<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 23, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
STROUDS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 95-4107241
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
780 SOUTH NOGALES STREET 91748
CITY OF INDUSTRY, CALIFORNIA (Zip Code)
(Address of principal executive offices)
--------------------
1999 SPECIAL PURPOSE STOCK OPTION PLAN OF
STROUDS, INC.
--------------------
CHARLES R. CHINNI
CHIEF EXECUTIVE OFFICER
STROUDS, INC.
780 SOUTH NOGALES STREET
CITY OF INDUSTRY, CALIFORNIA 91748
(626) 912-2866
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPY TO:
PAUL D. TOSETTI, ESQ.
LATHAM & WATKINS
633 WEST FIFTH STREET, SUITE 4000
LOS ANGELES, CALIFORNIA 90071
(213) 485-1234
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------- -------------------- -------------------- -------------------- --------------------
PROPOSED
AMOUNT PROPOSED MAXIMUM
OF SHARES MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- -------------------------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Common Stock,
$0.0001 par value 250,000 $1.06 $ 265,000 $ 73.67
200,000 $2.38 $ 476,000 $ 132.32
1,550,000 $2.18 $3,379,000 $ 939.36
--------- -------
Total 2,000,000 $1,145.35
- -------------------------------- -------------------- -------------------- -------------------- --------------------
</TABLE>
(1) The 1999 Special Purpose Stock Option Plan of Strouds, Inc. (the
"Plan") authorizes the issuance of a maximum of 2,000,000 shares of
common stock of Strouds, Inc. (the "Company") plus substitutions or
adjustments to shares to account for any change in corporate
capitalization, such as any reorganization, merger, consolidation,
recapitalization, recapitalization, stock splitup, stock dividend or
other combination of shares.
<PAGE>
(2) Estimated solely for purposes of computing the registration fee for
the 2,000,000 shares registered herewith. Pursuant to Rule 457(c),
the proposed Maximum Offering Price Per Share is based upon (a)(i)
the exercise price per share ($1.06) of outstanding options for
250,000 shares and (ii) the exercise price per share ($2.38) of
outstanding options for 200,000 shares and (b) for the remaining
shares, the average of the high and low trading prices of the Company's
common stock on the Nasdaq National Market on November 22, 1999.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents filed with the Securities and Exchange
Commission (the "Commission") by the Strouds, Inc., a Delaware corporation (the
"Company"), are incorporated by reference as of their respective dates in this
Registration Statement on Form S-8 (the "Registration Statement"):
(a) The Company's Annual Report on Form 10-K and Form 10-K/A for
the fiscal year ended February 27, 1999;
(b) The Company's Quarterly Reports on Form 10-Q for the quarters
ended May 29, 1999 and August 28, 1999;
(c) The Company's Proxy Statement dated May 28, 1999 relating to
the Annual Meeting of Stockholders held on June 30, 1999;
(d) The Company's Prospectus dated October 11, 1994, filed in
connection with the Registration Statement referred to in Item
3(e) below pursuant to Rule 424(b) under the Securities Act of
1933, as amended (the "Securities Act"); and
(e) Description of the Company's Common Stock contained in the
Company's Registration Statement on Form S-1 filed with the
Commission on July 29, 1994 (Registration No. 33-82090), as
amended by Amendment No. 1 filed with the Commission on
September 13, 1994, Amendment No.2 filed with the Commission
on October 5, 1994 and a Prospectus dated October 11, 1994
filed with the Commission on October 13, 1994 .
All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended, after
the date of this Registration Statement and prior to the filing of a
post-effective amendment which indicates that all securities offered have
been sold or which deregisters all securities then remaining unsold, are
incorporated by reference in this Registration Statement and are a part
hereof from the date of filing such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Registration
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Registration Statement.
Item 4. Description of Securities
Not required to be filed with this Registration Statement.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers
2
<PAGE>
Section 145 of the General Corporation Law of the State of Delaware
(the "Delaware Corporation Law") gives Delaware corporations broad powers to
indemnify their present and former directors and officers against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with threatened, pending or
completed actions, suits or proceedings to which they are parties or are
threatened to be made parties by reason of being or having been such
directors or officers, subject to specified conditions and exclusions; gives
a director or officer who successfully defends an action the right to be so
indemnified; and permits a corporation to buy directors' and officers'
liability insurance. Such indemnification is not exclusive of any other
rights to which those indemnified may be entitled under any by-law,
agreement, vote of stockholders or otherwise.
