<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended August 1, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from To
Commission File No. 0-17870
LECHTERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY No. 13-2821526
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION) IDENTIFICATION NO.)
1 Cape May Street, Harrison, NEW JERSEY 07029-2404
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code:
(973) 481-1100
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months, and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO
The number of shares of the Registrant's common stock, without
par value, outstanding at September 8, 1998: 17,176,286:
<PAGE> 2
LECHTERS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR QUARTER ENDED AUGUST 1, 1998
INDEX
PAGE NO.
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
August 1, 1998 and January 31, 1998 1
Consolidated Statements of Income
for the Thirteen and Twenty-Six Weeks Ended
August 1, 1998 and August 2, 1997 2
Consolidated Statements of Cash Flows
for the Twenty-Six Weeks Ended
August 1, 1998 and August 2, 1997 3
Consolidated Statement of Shareholders'
Equity for the Twenty-Six Weeks Ended
August 1, 1998 4
Notes to Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-8
PART II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 9-10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8K 10-11
- ----------------------------------------------------------------------
Forward Looking Statements - All statements in this Report on Form
10-Q, including those incorporated herein by reference, that do
not reflect historical information are forward looking statements made
in reliance upon the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Important factors that could
cause actual results to differ materially from those discussed in
such forward looking statements include, but are not limited
to, competition, economic downturns, dependence upon product
development, international business risks and seasonality of business.
- ----------------------------------------------------------------------
<PAGE> 3
PART I. Financial Information
LECHTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
August 1, January 31,
1998 1998
<S> <C> <C>
A S S E T S (unaudited)
Current Assets:
Cash and Cash Equivalents $12,990 $16,395
Marketable Securities 61,722 74,747
Accounts Receivable 9,531 5,084
Merchandise Inventories 108,454 99,034
Prepaid Expenses 6,570 2,145
Total Current Assets 199,267 197,405
Property and Equipment:
Fixtures and Equipment 58,625 58,841
Leasehold Improvements 95,783 94,556
154,408 153,397
Less Accumulated Depreciation &
Amortization 85,147 79,891
Net Property and Equipment 69,261 73,506
Other Assets 8,431 6,523
Total Assets $276,959 $277,434
LIABILITIES AND SHAREHOLDERS'EQUITY
Current Liabilities
Accounts Payable $14,973 $10,127
Dividends Payable-Preferred Stock - 1,010
Salaries, Wages and Other
Accrued Expenses 21,902 18,102
Taxes, Other Than Income Taxes 1,503 1,227
Income Taxes Payable 1,032 2,941
Total Current Liabilities 39,410 33,407
Long-term Debt
5% Convertible Subordinated
Debentures due September 27,
2001 (Net of Unamortized
Discount of $4,397 and $4,999,
respectively) 60,603 60,001
Total Long-Term Debt 60,603 60,001
Deferred Income Taxes and Other
Deferred Credits 18,616 18,176
Shareholders' Equity:
Convertible Preferred Stock,
$100 Par Value
Authorized 1,000,000 Shares,
Issued and Outstanding -
Series A - 149,999
Shares; Series B-50,001 Shares 20,000 20,000
Common Stock, No Par Value,
Authorized 50,000,000 Shares,
Issued and Outstanding
17,176,286 and 17,174,286,
respectively 58 58
Unrealized Holding Gain on
Available for Sale Securities 30 84
Additional Paid-in Capital 62,380 62,370
Retained Earnings 75,862 83,338
Total Shareholders' Equity 158,330 165,850
Total Liabilities and
Shareholders' Equity $ 276,959 $277,434
</TABLE>
See accompanying notes to consolidated financial statements.
-1-
<PAGE> 4
LECHTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Thirteen Weeks Twenty-Six Weeks
Ended Ended
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net Sales $91,422 $95,114 $177,616 $180,243
Cost of Goods Sold
(including
occupancy and
indirect costs) 69,862 72,266 134,398 137,418
Gross Profit 21,560 22,848 43,218 42,825
Selling, General and
Administrative Expenses 27,942 27,892 56,228 55,383
Operating Loss (6,382) (5,044) (13,010) (12,558)
Other Expenses (Income):
Interest Expense 1,125 1,134 2,222 2,280
Interest Income (918) (618) (2,339) (1,306)
Net Investment
(Gain/Income)Loss (80) (10) (221) (44)
Total Other Expenses
(Income) 127 506 (338) 930
Loss Before Income Taxes (6,509) (5,550) (12,672) (13,488)
Income Tax Benefit (2,673) (2,275) (5,196) (5,530)
Net Loss (3,836) (3,275) (7,476) (7,958)
Preferred Stock
Dividend Requirement 253 253 505 505
Net Loss Applicable to
Common Shareholders ($4,089) ($3,528) ($7,981) ($8,463)
Net Loss Per Common
Share - Basic ($0.24) ($0.21) ($0.46) ($0.49)
Net Loss Per Common
Share - Diluted ($0.24) ($0.21) ($0.46) ($0.49)
Weighted Average Common
Shares Outstanding
- Basic 17,176,000 17,155,000 17,175,000 17,155,000
Weighted Average Common
Shares Outstanding
- Diluted 17,176,000 17,155,000 17,175,000 17,155,000
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<PAGE> 5
LECHTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
Twenty-Six Weeks
Ended
August 1, August 2,
1998 1997
(unaudited)
<S> <C> <C>
Cash Flows From Operating
Activities:
Net Loss ($7,476) ($7,958)
Adjustments to Reconcile Net
Loss to Net
Cash Used In Operating
Activities:
Depreciation and Amortization 8,258 8,950
Other 553 844
Changes in Assets and
Liabilities:
Increase in Accounts Receivable (4,447) (7,343)
Increase in Merchandise
Inventories (9,420) (11,614)
Increase in Prepaid Expenses (4,425) (2,714)
Increase in Accounts Payable,
Accrued Expenses and Taxes
Other Than Income Taxes 8,922 17,024
Decrease in Income Taxes Payable (1,909) (1,957)
Increase in Other Assets (2,502) (1,832)
Net Cash Used In Operating
Activities (12,446) (6,600)
Cash Flows From Investing
Activities:
Capital Expenditures (2,892) (2,594)
Decrease in Available for Sale
Securities 12,933 15,870
Net Cash Provided by Investing
Activities 10,041 13,276
Cash Flows From Financing
Activities:
Payment of Preferred Stock
Dividend (1,010) (1,010)
Exercise of Stock Options 10 -
Net Cash Used In Financing
Activities (1,000) (1,010)
Net (Decrease) Increase in
Cash and Cash Equivalents (3,405) 5,666
Cash and Cash Equivalents,
Beginning of Period 16,395 7,022
Cash and Cash Equivalents, End
of Period $12,990 $12,688
Supplemental Disclosure of Cash
Flows Information:
Cash Paid During the Period
for:
Interest $ - $ 121
Income Taxes $ 2,183 $ 1,923
</TABLE>
See accompanying notes to consolidated financial statements.
