<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
------------------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by registrant [X]
Filed by a party other than registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary proxy statement [ ] Confidential For Use of the Commission
Only (as permitted by Rule 14a-6(c)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
LECHTERS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
LECHTERS, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined).
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
------------------------------------------------------------------------
(3) Filing party:
------------------------------------------------------------------------
(4) Date filed:
------------------------------------------------------------------------
IT IS ANTICIPATED THAT THIS PROXY STATEMENT AND A RELATED FORM OF PROXY WILL
FIRST BE DELIVERED
TO SECURITY HOLDERS ON OR AROUND MAY 16, 1997
<PAGE> 2
LECHTERS, INC.
1 CAPE MAY STREET
HARRISON, NEW JERSEY 07029-9998
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------------
The Annual Meeting of Shareholders of Lechters, Inc. (the "Company") will
be held at the offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th
Street, 19th Floor, New York, New York on Tuesday, June 17, 1997, at 9:00 a.m.,
for the following purposes:
(1) to elect four directors;
(2) to consider and act upon a proposal to ratify the appointment of
Deloitte & Touche LLP as the independent auditors of the Company
for the fiscal year ending January 31, 1998; and
(3) to transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on May 2, 1997 as
the record date for determining shareholders entitled to notice of and to vote
at the meeting. The transfer books of the Company will not be closed.
By Order of the Board of Directors,
IRA S. ROSENBERG,
Secretary
Harrison, New Jersey
May 16, 1997
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, YOU ARE URGED TO
SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE.
<PAGE> 3
LECHTERS, INC.
1 CAPE MAY STREET
HARRISON, NEW JERSEY 07029-9998
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Lechters, Inc., a
New Jersey corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors for use at the Annual Meeting of Shareholders
of the Company to be held on Tuesday, June 17, 1997 and any adjournment or
adjournments thereof. A copy of the notice of meeting accompanies this Proxy
Statement. It is anticipated that the mailing of this Proxy Statement will
commence on or about May 16, 1997.
Only shareholders of record at the close of business on May 2, 1997, the
record date for the meeting, will be entitled to notice of and to vote at the
meeting. On the record date the Company had outstanding 17,155,086 shares of
common stock, no par value (the "Common Stock"), 149,999 shares of Series A
Convertible Preferred Stock, $100 par value ("Series A Preferred Stock"), and
50,001 shares of Series B Convertible Preferred Stock, $100 par value ("Series B
Preferred Stock" and, together with the Series A Preferred Stock, the "Preferred
Stock").(1) The Preferred Stock was issued to Prudential Private Equity
Investors III, L.P. ("PPEI") on April 5, 1996.
On all matters submitted to the shareholders for a vote, holders of the
Common Stock are entitled to one vote per share, holders of the Series A
Preferred Stock are entitled to one vote for each share of Common Stock issuable
upon conversion of the Series A Preferred Stock as of the record date for such
vote, and holders of the Series B Preferred Stock have no voting rights. The
holders of the Series A Preferred Stock are entitled to vote 2,399,984 shares at
the 1997 Annual Meeting of Shareholders. PPEI was the sole holder of all of the
outstanding shares of Series A Preferred Stock as of the record date.
The holders of Series A Preferred Stock, voting separately as a single
series to the exclusion of all other series of the Company's capital stock, and
with each share of Series A Preferred Stock entitled to one vote, are entitled
to elect one Director to serve on the Company's Board of Directors until he is
removed from office or his successor is duly elected by the holders of the
Series A Preferred Stock. PPEI, as holder of the Series A Preferred Stock, has
designated Robert Knox, who has been serving as a Director of the Company since
1986, as the Director to serve on the Company's Board of Directors. His term
expires as of the 1997 Annual Meeting of Shareholders.
Shareholders who execute proxies may revoke them by giving written notice
to the Secretary of the Company at any time before such proxies are voted or by
executing a later-dated proxy. Attendance at the meeting will not have the
effect of revoking a proxy unless the shareholder so attending, in writing, so
notifies the Secretary of the meeting at any time prior to the voting of the
proxy.
The Board of Directors does not know of any matter that is expected to be
presented for consideration at the meeting, other than (i) the election of
directors and (ii) the proposal to ratify the appointment of the independent
auditors of the Company for the current fiscal year. However, if other matters
properly come before the meeting, the persons named in the accompanying proxy
intend to vote thereon in accordance with their judgment.
The Company will bear the cost of the meeting and the cost of soliciting
proxies, including the cost of mailing the proxy material. In addition to
solicitation by mail, directors, officers and regular employees of the Company
(who will not be specifically compensated for such services) may solicit proxies
by telephone or otherwise. Arrangements will be made with brokerage houses and
other custodians, nominees and fiduciaries
- ---------------
(1) The Preferred Stock is convertible into a number of shares of Common Stock
that is computed by multiplying the number of shares of Preferred Stock by
$100 and dividing the result by the conversion price then in effect. The
conversion price presently in effect is $6.25.