As permitted by Section 145 of the Delaware Corporation Law, Article
V of the Restated Bylaws of the Company provides for the indemnification by
the Company of its directors and officers against liabilities and expenses
incurred in connection with actions, suits or proceedings brought against
them by a third party or in the right of the Company, by reason of the fact
that they were or are such directors or officers.
Article Tenth of the Company's Certificate of Incorporation provides
that to the fullest extent permitted by the Delaware Corporation Law as the
same exists or may hereafter be amended, a director of the Company shall not
be liable to the Company or its stockholders for monetary damages for breach
of fiduciary duty as a director.
The Company has also purchased insurance for its directors and
officers for certain losses arising from claims or charges made against them
in their capacities as directors and officers.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
The following is a list of exhibits filed as part of this
Registration Statement, which are incorporated herein:
*4.1 1999 Special Purpose Stock Option Plan of Strouds, Inc.
*5.1 Opinion of Latham & Watkins
*10.1 Fourth Amendment to the Amended and Restated 1994 Equity
Participation Plan of Strouds, Inc., effective as of June 30,
1999
*23.1 Consent of KPMG LLP
*23.2 Consent of Latham & Watkins (included as part of Exhibit 5.1)
*24.1 Power of Attorney (included on the signature page of this
Registration Statement)
- ---------------------------
*Filed herewith
Item 9. Undertakings
The undersigned registrant hereby undertakes:
3
<PAGE>
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or
events arising after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in this
Registration Statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) shall
not apply if this Registration Statement is on Form S-3, Form S-8 or Form F-3
and the information to be included in a post-effective amendment to those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are
incorporated by reference in this Registration Statement.
(2) That, for purposes of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Industry, State of California, on
the 23rd day of November, 1999.
STROUDS, INC.
By: /s/ Charles R. Chinni
----------------------------------
Charles R. Chinni
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Charles Chinni and Wilfred C. Stroud and each or either of them, his true and
lawful attorney-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant
to Rule 462(b) under the Securities Act, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing necessary or desirable to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement on Form S-8 has been signed below by the
following persons in their capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Charles R. Chinni Chairman of the Board, President, Chief November 23, 1999
- -------------------------------------------- Executive Officer
Charles R. Chinni and Director (Principal Executive
Officer)
/s/ Wilfred C. Stouds Director and Chairman Emeritus November 23, 1999
- --------------------------------------------
Wilfred C. Stroud
/s/ Robert M. Menar Chief Operating Officer November 23, 1999
- --------------------------------------------
Robert M. Menar
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Larry R. Bemis Director November 23, 1999
- --------------------------------------------
Larry R. Bemis
/s/ Dale D. Achabal Director November 23, 1999
- --------------------------------------------
Dale D. Achabal
/s/ Marco F. Weiss Director November 23, 1999
- --------------------------------------------
Marco F. Weiss
/s/ Richard F. Clayton Director November 23, 1999
- --------------------------------------------
Richard F. Clayton
/s/ Marshall Geller Director November 23, 1999
- --------------------------------------------
Marshall Geller
</TABLE>
6
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
------- ----
*4.1 1999 Special Purpose Stock Option Plan of Strouds, Inc.
*5.1 Opinion of Latham & Watkins
*10.1 Fourth Amendment to Amended and Restated 1994 Equity
Participation Plan. effective as of June 30, 1999
*23.1 Consent of KPMG LLP
*23.2 Consent of Latham & Watkins (included as part of Exhibit 5.1)
*24.1 Power of Attorney (included on the signature page of this
Registration Statement)
---------------------------
*Filed herewith
7
<PAGE>
EXHIBIT 4.1
THE 1999 SPECIAL PURPOSE STOCK OPTION PLAN OF
STROUDS, INC.
