<PAGE>



              EMPLOYMENT AGREEMENT WITH CHARLES CHINNI




     THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
this 7 day of July, 1997, by and between Strouds, Inc. ("Employer") and
Charles Chinni ("Employee").


     1.     EMPLOYMENT AND TERM.  Employer hereby employs Employee and
Employee hereby accepts employment with and agrees to serve Employer in the
capacities and subject to and upon the terms and conditions hereinafter set
forth.  The term of Employee's employment hereunder shall be the period
commencing on July 7, 1997, subject to termination as provided in paragraphs
15 and 16 hereof, and ending on February 26, 2000. 


     2.     DUTIES.  Employee shall be employed by Employer as President and
Chief Executive Officer of Strouds, Inc. reporting to the Board of Directors
of Strouds, Inc.  Employee shall perform the duties normally associated with
such position, subject at all times to the general supervision and pursuant to
the orders, advice and direction of the Board of Directors of Employer, and
Employee shall perform such other duties as the Board of Directors of Employer
may reasonably assign to Employee from time to time.  Employee agrees that so
long as this Agreement continues in effect, Employee shall devote his full
business time and energies to the business and affairs of Employer, use his
best efforts, skills and abilities to promote Employer's interests, and
perform the duties described herein and such other duties as may be reasonably
assigned to Employee. 


     3.     BOARD OF DIRECTORS.  Employee shall be a member of the Board of
Directors of Strouds, Inc. (the  Board ) as of July 8, 1997 subject to
election by the Board at its July 8, 1997 meeting, and continue as a member of
the Board thereafter during the term of the Agreement, subject to Employer's
by-laws and to nomination and election by Employer's shareholders in fiscal
years after 1997.


     4.     BASE SALARY.  Employer shall pay Employee, and Employee hereby
agrees to accept, as compensation for services rendered hereunder a salary of
Three Hundred Fifty Thousand Dollars ($350,000.00) per year ($13,461.54 bi-
weekly) payable in arrears in installments at such intervals as Employer pays
the salaries of Employer's executive officers subject to the termination
provisions of paragraphs 15 and 17 hereof.  Employer will reevaluate
Employee's base salary no later than May 1, 1999.  Employee understands and
agrees that Employer has no obligation to increase his base salary as a result
of such evaluation.

     5.     CONTRACT REVIEW.  Strouds will reimburse Employee for his
reasonable attorneys fees incurred in drafting and reviewing this Agreement,
up to Two Thousand Dollars ($2,000.00).  Alternatively, at Employee's request,
such payment will be made directly to Employee's counsel.





<PAGE>
     6.     TRANSITION AND MOVING EXPENSES. 


          (a)     Employer shall lease or rent an apartment or condominium for
Employee for up to 18 months from the commencement of his employment, which
payment shall  be considered taxable income.  The rent to be paid by Employer
shall be agreed upon by Employer and Employee but shall be no more than Four
Thousand Two Hundred Dollars ($4,200.00) per month.


          (b)     Employer shall pay moving expenses from New Jersey to
California for Employee s automobile and limited household items from one
household.


          (c)     When, during the term of this Agreement, Employee sells his
current residence in New Jersey, Employer shall pay the commission on the sale
and the moving expenses for remaining household items upon completion of the
sale, grossed up to cover Employee's income tax thereon.


     7.     BONUS.

          (a)     Employer shall pay Employee a cash bonus for fiscal 1997 in
the amount of Eighty-Seven Thousand Five Hundred Dollars ($87,500.00) if
Strouds, Inc. achieves an Adjusted Net Income (Loss) of ($3,600,000.00) or
less for fiscal 1997.  Employer shall pay Employee an additional cash bonus
for fiscal 1997 in the amount of Eighty-Seven Thousand Five Hundred Dollars
($87,500.00) if Strouds, Inc. achieves an Adjusted Net Income (Loss) of no
more than ($2,700,000.00) for fiscal 1997, for a total possible bonus of
$175,000 for fiscal 1997 results.


          (b)     Employer shall pay Employee a cash bonus for fiscal 1998 in
the amount of Eighty-Seven Thousand Five Hundred Dollars (87,500.00) if
Strouds, Inc. achieves an Adjusted Net Income (Loss) of  ($2,000,000.00) or
less for fiscal 1998.  Employer shall pay Employee an additional cash bonus
for fiscal 1998 in the amount of Eighty-Seven Thousand Five Hundred Dollars
($87,500.00) if Strouds, Inc. achieves an Adjusted Net Income (Loss) equal to
its Financial Plan approved by the Board, for a total possible bonus of
$175,000 for fiscal 1998 results.




