Document:

<PAGE>   1
EXHIBIT 10.6                                                    [EXECUTION COPY]

                THIRD AMENDMENT TO PLEDGE AND SECURITY AGREEMENT

         THIRD AMENDMENT TO PLEDGE AND SECURITY AGREEMENT, dated as of July 2,
2000, between BARNES & NOBLE, INC., a corporation duly organized and validly
existing under the laws of the State of Delaware (the "Company"); each of the
Subsidiaries of the Company identified under the caption "SUBSIDIARY GUARANTORS"
on the signature pages hereof (individually, a "Subsidiary Guarantor" and,
collectively, the "Subsidiary Guarantors" and, together with the Company, the
"Obligors"); and THE CHASE MANHATTAN BANK, as agent for the lenders or other
financial institutions or entities party, as lenders, to the Credit Agreement
referred to below (in such capacity, together with its successors in such
capacity, the "Administrative Agent").

         The Company, the Subsidiary Guarantors, certain lenders and the
Administrative Agent are parties to a Amended and Restated Credit Agreement
dated as of November 18, 1997 (as modified and supplemented and in effect from
time to time, the "Amended and Restated Credit Agreement"), providing, subject
to the terms and conditions thereof, for extensions of credit (by making of
loans and issuing letters of credit) to be made by said lenders to the Company
in an aggregate principal or face amount not exceeding $850,000,000 (as that
amount may be increased as provided therein). The Obligors and the Agent wish to
amend the Security Agreement referred to in the Amended and Restated Credit
Agreement in certain respects and, accordingly, agree as follows:

         Section 1. Definitions. Except as otherwise defined in this Amendment,
terms defined in the Amended and Restated Credit Agreement are used herein as
defined therein.

         Section 2. Amendments. Subject to the satisfaction of the conditions
precedent specified in Section 3 below, but effective as of the date hereof, the
Annexes to the Security Agreement shall be amended as follows:

                  (a) Annex 1. Annex 1 to the Security Agreement shall be
         amended in its entirety to read as Annex 1 hereto.

                  (b) Annex 2. Annex 2 to the Security Agreement shall be
         amended in its entirety to read as Annex 2 hereto.

                  (c) Annex 3. Annex 3 to the Security Agreement shall be
         amended in its entirety to read as Annex 3 hereto.

                  (d) Annex 4. Annex 4 to the Security Agreement shall be
         amended in its entirety to read as Annex 4 hereto.

                  (e) Annex 5. Annex 5 to the Security Agreement shall be
         amended in its entirety to read as Annex 5 hereto.

         Section 2. Conditions Precedent. As provided in Section 2 above, the
amendments set forth in Section 2 shall become effective, as of the date hereof,
upon the due execution and delivery of this Amendment by the Obligors and the
Agent.

         Section 3. Miscellaneous. Except as herein provided, the Security
Agreement shall remain unchanged and in full force and effect. This Amendment
may be executed in any number of counterparts, all of which taken together shall
constitute one and the same amendatory instrument and any of the parties hereto
may execute this Amendment by signing any such counterpart. This Amendment shall
be governed by, and construed in accordance with, the internal laws of the State
of New York.

                                       1
<PAGE>   2
         IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to be duly executed and delivered as of the day and year first above written.

                       BARNES & NOBLE, INC.

                       By /s/ Maureen O'Connell
                          -----------------------------------------------------
                             Title: Maureen O'Connell, Chief Financial Officer

                       SUBSIDIARY GUARANTORS

                       B. DALTON BOOKSELLER, INC.

                       By /s/ Maureen O'Connell
                          -----------------------------------------------------
                             Title: Maureen O'Connell, Vice President

                       BARNES & NOBLE BOOKSELLERS, INC.

                       By /s/ Maureen O'Connell
                          -----------------------------------------------------
                             Title: Maureen O'Connell, Vice President

                       MABO BOOKS CORP.
                       (formerly known as Marboro Books Corp.)