- 3 -
<PAGE> 6
LECHTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Amounts in thousands)
<TABLE>
<CAPTION>
Common Preferred Additional Unrealized
Stock Stock Paid-In Retained Holding
Issued Issued Capital Earnings (Loss) Gain Total
<S> <C> <C> <C> <C> <C> <C>
Balance,
January 31, 1998 $58 $20,000 $62,370 $83,338 $ 84 $165,850
Net Loss Twenty-
Six Weeks Ended
August 1, 1998 -- -- -- (7,476) -- (7,476)
Unrealized
Holding Loss
Adjustment -- -- -- -- (54) (54)
Exercise of
Stock Options -- -- 10 -- -- 10
Balance,
August 1, 1998
(unaudited) $58 $20,000 $62,380 $75,862 $ 30 $158,330
</TABLE>
See accompanying notes to consolidated financial statements.
- 4 -
<PAGE> 7
LECHTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
The accompanying unaudited Consolidated Financial Statements
have been prepared in accordance with the instructions for Form
10-Q and do not include all the information and footnotes required
by generally accepted accounting principles for complete
financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation for interim periods have been
included. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the audited
financial statements and the notes thereto included in the Company's
Annual Report on Form 10-K for the year ended January 31, 1998.
The Company's results of operations for the thirteen and
twenty-six weeks ended August 1, 1998 are not necessarily indicative
of the operating results for the full year.
Certain reclassifications have been made to the financial
statements of the prior year to conform with the classifications
used for Fiscal 1998.
2. NET LOSS PER SHARE
"Basic" net loss per share data were computed by dividing
net loss, reduced by the Convertible Preferred Stock
Dividend requirement, by the weighted average number of common
shares outstanding during the thirteen and twenty-six weeks ended
August 1, 1998 and August 2, 1997. With respect to "diluted" net
loss per share, stock options which are potential common shares,
were excluded from the weighted average of outstanding shares
because inclusion would reduce the loss per share. With respect to
the Company's 5% Convertible Subordinated Debentures and the
Company's Convertible Preferred Stock, for the purpose of
computing diluted net loss per share, the assumed conversion
of such debentures and such preferred stock would each have an
anti-dilutive effect on diluted loss per share for the thirteen
and twenty-six weeks ended August 1, 1998 and August 2, 1997.
- 5 -
<PAGE> 8
3. COMPREHENSIVE INCOME (LOSS)
In June, 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income." As required by SFAS No. 130
the following is a summary of the Company's comprehensive
income (loss):
Twenty-Six Weeks Ended
August 1, August 2,
1998 1997
Net Loss ($ 7,476) ($7,958)
Components of Comprehensive (Loss) Income:
Unrealized Holding (Loss)
Gain on Available
For Sale Securities -
Net of Applicable
Income Tax Benefit/Expense (54) 22
Comprehensive Loss ($7,530) ($7,936)
4. RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued SFAS No. 131,
" Disclosures about Segments of an Enterprise and
Related Information", effective for fiscal years beginning after
December 15, 1997. As provided by SFAS No. 131, disclosures are
not required for interim periods of the initial year of
application, but comparative information will be reported in
financial statements for interim periods during the second year
of application.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED AUGUST 1, 1998 IN COMPARISON WITH THIRTEEN
WEEKS ENDED AUGUST 2, 1997.
Net sales for the thirteen weeks ended August 1, 1998
decreased $3,692,000 to $91,422,000, a decrease of 3.9% compared to
the comparable period of Fiscal 1997. The decrease was attributable
to a reduction of stores in operation which averaged 33 fewer
locations from Fiscal 1997 and to the sales declines in the Company's
Famous Brands Housewares Outlet stores related to the transition to
more "special buy", "off price" merchandise. The reduction in the
number of stores reflects the Company's strategy to improve the quality of
its store locations by upgrading to better performing sites.
Lechters Housewares store sales for the second quarter decreased 2.8%
to $69,916,000 while Famous Brands Housewares Outlet sales declined 7.2%
to $21,506,000. On a comparable store basis, sales for the
Company declined 1.3%. Lechters Housewares comparable store sales
increased 0.2% for the quarter and Famous Brands Housewares Outlet
stores decreased 5.8%. During the second quarter of Fiscal 1998, the
Company opened 4 stores and closed 7 reducing the stores in operation
at August 1, 1998 to 612 from the 615 in operation at the beginning
of the second quarter compared to 645 stores in operation at August 2, 1997.
-6-
<PAGE> 9
Gross Profit for the second quarter was $21,560,000, 23.6% of
sales and was $1,288,000 and 0.4 percentage points as a percent of
sales lower than gross profit for the second quarter of Fiscal 1997.
The sales decrease was the primary reason for the decrease in
amount. Additional price reductions and the emphasis on "off-price"
merchandise, partially offset by the reduction in occupancy
costs related to fewer stores in operations were the significant
factors with respect to the gross profit rate decrease.
Selling, General and Administrative Expenses increased
nominally,$50,000, to $27,942,000, which was 30.6% of sales and were
1.3% percentage points higher than the expense rate for the second
quarter of Fiscal 1997. While store operating expenses with the exception
of payroll were reduced from the prior year, expenses in the
Service Office were higher reflecting the continued increased costs of
the merchandise division due to the "off-price" programs and
increased costs in information technology in support of a new infra-
structure and other initiatives including Year 2000 compliance.
Other (Income)/Expense for the quarter was an expense of
$127,000, 0.1% of net sales and was $379,000 and 0.4 percentage points below
the amount for the comparable period last year. Interest expense
was virtually equivalent to last year's amount while interest
and investment income and gains were $370,000 higher for the
second quarter versus the comparable period last year. As of
August 1, 1998 Marketable Securities classified as available for
sale were $61,722,000 which was $23,470,000 higher than at August 2,
1997. The higher invested balances produced the increased interest
and investment related income.
TWENTY-SIX WEEKS ENDED AUGUST 1, 1998 IN COMPARISON WITH TWENTY-SIX
WEEKS ENDED AUGUST 2, 1997
Net sales for the twenty-six weeks ended August 1, 1998
decreased $2,627,000 to $177,616,000, a 1.5% decrease from the comparable
twenty-six week period of Fiscal 1997. The sales decrease was due to
the reduced number of stores in operation during Fiscal 1998 which
on average had 31 fewer store locations than Fiscal 1997 and to the
sales decrease in the Company's Famous Brands Housewares Outlet
stores related to the transition to more "special buy", "off-
price" merchandise. Sales for the Company's Lechters Housewares
stores decreased 0.1% to $137,328,000 and sales for the Company's
Famous Brands Housewares Outlet stores decreased 5.9% to $40,288,000. On
a comparable store basis, sales for the Company increased 0.8% with
the Lechters Housewares stores increasing 2.8% and sales for
Famous Brands Housewares Outlet stores decreasing 5.3%. Year-to-date,
the Company has opened 7 stores and closed 21 reducing the stores
in operation from 626 at January 31, 1998 to 612 as of August 1, 1998
compared to 645 stores in operation at August 2,1997.
