<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
<TABLE>
<S> <C>
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 Section240.14a-11(c) or
Section240.14a-12
</TABLE>
<TABLE>
<S> <C>
STROUDS, INC.
- ------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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:
----------------------------------------------------------
</TABLE>
<PAGE>
STROUDS, INC.
780 SOUTH NOGALES STREET
CITY OF INDUSTRY, CALIFORNIA 91748
June 2, 2000
To Our Stockholders:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
(the "Annual Meeting") of Strouds, Inc. (the "Company") which will be held on
Wednesday, July 12, 2000, at 10:00 a.m., local time, at Industry Hills Sheraton,
One Industry Hills Parkway, City of Industry, California. All stockholders of
record at the close of business on May 19, 2000 are entitled to receive notice
of and to vote at the Annual Meeting or any adjournment or postponement thereof.
The Annual Meeting will be held to: (a) elect seven directors to the
Company's Board of Directors to serve until the annual meeting of stockholders
in the year 2001 and until their successors are duly elected and qualified,
(b) ratify the appointment of independent public accountants for the fiscal year
ending on March 3, 2001, and (c) transact such other business as may properly be
brought before the Annual Meeting or any adjournment or postponement thereof.
We hope you will attend the Annual Meeting in person. Whether or not you
expect to attend the Annual Meeting in person, 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,
[SIGNATURE]Charles R. Chinni
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
STROUDS, INC.
780 SOUTH NOGALES STREET
CITY OF INDUSTRY, CALIFORNIA 91748
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 12, 2000
------------------------
The 2000 Annual Meeting of Stockholders (the "Annual Meeting") of
Strouds, Inc. (the "Company") will be held on Wednesday, July 12, 2000, at
10:00 a.m., local time, at Industry Hills Sheraton, One Industry Hills Parkway,
City of Industry, California to:
1. elect seven directors to the Company's Board of Directors to serve until
the annual meeting of stockholders in the year 2001 and until their
successors are duly elected and qualified;
2. ratify the appointment of KPMG LLP as the Company's independent public
accountants for the fiscal year ending on March 3, 2001; and
3. transact such other business as may properly be brought before the
Annual Meeting or any adjournment or postponement thereof.
Stockholders of record at the close of business on May 19, 2000 are entitled
to receive notice of and to vote at the Annual Meeting or any adjournment or
postponement thereof. 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.
THE ENCLOSED PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY,
WHICH RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF THE DIRECTOR
NOMINEES NAMED THEREIN AND VOTE FOR THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS. Please refer to the attached proxy statement,
which forms a part of this notice and is incorporated herein by reference, for
further information with respect to the business to be transacted at the Annual
Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON,
HOWEVER, PLEASE COMPLETE THE ACCOMPANYING PROXY AND RETURN IT IN THE ENCLOSED
ADDRESSED ENVELOPE. If you attend the Annual Meeting, you may vote in person
even if you have sent in your proxy card.
By Order of the Board of Directors
[SIGNATURE]Charles R. Chinni
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
City of Industry, California
June 2, 2000
<PAGE>
STROUDS, INC.
----------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 12, 2000
---------------------
This proxy statement (the "Proxy Statement") is furnished in connection with
the solicitation of proxies by the Board of Directors of Strouds, Inc.
("Strouds" or the "Company") from the holders of its outstanding shares of
common stock, par value $0.0001 per share (the "Common Stock"), for use at the
Annual Meeting of Stockholders to be held on Wednesday, July 12, 2000 (the
"Annual Meeting") to:
1. elect seven directors to the Company's Board of Directors to serve until
the annual meeting of stockholders in the year 2001 (the "2001 Annual
Meeting") and until their successors are duly elected and qualified;
2. ratify the appointment of KPMG LLP as the Company's independent public
accountants for the fiscal year ending on March 3, 2001; and
3. transact such other business as may properly be brought before the
Annual Meeting or any adjournment or postponement thereof.