          (c)     Adjusted Net Income (Loss) means Income or (Loss) before any
tax benefit and after any bonus expense.


          (d)     Cash bonus shall be paid as soon as practicable, but not
more than 14 days, after Employer's independent public accounting firm,
currently KPMG Peat Marwick, delivers its audit of Strouds, Inc. fiscal year
end.


          (e)     No cash bonus shall be paid to Employee with respect to a
fiscal year during which this Agreement terminates pursuant to paragraphs 15
(a), (b), (c), (d), (e), or (f) or 16 hereof.  If the Agreement terminates
pursuant to paragraph 15 (g), 15 (h), or 15(i), and if (i) Strouds, Inc. has


2


<PAGE>
achieved the year-to-date Adjusted Net Income (Loss), established on a month-
by-month basis to equal the annual achievement levels set forth in paragraphs
7(a) or 7(b), whichever applies, as of  the month ended immediately preceding
the date the Agreement terminates, and (ii) for the full fiscal year in which
the Agreement terminates Strouds, Inc. achieves the Adjusted Net Income (Loss) 
set forth in paragraphs 7(a) or 7(b), whichever applies, then Employer will
pay Employee, pursuant to paragraph 7(d), a cash bonus with respect to the
fiscal year in which the Agreement terminates in an amount equal to the  cash
bonus achieved for the full year pursuant to paragraph 7(a) or 7(b), whichever
applies, multiplied by a fraction, the numerator of which is the number of
full months in the fiscal year prior to the month in which the Agreement
terminates and the denominator of which is 12. 


     8.     STOCK OPTIONS. 

          (a)     On the date of employment, Employee shall be granted a
nonqualified stock option pursuant to Employer s Amended and Restated 1994
Equity Participation Plan (the "Plan") to purchase 100,000 shares of common
stock in Strouds, Inc. (the  Common Stock ) with an exercise price equal to
the fair market value of the Common Stock on such date.  In addition, on the
date of employment, Employee shall be granted a nonqualified stock option
under the Plan to purchase an additional 200,000 shares of the Common Stock
with an exercise price equal to the fair market value of the Common Stock on
such date subject to approval of  an amendment to Employer s Plan to be
presented to Employer s shareholders at the 1998 annual meeting allowing for
the grant of such additional options under the Plan.


          (b)     At the time of payment of a cash bonus, if any, to Employee
for fiscal 1997 as provided in paragraph 7(a), Employee shall be granted a
nonqualified stock option under the Plan to purchase an additional 50,000 
shares of  the Common Stock if, and only if, Strouds, Inc. achieves an
Adjusted Net Income (Loss) of ($2,700,000.00) or less for fiscal 1997.  In
addition, if  Strouds, Inc. incurs an Adjusted Net Income (Loss) of less than
($2,700,000.00) for fiscal 1997, Employee shall be granted an additional
nonqualified stock option under the Plan to purchase 10,000 shares of the
Common Stock (up to a maximum of 50,000 shares) for every 1/2 of 1% by which
the Adjusted Net Income (Loss) is less than ($2,700,000.00) with an exercise
price equal to the fair market value of the Common Stock on the date of grant. 
In the event that Strouds, Inc. does not achieve a ($2,700,000.00) Adjusted
Net Income (Loss) or less for fiscal 1997, the Board of Directors (or the
Compensation Committee established under the Plan) may nonetheless grant
additional stock options under the Plan (up to a maximum of 50,000 shares) if
it determines, in its sole discretion, that it is nonetheless appropriate to
make such grant upon review of all the circumstances leading to the fiscal
result for the year and the margin by which the financial goal of a
($2,700,000.00) Adjusted Net Income (Loss) was not attained.  


