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                                                                  EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT


                  THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered
into this 5th day of January 2001 by and between Strouds, Inc. ("Employer")
and Thomas S. Paccioretti ("Employee").

                  1. EMPLOYMENT AND TERM. Employer hereby agrees to employ
Employee as its President and Chief Executive Officer upon the terms and
conditions hereinafter set forth. The term of Employee's employment shall be
from December 1, 2000 until April 1, 2001, unless earlier terminated in
accordance with Paragraph 10; provided, however, that Employer, at its election,
shall have the option to extend the term of Employee's employment hereunder for
a single thirty (30) or sixty (60) day period by delivery of advance written
notice thereof to Employee by no later than March 16, 2001. By mutual agreement
in writing, the term may be extended further for a period agreed to by Employer
and Employee.

                  2. DUTIES. Employee shall serve as the President and Chief
Executive Officer of Employer, reporting only to the Board of Directors. Other
than the Chairman of the Board, no executive or other employee of Employer shall
hold a position, stature, title or powers higher or greater than or equal to
those of Employee. Subject to the authority of the Board of Directors, Employee
shall have supervision and control over, and responsibility for, the general
management and operation of Employer and shall have such other powers and duties
as may from time to time be prescribed by the Board of Directors, provided that
such duties are reasonable and customary for a president and chief executive
officer. The powers of Employee shall include the following:

                           a.       To implement compensation programs, which
in his sole judgment, are needed to implement the business and reorganization
plans.

                           b.       To modify existing contracts or craft new
contracts with existing and new suppliers and vendors.

                           c.       To approve all capital expenditures
funded by Employer or directly or indirectly impacting Employer.

                           d.       To approve all, payments to third party
vendors, including architects, design, maintenance, construction, and their
subcontractors.

                           e.       To set company policy with respect to
executive and managerial privileges and to approve any and all payments of
same including but not limited to travel, entertainment, auto leases,
insurance, and mobile and home phone expenses.

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                           f.       To approve all capital expenditures
necessary to implement the business and reorganization plan.

Employee agrees that so long as this Agreement continues in effect, Employee
shall devote his full business time and best efforts, skills, abilities and
energies to the business and affairs of Employer.

                  3. BASE SALARY. Employer shall pay Employee a monthly base
salary of Thirty-five Thousand Dollars ($35,000.00), subject to upward
adjustment at the sole discretion of Employer's Board of Directors. The base
salary shall be paid to Employee in accordance with Employer's regular
payroll practices with respect to senior management compensation.

                  4. INCENTIVE BONUS. Employer shall pay to Employee a One
Hundred Eighty-Five Thousand Dollar ($185,000.00) Incentive Bonus if: (a)
during the term of this Agreement (including any extensions thereof), (i) an
agreement is executed for the sale of all or substantially all of Employer's
assets under a sale pursuant to Section 363 of the Bankruptcy Code with one
or more buyers or (ii) the Company files a plan of reorganization with the
bankruptcy court (hereinafter, the occurrence of (i) or (ii) will be referred
to as an "Incentive Event"); and, (b) at any time the bankruptcy court
approves and/or confirms the Incentive Event.

                  5. BENEFITS. Employer shall provide Employee with medical,
hospital, surgical, dental, disability, accidental death, travel and life
insurance coverage on the same basis and to the same extent as such coverage
is provided to Employer's executive officers, subject to Employee's
satisfaction of any eligibility criteria for such coverage. Furthermore,
Employee shall participate in any retirement plan, on the same basis as
Employer's other executive officers, subject to Employee's satisfaction of
any eligibility criteria for such participation. Employee shall be entitled
to one week of paid vacation for each 3 months of employment, subject to the
terms of Employer's vacation policy then in effect. Such vacation shall be
taken at such time or times as shall not unduly disrupt the orderly conduct
of business of Employer.