The Company's principal executive offices are located at 780 South Nogales
Street, City of Industry, California 91748, telephone (626) 912-2866. A copy of
the Company's fiscal 1999 Annual Report to Stockholders and this Proxy Statement
and accompanying proxy card will be first mailed to stockholders on or about
June 2, 2000. The Company defines its fiscal year as the period in which most of
the business activity occurs (e.g., the year ending February 26, 2000 is
referred to as fiscal 1999).
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND IF GIVEN
OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED AND
THE DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
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., 77 Water Street, New
York, New York 10005, telephone (212) 269-5550, to assist in the solicitation of
proxies with respect to the shares of Common Stock held of record by brokers,
nominees and institutions. The estimated cost of the services of D.F. King &
Co., Inc. is $4,000, plus expenses.
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.
<PAGE>
Concerning the approval of independent public accountants, by checking the
appropriate box on your proxy card you may: (a) vote "For" the item; (b) vote
"Against" the item; or (c) "Abstain" from voting on the item. The effects of
abstentions and votes against certain matters are discussed further below.
Stockholders may vote by either (a) completing and returning the enclosed
proxy card prior to the Annual Meeting, (b) voting in person at the Annual
Meeting, or (c) submitting a signed proxy card at the Annual Meeting.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO SIGN, DATE AND RETURN
THE ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING
IN PERSON.
You may revoke your proxy at any time before it is actually voted at the
Annual Meeting by (a) delivering written notice of revocation to the Secretary
of the Company at 780 South Nogales Street, City of Industry, California, 91748,
(b) submitting a later dated proxy, or (c) 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 Common Stock issued and outstanding on May 19, 2000, will
constitute a quorum.
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 19, 2000 are entitled
to vote at the Annual Meeting. At that date, 7,146,221 shares of Common Stock
were outstanding. Each share of Common Stock is entitled to one vote. In all
matters other than the election of directors, the affirmative vote of a majority
of the shares of Common Stock that are represented in person or represented by
proxy at the Annual Meeting and entitled to vote is required to approve each
matter. Directors shall be elected by a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors.
------------------------
The date of this Proxy Statement is June 2, 2000.
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS TO THE 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 seven directors. Directors are
elected at the Annual Meeting and will serve until the 2001 Annual Meeting and
until each respective successor shall have been duly 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 herein will be unable or will decline to serve if elected, and
each nominee has informed the Company that he will serve if elected.
NOMINEES FOR ELECTION AS A DIRECTOR
The following table sets forth the name of, and certain information with
respect to, the seven persons nominated by the Company at the Annual Meeting:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITIONS CURRENTLY HELD WITH THE COMPANY
- ---- -------- -------- ----------------------------------------------------
<S> <C> <C> <C>
Charles R. Chinni (1)....... 56 1997 Chairman of the Board of Directors, President and
Chief Executive Officer
Wilfred C. Stroud........... 74 1979 Founder, Chairman Emeritus and Director
Larry R. Bemis (2).......... 55 1997 Director
Dale D. Achabal (3)......... 54 1997 Director
Marco F. Weiss (1)(3)....... 69 1997 Director
Marshall S. Geller (1)(2)... 61 1998 Director
Robert M. Menar............. 62 1999 Director, Chief Operating Officer and Secretary
</TABLE>
- --------------------------
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
The following is a biographical summary of the experience of the nominees
for directors to the Company's Board of Directors:
CHARLES R. CHINNI: On July 7, 1997, Mr. Chinni joined Strouds as its
President, Chief Executive Officer and a director on the Board of Directors.
Mr. Chinni has served as the Chairman of the Board of Directors of the Company
since February 28, 1999. Prior to joining Strouds, Mr. Chinni was Executive
Vice-President of Merchandising for Kmart Corporation, a discount retailer, from
May 1995 to November 1995. Prior to his employment at Kmart Corporation,
Mr. Chinni spent over 30 years with Macy's culminating with the position of
President--Merchandising for the combined Macy's companies before the sale of
Macy's to Federated Department Stores in 1995.