<PAGE> 4
to forward proxies and proxy material to their principals and the Company will
reimburse them for their expenses.
Directors will be elected by a plurality of the votes cast. All proxies
received pursuant to this solicitation will be voted except as to matters where
authority to vote is specifically withheld and, where a choice is specified as
to the proposal, they will be voted in accordance with such specification. If no
instructions are given, the persons named in the proxy solicited by the Board of
Directors of the Company intend to vote for the nominees for election as
directors of the Company listed herein. Abstentions and broker non-votes will
not be considered votes cast.
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of Common Stock by each person known by the Company to be the
beneficial owner of more than five percent of the outstanding Common Stock,
based upon total shares outstanding as of the dates listed in the footnotes to
the table:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS
- ------------------------------------------------------------------- ------------------ --------
<S> <C> <C>
Donald Jonas....................................................... 4,175,493(1) 24.3%
c/o Lechters, Inc.
1 Cape May Street
Harrison, New Jersey 07029
ICM Asset Management, Inc.......................................... 2,347,200(2) 13.7%
601 W. Main Ave., Ste. 917
Spokane, WA 99201
FMR Corp........................................................... 1,350,500(3) 7.87%
82 Devonshire Street
Boston, MA 02109-3614
Barrow, Hanley, Mewhinney & Strauss, Inc........................... 1,216,500(4) 7.1%
One McKinney Plaza
3232 McKinney Avenue, 15th Fl.
Dallas, TX 75204-2429
</TABLE>
- ---------------
(1) Includes 111,384 shares held by Mr. Jonas' wife, as to which shares Mr.
Jonas disclaims beneficial ownership.
(2) ICM Asset Management, Inc., has sole voting power with respect to 1,622,850
shares and sole dispositive power with respect to all the shares. Based on
information as of February 12, 1997, contained in a Schedule 13G filed with
the Securities and Exchange Commission.
(3) FMR Corp. ("FMR") is the parent of Fidelity Management & Research Company
("Fidelity"). Edward C. Johnson 3d and FMR, through its control of Fidelity,
each has sole power to dispose of and are beneficial owners of 1,350,000
shares by virtue of Fidelity's position as investment advisor to various
investment companies. The power to vote such shares is held by the Board of
Trustees of the investment companies. Edward C. Johnson 3d, Chairman of FMR,
Abigail P. Johnson, a director of FMR, together with members of the Edward
C. Johnson family and trusts for their benefit, are the beneficial owners of
the shares by virtue of their ownership and control of FMR. Based on
information as of February 14, 1997, contained in a Schedule 13G filed with
the Securities and Exchange Commission.
(4) Barrow, Hanley, Mewhinney & Strauss, Inc. has sole voting power with respect
to 697,300 shares. Based on information as of February 13, 1997, contained
in a Schedule 13G filed with the Securities and Exchange Commission.
2
<PAGE> 5
The following table sets forth information regarding the beneficial
ownership of Series A Preferred Stock by each person known by the Company to be
the beneficial owner of more than five percent of the outstanding Series A
Preferred Stock, based upon total shares outstanding as of April 18, 1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS BENEFICIAL OWNED OF CLASS
- --------------------------------------------------------------------- ------------------ --------
<S> <C> <C>
Prudential Private
Equity Investors III, L.P.......................................... 149,999 100%
717 Fifth Avenue
Suite 1100
New York, New York 10022
</TABLE>
The following table sets forth information regarding the beneficial
ownership of Series B Preferred Stock by each person known by the Company to be
the beneficial owner of more than five percent of the outstanding Series B
Preferred Stock, based upon total shares outstanding as of April 18, 1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS BENEFICIAL OWNED OF CLASS
- --------------------------------------------------------------------- ---------------- --------
<S> <C> <C>
Prudential Private Equity
Investors III, L.P................................................. 50,001 100%
717 Fifth Avenue
Suite 1100
New York, New York 10022
</TABLE>
Except as noted in the footnotes in the three tables above, (i) none of
such shares are known by the Company to be shares with respect to which the
beneficial owner has the right to acquire beneficial ownership and (ii) the
Company believes the beneficial holders listed above have sole voting and
investment power regarding the shares shown as being beneficially owned by such
beneficial holders.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes with each class
holding office for a staggered three-year term. The terms of Ms. Maneker and of
Messrs. Begun, Knox and Wolff, the Class B Directors, will expire at the Annual
Meeting of Shareholders to be held on June 17, 1997, and such persons are
nominees for reelection as directors at such meeting. The terms of Messrs.
