<PAGE>
As filed with the Securities and Exchange Commission on May 28, 1996
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / 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 Section 240.14a-11(c) or Section
240.14a-12
STROUDS, 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
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>
STROUDS, INC.
780 SOUTH NOGALES STREET
CITY OF INDUSTRY, CA 91748
May 28, 1996
To Our Stockholders:
You are cordially invited to attend the Strouds, Inc. Annual Meeting of
Stockholders ("Annual Meeting") which will be held on July 2, 1996, at 10:00
a.m. at Industry Hills Sheraton, One Industry Hills Parkway, City of Industry,
California 91744. All stockholders of record as of May 10, 1996 are entitled to
vote at the Annual Meeting.
The Annual Meeting will be held to: (a) elect six directors, (b) ratify the
appointment of independent public accountants for the fiscal year ending on
March 1, 1997, and (c) transact such other business as may properly be brought
before the Annual Meeting or any adjournments thereof.
We appreciate your continued confidence in the Company and hope you will
attend the Annual Meeting in person.
Whether or not you expect to attend the Annual Meeting, please complete,
sign, date and return the enclosed proxy card promptly to ensure that your
shares will be represented at the Annual Meeting. If you attend the Annual
Meeting, you may vote in person even if you have sent in your proxy card.
Sincerely,
[SIG]
Wayne P. Selness
President and Chief Executive Officer
<PAGE>
STROUDS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Strouds, Inc. will be held at Industry
Hills Sheraton, One Industry Hills Parkway, City of Industry, California on
Tuesday, July 2, 1996, at 10:00 a.m. to:
1. elect six directors;
2. ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent public accountants for the fiscal year ending on March 1,
1997; and
3. transact such other business as may properly be brought before the
Annual Meeting or any adjournments thereof.
Stockholders of record at the close of business on May 10, 1996 are entitled
to notice of and to vote at the Annual Meeting. The list of stockholders will be
available for examination for the ten days prior to the Annual Meeting at
Strouds, Inc., 780 South Nogales Street, City of Industry, California 91748.
All stockholders are cordially invited to attend the Annual Meeting.
PLEASE COMPLETE THE ACCOMPANYING PROXY AND RETURN IT IN THE ENCLOSED
ADDRESSED ENVELOPE.
By Order of the Board of Directors
[SIG]
Wayne P. Selness
President and Chief Executive Officer
City of Industry, California
May 28, 1996
<PAGE>
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Strouds, Inc. ("Strouds" or the "Company")
for use at the Annual Meeting of Stockholders to be held on July 2, 1996 (the
"Annual Meeting").
The Company's principal executive offices are located at 780 South Nogales
Street, City of Industry, California 91748. A copy of the Company's fiscal 1995
Annual Report to Stockholders and this Proxy Statement and accompanying proxy
card will be first mailed to stockholders on or about May 28, 1996.
VOTING PROCEDURES
A proxy card is enclosed for your use. You are solicited on behalf of the
Board of Directors to sign, date and return the proxy card in the accompanying
envelope, which is postage prepaid if mailed in the United States.
You have three choices on each of the matters to be voted upon at the Annual
Meeting. Concerning the election of directors, by checking the appropriate box
on your proxy card you may: (a) vote for all of the director nominees as a
group; (b) withhold authority to vote for all director nominees as a group; or
(c) vote for all director nominees as a group except those nominees you identify
on the appropriate line. Concerning the ratification of independent public
accountants, by checking the appropriate box you may: (a) vote "For" the item;
(b) vote "Against" the item; or (c) "Abstain" from voting on the item. As
discussed below, if you "Abstain" from voting on any matter other than the
election of directors, it will have the effect of a vote "Against" the item if a
quorum is present.
Stockholders may vote by either completing and returning the enclosed proxy
card prior to the Annual Meeting, voting in person at the Annual Meeting, or
submitting a signed proxy card at the Annual Meeting.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO SIGN AND RETURN THE
ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
You may revoke your proxy at any time before it is actually voted at the
Annual Meeting by delivering written notice of revocation to the Secretary of
the Company at 780 South Nogales Street, City of Industry, California, 91748, by
submitting a later dated proxy, or by attending the Annual Meeting and voting in
person. Attendance at the Annual Meeting will not, by itself, constitute
revocation of the proxy. You may also be represented by another person present
at the Annual Meeting by executing a form of proxy designating such person to
act on your behalf.
Each unrevoked proxy card properly signed and received prior to the close of
the Annual Meeting will be voted as indicated. Unless otherwise specified on the
proxy, the shares represented by a signed proxy card will be voted FOR items 1
and 2 on the proxy card and will be voted in the discretion of the persons named
as proxies on the other business that may properly come before the Annual
Meeting.
If a proxy card indicates an abstention or a broker non-vote on a particular
matter, then the shares represented by such proxy will be counted for quorum
purposes. If a quorum is present, an abstention will have the effect of a vote
against the matter (except for the election of directors, in which case such
abstention has no effect) and broker non-votes will have no effect.
The presence at the Annual Meeting, in person or by proxy, of a majority of
the shares of the Company's Common Stock ("Common Stock") issued and outstanding
on May 10, 1996, will constitute a quorum.
1
<PAGE>
Votes cast at the Annual Meeting will be tabulated by the persons appointed
by the Company to act as inspectors of election for the Annual Meeting.
SHARES ENTITLED TO VOTE AND REQUIRED VOTE
Stockholders of record at the close of business on May 10, 1996 are entitled
to vote at the Annual Meeting. At that date, 8,512,059 shares of Common Stock
were outstanding. The affirmative vote of the holders of a majority of the
shares of Common Stock that are represented in person or by proxy at the Annual
Meeting and entitled to vote is required to approve each matter, other than the
election of directors, to be voted on at the Annual Meeting. Directors shall be
elected by a plurality of the votes of the shares present or represented by
proxy at the Annual Meeting and entitled to vote on the election of directors.
Each share of Common Stock is entitled to one vote.