                       By /s/ Maureen O'Connell
                          -----------------------------------------------------
                             Title: Maureen O'Connell, Vice President

                       DOUBLEDAY BOOK SHOPS, INC.

                       By /s/ Maureen O'Connell
                          -----------------------------------------------------
                             Title: Maureen O'Connell, Vice President

                       CCI HOLDINGS, INC.

                       By /s/ Maureen O'Connell
                          -----------------------------------------------------
                             Title: Maureen O'Connell, Vice President

                       BABBAGE'S ETC. LLC

                       By /s/ Leonard Riggio
                         ------------------------------------------------------
                            Title: Leonard Riggio, Manager

                                       2
<PAGE>   3
                       VENDAMERICA, INC.

                       By /s/ Maureen O'Connell
                          -----------------------------------------------------
                             Title: Maureen O'Connell, Vice President

                       FUNCO, INC.

                       By /s/ Maureen O'Connell
                          -----------------------------------------------------
                             Title: Maureen O'Connell, Vice President

                       SUNRISE PUBLICATIONS, INC.

                       By /s/ Maureen O'Connell
                          -----------------------------------------------------
                             Title: Maureen O'Connell, Vice President

                       THE CHASE MANHATTAN BANK, as Administrative Agent

                       By /s/ Barry K. Bergman
                          -----------------------------------------------------
                             Title: Vice President

                                       3
<PAGE>   4
                                                                        ANNEX 1

                                  PLEDGED STOCK

BARNES & NOBLE, INC.

<TABLE>
<CAPTION>
                               Certificate             Registered
         Issuer                   Nos.                   Owner              Number of Shares
         ------                   ----                   -----              ----------------
<S>                            <C>                     <C>                  <C>
B. Dalton Bookseller,              C-1            Barnes & Noble, Inc.      360 shares of common stock,
Inc.                                                                        par value $100

Barnes & Noble                      1             Barnes & Noble, Inc.      100 shares of common stock,
Booksellers, Inc.                                                           par value $1

Mabo Books Corp.                    4             Barnes & Noble, Inc.      10 shares of common stock, no
                                                                            par value

CCI Holdings, Inc.                  1             Barnes & Noble, Inc.      3,000 shares of common stock,
                                                                            par value $1

B&N. Sub Corp                       1             Barnes & Noble, Inc.      100 shares of common stock,
                                                                            par value $1
</TABLE>

B. DALTON BOOKSELLER, INC.

<TABLE>
<CAPTION>
                               Certificate             Registered
         Issuer                   Nos.                   Owner              Number of Shares
         ------                   ----                   -----              ----------------
<S>                            <C>                <C>                       <C>
Doubleday Book Shops,               5             B. Dalton                 1,000 shares of common stock,
Inc.                                              Bookseller, Inc.          par value $1

Vendamerica, Inc.                   2             B. Dalton                 1,000 shares of common stock,
                                                  Bookseller, Inc.          no par value

Funco, Inc.                       2400            B.  Dalton                1,000 shares of common stock,
                                                  Bookseller, Inc.          par value $.01
</TABLE>

BARNES & NOBLE BOOKSELLERS, INC.

         NONE

MABO BOOKS CORP.

         NONE

DOUBLEDAY BOOK SHOPS, INC.

         NONE

                                       4
<PAGE>   5
CCI HOLDINGS, INC.

         NONE

BABBAGE'S ETC. LLC.

         NONE

VENDAMERICA, INC

         NONE

FUNCO, INC.

<TABLE>
<CAPTION>
                                       Certificate           Registered
           Issuer                         Nos.                 Owner                    Number of Shares
           ------                         ----                 -----                    ----------------
<S>                                    <C>                  <C>                         <C>
Babbage's Etc. LLC                         N/A              Funco, Inc.                 100% Membership Interest

Sunrise Publications, Inc.                  1               Funco, Inc.                 1,000,000 shares of common
                                                                                        stock, par value $.01
</TABLE>

                                       5
<PAGE>   6
                                                                         ANNEX 2

                     LIST OF PATENTS AND PATENT APPLICATIONS

BARNES & NOBLE, INC.