Strouds, Inc., a Delaware corporation (the "Company"), has adopted The
1999 Special Purpose Stock Option Plan of Strouds, Inc. (the "Plan"), effective
June 30, 1999, for the benefit of its eligible employees.
The purposes of this Plan are as follows:
(1) To provide an additional incentive for eligible key Employees (as
defined below) to further the growth, development and financial success of the
Company by personally benefiting through the ownership of Company stock.
(2) To enable the Company to obtain and retain the services of eligible
key Employees considered essential to the long range success of the Company by
offering them an opportunity to own stock in the Company.
(3) To provide a material inducement to eligible key Employees to enter
into employment contracts with the Company.
ARTICLE I.
DEFINITIONS
1.1 GENERAL. Wherever the following terms are used in this Plan they
shall have the meaning specified below, unless the context clearly indicates
otherwise.
1.2 AWARD LIMIT. "Award Limit" shall mean five hundred thousand
(500,000) shares of Common Stock.
1.3 BOARD. "Board" shall mean the Board of Directors of the Company.
1.4 CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.5 COMMITTEE. "Committee" shall mean the Compensation Committee of the
Board, or another committee, or a subcommittee of the Board, appointed as
provided in Section 6.1.
1.6 COMMON STOCK. "Common Stock" shall mean the common stock of the
Company, par value $.0001 per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding any preferred
stock and any warrants, options or other rights to purchase Common Stock. Debt
securities of the Company convertible into Common Stock shall be deemed equity
securities of the Company.
1.7 COMPANY. "Company" shall mean Strouds, Inc., a Delaware
corporation.
1.8 DIRECTOR. "Director" shall mean a member of the Board.
1.9 EMPLOYEE. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.
1.10 EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.11 FAIR MARKET VALUE. "Fair Market Value" of a share of Common Stock
as of a given date shall be (i) the closing price of a share of Common Stock on
the principal exchange on which shares of Common Stock are then trading, if any
(or as reported on any composite index which includes such principal exchange),
on the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, or (ii) if Common Stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the trading day
previous to such date as reported by NASDAQ or such successor quotation system;
or (iii) if Common Stock is not publicly traded on an exchange and not quoted on
NASDAQ or a successor quotation system, the Fair Market Value of a share of
Common Stock as established by the Committee acting in
<PAGE>
good faith.
1.12 INDEPENDENT DIRECTOR. "Independent Director" shall mean a member
of the Board who is not an Employee of the Company.
1.13 NON-QUALIFIED STOCK OPTION. "Non-Qualified Stock Option" shall
mean a stock option which does not constitute an "incentive stock option" under
Section 422 of the Code.
1.14 OPTION. "Option" shall mean a Non-Qualified Stock Option granted
under Article III of this Plan. All Options granted under this Plan shall be
Non-Qualified Stock Options.
1.15 OPTIONEE. "Optionee" shall mean an Employee granted an Option
under this Plan.
1.16 PLAN. "Plan" shall mean The 1999 Special Purpose Stock Option Plan
of Strouds, Inc.
1.17 RULE 16B-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under
the Exchange Act, as such Rule may be amended from time to time.
1.18 SUBSIDIARY. "Subsidiary" shall mean (i) any corporation in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing 50 percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain and (ii) any
partnership or limited liability company in which the Company (A) directly or
indirectly holds a managing partner or managing member interest or (B) is
entitled to 50 percent or more of the profits or assets upon dissolution.
1.19 TERMINATION OF EMPLOYMENT. "Termination of Employment" shall mean
the time when the employee-employer relationship between an Optionee and the
Company or any Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (i) terminations where
there is a simultaneous reemployment or continuing employment of an Optionee by
the Company or any Subsidiary, (ii) at the discretion of the Committee,
terminations which result in a temporary severance of the employee-employer
relationship, and (iii) at the discretion of the Committee, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company or a Subsidiary with the former employee. The Committee, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment. Notwithstanding any other provision of
this Plan, the Company or any Subsidiary has an absolute and unrestricted right
to terminate an Employee's employment at any time for any reason whatsoever,
with or without cause, except to the extent expressly provided otherwise in
writing.
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1 SHARES SUBJECT TO PLAN.