Gross Profit for the twenty-six week period ended August 1,
1998 increased $393,000 to $43,218,000. At 24.3% of net sales, the
gross margin rate increased 0.5 percentage points over the rate for
the comparable period of Fiscal 1997. While increased price
reductions and the increased emphasis on "off-price", "special buy"
merchandise reduced the gross profit rate, the reduction was more than offset
by the reduced occupancy costs related to the reduction in the number
of stores in operation.
Selling, General and Administrative Expenses increased $845,000
to $56,228,000 and at 31.7% of net sales, were 1.0 percentage
point higher as a rate compared to the comparable period of Fiscal 1997.
As mentioned for the second quarter, the expense trends are similar
with store operating expenses with the exception of payroll reduced due
to on average 31 fewer stores in operation than last year. Service
Office expenses have increased due to additional resources needed to
support the "off-price" strategies and to support the information
technology initiatives including Year 2000.
-7-
<PAGE> 10
YEAR 2000 COMPLIANCE
The Company continues actively addressing the year 2000 issue.
All systems have been reviewed for compliance and where necessary
program modifications made. Alternatively, where also warranted by
business functionality requirements, certain legacy systems which
were scheduled for replacement independent of the Year 2000 issues,
have or will be replaced with new software certified to be year
2000 compliant. Furthermore, the Company has solicited the commitment
of its key vendors and service providers to ensure their systems
are capable of operating in the future and hence compatible to the
extent necessary.
The Company does not expect its cost of compliance to be
exceptional in light of its current plan to otherwise upgrade the
capabilities of its existing systems.
LIQUIDITY AND CAPITAL RESOURCES.
Cash, cash equivalents and marketable securities increased
$23,772,000 over their combined balances at the close of the second quarter
of Fiscal 1997.
Cash flow during the twenty-six weeks ended August 1, 1998
as reflected on the Statements of Cash Flows, was a net decrease of
cash and cash equivalents of $3,405,000. Operating activities, which
are comprised of the net loss of $7,476,000 adjusted for non-
cash expenses such as depreciation and amortization and changes
in operating assets, utilized $12,446,000 of cash during Fiscal 1998
to date. Significant components of operating cash flow for the twenty-
six weeks ended August 1,1998 included depreciation and
amortization which provided cash of $8,258,000, merchandise inventories
which increased utilizing cash of $9,420,000, accounts receivable
and prepaid expenses which increased utilizing cash of $4,447,000
and $4,425,000, respectively, and accounts payable, accrued expenses
and taxes other than income taxes which increased and provided cash
of $8,922,000. Total merchandise inventories were $3,602,000 lower
at August 1, 1998 than at August 2, 1997. Investing activities
provided $10,041,000 as the Company's capital expenditures utilized
$2,892,000 of cash while the $12,933,000 reduction in marketable
securities provided cash.
Capital expenditures to date were for the construction of
and fixtures for new and relocated stores, store renovations and
remodels and for computer hardware upgrades and additions. Financing
activities utilized $1,000,000 of cash as the Company paid the dividend on
the convertible preferred stock of $1,010,000 and the exercise of
stock options provided $10,000.
During the first quarter of Fiscal 1998, the Company entered
into a new $40,000,000 Credit Agreement with a syndicate of banks led
by Chase Manhattan Bank to replace the existing credit facility which
was to expire in May 1998. The new facility consists of a $20,000,000
line of credit for direct borrowings and a $20,000,000 line for
the issuance of letters of credit. The term of the new agreement is
for three years, with the letter of credit component renewable
annually during that period.
-8-
<PAGE> 11
PART II. Other Information
Item 4- Submission of Matters to a Vote of Security Holders
(a) Regular annual meeting of the Company's stockholders,
held June 18, 1998 in New York, NY.
(b) Directors elected at the meeting for a three-year term:
Donald Jonas
Stephen Westerfield
Continuing Directors:
Martin S. Begun Robert Knox
Roberta S. Maneker John Wolff
Anthony E. Malkin Charles A. Davis
Bernard D. Fischman Norman Matthews
(c)(1) a. To elect two Director Nominees; and
b. 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 30, 1999; and
c. To consider and act upon a proposal to approve the
1998 Long-Term Incentive Plan.
(2) Director Nominees
Class of Stock For Withhold Total Voted
Common 13,829,147 45,159 13,874,306
Preferred 2,399,984 - 2,399,984
Total 16,229,131 45,159 16,274,290
Proposal to ratify Deloitte & Touche LLP asIndependent Auditors
Class of Stock For Against Abstain Total Voted
Common 13,868,259 2,819 3,228 13,874,306
Series A
Preferred 2,399,984 - - 2,399,984
Total 16,268,243 2,819 3,228 16,274,290
-9-
<PAGE> 12
Proposal to approve the 1998 Long-Term Incentive Plan
Broker
Class of Stock For Against Abstain Non-Votes TotalVoted
Common 11,056,382 914,854 419,887 1,483,183 13,874,306
Series A
Preferred 2,399,984 - - - 2,399,984
Total 13,456,366 914,854 419,887 1,483,183 16,274,290
(3) Election of Directors
Name Votes For Votes Withheld
Donald Jonas 16,229,595 44,695
Stephen Westerfield 16,229,131 45,159
Item 5- Other Information
Rule 14a-4 of the Securities and Exchange Commission's proxy
rules allows the Company to use discretionary voting authority to vote
on matters coming before an annual meeting of stockholders, if
the Company does not have notice of the matter at least 45 days before
the date corresponding to the date on which the Company first mailed
its proxy materials for the prior year's annual meeting of
stockholders or the date specified by an overriding advance notice provision
in the Company's Bylaws. The Company's Bylaws do not contain such an
advance notice provision.
For the Company's Annual Meeting of Stockholders expected to be
held on June 17, 1999, stockholders must submit such written notice to
the Secretary of the Company on or before March 29, 1999.
This requirement is separate and apart from the Securities
and Exchange Commission's requirements that a stockholder must meet
in order to have a stockholder proposal included in the Company's
proxy statement under Rule 14a-8. For the Company's Annual Meeting
of Stockholders expected to be held on June 17, 1999, any stockholder
who wishes to submit a proposal for inclusion in the Company's
proxy materials pursuant to Rule 14a-8 must submit such proposal to
the Secretary of the Company on or before January 13, 1999.
Item 6- Exhibits and Reports on Form 8-K
a. Exhibits.
3.1 Restated Certificate of Incorporation of the Company (Incorporated
herein by reference to Exhibit 3.2 to the Company's Registration
Statement on Form S-1 File No. 33-29465 (the "Registration
Statement")).
