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                                                           EXHIBIT 10.7





                           INTEREST RATE SWAP AGREEMENT


     THIS AGREEMENT ("Agreement") is entered into as of the 17th day of
February, 2000, 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").

               (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").


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          (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 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.


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     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 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.


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     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.

     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.

     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/Gary Van Wagner
    -----------------                          ------------------
Name:  Steven D. Berg                     Name:  Gary Van Wagner
Its:  Vice President                      Its:  Senior Vice President and CFO


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