<PAGE>   1
                                    AGREEMENT

                                     BETWEEN

                    OFFICE AND DISTRIBUTION EMPLOYEES' UNION
                              LOCAL 99, U.N.I.T.E.

                                       AND

                            LECHTERS, INC. (EMPLOYER)

                                        *

                         MARCH 16, 1996 - MARCH 15, 1999
<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                         PAGE
                                                                         ----

<S>                                                                      <C>
UNION RECOGNITION......................................................     1

SCOPE OF AGREEMENT.....................................................     1

HIRING OF EMPLOYEES....................................................     2

UNION SECURITY.........................................................     3

TRIAL PERIOD ..........................................................     3

MANAGEMENT RIGHTS......................................................     3

TEMPORARY EMPLOYEES....................................................     4

SENIORITY AND LAYOFFS..................................................     4

JOB OPENINGS...........................................................     5

HOURS OF WORK..........................................................     6

OVERTIME PAY...........................................................     6

PAYMENT ON APPEARANCE FOR WORK.........................................     7

GENERAL WAGE INCREASE..................................................     8

CHANGE IN SHIFT TIMES..................................................     8

MINIMUM WAGE...........................................................     9

HOLIDAYS...............................................................     9

VACATIONS..............................................................    12

AUTHORITY TO ACT FOR UNION.............................................    13

NO-STRIKE PROVISION....................................................    14

NO LOCK-OUT PROVISION..................................................    14

ARBITRATION............................................................    15
</TABLE>
<PAGE>   3
<TABLE>
<S>                                                                        <C>
CHECK OFF OF DUES......................................................    17

BENEFIT FUNDS..........................................................    17

SEVERANCE FUND-TERMINATION OR DISMISSAL OF BENEFITS....................    21

DISCHARGE OF EMPLOYEES.................................................    24

SHOP STEWARD AND COMMITTEE.............................................    24

RIGHT OF VISITATION....................................................    25

STRIKES OF U.N.I.T.E. AFFILIATES.......................................    25

EXAMINATION OF RECORDS.................................................    26

PENALTY UPON FAILURE TO PAY DUES AND CONTRIBUTIONS.....................    26

PENALTY UPON FAILURE TO PAY DUES AND CONTRIBUTIONS.....................    26

PRE-TICKETING AND OTHER PROCESSING OPERATIONS..........................    26

UNION RECOGNITION IN ADDITIONAL FACILITIES.............................    27

REMOVAL OF FACILITIES..................................................    27

CONTRACTING OUT........................................................    27

REORGANIZATION.........................................................    28

SURVIVAL OF LIABILITY..................................................    28

CONTINUING OBLIGATIONS IN THE EVENT OF SALE OR TRANSFER................    28

INVALIDITY OF PART OF AGREEMENT........................................    29

NO DISCRIMINATION......................................................    29

EXISTING BENEFITS......................................................    30

JURY DUTY..............................................................    30

TIME OFF FOR UNION MEETINGS............................................    30

FIRE DRILLS............................................................    30
</TABLE>


                                       ii
<PAGE>   4
<TABLE>
<S>                                                                        <C>
NO MODIFICATION OR WAIVER..............................................    31

DURATION OF AGREEMENT..................................................    31
</TABLE>


                                      iii
<PAGE>   5
     AGREEMENT made and entered into the 16th of March, 1996, effective as March
16, 1996 by and between LECHTERS, INC. (Employer), located at 1 Cape May Street,
Harrison, NJ 07029, herein referred to as the "Employer," and LOCAL 99,
U.N.I.T.E. (formerly known as Local 99, I.L.G.W.U.), herein referred to as the
"Union."

                              W I T N E S S E T H:

     WHEREAS, the parties hereto desire to regulate mutual relations between the
Employer and the Union with a view toward securing harmonious cooperation
between them and averting disputes; and

     WHEREAS, the Union represents the overwhelming majority of the workers in
the job functions hereinafter set forth employed by the Employer;

     NOW, THEREFORE, in consideration of the mutual promises set forth, the
parties hereto agree with each other as follows:

                                UNION RECOGNITION

     1. The Employer recognizes the Union as the sole and exclusive bargaining
agent and representative of the employees covered by this Agreement for the
purposes of collective bargaining with respect to all matters affecting such
employees.

                               SCOPE OF AGREEMENT

     2. This contract shall apply to and cover warehouse and distribution
workers employed in the following job functions in the warehouse and
distribution center at One Cape May Street, Harrison, New Jersey and any other
warehouse and distribution center within 100 miles from its present location in
Harrison, New Jersey to which this Agreement shall apply as set forth in
paragraphs 32 and 33 hereof:

                  Shipping Clerks, including sorters, receiving clerks, packers,
                  order pickers, including full case pickers, drivers, hi-lo
                  drivers, fork lift drivers, porters, all warehouse clericals,
                  stock clerks, supply department employees, hi-lift drivers,
                  janitors, lead persons, cycle counters, replenishers and other
                  employees performing the same or similar type work employed by
                  Lechters warehouse and excluding, however, supervisory
                  personnel.
<PAGE>   6
     The above titles are not intended to define job functions or limit the
combinations and overlap of duties, but are only listed for the purpose of
determining which employees are covered by this Agreement.

     The Employer agrees to employ at least two (2) truck drivers who will
perform switching of trailers and local delivery duties as assigned by the
Employer.

        a. Current employees covered under the Agreement and trained for use of
PDT and RF guns shall receive a bonus as provided for in Exhibit C.

        b. The Employer will provide to the Union, at least weekly, a list of
temporary and lumper employees who worked with a daily recap. Lumpers will
perform work only as provided for in Exhibit D. No lumper shall be used both as
a Lumper and as a temporary employee in the same work day, or vice versa.
Lumpers may not be used until all employees in the receiving department who have
been involuntarily laid off shall have been rehired or given the opportunity to
return to work unless there is insufficient time to give notice to such laid off
employees so that they may return to work. Receiving department employees shall
be exempt from plant-wide seniority with respect to layoffs while the Employer
is participating in the "lumper" program. Layoffs within the receiving
department shall be based on plant-wide seniority within the Department.

                               HIRING OF EMPLOYEES

     3. a. The Employer shall have the sole and exclusive right to select and
hire its employees. Within forty-eight (48) hours from the time of hiring an
employee covered by this Agreement, the Employer shall send a written notice to
the Union on an appropriate form supplied by the Union, stating name, address,
salary, starting date and job function of such new employee. The Employer agrees
to notify the Union of job openings. If a request is made before 11:00 A.M. the
Union will use its best efforts to supply workers, if available, on or before
the end of the following work day, without regard to their Union membership. The
Employer shall be under no obligation to hire such referrals.

        b. All new employees shall be required to take a pre-placement physical
examination at U.N.I.T.E. Health Center without loss of pay. All covered workers
who have been employed for one (1) year, shall be given time off at least once
during each contract year of this Agreement, without loss of pay, for the
purpose of undergoing a physical check-up examination at the Union Health
Center. All such examinations shall take place at a time mutually agreed upon
and pursuant


                                       2
<PAGE>   7
to procedures between the Union and the Employer.

        c. All eligible covered workers shall be entitled to receive three and
one-half (3 1/2) hours with pay, during each contract year, for dental facility
visits authorized by the Union, with a minimum allowance of one (1) hour for
each visit.

                                 UNION SECURITY

     4. To the extent permitted by law, good standing membership in the Union
shall be a condition of employment for all employees covered by this Agreement
on or after the 30th day following the beginning of such employment or the
execution or the effective date of this Agreement, whichever is the later, but
not before completion of the worker's trial period. For the purpose of this
provision, a member of the Union shall be deemed to be in good standing only if
his initiation fees and periodic fixed dues are not in arrears for more than
thirty (30) days, and notice to that effect has been stated to the Employer by
the Union.

                                  TRIAL PERIOD

     5. A trial period of sixty (60) calendar days is hereby fixed for new
employees covered by this Agreement. During such trial period, the Employer may
discharge such new employees without cause, without notice to the employees or
to the Union and without the consent of the Union. Thereafter, the new employees
shall not be subject to discharge except as provided in this Agreement. The
trial period shall not be abused by the Employer and any claim of abuse shall be
the subject of arbitration hereunder.