3.2 By-laws of the Company (Incorporated herein by reference to
Exhibit 3.2 to the Company's Registration Statement on Form S-1
File No. 33-40372).
-10-
<PAGE> 13
4.1 Preferred Stock Purchase Agreement dated April 5,1996.
(Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended February 1, 1997).
4.2 Indenture, dated as of September 27, 1991, between the Company and
Chemical Bank, as Trustee. (Incorporated herein by reference to the
Company's Annual Report on Form 10-K for the year ended
January 25, 1992).
10.1 Lechters, Inc. Long-Term Incentive Plan.
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934,the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
LECHTERS, INC.
By: /s/ James J. Sheppard
James J. Sheppard
Senior Vice President and
Chief Financial Officer
Date: September 14, 1998
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JAN-30-1999 JAN-30-1999
<PERIOD-START> MAY-03-1998 FEB-01-1998
<PERIOD-END> AUG-01-1998 AUG-01-1998
<CASH> 12,990 0
<SECURITIES> 61,722 0
<RECEIVABLES> 9,531 0
<ALLOWANCES> 0 0
<INVENTORY> 108,454 0
<CURRENT-ASSETS> 199,267 0
<PP&E> 154,408 0
<DEPRECIATION> 85,147 0
<TOTAL-ASSETS> 276,959 0
<CURRENT-LIABILITIES> 39,410 0
<BONDS> 60,603 0
0 0
20,000 0
<COMMON> 58 0
<OTHER-SE> 138,272 0
<TOTAL-LIABILITY-AND-EQUITY> 276,959 0
<SALES> 91,422 177,616
<TOTAL-REVENUES> 91,422 177,616
<CGS> 69,862 134,398
<TOTAL-COSTS> 27,942 56,228
<OTHER-EXPENSES> 127 (338)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,125 2,222
<INCOME-PRETAX> (6,509) (12,672)
<INCOME-TAX> (2,673) (5,196)
<INCOME-CONTINUING> (3,836) (7,476)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,836) (7,476)
<EPS-PRIMARY> (0.24) (0.46)
<EPS-DILUTED> (0.24) (0.46)
</TABLE>
<PAGE> 1
LECHTERS, INC.
1998 LONG-TERM INCENTIVE PLAN
Article 1. Establishment, Purpose and Duration
1.1 Establishment of the Plan. Lechters, Inc., a New
Jersey corporation (hereinafter referred to as the "Company"),
hereby establishes an incentive compensation plan to be known as
the "Lechters, Inc. 1998 Long-Term Incentive Plan" (hereinafter
referred to as the "Plan"), as set forth in this document.
The Plan permits the grant of Nonqualified Stock Options (NQSO),
Incentive Stock Options (ISO), Stock Appreciation Rights (SAR),
Restricted Stock, Restricted Stock Units, Performance Units,
Performance Shares and other awards.
The Plan shall become effective when approved by the
shareholders at the Annual Meeting on June 18, 1998 (the "Effective
Date"), and shall remain in effect as provided in Section 1.3 herein.
1.2 Purpose of the Plan. The purpose of the Plan is to promote
the success and enhance the value of the Company by linking the
personal interests of Participants to those of Company shareholders
and customers.
The Plan is further intended to provide flexibility to the
Company in its ability to motivate, attract and retain the services of
Participants upon whose judgment, interest and special effort the
successful conduct of its operations is largely dependent.
1.3 Duration of the Plan. The Plan shall commence on the
Effective Date, as described in Section 1.1 herein, and shall remain
in effect, subject to the right of the Board of Directors to terminate
the Plan at any time pursuant to Article 15 herein, until all Shares
subject to it shall have been purchased or acquired according to the
Plan's provisions.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have
the meanings set forth below and, when such meaning is intended,
the initial letter of the word is capitalized:
2.1 "Award" means, individually or collectively, a grant
under the Plan of NQSOs, ISOs, SARs, Restricted Stock, Restricted
Stock Units, Performance Units, Performance Shares or any other
type of award permitted under Article 10 of the Plan.
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2.2 "Award Agreement" means an agreement entered into by
each Participant and the Company, setting forth the terms and
provisions applicable to an Award granted to a Participant under
the Plan.
2.3 "Base Value" of an SAR shall have the meaning set forth
in Section 7.1 herein.
2.4 "Board" or "Board of Directors" means the Board of
Directors of the Company.
2.5 "Change in Control" means the earliest of the following
to occur: (a) the acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of the combined voting power of the then outstanding
securities of the Company entitled to vote generally in the election
of directors ("Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not constitute a Change
of Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company or any subsidiary thereof, (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled
by the Company or (iv) any acquisition by any corporation pursuant to
a transaction described in clauses (i), (ii) and (iii) of paragraph (c)
below; or (b) individuals who, as of January 1, 1998, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however that any individual becoming a
director subsequent to January 1, 1998, whose election or nomination for
election by the Company's shareholders was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent
Board; or (c) the effective date of a reorganization, merger or
consolidation of the Company (a "Business Combination"), in each case,
unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners of
the Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
80% of the combined voting power of the then outstanding securities
entitled to vote generally in the election of directors of the corporation
resulting from such Business Combination (including, without limitation,
a corporation which as a result of such transaction owns the Company
through one or more subsidiaries) in substantially the same proportion
as their ownership, immediately prior to such Business Combination, of
the Outstanding Company Voting Securities, (ii) no Person (excluding any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of the combined voting power
of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business
Combination and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or (d) the effective date
of (i) a complete liquidation or dissolution of the Company or
(ii) the sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect to
which following such sale or other disposition (A)80% of the
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combined voting power of the then outstanding securities of such
corporation entitled to vote generally in the election of directors
is then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Voting Securities immediately
prior to such sale or other disposition, in substantially the same
proportion as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Voting Securities, (B) less
than 20% of the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by any Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation), except to the extent
that such Person owned 20% or more of the Outstanding Company Voting
Securities prior to the sale or disposition and (C) at least a majority
of the members of the board of directors of such corporation were members
of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
sale or other disposition of assets of the Company or were elected,
appointed or nominated by the Board.
2.6 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
2.7 "Committee" means the committee, as specified in Article 3,
appointed by the Board to administer the Plan with respect to Awards.
2.8 "Company" means Lechters, Inc., a New Jersey
corporation, or any successor thereto as provided in Article 17 herein.
2.9 "Director" means any individual who is a member of
the Board of Directors of the Company.
2.10 "Dividend Equivalent" means, with respect to Shares
subject to an Award, a right to be paid an amount equal to dividends
declared on an equal number of outstanding Shares.
2.11 "Eligible Person" means a Person who is eligible to
participate in the Plan, as set forth in Section 5.1 herein.