<TABLE>
<CAPTION>
File                       Patent                    Country                    Registration No.          Date
----                       ------                    -------                    ----------------          ----
<S>                        <C>                       <C>                        <C>                       <C>
NONE
</TABLE>

B. DALTON BOOKSELLER, INC.

<TABLE>
<CAPTION>
File                       Patent                    Country                    Registration No.          Date
----                       ------                    -------                    ----------------          ----
<S>                        <C>                       <C>                        <C>                       <C>
NONE
</TABLE>

BARNES & NOBLE BOOKSELLERS, INC.

<TABLE>
<CAPTION>
File                       Patent                    Country                    Registration No.          Date
----                       ------                    -------                    ----------------          ----
<S>                        <C>                       <C>                        <C>                       <C>
NONE
</TABLE>

MABO BOOKS CORP.

<TABLE>
<CAPTION>
File                       Patent                    Country                    Registration No.          Date
----                       ------                    -------                    ----------------          ----
<S>                        <C>                       <C>                        <C>                       <C>
NONE
</TABLE>

DOUBLEDAY BOOK SHOPS, INC.

<TABLE>
<CAPTION>
File                       Patent                    Country                    Registration No.          Date
----                       ------                    -------                    ----------------          ----
<S>                        <C>                       <C>                        <C>                       <C>
NONE
</TABLE>

CCI HOLDINGS, INC.

<TABLE>
<CAPTION>
File                       Patent                    Country                    Registration No.          Date
----                       ------                    -------                    ----------------          ----
<S>                        <C>                       <C>                        <C>                       <C>
NONE
</TABLE>

BABBAGE'S ETC. LLC

<TABLE>
<CAPTION>
File                       Patent                    Country                    Registration No.          Date
----                       ------                    -------                    ----------------          ----
<S>                        <C>                       <C>                        <C>                       <C>
NONE
</TABLE>

                                       6
<PAGE>   7
VENDAMERICA, INC.

<TABLE>
<CAPTION>
File                       Patent                    Country                    Registration No.          Date
----                       ------                    -------                    ----------------          ----
<S>                        <C>                       <C>                        <C>                       <C>
NONE
</TABLE>

FUNCO, INC.

<TABLE>
<CAPTION>
File                       Patent                    Country                    Registration No.          Date
----                       ------                    -------                    ----------------          ----
<S>                        <C>                       <C>                        <C>                       <C>
NONE
</TABLE>

SUNRISE PUBLICATIONS, INC.

<TABLE>
<CAPTION>
File                       Patent                    Country                    Registration No.          Date
----                       ------                    -------                    ----------------          ----
<S>                        <C>                       <C>                        <C>                       <C>
NONE
</TABLE>

                                       2
<PAGE>   8
                                                                         ANNEX 3

                LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS,
                  TRADEMARK AND SERVICE MARK REGISTRATIONS AND
            APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS

                               A. U.S. TRADEMARKS

BARNES & NOBLE, INC.

<TABLE>
<CAPTION>
                                             Application (A)
                                             Registration (R)
Mark                                         or Series (S) No.
----                                         -----------------
<S>                                          <C>
1873 Press                                   75/857,302(A)

1873 Press                                   75/857,304(A)

1873 Press                                   75/857,305(A)

1873 Press and Colophon                      75/887,883(A)

1873 Press Colophon                          75/857,882(A)

Blink                                        75/320,806(A)

The Book Lover's Second Home                 1,930,860(R)

Classics to Read By                          75/793,114(A)

Discover Great New Writers                   2,119,401(R)

Discover Great New Writers                   2,119,402(R)

Discover Great New Writers                   2,119,413(R)

Explorations                                 75/914,447(A)

Meet Me at Barnes & Noble                    1,910,598(R)

