<PAGE>   1

                                   AGREEMENT

                                    BETWEEN

                           OFFICE AND DISTRIBUTION
                       EMPLOYEES' UNION LOCAL 99, UNITE

                                     AND

                           LECHTERS, INC. (OFFICE)

                                      *

                         JULY 1, 1997 - JUNE 30, 2000


                                                          [REVISED - 10/15/97]
<PAGE>   2

                               TABLE OF CONTENTS

UNION RECOGNITION............................................................1

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

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

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

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

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

SENIORITY, LAYOFF AND LEAVE OF ABSENCE.......................................4

HOURS OF WORK................................................................5

OVERTIME PAY.................................................................5

PAYMENT OF APPEARANCE FOR WORK...............................................6

GENERAL WAGE INCREASE........................................................7

MINIMUM WAGE.................................................................7

HOLIDAYS.....................................................................7

VACATIONS...................................................................10

AUTHORITY TO ACT FOR UNION..................................................11

NO-STRIKE PROVISION.........................................................12

NO LOCK-OUT PROVISION.......................................................13


                                     i
<PAGE>   3

ARBITRATION.................................................................13

CHECK OFF OF DUES...........................................................16

BENEFIT FUNDS...............................................................16

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

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

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

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

STRIKES OF UNITE AFFILIATES.................................................25

EXAMINATION OF RECORDS......................................................25

PENALTY UPON FAILURE TO PAY DUES AND CONTRIBUTIONS..........................25

MANAGEMENT RIGHTS...........................................................26

UNION RECOGNITION IN ADDITIONAL FACILITIES..................................26

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

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

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

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

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


                                     ii
<PAGE>   4

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

NO DISCRIMINATION...........................................................30

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

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

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

UNUSUAL WEATHER CONDITIONS..................................................31

FIRE DRILLS.................................................................31

HEALTH AND SAFETY...........................................................31

NO MODIFICATION OR WAIVER...................................................31

DURATION OF AGREEMENT.......................................................32

401(k) SAVINGS PLAN.........................................................32

UNION RECOGNITION............................................................1

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

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

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

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

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

SENIORITY, LAYOFF AND LEAVE OF ABSENCE.......................................4


                                      iii
<PAGE>   5

HOURS OF WORK................................................................5

OVERTIME PAY.................................................................5

PAYMENT OF APPEARANCE FOR WORK...............................................6

GENERAL WAGE INCREASE........................................................7

MINIMUM WAGE.................................................................7

HOLIDAYS.....................................................................7

VACATIONS...................................................................10

AUTHORITY TO ACT FOR UNION..................................................11

NO-STRIKE PROVISION.........................................................12

NO LOCK-OUT PROVISION.......................................................13

ARBITRATION.................................................................13

CHECK OFF OF DUES...........................................................16

BENEFIT FUNDS...............................................................16

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

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

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

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

STRIKES OF UNITE AFFILIATES.................................................25


                                       iv
<PAGE>   6

EXAMINATION OF RECORDS......................................................25

PENALTY UPON FAILURE TO PAY DUES AND CONTRIBUTIONS..........................25

MANAGEMENT RIGHTS...........................................................26

UNION RECOGNITION IN ADDITIONAL FACILITIES..................................26

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...........................................................30

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

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

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

UNUSUAL WEATHER CONDITIONS..................................................31

FIRE DRILLS.................................................................31

HEALTH AND SAFETY...........................................................31


                                      v
<PAGE>   7

NO MODIFICATION OR WAIVER...................................................31

DURATION OF AGREEMENT.......................................................32

401(k) SAVINGS PLAN.........................................................32


                                     vi
<PAGE>   8

      AGREEMENT made and entered into the _____ day of October, 1997, effective
as of July 1, 1997 by and between Lechters, Inc. (Office), hereinafter referred
to as the "Employer" and the Office and Distribution Employees' Union, Local 99,
UNITE, affiliated with the AFL-CIO, hereinafter referred to as the "Union."