2.12 "Employee" means any full-time or regularly-scheduled
part-time employee of the Company or of the Company's Subsidiaries, who
is not covered by any collective bargaining agreement to which the
Company or any of its Subsidiaries is a party. For purposes of the Plan,
transfer of employment of a Participant between the Company and any one
of its Subsidiaries (or between Subsidiaries) shall not be deemed a
termination of employment.
2.13 "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor act thereto.
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2.14 "Exercise Period" means the period during which an
SAR or Option is exercisable, as set forth in the related Award Agreement.
2.15 "Fair Market Value" of the Company's common stock on
a Trading Day shall mean the last reported sale price for common stock
or, in case no such reported sale takes place on such Trading Day, the
average of the closing bid and asked prices for the common stock for such
Trading Day, in either case on the principal national securities exchange
on which the common stock is listed or admitted to trading, or if the
common stock is not listed or admitted to trading on any national
securities exchange, but is traded in the over-the-counter market,
the closing sale price of the common stock or, if no sale is publicly
reported, the average of the closing bid and asked quotations for the
common stock, as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or any comparable
system or, if the common stock is not listed on NASDAQ or a comparable
system, the closing sale price of the common stock or, if no sale is
publicly reported, the average of the closing bid and asked prices, as
furnished by two members of the National Association of Securities Dealers,
Inc. who make a market in the common stock selected from time to time by
the Company for that purpose. In addition, for purposes of this definition,
a "Trading Day" shall mean, if the common stock is listed on any national
securities exchange, a business day during which such exchange was open
for trading and at least one trade of common stock was effected on
such exchange on such business day, or, if the common stock is not listed
on any national securities exchange but is traded in the over-the-counter
market, a business day during which the over-the-counter market was open
for trading and at least one "eligible dealer" quoted both a bid and
asked price for the common stock. An "eligible dealer" for any
day shall include any broker-dealer who quoted both a bid and asked
price for such day, but shall not include any broker-dealer who quoted
only a bid or only an asked price for such day. In the event the Company's
common stock is not publicly traded, the Fair Market Value of such common
stock shall be determined by the Committee in good faith.
2.16 "Freestanding SAR" means an SAR that is granted independently of
any Option.
2.17 "Incentive Stock Option" or "ISO" means an option to purchase
Shares, granted under Article 6 herein, which is designated as an Incentive
Stock Option and satisfies the requirements of Section 422 of the Code.
2.18 "Nonqualified Stock Option" or "NQSO" means an option to
purchase Shares, granted under Article 6 herein, which is not intended to
be an Incentive Stock Option under Section 422 of the Code.
2.19 "Option" means an Incentive Stock Option or a Nonqualified
Stock Option.
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2.20 "Option Exercise Price" means the price at which a
Share may be purchased by a Participant pursuant to an Option, as
determined by the Committee and set forth in the Option Award Agreement.
2.21 "Participant" means an Eligible Person who has
outstanding an Award granted under the Plan.
2.22 "Performance Period" means the time period during
which Performance Unit/Performance Shares performance goals much be met
2.23 "Performance Share" means an Award described in Article
9 herein.
2.24 "Performance Unit" means an Award described in Article 9
herein.
2.25 "Period of Restriction" means the period during which
the transfer of Restricted Stock is limited in some way, as provided
in Article 8 herein.
2.26 "Person" shall have the meaning ascribed to such
term in Section 3(a)(9) of the Exchange Act, as used in Sections
13(d) and 14(d) thereof, including usage in the definition of a "group"
in Section 13(d) thereof.
2.27 "Plan" means the Lechters, Inc. 1998 Long-Term Incentive Plan.
2.28 "Restricted Stock" means an Award described in Article 8 herein.
2.29 "Restricted Stock Unit" means an Award described in Article 8
herein.
2.30 "Shares" means the shares of common stock, no par value,
of the Company.
2.31 "Stock Appreciation Right" or "SAR" means a right, granted alone
or in connection with a related Option, designated as an SAR, to
receive a payment on the day the right is exercised, pursuant to the terms
of Article 7 herein. Each SAR shall be denominated in terms of one Share.
2.32 "Subsidiary" means any corporation that is a "subsidiary
corporation" of the Company as that term is defined in Section 424(f) of the
Code.
2.33 "Tandem SAR" means an SAR that is granted in connection
with a related Option, the exercise of which shall require forfeiture of
the right to purchase a Share under the related Option (and when a
Share is purchased under the Option, the Tandem SAR shall be similarly
canceled).
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Article 3. Administration
3.1 The Committee. The Plan shall be administered by a committee
(the "Committee") consisting solely of two or more members of the Board.
The members of the Committee shall be appointed from time to time by, and
shall serve at the discretion of, the Board of Directors.
3.2 Authority of the Committee. The Committee shall have full power
except as limited by law, the Articles of Incorporation and the Bylaws
of the Company, subject to such other restricting limitations or directions
as may be imposed by the Board and subject to the provisions herein,
to determine the Eligible Persons to receive Awards; to determine
the size and types of Awards; to determine the terms and conditions of
such Awards; to construe and interpret the Plan and any agreement or
instrument entered into under the Plan; to establish, amend or waive
rules and regulations for the Plan's administration; and (subject to the
provisions of Article 15 herein) to amend the terms and conditions of any
outstanding Award. Further, the Committee shall make all other
determinations which may be necessary or advisable for the
administration of the Plan. As permitted by law, the Committee may
delegate its authorities as identified hereunder.
3.3 Restrictions on Distribution of Shares and Share
Transferability. Notwithstanding any other provision of the Plan,
the Company shall have no liability to deliver any Shares or benefits
under the Plan unless such delivery would comply with all applicable
laws (including, without limitation, the Securities Act of 1933) and
applicable requirements of any securities exchange or similar entity
and unless the Participant's tax obligations have been satisfied as
set forth in Article 16. The Committee may impose such restrictions on
any Shares acquired pursuant to Awards under the Plan as it may
deem advisable, including, without limitation, restrictions to comply
with applicable Federal securities laws, with the requirements of
any stock exchange or market upon which such Shares are then listed
and/or traded and with any blue sky or state securities laws applicable
to such Shares.
3.4 Decisions Binding. All determinations and decisions
made by the Committee pursuant to the provisions of the Plan and all
related orders or resolutions of the Board shall be final, conclusive and
binding on all persons, including the Company, its shareholders,
Eligible Persons, Employees, Participants and their estates and beneficiaries.
3.5 Costs. The Company shall pay all costs of administration
of the Plan.
Article 4. Shares Subject to the Plan
4.1 Number of Shares. Subject to Section 4.2 herein, the
maximum number of Shares available for grant under the Plan shall
be one million (1,000,000). Shares underlying lapsed or forfeited
Awards, or Awards that are not paid in Shares, may be reused for other
Awards; if the Option Exercise Price is
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satisfied by tendering Shares, only the number of Shares issued net
of the Shares tendered shall be deemed issued under the Plan. The
maximum number of shares that may be issued for Options shall be one
million (1,000,000) Shares. Shares granted pursuant to the Plan may be
(i) authorized but unissued Shares of Common Stock, (ii) Treasury Shares
or (iii) Shares purchased on the open market.