                                MANAGEMENT RIGHTS

     6. Subject only to the provisions of this Agreement and applicable law,
management of the Employer's operations and direction of its working force
including, but not limited to the right to schedule and assign work to be
performed; hire or rehire employees; promote; layoff or recall employees who are
laid off; suspend; discipline or discharge for proper cause; and transfer
employees because of lack of work or other legitimate reasons, shall be vested
exclusively with the Employer.


                                       3
<PAGE>   8
                               TEMPORARY EMPLOYEES

     7. a. The Employer may employ temporary employees who shall not be required
to become members of the Union. Such temporary employees may be used by the
Employer only to compensate for an absent full-time employee on a one-for-one
basis.

        b. The Employer may supplement the normal work force with no more than
ten (10) temporary employees per day between the months of February through May
and with no more than fifteen (15) temporary employees between June through
January.

        c. No temporary employee may work for more than sixty (60) calendar days
in any six (6) month period. Should any temporary employee remain in the
Employer's employ for a period in excess of sixty (60) calendar days in any six
(6) month period, then such employees shall thereafter be required to become a
member of the Union.

        d. The Employer shall maintain a daily log of temporary employees who
shall sign in and out recording the time of the commencement and termination of
work. The log shall set forth that it is for temporary employees.

        e. Except for temporary employees employed under subsection a. above,
before temporary employees are hired, all regular workers must be recalled from
layoff before any regular employees can be laid off, all temporaries must be
laid off.

        f. A list of temporary employees will be provided to the
Labor-Management Committee on a weekly basis. A list of all Union associates who
are absent from work will be provided on a daily basis.

        g. The Employer shall not abuse the within provisions for temporary
help.

                              SENIORITY AND LAYOFFS

     8. a. All rehirings and layoffs shall be done in accordance with seniority,
i.e. the last employee hired shall be the first employee laid off, and the last
employee laid off shall be the first employee rehired. Layoffs and rehirings
shall not be on a departmental basis, except where the employee in question is


                                       4
<PAGE>   9
unable to perform the required work. Regardless of seniority rights of part-time
employees, they shall be the first to be laid off and the last to be rehired,
except where a full-time employee is unable or unwilling to perform the required
work and except where the part-time employees were formerly full-time employees.
For workers employed less than one (1) year, notice of layoff shall be made
available by the Employer during the day of such layoff. Workers employed for
one (1) year or longer shall receive notice of layoff at least five (5) working
days prior to such layoff or such workers shall be paid for said period in lieu
of said notice. Part-timers shall be informed of layoff provisions at the time
they are hired. Employees on layoff should advise the Personnel Department where
they can be reached while on layoff or absent.

        b. Leaves of absence in case of sickness, pregnancy, jury duty or Union
business shall be granted for reasonable periods. Other leaves of absence for
personal needs may be requested and shall not unreasonably be withheld. At least
five (5) days leave of absence with pay shall be granted in case of death in a
worker's immediate family which includes spouse, parent and grandparent, child
and grandchild, sister and brother. At least two (2) days leave of absence with
pay shall be granted in case of death of a worker's father-in-law or
mother-in-law; two (2) days leave of absence with pay shall be granted to a
covered male worker in connection with the birth of his child. Proof of such
occurrences may be required.

        c. For the purpose of adjusting any inequities, the Employer or the
Union may request a review of a worker's continuing status of employment when an
extended layoff period or an extended leave of absence exists.

                                  JOB OPENINGS

     9. Vacancies on classified jobs or other jobs in the plant shall be posted
for no less than three (3) working days. Bidding shall be in writing and awarded
to the most senior qualified employee. An employee may apply for a new opening
only once in any twelve (12) consecutive month period.

        The Employer will reassign associates from position to position based on
seniority, provided the most junior person has the qualifications and skills to
perform the temporary assignment.


                                       5
<PAGE>   10
                                  HOURS OF WORK

     10. a. The days of work shall be from Monday to Friday inclusive, and the
hours of work from 8:00 A.M. to 4:15 P.M. daily, inclusive of one-half (1/2)
hour for lunch. The Union shall not unreasonably withhold its consent to vary
the start of the work day. Current starting time and lunch hour arrangements
heretofore agreed between the Union and the Employer may be continued.

        b. The Employer shall provide a time clock. All workers shall punch time
cards before and after work periods.

                                  OVERTIME PAY

     11. Employees shall be paid at the rate of time and one-half for overtime
after seven and three quarters (7 3/4) hours in a day and for all work performed
in excess of thirty-eight and three quarters (38 3/4) hours per week. Overtime
at the rate of time and one-half shall be paid for work performed before and
after regularly scheduled hours.

        a. When overtime is needed, employees shall be notified as far in
advance as possible in order to allow them to make necessary preparations for
working overtime and such notice shall be given no later than the employees'
scheduled lunch break if overtime work that day is needed.

        b. The Union agrees that it will, through its shop committee, cooperate
in having employees perform overtime work when it is requested.

        c. The Company will request volunteers from among the employees who are
capable and qualified to perform the overtime work involved. When such overtime
work is necessary and there are insufficient volunteers, the employee in the
department with the least seniority shall be the first to be required to work.
If requested to work overtime, the employee will be required to do so during the
peak season between September 1 and December 31, unless he or she has a
reasonable excuse for being unable to work. Overtime during the non-peak season
shall be voluntary except in the case of an emergency.

        d. Overtime will be allocated as equally as possible among employees
consistent with Section (b). The overtime records shall be available for
inspection at the request of the Union.


                                       6
<PAGE>   11
        e. Where there has been a reduction in working force in a department, no
overtime shall be permitted in such department until all employees in that
department who have been involuntarily laid off shall have been rehired or given
the opportunity to return to work unless there is insufficient time to give
notice to such laid off employees so that they may return to work.

        f. The Company agrees that all disputes under this Article shall be
subject to the grievance and arbitration procedures of the Agreement.

        g. Except as hereinafter provided, during the entire period of this
Agreement, Saturday work shall be paid at the rate of time and one-half and
Sunday and legal holiday work at the rate of double time.

        h. A worker who is required to work more than three (3) hours of
overtime in any one day shall receive twenty (20) minutes time for supper, shall
be paid for such time and, in addition, shall receive supper money of three
($3.00) dollars.

                         PAYMENT ON APPEARANCE FOR WORK

     12. a. An employee called into work and who reports to work shall receive
one full day's employment or one day's pay for such day. If an employee is
called in on Saturday, Sunday and/or holiday, he shall receive at least a
minimum of five (5) hours work or a minimum of five (5) hours pay at the
applicable overtime rates.

        b. The Employer shall post notice on its phone call-in system no less
than ninety (90) minutes before an employee shift start time advising employees
that the facility is closed and they should not appear for work. Employees shall
use reasonable efforts, when conditions indicate that the facility may be
closed, to call in. In the event notice fails, despite reasonable efforts by the
employee, an employee appearing at the facility for work when the facility is
closed shall be paid four (4) hours pay. In the event employees are told to
leave before the conclusion of their shift because of such conditions, shall
receive a full day's pay. Employees may continue to choose to use personal or
accrued vacation time to receive payment for any day in which the facility is
closed and they would not otherwise receive payment.


                                       7
<PAGE>   12
                              GENERAL WAGE INCREASE

     13. a. Employees in the bargaining unit will receive wage adjustments as
follows (pro-rata for part-time employees):

<TABLE>
<S>                                                               <C>
              - March 16, 1996                                    $15.00/week
              - March 16, 1997                                      8.00/week
              - September 16, 1997                                  7.00/week
              - March 16, 1998                                      8.00/week
              - September 16, 1998                                  7.00/week
</TABLE>

        b. Workers shall hereafter be paid their wages in cash not later than
three (3) working days after the end of the work week, except by special
arrangement with the Union. Payment of wages by check may be made upon mutual
Agreement of the parties.

        c. In the event of a rise in the cost of living the Union may, at any
time during this Agreement, request an upward revision of wages for workers
covered under this Agreement. In the event of disagreement between the parties,
the matter shall be adjusted in the same manner as any other dispute under this
Agreement.

                              CHANGE IN SHIFT TIMES

     14. A change in permanent shift times shall occur on April 29, 1996 as
follows:

            - 7:00 a.m. to 3:15 p.m.        Mezzanine and Replenishers

            - 8:00 a.m. to 4:15 p.m.        All other employees, however, the
Employer may reassign twenty-five (25%) percent of the work force in shipping
and twenty-five (25%) percent of full case for the 7:00 a.m. shift. In making
such assignment, the Employer will first use volunteers and, if insufficient
volunteers are obtained, the Employer will reassign employees based upon reverse
shop seniority, with the least senior employee being reassigned. The Employer
will provide to the Union a list identifying those employees who are in the
Replenishing Department.

