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                        INTEREST RATE SWAP AGREEMENT

      THIS AGREEMENT ("Agreement") is entered into as of the 11th day of
September, 1998, by and between STROUDS, INC. ("Fixed Rate Payer"), and WELLS
FARGO BANK, NATIONAL ASSOCIATION ("Floating Rate Payer").

      WHEREAS, both Fixed Rate Payer and Floating Rate Payer seek to reduce
actual or expected exposure to changes in interest rates or to lower costs of
actual or expected borrowings.

      WHEREAS, the Fixed Rate Payer is willing to make the payments based on a
fixed rate of interest as provided herein; and

      WHEREAS, the Floating Rate Payer is willing to make the payments based
on a floating rate of interest as provided herein;

      NOW THEREFORE, in consideration of their mutual covenants, Fixed Rate
Payer and Floating Rate Payer agree as follows:

      1.    DEFINITIONS.  The capitalized terms, "Effective Date", "Fixed
Rate", "Floating Rate", "Floating Rate Maturity", "Net Swap Settlement Payment
Dates", "Reset Dates", "Swap Amount", "Termination Date" and "Trade Date"
shall each be as specified in the Swap Confirmation.  All other capitalized
terms shall have the meanings set forth below or otherwise as set forth in
this Agreement:

            (a)   "BUSINESS DAY" means a day (other than Saturday, Sunday or
holiday) on which Bank is open and conducting its customary banking
transactions in the State of California.

            (b)   "BUSINESS DAY CONVENTION" means, for purposes of determining
each Calculation Period, that convention specified in the Swap Confirmation
for adjusting any relevant date if it would otherwise fall on a day that is
not a Business Day, so that:

                  (i)   if "following" is specified, that date will be the
first following day that is a Business Day;

                  (ii)  if "modified following" is specified, that date will
be the first following day that is a Business Day unless that day falls in the
next calendar month, in which case that date will be the first preceding day
that is a Business Day; and

                  (iii) if "preceding" is specified, that date will be the
first preceding day that is a Business Day. 




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            (c)   "CALCULATION PERIOD"  means, subject to the Business Day
Convention, each consecutive period  designated in the Swap Confirmation, the
first of which will commence on, and include, the Effective Date and extend
to, but exclude, the first Reset Date. Each subsequent Calculation Period will
commence on, and include, the Reset Date and extend to, but exclude the next
Reset Date.  The final Calculation Period will end on, but exclude, the
Completion Date.

            (d)   "SWAP CONFIRMATION" means a document, substantially in the
form of Exhibit A hereto, with the information required in each blank space
completed.

            (e)   "COMPLETION DATE" shall mean the Termination Date unless an
Early Termination Date has occurred, in which case the Completion Date shall
be the Early Termination Date.

            (f)   "DAY COUNT CONVENTION" means that the calculation of each
Net Swap Settlement will be based on the actual number of days in the
Calculation Period divided by a 360-day year.

            (g)   "EARLY TERMINATION DATE" means the date, if any, prior to
the Termination Date upon which this Agreement is terminated pursuant to
Paragraph 3(a) below.

            (h)   "LIBOR" means, with respect to each Calculation Period, the
rate for deposits in  U.S. Dollars for a period equal to the Floating Rate
Maturity, as such rate appears on  Telerate Page 3750 as of 11:00 AM, London
Time, on the Reset Date (or the Effective Date in the case of the initial
Period). If such rate does not appear on Telerate Page 3750, the rate for that
Reset Date will be the arithmetic mean of the rates quoted by major Banks in
London, selected by Floating Rate Payer, for a period equal to the Floating
Rate Maturity, as of 11:00 AM, London Time, on the Reset Date.

            (i)   "TELERATE PAGE 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service (or such other page as may replace
Page 3750 on that service or such other service as may be nominated by the
British Bankers  Association as the information vendor for the purpose of
displaying British Bankers  Association Interest Settlement Rates for U.S.
Dollar Deposits).

      2.    DETERMINATION; NET SWAP SETTLEMENT PAYMENTS.

            (a)   On the first Business Day following the end of each
Calculation Period, Floating Rate Payer will send Fixed Rate Payer a written
notice ("Settlement Notice") specifying:

                  (i)   the amount of interest which would have accrued on the
Swap Amount during the Calculation Period at a rate per annum equal to the
Floating Rate ("Floating Rate Payment").