                                   WITNESSETH:

      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
employed by the Employer 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 workers employed in the
following job functions in the office at One Cape May Street, Harrison, New
Jersey and any other office within one hundred (100) miles from the present
location in Harrison, New Jersey, to which this Agreement shall apply as set
forth in paragraphs 29 and 30 hereof:

      Accounting Clerks             Bookkeeper
      Statistical Clerks            Calculating Machine Operators
      Stenographers                 Comptometer Operators

                                      1
<PAGE>   9

      Typists                       Bookkeeping Machine Operators
      General Office Clerks         Payroll Clerks (non-confidential)
      Mail Clerks                   Switchboard Operators
      File Clerks                   Distributors (paper and physical)
      Merchandising Clerks          Re-Order Clerks
      Floor Clerks                  Chargers
      Manual Ticketers              Unit Control Clerks
      Machine Ticketers             Order Pickers
      Examiners                     Receiving Clerks
      Shipping Clerks               Secretaries (excluding confidential 
                                        executive secretaries)
      Packers                       Buying Clerks
      Porters                       Stock Clerks
      Check Out Clerks              Fork Lift Operators
      E.D.P. Operators

and all other employees doing similar work although described by another job
title. 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.

                               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 covered workers who have been employed for one (1) year, shall be
given time off at least

                                      2
<PAGE>   10

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 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, it shall be a condition of employment
for all employees covered by this Agreement on or after the thirtieth (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, to become and remain a member of the Union. For the
purpose of this provision, to become and remain a member of the Union shall be
deemed to mean that 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 forty (40) work days is hereby fixed for new
employees covered by this Agreement. The seven ($7.00) dollar increase provided
under Section 12(B) shall be paid on completion of the trial period, retroactive
to the thirty-first (31st) day of employment. 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.


                                      3
<PAGE>   11

                               TEMPORARY EMPLOYEES

      6. The use of temporary employees by the Employer shall be permitted as
follows:

      A. As fill-ins on a one-for-one basis, subject to a maximum employment
period of eight (8) weeks during any twelve (12) consecutive month period or the
period of absence of the regular employee for whom the temporary employee is
filing in, if that period is longer.

      B. As supplements to the regular work force, limited to forty (40)
temporary days during any twelve (12) consecutive month period.

      C. As packers and movers to pack and move files and move cabinets and
furniture, limited to sixty (60) temporary days during any twelve (12)
consecutive month period.

                     SENIORITY, LAYOFF AND LEAVE OF ABSENCE

      7. A. All rehiring 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 rehires
shall not be on a departmental basis, except where the employee in question is
unable to perform the required work. Accordingly, the Employer may elect to
layoff the employee with the least seniority who is not able to perform the
required work or rehire the employee with the most seniority who is able perform
the required work. An employee who does not return from layoff within five (5)
working days may be subject to termination. The Employer agrees to use all
reasonable efforts, including, notifying such employee, in writing, of their
right to return to work. 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.


                                        4
<PAGE>   12

      B. Unpaid leave of absence in case of sickness or pregnancy shall be
granted for reasonable periods. Other leaves of absence for personal needs may
be requested and shall not unreasonably be withheld. If, however, the employee
is entitled to a vacation or holiday, the employee shall use such vacation or
holiday instead of being granted an unpaid leave of absence for a purpose not
covered by the Family Medical Leave Act. 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, grandparent, child, grandchild, sister or brother. 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. In the event additional time off without pay is
requested, consent to such request shall not be unreasonably withheld. 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.

      The parties agree to meet during the term of the contract to jointly
develop a mutually acceptable departmental seniority plan for purposes of layoff
and recall.

                                  HOURS OF WORK

      8. The Employer shall have the right to vary by not more than two (2)
hours, the start time of workers hired on or after July 1, 1997. The regular
work day shall end eight (8) hours after the start time, inclusive of one (1)
hour for lunch, for such workers. Present employees shall be notified of any
such position and qualified employees shall be given preference in accordance
with seniority for such position. 

                                  OVERTIME PAY

      9. 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.


                                        5
<PAGE>   13

      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 will be
required to work in order of reverse seniority.

      D. Overtime will be allocated as equally as possible among employees
consistent with Section 9B. The overtime records shall be available for
inspection at the request of the Union.

      E. 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 shall be paid at the rate of double time.

      F. The supper money work requirement shall be increased from two (2) hours
to two and one-half (2 1/2 ) hours and supper money shall be payable for work on
weekdays only.