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Set forth in the following table is the beneficial ownership of the
Company's Common Stock as of March 31, 1996, for all current directors,
including all nominees to the Board of Directors, the five executive officers of
the Company named under the table titled "Executive Compensation" and all
directors and current executive officers as a group. Pursuant to the rules of
the Securities Exchange Commission, in calculating percentage ownership, each
person is deemed to beneficially own his own shares subject to options
exercisable within 60 days, but options owned by others (even if exercisable
within 60 days) are deemed not to be outstanding shares.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER POSITION OWNED OF CLASS
- ----------------------------------- ----------------------------------- -------------- --------
<S> <C> <C> <C>
Wayne P. Selness President, Chief Executive Officer 264,063(a) 3.1 %
and Director
Wilfred C. Stroud Chairman and Director 804,805(b) 9.5 %
Jonathan W. Spatz Senior Vice President Finance -- 6,540(c) *
Chief Financial Officer
Robert C. Widdess Senior Vice President -- 23,562(d) *
Merchandising
Joseph A. Imbrogulio Senior Vice President -- Store 17,454(e) *
Planning
Noel E. Urben Director 2,500(f) *
Raymond L. Klauer Director 3,500(f) *
Martin M. Jelenko Director 2,500(f) *
George L. Jones Director 2,500(f) *
All directors and executive
officers as a group (10 persons) 1,132,424(g) 13.1 %
</TABLE>
- ------------------------
* Less than 1%.
(a) Beneficial ownership includes 114,810 shares of Common Stock which may be
acquired upon exercise of employee stock options exercisable within the next
60 days.
(b) Beneficial ownership includes 4,167 shares of Common Stock which may be
acquired upon exercise of employee stock options exercisable within the next
60 days.
2
<PAGE>
(c) Beneficial ownership includes 6,440 shares of Common Stock which may be
acquired upon exercise of employee stock options exercisable within the next
60 days.
(d) Beneficial ownership includes 4,773 shares of Common Stock which may be
acquired upon exercise of employee stock options exercisable within the next
60 days.
(e) Beneficial ownership includes 4,640 shares of Common Stock which may be
acquired upon exercise of employee stock options exercisable within the next
60 days.
(f) Beneficial ownership includes 2,500 shares of Common Stock which may be
acquired upon exercise of employee stock options exercisable within the next
60 days.
(g) Beneficial ownership includes 144,830 shares of Common Stock which may be
acquired upon exercise of employee stock options exercisable within the next
60 days.
COMPLIANCE WITH SECTION 16(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "1934
Act") requires the Company's directors and officers, and persons who own more
than ten percent of a registered class of the Company's equity securities
("Insiders"), to file with the Securities and Exchange Commission (the
"Commission") initial reports of ownership and reports of changes in ownership
of Common Stock. Insiders are required by the Commission's regulations to
furnish the Company with copies of all Section 16(a) reports filed by such
persons.
To the Company's knowledge, based solely on its review of the copies of such
reports furnished to the Company and written representations from the Insiders
that no other reports were required, during the fiscal year ended March 2, 1996,
all Section 16(a) filing requirements applicable to Insiders were complied with.
3
<PAGE>
PROPOSAL NO. 1:
ELECTION OF BOARD OF DIRECTORS
GENERAL INFORMATION -- ELECTION OF DIRECTORS
Pursuant to the Company's Bylaws and resolutions adopted by the Company's
Board of Directors, the Company currently has six directors. Directors are
elected at the Annual Meeting and will serve until the 1997 Annual Meeting and
until each respective successor shall have been elected or appointed.
In the absence of instructions to the contrary, votes will be cast for the
election of the following as directors pursuant to the proxies solicited hereby.
In the event any nominee is unable or declines to serve as a director at the
time of the Annual Meeting, the proxy will be voted for any substitute nominee
selected by the current Board of Directors. However, the proxy cannot be voted
for a greater number of persons than the number of nominees designated by the
Board of Directors. Management has no reason to believe, at this time, that the
persons named will be unable or will decline to serve if elected, and each
nominee has informed the Company that he will serve if elected.
The following table sets forth the name of, and certain information with
respect to, the six persons nominated by the Company at the Annual Meeting.
<TABLE>
<CAPTION>
DIRECTOR
NOMINEES FOR DIRECTOR AGE SINCE POSITIONS CURRENTLY HELD WITH THE COMPANY
- ----------------------------- --------- --------- -----------------------------------------------------
<S> <C> <C> <C>
Wilfred C. Stroud(1) 70 1979 Chairman and Director
Wayne P. Selness(1) 51 1987 President, Chief Executive Officer and Director
Noel E. Urben(1)(2) 58 1987 Director
Raymond L. Klauer(2)(3) 64 1993 Director
Martin M. Jelenko(2)(3) 50 1995 Director
George L. Jones(1)(3) 45 1995 Director
</TABLE>
- ------------------------
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
WILFRED C. STROUD: Mr. Stroud has served as Chairman and a director of the
Company since founding Strouds in 1979. Mr. Stroud also served as Chief
Executive Officer from the inception of the Company through May 1994 and as
President of the Company from 1979 to May 1991. Prior to founding Strouds, from
1956 to 1979, Mr. Stroud was employed by the Broadway Division of Carter-Hawley
Hale where he spent eight years as a Divisional Merchandise Manager.
WAYNE P. SELNESS: Mr. Selness has served as Chief Executive Officer of the
Company since May 1994 and President since May 1991. He has served as a director
of the Company since May 1987. From 1980 to 1991, he was Executive Vice
President of the Company. Prior to joining Strouds, Mr. Selness was employed by
the Broadway Division of Carter-Hawley Hale from 1968 to 1980 and served as a
Divisional Vice President -- Merchandise Manager from 1977 to 1980.
NOEL E. URBEN: Mr. Urben has served as a director of the Company since 1987.
Mr Urben is presently Senior Managing Director at Windward Capital Partners,
L.P., a partnership which invests in buy-outs,
4
<PAGE>
recapitalizations and emerging growth companies. Mr. Urben served as President
of BT Capital Partners, Inc. (f.k.a. BT Capital Corporation) ("BT Capital"), a
small business investment corporation which is a subsidiary of Bankers Trust New
York Corporation, parent company of Bankers Trust Company, from 1984 through
1994 and as a managing director of Bankers Trust Company from 1986 to 1995.