WILFRED C. STROUD: Since February 28, 1999, Mr. Stroud has served as the
Founder, Chairman Emeritus and a director on the Company's Board of Directors.
Prior to that time, Mr. Stroud served as Chairman of the Board of Directors 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. Mr. Stroud serves as a
consultant to C.H.F. Industries, Inc., a supplier of merchandise to various
retailers, including the Company. Prior to founding
3
<PAGE>
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.
LARRY R. BEMIS: Mr. Bemis was appointed a director to the Company's Board
of Directors effective June 1, 1997. Mr. Bemis is a partner in the Newport Beach
law firm of Millar, Hodges & Bemis, specializing in business, income and estate
tax planning, real estate and corporate law. Prior to forming Millar, Hodges and
Bemis, Mr. Bemis was a partner at Witter and Harpole, in Newport Beach, where he
began his law practice in 1973. Prior to joining Witter and Harpole, Mr. Bemis
was a revenue agent and appellate conferee with the Internal Revenue Service in
Los Angeles. Mr. Bemis provides certain legal services to the Company. See
"Certain Transactions--Other Relationship."
DALE D. ACHABAL: Dr. Achabal was appointed a director to the Company's
Board of Directors effective June 1, 1997. Dr. Achabal has been the L.J. Skaggs
Distinguished Professor since 1987 and an Associate Dean in the Leavey School of
Business since 1997 at Santa Clara University where he has taught since 1980 and
Director of the Retail Management Institute since 1997. Dr. Achabal also serves
on the Advisory Board of Active Research, Blue Martini and Digital Impact.
Dr. Achabal is also a member of the Information Technology Council of the
National Retail Federation since 1992 and the Editorial Board of the JOURNAL OF
RETAILING since 1982. Dr. Achabal is a consultant to a variety of retail
organizations in the United States, Europe and Asia Pacific in the areas of
strategic market planning and developing advanced decision support systems.
MARCO F. WEISS: Mr. Weiss was elected to the Company's Board of Directors
on June 1, 1997. Mr. Weiss is currently a consultant in international business
transactions specializing in the Russian economy. From 1995 to 1999, Mr. Weiss
maintained an office with the Goldman & Kagon Law Corporation providing
consulting services in international business transactions. From 1991 to 1994,
Mr. Weiss served as Chairman of ECONT, a Russian-American Joint Venture. From
1991 to 1994, Mr. Weiss served as Vice-Chairman and Chief Operating Officer of
the Marvol Group, a diversified Russian company with a global presence dealing,
among other things, in manufacturing and the merchandising of consumer products.
From 1992 to 1995, Mr. Weiss also practiced as a consultant specializing in U.S.
law in the United Kingdom. Prior to relocating abroad, Mr. Weiss was a partner
in a number of Los Angeles law firms and specialized in capital formation and
securities transactions.
MARSHALL S. GELLER: Mr. Geller was appointed a director to the Company's
Board of Directors on July 24, 1998. Since 1995, Mr. Geller has been the
Chairman of the board of directors, Chief Executive Officer and Founding Partner
of Geller & Friend Capital Partners, Inc., a company involved in merchant
banking and investment advising, since its formation in November 1995. From 1991
to 1995, Mr. Geller was the Senior Managing Partner and Founder of Golenberg &
Geller, Inc., a merchant banking investment company. From 1967 to 1988,
Mr. Geller was the Senior Managing Director for Bear Stearns & Company.
Mr. Geller currently serves as a director of Hexcel Corporation, Players
International, Inc., Value Vision International, Inc., Ballantyne of
Omaha, Inc., iMALL Inc., and Cabletel Communications Corporation.