Nite Reader                                  2,105,941(R)

Now What?!                                   75/853,137(A)

Premier Music (Design)                       1,903,140(R)
</TABLE>

                                       7
<PAGE>   9
<TABLE>
<S>                                          <C>
Punctuate!                                   75/841,046(A)

Ransom Notes                                 75/912,951(A)

Read Only                                    75/892,798(A)

Silver Lining Books                          75/635,541(A)

What Are You Reading?                        2,126,136(R)
</TABLE>

B. DALTON BOOKSELLER, INC.

<TABLE>
<CAPTION>
                                                  Application (A)
                                                  Registration (R)
Mark                                              or Series (S) No.
----                                              -----------------
<S>                                               <C>
Books Dalton                                      1,667,902 (R)

B. Dalton Jr.                                     1,684,036 (R)

B. Dalton Jr. (Design)                            1,667,039 (R)

Booksavers                                        1,597,933 (R)

P.B. Pages                                        1,814,553 (R)

B. Dalton's                                       1,293,494 (R)

Barnes & Noble Jr.
(Design)                                          1,609,403 (R)

Barnes & Noble Jr.                                1,606,005 (R)

B. Dalton Bookseller                                846,824 (R)

B. Dalton                                         1,158,498 (R)

Hooked on Books                                   1,147,660 (R)

People Who Know Books
Know B. Dalton                                    1,306,552 (R)

Amaranth Press                                    1,404,928 (R)

Pickwick                                          1,047,832 (R)

Lamp of Learning
(Design)                                          1,607,811 (R)
</TABLE>

                                       8
<PAGE>   10
BARNES & NOBLE BOOKSELLERS, INC.

<TABLE>
<CAPTION>
                                                  Application (A)
                                                  Registration (R)
Mark                                              or Series (S) No.
----                                              -----------------
<S>                                               <C>
Bookstar (Design)                                 1,558,604 (R)

Amaranth Press                                    1,404,928(R)
</TABLE>

MABO BOOKS CORP.

<TABLE>
<CAPTION>
                                                  Application (A)
                                                  Registration (R)
Mark                                              or Series (S) No.
----                                              -----------------
<S>                                               <C>
NONE
</TABLE>

CCI HOLDINGS, INC.

<TABLE>
<CAPTION>
                                                  Application (A)
                                                  Registration (R)
Mark                                              or Series (S) No.
----                                              -----------------
<S>                                               <C>
NONE
</TABLE>

DOUBLEDAY BOOK SHOPS, INC.

<TABLE>
<CAPTION>
                                                  Application (A)
                                                  Registration (R)
Mark                                              or Series (S) No.
----                                              -----------------
<S>                                               <C>
The Old Corner                                    (Mass.) 0025314 (R)
  Bookstore

Books of All Publishers
Since 1910  (and Design)                          1,516,823 (R)
</TABLE>

BABBAGE'S ETC. LLC

<TABLE>
<CAPTION>
                                                  Application (A)
                                                  Registration (R)
Mark                                              or Series (S) No.
----                                              -----------------
<S>                                               <C>
Babbage's                                         1,345,315 (R) and
                                                  1,569,315 (R)
</TABLE>

                                       10
<PAGE>   11
<TABLE>
<S>                                               <C>
America's Software for                            1,547,310 (R) and
the Home                                          1,553,597 (R)

Babbage's Software for                            1,345,205 (R)
the Home

Gamestop                                          1,707,460 (R)
</TABLE>

VENDAMERICA, INC.

<TABLE>
<CAPTION>
                                                  Application (A)
                                                  Registration (R)
Mark                                              or Series (S) No.
----                                              -----------------
<S>                                               <C>
NONE
</TABLE>

FUNCO,INC.