RAYMOND L. KLAUER: Mr. Klauer has served as a director of the Company since
1993. Mr. Klauer retired from May Company Department Stores in 1984 where he
held the office of Vice Chairman and director of the May Company from 1978 to
1984. Mr. Klauer is currently active as a private business consultant.
MARTIN M. JELENKO: Mr. Jelenko was appointed a director of the Company in
May 1995. Mr. Jelenko has served as Managing Director, BT Capital, since
February 1992. From September 1988 until February 1992, Mr. Jelenko served as
Chairman and CEO of Maiden Lane Associates, Ltd., and from April 1984 until
August 1988 he served as Associate Director, Bear Stearns & Co.
GEORGE L. JONES: Mr. Jones was appointed a director of the Company in May
1995. Mr. Jones has served as President, Worldwide Licensing, Warner Bros.
Consumer Products since August 1994. From July 1991 to August 1994 he served as
President and CEO of Rose's Stores, Inc., and from November 1988 until July 1991
as Executive Vice President, Store Operations of Target Stores. In September
1993, Rose's Stores, Inc. filed a Chapter 11 bankruptcy petition.
COMPENSATION OF DIRECTORS
The Company pays each director who is neither an employee of the Company nor
associated with one of the Company's principal stockholders a $1,000 fee for
each meeting of the Board of Directors attended and, if not held in conjunction
with a regular Board of Directors meeting, a $500 fee for each Board of
Directors committee meeting attended. The Company also reimburses all directors
for all expenses incurred in connection with their activities as directors.
In May 1995, each of Messrs. Jones and Jelenko were awarded stock options to
purchase 10,000 shares of Common Stock under the Company's 1994 Equity
Participation Plan. These awards vest in 25% installments over the first four
years following the original date of grant.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
BOARD OF DIRECTORS
The Board of Directors met nine times during fiscal year ended March 2,
1996. During that fiscal year, attendance at Board of Directors meetings
averaged 96% and attendance at Committee meetings averaged 93%.
AUDIT COMMITTEE
The Audit Committee of the Board of Directors is presently comprised of
Messrs. Urben, Klauer and Jelenko. Mr. Urben chairs the committee. Charles
Robins was a member of this committee until his retirement from the Board of
Directors in May 1995. Mr. Jelenko became an acting member of this committee
upon his appointment by the Board of Directors in January 1996. As directed by
the Board of Directors, the functions of the Audit Committee include (a)
reviewing and monitoring the Company's financial reports and accounting
practices, (b) annually recommending to the Board of Directors for appointment
by the Board of Directors independent public accountants as auditors of the
books, records and accounts of the Company, (c) reviewing the scope of audits
made by the independent public accountants and
5
<PAGE>
(d) receiving and reviewing the audit reports submitted by the independent
public accountants and taking such action in respect of such reports as the
Audit Committee deems appropriate. During the fiscal year ended March 2, 1996,
the Audit Committee held two meetings.
COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is presently comprised
of Messrs. Klauer, Jones and Jelenko. Mr. Klauer chairs the committee. Charles
Robins was a member of this committee until his retirement from the Board of
Directors in May 1995. Mr. Urben was a member of this committee until his
resignation from the committee in January 1996, whereupon Messrs. Jones and
Jelenko were appointed as acting members by the Board of Directors. As directed
by the Board of Directors, the functions of the Compensation Committee include
ensuring that the officers and management personnel of the Company are
compensated in terms of salaries, supplemental compensation and benefits which
are internally equitable and externally competitive, and administering the
following benefit plans (as such plans may be amended from time to time) of the
Company: Stock Option Plan for Executive and Key Employees; 1994 Equity
Participation Plan; and 1994 Employee Qualified Stock Purchase Plan. During the
fiscal year ended March 2, 1996, the Compensation Committee held seven meetings.
EXECUTIVE COMMITTEE
The Executive Committee of the Board of Directors was formed in January 1996
and is presently comprised of Messrs. Stroud, Selness, Urben and Jones. Mr.
Stroud chairs the committee. As directed by, and between meetings of, the Board
of Directors, the function of the Executive Committee is to exercise the
authority and power of the Board of Directors to manage the Company's business
and affairs, except for certain duties specifically reserved to the full Board
of Directors in the Company's Bylaws. During the fiscal year ended March 2,
1996, the Executive Committee held no meetings.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
EACH OF THE DIRECTORS NOMINATED IN PROPOSAL 1.
6
<PAGE>
PROPOSAL NO. 2:
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of the Audit Committee, has
appointed KPMG Peat Marwick LLP as the Company's independent public accountants
for the fiscal year ending March 1, 1997. KPMG Peat Marwick LLP has been the
Company's independent public accountants since fiscal 1987. A representative of
KPMG Peat Marwick LLP will be present at the Annual Meeting and will be given an
opportunity to make a statement and answer questions. This appointment is being
submitted for ratification at the Annual Meeting. If the appointment is not
ratified, the appointment will be reconsidered by the Board of Directors,
although the Board of Directors will not be required to appoint different
independent auditors for the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP
AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR
THE FISCAL YEAR ENDING MARCH 1, 1997.
7
<PAGE>
EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL
The executive officers and certain key personnel of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --------- ------------------------------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS
Wilfred C. Stroud 70 Chairman and Director
Wayne P. Selness 51 President, Chief Executive Officer and Director
Jonathan W. Spatz 40 Senior Vice President -- Finance and Chief Financial Officer
Joseph A. Imbrogulio 70 Senior Vice President -- Store Planning
Robert C. Widdess 52 Senior Vice President -- Merchandising
Douglas C. Felderman 43 Vice President -- Finance
KEY PERSONNEL
Carolyn A. Bush 40 Vice President -- Home Services
Roberta A. Chavance 45 Vice President -- Human Resources
Anthony M. Joseph 62 Vice President -- Management Information Systems
Allen L. Josephson 41 Vice President -- Merchandising
Denise Marsicano 41 Vice President -- Stores
Paul T. Stenbo 41 Vice President -- Creative Services
</TABLE>
Mr. Stroud has served as Chairman and a director of the Company since
founding Strouds in 1979. Mr. Stroud also served as Chief Executive Officer from
the inception of the Company through May 1994 and as President of the Company
from 1979 to May 1991. Prior to founding Strouds, from 1956 to 1979, Mr. Stroud
was employed by the Broadway Division of Carter-Hawley Hale where he spent eight
years as a Divisional Merchandise Manager.