4.2 Adjustments in Authorized Shares and Awards. In the event
of any merger, reorganization, consolidation, recapitalization,
liquidation, stock dividend, split-up, spin-off, share combination,
share exchange or other change in the corporate structure of the Company
affecting the Awards of the Shares, such adjustment shall be made in the
outstanding Awards, the number and class of Shares which may be delivered
under the Plan, and in the number and class of and/or price of Shares
subject to outstanding Awards granted under the Plan, as may be determined
to be appropriate and equitable by the Committee, in its sole discretion,
to prevent dilution or enlargement of rights. Notwithstanding the
foregoing, (i) each such adjustment with respect to an Incentive Stock
Option shall comply with the rules of Section 424(a) of the Code and
(ii) in no event shall any adjustment be made which would render any
Incentive Stock Option granted hereunder to be other than an incentive
stock option for purposes of Section 422 of the Code.
Article 5. Eligibility and Participation
5.1 Eligibility. Persons eligible to participate in the Plan
("Eligible Persons") include all officers, key employees and directors of
the Company and its Subsidiaries, consultants and advisors to the Company
and its Subsidiaries and other persons or entities providing goods or
services to the Company and its Subsidiaries, in each case as determined by
the Committee.
5.2 Actual Participation. Subject to the provisions of the Plan,
the Committee may, from time to time, select from all Eligible Persons those
to whom Awards shall be granted.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and conditions of the
Plan, Options may be granted to an Eligible Person at any time and from
time to time, as shall be determined by the Committee.
The Committee shall have complete discretion in determining the
number of Shares subject to Options granted to each Eligible Person
(subject to Article 4 herein) and, consistent with the provisions of
the Plan, in determining the terms and conditions pertaining to such
Options. The Committee may grant ISOs, NQSOs or a combination thereof.
6.2 Option Award Agreement. Each Option grant shall be evidenced
by an Option Award Agreement that shall specify the Option Exercise
Price, the term of
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the Option, the number of Shares to which the Option pertains,
the Exercise Period and such other provisions as the Committee
shall determine,including but not limited to any rights to Dividend
Equivalents. The Option Award Agreement shall also specify whether
the Option is intended to be an ISO or a NQSO.
The Option Exercise Price for each Share purchasable under
any ISO granted hereunder shall be such amount as the Committee shall,
in its best judgment, determine to be not less than one hundred percent
(100%) of the Fair Market Value per Share at the date the Option is
granted; and provided, further, that in the case of an ISO granted to a
person who, at the time such ISO is granted, owns shares of stock of the
Company or of any Subsidiary which possess more than ten percent (10%) of
the total combined voting power of all classes of shares of stock of the
Company or of any Subsidiary, the Option Exercise Price for each Share
shall be such amount as the Committee, in its best judgment, shall
determine to be not less than one hundred ten percent (110%) of
the Fair Market Value per Share at the date the Option is granted.
The Option Exercise Price will be subject to adjustment in accordance
with the provisions of Section 4.2 of the Plan.
No ISO by its terms shall be exercisable after the expiration of
ten (10) years from the date of grant of the Option; provided, however,
in the case of an ISO granted to a person who, at the time such Option is
granted, owns shares of stock of the Company or of any Subsidiary possessing
more than ten percent (10%) of the total combined voting power of all
classes of shares of stock of the Company or of any Subsidiary, such
Option shall not be exercisable after the expiration of five (5) years
from the date such Option is granted.
No ISO may be granted after the expiration of ten (10) years from the
date the Plan is adopted, or the date the Plan is approved by the
shareholders of the Company, whichever is earlier
6.3 Exercise of and Payment for Options. Options granted under the
Plan shall be exercisable at such times and shall be subject to such
restrictions and conditions as the Committee shall in each instance approve.
A Participant may exercise an Option at any time during the
Exercise Period. Options shall be exercised by the delivery of a
written notice of exercise to the Company, setting forth the number
of Shares with respect to which the Option is to be exercised, accompanied
by provision for full payment for the Shares.
The Option Exercise Price shall be payable: (a) in cash or its
equivalent, (b) by tendering previously acquired Shares having an
aggregate Fair Market Value at the time of exercise equal to the total
Option Exercise Price (provided that the Shares which are tendered must
have been held by the Participant for at least six (6) months prior to
their tender to satisfy the Option Exercise Price), (c) by
broker-assisted cashless exercise or (d) by a combination of (a), (b)
and/or (c).
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As soon as practicable after receipt of a written notification of
exercise of an Option and provision for full payment therefor, there
shall be delivered to the Participant, in the Participant's name,
Share certificates in an appropriate amount based upon the number
of Shares purchased under the Option(s).
6.4 Termination. Each Option Award Agreement shall set forth the
extent to which the Participant shall have the right to exercise the
Option following termination of the Participant's employment with,
service on the Board of, or other relationship with the Company and its
Subsidiaries. Such provisions shall be determined in the sole discretion
of the Committee (subject to applicable law), shall be included in the
Option Award Agreement entered into with Participants, need not be
uniform among all Options granted pursuant to the Plan or among
Participants and may reflect distinctions based on the reasons for
termination.
6.5 Transferability of Options. Except as otherwise determined
by the Committee, all Options granted to a Participant under the
Plan shall be exercisable during his or her lifetime only by such
Participant and no Option granted under the Plan may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than
by will or by the laws of descent and distribution. ISOs are not
transferable.
Article 7. Stock Appreciation Rights
7.1 Grant of SARs. Subject to the terms and conditions of the Plan,
an SAR may be granted to an Eligible Person at any time and from time to
time as shall be determined by the Committee. The Committee may grant
Freestanding SARs, Tandem SARs or any combination of these forms of SARs.
The Committee shall have complete discretion in determining the
number of SARs granted to each Eligible Person (subject to
Article 4 herein) and, consistent with the provisions of the Plan,
in determining the terms and conditions pertaining to such SARs.
The Base Value of a Freestanding SAR shall equal the Fair Market
Value of a Share on the date of grant of the SAR. The Base Value of
Tandem SARs shall equal the Option Exercise Price of the related Option.
7.2 SAR Award Agreement. Each SAR grant shall be evidenced by an
SAR Award Agreement that shall specify the number of SARs granted,
the Base Value, the term of the SAR, the Exercise Period and such other
provisions as the Committee shall determine.
7.3 Exercise and Payment of SARs. Tandem SARs may be exercised
for all or part of the Shares subject to the related Option upon the
surrender of the right
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to exercise the equivalent portion of the related Option. A Tandem
SAR may be exercised only with respect to the Shares for which its
related Option is then exercisable.