                  6. INDEMNIFICATION. Employer shall indemnify and defend
Employee to the fullest extent permitted under Delaware law. This includes,
but is not limited to, a duty to indemnify Employee if he is made, or
threatened to be made, a party to an action or proceeding, to the fullest
extent permitted by applicable law, including an action by or in the right of
Employer to procure a judgment in its favor, by reason of the fact that
Employee is or was an officer, director or employee of Employer, against all
costs and expenses resulting from or related to such action or proceeding, or
any appeal thereof, if Employee acted in good faith for a purpose which he
reasonably believed to be in the best interests of Employer. The termination
of any such action or proceeding by judgment, settlement, conviction or upon
a plea of nolo contendere, or its equivalent, shall not in itself create the
presumption that Employee did not act in good faith for a purpose which he
reasonably believed to be in the best interests of Employer. As used in this
Paragraph, (a) "costs and expenses" means any and all costs, expenses and
liabilities incurred by Employee, including but not limited to (i) attorneys'
fees, (ii) amounts paid

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in settlement of, or in the satisfaction of any order or judgment in, any
action or proceeding and (iii) fines, penalties and assessments asserted or
adjudged in any action or proceeding; and (b) "action or proceeding" means
any and all suits, claims, actions, investigations or proceedings whether
civil, criminal or administrative, heretofore or hereafter instituted or
asserted.

                  Employer shall procure and maintain directors' and
officers' liability insurance covering Employee to the same extent as other
officers and the directors of Employer.

                  Notwithstanding anything herein to the contrary, the
provisions of this Paragraph 6 shall survive the termination of this
Agreement and the termination of Employee's employment.

                  7. EXPENSES. Employer will reimburse Employee for all
ordinary and reasonable out-of-pocket business expenses incurred by Employee
in connection with the performance of services hereunder in accordance with
Employer's expense approval procedures then in effect, including Two Hundred
Dollars ($200.00) per month for insurance, maintenance and fuel of one
vehicle, and reimbursement for automobile mileage. Air travel for business
will be by coach class.

                  8. CONFIDENTIALITY. Employee recognizes and acknowledges
that in the course of Employee's employment by Employer, Employee will have
access to or may obtain information of a secret, special and unique value to
Employer concerning customers, customer lists, marketing strategies, business
plans, contracts, personnel information, financial information, relationships
between Employer and third parties, processes, products, formulas, devices,
designs, inventions, discoveries and methods of operation (collectively and
individually, "Confidential Information"). Employee further recognizes and
acknowledges that all Confidential Information which is now or may hereafter
be in Employee's possession is the property of Employer and that protection
of the Confidential Information against unauthorized disclosure or use is of
critical importance to Employer in order to protect Employer from unfair
competition and irreparable harm. To protect Employer from such harm,
Employee therefore agrees to make the promises set forth in this Paragraph.

                     a.       PROMISE NOT TO DISCLOSE.  Employee promises
never to use or disclose any Confidential Information before it has become
generally known within the relevant industry through no fault of Employee.
Employee agrees that this promise shall never expire.

                     b.       RETURN OF CONFIDENTIAL INFORMATION.  When
Employee's employment with Employer ends, Employee will promptly deliver to
Employer, or at its written instruction destroy, all documents, data,
drawings, manuals, letters, notes, reports, electronic mail, recordings and
copies thereof relating to any Confidential Information in Employee's
possession or control.

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                  9.  RELIEF. It is recognized that in the event of
Employee's breach of Paragraph 8, the damages resulting from such breach
would be difficult, if not impossible, to ascertain and that Employer would
be subject to irreparable injury therefrom. It is agreed, therefore, that
Employer, in addition to and without limiting any other remedy or right it
may have, shall be entitled to such equitable and injunctive relief as may be
available to restrain Employee from violation of any of said covenants, such
right to injunctive and equitable relief to be cumulative and in addition to
whatever other remedies Employer may have, including the recovery of damages
from Employee.

                  10. BASES FOR TERMINATION.  This Agreement and the
employment of Employee hereunder shall terminate upon the occurrence of the
first to occur of the following events or conditions:

                      a.       the expiration of the term specified in
Paragraph 1 hereof;

                      b.       the death of Employee;

                      c.       the voluntary resignation of Employee, without
Good Reason (as defined below);

                      d.       Employee's disability, subject to Employee's
right to receive a disability benefit as provided in Paragraph 5 hereof, if
any. For purposes of this Agreement, the term "disability" shall mean a
physical or mental illness or injury of a permanent nature which prevents
Employee from performing the essential functions of the job which he is
employed to perform, even with reasonable accommodation. Employer and
Employee will cooperate with each other and comply with all reasonable
requests to determine whether a disability exists and, if so, whether a
reasonable accommodation is possible;