              With respect to any shift commencing on or after 2:00 p.m., shift
differentials shall be amended to provide that employees hired after the
effective date of this Agreement shall receive a differential of fifty ($.50)
cents per hour.


                                       8
<PAGE>   13
Current employees shall receive a differential of one dollar and fifty ($1.50)
cents per hour (in lieu of the twenty (20%) percent differential provided for in
the old agreement). The Company shall first offer current employees the right to
change to fifty (50%) percent of the available positions on the other shift
before hiring new employees.

                                  MINIMUM WAGE

     15. a. Employees covered by this Agreement shall receive, at the time of
hiring, the minimum wage or salary provided by state law, which is now not less
than $5.05 dollars per hour.

        b. Each new employee regardless of his starting weekly wage, shall
receive not less than a seven ($7.00) dollar increase in his weekly wage after
the completion of his temporary or trial period. The seven ($7.00) dollar
increase shall be retroactively paid to the 31st day of employment.

        c. The Union reserves the right to request an upward adjustment of the
wages prescribed herein to become effective at any time on or after March 16,
1996. In case of a dispute, the matter shall be referred to the Impartial
Chairman for his determination in the same manner as any other dispute under
this Agreement.

        d. If, during the term of this Agreement, a new applicable minimum wage
law is enacted and/or becomes effective which increases the present applicable
minimum hourly rate of pay, then the minimum weekly wage set forth herein shall
automatically be adjusted as required and the minimum wage hereunder shall be at
no time less than fifteen (15%) percent per hour above such newly established
applicable minimum wage.

                                    HOLIDAYS

     16.a. During the term of this Agreement all workers covered hereunder shall
be entitled to receive a full day's pay for each of the following legal or
religious holidays; each shall be observed, regardless of the day of the week in
which each occurs:


                                       9
<PAGE>   14
                                 New Year's Day
                             Martin Luther King Day
                              Washington's Birthday
                                   Good Friday
                                  Memorial Day
                                    July 4th
                                    Labor Day
                                Thanksgiving Day
                             Day After Thanksgiving
                          Christmas Eve (December 24th)
                          Christmas Day (December 25th)

           All covered workers must work the scheduled day before the holiday
and the scheduled day after the holiday in order to receive holiday pay; unless
excused for bona-fide reasons. In addition to the above, all covered workers
shall be entitled to receive four (4) additional guaranteed holidays to be
designated by each worker during the calendar year, making a total of fifteen
(15) guaranteed holidays. The personal days shall be scheduled subject to
management approval based on reasonable staffing requirements, which approval
will not be unreasonably withheld. The employee will be guaranteed such personal
day during the year.

           In the event a substantial number of the Employer's workers selects a
common date, the Employer may adopt such date as an additional guaranteed
holiday and close its business entirely on such date, which shall be binding on
all employees. A worker employed after January 1st shall not have the right to
select such additional holiday to occur within six (6) months from the start of
his employment. However, such worker shall be entitled to holiday pay in the
event of a complete shut down by the Employer as indicated above in lieu of the
selected date.

        b. If work is performed on a regular work day or a Saturday and a legal
holiday is celebrated on such day, employees shall receive one day's holiday pay
plus double time for the number of hours worked. If work is performed on a
Sunday which is a legal holiday and it is celebrated on the following Monday,
employees shall receive double time for the number of hours worked. If work is
performed on a Monday, which is the day of celebration of a legal holiday which
fell on the preceding Sunday, employees shall receive one full day's pay plus
double time for the number of hours worked.


                                       10
<PAGE>   15
        c. If a legal holiday falls on Saturday, the Employer may substitute
therefore the preceding Friday or the following Monday in lieu of the legal
holiday upon reasonable notice.

           The date of observance of any of the foregoing holidays shall conform
to applicable Federal policy regardless of the location of the Employer's
offices, warehouses and/or its facilities.

           An employee absent without just cause on the scheduled work day
immediately preceding a holiday or the scheduled work day immediately succeeding
a holiday shall not be entitled to receive holiday pay.

           At the request of the Union, May 1st shall be designated as a holiday
but without pay to the covered employees.

           It is not intended that employees receive more than one day's holiday
pay for any one holiday provided for in this Agreement.

        d. If a legal holiday or holidays fall during the period when a worker
is laid off, holiday pay shall be given to the worker upon his recall and return
to work.

        e. The Union and/or the Employer may request a reopening, but not more
than once each contract year, for the purpose of reviewing and arranging the
specific days on which all of the guaranteed paid holidays shall be observed.

        f. New employees shall receive no holiday pay for holidays falling
within their trial period but after completing their trial period they shall be
paid retroactively for any holidays falling in their trial period.

           Temporary employees shall receive no pay for holidays but upon
becoming regular or permanent employees with no break in service they shall be
paid retroactively for any holidays.

           Newly hired employees are not permitted to select floating and/or
personal holidays until employed at least six (6) months. If the Employer elects
to close its business for a floating holiday, then all workers will be paid.

           Where possible forty-eight (48) hours prior notification for
selection of personal days will be given by employees to the Employer.


                                       11
<PAGE>   16
                                    VACATIONS

     17. a. The vacation period shall be from February 1st to September 30th of
each year, however, where the Employer and the employee agree on a different
vacation period the Union shall not unreasonably withhold its consent.
Associates may also request vacations between October 1st and December 31st,
which will be approved and granted at a rate of five (5) persons per week, but
no more than three (3) from the mezzanine and two (2) from all other
departments, according to seniority to associates who request vacations during
the normal vacation scheduling period. Vacations will be granted at the time
most desired by the associate whenever possible, however, the Employer reserves
the right to ensure proper coverage for business operations.

           Vacation requests should be submitted for approval during the normal
vacation scheduling period. No vacations will be approved without a minimum of
two (2) weeks notice.

           Vacations with pay will be granted each year, as provided in this
Paragraph 17, to covered employees who will have the required length of
employment as of Labor Day of each year, except that for covered employees with
five (5) or more years of seniority, the date for determining eligibility shall
be December 31.

<TABLE>
<CAPTION>
Length of Employment                                                    Vacation Period With Pay
--------------------                                                    ------------------------

<S>                                                                     <C>
1 year and over, but less than 2 years ............................                 One week
2 years and over, but less than 5 years ...........................                 Two weeks
5 years and over, but less than 10 years ..........................               Three weeks
10 years and over .................................................                Four weeks
</TABLE>

        b. An employee who is on the payroll of the Employer on June 1st and who
was hired between Labor Day and December 31st of the previous year shall be
entitled to receive three (3) working days vacation with pay during the summer
vacation period immediately following the beginning of employment.

           An employee who is hired between January 1st and June 1st of any
contract year shall, if he is employed on December 1st of the same year, be
entitled to receive three (3) working days of vacation with pay during the
winter vacation period of that year.


                                       12
<PAGE>   17
           All workers, whenever employed, who are eligible to receive three (3)
days, one (1) week or two (2) weeks regular vacation with pay and who are
employed on December 1st of the same vacation year, shall be entitled to receive
an additional three (3) working days of vacation with pay during the winter
vacation period of that year.

        c. Upon consent of an individual worker and the Employer, vacation pay
for the third and/or fourth weeks vacation may be given in lieu of vacation. The
date of the third and/or fourth weeks vacation shall be mutually arranged and
shall be taken between December 1 and January 31. Such arrangements shall be
made within a reasonable time prior to the vacation period.

        d. Whenever a holiday falls within an employee's vacation, and either
occurs on a day in the employee's regularly scheduled work-week or is a
guaranteed legal holiday, the employee shall be granted an extra day of vacation
or an extra day's pay at the option of the Employer.

        e. (i) Employees employed for fifteen (15) years but less than twenty
(20) years shall receive, in addition to four (4) weeks vacation with pay, the
sum of Seventy-Five ($75.00) Dollars at the time of vacation by separate
payment; employees employed for twenty (20) years, but less than twenty-five
(25) years shall receive the sum of One Hundred Fifty ($150.00) Dollars at the
time of the mid-winter vacation by separate payment and employees employed for
twenty-five (25) years and over shall receive the sum of Two Hundred Fifty
($250.00) Dollars at the time of the mid-winter vacation by separate payment.