Jonas, Lechter and Pfeffer, as Class A Directors, will expire in 1998 and the
terms of Messrs. Davis, Fischman, Malkin and Matthews, the Class C Directors,
will expire in 1999.
At the meeting, Ms. Maneker and Messrs. Begun, Knox and Wolff are to be
elected directors to hold office until the annual meeting in 2000 and until each
of their successors has been elected and qualified. If any nominee listed in the
table below should become unavailable for any reason, which management does not
now anticipate, the persons named in the proxy solicited by the Board of
Directors reserve the right to substitute another person of their choice in his
or her place. All nominees named in the table below are now directors of the
Company.
3
<PAGE> 6
The following information is furnished with respect to each nominee for
director of the Company and each other member of the Board of Directors whose
term of office will continue after the Annual Meeting. All such information has
been furnished to the Company by such directors.
NOMINEES
CLASS B -- TERMS EXPIRING 1997
<TABLE>
<CAPTION>
CURRENT POSITIONS
NAME AND AGE WITH THE COMPANY
------------------------------------------------------------- -----------------------
<S> <C>
Martin S. Begun (64)......................................... Director
Robert Knox (44)............................................. Director
Roberta S. Maneker (59)...................................... Director
John Wolff (44).............................................. Director
</TABLE>
DIRECTORS CONTINUING IN OFFICE
CLASS A -- TERMS EXPIRING 1998
<TABLE>
<CAPTION>
CURRENT POSITIONS
NAME AND AGE WITH THE COMPANY
------------------------------------------------------------- -----------------------
<S> <C>
Donald Jonas (67)............................................ Chairman of the Board,
President and Chief
Executive Officer
Albert Lechter (68).......................................... Director
Leonard Pfeffer (70)......................................... Director
</TABLE>
CLASS C -- TERMS EXPIRING 1999
<TABLE>
<CAPTION>
CURRENT POSITIONS
NAME AND AGE WITH THE COMPANY
------------------------------------------------------------- -----------------------
<S> <C>
Charles A. Davis (48)........................................ Director
Bernard D. Fischman (82)..................................... Director
Anthony E. Malkin (34)....................................... Director
Norman Matthews (64)......................................... Director
</TABLE>
Donald Jonas has been Chairman of the Board and a director of the Company
or its former parent since 1979. Mr. Jonas has been President and Chief
Executive Officer since January 16, 1996, and Mr. Jonas previously served as
Chief Executive Officer of the Company from January 1984 to January 1994. He is
also a director of Dress Barn, Inc.
Albert Lechter currently serves as a director for and a consultant to the
Company. He served as President and a director of the Company or its former
parent from 1975 to 1992. Mr. Lechter was Vice Chairman of the Board from 1992
until November 1993.
Leonard Pfeffer has been a director of the Company or its former parent
since 1979 and serves as a consultant to the Company. He served as an Executive
Vice President from 1979 to 1992. He was also Chief Financial Officer of the
Company from 1983 to 1991.
Martin S. Begun has been associated with New York University since 1963 and
is currently Vice President for External Relations of the New York University
Medical Center and Associate Dean of its School of Medicine. He has been a
director of the Company since 1986.
Robert Knox became Senior Managing Director of Cornerstone Equity
Investors, LLC, a private equity investment firm, in 1996. He was Chairman and
Chief Executive Officer of Prudential Equity Investors, Inc. from 1994 to 1996,
and was President of that firm from 1984 to 1994. He is also a director of
Health
4
<PAGE> 7
Management Associates, Inc. and several private companies. He has been a
director of the Company since 1986, and is the designated director of the holder
of the Series A Preferred Stock.
Roberta S. Maneker became a trustee of Oberlin College in 1996 and has been
a freelance magazine writer since November 1994. Prior to that time she was
Senior Vice President of Marketing and Corporate Communications at Christie's,
an auction house, since 1987. She has been a director of the Company since 1992.
John Wolff has been a partner of CEW Partners, a New York-based investment
firm, since 1984. He has been a director of the Company since 1986, and has
served as a part-time consultant to the Company from time to time.
Anthony E. Malkin has been a director of the Company since December of
1994. He has been President and Chief Operating Officer of W&M Properties, Inc.
for more than the last five years.
Charles A. Davis is a limited partner of Goldman, Sachs & Co., an
investment banking firm, and was a general partner of Goldman, Sachs & Co. from
1990 to December 1994. He is also a director of Media General, Inc., US Life
Corporation, Merchants Bancshares, Inc., Heilig Meyers Company and the
Progressive Corporation. He has been a director of the Company since 1989.