Mr. Selness has served as Chief Executive Officer of the Company since May
1994 and President since May 1991. He has served as a director of the Company
since May 1987. From 1980 to 1991, he was Executive Vice President of the
Company. Prior to joining Strouds, Mr. Selness was employed by the Broadway
Division of Carter-Hawley Hale from 1968 to 1980 and served as a Divisional Vice
President -- Merchandise Manager from 1977 to 1980.
Mr. Spatz has served as Senior Vice President -- Finance and Chief Financial
Officer of the Company since August 1994. Prior to joining the Company, Mr.
Spatz was a business consultant from August 1993 to August 1994. From March 1989
to August 1993, Mr. Spatz served as Vice President -- Finance and Chief
Financial Officer of Chief Auto Parts, Inc. (a specialty retailer of auto parts
and accessories).
Mr. Imbrogulio has served as Senior Vice President -- Store Planning of the
Company since 1983. Prior to joining Strouds, Mr. Imbrogulio was employed by
Western States Home Products from 1976 to 1983 and served as its National Sales
Manager.
Mr. Widdess has served as Senior Vice President -- Merchandising of the
Company since May 1994. From July 1991 to May 1994, Mr. Widdess was Vice
President -- Merchandising. From August 1987 to July 1991, he was Vice President
- -- Stores and from May 1985 to August 1987 he was Vice President --
Merchandising. Prior to joining Strouds, Mr. Widdess was employed by the
Weinstock's Division of Carter-Hawley Hale where he served as Divisional Vice
President -- Merchandise Manager from 1979 to 1985.
8
<PAGE>
Mr. Felderman has served as Vice President -- Finance of the Company since
November 1995. Mr. Felderman served as Vice President, Chief Financial Officer
for Crocodile Enterprises, Inc. from April 1994 to September 1995 (a restaurant
operator of casual full service and quick service restaurants.) From September
1990 to April 1994 he was a business consultant.
Ms. Bush joined Strouds in January 1996 as Vice President -- Home Services.
Prior to joining Strouds, Ms. Bush served as Vice President of Lease and Cost
Divisions for Broadway Stores Inc., formerly Carter-Hawley Hale, from June 1994
through December 1995. From March 1992 through May 1994 she served as Executive
Vice President and Chief Operating Officer for East-West Floor Covering, Inc.,
(a small floor covering company specializing in operating lease departments
within department stores.) Prior to that time, Ms. Bush served as Divisional
Vice President of Lease and Home Services, with Broadway Stores, Inc. Ms. Bush
was with Broadway Stores, Inc. for an aggregate of twelve years.
Ms. Chavance has served as Vice President -- Human Resources of the Company
since 1990. From 1989 to 1990, Ms. Chavance was the Director of Personnel and,
from 1984 to 1989, the Manager of Personnel and Training.
Mr. Joseph has served as Vice President -- Management Information Systems of
the Company since August 1994. Prior to joining Strouds, Mr. Joseph served as
Vice President -- Management Information Systems of Solo Serve Corporation (a
retailer of off-price family clothing and home fashions) from March 1993 to July
1994. From April 1991 to March 1993, Mr. Joseph served as a Director of Western
Region Retail Consulting (a consulting unit of Coopers & Lybrand). Prior to that
time, Mr. Joseph had founded and was the principal of Bartlett Joseph Associates
(a retail management consultant) from April 1989 to April 1991.
Mr. Josephson has served as Vice President -- Merchandising of the Company
since 1991. Prior to joining Strouds, Mr. Josephson was employed by Spring Air
Mattress Company as Vice President of Major Accounts from 1990 to 1991. From
1988 to 1990 he was employed by the Broadway Department Stores as a Divisional
Vice President of Home Textiles. From 1977 to 1988 Mr. Josephson was employed by
Robinsons Department Stores and served as Divisional Merchandise Manager from
1983 to 1988.
Ms. Marsicano has served as Vice President -- Stores of the Company since
1993. From 1989 to 1993, Ms. Marsicano served as Regional Store Manager and from
1988 to 1989 as Store Manager. Prior to joining Strouds, Ms. Marsicano was
employed by Bloomingdales from 1976 to 1988 where she held the position of
Buyer.
Mr. Stenbo has served as Vice President -- Creative Services of the Company
since September 1995. From May 1988 to September 1995, Mr. Stenbo was Director
of Visual Merchandising of the Company. Prior to joining Strouds, Mr. Stenbo was
employed by Bullocks Wilshire from October 1987 to May 1988 where he had the
position of Director of Visual Merchandising. From 1983 to 1987, Mr. Stenbo was
employed by Bullocks (now Macy's) as Fashion Coordinator.
9
<PAGE>
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth certain compensation
information concerning the Company's Chief Executive Officer and its four other
most highly compensated executive officers receiving over $100,000 per year for
services rendered in all capacities to the Company during the fiscal year ended
March 2, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SHARES ALL OTHER
NAME AND ------------------------------------- UNDERLYING COMPENSATION
PRINCIPAL POSITION FISCAL YEAR SALARY ($) BONUS ($)(1) OPTIONS (#) ($)(2)
- ------------------------------------------------- ----------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Wayne P. Selness................................. 1995 $ 270,000 $ 3,175 154,500 $ 2,466(4)
President, Chief Executive 1994 227,500 10,522 77,400 859(4)
Officer and Director(3) 1993 177,528 7,579 -- 3,003(4)
Wilfred C. Stroud................................ 1995 195,692 2,293 20,834 41,936(5)
Chairman and Director(3) 1994 195,000 11,091 -- 65,389(5)
1993 187,125 6,391 -- 67,633(5)
Jonathan W. Spatz(6)............................. 1995 160,000 1,882 15,000 24,954(7)
Senior Vice President -- Finance, 1994 101,538 -- 17,200 18,576(7)
Chief Financial Officer
Robert C. Widdess................................ 1995 138,000 1,623 6,666 2,220(4)
Senior Vice President -- Merchandising 1994 129,500 7,109 8,600 914(4)
1993 119,952 4,097 -- 2,210(4)
Joseph A. Imbrogulio............................. 1995 125,000 1,470 6,000 2,119(4)
Senior Vice President -- Store Planning 1994 125,000 7,110 8,600 865(4)
1993 119,952 4,097 -- 2,212(4)
</TABLE>
- ------------------------
(1) Reflects bonus received during fiscal years ended February 26, 1994,
February 25, 1995 and March 2, 1996, respectively, for services rendered
during fiscal years ended February 27, 1993, February 26, 1994, and February
25, 1995 respectively.