                         PAYMENT OF APPEARANCE FOR WORK

      10. 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, such

                                        6
<PAGE>   14

employees shall receive a full day's pay. Employees may 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.

                              GENERAL WAGE INCREASE

      11. The weekly general wage increase shall be $14.00 on July 1, 1997;
$14.00 on July 1, 1998; and $15.00 on July 1, 1999.

                                  MINIMUM WAGE

      12. A. The minimum weekly wage for all shall be not less than one hundred
eighty dollars and twenty-five cents ($180.25) for a full basic work week and,
after completion of the temporary or trial period, all employees shall be paid
not less than one hundred eighty-seven dollars and twenty-five cents ($187.25)
for a full basic work week.

      B. 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, after completion of
the trial period, set forth herein shall automatically be adjusted as required
and the minimum wage, after completion of the trial period hereunder, shall be
at no time less than fifteen (15%) percent per hour above such newly established
applicable minimum wage.

                                    HOLIDAYS

      13. 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
holidays, each of which shall be observed, regardless of the day of the week in
which each occurs:

                                 New Year's Day
                              Washington's Birthday

                                        7
<PAGE>   15

                                  Memorial Day
                                Independence Day
                                    Labor Day
                                  Election Day
                                Thanksgiving Day
                                  Christmas Day

      In addition to the above, all covered workers shall be entitled to receive
one (1) additional guaranteed holiday to be designated by each worker at the
start of each calendar year of this Agreement. In the event a substantial number
of the Employer's workers select a common date, the Employer may adopt such date
as the additional guaranteed holiday and close its business entirely on such
date, which shall be binding upon 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.

      In addition to the above, all covered workers shall be entitled to receive
two (2) additional personal guaranteed holidays to be designated by each worker
during each calendar year of this Agreement. Three (3) days prior notification
for selection of personal days will be given by the worker if possible.

      B. The following four (4) religious holidays, Rosh Hashanah (2 days), Yom
Kippur and Good Friday, shall be guaranteed holidays regardless of the day of
the week in which each occurs. If any such holiday occurs on a Saturday or
Sunday, a substitute day off with pay shall be mutually arranged. If any such
holiday occurs during the work week, Monday through Friday, and the Employer
elects to remain open, all covered workers shall be paid at the regular rate of
pay and in return, therefore, it shall be mutually arranged for such other day
or days, as the case may be, in substitution as paid holidays. Arrangements
shall be made for the substitute days within a reasonable period of time prior
to the date of the guaranteed holiday. The covered worker may elect not to work
for religious reasons on any of the aforesaid religious holidays. 

      C. If work is performed on a regular work day or a Saturday and a legal
holiday is celebrated on

                                      8
<PAGE>   16

such day, 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 (1) full
day's pay plus double time for the number of hours worked.

      D. If a legal holiday falls on Saturday, the Employer may substitute 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.

      For purposes of computing holiday pay only, if the first work day after a
holiday is in a new work-week, the work-week shall be defined as the period
including the first work day after the holiday(s) and the four (4) previous work
days which include the holiday(s).

      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 (1) day's holiday
pay for any one (1) holiday provided for in this Agreement.

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

      F. 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.


                                      9
<PAGE>   17

      Temporary employees shall receive no pay for holidays but, upon becoming
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.

                                    VACATIONS

      14. A. The vacation period shall be from January 1 to January 31 and April
1 to December 31 of each year and where Employer and employee agree on a
different period, the Union shall not unreasonably withhold its consent.
Vacations with pay will be granted each year, as provided in this paragraph 14,
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                                1 week 
2 years and over, but less than 5 years                               2 weeks
5 years and over, but less than 10 years                              3 weeks
10 years and over                                                     4 weeks
</TABLE>

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

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

                                      10
<PAGE>   18

      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 1 of the same vacation year, shall be entitled to receive
an additional three (3) working days of vacation with pay during the winter
vacation periods of that year.

      C. Vacation requests shall be submitted for approval during the normal
vacation scheduling period. No vacations will be approved without a minimum of
two (2) weeks notice and without the Employer being assured of adequate
staffing. The Employer's approval shall not be unreasonably withheld or delayed.

      D. Upon consent of an individual worker and his 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 periods.

      E. Whenever a holiday falls within an employee's vacation period 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.

      F. Employees employed for ten (10) 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 winter 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.