(a) The shares of stock subject to Options granted under the Plan shall
be Common Stock, initially shares of the Company's Common Stock, par value
$.0001 per share. The aggregate number of such shares which may be issued upon
exercise of such Options shall not exceed two million (2,000,000) shares of
Common Stock. The shares of Common Stock issuable upon exercise of such Options
may be either previously authorized but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to Options
granted under the Plan to any individual in any fiscal year shall not exceed the
Award Limit.
2.2 UNEXERCISED OPTIONS AND OTHER RIGHTS. If any Option expires or is
canceled without having been fully exercised, the number of shares subject to
such Option but as to which such Option was not exercised prior to its
expiration or cancellation may again be optioned or granted hereunder, subject
to the limitations of Section 2.1.
ARTICLE III.
GRANTING OF OPTIONS
3.1 ELIGIBILITY. Only the following classes of persons shall be
eligible to receive grants of Options under this Plan: (i) except as provided in
(ii) below, key Employees who are not officers or directors of the Company, and
(ii) newly hired Employees (including Employees who will become officers or
directors of the Company) and who have not previously been employed by the
Company and with respect to whom Options are to
<PAGE>
be granted as an inducement essential to such Employees' entering into
employment contracts with the Company.
3.2 NON-QUALIFIED OPTIONS. No Option granted under this Plan shall
constitute an "incentive stock option" under Section 422 of the Code.
3.3 GRANTING OF OPTIONS.
(a) The Committee shall from time to time, in its absolute discretion,
and subject to applicable limitations of this Plan:
(i) Determine which eligible Employees are key Employees and
select from among the key Employees such of them as in its opinion
should be granted Options;
(ii) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to the selected key
Employees;
(iii) Determine the terms and conditions of such Options,
consistent with this Plan.
(b) Upon the selection of a key Employee to be granted an Option, the
Committee shall instruct the Secretary of the Company to issue the Option and
may impose such conditions on the grant of the Option as it deems appropriate.
Without limiting the generality of the preceding sentence, the Committee may, in
its discretion and on such terms as it deems appropriate, require as a condition
on the grant of an Option to an Employee that the Employee surrender for
cancellation some or all of the unexercised Options which have been previously
granted to him under this Plan or otherwise. An Option, the grant of which is
conditioned upon such surrender, may have an option price lower (or higher) than
the exercise price of such surrendered Option, may cover the same (or a lesser
or greater) number of shares as such surrendered Option, may contain such other
terms as the Committee deems appropriate, and shall be exercisable in accordance
with its terms, without regard to the number of shares, price, exercise period
or any other term or condition of such surrendered Option.
ARTICLE IV.
TERMS OF OPTIONS
4.1 OPTION AGREEMENT. Each Option shall be evidenced by a written Stock
Option Agreement, which shall be executed by the Optionee and an authorized
officer of the Company and which shall contain such terms and conditions as the
Committee shall determine, consistent with this Plan.
4.2 OPTION PRICE. The price per share of the shares subject to each
Option shall be set by the Committee; PROVIDED, HOWEVER, that such price shall
not be less than 100% of the Fair Market Value of a share of Common Stock on the
date the Option is granted.
4.3 OPTION TERM. The term of each Option shall be set by the Committee
in its discretion; PROVIDED, HOWEVER, that such term shall not be more than ten
(10) years from the date the Option is granted. Notwithstanding anything
contained herein, unless the Committee provides otherwise pursuant to the terms
of the Option, if an Option (or portion thereof) is not exercisable solely by
reason of Section 4.4(c) on the date on which such Option would otherwise
terminate pursuant to the terms of such Option, such Option (or portion thereof)
shall not terminate until three (3) months after such Option (or portion
thereof) thereafter ceases to be subject to Section 4.4(c).
4.4 OPTION VESTING.
(a) The period during which the right to exercise an Option in whole or
in part vests in the Optionee shall be set by the Committee and the Committee
may determine that an Option may not be exercised in whole or in part for a
specified period after it is granted. At any time after grant of an Option, the
Committee may, in its sole and absolute discretion and subject to whatever terms
and conditions it selects, accelerate the period during which an Option vests.