           (ii) Additionally, employees employed for fifteen (15) years, twenty
(20) years and twenty-five (25) years shall receive $50.00 on each of the
following dates: on the 15th, 20th and 25th anniversary of the starting date of
employment of such employees by the Employer.

                           AUTHORITY TO ACT FOR UNION

     18. It is understood and agreed that only the following are authorized to
act as agents of the Union in the administration of this Agreement and in
dealing with and determining any questions which may arise thereunder, or in the
relations between the Employer and the Union: Manager and Business
Representatives (to be designated by name, in writing, to the Employer) and the
Employer Representatives, designated by name, in writing, to the Union.

           However, the right is reserved to the Union to substitute a different
agent or agents or add new agents at any time during the life of this Agreement
by serving upon the Employer notice in writing of such change or addition of
agents of the Union.

           No person shall be deemed an agent of the Union unless designated as
such by the Union in writing. Neither the shop steward nor any shop committee
shall be deemed or construed to be an agent of the Union unless designated in
writing as such agent.


                                       13
<PAGE>   18

                               NO-STRIKE PROVISION

     19. a. The Union agrees that it will not call, authorize or ratify a
strike, or stoppage during the life of this Agreement. Should any unauthorized
strike or stoppage of work by covered employees occur, the Union obligates
itself, within twenty-four (24) hours after receipt of notice thereof from the
Employer, solely to endeavor in good faith to bring about the return to their
work of the covered employees who have stopped work. Upon failure of such
employees to return to work within the said twenty-four (24) hours, the Employer
may at its option consider that all or any of the employees have abandoned their
employment. Should the Employer re-employ any such employees, it shall re-employ
all of them and shall treat all alike and shall not discriminate among them.
Compliance by the Union in good faith with this provision shall be deemed full
compliance with the Union's obligations hereunder. As an alternative to
submitting the matter to arbitration pursuant to Paragraph 21 hereof, the
Employer or shall also have the option of terminating this Agreement upon
failure of the Union to comply with this paragraph.

        b. The foregoing no-strike, no-stoppage obligation shall be wholly
suspended and of no force and effect, and the Union may call, authorize or
ratify a strike or stoppage at any shop, office, warehouse and/or facility of
any Employer during the continuance of any strike or stoppage (not in violation
of contract) declared by U.N.I.T.E. or any affiliate thereof at any shop,
office, warehouse and/or facility of any firm which is directly or indirectly
affiliated with or related to the Employer, or for the Employer's failure to
submit to arbitration or to comply with the decisions of the Impartial Chairman
within forty-eight (48) hours, or the Employer's failure to pay wages, overtime
and/or holiday pay to his covered workers.

                              NO LOCK-OUT PROVISION

     20. The Employer agrees that it will not order, authorize or ratify a
lock-out during the life of this Agreement. Should the Employer cause a
lock-out, or should there result a lock-out for any other reason, notice thereof
shall be given by the Union to the Employer. Thereupon, the Employer obligates
itself within twenty-four (24) hours after receipt of such notice, solely to
endeavor in good faith to have the lock-out terminated and to cause the
re-employment of the employees. Upon the failure of the Employer to do so within
twenty-four (24) hours, the Union upon failure to reach an Agreement with the
Employer shall have the option of terminating this Agreement with respect to the
Employer involved, or of submitting


                                       14
<PAGE>   19
the matter to arbitration pursuant to Paragraph 21 hereof.

                                   ARBITRATION

     21. All complaints, disputes or grievances arising directly or indirectly
between the Union and the Employer or any of his subsidiary, auxiliary and
affiliated firms or his or their successors and assigns, involving questions of
interpretation, application, performance or operation of any clause of this
Agreement or any acts, conduct or relations between them including, without
limitation, any claim against the Employer arising out of any alleged
dissolution or termination of his business prior to the expiration of this
Agreement or any claim against his successors or assigns arising out of any
alleged merger with or purchase of assets from another Employer prior to the
expiration of this Agreement, shall be submitted in writing by the party hereto
claiming to be aggrieved, to the other party involved or Impartial Chairman, and
the Employer involved and the Manager of the Union, or their deputies, shall, in
the first instance, jointly investigate such complaints, grievances, or disputes
and attempt an adjustment. Decisions reached by them or their deputies shall be
binding on them. Should they fail to agree, the question or dispute shall be
referred to the Impartial Chairman to be mutually agreed upon and his decision
shall be final and binding upon the Union and the Employer. In the event of a
default by the Union or the Employer in appearing before the Impartial Chairman,
after due written notice shall have been given to the Employer or Union as
hereinafter provided, the Impartial Chairman is hereby authorized to render a
decision upon the testimony of the party appearing.

              All decisions reached by the Employer and the Manager of the
Union, or their deputies, or rendered by the Impartial Chairman, shall be
complied with within forty-eight (48) hours. Should the Employer fail to comply
with the decision of the Impartial Chairman within forty-eight (48) hours, the
Employer shall automatically lose all rights and privileges under this Agreement
and the Union shall be free to take any action it may deem appropriate to
enforce the rights of the workers against the Employer, including the right to
strike against the Employer.

              The Union and the Employer designate J.J. Pierson, Esq. to act as
Impartial Chairman and Arbitrator in connection with any aforesaid complaint or
aforesaid dispute or aforesaid grievance arising during the term of this
Agreement, and agree that all hearings had before him or before his successor or
successors shall be held in the City of New York.


                                       15
<PAGE>   20
              The Employer and the Union each agree to pay one-half of the fee
of the Arbitrator and each party shall be responsible for its own costs of such
arbitration.

              Should the designated Impartial Chairman resign, refuse to act or
be incapable of acting, or should the office become vacant for any reason, the
Union and the Employer shall immediately and within five (5) days after the
occurrence of such vacancy, designate another person to act as such Impartial
Chairman. If they fail to agree, the New Jersey State Board of Mediation shall,
on application of either the Union or the Employer, summarily make such
appointment on an ad hoc basis for each submitted case.

              The Impartial Chairman may, as part of his decision, issue any and
all mandatory directions, prohibitions or orders directed to or against the
Union or the Employer breaching this Agreement or any part thereof.

              It is the intention and Agreement of the Union and the Employer
that the procedure established in this Agreement for the adjustment of disputes
shall be the exclusive means for the determination of all disputes, complaints
or grievances specified herein, expressly including all strikes, stoppages,
lockouts and any and all claims, demands or acts arising therefrom. Neither the
Union nor the Employer shall institute any proceedings in a court of law or
equity other than to compel arbitration or to enforce the decision and award of
the Impartial Chairman, or to compel the production of books and records of the
Employer for examination by the Impartial Chairman or his representatives. This
provision shall be a complete and bona fide defense to any action or proceeding
instituted contrary to the terms hereof.

              The Employer or the Union, as the case may be, who violates or
causes to be violated any provision of this Agreement, shall, whenever this
Agreement does not provide for the payment of specified damages, nevertheless
pay damages for such violation. The amount of such damages shall be agreed upon
by the Union and the Employer and in the event of their inability to agree, it
shall be determined by the Impartial Chairman.

              Since it is difficult to ascertain the specific amount of damages
payable, the amount of such damages shall for all purposes be deemed liquidated
damages. Whenever the Employer is required to pay such damages, they shall be
paid to the Union for and on behalf of itself and to compensate employees who
may be entitled to compensation.


                                       16
<PAGE>   21
              The provisions contained herein do not empower the Impartial
Chairman to act with respect to any renegotiation, extension or renewal of this
Agreement at the end thereof. The costs of arbitration shall be shared equally
by both parties.

              The Union and the Employer further agree that the notice of
hearing before the Impartial Chairman and the service of all papers used in any
application to the court in any proceedings to confirm the award of the
Impartial Chairman may be made by Certified Mail, Return Receipt Requested, at
the last known address of residence of the owner or officer of or place of
business of the respondent in such proceeding, within or without the State of
New Jersey, as the case may be, including service of the papers conferring
jurisdiction of the Union and the Employer upon the court, and the Union and the
Employer expressly agree that such award shall be enforceable by appropriate
proceedings in any court of competent jurisdiction.

              If any issue should arise as to the validity of any provision of
this Agreement, or the arbitrability of this Agreement, substantive or
procedural, the Impartial Chairman shall have exclusive jurisdiction to
determine such issue.