Bernard D. Fischman has been Of Counsel to the law firm of LeBoeuf, Lamb,
Greene & MacRae, L.L.P., which serves as counsel to the Company, since March of
1994. Prior to that time he was a partner in the law firm of Shea & Gould for
more than the previous five years. He has been a director of the Company since
1989.
Norman Matthews has been a retail consultant to the Company since 1989. He
is a director of Progressive Corp., Loehmann's, Inc., Toys R' Us and Finlay
Jewelry. He previously served as a director of Hills Stores Company and Eye Care
Centers of America. He has been a director of the Company since 1989.
5
<PAGE> 8
BENEFICIAL OWNERSHIP OF DIRECTORS AND MANAGEMENT
The table below sets forth the beneficial ownership of the Common Stock as
of April 18, 1997 by (i) each director and nominee for director, (ii) each of
the executive officers named in the "Summary Compensation Table," and (iii) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP
OF COMMON STOCK AS PERCENT
NAME POSITION OF APRIL 18, 1997 OF CLASS
- ---------------------------- ------------------------------------ ----------------------- --------
<S> <C> <C> <C>
Donald Jonas................ Chairman of the Board, President 4,175,493(1) 24.3%
and Chief Executive Officer
Anthony E. Malkin........... Director 0 (10)
Albert Lechter.............. Director 3,000 (10)
Leonard Pfeffer............. Director 29,120 (10)
Martin S. Begun............. Director 3,700(2) (10)
Robert Knox................. Director 21,088(2) (10)
Roberta S. Maneker.......... Director 3,200(2) (10)
John Wolff.................. Director 61,200(2)(3) (10)
Charles A. Davis............ Director 1,600(2) (10)
Bernard D. Fischman......... Director 58,400(4) (10)
Norman Matthews............. Director 134,502(5) (10)
Robert Harloe............... Senior Vice President-Human 9,176(6) (10)
Resources
Dennis Hickey............... Senior Vice President-Stores 33,387(7) (10)
Frank O'Neill............... Senior Vice President-Director of 16,428(8) (10)
Real Estate and Construction
James A. Shea............... Senior Vice President-General 11,000(6) (10)
Merchandising Manager
John W. Smolak.............. Senior Vice President and Chief 9,231(6) (10)
Financial Officer
All directors and executive
officers of the Company as
a group (17 persons)...... 4,593,798(9) 26.8%
</TABLE>
- ---------------
(1) Information concerning Mr. Jonas' ownership of Common Stock is set forth
under "Principal Shareholders."
(2) Includes 1,200 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days of April 18, 1997. Does not include
4,800 shares of Common Stock issuable pursuant to options not exercisable
within 60 days of April 18, 1997.
(3) Includes 60,000 shares of Common Stock held of record by CEW Partners, the
general partner of which is Basil Venture Partners of which Mr. Wolff is a
partner, although Mr. Wolff disclaims such beneficial ownership.
(4) Includes 200 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days of April 18, 1997. Does not include
800 shares of Common Stock issuable pursuant to options not exercisable
within 60 days of April 18, 1997.
(5) Includes 124,502 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days of April 18, 1997. Does not include
16,800 shares of Common Stock issuable pursuant to options not exercisable
within 60 days of April 18, 1997.
(6) Includes 9,000 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days of April 18, 1997. Does not include
61,000 shares of Common Stock issuable pursuant to options not exercisable
within 60 days of April 18, 1997.
6
<PAGE> 9
(7) Includes 29,000 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days of April 18, 1997. Does not include
61,000 shares of Common Stock issuable pursuant to options not exercisable
within 60 days of April 18, 1997.
(8) Includes 15,200 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days of April 18, 1997. Does not include
85,800 shares of Common Stock issuable pursuant to options not exercisable
within 60 days of April 18, 1997.
(9) Includes 205,402 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days of April 18, 1997. Does not include
385,400 shares of Common Stock issuable pursuant to options not exercisable
within 60 days of April 18, 1997.
(10) The percentage of shares beneficially owned does not exceed one percent of
the outstanding shares on April 18, 1997.
There was no beneficial ownership of the Preferred Stock as of April 18,
1997 by (i) each director and nominee for director, (ii) each of the executive
officers named in the "Summary Compensation Table," and (iii) all directors and
executive officers of the Company as a group.
Except as noted in the footnotes above, (i) none of such shares is known by
the Company to be shares with respect to which such beneficial owner has the
right to acquire beneficial ownership and (ii) the Company believes the
beneficial holders listed above have sole voting and investment power regarding
the shares shown as being beneficially owned by them.
DIRECTOR COMPENSATION AND ATTENDANCE
Directors who are not officers of, consultants to or attorneys for the
Company receive directors' fees of $1,000 per meeting, plus an annual fee of
$10,000.