(b) No portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable, except as may be otherwise
provided by the Committee either in the Stock Option Agreement or by action of
the Committee following the grant of the Option.
(c) Notwithstanding anything contained herein, no Option (or portion
thereof) shall be exercisable by any person to the extent that the Company's
federal income tax deduction with respect to the exercise of such Option (or
portion thereof) would be subject to disallowance pursuant to Section 162(m) of
the Code, or any successor thereto.
<PAGE>
4.5 CONSIDERATION. In consideration of the granting of an Option,
the Optionee shall agree, in the written Stock Option Agreement, to remain in
the employ of the Company or any Subsidiary for a period of at least one year
after the Option is granted (or such shorter period as may be fixed in the
Stock Option Agreement or by action of the Committee following grant of the
Option). Nothing in this Plan or in any Stock Option Agreement hereunder
shall confer upon any Optionee any right to continue in the employ of the
Company or any Subsidiary, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly
reserved, to discharge any Optionee at any time for any reason whatsoever,
with or without good cause.
ARTICLE V.
EXERCISE OF OPTIONS
5.1 PARTIAL EXERCISE. An exercisable Option may be exercised in whole
or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee may require that, by the terms of the
Option, a partial exercise be with respect to a minimum number of shares.
5.2 MANNER OF EXERCISE. All or a portion of an exercisable Option shall
be deemed exercised upon delivery of all of the following to the Secretary of
the Company or his office:
(a) A written notice complying with the applicable rules established by
the Committee stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to exercise
the Option or such portion;
(b) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee may, in its
absolute discretion, also take whatever additional actions it deems appropriate
to effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant to Section
7.1 by any person or persons other than the Optionee, appropriate proof of the
right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised. However, at
the discretion of the Committee, the terms of the Option may (i) allow a delay
in payment up to thirty (30) days from the date the Option, or portion thereof,
is exercised; (ii) allow payment, in whole or in part, through the delivery of
shares of Common Stock owned by the Optionee, duly endorsed for transfer to the
Company with a Fair Market Value on the date of delivery equal to the aggregate
exercise price of the Option or exercised portion thereof; (iii) allow payment,
in whole or in part, through surrender of shares of Common Stock then issuable
upon exercise of the having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the delivery of
property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee, or (vi) allow payment through any
combination of the consideration provided in the foregoing subparagraphs (ii),
(iii), (iv) and (v). In the case of a promissory note, the Committee may also
prescribe the form of such note and the security to be given for such note. The
Option may not be exercised, however, by delivery of a promissory note or by a
loan from the Company when or where such loan or other extension of credit is
prohibited by law.
5.3 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Company shall not
be required to issue or deliver any certificate or certificates for shares of
stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory body
which the Committee shall, in its absolute discretion, deem necessary or
advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise
of the Option as the Committee may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable
<PAGE>
withholding tax.
5.4 RIGHTS AS STOCKHOLDERS. The holders of Options shall not be, nor
have any of the rights or privileges of, stockholders of the Company in respect
of any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.
5.5 OWNERSHIP AND TRANSFER RESTRICTIONS. The Committee, in its absolute
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Stock Option Agreement
and may be referred to on the certificates evidencing such shares.
ARTICLE VI.
ADMINISTRATION
6.1 COMPENSATION COMMITTEE. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the Committee
under this Plan) shall consist solely of two or more Independent Directors
appointed by and holding office at the pleasure of the Board, each of whom is a
"non-employee director" (as defined by Rule 16b-3). Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members may
resign at any time by delivering written notice to the Board. Vacancies in the
Committee may be filled by the Board.
6.2 DUTIES AND POWERS OF COMMITTEE. It shall be the duty of the
Committee to conduct the general administration of this Plan in accordance with
its provisions. The Committee shall have the power to interpret this Plan and
the agreements pursuant to which Options are granted, and to adopt such rules
for the administration, interpretation, and application of this Plan as are
consistent therewith and to interpret, amend or revoke any such rules. Any such
grant under this Plan need not be the same with respect to each Optionee. In its
absolute discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under this Plan except with
respect to matters which under Rule 16b-3, or any regulations or rules issued
thereunder, are required to be determined in the sole discretion of the
Committee.