(2) Perquisites less than $50,000 or 10% of the total of annual salary and bonus
are not disclosed.
(3) Prior to May 1994, Mr. Stroud served as Chairman and Chief Executive Officer
of the Company and Mr. Selness served as President of the Company. In May
1994, Mr. Selness was elected Chief Executive Officer of the Company, with
Mr. Stroud remaining as Chairman.
(4) Represents Company matching contributions to the Company's 401(k) plan on
behalf of the executive officer.
(5) The Company contributed $2,433 to the Company's 401(k) plan on behalf of Mr.
Stroud for the fiscal year ended March 2, 1996, and contributed $574 to the
Company's 401(k) plan and $14,647 in premiums on life insurance for his
benefit for the fiscal year ended February 25, 1995 and $3,166 to the
Company's 401 (k) plan and $14,656 in premiums on life insurance for the
fiscal year ended February 26, 1994. The
10
<PAGE>
Company is a party to "split dollar" life insurance agreements with a trust
established by Mr. Stroud under which the trust pays the portion of the
premiums attributable to the death benefit under life insurance policies
insuring the lives of Mr. Stroud and his spouse and owned by the trust, and
the Company pays the balance of the premiums. Upon the termination of the
agreements or the deaths of Mr. Stroud and his spouse, all premiums
previously advanced by the Company under the policies are required to be
repaid by the trust. Included in the amounts shown for Mr. Stroud in fiscal
years 1995, 1994 and 1993 are $39,502, $50,168 and $49,811, respectively,
representing the value of the premium payments by the Company in such years,
projected on an actuarial basis assuming that Mr. Stroud retires at age 75
and the agreements are then terminated, and assuming an interest rate equal
to the Company's then incremental borrowing rate.
(6) Mr. Spatz has served as Senior Vice President -- Finance and Chief Financial
Officer of the Company since August 1994. The salary reported for fiscal
year 1994 reflects compensation received for a partial year.
(7) Included in the amounts shown for Mr. Spatz in fiscal years 1995 and 1994
are $18,954 and $15,345, respectively, relating to relocation and travel
expenses and $6,000 and $3,231 respectively, representing an automobile
allowance paid to him by the Company during such years.
The following table sets forth certain information regarding grants of stock
options made to the executive officers named in the Summary Compensation Table
during the fiscal year ended March 2, 1996, including information as to the
potential realizable value of such options at assumed annual rates of stock
price appreciation for the 10 year option terms.
OPTION GRANTS DURING FISCAL YEAR ENDED MARCH 2, 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED ANNUAL
SHARES % OF TOTAL OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR OPTION
OPTIONS EMPLOYEES IN FISCAL EXERCISE TERM (1)
GRANTED YEAR ENDED MARCH 2, PRICE PER ------------------------
NAME (#) 1996 SHARE EXPIRATION DATE 5% ($) 10% ($)
- ----------------------------------- ---------- ------------------- ----------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Wayne P. Selness................... 53,750 8.00 5/12/05
100,750 44.9% 4.25 10/24/05 $ 539,710 $ 1,367,730
Wilfred C. Stroud.................. 20,834 6.1% 8.00 05/12/05 104,819 265,632
Jonathan W. Spatz.................. 15,000 4.4% 8.00 05/12/05 75,467 191,249
Robert C. Widdess.................. 6,666 1.9% 8.00 05/12/05 33,538 84,991
Joseph A. Imbrogulio............... 6,000 1.7% 8.00 05/12/05 30,187 76,500
All Optionees...................... 343,868 100% $4.25-8.00 03/31/05-01/03/06 $ 1,388,966 $ 3,519,910
All Stockholders(2)................ N/A N/A N/A N/A $37,048,745 $93,888,794
All Optionees as a percent
of All Stockholders Gain.......... N/A N/A N/A N/A 3.8% 3.8%
</TABLE>
- ------------------------------
(1) The dollar amounts under these columns are the result of calculations at
five percent and 10 percent rates set by the Securities and Exchange
Commission and therefore are not intended to forecast possible future
appreciation, if any, of the Company's Common Stock price. In the above
table, the Company did not use an alternative formula for a grant date
valuation, as the Company is not aware of any formula which will determine
with reasonable accuracy a present value based on future unknown or volatile
factors.
(2) These amounts represent the appreciated value which common stockholders
would receive at the hypothetical five and 10 percent rates based on the
market value of Common Stock outstanding at or near the option grant dates.
11
<PAGE>
The following table relates to options exercised during fiscal year 1995 and
options outstanding at March 2, 1996:
AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED
MARCH 2, 1996 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES MARCH 2, 1996 (#) MARCH 2, 1996 ($)(1)
ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wayne P. Selness................. -- -- 88,580 143,320 $ 18,275 $ 6,913
Wilfred C. Stroud................ -- -- -- 20,834 -- --
Jonathan W. Spatz................ -- -- 3,440 28,760 -- --
Robert C. Widdess................ 38,700 $ 53,236 1,720 13,546 -- --
Joseph A. Imbrogulio............. 43,000 $ 146,871 1,720 12,880 -- --
</TABLE>
- ------------------------
(1) Amount represents the difference between the aggregated exercise prices of
unexercised options and a $4.50 market price on March 2, 1996.
12
<PAGE>
COMPENSATION COMMITTEE REPORT
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is presently comprised
of Messrs. Klauer, Jones and Jelenko. Mr. Klauer chairs the committee. Charles
Robins was a member of this committee until his retirement from the Board of
Directors in May 1995. Mr. Urben was a member of this committee until his
resignation from the committee in January 1996, whereupon Messrs. Jones and
Jelenko were appointed as members by the Board of Directors. Mr. Jelenko is a
Managing Director of BT Capital, which is a major stockholder of the Company and
received certain registration rights from the Company in January 1996. See
"Certain Transactions -- Registration Rights."