                                CHECK OFF OF DUES

     22. The Employer, where legally so authorized by an individual employee in
writing, agrees to deduct the membership dues, assessments, and initiation fees
weekly from the wages or salary of such employee and remit the same to the
Union, not less than once a month, by the fifteenth day of the same month.
Deductions made after the fifteenth day of the month shall be remitted with the
payments of the following month. Sums so deducted by the Employer shall be kept
separate and apart from the general funds of the Employer and shall be held in
trust by the Employer for the benefit of the Union.

                                  BENEFIT FUNDS

     23. The term "benefit funds" is the collective designation of the Health &
Welfare Fund of Local 99, U.N.I.T.E. (hereafter referred to as the "Health and
Welfare Fund"), U.N.I.T.E. National Retirement Fund (hereafter referred to as
the "Retirement Fund"), and U.N.I.T.E. Health Services Plan (hereafter referred
to as "Health Services Plan").


                                       17
<PAGE>   22
              The Employer shall pay monthly to the Union for and on behalf of
the benefit funds and during the period indicated the percentages set forth
below of his total gross weekly payroll (before deductions for Federal, State
and City taxes) of all his employees, covered by this Agreement whether regular
or trial workers. When trial workers become permanent, payments by the Employer
to the benefit funds will be paid retroactive to the first day of employment.
The Employer is not required to make payment to any benefit funds for temporary
employees.

              If temporary employees become regular or permanent employees the
Employer's payment to the funds will commence on the first day of regular or
permanent employment.

              Such payments shall be allocated and paid as follows:

              a. Effective March 16, 1996 fourteen and one-fourth percent 
(14-1/4%) of gross payroll towards the Health and Welfare Fund, a trust fund
established by collective Agreement prior to January 1, 1946 and maintained and
administered by a Union Board of Trustees, in trust for the purpose of providing
workers with health, welfare, recreational benefits and other services relating
specifically to their health and welfare as set forth in the by-laws of such
Fund. Upon the demise of an employee the Health and Welfare Fund provides for
the payment of death benefits for next of kin. In addition, the sum equal to
four-tenths of one percent (.4%) of gross payroll towards the Health and Welfare
Fund for the purpose of paying the Employer's share of the Federal Insurance
Contributions Act contribution on disability benefits paid by the Health and
Welfare Fund.

              b. Effective March 16, 1996, contributions to the Retirement Fund
shall remain at a sum equal to nine (9%) percent of gross payroll towards the
Retirement Fund, a trust fund established by collective Agreement for the
purpose of providing pensions or annuities on retirement or death of workers.

              c. Effective March 16, 1996, contributions to the Health Services
Plan shall be a sum equal to two and one-half (2 1/2%) percent of gross payroll.
The Union reserves the right at any time during the term of the Agreement to
request an increased rate of contributions to the Health and Welfare Fund,
Retirement Fund and/or the Health Services Plan. In the event of disagreement
between the parties the dispute shall be referred to the Impartial Chairman for
final determination.


                                       18
<PAGE>   23
              d. Each of the aforesaid payments under a., b. and c. above shall
be remitted on or before the fifteenth (15th) day of the following month. None
of the payments made hereunder shall constitute or be deemed wages due to
workers. All contributions required to be made under a., b. and c. above shall
be allocated by the Employer each week and kept separate and apart from its
general funds and held in trust for the benefit of the particular fund.

              e. The Union agrees that all contributions received for the Health
and Welfare Fund shall continue to be held in trust for the sole benefit of such
covered employees, deposited and held in an account separately maintained under
the name of the Health and Welfare Fund and that the monies in such account
shall be used only for the specific purpose of such Fund in accordance with its
Constitution, by-laws and rules and regulations and for the administrative
expenses thereof, and shall not be used for any other purpose.

                 The Employer shall not have any legal or equitable right,
title, claim or interest in or to said Fund or the administration thereof. No
individual worker shall have any legal or equitable right, title or interest in,
or claim against his or any other Employer's payments toward the Fund or against
the Fund except as may be provided by the by-laws or rules and regulations of
said Fund.

              f. The said Retirement Fund and the Health Services Plan shall
each be administered in accordance with its by-laws and rules and regulations by
a Board of Trustees. Each Board of Trustees shall be composed of Union
representatives and an equal number of representatives of the Employer. In the
event that the Board of Trustees shall be deadlocked on any issue or matter
arising in connection with its Fund, the same shall be decided by a neutral
person as set forth in the by-laws and rules and regulations of said Fund, and
his decision shall be final and binding. The parties hereto hereby ratify,
confirm and approve the composition and membership of each Board of Trustees as
now or hereafter constituted.

                 Each Board of Trustees shall adopt and promulgate such by-laws
and rules and regulations to effectuate the purpose of its Fund as it may deem
necessary and desirable, including the detailed basis upon which payments from
each Fund will be made, and shall have the power to modify the same from time to
time. The parties hereto agree to be bound thereby and they are hereby
incorporated in and made part of this Agreement.


                                       19
<PAGE>   24
                 An annual audit of each Fund shall be made by accountants
designated by the Board of Trustees. A statement of the results of such audit
shall be made available for inspection by interested persons at the principal
office of the Fund and at such other places as may be designated by each Board
of Trustees.

                 The Employer shall not have any legal or equitable right,
title, claim or interest in or to each said Fund. No individual worker shall
have any legal or equitable right, title or interest in, or claim against, his
or any other Employer's payments toward said Funds or against said Funds except
as may be provided by the by-laws or rules and regulations of said Funds.

                 None of the monies paid into the Retirement Fund and the Health
Services Plan shall be used for any purpose other than set forth hereinabove and
to pay the operating and administrative expenses of each Fund respectively. The
monies of each Fund shall be kept separate and apart from all other monies.

              g. The aforementioned enumerated powers and duties of the Board of
Trustees of said Retirement Fund and Health Services Plan shall not be
considered in any way whatsoever as a limitation on the powers and duties of the
Board of Trustees of each Fund to do any and all other things which may be
necessary or incidental to the proper operation, administration and maintenance
of the said Funds, and to fully effectuate their purposes.

              h. The Union or the Board of Trustees of any such Fund, shall be
proper parties in interest to enforce collection of payments due from the
Employer toward any said Fund. In the event any amount due from the Employer
under this paragraph remains unpaid for thirty (30) days after becoming due,
such amount shall automatically bear interest thereafter at the rate of nine
(9%) percent per annum and the Employer shall pay the same. The Impartial
Chairman may, in connection with any action or proceeding to confirm the award
made pursuant to paragraph 24(h), also have the right to direct the Employer to
pay to the Union reasonable attorney's fees and expenses in amounts fixed by him
and the reasonable costs of investigations to determine the amount due.

              i. It is agreed that all of the aforesaid payments required to be
made under this Paragraph have no relation to eligibility of workers to benefits
from the benefit funds; eligibility for benefits shall be determined solely
under the rules and regulations of each of the aforesaid Funds which include the
detailed basis upon which benefits to eligible workers shall be paid.


                                       20
<PAGE>   25
         j. The provisions herein relating to the Funds constitute a
consideration of this Agreement and are of the essence of this Agreement.
Failure by the Employer to pay the amount due from it hereunder to the Funds
shall be deemed a breach of this Agreement by the Employer.

         k. The Board of Trustees or other body administering said benefit
funds, including the Union's Health and Welfare Fund, is hereby authorized, in
its sole discretion, upon such basis as it deems desirable, and to the extent
permitted by law, to transfer or mingle the assets of or to merge any of said
benefit Funds with any other benefit fund or funds now existing or hereafter
established and provided for in a collective bargaining Agreement with
U.N.I.T.E. or an affiliate thereof. In the event of such transfer, mingling or
merger, the amounts hereinabove provided to be allocated towards said Funds
shall be paid over to the Fund or Funds with which there has been such transfer,
mingling or merger.

                SEVERANCE FUND-TERMINATION OR DISMISSAL BENEFITS

     24. The parties hereto recognize the necessity of protecting workers who,
for many years, have contributed their loyal service and who, through no fault
of their own, find themselves dismissed from their employment by the closing
down or reorganization of their Employer's business. It is recognized that this
problem is one of special interest and concern to the parties, and that
industrial tranquility and stability will be aided and preserved by the
establishment of a separate and individual Severance Fund for the Employer. With
the express intent and agreement of the parties and, subject to applicable and
existing law, the parties agreed to continue the separate individual Severance
Fund, the signatories to each such Fund to consist of the Union and the
Employer.

