<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14A
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(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
LECHTERS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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:
------------------------------------------------------------------------
<PAGE> 2
LECHTERS, INC.
1 CAPE MAY STREET
HARRISON, NEW JERSEY 07029-2404
------------------------
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 22, 1999, 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 29, 2000; 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 April 30, 1999 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 21, 1999
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 07029-2404
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 22, 1999 and any adjournment or
adjournments thereof. A copy of the notice of meeting accompanies this Proxy
Statement. This Proxy Statement and related form of proxy were first delivered
to shareholders on or about May 21, 1999.
Only shareholders of record at the close of business on April 30, 1999, 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 17,176,286 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 1999 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 2000 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. Withheld votes
will be excluded from the vote and will have no effect. 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.
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................................................ 4,135,948(1) 24.1%
c/o Lechters, Inc.
1 Cape May Street
Harrison, New Jersey 07029
ICM Asset Management, Inc................................... 1,104,950 6.4(2)
601 W. Main Ave., Suite 600
Spokane, WA 99201
Franklin Resources, Inc..................................... 1,501,600 8.7(3)
777 Mariners Island Boulevard
San Mateo, CA 94404
Dimensional Fund Advisors................................... 1,089,100 6.34(4)
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Grace & White, Inc. ........................................ 920,100 5.36(5)
515 Madison Avenue, Suite 1700
New York, NY 10022
</TABLE>
- ---------------
(1) As of April 16, 1999. Includes 111,384 shares held by Mr. Jonas' wife, as to
which shares Mr. Jonas disclaims beneficial ownership.
(2) ICM Asset Management, Inc., a registered investment adviser, has sole voting
power with respect to 732,100 shares and sole dispositive power with respect
to all the shares. Based on information as of December 31, 1998, contained
in a Schedule 13G filed with the Securities and Exchange Commission.
(3) Franklin Resources, Inc. ("FRI") is the parent of Franklin Advisory
Services, Inc., and Charles B. Johnson and Rupert H. Johnson, Jr. are
principal shareholders of FRI. FRI and the principal shareholders may be
deemed to be the beneficial owners of the stock held by persons and entities
advised by Franklin Advisory Services, Inc., which has sole voting and
dispositive power over the securities. Based on information as of December
31, 1998, contained in a Schedule 13G filed with the Securities and Exchange
Commission.
(4) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
adviser, is deemed to have beneficial ownership of 1,089,100 shares of
Lechters stock as of December 31, 1998, all of which shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, for all of
which Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
2
<PAGE> 5
(5) Grace & White, Inc., a registered investment adviser, has sole voting power
with respect to 53,500 shares and sole dispositive power with respect to all
the shares. Based on information as of December 31, 1998 contained in a
Schedule 13G filed with the Securities and Exchange Commission.
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 16, 1999:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY 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 16, 1999:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY 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, 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 Messrs. Davis,
Fischman, Malkin and Matthews, the Class C Directors, will expire at the Annual
Meeting of Shareholders to be held on June 22, 1999; the terms of Ms. Maneker
and Messrs. Begun, Knox and Wolff, the Class B Directors, will expire in 2000;
and the terms of Messrs. Jonas and Westerfield, the Class A Directors, will
expire in 2001.
At the meeting, Messrs. Davis, Fischman, Malkin and Matthews are to be
elected directors to hold office until the annual meeting in 2002 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
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 C -- TERMS EXPIRING 2002
<TABLE>
<CAPTION>
CURRENT POSITIONS
NAME AND AGE WITH THE COMPANY
------------ ----------------------
<S> <C>
Charles A. Davis (50)....................................... Director
Bernard D. Fischman (84).................................... Director
Anthony E. Malkin (36)...................................... Director
Norman Matthews (66)........................................ Director
</TABLE>
DIRECTORS CONTINUING IN OFFICE
CLASS B -- TERMS EXPIRING 2000
<TABLE>
<CAPTION>
CURRENT POSITIONS
NAME AND AGE WITH THE COMPANY
------------ ----------------------
<S> <C>
Martin S. Begun (66)........................................ Director
Robert Knox (46)............................................ Director
Roberta S. Maneker (61)..................................... Director
John Wolff (46)............................................. Director
</TABLE>
CLASS A -- TERMS EXPIRING 2001
<TABLE>
<CAPTION>
CURRENT POSITIONS
NAME AND AGE WITH THE COMPANY
------------ ----------------------
<S> <C>
Donald Jonas (69)........................................... Chairman of the Board
and Chief Executive
Officer
Stephen T. Westerfield (56)................................. Director
</TABLE>
Charles A. Davis is the President and Chief Executive Officer of Marsh &
McLennan Capital, Inc., a global private equity firm, since April 1998. Prior to
that time, he was 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, the Progressive
Corp. and Sen-Tech. 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.