REPORT ON ANNUAL COMPENSATION OF EXECUTIVE OFFICERS
The report of the Compensation Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended (the
"Securities Act") or under the 1934 Act, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
* * * * * *
The Compensation Committee's policy is to establish compensation levels for
the Chief Executive Officer (the "CEO") and the other executive officers which
reflect the Company's overall performance and the individual executive's
performance, responsibilities and contributions to the long-term growth and
profitability of the Company. The Compensation Committee's policy is to
determine the appropriate executive compensation levels which will enable the
Company to attract and retain qualified executives.
The Compensation Committee, with the assistance of the CEO, determines the
compensation of the executive officers based on its evaluation of the Company's
overall performance, primarily based on the Company's sales and earnings
performance compared with the Company's operating plan, as well as various
qualitative factors such as the Company's product and service quality, the
extent to which the executive officer has contributed to forming a strong
management team and other factors which the Compensation Committee believes are
indicative of the Company's ongoing ability to achieve its long-term sales
growth and profit objectives. With respect to each executive, the Compensation
Committee focuses on that individual executive's areas of responsibility and his
contribution toward achieving corporate objectives.
Total compensation of each executive officer of the Company consists of four
components: base salary, annual incentive in the form of a cash bonus, long-term
incentive in the form of equity based stock options and miscellaneous benefits
and perquisites. Each component is discussed below.
The principal component of the compensation of each executive officer is the
executive's base salary. In setting base salaries, the Compensation Committee
reviews the corporate and individual performance factors described above and the
practices of a primary peer group generally consisting of public growth-oriented
specialty retailers in comparable lines of trade, and a secondary peer group
generally consisting of public department store retailers. The comparison peer
groups are not identical to the peer group included in the performance
comparison graph under "Stock Performance Graph" below. The Compensation
Committee attempts to set the Company's base executive compensation levels at
levels that generally approximate 90% of the executive base compensation levels
at the companies in its primary peer group.
13
<PAGE>
The base salary of the CEO for the fiscal year ended March 2, 1996 was
$270,000.
Executive officers are eligible to receive annual incentives in the form of
cash bonuses. The Compensation Committee determined that for the fiscal year
ended March 2, 1996, these bonuses would be targeted at 20-50% of base salary
and would be based on the Company's financial performance against certain pre-
defined goals. The $3,175 bonus received by the CEO in fiscal 1995 was paid for
services he rendered in fiscal 1994 and represented approximately 1% of his base
salary in fiscal 1994. In order to be more comparable with its primary peer
group and to put a greater proportion of its executive officers' total
compensation at risk, the Compensation Committee has determined that annual
bonuses will be based on achievement of pre-defined net income levels, without
regard to an executive's personal performance (although the Compensation
Committee can approve exceptions for outstanding individual performances). Under
this system, bonuses can be earned up to a maximum of 150% of target bonus
amounts. The target bonus amounts are generally based on the practices of the
Company's primary peer group.
Another component of the total compensation of each executive officer of the
Company is long-term incentives in the form of equity based stock options. These
incentives are used to encourage the Company's management to maximize
stockholder value and utilize vesting periods to assist the Company in retaining
key employees. In general, the number of equity based stock options granted by
the Compensation Committee to each executive officer is based on an option grant
multiplier (which multiplier is, in part, based on the practices of the
Company's primary peer group) applied to each executive's base salary and an
estimate as to the fair market value of the underlying stock at the time of
grant of such options. The options granted to the CEO for the fiscal year ended
March 2, 1996 were 154,500 (representing a multiplier of approximately 3). In
granting such options, the Compensation Committee took into consideration the
fact that the CEO let a significant number of in-the-money options expire
without being exercised during fiscal 1995.
The last component of total compensation is Company benefits and perquisites
generally consisting of car allowances, matching contributions to individual
executive's 401(k) Plans and customary life and health benefits. In addition,
Mr. Wilfred C. Stroud, the Chairman of the Board of Directors, receives split
dollar life insurance benefits from the Company.
During 1993, the Internal Revenue Code of 1986 was amended to include
Section 162(m) which denies a deduction to any publicly held corporation for
compensation paid to any "covered employee" (which is defined as the CEO and the
Company's other four most highly compensated officers, as of the end of a
taxable year) to the extent that the compensation exceeds $1 million in any
taxable year of the corporation beginning after 1993. Compensation which
constitutes "performance based compensation" is excludable in applying the $1
million limit. It is the Company's policy to qualify compensation paid to its
top executives for deductibility under Section 162(m) in order to maximize the
Company's income tax deductions.
By the Compensation Committee
Raymond L. Klauer, Chairman
George L. Jones
Martin M. Jelenko
14
<PAGE>
STOCK PERFORMANCE GRAPH
The Stock Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or under the 1934 Act, except
to the extent the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
Set forth below is a line graph comparing the total cumulative return of the
Company's Common Stock since the Company's initial public offering on October
12, 1994 to (a) a group of peer issuers with similar home retail businesses, and
(b) the Nasdaq Stock Market -- U.S. Index.
COMPARISON OF CUMULATIVE TOTAL RETURN(1)
FOR STROUDS, INC., A PEER GROUP AND THE NASDAQ STOCK MARKET -- US INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STROUD'S INC PEER GROUP (2) NASDAQ STOCK MARKET-US
<S> <C> <C> <C>
10/12/94 100 100 100
2/25/95 60 95 104
3/2/96 36 100 146
</TABLE>
- ------------------------
(1) Assumes $100 was invested on October 12, 1994 in stock or index and assumes
dividends are reinvested.
(2) The Peer Group companies consist of Bombay Co. Inc., Pier One Imports, Inc.,
Williams Sonoma, Inc., Bed Bath & Beyond, Inc., Three D Departments, Inc.,
Lechters, Inc., Goodguys, Inc. and Barnes & Noble, Inc.
15
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS RELATING TO CHF AND REFLECTIONS
In 1979, Mr. Stroud, currently Chairman of the Company, invested in
Reflections Fine Bedding Attire, Inc. ("Reflections"), a manufacturer of bedding
merchandise and accessories. In recent years, Mr. Stroud has been a director of
Reflections and has beneficially owned (along with his spouse) 45% of the stock
of Reflections. The spouse of Mr. Selness, President and Chief Executive Officer
of the Company, has also been a director of Reflections, and Mr. Selness and his
wife have beneficially owned 10% of the stock of Reflections. In the fiscal year
ended March 2, 1996, Reflections sold approximately $1.5 million of merchandise
to Strouds at prices Strouds believes to be competitive with other suppliers of
similar products. The sales to Strouds during this period represented
approximately 31.3% of Reflections' total sales.