Pursuant to a consulting agreement between the Company and Norman Matthews,
Mr. Matthews received $50,000 in the fiscal year ended February 1, 1997 for
services provided to the Company.
Pursuant to a consulting agreement between the Company and Leonard Pfeffer,
Mr. Pfeffer received approximately $75,000 in the fiscal year ended February 1,
1997 for providing certain advisory services to the Company and refraining from
direct or indirect employment in substantial competition with the Company. Mr.
Pfeffer will receive $75,000 annually until the expiration of the agreement in
2002. The Company maintains life insurance coverage for Mr. Pfeffer so that upon
the death of such executive the Company will receive from the insurance proceeds
a sum approximately sufficient to offset the aggregate benefits payable under
such consulting agreement. Pursuant to a June 15, 1995 amendment to the
consulting agreement, Mr. Pfeffer may participate in the Company's group life,
medical and dental insurance plans until 2002. In addition, the Company will
maintain a split-dollar life insurance policy for the life of Mr. Pfeffer (under
the split-dollar policy, the Company is entitled to receive from the cash
surrender value or death benefit a sum equal to the premium costs incurred by
the Company to maintain the policy, with the remainder going to a beneficiary
chosen by the executive insured).
Pursuant to a consulting agreement between the Company and Albert Lechter,
Mr. Lechter received approximately $100,000 in the fiscal year ended February 1,
1997, for providing certain advisory services to the Company and refraining from
direct or indirect employment in substantial competition with the Company. Mr.
Lechter will receive $100,000 annually until the expiration of the agreement in
2003. The Company maintains life insurance coverage for Mr. Lechter so that upon
the death of such executive the Company will receive from the insurance proceeds
a sum approximately sufficient to offset the aggregate benefits payable under
such consulting agreement. Pursuant to a June 15, 1995 amendment to the
consulting agreement, Mr. Lechter may participate in the Company's group life,
medical and dental insurance plans until 2003, and will receive a car allowance
and secretarial and office services for that period. In addition, the Company
will maintain a split-dollar life insurance policy for the life of Mr. Lechter.
The Board of Directors held four meetings during the fiscal year ended
February 1, 1997. During such fiscal year, none of the directors attended fewer
than 75% of the aggregate of (i) the total number of meetings
7
<PAGE> 10
of the Board of Directors and (ii) the total number of meetings held by all
committees of the Board on which such director served.
BOARD COMMITTEES AND MEMBERSHIP
The Company has an Executive Committee consisting of Charles A. Davis,
Donald Jonas, Robert Knox and John Wolff, which is empowered to exercise all
powers of the Board of Directors in the management of the affairs of the Company
with certain exceptions. The Executive Committee held no meetings during the
fiscal year ended February 1, 1997.
The Company has an Audit Committee, consisting of Martin S. Begun, Robert
Knox and John Wolff, which reviews the scope and results of the independent
accountants' examination and related fees, the internal audit activity of the
Company and other pertinent auditing and internal control matters. The Audit
Committee held two meetings during the fiscal year ended February 1, 1997.
The Company has a Compensation Committee, consisting of Martin S. Begun,
Bernard D. Fischman and Roberta S. Maneker. The Compensation Committee has the
authority to review all matters relating to the personnel of the Company. The
Compensation Committee held no meetings during the fiscal year ended February 1,
1997.
The Company does not have a Nominating Committee.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table contains information about the compensation paid by the
Company for services rendered in all capacities during the last three fiscal
years to the Chief Executive Officer of the Company and each of the five most
highly paid executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION PAYOUTS
-------------------------------- AWARDS ---------
OTHER -------------------- LONG TERM
ANNUAL RESTRICTED INCENTIVE ALL OTHER
NAME AND YEAR SALARY BONUS COMPENSATION STOCK OPTIONS PLAN COMPENSATION
PRINCIPAL POSITION ENDED ($) ($) ($) AWARD (#) PAYOUT ($)
- --------------------- ------- -------- ------ ------------ ---------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald Jonas......... 2/1/97 $ 60,000 -- $ 20,623(1) -- -- -- 153,851(2)(4)(6)
Chairman of the
Board, 2/3/96 60,000 -- 28,476 -- -- -- 140,413
President and Chief 1/28/95 60,000 -- 40,709 -- -- -- 140,812
Executive Officer
Robert J. Harloe..... 2/1/97 184,712 12,500 10,999(3) -- -- -- 1,508(2)(4)
Senior Vice
President- 2/3/96 169,962 8,250 -- 25,000 45,000 -- 145,776
Human Resources 1/28/95 -- -- -- -- -- -- --
Dennis Hickey........ 2/1/97 214,120 12,500 10,999(3) -- -- -- 3,531(2)(4)
Senior Vice
President- 2/3/96 207,939 35,000 -- 25,000 45,000 -- 2,077
Stores 1/28/95 200,000 25,000 -- -- -- -- 1,134
Frank O'Neill........ 2/1/97 272,797 12,500 10,999(3) -- -- -- 3,399(2)(4)
Senior Vice
President- 2/3/96 264,885 25,000 -- 25,000 76,000 -- 2,087
Director of Real
Estate 1/28/95 250,000 20,000 -- -- 11,000 -- 4,005
James A. Shea........ 2/1/97 298,536 30,000 10,999(3) -- -- -- 71,346(2)(4)(5)
Senior Vice
President- 2/3/96 290,014 -- -- 25,000 45,000 -- 77,184
General Merchandising 1/28/95 -- -- -- -- -- -- --
Manager
John W. Smolak....... 2/1/97 249,617 12,500 10,999(3) -- -- -- 39,065(2)(4)(5)
Senior Vice President 2/3/96 216,737 -- -- 25,000 45,000 -- 134,982
and Chief Financial 1/28/95 -- -- -- -- -- -- --
Officer
</TABLE>
8
<PAGE> 11
- ---------------
(1) Represents the cost of the Company of providing Mr. Jonas with an automobile
and a driver for the fiscal years ended February 1, 1997, February 3, 1996
and January 28, 1995, respectively.