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.
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.
Martin S. Begun is the President of MSB Strategies, Inc., a consulting firm
in Public Policy Planning. From 1963 to 1997, he was associated with New York
University and was 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.
4
<PAGE> 7
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 Management Associates, Inc. and several private companies. He is a
trustee of Boston University. 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.
Donald Jonas has been Chairman of the Board and a director of the Company
or its former parent since 1979. Mr. Jonas served as President and Chief
Executive Officer from January 16, 1996 until February 11, 1999 and as Chief
Executive Officer thereafter; 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.
Stephen T. Westerfield has been a director of the Company since 1997. He is
the President and Chief Executive Officer of STW International, an international
consulting firm in retail and manufacturing. He is Chairman of the Board and
director of TDI, an international distributor of copy ink for computer and other
high technology printers since 1997. He serves as a director of Bealls, Inc., a
specialty retailer operating in the southern United States.
5
<PAGE> 8
BENEFICIAL OWNERSHIP OF DIRECTORS AND MANAGEMENT
The table below sets forth the beneficial ownership of the Common Stock as
of April 16, 1999 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 16, 1999 OF CLASS
---- -------- ----------------------- --------
<S> <C> <C> <C>
Donald Jonas................... Chairman of the Board and Chief 4,135,948(1) 24.1%
Executive Officer
Anthony E. Malkin.............. Director 0
Martin S. Begun................ Director 6,100(2) (12)
Robert Knox.................... Director 23,488(2) (12)
Roberta S. Maneker............. Director 3,600(2) (12)
John Wolff..................... Director 63,600(2)(3) (12)
Charles A. Davis............... Director 4,000(2) (12)
Bernard D. Fischman............ Director 58,800(4) (12)
Norman Matthews................ Director 142,902(5) (12)
Stephen T. Westerfield......... Director 34,000(6) (12)
James A. Shea.................. President 54,600(7) (12)
William R. Sullivan............ Senior Vice President-Real 4,000(8) (12)
Estate
Robert Harloe.................. Senior Vice President-Human 37,831(9) (12)
Resources
Dennis Hickey.................. Senior Vice President-Stores 63,222(10) (12)
John W. Smolak................. Former Senior Vice President and 2,389 (12)
Chief Financial Officer
All directors and executive 4,685,703(11) 27.3%
officers of the Company as
a group (17 persons).........
</TABLE>
- ---------------
(1) Information concerning Mr. Jonas' ownership of Common Stock is set forth
under "Principal Shareholders."
(2) Includes 3,600 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days.
(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. Mr. Wolff disclaims beneficial ownership of such shares.
(4) Includes 600 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days.
(5) Includes 132,902 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days.
(6) Includes 14,000 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days.
(7) Includes 47,000 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days.
(8) Includes 4,000 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days.
(9) Includes 37,000 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days.
6
<PAGE> 9
(10) Includes 57,000 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days.
(11) Includes 337,702 shares of Common Stock issuable pursuant to options
exercisable currently or within 60 days.
(12) The percentage of shares beneficially owned does not exceed one percent of
the outstanding shares on April 16, 1999.
Except as noted in the footnotes above, 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 January 30, 1999 for
services provided to the Company.
The Board of Directors held three meetings during the fiscal year ended
January 30, 1999. During such fiscal year, none of the directors attended fewer
than 75% of the aggregate of (i) the total number of meetings 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 one meeting during the
fiscal year ended January 30, 1999.
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 one meeting during the fiscal year ended January 30, 1999.
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 formal meetings during the fiscal year ended
January 30, 1999 but acted on written approvals.
The Company does not have a Nominating Committee.
EXECUTIVE 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 four most
highly paid executive officers of the Company.