          (c)     At the time of payment of a cash bonus, if any, to Employee
for fiscal year 1998 as provided in paragraph 7(b), Employee shall be granted
a nonqualified stock option under the Plan to purchase an additional 50,000
shares of the Common Stock if, and only if, Strouds, Inc. achieves an amount
of Adjusted Net Income (Loss) equal to its Financial Plan approved by the



3


<PAGE>

Board.  In addition, if Strouds, Inc. incurs Adjusted Net Income greater than,
or Adjusted Net (Loss) less than, the goal established pursuant to the
preceding sentence for fiscal 1998, Employee shall be granted an additional
nonqualified stock option under the Plan to purchase 10,000 shares of the
Common Stock (up to a maximum of 50,000 shares) for every 1/2 of 1% by which
the goal is bettered.  In the event Strouds, Inc. does not achieve the
established goal for the 1998 fiscal year, the Board of Directors may
nonetheless grant additional stock options under the Plan (up to a maximum of
50,000 shares) if it determines in its sole discretion that it is nonetheless
appropriate to make such grant upon review of all the circumstances leading to
the fiscal result for the year and the margin by which the goal was not
attained.


          (d)     All options granted pursuant to the above provision shall
vest at the rate of 25% per year on each anniversary date of the date of the
grant of such options.


          (e)     For purpose of this paragraph Adjusted Net Income (Loss) is
defined in paragraph 7(c).



     9.     AIRLINE TICKETS.  Employer shall provide Employee airline tickets
each month beginning in August 1997 having a cost no greater than $1,666.67
per month, subject to the last sentence of this paragraph.  Employer will pay
Employee such additional amount as necessary to defray income tax, if any,
attributable to provision of these tickets.  These airline tickets are limited
to use by Employee and his wife and will be provided for as long as Employee's
wife maintains her primary residence in New Jersey and Employee and his wife
are not legally separated, but no longer than 18 months beginning in August
1997.  The entitlement to such airline tickets is cumulative from month-to-
month.


     10.    BENEFITS. Employer shall provide Employee with medical, hospital,
surgical, disability, accidental death, travel and/or life insurance coverage,
if any, on the same basis as such coverage is provided to Employer's executive
officers, subject to Employee's satisfaction of any eligibility criteria for
such coverage.  Employee shall be entitled to participate in Employer's
retirement plans, if any, on the same basis as Employer's comparable
employees, subject to Employee's satisfaction of any eligibility criteria for
such participation.  Employee shall be entitled to three weeks paid vacation
for each 12 months of employment, subject to the terms of Employer's vacation
policy for employees as it now exists and as changed from time-to-time.  Such
vacation shall be taken at such time or times as shall not unduly disrupt the
orderly conduct of business of Employer.


     11.    EXPENSES.  Employer will reimburse Employee for all ordinary and
reasonable out-of-pocket business expenses incurred by Employee in connection
with his performance of services hereunder during the term of this Agreement
in accordance with Employer's expense approval procedures then in effect,
including, $269.23  bi-weekly for lease, insurance, maintenance and fuel of
one vehicle.  Travel for business will be by coach class.


4




<PAGE>
     12.    CONFIDENTIALITY.  Employee recognizes and acknowledges that in the
course of Employee's employment by Employer pursuant to this Agreement,
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 those persons, entities, and
others with which Employer has contracted and others who have business
dealings with Employer, 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.  Employee therefore agrees that Employee shall not at any time,
either while employed by Employer, except in performance of Employee's duties
hereunder, or afterwards, without the prior written consent of Employer, make
any independent use of such Confidential Information, or disclose the same,
directly or indirectly, to any other person, firm, corporation or other
entity, for any reason or purpose whatsoever, except on advice of counsel
during testimony under subpoena in any court or before any administrative
agency having jurisdiction or during any authorized governmental inquiry or
investigation, provided that Employee shall cooperate with Employer in taking
all necessary and appropriate steps to assure the protection of such
Confidential Information from unauthorized use or disclosure outside of such
action, proceeding, inquiry or investigation, or except to the extent that any
such Confidential Information shall be in the public domain other than by
reason of Employee's breach of this paragraph 12.