(2) Includes insurance premiums paid by the Company with respect to term life
insurance for each of the named executive officers.
(3) Represents automobile allowances paid by the Company to each of the named
executive officers.
(4) Includes matching contributions under the Company's 401(k) plan of $1,154
for Mr. Jonas, $1,004 for Mr. Harloe, $3,027 for Mr. Hickey, $2,895 for Mr.
O'Neill, $718 for Mr. Shea and $810 for Mr. Smolak.
(5) Includes the cost of the Company for relocation of Mr. Shea, $70,124, and
Mr. Smolak, $37,751.
(6) Includes insurance premiums in the amount of $152,193 paid by the Company
with respect to split-dollar life insurance policies for the benefit of Mr.
Jonas on the lives of Mr. Jonas and his wife. Mr. Jonas' designee is the
owner of the policies and the owner has the right to designate the
beneficiary thereunder. In the event of the death of Mr. Jonas or his wife,
the beneficiary receives the death benefit and in the event of the policy
cancellation, the owner receives the cash surrender value. However, both the
death benefit and the cash surrender value are subject to the right of the
Company to receive a sum equal to the aggregate premium cost incurred by the
Company for the maintenance of the policies.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company's consulting agreements with Messrs. Lechter and Pfeffer are
discussed under "Director Compensation and Attendance." The Company's consulting
agreement with Mr. Jonas is discussed under "Board Report on Executive
Compensation."
STOCK OPTIONS
No options were granted under the Stock Option Plan or outside of the Stock
Option Plan to each of the executive officers named in the Summary Compensation
Table during the fiscal year ended February 1, 1997. The Stock Option Plan does
not permit the issuance of stock appreciation rights.
9
<PAGE> 12
The following table sets forth information for each of the executive
officers named in the Summary Compensation Table with respect to the value of
options exercised during the fiscal year ended February 1, 1997 and the value of
outstanding and unexercised options held as of February 1, 1997, based upon the
market value of the Common Stock of $3.9375 per share on that date. There were
no options exercised by the executive officers named below during the fiscal
year ended February 1, 1997.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR-END(#) AT FISCAL YEAR-END($)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ---------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald Jonas............ -- $ -- $ -- $ -- $ -- $ --
Robert J. Harloe........ -- -- 4,000 16,000 -- --
5,000 20,000 -- --
-- -- -- 25,000 -- --
Dennis Hickey........... -- -- 20,000 -- -- --
-- -- 4,000 16,000 -- --
-- -- 5,000 20,000 -- --
-- -- -- 25,000 -- --
Frank O'Neill........... -- -- 10,200 40,800 -- --
5,000 20,000 -- --
-- -- -- 25,000 -- --
James A. Shea........... -- -- 4,000 16,000 -- --
5,000 20,000 -- --
-- -- -- 25,000 -- --
John W. Smolak.......... -- -- 4,000 16,000 -- --
5,000 20,000 -- --
-- -- -- 25,000 -- --
</TABLE>
None of the options held by the executive officers named in the Summary
Compensation Table were repriced during the fiscal year ended February 1, 1997.
The Stock Option Plan does not permit the issuance of stock appreciation rights.
BOARD REPORT ON EXECUTIVE COMPENSATION
The principal objectives of the Company's compensation program are to
attract and retain qualified executives and to provide incentives for such
executives to enhance the profitability and growth of the Company and thus
enhance shareholder value.