The stockholders of Reflections had an outstanding debt obligation to a bank
lender in the amount of $675,000, the proceeds of which were loaned to
Reflections. In 1993, Mr. Stroud and his spouse assumed this note. Pursuant to
an understanding among the stockholders of Reflections, at such time as Mr. and
Mrs. Stroud are required to make payments on the note, the other stockholders
are required to reimburse them for their pro rata share (in accordance with
their stock ownership) of the note (the "Reflections Reimbursement Obligation").
On April 2, 1993, Reflections filed a voluntary Chapter 11 bankruptcy
proceeding. On June 1, 1993, CHF Industries, Inc. ("CHF"), an entity
unaffiliated with Reflections or Strouds, acquired substantially all of the
assets and business of Reflections (the "Reflections Business"). As part of the
acquisition, CHF required that Mr. Stroud enter into a Non-Competition and
Consulting Agreement with CHF, dated June 1, 1993 (the "CHF Agreement"). The CHF
Agreement provides generally that for a period of 10 years from the date of the
closing of the purchase of the Reflections Business by CHF, neither Mr. Stroud
nor any affiliate of Mr. Stroud's will directly or indirectly compete with the
Reflections Business nor solicit any employee or supplier of Reflections or CHF
to alter or terminate their business relationship. The CHF Agreement further
provides that Mr. Stroud will consult with and advise CHF on an as-needed basis
with respect to the sale and marketing by CHF of merchandise to Reflections
Business customers, including, but not limited to, Strouds. So long as Mr.
Stroud is employed by the Company, the CHF Agreement would prevent the Company
from competing with Reflections in the manufacture of bedding merchandise and
accessories.
As consideration for Mr. Stroud's entering into the CHF Agreement, CHF
agreed to pay Mr. Stroud an amount based on a percentage of gross sales of the
Reflections Business, up to a maximum total payment of $825,000. In the event
that total gross sales of the Reflections Business to Strouds equals or exceeds
$2.5 million (subject to Consumer Price Index ("CPI") adjustment) in any
contract year ending May 31, then CHF is required to pay Mr. Stroud an amount
equal to 4.58% of total gross sales of the Reflections Business to all
customers, including Strouds. In the event that total gross sales of the
Reflections Business to Strouds is less than the $2.5 million target (subject to
CPI adjustment), then the payment would be reduced in the proportion by which
sales to Strouds failed to meet the target. Payments to Mr. Stroud may not
exceed $275,000 for any May 31 contract year.
The CHF Agreement was disclosed to the Board of Directors of Strouds, and
all of the directors (except for Mr. Stroud, who abstained) approved the terms
of the CHF Agreement and the payments by CHF to Mr. Stroud.
16
<PAGE>
All purchases by Strouds from Reflections and CHF have represented
independent decisions of the buying staff of Strouds based upon the quality and
design of product, salability, pricing, and the ability of CHF to meet a
satisfactory delivery schedule. The Company believes that all purchases from
Reflections and CHF have been in appropriate amounts and on terms comparable to
those that could have been obtained from other vendors. The Board of Directors
of the Company has adopted a policy of reviewing the Company's purchases from
CHF to determine whether such purchases have been in appropriate amounts and on
terms comparable to those that could have been obtained from other vendors. In
fiscal year ended March 2, 1996, purchases by Strouds from Reflections and CHF
equaled 1.1% of the Company's total cost of sales, including buying and
occupancy.
During the contract year ended May 31, 1995, total sales of the Reflections
Business were $5.7 million, of which $1.7 million were sales to Strouds.
Pursuant to the formula described above, Mr. Stroud received a payment of
$179,000 from CHF with respect to that contract year. To the extent that Mr.
Stroud receives payments under the CHF Agreement, the Reflections Reimbursement
Obligation will be reduced. As of May 31, 1995, a total of $378,000 (out of a
maximum of $825,000) had been paid to Mr. Stroud by CHF.
REGISTRATION RIGHTS
In November 1995, the Board of Directors adopted a Rights Agreement pursuant
to which it declared a dividend of one preferred stock purchase right (the
"Rights") for each share of Common Stock outstanding at the close of business on
November 30, 1995. Each Right will entitle the registered holder thereof, after
the Rights become exercisable and until November 17, 2005 (or the earlier
redemption, exchange or termination of the Rights), to purchase from the Company
one one-hundredth of a share of Series B Junior Participating Preferred Stock,
par value $0.0001 per share, at a price of $30.00 per one one-hundredth of a
Preferred Share, subject to certain anti-dilution adjustments.
In connection with the adoption of the Rights Agreement, and in order to
resolve an issue as to whether a previous registration rights agreement was
still in effect with BT Capital (the beneficial owner of approximately 27.9% of
the Company's Common Stock), the Company agreed to provide BT Capital with
certain demand and piggyback registration rights; PROVIDED, HOWEVER, that the
costs associated with exercising any such registration rights would be borne by
BT Capital.
CONFLICT OF INTEREST POLICY
In May 1995, the Board of Directors adopted a conflict of interest policy
which generally provides that no employee, officer or director of the Company
(individually and collectively, a "Company Person") should have any personal
interest that is incompatible with the loyalty and responsibility owed to the
Company. Pursuant to such policy, all Company Persons must discharge their
responsibility solely on the basis of what is in the best interest of the
Company and independent of personal considerations or relationships, and all
Company Persons are expected to adhere to both the letter and spirit of the
Company's conflict of interest policy.
17
<PAGE>
OTHER INFORMATION
CERTAIN STOCKHOLDERS
The table below sets forth certain information regarding the beneficial
owners of more than 5% of the Company's Common Stock as of March 31, 1996, other
than directors and executive officers.