6.3 MAJORITY RULE. The Committee shall act by a majority of its members
in attendance at a meeting at which a quorum is present or by a memorandum or
other written instrument signed by all members of the Committee.
6.4 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS. Members
of the Committee shall receive such compensation for their services as members
as may be determined by the Board. All expenses and liabilities which members of
the Committee incur in connection with the administration of this Plan shall be
borne by the Company. The Committee may, with the approval of the Board, employ
attorneys, consultants, accountants, appraisers, brokers, or other persons. The
Committee, the Company and the Company's officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee or the Board in good faith shall be final and binding upon all
Optionees, the Company and all other interested persons. No member of the
Committee or the Board shall be personally liable for any action, determination
or interpretation made in good faith with respect to this Plan or Options, and
all members of the Committee and the Board shall be fully protected by the
Company in respect of any such action, determination or interpretation.
ARTICLE VII.
MISCELLANEOUS PROVISIONS
7.1 NOT TRANSFERABLE.
(a) No Option under this Plan may be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of descent and
distribution, unless and until such Option has been exercised, the shares
underlying such Option have been issued, and all restrictions applicable to such
shares have lapsed. No Option or interest or right therein shall be liable for
the debts, contracts or engagements of the Optionee or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect.
(b) During the lifetime of the Optionee, only he may exercise an Option
(or any portion thereof) granted to him under the Plan. After the death of the
Optionee, any exercisable portion of an Option may, prior to the time when such
portion becomes unexercisable under the Plan or the applicable Stock Option
Agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.
7.2 AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN. Except as
otherwise provided in this
<PAGE>
Section 7.2, this Plan may be wholly or partially amended or otherwise
modified, suspended or terminated at any time or from time to time by the
Committee. No amendment, suspension or termination of this Plan shall,
without the consent of the Optionee, alter or impair any rights or
obligations under any Options theretofore granted, unless the Option itself
otherwise expressly so provides. No Options may be granted during any period
of suspension or after termination of this Plan.
7.3 CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY.
(a) In the event that the outstanding shares of Common Stock are
hereafter changed into or exchanged for cash or a different number or kind of
shares or other securities of the Company, or of another corporation, by reason
of reorganization, merger, consolidation, recapitalization, reclassification,
stock splitup, stock dividend, or combination of shares, appropriate adjustments
shall be made by the Committee in the number and kind of shares for which
Options may be granted, including adjustments of the limitations in Section 2.1
on the maximum number and kind of shares which may be issued and of the Award
Limit described in Section 1.2.
(b) In the event of such a change or exchange, subject to the other
provisions of this Plan, the Committee shall also make an appropriate and
equitable adjustment in the number and kind of shares as to which all
outstanding Options, or portions thereof then unexercised, shall be exercisable.
Such adjustment shall be made with the intent that after the change or exchange
of shares, each Optionee's proportionate interest shall be maintained as before
the occurrence of such event. Such adjustment in an outstanding Option may
include a necessary or appropriate corresponding adjustment in Option exercise
price, but shall be made without change in the total price applicable to the
Option, or the unexercised portion thereof (except for any change in the
aggregate price resulting from rounding-off of share quantities or prices).
(c) Notwithstanding the foregoing, in the event of such a
reorganization, merger, consolidation, recapitalization, reclassification, stock
splitup, stock dividend or combination, or other adjustment or even which
results in shares of Common Stock being exchanged or converted into cash,
securities or other property, the Company will have the right to terminate this
Plan as of the date of the exchange or conversion, in which case all options,
rights and other awards under this Plan shall become the right to receive such
cash, securities or other property, net of any applicable exercise price.
(d) In the event of a "spin-off" or other substantial distribution of
assets of the Company which has a material diminutive effect upon the Fair
Market Value of the Company's Common Stock, the Committee may in its discretion
make an appropriate and equitable adjustment to the Option exercise price to
reflect such diminution;
7.4 MERGER OF COMPANY. In the event of a merger or consolidation of the
Company with and into another corporation, the exchange of all or substantially
all of the assets of the Company for the securities of another corporation, the
acquisition by another corporation or person of all or substantially all of the
Company's assets or 80% or more of the Company's then outstanding voting stock,
or the liquidation or dissolution of the Company:
(a) At the discretion of the Committee, the terms of an Option may
provide that it cannot be exercised after such event.