<TABLE>
<S>                                               <C>
More Video Games at Half the Price                2,226,903 (R)

FuncoLand (Stylized Letters)                      2,085,805 (R)

FuncoLand National Video Game                     2,061,504 (R)
Championships

America's Place to Shop for Video Games           1,962,954 (R)

FuncoLand Fun Club                                1,876,618 (R)

FuncoLand Your Source for Interactive             1,896,591 (R)
Entertainment

Bring Home the Fun                                1,806,603 (R)

Experience the Fun at FuncoLand                   1,798,387 (R)
Funco                                             1,796,605 (R)

FuncoLand                                         1,796,604 (R)

Funco Land                                        1,708,866 (R)

Sunrise Publications                              1,999,100 (R)

Game Informer                                     1,788,102 (R)
</TABLE>

                                       11
<PAGE>   12
SUNRISE PUBLICATIONS, INC.

None

                                       12
<PAGE>   13
                                 U.S. TRADENAMES

BARNES & NOBLE, INC.

Name

NONE

B. DALTON BOOKSELLER, INC.

Name

NONE

BARNES & NOBLE BOOKSELLERS, INC.

Name

Bookstop

MABO BOOKS CORP.

Name

NONE

DOUBLEDAY BOOK SHOPS, INC.

Name

NONE

CCI HOLDINGS, INC.

Name

NONE

BABBAGE'S ETC. LLC

Name

Software Etc.

                                       13
<PAGE>   14
VENDAMERICA, INC.

Name

NONE

FUNCO, INC.

Name

NONE

SUNRISE PUBLICATIONS, INC.

Name

NONE

                                       14
<PAGE>   15
                              B. FOREIGN TRADEMARKS

   BARNES & NOBLE, INC.

<TABLE>
<CAPTION>
                                  Application (A)                                                      Registration or
   Mark                           Registration (R)                     Country                         Filing Date (F)
   ----                           ----------------                     -------                         ---------------
<S>                               <C>                                  <C>                             <C>
   NONE
</TABLE>

   B. DALTON BOOKSELLER, INC.

<TABLE>
<CAPTION>
                                  Application (A)                                                      Registration or
   Mark                           Registration (R)                     Country                         Filing Date (F)
   ----                           ----------------                     -------                         ---------------
<S>                               <C>                                  <C>                             <C>
   NONE
</TABLE>

   BARNES & NOBLE BOOKSELLERS, INC.

<TABLE>
<CAPTION>
                                  Application (A)                                                      Registration or
   Mark                           Registration (R)                     Country                         Filing Date (F)
   ----                           ----------------                     -------                         ---------------
<S>                               <C>                                  <C>                             <C>
   NONE
</TABLE>

MABO BOOKS CORP.

<TABLE>
<CAPTION>
                               Application (A)                                                      Registration or
Mark                           Registration (R)                     Country                         Filing Date (F)
----                           ----------------                     -------                         ---------------
<S>                               <C>                                  <C>                             <C>
NONE
</TABLE>

DOUBLEDAY BOOK SHOPS, INC.

<TABLE>
<CAPTION>
                               Application (A)                                                      Registration or
Mark                           Registration (R)                     Country                         Filing Date (F)
----                           ----------------                     -------                         ---------------
<S>                               <C>                                  <C>                             <C>
NONE
</TABLE>

CCI HOLDINGS, INC.

<TABLE>
<CAPTION>
                               Application (A)                                                      Registration or
Mark                           Registration (R)                     Country                         Filing Date (F)
----                           ----------------                     -------                         ---------------
<S>                               <C>                                  <C>                             <C>
NONE
</TABLE>

                                       15
<PAGE>   16
BABBAGE'S ETC. LLC

<TABLE>
<CAPTION>
                               Application (A)                                                      Registration or
Mark                           Registration (R)                     Country                         Filing Date (F)
----                           ----------------                     -------                         ---------------
<S>                               <C>                                  <C>                             <C>
NONE
</TABLE>

VENDAMERICA, INC.