         The exclusive purpose of each such individual Fund is to pay to each
covered worker employed by each individual Employer who has been dismissed or
terminated from his employment and otherwise meets the eligibility requirements
set forth in the Rules and Regulations of each such Fund a lump sum equal to one
week's wages multiplied by the number of years of his employment with the
Employer. Such payments are designated as termination or severance or dismissal
payments, the right to which shall have been earned by covered Employees during
their prior service. The Rules and Regulations of each such individual Fund
shall comply in all respects with applicable law and shall set forth, among
other things, eligibility requirements and all other conditions to be met prior
to the payment of benefits.


                                       21
<PAGE>   26
         a. The Employer shall deposit monthly into a custodian bank account of
the jointly administered Severance Fund a sum not to exceed one-half (1/2%)
percent of its gross weekly payroll (before deductions for Federal, State and
City taxes) of the covered workers, to enable the Fund in due course to pay
covered Employees the aforesaid severance or dismissal benefits. The aforesaid
payments shall be remitted on or before the fifteenth (15th) day of the
following month.

         b. At the time of the initial deposit and at the end of each calendar
year thereafter, the Employer shall submit a written statement to the Union
setting forth the names and addresses of each covered worker or workers on whose
behalf such payment may be made, their Social Security numbers, job
classifications, weekly wages, dates of hiring and number of years of
employment, including the amount of deposit. In addition to the foregoing, the
Employer shall submit a written statement not less than every three months
setting forth information comparable to that presently supplied to the benefit
funds referred to in Paragraph 23. The Union shall have the right to examine the
Employer's books and records in order to ascertain whether the provisions hereof
are being fully complied with and whether said amounts have been fully paid, in
the same manner as is provided in this Agreement for the examination of the
Employer's books and records for any other purpose.

         c. The Fund shall be administered in accordance with its By-laws and
Rules and Regulations to be promulgated, by Trustees which shall be composed of
one Employer and one Union representative, and alternate representatives, one
designated by the Employer and by the Union respectively. In the event that the
Trustees shall be deadlocked on any issue or matter arising in connection with
the Fund, the same shall be decided by a neutral person, namely, the Impartial
Chairman acting under the arbitral provisions of this Agreement and his decision
shall be final and binding. The Employer hereby ratifies, confirms and approves
the composition and membership of the Trustees of the Fund respectively as now
or hereafter constituted. All Trustees shall serve without compensation.

         d. The Trust Fund is hereby declared to be an irrevocable trust and the
Trustees of the Fund agree to receive, hold and administer the Trust Fund for
the exclusive purpose of providing benefits in accordance with the Rules and
Regulations adopted by the Trustees. Interest and dividends accumulated may be
used for reasonable, necessary and proper expenses under existing law in the
operation and management of the Fund.

                                       22
<PAGE>   27
         e. The Trustees of the Fund are hereby authorized to adopt and
promulgate By-Laws and Rules and Regulations (subject to existing and applicable
law) to effectuate the purposes of the Fund as they may deem necessary or
desirable, including the detailed basis upon which payments from the Fund will
be made and shall have the power to modify same from time to time to carry out
more effectively the purposes of the Fund. All By-Laws, Rules and Regulations
and amendments thereto, adopted and promulgated by the Trustees of the Fund,
shall be deemed incorporated herein and a part hereof with the same force and
effect as if set forth in full herein.

         f. The Trustees of the Fund shall have the power and authority, in
their sole discretion to determine the type and kind of investments of the Trust
Fund and/or direct a bank custodian to so invest the same. The Trustees of the
Fund shall be the financial advisors of the Fund.

         g. No worker shall make or be required to make any payment whatsoever
to any Fund. The Employer agrees that its obligation to make payments toward its
Fund shall not be subject to set-off or counterclaim which the Employer may have
for any liability of the Union or of any Employee.

         h. The Employer shall not have any right, title or claim, legal or
equitable, in or to any sum paid by it to its Fund or against the Fund itself
except as provided for in the Rules and Regulations. No Employee shall have any
right, title, interest or claim, legal or equitable, in or to the Employer's
payments to its Fund except as provided for in the Rules and Regulations.

         i. The custodian bank in which the Trust Fund shall be deposited shall
issue quarterly statements of income and assets to the Trustees indicating among
other things the amount then on deposit, what part thereof, if any, represents
accumulated interest, together with any securities held and the transactions for
the period. The statements shall be made available for inspection by interested
persons at the principal office of each Fund.

         j. The Trustees of the Fund shall be responsible for filing and
reporting disclosure documents with the proper governmental agencies whenever
required to do so.

         k. The aforementioned enumerated powers and duties of the Trustees of
the Fund shall not be considered in any way whatsoever as a limitation of the
powers and duties of the Trustees to do any and all other things which may


                                       23
<PAGE>   28
be necessary or incidental to the proper operation, administration and
maintenance of the said Fund and to fully effectuate its purposes under
applicable law.

         l. The provisions herein relating to the Fund constitute a
consideration for this Agreement and are the essence of this Agreement. Failure
by the Employer to pay the amounts due from it to the Fund shall be deemed a
breach of this Agreement by the Employer. The Union shall be a proper party in
interest to enforce payment thereof under this Agreement.

         m. It is intended that the foregoing individual Severance Fund and
plans shall not constitute Employee Pension Benefit Plans as defined under the
Pension Reform Act of 1974, and the By-laws, Rules and Regulations thereof with
respect to the Fund shall be promulgated accordingly.

                             DISCHARGE OF EMPLOYEES

     25. No employee covered by this Agreement shall be discharged except for
just cause, which includes, but is not limited to incompetency, insubordination,
ineligibility for bonding by any reputable bonding company, or continual
lateness or continual absence. The Employer shall notify the Union in writing,
within forty-eight (48) hours of all cases of discharge of covered employees.

         Should a dispute or difference arise as to whether or not the discharge
was for just cause, the matter shall be submitted to arbitration as provided
herein. If the Impartial Chairman finds that the employee was discharged without
just cause, he may order reinstatement and may require the payment of back pay
in such amount as, in his judgment, the circumstances warrant.

                           SHOP STEWARD AND COMMITTEE

     26. a. The Union shall have the right to certify to the Employer one
employee to be designated as shop steward and such other employees to be
designated as members of the shop committee on the basis of one for every
twenty-five employees but not in excess of a total of ten excluding the shop
steward. They shall assist the Union in carrying out the intent and purpose of
this Agreement. The Union Committee shall meet once per month for a period of
one hour. The Employer will not unreasonably withhold consent for special
requests for additional time.


                                       24
<PAGE>   29
         b. During any counselling of a Union employee, a shop steward or a shop
committee person must be present.

         c. Counselling records of employees will be considered stale and of no
effect and will be cleared from an employee's personnel records after a two (2)
year rolling period with respect to non-attendance matters and after a one (1)
year rolling period with respect to attendance matters. A joint Labor-Management
Committee shall be established which shall deal with health, safety and training
issues of employees. The Labor-Management and Labor-Safety meeting will be held
on the third Thursday of every month during regular working hours to review
ongoing issues and conditions, make recommendations with respect to operations
and conditions, subject to the terms of this Agreement, including issues
relating to absenteeism. The Union shall designate the Union members to serve on
such committee and the Employer shall designate the Employer members to serve on
such committee.

                               RIGHT OF VISITATION

     27. Representatives of the Union shall be permitted free access to the
establishments where its members are employed, for the purpose of observing if
the conditions of this Agreement are maintained, and for any other reasonable
purpose arising out of the operation of this Agreement, provided there is no
interference with the business of the Employer.

                        STRIKES OF U.N.I.T.E. AFFILIATES

     28. As far as is consistent with law it shall not be considered a breach of
this Agreement on the part of the Union or on the part of any individual
employee, if any employee or employees refuses to enter upon the premises of any
employer against whom the Union or an affiliate of U.N.I.T.E. is conducting a
bona fide strike, either of their own volition or by direction of the Union nor
shall such refusal be cause for discharge or disciplinary action. The word
"premises" is herein defined as limited to the area actually and immediately
occupied by said Employer and does not include any area or part of a building
not physically occupied by said Employer.


                                       25
<PAGE>   30
                             EXAMINATION OF RECORDS

     29. The Union shall have the right at all reasonable times and upon
reasonable notice to the Employer, to investigate such books and records of the
Employer as are necessary in order to ascertain whether the provisions of this
Agreement are being fully complied with. The Employer shall have the right to
have its representative accompany the Union representative upon such
investigation. The Impartial Chairman shall have the right to institute any such
investigation.