ROBERT M. MENAR: Mr. Menar was appointed a director to the Company's Board
of Directors on January 26, 2000. Mr. Menar served as a consultant to the
Company from August 1997 to August 1999 before he joined the Company as Chief
Operating Officer. From 1995 to August 1999, Mr. Menar served as the President,
Chief Executive Officer and Founder of R.M. Menar & Associates, Inc., a
management consulting firm focused on mergers, consolidations and operational
turnarounds. From October 1993 to October 1995, Mr. Menar served as Corporate
Executive Vice President of Operations for Broadway Stores, Inc., formerly
Carter Hawley Hale Stores, Inc. From April 1993 to October 1993 and from
January 1990 to April 1993, Mr. Menar was the Corporate Senior Vice President
and Chief Executive Officer--Information Services Division of Broadway Stores,
Inc, respectively. Mr. Menar has served as a director of The Institute of Retail
Management, California University at Los Angeles, an advisory board
4
<PAGE>
member of the University of California, Irvine, graduate school of business
administration and a member of the Research Board New York and Nation Federation
of Retailers UPC/EDI Industry Standards Board.
COMPENSATION OF DIRECTORS
The Company provides for the grant to each non-employee director, as of the
date that such non-employee director is initially elected to the Board of
Directors, of non-qualified stock options to purchase 10,000 shares of Common
Stock of the Company. Annual grants of non-qualified stock options to purchase
10,000 shares of Common Stock are provided at the time of re-election. These
options have a term of ten years, an exercise price of 100% of the fair market
value of a share of Common Stock on the date the options are granted and will
become exercisable in four cumulative 25% installments on each successive one
year anniversary of the date the option is granted. The Company pays each
director who is neither an employee of the Company nor associated with one of
the Company's principal stockholders a $2,000 fee for each meeting of the
Company's Board of Directors attended and, if not held in conjunction with a
regular Board of Directors meeting, a $1,000 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.
Messrs. Bemis, Achabal and Weiss in fiscal year 1997, and Messrs. Geller and
Richard F. Clayton, a former director of the Company who resigned effective as
of April 1, 2000, in fiscal year 1998, were awarded stock options to purchase
10,000 shares of Common Stock under the Company's Second Amended and Restated
1994 Equity Participation Plan. Messrs. Bemis, Achabal and Weiss in fiscal year
1998 were awarded stock options to purchase 5,000 shares of Common Stock under
the Company's Second Amended and Restated 1994 Equity Participation Plan.
Messrs. Achabal, Bemis, Clayton, Geller and Weiss in fiscal year 1999 were
awarded stock options to purchase 10,000 shares of Common Stock under the
Company's Second Amended and Restated 1994 Equity Participation Plan. These
awards vest in 25% installments over the first four years following the original
date of grant.
Mr. Stroud retired on February 27, 1999. For three fiscal years thereafter,
he will serve as the Chairman Emeritus of the Board of Directors and in such
capacity, will consult with the other members of the Board of Directors and the
management of the Company. During such three year period, Mr. Stroud's
compensation will consist of his full base salary, an automobile allowance and
personal and spousal health benefits which are comparable to those provided to
the executive officers of the Company. After such three year period, Mr. Stroud
will receive payments from the Company in an amount of $120,000 per year for the
rest of his life. After his death, Mr. Stroud's wife will receive payments from
the Company in an amount of $50,000 per year and will also receive health
benefits for the rest of her life.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
BOARD OF DIRECTORS
The Board of Directors of the Company met six times during fiscal year ended
February 26, 2000. During that fiscal year, attendance at the Board of Directors
meetings averaged 94% and attendance at committee meetings of the Board of
Directors averaged 97%. No incumbent directors attended fewer than 75% of the
total number of meetings of the Board of Directors and committees of the Board
of Directors on which they served.
AUDIT COMMITTEE
The Audit Committee of the Board of Directors is presently comprised of
Messr. Bemis. Mr. Bemis serves as the chair of the Audit Committee. Mr. Clayton
was a member of the Audit Committee until his registration on April 1, 2000. 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
5
<PAGE>
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 (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
February 26, 2000, the Audit Committee held two meetings.
COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is presently comprised
of Messrs. Weiss, Achabal and Geller. Mr. Weiss serves as the chair of the
Compensation Committee. 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; Second Amended and Restated 1994 Equity Participation Plan; and
1994 Employee Qualified Stock Purchase Plan. During the fiscal year ended
February 26, 2000, the Compensation Committee held five meetings.
EXECUTIVE COMMITTEE
The Executive Committee of the Board of Directors is presently comprised of
Messrs. Chinni, Weiss and Geller. Mr. Chinni chairs the Executive 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 February 26, 2000, the Executive Committee
held five meetings.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
EACH OF THE DIRECTORS NOMINATED
TO THE BOARD OF DIRECTORS AS
SET FORTH IN PROPOSAL NO. 1.
6
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of the Audit Committee, has
appointed KPMG LLP as the Company's independent public accountants for the
fiscal year ending March 3, 2001. KPMG LLP has been the Company's independent
public accountants since fiscal year 1987. A representative of KPMG 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 public
accountants for the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF KPMG LLP AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR
THE FISCAL YEAR ENDING MARCH 3, 2001
AS SET FORTH IN PROPOSAL NO. 2.
7
<PAGE>
EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL
The executive officers and certain key personnel of the Company as of
June 1, 2000 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ----------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS:
Charles R. Chinni................. 56 Chairman of the Board of Directors, President and
Chief Executive Officer
Wilfred C. Stroud................. 74 Founder, Chairman Emeritus and Director
Robert M. Menar................... 62 Director, Chief Operating Officer and Secretary
Harry Brown....................... 53 Executive Vice President--General Merchandise
Manager
Denise Marsicano.................. 45 Senior Vice President--Stores
Gary A. Van Wagner................ 37 Vice President--Chief Financial Officer
KEY PERSONNEL:
Donna J. Aidekman................. 40 Vice President--Divisional Merchandise Manager
Carolyn A. Bush................... 44 Vice President--Home Services
Norman L. Goldman................. 49 Vice President--Merchandising for Outlet Stores
Jacki C. Hampton.................. 40 Vice President--Real Estate Planning and
Construction
Jayne K. Hayes.................... 43 Vice President--Stores
Richard L. Stanton................ 51 Vice President--Management Information Systems
Tracey E. Stein................... 34 Vice President--Stores
Robert F. Valone.................. 33 Vice President--Divisional Merchandise Manager
</TABLE>
In addition to Messrs. Chinni, Stroud and Menar whose biographies appear
under "Proposal 1--Election of Directors to the Board of Directors," the
following is a biographical summary of the experience of the executive officers
and certain key personnel of the Company:
HARRY BROWN: Mr. Brown joined the Company as Executive Vice
President--General Merchandise Manager of the Company in November 1999. Prior to
joining Strouds, Mr. Brown served as Vice Chairman and Chief Merchandising
Officer of Stage Stores, Inc. from 1997 to December 1998. From 1995 to 1997,
Mr. Brown was Executive Vice President--Merchandising and Marketing of Office
Depot. Mr. Brown also served as Executive Vice
President--Merchandising/Marketing/Planning/Allocation from 1994 to 1995, Senior
Vice President--General Merchandise Manager from 1991 to 1994 and Vice
President--General Merchandise Manager from 1989 to 1991 of Marshall's.
DENISE MARSICANO: Ms. Marsicano was named Senior Vice President of the
Company in September 1999. Ms. Marsicano also served as Vice President--Stores
of the Company from 1993 to August 1999. Ms. Marsicano served as the Company's
Regional Store Manager from 1989 to 1993 and the Store Manager from 1988 to
1989. Prior to joining Strouds, Ms. Marsicano was employed by Bloomingdales from
1976 to 1988 where she held the position of Buyer.