Notwithstanding any other provision of the Plan to the contrary,
with respect to a Tandem SAR granted in connection with an ISO: (i) the
Tandem SAR will expire no later than the expiration of the underlying ISO;
(ii) the value of the payout with respect to the Tandem SAR may be for no
more than one hundred percent (100%) of the difference between the
Option Exercise Price of the underlying ISO and the Fair Market Value of
the Shares subject to the underlying ISO at the time the Tandem SAR is
exercised; and (iii) the Tandem SAR may be exercised only when the Fair
Market Value of the Shares subject to the ISO exceeds the Option
Exercise Price of the ISO.
Freestanding SARs may be exercised upon whatever terms and conditions
the Committee, in its sole discretion, imposes upon them.
A Participant may exercise an SAR at any time during the Exercise
Period. SARs shall be exercised by the delivery of a written notice of
exercise to the Company, setting forth the number of SARs being exercised.
Upon exercise of an SAR, a Participant shall be entitled to receive
payment from the Company in an amount equal to the product of:
(a) the excess of (i) the Fair Market Value of a Share on the
date of exercise over (ii) the Base Value multiplied by
(b) the number of Shares with respect to which the SAR is exercised.
At the sole discretion of the Committee, the payment to the
Participant upon SAR exercise may be in cash, in Shares of equivalent
value or in some combination thereof.
7.4 Termination. Each SAR Award Agreement shall set forth the
extent to which the Participant shall have the right to exercise
the SAR following termination of the Participant's employment with,
service on the Board of, or other relationship with the Company and its
Subsidiaries. Such provisions shall be determined in the sole discretion
of the Committee, shall be included in the SAR Award Agreement entered
into with Participants, need not be uniform among all SARs granted
pursuant to the Plan or among Participants and may reflect distinctions
based on the reasons for termination.
7.5 Transferability of SARs. Except as otherwise determined by
the Committee, all SARs granted to a Participant under the Plan shall be
exercisable during his or her lifetime only by such Participant
or his or her legal representative and no SAR granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.
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Article 8. Restricted Stock and Restricted Stock Units
8.1 Grant of Restricted Stock and Restricted Stock Units. Subject to
the terms and conditions of the Plan, Restricted Stock and/or Restricted
Stock Units may be granted to an Eligible Person at any time and from time
to time, as shall be determined by the Committee.
The Committee shall have complete discretion in determining the
number of shares of Restricted Stock and/or Restricted Stock Units
granted to each Eligible Person (subject to Article 4 herein) and,
consistent with the provisions of the Plan, in determining the terms
and conditions pertaining to such Awards.
8.2 Restricted Stock/Restricted Stock Unit Award Agreement. Each
grant of Restricted Stock and/or Restricted Stock Units grant shall
be evidenced by a Restricted Stock and/or Restricted Stock Unit Award
Agreement that shall specify the number of shares of Restricted Stock
and/or Restricted Stock Units granted, the initial value (if applicable),
the Period or Periods of Restriction, and such other provisions as the
Committee shall determine.
8.3 Transferability. Restricted Stock and Restricted Stock Units
granted hereunder may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the applicable
Period of Restriction established by the Committee and specified in the
Award Agreement. All rights with respect to the Restricted Stock and
Restricted Stock Units granted to a Participant under the Plan shall be
available during his or her lifetime only to such Participant or his or
her legal representative.
8.4 Certificate Legend. Each certificate representing Restricted
Stock granted pursuant to the Plan may bear a legend substantially as
follows:
"The sale or other transfer of the shares of stock represented
by this certificate, whether voluntary, involuntary or by
operation of law, is subject to certain restrictions on transfer
as set forth in Lechters, Inc. 1998 Incentive Plan and in a
Restricted Stock Award Agreement. A copy of such Plan and such
Agreement may be obtained from Lechters, Inc."
The Company shall have the right to retain the certificates
representing Restricted Stock in the Company's possession until such time
as all restrictions applicable to such Shares have been satisfied.
8.5 Removal of Restrictions. Restricted Stock shall become
freely transferable by the Participant after the last day of the Period
of Restriction applicable thereto. Once Restricted Stock is released from
the restrictions, the Participant shall be entitled to have any legend
referred to in Section 8.4 removed from the Participant's stock certificate.
Payment of Restricted Stock
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Units shall be made after the last date of the period of Restriction
applicable thereto. The Committee, in its sole discretion, may pay
Restricted Stock Units in cash or in shares (or in a combination thereof),
which have an aggregate Fair Market Value equal to the value of the
Restricted Stock Units.
8.6 Voting Rights. During the Period of Restriction, Participants
holding Restricted Stock may exercise full voting rights with respect to
those Shares.
8.7 Dividends and Other Distributions. Subject to the Committee's
right to determine otherwise at the time of grant, during the Period
of Restriction, Participants holding Restricted Stock shall receive all
regular cash dividends paid with respect to all Shares while they are so
held. All other distributions paid with respect to such Restricted Stock
shall be credited to Participants subject to the same restrictions on
transferability and forfeitability as the Restricted Stock with respect
to which they were paid and shall be paid to the Participant promptly after
the full vesting of the Restricted Stock with respect to which such
distributions were made.
Rights, if any, to Dividend Equivalents on Restricted Stock Units
shall be established by the Committee at the time of grant and set
forth in the Award Agreement.
8.8 Termination. Each Restricted Stock/Restricted Stock Unit
Award Agreement shall set forth the extent to which the Participant
shall have the right to receive Restricted Stock and/or a Restricted
Stock Unit payment following termination of the Participant's employment
with, service on the Board of, or other relationship with the Company and
its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award Agreement
entered into with Participants, need not be uniform among all grants of
Restricted Stock/Restricted Stock Units or among Participants and
may reflect distinctions based on the reasons for termination.
Article 9. Performance Units and Performance Shares
9.1 Grant of Performance Units and Performance Shares. Subject to
the terms and conditions of the Plan, Performance Units and/or Performance
Shares may be granted to an Eligible Person at any time and from time
to time, as shall be determined by the Committee.
The Committee shall have complete discretion in determining the
number of Performance Units and/or Performance Shares granted to
each Eligible Person (subject to Article 4 herein) and, consistent
with the provisions of the Plan, in determining the terms and conditions
pertaining to such Awards.
9.2 Performance Unit/Performance Share Award Agreement. Each
grant of Performance Units and/or Performance Shares shall be evidenced
by a Performance
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Unit and/or Performance Share Award Agreement that shall specify the
number of Performance Units and/or Performance Shares granted, the
initial value (if applicable), the Performance Period, the performance
goals and such other provisions as the Committee shall determine,
including but not limited to any rights to Dividend Equivalents.
9.3 Value of Performance Units/Performance Shares. Each Performance
Unit shall have an initial value that is established by the Committee at
the time of grant. The value of a Performance Share shall be equal to the
Fair Market Value of a Share. The Committee shall set performance goals in
its discretion which, depending on the extent to which they are met, will
determine the number and/or value of Performance Units/Performance
Shares that will be paid out to the Participants.