     13.     RESTRICTIVE COVENANT.  Employee acknowledges that Employee is a
key employee and that the services to be rendered hereunder are of a critical
nature to the success of Employer.  In view of the value to Employer of the
services of Employee for which Employer has contracted hereunder, and in
recognition of Employer's obligations hereunder, Employee covenants and agrees
as follows:


          (a)     During Employee's employment hereunder, Employee shall not,
directly or indirectly, as employee, consultant, agent, officer, director,
owner, partner, broker, dealer, or stockholder, solicit business for any
person, firm, entity, or supplier engaged primarily in the home textiles
specialty retail business in which Employer engages or in any other business
in which Employer, from time to time, shall be engaged in those cities or
counties of the United States in which Employer shall then be transacting
business, from any client, customer or account of Employer or attempt to
convert said persons or entities to other methods of using the same or similar
products or services as provided by Employer;


          (b)     During Employee's employment hereunder, Employee shall not,
directly or indirectly, as employee, consultant, agent, officer, director,
owner, partner, broker, dealer, or stockholder, for any person, firm, entity,
or supplier, engage in the home textiles specialty retail business in which
Employee engages or in any other business in which Employer, from time to
time, shall be engaged, in those cities or counties of the United States in


5



<PAGE>
which Employer shall then be transacting business, or in any other business
activity for gain or profit or other pecuniary advantage; provided, however,
that this paragraph shall not limit or restrict Employee's right to make and
have personal investments (i) in such form or manner as will not require
Employee's active services in the daily operations or affairs of the business
in which such investments are made and will not otherwise conflict with
Employee's duties and obligations to Employer; (ii) if such investments do not
constitute more than 5% of any class of securities of any corporation that has
a class of securities registered pursuant to the Securities Exchange Act of
1934; and, (iii) such investments are not in a direct competitor of Employer
in the home textiles specialty retail business.


          (c)     For two years after termination of this Agreement pursuant
to paragraph 15 or 16, Employee shall not directly or indirectly, as employee,
consultant, agent, officer, director, owner, partner, broker, dealer, or
stockholder, engage in the home textiles specialty retail business in which
Employee engages or in any other business in which Employer, from time to
time, shall be engaged during the term of this Agreement, in those cities or
counties of the United States in which Employer shall then be transacting
business.


          (d)     During Employee's employment hereunder, and for a period of
two years after Employee ceases to be employed by Employer, Employee shall
not, directly or indirectly, solicit for employment or employ any employee of
Employer.


As used herein, the term transacting business within "those cities and
counties" includes the carrying on of a business which may be located
elsewhere but which involves sales or any activity within the stipulated city
or county.  The covenants contained in this paragraph shall be deemed to be a
series of separate covenants, for each city and county of each state where
Employer is carrying on such business.  If in any judicial proceeding a court
shall refuse to enforce all of the separate covenants deemed included in such
action, then such unenforceable covenants shall be deemed eliminated from the
provisions hereof for the purposes of such proceedings to the extent necessary
to permit the remaining separate covenants to be enforced in such proceedings.


     14.    RELIEF.  It is recognized that in the event of Employee's breach
of paragraph 12 or 13 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 in the premises, including the recovery of
damages from Employee.


     15.    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:


6



<PAGE>

          (a)     the expiration of the term specified in paragraph 1 hereof;


          (b)     the death of Employee;


          (c)     the voluntary resignation of Employee;


          (d)     Employee's disability, subject to the Employee's right to
receive a disability benefit as provided in paragraph 10 hereof, if any;


          (e)     the election of Employer to terminate Employee's employment
for "cause," which shall mean (i) a determination by Employer in its sole
discretion exercised in good faith that there has been continued neglect by
Employee of Employee's duties hereunder, a breach or non-observance by
Employee of any of the covenants of Employee contained herein, or Employee's
failure within a reasonable time after written notice to correct any
performance deficiency specified in the notice to the satisfaction of
Employer; or (ii) Employee's embezzlement, fraud, acceptance of a bribe or
kickback or other similar act for Employee's personal benefit or to the
detriment of Employer on Employee's part, or a failure, willful or otherwise,
to implement reasonable or proper policies or procedures established by
Employer for the transaction of business by Employer;


          (f)     the election of Employer to terminate Employee's employment
upon the entry of any order for relief in respect of Employee under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt or
similar law of any jurisdiction now or hereafter in effect;


          (g)     the election of Employer to terminate without cause at any
time by giving Employee written notice of termination; 


          (h)     failure of Employee to be nominated as a member of the Board
or to be elected as a member of the Board by Employer's shareholders in a
fiscal year after 1997; or


          (i)     rejection by the shareholders of Strouds, Inc. of the
amendment to the Employer s Plan to be presented pursuant to paragraph 8(a)
hereof, but only if Employee notifies Employer within 30 days after the
rejection that he elects to terminate the Agreement pursuant to this
subparagraph 15(i). 