GARY A. VAN WAGNER: Mr. Van Wagner was named Vice President--Chief
Financial Officer of the Company in December 1999. Mr. Van Wagner joined the
Company in January 1998 as Corporate Controller. Prior to joining Strouds,
Mr. Van Wagner served as Controller for Reddi Brake Supply Company, Inc., a
distributor of parts to the automotive after-market, from October 1996 to
January 1998. From October 1995 to October 1996, he was a business consultant.
Prior to that he served an aggregate of eight years with Standard Brands Paint
Company, Inc., where he was Vice President/Controller from August 1993 to
October 1995. Standard Brands underwent a voluntary re-organization under the
United States Bankruptcy Code in 1992.
8
<PAGE>
DONNA J. AIDEKMAN: Ms. Aidekman was named Vice President--Divisional
Merchandise Manager of the Company in March 1998. She has also served as the
Company's Director of Merchandising--Fashion Bedding from December 1995 to March
1998, Director of Merchandising--Bedding and Juvenile from August 1988 to
November 1995, Regional Store Manager from March 1988 to August 1988, and Store
Manager from April 1984 to March 1988. Before joining Strouds, Ms. Aidekman was
employed by J.W. Robinson's, a department store, as a department manager and
assistant buyer.
CAROLYN A. BUSH: 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
this 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 eleven years.
NORMAN L. GOLDMAN: Mr. Goldman has served as Vice President--Merchandising
for Outlet Stores of the Company since January 2000. Mr. Goldman has also served
as the Company's Director of Merchandising--Outlet Stores from October 1995 to
December 1999. Prior to joining Strouds, Mr. Goldman served as Vice President of
Merchandising of Three D Departments, Inc., a linen specialty store chain, from
November 1989 to August 1995. From July 1979 to October 1989, Mr. Goldman served
as President and Co-Founder of Linens Plus, a chain of eight discount linen and
domestic stores in Phoenix, Arizona.
JACKI C. HAMPTON: Ms. Hampton has served as Vice President--Real Estate
Planning and Construction of the Company since April 2000. Ms. Hampton also
served as the Company's Director--Store Construction and Development from July
1995 to March 2000, Manager--Store Planning from September 1987 to June 1995,
Store Manager from November 1985 to August 1987 and Assistant Store Manager from
September 1984 to October 1985. Prior to joining Strouds, Ms. Hampton was
employed by Three D Departments, Inc., a linen specialty store chain, as Store
Manager from February 1984 to August 1984 and by Bullocks, a department store,
as an Area Manager from 1981 to January 1984.
JAYNE K. HAYES: Ms. Hayes has served as Vice President--Stores of the
Company since February 2000. Ms. Hayes also served as the Company's District
Manager--Full Line Stores from July 1997 to January 2000. Prior to joining
Strouds, Ms. Hayes was employed by Richard Honquest Fine Furnishings as a Sales
Consultant from June 1996 to June 1997. From September 1995 to May 1996,
Ms. Hayes served as Business Manager for ABCO Movers, a local delivery company.
Ms. Hayes was also employed by Pier 1 Imports, a chain of specialty stores, as
Regional Manager from December 1992 to August 1995, Regional Operations Director
from June 1991 to November 1992, and Store Manager/Training Manager from
February 1987 to May 1991.
RICHARD L. STANTON: Mr. Stanton has served as Vice President--Management
Information Systems of the Company since March 1999. From November 1996 to
February 1999, Mr. Stanton was an Information Systems Management Consultant
associated with R.M. Menar & Associates, a management information systems
consulting firm. During that time, from December 1997 to February 1999, he
worked as a consultant to Strouds in Management Information Systems. From 1989
to 1996, Mr. Stanton served as Divisional Vice President of Services Marketing
for Broadway Stores, Inc., formerly Carter Hawley Hale Stores, Inc. Mr. Stanton
was with Broadway Stores, Inc. in management systems development for an
aggregate of sixteen years.