<TABLE>
<CAPTION>
                               Application (A)                                                      Registration or
Mark                           Registration (R)                     Country                         Filing Date (F)
----                           ----------------                     -------                         ---------------
<S>                               <C>                                  <C>                             <C>
NONE
</TABLE>

FUNCO, INC.

<TABLE>
<CAPTION>
                               Application (A)                                                      Registration or
Mark                           Registration (R)                     Country                         Filing Date (F)
----                           ----------------                     -------                         ---------------
<S>                               <C>                                  <C>                             <C>
NONE
</TABLE>

SUNRISE PUBLICATIONS, INC.

<TABLE>
<CAPTION>
                               Application (A)                                                      Registration or
Mark                           Registration (R)                     Country                         Filing Date (F)
----                           ----------------                     -------                         ---------------
<S>                               <C>                                  <C>                             <C>
NONE
</TABLE>

                                       16
<PAGE>   17
                                                                         ANNEX 4

                LIST OF CONTRACTS, LICENSES AND OTHER AGREEMENTS
                        RELATING TO INTELLECTUAL PROPERTY

BARNES & NOBLE, INC.

License Agreement dated as of February 11, 1989 between Barnes & Noble College
Bookstores, Inc. and Barnes & Noble Discount Bookstores, Inc. (a predecessor of
B. Dalton Bookseller, Inc.), and Consents to License Agreement Assignments,
dated as of November 18, 1988 and November 16, 1992, respectively.

B. DALTON BOOKSELLER, INC.

Letter Agreement dated as of February 21, 1989 from Scribner's Book Companies,
Inc. and MacMillan, Inc. to B. Dalton Bookseller, Inc.

BARNES & NOBLE BOOKSELLERS, INC.

         NONE

MABO BOOKS CORP.

         NONE

DOUBLEDAY BOOK SHOPS, INC.

Trade Mark and Service Mark License dated as of May 31, 1990 between Bantam
Doubleday Dell Publishing Group, Inc. and Doubleday Book Shops, Inc.

CCI HOLDINGS, INC.

         NONE

BABBAGE'S ETC. LLC

         NONE

VENDAMERICA, INC.

         NONE
                                       17
<PAGE>   18
FUNCO, INC.

         NONE

SUNRISE PUBLICATIONS, INC.

         NONE

                                       18
<PAGE>   19
                                                                         ANNEX 5

                                LIST OF LOCATIONS

BARNES & NOBLE, INC.                     B. DALTON BOOKSELLER, INC.

1.       122 Fifth Avenue                1.      122 Fifth Avenue
         New York, NY  10011                     New York, NY  10011

2.       1400 Old Country Road           2.      1400 Old Country Road
         Westbury, NY  11590                     Westbury, NY  11590

BARNES & NOBLE BOOKSELLERS, INC.         3.      100 Middlesex Center Boulevard
                                                 Jamesburg, NJ 08831
1.       122 Fifth Avenue
         New York, NY  10011             4.       331 Herrod Drive
                                                  Jamesburg, NJ 08831
2.       1400 Old Country Road
         Westbury, NY  11590             5.       308 Herrod Drive
                                                  Jamesburg, NJ 08831
MABO BOOKS CORP.

1.       122 Fifth Avenue                CCI HOLDINGS, INC.
         New York, NY  10011
                                         1.       122 Fifth Avenue
2.       1400 Old Country Road                    New York, NY  10011
         Westbury, NY  11590
                                         2.       1400 Old Country Road
3.       One Pond Road                            Westbury, NY 11590
         Rockleigh, NJ  07647
                                         3.       6411 Burleson Road
DOUBLEDAY BOOK SHOPS, INC.                        Austin, TX 78744

1.       122 Fifth Avenue
         New York, NY  10011

2.       1400 Old Country Road
         Westbury, NY  11590

BABBAGE'S ETC. LLC

1.       122 Fifth Avenue
         New York, NY  10011

2.       1400 Old Country Road
         Westbury, NY  11590

3.       2250 William D. Tate Avenue
         Grapevine, TX 76051

                                       19
<PAGE>   20
VENDAMERICA, INC

1.       122 Fifth Avenue
         New York, NY  10011

2.       1400 Old Country Road
         Westbury, NY  11590

3.       2250 William D. Tate Avenue
         Grapevine, TX 76051

FUNCO,INC.