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                  (ii)  the amount of interest which would have accrued on the
Swap Amount during the Calculation Period at a rate per annum equal to the
Fixed Rate ("Fixed Rate Payment"); and

                  (iii) the difference, if any, between the Floating Rate
Payment and the Fixed Rate Payment ("Net Swap Settlement Payment").

            (b)   All calculations under Paragraph 2(a) above will be made on
the basis of the Day Count Convention.

            (c)   On each Net Swap Settlement Payment Date:

                  (i)   if the Fixed Rate Payment exceeds the Floating Rate
Payment, Fixed Rate Payer shall pay Floating Rate Payer the amount of the Net
Swap Settlement Payment by, at Floating Rate Payer s option, Floating Rate
Payer s debiting Fixed Rate Payer's demand deposit account with Floating Rate
Payer, or by wiring funds to Floating Rate Payer; or

                  (ii)  if the Floating Rate Payment exceeds the Fixed Rate
Payment, Floating Rate Payer shall pay Fixed Rate Payer the amount of the Net
Swap Settlement Payment by, at Floating Rate Payer s option, crediting Fixed
Rate Payer's demand deposit account with Floating Rate Payer, or by wiring
funds to a designated Fixed Rate Payer account.  

      3.    EARLY TERMINATION.  

            (a)   This Agreement shall expire on the Termination Date and
neither party may terminate this Agreement prior thereto; provided, however
that in the event that either Floating Rate Payer or Fixed Rate Payer fail to
make any payment when due hereunder or otherwise fail to perform any of their
obligations hereunder, unless such default is cured within five Business Days
of the defaulting party's receipt of written notice thereof, the
non-defaulting party may, so long as such default in then continuing, upon
five Business Days written notice terminate this Agreement.

            (b)   In the event of an early termination of this Agreement
pursuant to Paragraph 3(a), the defaulting party shall promptly pay the
non-defaulting party, on demand, an amount equal to the Termination Amount.
Each party hereto acknowledges the Termination Amount to be a reasonable
estimate of the value, costs and loss of compensation incurred by the other
party as a result of the early termination of this Agreement.

            (c)   "Termination Amount" means the amount in U.S. Dollars equal
to the arithmetic mean of the respective one-time all-in fees (including
documentation costs) communicated to the non-defaulting party on the earliest
practicable Business Day following the Early Termination Date by each of three
leading commercial banks or investment banking firms in San Francisco, Los
Angeles or New York selected in good faith by the non-defaulting party as the
fee that it would charge to assume, as of the Early Termination Date, all of
the rights and obligations of the defaulting party.  However, if one or more


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such entities fail so to communicate such a fee, the Termination Amount shall
be determined on the basis of those fees so communicated by the other
entities.

      4.    LIMITATIONS OF LIABILITY.  In no event shall either party hereto
be liable to the other for loss of profit or indirect, special, consequential,
punitive or exemplary damages, arising out of any default under this
Agreement.

      5.    NOTICES.  All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed served
when personally delivered or, if mailed, upon the first to occur of receipt or
the expiration of seventy-two hours after deposit in the United States Postal
Service, certified mail, or if sent by overnight courier service, upon the
first to occur of receipt or 3:00 p.m. (local time at place of delivery) the
next Business Day, addressed to Floating Rate Payer or Fixed Rate Payer at
their respective addresses set forth in the Swap Confirmation.

      6.    SUCCESSORS; ASSIGNS.  This Agreement shall be binding on and inure
to the benefit of the successors and assigns of the parties; provided,
however, that Fixed Rate Payer shall not, without the prior written consent of
Floating Rate Payer, assign (whether by operation of law or otherwise) its
rights and obligations under this Agreement or any interest herein and any
such attempted assignment shall be void and without force or effect.

      7.    GOVERNING LAW.  This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without giving effect
to any choice of law doctrine.

      8.    NO THIRD PARTY BENEFICIARY.  This Agreement and the payments to be
made by the parties hereunder are solely for the benefit of the parties hereto
for the purposes stated herein and no other person or entity shall have any
rights hereunder or be a beneficiary of either party's obligations under this
Agreement.