               PENALTY UPON FAILURE TO PAY DUES AND CONTRIBUTIONS

     30. a. Workers shall be paid for the time lost during which a shop may be
stopped due to the failure of the Employer to remit dues, assessments and
initiation fees and/or make contributions to the Funds and/or the Employer's
failure to pay wages, overtime, vacation and/or holiday pay, all as required
herein, only after five (5) days have elapsed after such Employer has received
written notice of failure to make such remittances and/or payments, and same
have not been paid; such a stoppage for any of the aforementioned reasons is
hereby expressly authorized as an exception to Paragraphs 19 and 21 of this
Agreement.

         b. In the event the Employer fails to make payments to the Health and
Welfare Fund when due, the Employer shall, after fifteen (15) days notice of
delinquency to it by certified mail, be liable to each of its covered workers
for any benefits to which such covered workers may become eligible by reason of
illness, hospitalization, surgery or otherwise, after said notice. Such
liability shall be in addition to other obligations of the Employer under this
Agreement.

                  PRE-TICKETING AND OTHER PROCESSING OPERATIONS

     31. The manner and methods of all operations in the processing of
merchandise as well as office work in connection therewith shall be in the
discretion of the Employer, but in no event, except as provided in the following
sentence, shall the exercise of such discretion directly or indirectly cause the
loss of jobs to regular workers and/or cause their lay-offs. The foregoing is
subject to seasonal variations of the post lay-off period and/or to conditions
which have a substantial adverse economic affect upon the Employer's business,
it being the Employer's intention to contain outside operations in the
processing of merchandise and/or office work with a view toward safeguarding the
jobs of regular workers and to obviate the necessity of undue lay-offs.


                                       26
<PAGE>   31
                   UNION RECOGNITION IN ADDITIONAL FACILITIES

     32. Should the Employer (or its subsidiary or affiliate) open an additional
warehouse, office or similar distribution or office facilities beyond 100 miles
from its present location in Harrison, New Jersey, notwithstanding the various
provisions set forth in the parties' collective bargaining Agreement, the
Agreement shall not cover the workers hired at the new facility and shall not
govern the terms and conditions of employment of those workers at the new
facility until such time as the Union demonstrates that it has been designated
by a majority of the employees at such new facility. The determination as to
whether the Union has been so designated shall be subject to the arbitration
provisions set forth in this Agreement. Until such time as the parties mutually
agree upon changes in terms and conditions of employment, the terms of this
Agreement shall apply.

                              REMOVAL OF FACILITIES

     33. During the term of this Agreement the Employer shall not move its
warehouse, office or similar distribution or office facilities from its present
location without the Union's consent. In the event the Employer expands or opens
any additional or new warehouse or office facilities during the term of this
Agreement, it shall not move therefrom without the Union's consent. It is
understood, however, that consent shall not be withheld if such contemplated
removal is to a location within 100 miles from its present location in Harrison,
New Jersey and then, only if the Employer and the Union have mutually agreed
upon adjustments, if any in terms and conditions of employment. In the event the
parties are unable to mutually agree upon said adjustments, if any, the matters
in disagreement shall be referred to the Impartial Chairman for final
determination.

                                 CONTRACTING OUT

     34. Anything in this Agreement to the contrary notwithstanding, contracting
out by the Employer to any other warehouse or similar distribution facilities of
any of the operations in the processing of merchandise and/or office work is
prohibited except when all of the Employer's regular workers are working full
time and then, only if such work is given to establishments in contractual
relations with the Union. However, the Employer may continue renting temporary
warehouse space, including landlord services, for purposes of temporary storage
only for products that will be delivered, handled and processed by the Harrison
Warehouse Associates. In addition, the Employer may use lumpers in accordance
with paragraph 2 and Exhibit D hereof.


                                       27
<PAGE>   32
                                 REORGANIZATION

     35. The Employer shall have the right in good faith to reorganize its
warehouse and/or facilities. A reorganization in good faith shall mean a bona
fide reorganization of the Employer's business, necessitated by a permanent
curtailment of his business or a fundamental change in the character of his
business.

                              SURVIVAL OF LIABILITY

     36. a. The Employer, and its subsidiaries or affiliates at the time of the
execution of this Agreement and its transferees, successors and assigns and the
persons, firms and corporations becoming members thereof subsequent to the date
of the execution of this Agreement and their transferees, successors and
assigns, shall be and continue to remain liable hereunder for their own
obligations respectively, for and during the term hereof. The Impartial Chairman
shall have the power to determine whether any person, firm or corporation is a
transferee, successor or assign of the Employer.

         b. Subsidiary or affiliated firms or corporations of the Employer
shall, for the purpose of this Agreement, be deemed bound by all terms of this
Agreement to the extent that they are Employers of workers covered hereunder.
The Impartial Chairman shall have the power to determine whether an alleged
subsidiary or affiliate of the Employer is in fact such subsidiary or affiliate.

             CONTINUING OBLIGATIONS IN THE EVENT OF SALE OR TRANSFER

     37. The Employer agrees that:

         a. it shall not nor permit its subsidiaries and/or affiliates to enter
into any partnership, or consolidate or merge with, or be absorbed by any
person, firm or concern or sell or transfer its or their business, in whole or
in part, to any other person, firm or concerns unless the new or purchasing firm
agrees to be bound under this Agreement for the duration hereof and assume all
of the obligations, accrued and otherwise, to the workers, the Union and the
Benefit Funds hereunder and recognize the Union as the sole and exclusive
bargaining agent and representative of the employees covered by this Agreement;

         b. it will, on its own behalf and on behalf of its subsidiaries and
affiliates, give to the Union at least thirty (30) days written notice prior to
a final closing of any transaction or disposition enumerated above, and;


                                       28
<PAGE>   33
         c. it and/or its subsidiaries and affiliates shall be liable to the
Union and to the workers for damages, liquidated and otherwise, to be fixed by
the Impartial Chairman, for any action, transaction or disposition in violation
hereof; and,

         d. in the event of any transaction or disposition enumerated above, it
and/or its subsidiaries and affiliates will nevertheless continue to remain
individually, collectively and personally liable under all of the provisions of
this Agreement for the duration hereof unless specifically released therefrom by
the Union. In addition, the new firm, person or concern shall be liable and
responsible to the workers, the Union and the Benefit Funds under the provisions
hereof by operation of applicable and decisional law.

                         INVALIDITY OF PART OF AGREEMENT

     38. a. If any provision of this Agreement, or the enforcement or
performance of such provision is or shall at any time be determined to be
contrary to law by or enjoined by a court or administrative agency, then such
provision shall not be applicable or enforced or performed except to the extent
permitted by law. The Union and the Employer shall thereupon negotiate a
substitute provision. If they are unable to agree, the Impartial Chairman shall
determine such substitute provision which shall be deemed incorporated into this
Agreement.

         b. If any provision of this Agreement or its application to the
Employer, person or circumstance is so held invalid or enjoined, the remainder
of this Agreement, or the application of such provision to other Employers,
persons or circumstances, shall not be affected thereby.

         c. The interpretation and enforcement of this Agreement shall be
governed by federal law and by the laws of the State of New York not
inconsistent therewith.

                                NO DISCRIMINATION

     39. There shall be no discrimination in hiring, promotions or in terms and
conditions of employment because of race, creed, color, national origin, sex or
age.


                                       29
<PAGE>   34
                                EXISTING BENEFITS

     41. Existing benefits shall not be reduced during the term of this
Agreement.

                                   JURY DUTY

     42. If, after one year of employment, a covered worker shall be required to
serve as a juror (not as a volunteer and if not excused), he shall be entitled
to receive the difference between the sums received by him for such jury service
and his regular daily pay but such entitlement period shall not exceed three (3)
weeks (15 working days) in any one year.

         A worker who receives notice of jury duty shall immediately notify his
Employer.

                              TIME OFF FOR UNION MEETINGS

     43. The Employer agrees to grant to his covered workers up to three (3)
hours time off, without loss of pay, not more than three times during each year
of this Agreement, to attend meetings called and sanctioned by the Union.

                             POOR WORKING CONDITIONS

     44. When any working conditions, including, but not limited to excessive
heat or cold, may adversely affect a worker's health or create unnecessary
burden in the performance of the work, the Employer must correct and alleviate
such situation with due diligence.

                                   FIRE DRILLS

     45. The Employer shall hold two shop fire drills in each year of this
Agreement in which workers are to leave the building or move into safety areas
or fire towers, as recommended by the local fire department. Workers hired in
the period between drills shall be instructed as to the location of all means of
egress from the shop.