TRACEY E. STEIN: Ms. Stein has served as Vice President--Stores of the
Company since February 2000. Ms. Stein has also served as the Company's District
Manager--Full Line Stores from March 1995 to January 2000, Store Manager from
November 1990 to February 1995, Assistant Store Manager from May 1990 to October
1990 and Management Trainee from July 1989 to April 1990. Prior to joining
Strouds,
9
<PAGE>
Ms. Stein was employed by Bloomingdales, a division of Federated Department
Stores, as Assistant Buyer from November 1987 to May 1989.
ROBERT F. VALONE: Mr. Valone has served as the Vice President--Divisional
Merchandise Manager of the Company since November 1999. Mr. Valone has also
served as the Company's Director of Merchandising--Basic Bedding from May 1999
to November 1999. Prior to joining Strouds, Mr. Valone served as the Divisional
Vice President of Merchandise from November 1997 to April 1999 and the Buyer
from September 1995 to October 1997 of Pacific Linen, a regional specialty store
chain. From July 1993 to August 1995, Mr. Valone was a Buyer for Broadway
Stores, Inc., formerly Carter Hawley Hale Stores, Inc. Mr. Valone has also
served as Buyer from November 1990 to June 1993 and as Assistant Buyer from July
1998 to October 1990 of The May Department Stores, a chain of department stores.
10
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table belows sets forth certain compensation
information concerning the Company's Chief Executive Officer, its former Chief
Executive Officer and its other Most highly compensated current executive
officer (the "Named Executive Officers") for services rendered in all capacities
to the Company during the fiscal year ended February 26, 2000:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
----------------------------------- SHARES OTHER
FISCAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) ($)(1)
- --------------------------- -------- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Charles R. Chinni (2)................... 1999 538,750 195,000(3) 1,225,000 45,769(5)
Chairman of the Board of Directors, 1998 387,692 175,000(4) 100,000 65,909(6)
President, Chief Executive Officer, and 1997 222,116 -- 300,000 29,642(7)
Director
Wilfred C. Stroud....................... 1999 204,000 20,400(3) -- --
Founder, Chairman Emeritus and 1998 204,000 -- 12,500 9,100(9)
Director 1997 204,000 -- 45,834(8) 29,246(9)
Robert M. Menar (10).................... 1999 188,462 -- 250,000 --
Director, Chief Operating Officer and
Secretary
Harry Brown (11)........................ 1999 92,308 -- 200,000 --
Executive Vice President--
General Merchandise Manager
Denise Marsicano........................ 1999 150,846 46,944(3) -- --
Senior Vice President--Stores 1998 135,000 15,000(4) 9,000 --
1997 130,000 -- 40,000(12) --
Gary Van Wagner (13).................... 1999 106,163 12,771(3) 25,000 --
Vice President--Chief Financial Officer
Douglas C. Felderman (15)............... 1999 57,567 80,000(3) -- --
Senior Vice President--Finance, 1998 183,077 -- 45,000 --
Chief Financial Officer and Secretary 1997 138,076 -- 55,000(14) --
</TABLE>
- --------------------------
(1) Perquisites less than $50,000 or 10% of the total of annual salary and bonus
are not disclosed.
(2) Mr. Chinni joined the Company to serve as its President and Chief Executive
Officer in July 1997. The salary reported for fiscal year 1997 reflects
compensation received for a partial year.
(3) Reflects bonus received during fiscal year ended February 26, 2000 for
services rendered during fiscal year ended February 27, 1999.
(4) Reflects bonus received during fiscal year ended February 27, 1999 for
services rendered during fiscal year ended February 28, 1998.
(5) Includes $38,769 relating to housing and travel expenses and $7,000
representing an automobile allowance paid to Mr. Chinni by the Company.
(6) Includes $58,909 relating to housing and travel expenses and $7,000
representing an automobile allowance paid to Mr. Chinni by the Company.
11
<PAGE>
(7) Includes $25,200 relating to relocation and travel expenses and $4,442
representing an automobile allowance paid to Mr. Chinni by the Company.