                           AUTHORITY TO ACT FOR UNION

      15. 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:

                                      11
<PAGE>   19

      Manager

      Representatives (to be designated by name, in writing, to the Employer)

      The right is reserved, however, 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 one 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 an agent.

                               NO-STRIKE PROVISION

      16. A. The Union agrees that during the term of this Agreement and, with
respect to the Harrison location of the Employers covered by this Agreement,
there shall be no strike of any kind, picketing, hand billing, work stoppage or
slowdown. Should a strike of any kind, picketing, handbilling, work stoppage or
slowdown occur during the life of this Agreement, 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 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 18 hereof, the Employer shall also have the
option of terminating this Agreement upon the 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 a stoppage at any shop, office, warehouse and/or facility of any
Employer during the continuance of any strike or stoppage (not in violation of

                                      12
<PAGE>   20

contract) declared by UNITE 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

      17. 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 the Employer, or of
submitting to arbitration pursuant to paragraph 18 hereof.

                                   ARBITRATION

      18. All complaints, disputes or grievances arising directly or indirectly
between the Union and the Employer or any of its subsidiaries, auxiliary and
affiliated firms or its or their successors and assigns, involving questions or
interpretation, application, performance or operation or any clause of this
Agreement or any acts, conduct or relations between them, including, without
limitation, any claims against the Employer arising out of any alleged
dissolution or termination of its business prior to the expiration of this
Agreement or any claim against its 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, and the Employer 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 a permanent
umpire to be known as the Impartial Chairman in the industry and his decision
shall be final

                                      13
<PAGE>   21

and binding upon the Union and the Employer. Arbitrations shall be held within
thirty (30) days. 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.

      Each case shall be considered on its merits and the collective agreement
shall constitute the basis upon which decisions shall be rendered. No decision
shall be used as a precedent for any subsequent case.

      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.

      It is hereby expressly agreed between the parties hereto that the oath of
the arbitrator, required by Section 7506(a) of the Civil Practice Law and Rules
is hereby expressly waived.

      The Union and the Employer designate J.J. Pierson, Esquire 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 successors
shall be held in the City of New York.

      In the event J.J. Pierson, Esquire is unable or unwilling to serve or
cannot schedule a hearing within thirty (30) days after the filing of a
grievance, the Union and the Employer designate first Robert Herzog and the
second the State Mediation Board to act as Alternate Impartial Chairmen and
Arbitrators.

      The Employer agrees to pay its share of the cost of each arbitration.

                                      14
<PAGE>   22

      Should an 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 occupancy of such
vacancy, designate another person to act as such Impartial Chairman. If they
fail to agree, the Mayor of the City of New York shall, on application of either
the Union or the Employer, summarily make such appointment.

      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 accountants. 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.


                                      15
<PAGE>   23

      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 York, 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

      19. The Employer, where legally so authorized by an individual employee in
writing, agrees to deduct the membership dues and initiation fees weekly from
the wages or salary of such employee and remit same to the Union not less than
once a month by the 15th day of the same month. Deductions made after the 15th
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

      20. The term "benefit funds" is the collective designation of the Health &
Welfare Fund of Local 99, UNITE (hereafter referred to as the "Health & Welfare
Fund"), UNITE National Retirement Fund (hereafter referred to as the "Retirement
Fund"), and UNITE Health Services Plan (hereafter referred to as "Health
Services Plan").

                                      16
<PAGE>   24

      The Employer shall pay monthly to the Union for and on behalf of the
benefit funds and during the periods indicated the percentages set forth below
of his total gross weekly payroll (before deductions of federal, state and city
taxes) of all his employees, covered by this Agreement whether regular or trial
workers.

      For new employees hired on and after July 1, 1994 and temporary employees
who become permanent employees, contributions to the Funds shall commence upon
the conclusion of the 31st day of employment.

      Such payments shall be allocated and paid as follows:

      A. Effective July 1, 1997, a sum equal to fourteen and one-half (14.50%)
percent towards the Health & Welfare Fund. Effective July 1, 1998, a sum equal
to fourteen and three-quarters (14.75%) percent towards the Health & Welfare
Fund. Effective July 1, 1999, a sum equal to fifteen and one-quarter (15.25%)
percent towards the Health & Welfare Fund, a trust fund established by a
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 & 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%) shall be paid to the Health & 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 & Welfare Fund.