                      e.       the election of Employer to terminate
Employee's employment for Cause.  For purposes of this Agreement, "Cause"
shall mean (i) the conviction of Employee of a felony which can reasonably be
expected to have a material adverse impact on Employer's business or
reputation; (ii) the commission by Employee of an act of fraud or
embezzlement involving assets of Employer or its customers, suppliers or
affiliates; or (iii) Employee's willful and continued failure to
substantially follow and comply with the specific and lawful directives of
the Board (other than any such failure resulting from Employee's incapacity
due to physical or mental illness or any such actual or anticipated failure
after Employee's issuance of a notice of termination for Good Reason), after
the Board has provided Employee a written demand for substantial performance
which specifically identifies the manner in which the Board believes that
Employee has not substantially followed and complied with a directive of the
Board and Employee has been afforded a reasonable opportunity to cure, or
correct the activity described in the notice, and has failed to substantially
cure, correct or cease the activity, as appropriate. No act, or failure to
act, on Employee's part shall be deemed "willful" unless done, or omitted to
be done, by Employee in bad faith.

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                  Notwithstanding the foregoing, Employee shall not be deemed
to have been terminated for Cause unless and until there shall have been
delivered to Employee all of the following: (A) a copy of a resolution, duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board of Directors at a meeting which the Board of
Directors called and held for the purpose of determining whether Cause exists
(after reasonable notice to Employee and opportunity for him, together with
his counsel, to be heard before the Board of Directors), finding that, in the
good faith opinion of the Board of Directors, Employee was guilty of the
conduct set forth in this Section and specifying the particulars thereof in
detail, (B) an affidavit sworn to by the Secretary of Employer stating that
such resolution was in fact adopted by the affirmative vote of not less than
a majority of the entire membership of the Board and Directors and (C) a
report with respect to such conduct from a firm of independent attorneys
selected by a majority of the entire membership of the Board of Directors to
the effect that the conduct of Employee has been such as to permit the Board
of Directors to terminate Employee's employment for Cause within the meaning
of the provisions of this Section.

                           f.       the election of Employee to terminate for
Good Reason.  For purposes of this Agreement, "Good Reason" shall mean,
without Employee's express consent, the occurrence of any of the following
circumstances unless such circumstances are fully corrected prior to the date
of Employee's termination of this Agreement:

                                    (1)     the removal of Employee from the
position of President and Chief Executive Officer, or the assignment to
Employee of any duties which are materially inconsistent with such position;
a significant alteration in the nature or status of Employee's
responsibilities or the conditions of Employee's employment; or any other
action by Employer that results in a material diminution in Employee's
position, authority, title, duties or responsibilities;

                                    (2)     the relocation of Employer's
offices at which Employee is principally employed on the date hereof outside
the greater Los Angeles metropolitan area;

                                    (3)     Employer's material breach of the
provisions in this Agreement;

                                    (4)     Employer's reduction of
Employee's base salary as provided in Paragraph 3; or

                           g.       the election of Employer to terminate
Employee's employment without Cause.

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                      h.       Any termination of this Agreement pursuant to
subparagraphs (a), (b) or (c) above, shall be effective on the expiration
date of this Agreement or the date of death or resignation, as the case may
be. Any termination pursuant to subparagraphs (d), (e), (f) or (g) shall be
effective immediately upon delivery of written notice of termination to
Employee or Employer, as the case may be.

                  11. PARTIES' RIGHTS AND OBLIGATIONS UPON TERMINATION.

                      a.       If this Agreement is terminated pursuant to
subparagraphs 10(b), (c), (d) or (e), Employer shall be obligated to pay
Employee's salary and earned but unused vacation, prorated on a daily basis,
through the date of termination, and, in the case of the death of Employee,
to pay to Employee's estate or designated beneficiary the insurance benefits
to which they are entitled, if any, and Employee shall have no other right to
wages, salaries, bonuses, benefits (except as required by COBRA), fees,
commissions, expenses not yet incurred of the types specified in Paragraph 7
hereof, severance pay, or debt, or equity interest in Employer not already
owned by Employee.

                      b.       If this Agreement is terminated pursuant to
subparagraphs 10(f) or (g), Employer shall be obligated to pay to Employee:

                               (1)     Employee's base salary through April
1, 2001;