                                       30
<PAGE>   35
                            NO MODIFICATION OR WAIVER

     46. a. The Employer and no worker or group of workers shall have the right
to modify or waive any provision of this Agreement.

         b. The failure of either party to this Agreement to require strict
performance of any provision of the Agreement shall not be deemed a waiver or
abandonment of any of the rights or remedies provided herein for violation of
the Agreement or any provision thereof; nor shall it constitute a waiver or
abandonment of any right or remedy herein provided for a subsequent violation of
any provision of the Agreement.

         c. The parties' Agreement dated April 27, 1993 concerning the Supply
Department is hereby incorporated by reference as if fully set forth.

                                 TRANSPORTATION

     47. Transportation considerations will be as set forth in Exhibit E annexed
hereto.

                              DURATION OF AGREEMENT

     48. The term of this Agreement shall be from March 16, 1996 to March 15,
1999.

     IN WITNESS WHEREOF, the parties have hereunto set their hands and seals the
day and year first above written.

     Lechters, Inc.                    Office and Distribution Employees' Union,
                                       Local 99, U.N.I.T.E.


By: /s/ Ira S. Rosenberg               By: /s/ Christine Kerber
    ----------------------------           -------------------------------
    Ira S. Rosenberg                       Christine Kerber
    Vice President                         Manager


                                       31
<PAGE>   36
                                 LECHTERS, INC.
                                 VACATION POLICY
                       UNION DEMAND #7 & COMPANY DEMAND #5

Contract Paragraph 13a.

                                    VACATIONS

The vacation period shall be from FEBRUARY 1 TO SEPTEMBER 30 of each year,
however, where the Employer and the employee agree on a different vacation
period the Union shall not unreasonably withhold its consent. Associates may
also request vacations between OCTOBER 1 AND DECEMBER 31, which will be approved
and granted at a rate of five (5) persons per week, but no more than three (3)
from the mezzanine and two (2) from all other departments, according to
seniority, to associates who request vacations during the normal vacation
scheduling period.

Vacations will be granted at the time most desired by the associate whenever
possible, however, the Employer reserves the right to require alternative dates
in order to ensure proper coverage for business operations. Vacation requests
should be submitted for approval during the normal vacation scheduling period.
No vacations will be approved with out a minimum of two (2) weeks notice.

Vacations with pay will be granted each year, as provided in this paragraph 13,
to covered employees who will have the required length of employment as of Labor
Day of each year, except that for covered employees with 5 years or more of
seniority, the date shall be December 31.


                                                          Revised March 27, 1996


                                   EXHIBIT A
<PAGE>   37
(1)                                 OVERTIME


1.0 When overtime is needed, employees shall be notified as far in advance as
possible in order to allow them to make necessary preparations for working
overtime and such notice shall be given no later than the employees' scheduled
lunch break if overtime that day is needed.

1.1 The Union agrees that it will, through its shop committee, cooperate in
having employees perform overtime work when it is requested.

1.2 The Company will request volunteers from among the employees who are capable
and qualified to perform the overtime work involved. When such overtime work is
necessary and there are insufficient volunteers, the employee in the department
with the least seniority shall be the first to be required to work. If requested
to work overtime, the employee will be required to do so during the peak season
between September 1 and December 31, unless he or she has a reasonable excuse
for being unable to work. Overtime during the non-peak season shall be voluntary
except in the case of an emergency.

1.3. Overtime will be allocated as equally as possible among employees
consistent with Section 1.2. The overtime records shall be available for
inspection at the request of the Union.

1.4. Where there has been a reduction in working force in a department, no
overtime shall be permitted in such department until all employees in that
department who have been involuntarily laid off shall have been rehired or given
the opportunity to return to work unless there is insufficient time to give
notice to such laid off employees so that they may return to work.

1.5 The Company agrees that all disputes under this Article shall be the subject
to the grievance and arbitration procedures of the Agreement.
------------------
(1) March 26, 1996

                                   EXHIBIT B
<PAGE>   38
                                   MEMORANDUM




     TO:    Sydney Gerstein, President
            Local 99, U.N.I.T.E.
   FROM:    Ira Rosenberg, VP-Secretary/Corporate Counsel Lechters, Inc.
   DATE:    March 26, 1996
     RE.    COMPUTER TRAINING BONUS FOR WORKERS COVERED BY COLLECTIVE BARGAINING
            AGREEMENT - MARCH 16, 1996 THROUGH MARCH 15, 1999.

As per our agreement, this will be our policy regarding training bonuses paid to
employees for PDTs and RF guns:

Workers who were employed with Lechters, Inc., covered under the aforementioned
collective bargaining agreement as of April 1, 1996 and have not previously
received a training bonus, shall be entitled to the following bonuses for
successful completion of initial computer equipment training.

     1.   PDTs - Upon successful completion of training on a PDT, existing
          employees shall receive a one time "training bonus" in the amount of
          $50.00, subject to all applicable payroll taxes.

     2.   RF guns - Upon successful completion of training with a RF gun,
          existing employees shall receive a one time "training bonus" in the
          amount of $100.00, subject to all applicable payroll taxes.

Workers who are hired after April 1, 1996, and are covered under the
aforementioned collective bargaining agreement, shall not be eligible for any
bonuses for training on either a PDT or a RF gun, as it is deemed part of the
work requirements.

Please countersign below and return to me the enclosed copy of this memorandum,
evidencing your agreement to the foregoing information.


AGREED:

Lechters, Inc. by: ________________________        Date:________________


Local 99 by: ______________________________        Date:________________


                                   EXHIBIT C
<PAGE>   39
                                 LECHTERS, INC.
[LECHTERS LETTERHEAD]          UNION PROPOSAL #15
                            "Lumper" Program Outline


1.   "Lumpers" are persons who are hired and paid for by trucking companies.

2.   The service of the "lumpers" are a service that the Company is entitled to,
     without any additional charges, for the limited purpose of unloading trucks
     operated by the transportation company which hires and pays for the
     "lumpers."

3.   The duties of the "lumpers" are strictly limited to unloading those trucks
     and placing the merchandise onto pallets on the receiving dock. They are
     not authorized to move pallets once merchandise is placed onto the pallets.

4.   Pallets are provided by Lechters, but Lechters provides no other equipment
     to the lumpers.

5.   Workers employed as "lumpers" will not work for Lechters, Inc. as a
     temporary employee on the same day they are working as a "lumper".

6.   Lechters, Inc. will provide a list of all workers employed as "lumpers" as
     requested and not less than once a week.


                                                                   April 1, 1996


                                   EXHIBIT D
<PAGE>   40
                                   MEMORANDUM


      TO:    Sydney Gerstein, President Local 99, U.N.I.T.E.
    FROM:    Ira Rosenberg, VP-Secretary/Corporate Counsel Lechters, Inc.
    DATE:    March 26, 1996
      RE:    SUPPLEMENTAL TRANSPORTATION FOR WORKERS COVERED BY COLLECTIVE
             BARGAINING AGREEMENT - MARCH 16, 1996 THROUGH MARCH 15, 1999.

As per our agreement, this will be our policy regarding Company provided
supplemental transportation for workers covered by the aforementioned collective
bargaining agreement.

It is the responsibility of each Associate to arrange their own transportation
to and from work for the agreed work schedule, so as to arrive to work on time.

However, the Company does agree to provide supplemental transportation in the
form of one vehicle, that will pick up and drop off workers at the Harrison PATH
station for all regular warehouse shifts, and for any mandatory overtime hours.

The Company further agrees to select two (2) union associates who will be
primarily responsible for driving other associates to and from the PATH station
at the start and conclusion of warehouse shifts, as well as two (2) additional
associates who will act as back up drivers in the event of an absence of a
primary driver. It is our present intention to select one (1) primary and one
(1) back up office union associate to drive the designated vehicle in the
morning and one (1) primary and one (1) back up warehouse union associate to
drive the designated vehicle in the late afternoon.

Associates being considered by the Company for this responsibility, will be
subject to a driving record search through the Department of Motor Vehicles. In
order to be selected, associates driving record must be in "good standing," and
remain in good standing through out the duration of their driving
responsibilities.

Please countersign below and return to me the enclosed copy of this memorandum,
evidencing your agreement to the foregoing information.

AGREED:

Lechters, Inc. by:. ______________________                 Date:________________


Local 99 by: _____________________________                 Date:________________


                                   EXHIBIT E