      In the event National Health Reform legislation passes, or amendments
thereto, during the term of this Agreement and becomes applicable to the
Employer, the Union agrees that to the extent reasonably indicated, downward
adjustments in the amount of contributions to the Health & Welfare Fund will be
made as a result of reduced exposure of the Health & Welfare Fund. In the event
that during the term of this Agreement, the Union is advised by the Local 99
Health & Welfare Fund that additional contributions are required to maintain the
existing level of benefits, the Union may reopen this Agreement by notice to the
Employer to obtain additional contributions to the Health & Welfare Fund to the
extent reasonably indicated. Any dispute involving application of this section
shall be determined under the grievance-


                                       17
<PAGE>   25

arbitration provisions set forth in this Agreement, however, no increase in the
Employer's Health & Welfare contribution shall be effective prior to January 1,
1996.

      B. Effective July 1, 1994, a sum equal to nine (9%) percent 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 July 1, 1997, a sum equal to three and one-half (3.5%)
percent towards the Health Services Plan a trust fund established by a
collective bargaining agreement for the purpose of providing drug,
pharmaceutical and medication benefits to workers and their families.

      D. Each of the aforesaid payments under A, B and C above shall be remitted
on or before the 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 &
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 & 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 in 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

                                      18
<PAGE>   26

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.

      An annual audit of each such Fund shall be made by accountants designated
by each 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 herein above 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

                                      19
<PAGE>   27

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
this paragraph 20(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.

      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 UNITE or an affiliate
thereof. In the event of such transfer, mingling or merger, the amounts herein
above 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 OF BENEFITS

                                       20
<PAGE>   28

      21. 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 an individual Severance Fund. With the express intent and
agreement of the parties and, subject to applicable and existing law, effective
July 1, 1982, the parties agreed to establish and create a Severance Fund, the
signatories to 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 the 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 computed by
multiplying one (1) weeks pay (based upon five (5) years average weekly wage) by
the number of years of service of each employee. 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 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.

      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 deduction 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.
As of July 1, 1994, contributions shall be at the rate of one-half (1/2%)
percent of its gross weekly payroll. Severance Fund contributions shall remain
at the rate of one-half (1/2%) percent for the duration of this Agreement.


                                      21
<PAGE>   29

      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 hire and number of years of employed, including the
amount of deposit. In addition to the foregoing, the Employer shall submit a
written statement not less than every three (3) months setting forth information
comparable to that presently supplied to the benefit funds referred to in
paragraph 20. 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 each 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 the Union respectively. The Employer
representative and alternate shall be designated by the Employer. 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 of the membership of the Trustees of the
Fund respectively as now or hereafter constituted. All Trustees shall serve
without compensation.

      D. Each Trust Fund is hereby declared to be an irrevocable trust and the
Trustees of each 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.

      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

                                       22
<PAGE>   30

made and shall have the power to modify same from time to time to carry out more
effectively the purposes of such 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 such 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, interest 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 or 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 the 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 be necessary
or incidental to the proper operation, administration and maintenance of the
said Fund and to fully effectuate its purposes under applicable law.


                                      23
<PAGE>   31

      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 its 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 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

      22. 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.

      Individuals suffering from drug or alcohol abuse must seek treatment or
their employment may be suspended.

      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 amounts as, in his judgment, the circumstances warrant.

                           SHOP STEWARD AND COMMITTEE

      23. The Union shall have the right to certify to the Employer one (1)
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 (1) for every
twenty-five (25) employees, but not in excess of a total of ten (10) excluding
the shop steward. They shall assist the Union in carrying out the intent and
purpose of this Agreement. The employee designated as shop steward shall have
more seniority than all other employees for purposes of

                                      24
<PAGE>   32

lay-off and recall, so as to allow the shop steward to handle grievances and
contract administration.

                               RIGHT OF VISITATION

      24. 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 UNITE AFFILIATES

      25. 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 refuse to enter upon the premises of any
Employer against whom the Union of an affiliate of UNITE 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.