During the fiscal year ended February 1, 1997, the Company's executive
compensation program was administered by the Board of Directors. The executive
compensation program consists principally of base salaries and long-term
incentives.
The following describes components of the Company's executive compensation
program and the related factors considered by the Board in determining
compensation:
Base Salaries. Base salaries are determined after evaluating a number of
factors, including local market conditions, job performance and amounts paid to
executives with comparable experience, qualifications and responsibilities at
other retailers. The Company defers the compensation payable to certain
employees (as described below), lowering the base salaries currently payable to
such employees.
Other Compensation. In order to lower the base salaries currently payable
to certain employees, thereby conserving the Company's working capital, the
Company has entered into deferred compensation agreements
10
<PAGE> 13
with certain employees whereby compensation is deferred until termination of
employment with the Company. The deferred compensation agreements provide, in
part, that if the employee has attained the age of 56 or older on the date of
his termination of employment, the Company will pay to the employee certain
compensation for a period of 10 years. The annual amount payable by the Company
increases 10% for each year of service after age 56 with the maximum amount
payable if the employee retires at age 65 or older. Certain of the deferred
compensation agreements require that the individual provide advisory services to
the Company and to refrain from substantial competition with the Company during
this 10 year period after retirement. The Company believes that deferred
compensation agreements such as these encourage employees of the Company to
remain employed by or associated with the Company. The Company maintains life
insurance coverage for each eligible executive so that upon the death of such
executive the Company will recover from the insurance proceeds a sum
approximately sufficient to offset the aggregate benefits payable under each
agreement.
Long-Term Incentive Compensation. The Company's long-term incentive
compensation program consists principally of stock options which generally vest
over a number of years. The number of shares of Common Stock subject to an
executive's stock option grant is determined with reference to the
responsibility and experience of the executive and competitive conditions. By
aligning the financial interests of the Company's executives with those of the
Company's shareholders, these equity awards are intended to be directly related
to the creation of value for shareholders of the Company. The deferred vesting
provisions are designed to create an incentive for the individual executive to
remain with the Company.
Benefits. The Company offers basic benefits, such as medical, life and
disability insurance comparable to those provided by other similar companies.
Chief Executive Officer. The relatively low compensation paid to Donald
Jonas, the Chief Executive Officer of the Company during the fiscal year ended
February 1, 1997, in comparison to compensation paid to chief executive officers
of other comparable retailers, results from such officer's request that he not
receive higher compensation. Mr. Jonas and the Board of Directors believe that,
since Mr. Jonas is the largest single shareholder of the Company, his interests
and those of the other shareholders are aligned, and therefore Mr. Jonas has
sufficient incentive to want to maximize shareholder value. In addition, Mr.
Jonas is a party to a consulting agreement with the Company which provides that,
upon retirement at age 65 or older, Mr. Jonas will, for a period of 10 years, be
annually paid $100,000 and be provided with (or be paid the cash equivalent of)
certain services including a secretary, office, driver and car, in return for
his providing certain advisory services to the Company and refraining from
direct or indirect employment in substantial competition with the Company. The
annual amount to be paid to Mr. Jonas under this consulting agreement will be
reduced by 10% for each one year decrease in Mr. Jonas' retirement age below age
65. During the fiscal year ended February 1, 1997, no payment was made under
such consulting agreement. The Company maintains life insurance coverage for Mr.
Jonas to fund the aggregate benefits payable under such consulting agreement.
Pursuant to a June 15, 1995 amendment to the consulting agreement, Mr. Jonas may
participate in the Company's group life, medical and dental insurance plans, and
will receive a car allowance, a driver and secretarial services. In addition,
the Company will maintain split-benefit life insurance policies for the lives of
Mr. Jonas and his wife.
