral 
election is permitted, the Committee shall, in its sole discretion, 
establish rules and procedures for such payment deferrals.

Article 13.  Rights of Participants

     13.1 Termination.  Nothing in the Plan shall interfere with or limit 
in any way the right of the Company or any  Subsidiary to terminate  any 
Participant's employment or other relationship with the Company or any 
Subsidiary at any time, for  any  reason  or no  reason  in  the  Company's  
or  the Subsidiary's  sole discretion,  nor confer upon any Participant any 
right to continue in the employ of, or otherwise in any relationship with,
the Company or any Subsidiary.

                                      -14-



<PAGE>  15



     13.2 Participation.  No Eligible Person shall have the right to be 
selected to receive an Award under the Plan, or, having been so selected, 
to be selected to receive a future Award.

     13.3  Limitation of Implied  Rights.  Neither a  Participant nor any 
other Person  shall,  by  reason  of the  Plan,  acquire  any right in or 
title to any assets,  funds  or  property  of  the  Company  or  any 
Subsidiary  whatsoever, including,  without  limitation,  any specific  
funds,  assets or other property which the Company or any Subsidiary, in 
their sole discretion, may set aside in anticipation  of a liability  under 
the Plan.  A  Participant shall have only a contractual  right to the 
Shares or  amounts,  if any,  payable under the Plan, unsecured by any 
assets of the Company or any Subsidiary.  Nothing contained in the Plan 
shall constitute a guarantee that the assets of such companies shall be
sufficient to pay any benefits to any Person.

     Except as  otherwise  provided  in the Plan,  no Award under the Plan 
shall confer upon the holder  thereof any right as a shareholder  of the 
Company prior to the date on which the individual  fulfills all conditions 
for receipt of such rights.


Article 14. Change in Control

     The terms of this Article 14 shall immediately  become operative,  
without further action or consent by any person or entity, upon a Change 
in Control, and once  operative  shall  supersede and take control over 
any other provisions of this Plan.

     Upon a Change in Control

     (a)  Any  and  all  Options  and  SARs  granted   hereunder shall  
          become immediately vested and exercisable;

     (b)  Any restriction  periods and restrictions  imposed on Restricted 
          Stock and  Restricted  Stock  Units  shall be deemed to have 
          expired;  such Restricted  Stock shall become  immediately  
          vested in full,  and such Restricted Stock Units shall be paid 
          out in cash on the effective date of the Change in Control; and

     (c)  The target payout opportunity  attainable under all outstanding 
          Awards of Performance  Units and  Performance  Shares shall be 
          deemed to have been  fully  earned  for the entire  Performance 
          Period(s)  as of the effective date of the Change in Control.  
          On the effective date of the Change in Control, all Performance 
          Shares shall be paid out in Shares, and all Performance Units 
          shall be paid out in cash.

                                      -15-



<PAGE>  16




Article 15. Amendment, Modification and Termination

     15.1 Amendment,  Modification and  Termination.  The Board may, at 
any time and from time to time, alter,  amend,  suspend or terminate the 
Plan in whole or in part.

     15.2 Awards Previously Granted.  No termination,  amendment or 
modification of the Plan shall  adversely  affect in any  material  way 
any Award  previously granted under the Plan without the written  consent 
of the Participant  holding such Award,  unless such  termination,  
modification or amendment is required by applicable law and except as 
otherwise provided herein. 


Article 16. Withholding

     16.1 Tax  Withholding.  The  Company  shall have the power and the 
right to deduct or withhold,  or require a Participant to remit to the 
Company, an amount (including any Shares withheld as provided below) 
sufficient to satisfy Federal, state and local taxes (including the 
Participant's FICA obligation)  required by law to be withheld with 
respect to an Award made under the Plan.

     16.2 Share Withholding.  With respect to tax withholding required 
upon the exercise of Options or SARs, upon the lapse of restrictions on 
Restricted Stock, or upon any other taxable event arising out of or as 
a result of Awards  granted hereunder,  Participants  may elect to satisfy 
the withholding requirement,  in whole or in part, by tendering  Shares 
held by the  Participant at least six (6) months prior to their tender or 
by having the Company  withhold Shares having a Fair  Market  Value on the  
effective  date of  exercise  equal to the  minimum statutory  total tax 
which could be imposed on the  transaction. All  elections shall be 
irrevocable, made in writing and signed by the Participant.

Article 17. Successors

     All  obligations  of the  Company  under the Plan,  with respect to 
Awards granted hereunder, shall be binding on any successor to the Company, 
whether the existence  of such  successor  is the result of a direct or 
indirect  purchase, merger,  consolidation or otherwise of all or 
substantially  all of the business and/or assets of the Company.


                                      -16-



<PAGE> 17


Article 18. Legal Construction

     18.1 Gender and Number.  Except where  otherwise  indicated by the 
context, any masculine term used herein also shall include the feminine, 
the plural shall include the singular and the singular shall include the 
plural.

     18.2  Severability.  In the event any  provision  of the Plan shall 
be held illegal or invalid for any reason, the illegality or invalidity 
shall not affect the remaining parts of the Plan, and the Plan shall be 
construed and enforced as if the illegal or invalid provision had not 
been included.

     18.3 Requirements of Law. The granting of Awards and the issuance of 
Shares under the Plan shall be subject to all applicable  laws,  rules and 
regulations, and to such  approvals  by any  governmental  agencies  or 
national  securities exchanges as may be required.

     18.4  Governing  Law. To the extent not preempted by Federal law, 
the Plan, and all  agreements  hereunder,  shall be  construed  in 
accordance  with,  and governed by, the laws of the State of New Jersey.

                                      -17-