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY OWNED
------------------------------------
NUMBER OF SHARES
BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED PERCENT OF CLASS
- ------------------------------------------------------------------------------ ----------------- -----------------
<S> <C> <C>
BT Capital Partners, Inc. ................................................... 2,347,800(1) 27.9%
280 Park Avenue
New York, New York 10017
West Highland Capital, Inc. ("WHC") .......................................... 680,000(2) 7.9%
300 Drake's Landing Road, Suite 290
Greenbrace, CA 94904
J.R. Zone, as Trustee of the ................................................. 539,779(3) 6.5%
J.R. Zone 1983 Trust Agreement
20700 Ventura Boulevard, #335
Woodland Hills, CA 91364
Dimensional Fund Advisors Inc. ("DFAI") ...................................... 494,700(4) 5.89%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Rockefeller & Co., Inc. ("Rockefeller") ...................................... 600,000(5) 7.0%
30 Rockefeller Plaza
New York, New York 10112
</TABLE>
- ------------------------
(1) Information based solely on Amendment No. 3 dated as of December 31, 1994 to
the Schedule 13G filed by Bankers Trust New York Corporation and its
indirect wholly-owned subsidiary, BT Capital, with the Securities and
Exchange Commission. Beneficial ownership includes 212,850 shares of Common
Stock subject to warrants that are presently exercisable.
(2) Information based solely on the Schedule 13G dated February 14, 1995 filed
by WHC with the Securities and Exchange Commission. Lang H. Gerhard and West
Highland Partners, L.P. may be deemed to beneficially own certain of the
shares beneficially owned by WHC because of commonality of voting and/or
investment power.
(3) Information based solely on the Schedule 13G dated February 1, 1995 filed by
J.R. Zone with the Securities and Exchange Commission.
(4) Information based solely on the Schedule 13G dated February 7, 1996 filed by
DFAI with the Securities and Exchange Commission. DFAI, a registered
investment advisor, is deemed to have beneficial ownership of 494,700 shares
of the Common Stock as of December 31, 1995, all of which shares are held in
portfolios of DFA Investment Dimensions Group, Inc., a registered open-end
investment company, or in a 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, all of
which DFAI serves as investment manager. DFAI disclaims beneficial ownership
of all such shares.
(5) Information based solely on the Schedule 13G dated February 9, 1996 filed by
Rockefeller with the Securities and Exchange Commission. Rockefeller filed
the Schedule 13G on behalf of certain clients for which it is the investment
manager (collectively, the "R&Co. clients"). Each of these R&Co. clients,
18
<PAGE>
individually, owns less than 5% of the Common Stock. Each of these R&Co.
clients has executed investment management agreements granting Rockefeller
the right to exercise full discretion with respect to all matters relating
to the Common Stock held by them (including sole voting and dispositive
power). Thus, while Rockefeller is for purposes of this filing regarded as
the beneficial owner of the Common Stock held by each of the R&Co. clients,
each of the R&Co. clients has the sole right to receive dividends from, and
the proceeds from the sale of, the shares of the Common Stock owned of
record by each of them.
OTHER MATTERS AT THE MEETING
The Board of Directors does not know of any matters to be presented at the
Annual Meeting of Stockholders other than those mentioned in this Proxy
Statement. If any other matters are properly brought before the Annual Meeting
of Stockholders, it is intended that the proxies will be voted in accordance
with the best judgment of the person or persons voting such proxies.
COST OF SOLICITATION
The expense of soliciting proxies and the cost of preparing, assembling and
mailing material in connection with the solicitation of proxies will be paid by
the Company. In addition to the use of mails, certain directors, officers or
employees of the Company and its subsidiaries, who receive no compensation for
their services other than their regular salaries, may solicit and tabulate
proxies. The Company has retained D.F. King & Co., Inc. to assist in the
solicitation of proxies with respect to shares of Strouds Common Stock held of
record by brokers, nominees and institutions. The estimated cost of the services
of D.F. King & Co., Inc. is $3,500, plus expenses.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any stockholder who meets the requirements of the proxy rules under the 1934
Act may submit to the Board of Directors proposals to be considered for
submission to the stockholders at the 1996 Annual Meeting of Stockholders. Any
such proposal must comply with the requirements of Rule 14a-8 under the 1934 Act
and be submitted in writing by notice delivered or mailed by first-class United
States mail, postage prepaid, to the Corporate Secretary, Strouds, Inc., 780
South Nogales Street, City of Industry, California 91748, and must be received
no later than January 28, 1997. Any such notice shall set forth: (a) the name
and address of the stockholder and the text of the proposal to be introduced;
(b) the number of shares of stock held of record, owned beneficially and
represented by proxy by such stockholder as of the date of such notice; and (c)
a representation that the stockholder intends to appear in person or by proxy at
the meeting to introduce the proposal specified in the notice. The chairman of
the meeting may refuse to acknowledge the introduction of any stockholder
proposal not made in compliance with the foregoing procedures. In addition, the
Company's Bylaws provide for notice procedures to recommend a person for
nomination as a director and to propose business to be considered by
stockholders at a meeting.
By Order of the Board of Directors
[SIG]
Wayne P. Selness
President and Chief Executive Officer
City of Industry, California
May 28, 1996
19
<PAGE>
P R O X Y STROUDS, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JULY 2, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Wilfred C. Stroud, Wayne P. Selness or
Jonathan W. Spatz, and each of them, his or her attorneys and agents, with full
power of substitution to vote as proxy for the undersigned, as herein stated, at
the Annual Meeting of Stockholders of Strouds, Inc., to be held at Industry
Hills Sheraton, One Industry Hills Parkway, City of Industry, California, on
July 2, 1996 or at any adjournment or postponement thereof, according to the
number of votes the undersigned would be entitled to vote if personally present
on the proposals set forth below (and as more particularly set forth in the
Notice of Annual Meeting enclosed herewith) and in accordance with their
discretion on any other matters that may properly come before the Annual Meeting
or any adjournment thereof.
PLEASE MARK YOUR CHOICE LIKE THIS / / IN DARK INK AND SIGN AND DATE ON THE
REVERSE SIDE
(1) ELECTION OF SIX DIRECTORS / / Vote FOR ALL (EXCEPT AS MARKED TO THE CONTRARY
BELOW) / / WITHHELD for ALL
Wilfred C. Stroud Wayne P. Selness Noel E. Urben
Raymond L. Klauer Martin M. Jelenko George L. Jones
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
(2) RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement dated May 28, 1996.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
Dated: ______________________, 1996
___________________________________
(Signature)
___________________________________
Signature if held jointly
Please sign exactly as your name
appears. Joint owners should each
sign. Trustees and others acting in
a representative capacity should
indicate the capacity in which they
sign.