7
<PAGE> 10
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------- ------------------------
AWARDS PAYOUTS
---------- ----------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND YEAR SALARY BONUS COMPENSATION OPTIONS LTIP COMPENSATION
PRINCIPAL POSITION ENDED ($) ($) ($) (#) PAYOUTS($) ($)
------------------ ------- -------- ------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald Jonas................. 1/30/99 60,000 -- 14,015(1) -- -- 162,383(2)(4)(5)
Chairman of the Board 1/31/98 60,000 -- 21,250 -- -- 163,159
and Chief Executive Officer 2/1/97 60,000 -- 20,623 -- -- 153,851
James A. Shea................ 1/30/99 318,251 -- 10,999(3) -- -- 56,206(2)(4)(8)
President 1/31/98 308,954 12,500 10,999 100,000 -- 2,541
2/1/97 298,536 30,000 10,999 -- -- 71,346
Robert J. Harloe............. 1/30/99 197,107 -- 10,999(3) -- -- 2,035(2)(4)
Senior Vice President- 1/31/98 191,350 12,500 10,999 50,000 -- 1,853
Human Resources 2/1/97 184,712 12,500 10,999 -- -- 1,508
Dennis Hickey................ 1/30/99 228,262 -- 10,999(3) -- -- 2,566(2)(4)
Senior Vice President- 1/31/98 221,594 12,500 10,999 50,000 -- 1,371
Stores 2/1/97 214,120 12,500 10,999 -- -- 3,531
William R. Sullivan(6)....... 1/30/99 225,961 -- 9,166(3) 20,000 -- 1,656(2)(4)
Senior Vice President- 1/31/98 -- -- -- -- -- --
Real Estate 2/1/97 -- -- -- -- -- --
John W. Smolak(7)............ 1/30/99 247,646 -- 4,583(3) -- -- 1,288(2)(4)
Former Senior Vice President 1/31/98 258,582 12,500 10,999 50,000 -- 3,164
and Chief Financial Officer 2/1/97 249,617 12,500 10,999 -- -- 39,065
</TABLE>
- ---------------
(1) Represents the cost to the Company of providing Mr. Jonas with
transportation services.
(2) Includes insurance premiums paid by the Company with respect to term life
insurance and long term disability 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 $317 for
Mr. Jonas, $471 for Mr. Shea, $986 for Mr. Harloe, $910 for Mr. Hickey, $0
for Mr. Sullivan and $784 for Mr. Smolak.
(5) Includes insurance premiums in the amount of $161,552 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.
(6) Mr. Sullivan joined the Company on March 2, 1998.
(7) Mr. Smolak left the Company effective May 15, 1998 and was paid his salary
through December 31, 1998.
(8) Includes $54,079 in forgiveness of a loan as provided in Mr. Shea's
employment agreement.
8
<PAGE> 11
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
----------------------------------------------- ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SARS
OPTIONS/ GRANTED TO EXERCISE
SARS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#) YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Donald Jonas.......................... -- -- -- -- -- --
James A. Shea......................... -- -- -- -- -- --
Robert J. Harloe...................... -- -- -- -- -- --
Dennis Hickey......................... -- -- -- -- -- --
William R. Sullivan................... 20,000 20.7 4.75 03/03/03 -- 41,172
John W. Smolak........................ -- -- -- -- -- --
</TABLE>
Options granted under the Company's 1989 Incentive Stock Option Plan are
granted at market value on the date of grant and are exercisable at a rate of
20% per year over a five-year period commencing with the date of grant.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES YEAR-END(#) FISCAL YEAR-END($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald Jonas................ -- -- -- -- -- --
James A. Shea............... -- -- 47,000 108,000 -- --
Robert J. Harloe............ -- -- 37,000 68,000 -- --
Dennis Hickey............... -- -- 57,000 68,000 -- --
William R. Sullivan......... -- -- -- 20,000 -- --
John W. Smolak.............. -- -- -- -- -- --
</TABLE>
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 January 30, 1999, 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. No formal weighting is given to these factors and determination
of the increase is entirely within the discretion of each member of the Board.
Base salaries for the named executive
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<PAGE> 12
officers were increased by an average of 3% in 1998. Compensation payable to
certain employees is deferred (as described below), lowering the base salaries
currently payable to such employees.
Bonuses. No bonuses were paid in 1998 to any of the named executive
officers.
Other Compensation. In order to lower the base salaries currently payable
to certain employees, thereby conserving the Company's working capital, the
Company entered into deferred compensation agreements 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 portion of 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. Options were granted during 1998 to Mr. Sullivan who
joined the Company in March. 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
January 30, 1999, 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.