(b) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either by the terms of such Option or by
a resolution adopted prior to the occurrence of such transaction or event, that
for a specified period of time prior to such transaction or event, such Option
shall be exercisable as to all shares covered thereby, notwithstanding anything
to the contrary in this Plan or in the provisions of such Option.
(c) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either by the terms of such Option or by
a resolution adopted prior to the occurrence of such transaction or event, that
upon such event, such Option be assumed by the successor or survivor
corporation, or a parent or subsidiary thereof, or shall be substituted for by
similar options, rights or awards covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices.
(d) No such adjustment or action shall be authorized to the extent such
adjustment or action would result in short-swing profits liability under Section
16 or violate the exemptive conditions of Rule 16b-3 unless the Committee
determines that the Option is not to comply with such exemptive conditions.
7.5 TAX WITHHOLDING. The Company shall be entitled to require payment
in cash or deduction from other compensation payable to each Optionee of any
sums required by federal, state or local tax law to be withheld with respect to
the issuance, vesting or exercise of any Option. The Committee may in its
discretion and in satisfaction of the foregoing requirement allow such Optionee
to elect to have the Company withhold shares of Common Stock otherwise issuable
under such Option (or allow the return of shares of Common Stock) having a Fair
Market Value equal to the sums required to be withheld. Notwithstanding any
other provision of this Plan, the number of shares of Common Stock otherwise
issuable upon the exercise of an Option which may be withheld in order to
satisfy the Optionee's federal and state income and payroll tax liabilities
with respect to the exercise or vesting of the Option shall be limited to the
number of shares which have a Fair Market Value equal to the aggregate amount
of such liabilities based on the minimum statutory withholding rates for
federal and state tax income and payroll tax purposes that are applicable to
such supplemental taxable income.
7.6 LOANS. The Committee may, in its discretion, extend one or more
loans to key Employees in
<PAGE>
connection with the exercise or receipt of an Option granted under this Plan.
The terms and conditions of any such loan shall be set by the Committee.
7.7 LIMITATIONS APPLICABLE TO SECTION 16 PERSONS. Notwithstanding any
other provision of this Plan, this Plan, and any Option granted to any
individual who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Options granted
hereunder shall be deemed amended to the extent necessary to conform to such
applicable exemptive rule.
7.8 EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS. The adoption of
this Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in this Plan shall be construed to
limit the right of the Company (i) to establish any other forms of incentives or
compensation for Employees, Independent Directors or consultants of the Company
or any Subsidiary or (ii) to grant or assume options or other rights otherwise
than under this Plan in connection with any proper corporate purpose including
but not by way of limitation, the grant or assumption of options in connection
with the acquisition by purchase, lease, merger, consolidation or otherwise, of
the business, stock or assets of any corporation, partnership, firm or
association.
7.9 COMPLIANCE WITH LAWS. This Plan, the granting and vesting of
Options under this Plan and the issuance and delivery of shares of Common Stock
and the payment of money under this Plan or under Options granted hereunder are
subject to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law and
federal margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and Options granted hereunder shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.
7.10 TITLES. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Plan.
7.11 GOVERNING LAW. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
<PAGE>
EXHIBIT 5.1
LATHAM & WATKINS
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
(213) 485-1234
November 23, 1999
Strouds, Inc.
780 South Nogales Street
City of Industry, California 91748
Re: Strouds, Inc.
REGISTRATION STATEMENT ON FORM S-8
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form
S-8 (the "Registration Statement"), which you intend to file with the Securities
and Exchange Commission in connection with the registration under the Securities
Act of 1933, as amended, of 2,000,000 shares of Common Stock, par value $.0001
per share (the "Shares"), to be sold by Strouds, Inc., a Delaware corporation
(the "Company"), under the 1999 Special Purpose Stock Option Plan of Strouds,
Inc. (the "Plan").