SUBMITTED BY THE BOARD OF DIRECTORS:
<TABLE>
<S> <C>
Donald Jonas Robert Knox
Albert Lechter Roberta S. Maneker
Anthony E. Malkin John Wolff
Leonard Pfeffer Charles A. Davis
Martin S. Begun Bernard D. Fischman
Norman Matthews
</TABLE>
11
<PAGE> 14
PERFORMANCE GRAPH
The following graph illustrates, for the period from January 25, 1992
through February 1, 1997, the cumulative total shareholder return (including
reinvestment of dividends) of $100 invested in (i) the Common Stock, (ii) the
Total Return Index for the NASDAQ Stock Market (U.S. companies) and (iii) the
Total Return Industry Index for NASDAQ Retail Trade Stocks.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FOR THE YEAR ENDED FEBRUARY 1, 1997
<TABLE>
<CAPTION>
MEASUREMENT PERIOD THE NASDAQ STOCK NASDAQ RETAIL
(FISCAL YEAR COVERED) LECHTERS MARKET (US) TRADE STOCKS
<S> <C> <C> <C>
1992 100 100 100
1993 95.858 113.08 90.2582
1994 69.8225 130.046 96.8288
1995 81.3609 124.064 85.3667
1996 25.4438 175.336 96.4831
1997 18.6391 229.837 118.628
</TABLE>
CERTAIN TRANSACTIONS
A subsidiary of the Company operates two stores in buildings in which
Donald Jonas has an interest. A subsidiary of the Company operates four stores
in buildings which are managed by a company with whom Mr. Malkin is affiliated
and in which Mr. Malkin's father has an interest. The Company believes that the
terms of these leases are comparable to other similar leases to which the
Company is a party.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors and greater
than ten-percent shareholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file. Based upon a review of
such forms furnished to the Company, the Company believes that during the fiscal
year ended February 1, 1997, all Section 16(a) filing requirements applicable to
its officers, directors and greater than ten-percent beneficial owners were
complied with.
12
<PAGE> 15
RATIFICATION OF APPOINTMENT OF AUDITORS
The firm of Deloitte & Touche LLP, independent auditors, has audited the
books and records of the Company since 1975 and the Board of Directors desires
to continue the services of this firm for the current fiscal year. Accordingly,
the Board of Directors recommends that the shareholders ratify the appointment
by the Board of Directors of the firm of Deloitte & Touche LLP to audit the
books and accounts of the Company for the current fiscal year.
Representatives of Deloitte & Touche LLP are expected to be available at
the Annual Meeting of Shareholders to respond to appropriate questions and will
be given the opportunity to make a statement if they desire to do so.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders of the Company wishing to include proposals in the proxy
material in relation to the annual meeting of the Company to be held in 1998
must submit the same in writing so as to be received at the executive office of
the Company on or before January 16, 1998. Such proposals must also meet the
other requirements of the rules of the Securities and Exchange Commission
relating to shareholders' proposals.
THE COMPANY WILL PROVIDE ANY SHAREHOLDER OF RECORD AT THE CLOSE OF BUSINESS
ON MAY 2, 1997, WITHOUT CHARGE, UPON WRITTEN REQUEST TO ITS SECRETARY AT 1 CAPE
MAY STREET, HARRISON, NEW JERSEY 07029, A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 1, 1997.
By Order of the Board of Directors,
IRA S. ROSENBERG,
Secretary
May 16, 1997
13
<PAGE> 16
LECHTERS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER
USING DARK INK ONLY [X]
________________________________________________________________________________
1. Election of Directors--
Nominees: Martin S. Begun, Robert Knox, Roberta S. Maneker and John Wolff.
_________________________________
(Except nominee(s) written above)
For All
For Withheld Except
[ ] [ ] [ ]
2. Ratification of selection of Deloitte & Touche LLP as Independent Public
Accountants of the Company for the fiscal year ending January 31, 1998.
For Against Abstain
[ ] [ ] [ ]
3. In their discretion, the proxies are authorized to vote upon such other
matters as may come before the meeting or any other adjournment thereof.
For Against Abstain
[ ] [ ] [ ]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED BY THE
UNDERSIGNED SHAREHOLDER. IF NO CHOICE IS SPECIFIED BY THE SHAREHOLDER, THIS
PROXY WILL BE VOTED "FOR" ITEMS (1), (2) AND (3), AND IN THE PROXIES' DISCRETION
ON ANY OTHER MATTERS COMING BEFORE THE MEETING.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such stock and hereby ratifies and confirms all that
said attorneys, agents, proxies, their substitutes or any of them may lawfully
do by virtue hereof.
________________________________________________________________________________
________________________________________________________________________________
Dated: _________________________________________________, 199___________________
Please date this Proxy and sign your name exactly as it appears hereon. Where
there is more than one owner, each should sign. When signing as an attorney,
administrator, executor, guardian, or trustee, please add your title as such. If
executed by a corporation, this Proxy should be signed by a duly authorized
officer. If a partnership, please sign in partnership name by authorized person.
<PAGE> 17
Please date, sign and return this Proxy Card in the enclosed envelope. No
postage is required if mailed in the United States.
LECHTERS, INC.
1 CAPE MAY STREET
HARRISON, NEW JERSEY 07029-9998
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 17, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Donald Jonas and Ira S. Rosenberg and
either of them proxies of the undersigned with full power of substitution, to
vote all the shares of Common Stock, without par value, and the Series A
Preferred Stock, $100 par value, of Lechters, Inc. (the "Company") held of
record by the undersigned on May 2, 1997, at the Annual Meeting of Shareholders
to be held June 17, 1997, and at any adjournment thereof.