9.4 Earning of Performance Units/Performance Shares. After the
applicable Performance Period has ended, the Participant shall be
entitled to receive a payout with respect to the Performance
Units/Performance Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the
corresponding performance goals have been achieved.
9.5 Form and Timing of Payment of Performance Units/Performance
Shares. Payment of earned Performance Units/Performance Shares shall
be made following the close of the applicable Performance Period.
The Committee, in its sole discretion, may pay earned Performance
Units/Shares in cash or in Shares (or in a combination thereof), which
have an aggregate Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable Performance
Period. Such Shares may be granted subject to any restrictions
deemed appropriate by the Committee.
9.6 Termination. Each Performance Unit/Performance Share Award
Agreement shall set forth the extent to which the Participant shall
have the right to receive a Performance Unit/Performance Share payment
following termination of the Participant's employment with, service
on the Board of, or other relationship with the Company and its
Subsidiaries during a Performance Period. Such provisions shall be
determined in the sole discretion of the Committee, shall be included in
the Award Agreement entered into with Participants, need not be uniform
among all grants of Performance Units/Performance Shares or among
Participants and may reflect distinctions based on reasons for termination.
9.7 Transferability. Except as otherwise determined by the
Committee, a Participant's rights with respect to Performance
Units/Performance Shares granted under the Plan shall be available during
the Participant's lifetime only to such Participant or the Participant's
legal representative and Performance Units/Performance Shares may not be
sold, transferred, pledged, assigned or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution.
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Article 10. Other Awards
The Committee shall have the right to grant other Awards which may
include, without limitation, the grant of Shares based on certain
conditions, the payment of Shares in lieu of cash or cash based on
performance criteria established by the Committee, and the payment of
Shares in lieu of cash under other Company incentive bonus programs.
Payment under or settlement of any such Awards shall be made in such
manner and at such times as the Committee may determine.
Article 11. Beneficiary Designation
Each Participant under the Plan may, from time to time,
name any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in case of
the Participant's death before the Participant receives any or all
of such benefit. Each such designation shall revoke all prior
designations by the same Participant, shall be in a form prescribed by
the Company and will be effective only when filed by the Participant in
writing with the Company during the Participant's lifetime. In the
absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
The spouse of a married Participant domiciled in a community
property jurisdiction shall join in any designation of beneficiary or
beneficiaries other than the spouse.
Article 12. Deferrals
The Committee may permit a Participant to defer the Participant's
receipt of the payment of cash or the delivery of Shares that would
otherwise be due to such Participant under the Plan. If any such deferral
election is permitted, the Committee shall, in its sole discretion,
establish rules and procedures for such payment deferrals.
Article 13. Rights of Participants
13.1 Termination. Nothing in the Plan shall interfere with or limit
in any way the right of the Company or any Subsidiary to terminate any
Participant's employment or other relationship with the Company or any
Subsidiary at any time, for any reason or no reason in the Company's
or the Subsidiary's sole discretion, nor confer upon any Participant any
right to continue in the employ of, or otherwise in any relationship with,
the Company or any Subsidiary.
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13.2 Participation. No Eligible Person shall have the right to be
selected to receive an Award under the Plan, or, having been so selected,
to be selected to receive a future Award.
13.3 Limitation of Implied Rights. Neither a Participant nor any
other Person shall, by reason of the Plan, acquire any right in or
title to any assets, funds or property of the Company or any
Subsidiary whatsoever, including, without limitation, any specific
funds, assets or other property which the Company or any Subsidiary, in
their sole discretion, may set aside in anticipation of a liability under
the Plan. A Participant shall have only a contractual right to the
Shares or amounts, if any, payable under the Plan, unsecured by any
assets of the Company or any Subsidiary. Nothing contained in the Plan
shall constitute a guarantee that the assets of such companies shall be
sufficient to pay any benefits to any Person.
Except as otherwise provided in the Plan, no Award under the Plan
shall confer upon the holder thereof any right as a shareholder of the
Company prior to the date on which the individual fulfills all conditions
for receipt of such rights.
Article 14. Change in Control
The terms of this Article 14 shall immediately become operative,
without further action or consent by any person or entity, upon a Change
in Control, and once operative shall supersede and take control over
any other provisions of this Plan.
Upon a Change in Control
(a) Any and all Options and SARs granted hereunder shall
become immediately vested and exercisable;
(b) Any restriction periods and restrictions imposed on Restricted
Stock and Restricted Stock Units shall be deemed to have
expired; such Restricted Stock shall become immediately
vested in full, and such Restricted Stock Units shall be paid
out in cash on the effective date of the Change in Control; and
(c) The target payout opportunity attainable under all outstanding
Awards of Performance Units and Performance Shares shall be
deemed to have been fully earned for the entire Performance
Period(s) as of the effective date of the Change in Control.
On the effective date of the Change in Control, all Performance
Shares shall be paid out in Shares, and all Performance Units
shall be paid out in cash.
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Article 15. Amendment, Modification and Termination
15.1 Amendment, Modification and Termination. The Board may, at
any time and from time to time, alter, amend, suspend or terminate the
Plan in whole or in part.
15.2 Awards Previously Granted. No termination, amendment or
modification of the Plan shall adversely affect in any material way
any Award previously granted under the Plan without the written consent
of the Participant holding such Award, unless such termination,
modification or amendment is required by applicable law and except as
otherwise provided herein.
Article 16. Withholding
16.1 Tax Withholding. The Company shall have the power and the
right to deduct or withhold, or require a Participant to remit to the
Company, an amount (including any Shares withheld as provided below)
sufficient to satisfy Federal, state and local taxes (including the
Participant's FICA obligation) required by law to be withheld with
respect to an Award made under the Plan.
16.2 Share Withholding. With respect to tax withholding required
upon the exercise of Options or SARs, upon the lapse of restrictions on
Restricted Stock, or upon any other taxable event arising out of or as
a result of Awards granted hereunder, Participants may elect to satisfy
the withholding requirement, in whole or in part, by tendering Shares
held by the Participant at least six (6) months prior to their tender or
by having the Company withhold Shares having a Fair Market Value on the
effective date of exercise equal to the minimum statutory total tax
which could be imposed on the transaction. All elections shall be
irrevocable, made in writing and signed by the Participant.
Article 17. Successors
All obligations of the Company under the Plan, with respect to
Awards granted hereunder, shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation or otherwise of all or
substantially all of the business and/or assets of the Company.
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Article 18. Legal Construction
18.1 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine,
the plural shall include the singular and the singular shall include the
plural.
18.2 Severability. In the event any provision of the Plan shall
be held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not
been included.
18.3 Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
18.4 Governing Law. To the extent not preempted by Federal law,
the Plan, and all agreements hereunder, shall be construed in
accordance with, and governed by, the laws of the State of New Jersey.
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