                             EXAMINATION OF RECORDS

      26. The Union shall have the right, at all reasonable times and upon
reasonable notice to the Employer, to investigate only 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

      27. 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

                                      25
<PAGE>   33

herein, only after five (5) days have elapsed after the 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 16 and 18 of this Agreement.

      B. In the event the Employer fails to make payments to the Health &
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.

                                MANAGEMENT RIGHTS

      28. 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.

                   UNION RECOGNITION IN ADDITIONAL FACILITIES

      29. Should the Employer (or its subsidiary or affiliate) open an
additional warehouse, office or similar distribution or office facilities beyond
one hundred (100) miles from its present location in Harrison, New Jersey,
notwithstanding the various provisions set forth in the parties' present
collective bargaining agreement, that 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.
Lechters agrees that the opening of any such new facility will not reduce the
number of workers employed in the warehouse at the Harrison facility as of
January 1, 1992.

                                      26
<PAGE>   34

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

      30. 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 one hundred (100) miles from the 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. The Union's consent shall not be
required in the event all or substantially all of the Employer's present
facilities are damaged or destroyed and the Employer relocates said facilities
within twenty (20) miles of the present facilities.

                                 CONTRACTING OUT

      31. A. 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 there is no reduction in number of the Employer's regular
workers working full time as a result of contracting out.

      B. There is no intent by the Employer to use contracting out to reduce the
work force.

      C. In the event the Union believes the Employer has unreasonably exercised
its right to contract out, then the Union may apply to the Arbitrator for order
requiring the Employer to cease and desist contracting out, modify the manner or
extent to which the Employer has contracted out, or otherwise take

                                      27
<PAGE>   35

such action as the Arbitrator deems appropriate.

                                 REORGANIZATION

      32. The Employer shall have the right in good faith to reorganize its
warehouse and/or office 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

      33. 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. Subsidiaries or affiliated firms or corporations of the Employer shall,
for the purpose of this Agreement, be deemed bound by all of the 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

      34. The Employer agrees that: 

      A. It will not nor will it 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 concern unless the new or purchasing firm

                                      28
<PAGE>   36

agrees to be bound under this Agreement for the duration hereof and assumes 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

      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

      35. 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.

                                      29
<PAGE>   37

      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

      36. 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.

                                EXISTING BENEFITS

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

                                    JURY DUTY

      38. 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

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

                                      30
<PAGE>   38

                           UNUSUAL WEATHER CONDITIONS

      40. When excessive heat or cold result in working conditions which may
adversely affect a worker's health or create an unnecessary burden in the
performance of the work, the Employer will promptly correct and alleviate such
situations.

                                   FIRE DRILLS

      41. The Employer will use its best efforts to hold two (2) 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, determined by the Employer. Workers
hired in the period between drills shall be instructed by the Employer as to the
location of means of egress from the shop. The Union may request two (2) such
additional fire drills in any one year of this Agreement.

                                HEALTH AND SAFETY

      42. The parties agree to establish a committee on health, safety and
sanitation to improve conditions.

                            NO MODIFICATION OR WAIVER

      43. A. No 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 this 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.

                                      31
<PAGE>   39

                              DURATION OF AGREEMENT

      44. This Agreement shall enter into force and effect on July 1, 1997 and
shall remain operative and binding upon the parties hereto until and including
June 30, 2000.

                               401(k) SAVINGS PLAN

      45. Workers covered by this Agreement shall be eligible to participate in
the Employer's 401(k) Savings Plan ("Plan") effective on or about February 1,
1998, provided that no less than forty (40%) percent of the workers enroll in
the Plan. The Employer shall contribute at the same rate as it does for
non-Union employees. The Employer shall have the right to amend or discontinue
the Plan at any time. Participation in the Plan shall be in accordance with all
Plan documents and provisions.

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

                                    OFFICE AND DISTRIBUTION EMPLOYEES' UNION,
                                    LOCAL 99, UNITE, AFFILIATED WITH AFL-CIO


                                    By:
                                        -------------------------------------
                                        Christine Kerber
                                        Manager


                                    LECHTERS, INC. (OFFICE)


                                    By:
                                        -------------------------------------
                                        Ira S. Rosenberg
                                        Vice-President

Witness:

RICHARD M. GREENSPAN
Counsel to Union



[L\CBA\99Lechters.Ofc]

                                      32