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), (g), or (h) shall be effective immediately upon
delivery of notice of termination to Employee.  Any termination pursuant to
subparagraph (i) shall be effective immediately upon delivery of notice of
termination to Employer.  In the case of termination pursuant to paragraph


7



<PAGE>
15(h), such delivery shall be deemed to occur immediately upon  the action or
inaction, as the case may be, becoming final in accordance with the by-laws of
Strouds, Inc. 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 his essential duties and other services 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 there is
a reasonable accommodation that does not produce undue hardship to Employer's
operation.  It is the parties' intent to comply with the Americans with
Disabilities Act and the California Fair Employment and Housing Act with
respect to disability.  Employee shall be deemed to have terminated his
employment on account of disability as of the date he is determined by
Employer to be disabled as defined herein.


     16.    VOLUNTARY TERMINATION BY EMPLOYEE.  Employee may terminate this
Agreement for any reason by giving Employer at least 30 days' written notice
of termination.


     17.    PARTIES' RIGHTS AND OBLIGATIONS UPON TERMINATION.  Except as noted
hereinafter, upon the expiration or earlier termination of this Agreement
Employer's sole obligation shall be to pay Employee or Employee's estate any
compensation remaining unpaid through the effective 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, non-vested stock
options, expenses not yet incurred of the types specified in paragraphs 6, 9,
and 11 hereof, severance pay, or debt or equity interest in Employer not
already owned by Employee.  The parties' rights and obligations on expiration
or earlier termination of this Agreement are further limited as follows:


          (a)     If this Agreement is terminated pursuant to subparagraphs
15(b), (c), (d), (e), (f), (g), (h), or (i), Employer shall be obligated to
pay Employee's salary and earned but unused vacation, prorated on a daily
basis, through the date of termination.


          (b)     If this Agreement is terminated pursuant to subparagraphs
15(g) , 15(h), or 15(i), Employer shall be obligated to pay to Employee, in
addition to the obligations set forth in subparagraph 17(a), Employee's base
salary in effect at the time of termination for the remaining term of the
Agreement or for one year, whichever is greater, which shall be paid in equal
installments at the same intervals as Employee has been paid during his
employment by Employer.


          (c)     The respective rights and obligations of Employer and
Employee pursuant to paragraphs 12, 13 and 14 hereof, shall survive the
expiration or earlier termination of this Agreement.


8







<PAGE>
     18.    PERSONS BOUND.  This Agreement shall inure to the benefit of and
be binding upon Employee, his legal representatives and testate or intestate
distributes, and Employer, its successors and assigns.  This Agreement may not
be assigned by Employee.  This Agreement may be assigned by Employer.


     19.     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 for the purpose in a notice similarly given to the
other party.


     20.    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.


     21.    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.


     22.    DISPUTES.  Any controversy or claim arising out of or relating to
this Agreement or for the breach thereof or to Employee's employment by
Employer, including without limitation any dispute relating to the termination
of this Agreement or Employee's employment, if not otherwise settled by the
parties hereto, shall be finally settled by arbitration to be held in Los
Angeles, California, in accordance with the National Rules for the Resolution
of Employment Disputes of the American Arbitration Association.  The parties
hereto hereby consent to personal jurisdiction in Los Angeles, California with
respect to such arbitration.  The award resulting from such arbitration shall
be final and binding upon both parties hereto.  Judgment upon said award may
be entered in any court having jurisdiction thereof.  In the event that any
arbitration or other proceeding shall be brought by Employee or Employer in
respect of an alleged breach by or default in the performance of the other
party hereto, each party shall bear his or its own attorneys' fees and costs
associated with or arising from such arbitration or other proceeding. 
Notwithstanding the foregoing, Employer may institute and prosecute to
judgment in any court having jurisdiction an action, suit or proceeding for
equitable or injunctive relief under paragraph 14 hereof and Employee shall
reimburse Employer for all reasonable costs and expenses (including attorneys'
fees) incurred by Employer, if successful, in connection therewith.


     23.     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, or written
or oral, express or implied, if any, between Employer and Employee.  No



9




<PAGE>
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.


     24.    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.


     25.     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.


Date:  JULY 11, 1997                  STROUDS, INC.



                                   By /s/ Wilfred C. Stroud
                                      






Date:  JULY 10, 1997


                                      /s/ Charles Chinni
                                      ----------------------------
                                      Charles Chinni
























10