During the fiscal year ended January 30, 1999, no payment was made under such
consulting agreement. The Company maintains life insurance coverage for Mr.
Jonas to fund a portion of 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 Roberta S. Maneker
Anthony E. Malkin John Wolff
Martin S. Begun Charles A. Davis
Norman Matthews Bernard D. Fischman
Robert Knox Stephen T. Westerfield
</TABLE>
10
<PAGE> 13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's executive compensation program was administered by the Board
of Directors during the fiscal year ended January 30, 1999. All members of the
Board participated in deliberations concerning executive officer compensation,
including Mr. Jonas.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company's consulting agreement with Mr. Jonas is discussed under "Board
Report on Executive Compensation."
CERTAIN TRANSACTIONS
A subsidiary of the Company operates two stores in buildings in which Mr.
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. Mr. Fischman is Of Counsel to the law firm of LeBoeuf, Lamb,
Greene & MacRae, L.L.P., which serves as counsel to the Company.
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<PAGE> 14
PERFORMANCE GRAPH
The following graph illustrates, for the period from January 29, 1994
through January 30, 1999, 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 FIVE YEARS ENDED JANUARY 30, 1999
[PERFORMANCE GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Lechters, Inc. 100.0000 116.5254 36.4407 26.6949 34.3220
- ---------------------------------------------------------------------------------------------------------------------------------
The NASDAQ Stock Market (US) 100.0000 95.4141 134.8433 176.7347 208.5817
- ---------------------------------------------------------------------------------------------------------------------------------
NASDAQ Retail Trade Stocks 100.0000 88.2019 99.6604 122.5846 143.0339
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
1999
- ---------------------------------------------------------------------
Lechters, Inc. 17.7966
- --------------------------------------------------------------------------------------
The NASDAQ Stock Market (US) 326.2741
- -------------------------------------------------------------------------------------------------------
NASDAQ Retail Trade Stocks 174.7556
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
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
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 shareholders 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 shareholders or the date specified by an overriding advance notice provision
in the Company's Bylaws. The Company's Bylaws do
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<PAGE> 15
not contain such an advance notice provision. For the Company's 2000 Annual
Meeting of Shareholders, shareholders must submit such written notice to the
Secretary of the Company on or before April 6, 2000.
Shareholders of the Company wishing to include proposals in the proxy
material for the 2000 Annual Meeting of Shareholders must submit the same in
writing so as to be received by the Secretary of the Company on or before
January 24, 2000. Such proposals must also meet the other requirements of the
rules of the Securities and Exchange Commission relating to shareholder
proposals.
THE COMPANY WILL PROVIDE ANY SHAREHOLDER OF RECORD AT THE CLOSE OF BUSINESS
ON APRIL 30, 1999, 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 JANUARY 30, 1999.
By Order of the Board of Directors,
IRA S. ROSENBERG,
Secretary
May 21, 1999
13
<PAGE> 16
PROXY PROXY
LECHTERS, INC.
1 CAPE MAY STREET
HARRISON, NEW JERSEY 07029-2404
ANNUAL MEETING OF SHAREHOLDERS -- JUNE 22, 1999
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 April 30, 1999, at the Annual Meeting of
Shareholders to be held June 22, 1999, and at any adjournment thereof.
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) and (2) AND IN THE PROXIES' DISCRETION ON
ANY OTHER MATTERS COMING BEFORE THE MEETING.
PLEASE DATE, SIGN AND RETURN THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
X FOLD AND DETACH HERE X
<PAGE> 17
LECHTERS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
THE DIRECTORS RECOMMEND A VOTE "FOR" ON ALL MATTERS
1. ELECTION OF DIRECTORS: For Withheld For All
Nominees: Charles A. Davis, All All Except
Bernard D. Fischman, Anthony E. [ ] [ ] [ ]
Malkin and Norman Matthews
- ---------------------------------------------
(Except nominee(s) written above)
2. Ratification of selection of For Against Abstain
Deloitte & Touche LLP as [ ] [ ] [ ]
Independent Public Accountants
of the Company for the fiscal
year ending January 29, 2000.
In their discretion, the proxies are
authorized to vote upon such other
matters as may come before the meeting
or any adjournment thereof.
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.
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.
- ------------------------------------------------
Signature
- ------------------------------------------------
Signature (if held jointly)
Dated: , 1999
-------------------------------------
- --------------------------------------------------------------------------------
X FOLD AND DETACH HERE X