                               (2)     The Incentive Bonus under Paragraph 4
of this Agreement, whether or not an Incentive Event has actually occurred,
only to the extent Employer has not already paid such Incentive Bonus to
Employee; provided, however, that if this Agreement is terminated pursuant to
subparagraphs 10(f) or (g) within the last thirty (30) days of the term of
the Agreement (including any extensions thereof), then Employer shall pay to
Employee the Incentive Bonus if and only if (A) by the end of the term
(including any extensions thereof) an Incentive Event occurs, and (B) the
bankruptcy court approves and/or confirms the Incentive Event;

                               (3)     The premiums on Employee's benefits
under Paragraph 5 through April 1, 2001; and

                               (4)     Any earned but unused vacation through
April 1, 2001.

                      c.       The respective rights and obligations of
Employer and Employee pursuant to Paragraphs 4, 6, 8 and 9 hereof shall
survive the expiration or earlier termination of this Agreement.

                  12. PERSONS BOUND.  This Agreement shall inure to the
benefit of and be binding upon Employee, his legal representatives and
testate or intestate distributes, and

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Employer, its successors and assigns. This Agreement may not be assigned by
Employee. This Agreement may be assigned by Employer.

                  13. NOTICES. Any notice or request required or permitted under
this Agreement shall be in writing and given or made by hand delivery or
registered or certified mail, return receipt requested, addressed to Employer or
to Employee at Employer's then principal place of business with a copy to
Employee at Employee's home address, as set forth on the records of Employer, or
to either party hereto at such other address or addresses as such party may from
time to time specify in a notice similarly given to the other party. A copy of
any notice to Employee should also be sent to his counsel as follows:

                           Adam Levin
                           Mitchell, Silberberg & Knupp LLP
                           11377 West Olympic Blvd.
                           Los Angeles, California  90064-1683

                  14. NO WAIVER, MODIFICATION. The waiver of the breach of
any term or condition of this Agreement shall not be deemed to constitute the
waiver of any other or subsequent breach of the same or any other term or
condition. No amendment or modification of this Agreement shall be valid or
binding unless made in writing and signed by the other party against whom
such waiver or modification is to be enforced.

                  15. GOVERNING LAW.  This Agreement shall be construed and
enforced in accordance with the laws of the State of California applicable to
agreements made and to be performed in said State.

                  16. DISPUTES. Any controversy or claim arising out of or
relating to this Agreement, including without limitation any dispute relating
to the termination of this Agreement or Employee's employment, shall be
arbitrated in Los Angeles, California, in accordance with the National Rules
for the Resolution of Employment Disputes of the American Arbitration
Association. Except to the extent inconsistent with the National Rules for
the Resolution of Employment Disputes of the American Arbitration
Association, the California Arbitration Act shall control. The parties
consent to personal jurisdiction in Los Angeles, California with respect to
such arbitration. The arbitration award shall be final and binding upon both
parties. Judgment upon said award may be entered in any court having
jurisdiction thereof. Each party shall bear, his or its own attorneys' fees
and costs associated with or arising from such arbitration, except with
respect to the American Arbitration Association filing fee which shall be
paid by Employer to the extent such fee exceeds the statutory filing fee in a
court of competent jurisdiction.

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                  17. ENTIRE AGREEMENT. This Agreement represents the entire
agreement of the parties hereto with respect to the subject matter hereof,
and supersedes all prior agreements, understandings, representations,
written or oral, express or implied, if any, between Employer and Employee.
No representation, condition, provision or term related to or connected with
this Agreement exists, or has been relied upon by either party hereto except
as specifically set forth herein.

                  Each party has cooperated in the drafting and preparation
of this Agreement. This Agreement shall not be construed against any party on
the basis that the party was the drafter.

                  18. EMPLOYEE'S WARRANTY.  Employee represents and warrants
to Employer that Employee is not bound by any agreement or subject to any
restriction which would interfere with or prevent Employee from entering into
and carrying out this Agreement.

                  19. SEVERABILITY.  The invalidity of all or any part of any
paragraph or subparagraph of this Agreement shall not render invalid the
remainder of this Agreement or of any such paragraph or subparagraph.

                  IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the day and year first above written.


Date:    January 5, 2001                    STROUDS, INC.


                                            By: /s/ Larry Bemis
                                               ---------------------------

                                            Its Director
                                               ---------------------------

                                            THOMAS S. PACCIORETTI


Date:    January 5, 2001                    /s/ Thomas S. Paccioretti
                                            ------------------------------
                                              Thomas S. Paccioretti

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