      9.    COUNTERPARTS.  This Agreement and the Swap Confirmation may be
executed in any number of counterparts and by each party hereto on separate
counterparts, each of which when executed and delivered shall constitute an
original, but all the counterparts shall together constitute but one and the
same instrument.

      10.   AMENDMENTS; WAIVERS.  Any amendment or waiver of any right under
any provision of this Agreement shall be in writing and, in the case of an
amendment, signed by both parties hereto, or in the case of a waiver, signed
by the party waiving such right.  No failure or delay by either party hereto
in exercising any right, power or privilege hereunder shall operate as a
waiver thereof.

      11.   TRADE DATE; INTEREST AGREEMENT NOT CREDIT COMMITMENT.  This
Agreement shall be effective at, and as of, 12:01 a.m., California time, on
the Trade Date.  Nothing in this Agreement shall be construed to (i) mean that

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Floating Rate Payer is committed to make a loan or extend any other credit to
Fixed Rate Payer, or (ii) amend or modify any contract, instrument or document
executed in connection with the Loan Facility.

      12.   COSTS, EXPENSES AND ATTORNEYS' FEES.  In the event of any dispute
or litigation between the parties hereto, the prevailing party shall be
entitled to recover from the other party, immediately upon demand, all costs
and expenses, including reasonable attorneys' fees, incurred by the prevailing
party in connection with the enforcement of its rights and/or the collection
of any amounts which become due to it under this Agreement, and the
prosecution or defense of any action in any way related to this Agreement,
including any of the foregoing incurred in connection with any bankruptcy
proceeding relating to such other party.

      13.   ENTIRE AGREEMENT.  This Agreement and the Swap Confirmation
constitute the entire agreement and understanding of the parties with respect
to its subject matter and supersedes all oral communications and prior
writings with respect thereto.

      14.   SECURITY.  All obligations of Fixed Rate Payer are secured by a
Standby Letter of Credit issued by Chase Manhattan Bank in the amount of
$175,000 expiring on March 1, 2001 - and referencing Swap #1267.

      15.   NO RELIANCE.  In connection with the negotiation of and entering
into this Agreement, (i)  Fixed Rate Payer acknowledges that the Floating Rate
Payer is not acting as a fiduciary or a financial or investment advisor for
it; (ii) Fixed Rate Payer is not relying upon any advice, counsel or
representations (whether written or oral) of the Floating Rate Payer hereto
other than the representations expressly set forth in this Agreement,  and in
any Confirmation; (iii)  the Floating Rate Payer has not given Fixed Rate
Payer any advice or counsel as to the expected or projected success, return,
performance, result, consequence or benefit (either legal, regulatory, tax,
financial, accounting, or otherwise) of this Agreement;  (iv)  Fixed Rate
Payer has consulted with its own legal, regulatory, tax, business, investment,
financial and accounting advisors to the extent is has deemed necessary and
has made its own investment, hedging, and trading decisions (including
decisions regarding suitability of any Transaction pursuant to this Agreement)
based upon its own judgment and upon any advice from such advisors as it has
deemed necessary and not upon any view expressed by the other party hereto;
(v) Fixed Rate Payer has determined that the rates, prices, or amounts and
other terms of each Transaction in the indicative quotations (if any) provided
by Floating Rate Payer hereto reflect those in the relevant market for similar
Transactions, and all trading decisions have been the result of arms length
negotiations between the parties; (vi) Fixed Rate Payer is entering into this
Agreement with a full understanding of all of the terms, conditions and risks
thereof (economic and otherwise), and Fixed Rate Payer is capable of assuming
and willing to assume (financially and otherwise) those risks; and (vii) Fixed
Rate Payer is a sophisticated investor.  




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

Floating Rate Payer:                Fixed Rate Payer:

WELLS FARGO BANK,                   STROUDS, INC.
NATIONAL ASSOCIATION



By:  /s/Steven D. Berg              By:  /s/ Douglas C. Felderman
     -----------------                   ------------------------
Name:  Steven D. Berg               Name:  Douglas C. Felderman
                                           --------------------
Its:  Vice President                Its:  Sr. Vice President - CFO
                                             




































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