1.       122 Fifth Avenue
         New York, NY  10011

2.       1400 Old Country Road
         Westbury, NY  11590

3.       10120 West 76th Street
         Eden Prairie, MN 55344

SUNRISE PUBLICATIONS, INC.

1.       122 Fifth Avenue
         New York, NY  10011

2.       1400 Old Country Road
         Westbury, NY  11590

3.       10120 West 76th Street
         Eden Prairie, MN 55344

                                       20<PAGE>   1
                                                                    Exhibit 10.8

                                AMENDMENT NO. 5

                                       TO

                        DEFERRED COMPENSATION AGREEMENT

     Amendment No. 5, effective the 2nd day of February, 2001, between LECHTERS,
INC. (hereinafter referred to as the "Corporation") and DONALD JONAS
(hereinafter referred to as "Employee") to Deferred Compensation Agreement,
dated December 9, 1987, as amended June 16, 1989, August 15, 1989, June 15,
1995 and April 8, 1996 (hereinafter referred to as the "Agreement").

     WHEREAS, the Corporation, Employee, and the owners of certain life
insurance policies on the life of Employee and Employee's spouse have agreed to
terminate the split dollar agreements related to the said life insurance
policies and to the cancellation of collateral assignments to the corporation
of the said life insurance policies; and

     WHEREAS, the Corporation has executed a release of any right to the said
life insurance policies in consideration of Employee's agreement to release the
Corporation from the obligation to make additional premium payments for the
said life insurance policies and to make pension payments to Employee; and

     WHEREAS, the parties desire to further amend said Agreement as follows:

     1.  Employee hereby releases the Corporation from its obligation to make
the payment to Employee under Paragraph 3 thereof as amended; however nothing
in this amendment shall be construed as to relieve the Corporation of its
obligation to provide the Employee or his spouse, as the case may be, with
services similar to those currently being provided to the Employee consisting
of a secretary, an office, driver and car, or the cost equivalent of such
services all as provided in Paragraph 1 of Amendment No. 3, and the right to
<PAGE>   2
participate in the Corporation provided insurance plans, as provided by
Paragraphs 2 and 3 of Amendment No. 3.

     2.  Employee hereby releases the Corporation from its obligation under
Paragraph 4 of Amendment No. 3 to pay the insurance premiums on the
split-dollar life insurance policies of Prudential Life Insurance Company,
Policy Numbers 79,699,276 and 79,713,181. The Corporation, for the sum of $1.00
and in consideration of the assumption of responsibility to pay insurance
premiums, less the P.S. 58 costs, for the life of the policies, hereby assigns
to Employee or Employee's assignees all rights to any outlays under such
policies and to the benefit payments of such policies.

     3.  Employee hereby releases the Corporation from its obligation under
Paragraph 4 of Amendment No. 3 to pay the insurance premiums on the
split-dollar life insurance policy of Metropolitan Life Insurance Company,
Policy Number 960450106PR. The Corporation, for the sum of $1.00 and in
consideration of the assumption of responsibility to pay insurance premiums,
less the P.S. 58 costs, for the life of the policy hereby assigns to Employee
or Employee's assignees all rights to any outlays to the extent of current cash
value under such policies and to the benefit payments of such policies.

     4.  Except as hereby amended, the Agreement is in all respects approved,
ratified and confirmed.

     IN WITNESS WHEREOF, the parties have caused this Amendment No. 5 to be
executed as of the date first written above.

                                             LECHTERS, INC.

                                             BY: /s/ David K. Cully
                                                 ---------------------------
                                                 Name:
                                                 Title:

                                             /s/ Donald Jonas
                                             -------------------------------
                                             DONALD JONAS

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