In our capacity as your special counsel in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the authorization, issuance and sale of
the Shares, and for the purposes of this opinion, have assumed such proceedings
will be timely completed in the manner presently proposed. In addition, we have
made such legal and factual examinations and inquiries, including an examination
of originals or copies certified or otherwise identified to our satisfaction of
such documents, corporate records and instruments, as we have deemed necessary
or appropriate for purposes of this opinion.
In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity to authentic original documents of all documents submitted to us
as copies.
We are opining herein as to the effect on the subject transaction
only of the General Corporation Law of the State of Delaware, and we express no
opinion with respect to the applicability thereto, or the effect thereon, of the
laws of any other jurisdiction or, in the case of Delaware, any other laws.
Subject to the foregoing and in reliance thereon, it is our opinion
that the Shares have been duly authorized, and upon the issuance of the Shares
under the terms of the Plan and delivery and payment therefor of legal
consideration in excess of the aggregate par value of the Shares issued, the
Shares will be validly issued, fully paid and nonassessable.
We consent to your filing this opinion as an exhibit to the
Registration Statement.
Very truly yours,
LATHAM & WATKINS
<PAGE>
EXHIBIT 10.1
FOURTH AMENDMENT TO
THE AMENDED AND RESTATED 1994 EQUITY PARTICIPATION PLAN
OF STROUDS, INC.
This Fourth Amendment to the Amended and Restated 1994 Equity
Participation Plan of Strouds, Inc. is adopted as of June 30, 1999 by the
Board of Directors (the "Board") of Strouds, Inc., a Delaware corporation
(the "Company").
RECITALS
WHEREAS, the Company maintains the Amended and Restated 1994 Equity
Participation Plan of the Company, effective as of September 1, 1994,
(hereinafter the "Plan"); and
WHEREAS, pursuant to Section 10.2 of the Plan, the Board may amend
the Plan from time to time;
NOW THEREFORE, BE IT RESOLVED, that the Plan be amended as follows,
effective June 30, 1999:
1. Section 3.4(d) shall be amended and restated in its entirety as
follows:
(d) During the term of the Plan, each person who is an
Independent Director as of the date of the initial public offering of Common
Stock automatically shall be granted an option to purchase ten thousand
(10,000) shares of Common Stock (subject to adjustment as provided in Section
10.3) on the date of such initial public offering. When a person is initially
elected to the Board following the date of the initial public offering of
Common Stock and is then an Independent Director, each such new Independent
Director automatically shall (i) be granted an Option to purchase ten
thousand (10,000) shares of Common Stock (subject to adjustment as provided
in Section 10.3) on the date of his or her election to the Board, and (ii) an
Option to purchase 10,000 shares of Common Stock (subject to adjustment as
provided in Section 10.3) on the date of each annual meeting of stockholders
after such initial election at which the Independent Director is re-elected
to the Board. Members of the Board who are Employees who subsequently retire
from the Company and remain on the Board will not receive an Option grant
pursuant to Section 3.4(d)(i) of the preceding sentence, but to the extent
that they are otherwise eligible, will receive, after retirement from the
Company, Options as described in clause (ii) of the preceding sentence. All
of the foregoing Option grants authorized by this Section 3.4(d) are subject
to stockholder approval of the Plan.
2. Section 10.2 shall be amended by deleting the third sentence of
the paragraph.
I hereby certify that the foregoing Fourth Amendment to the Plan was
duly adopted by the Board of Directors of Strouds, Inc. on June 30, 1999.
By /s/ Linda McNamara
----------------------
Linda McNamara
ASSISTANT SECRETARY
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Strouds, Inc.:
We consent to the use of our report incorporated herein by reference in the
registration statement on Form S-8 of Strouds, Inc. of our report dated April
14, 1999, relating to the balance sheets as of February 27, 1999 and February
28, 1998 and the related statements of operations, stockholders' equity, and
cash flows for each of the years in the three-year period ended February 27,
1999, which report appears in the Form 10-K and Form 10-K/A filed by Strouds,
Inc., on May 26, 1999 and September 9, 1999, respectively.
KPMG LLP
Los Angeles, California
November 8, 1999