(8) Of these options, only 12,500 represent new grants in fiscal 1997 and 33,334
represent the options that were repriced in May 1997.
(9) The Company contributed $235 to the Company's 401(k) plan on behalf of Mr.
Stroud for the fiscal year ended February 28, 1998. The 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 year 1997 are $29,011,
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. Mr. Stroud's retirement
was effective February 28, 1999 and the value of the premiums paid in 1998
equaled $9,100.
(10) Mr. Menar joined the Company in August 1999. The salary reported for fiscal
year 1999 reflects compensation received for a partial year.
(11) Mr. Brown joined the Company in November 1999. The salary reported for
fiscal year 1999 reflects compensation received for a partial year.
(12) Of these options, only 12,650 represent new grants in fiscal 1997 and
27,350 represent the options that were repriced in May 1997.
(13) Mr. Van Wagner's total annual salary and bonus did not exceed $100,000 for
fiscal years 1998 and 1997.
(14) Of these options, only 45,550 represent new grants in fiscal 1997 and 9,450
represent the options that were repriced in May 1997.
(15) Mr. Felderman resigned as an officer of the Company, effective May 27,
1999.
12
<PAGE>
OPTION GRANTS DURING FISCAL YEAR ENDED FEBRUARY 27, 1999
The following table sets forth certain information regarding grants of stock
options made to the Named Executive Officers during the fiscal year ended
February 26, 2000, including information as to the potential realizable value of
such options at assumed annual rates of stock price appreaciation for the ten
year option terms:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF TOTAL AT ASSUMED ANNUAL RATES
SHARES OPTIONS GRANTED TO OF STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES IN EXERCISE FOR OPTION TERM(1)
OPTIONS FISCAL YEAR ENDED PRICE PER EXPIRATION ---------------------------
NAME GRANTED FEBRUARY 26, 2000 SHARE DATE 5% ($) 10% ($)
- ---- ---------- ------------------ ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Chinni......... 225,000 -- $ 1.50 04-15-09 -- --
100,000 -- $ 2.16 10-20-09 -- --
900,000 63.2% $ 2.06 01-26-10 $1,515,510 $3,840,601
Wilfred C. Stoud.......... 0 0.0% N/A N/A 0 0
Robert M. Menar........... 250,000 12.9% $ 1.06 08-09-09 167,050 423,338
Harry Brown............... 200,000 10.3% $ 2.38 11-01-09 298,725 757,028
Denise Marsicano.......... 0 0.0% N/A N/A 0 0
Gary Van Wagner........... 25,000 1.3% $ 2.06 01-26-10 32,435 82,197
Douglas C. Felderman...... 30,000 1.5% $ 2.00 03-01-09 37,734 95,625
All Optioness............. 1,938,000 100.0% $1.06-$2.38 03-01-09 2,291,087 5,806,064
01-26-10
All stockholders (2)...... N/A N/A N/A N/A 8,776,721 22,24,935
All optionees as a
percent of All
Stockholders Gain........ N/A N/A N/A N/A 26.1% 26.1%
</TABLE>
- --------------------------
(1) The dollar amounts under these columns are the result of calculations at
five percent and ten percent rates set by the Securities and Exchange
Commission and therefore are not intended to forecast possible future
appreciation, if any, of the Company's Common Stock price. In the above
table, the Company did not use an alternative formula for a grant date
valuation, as the Company is not aware of any formula which will determine
with reasonable accuracy a present value based on future unknown or volatile
factors.
(2) These amounts represent the appreciated value which common stockholders
would receive at the hypothetical five and ten percent rates based on the
market value of Common Stock outstanding at or near the option grant dates.
13
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED FEBRUARY 26, 2000 AND FISCAL
YEAR END OPTION VALUES
The following table sets forth certain information regarding options
exercised during fiscal year 1999 and options outstanding at February 26, 2000
for the Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FEBRUARY 26, 2000 (#) FEBRUARY 26, 2000 ($)(1)
SHARES ACQUIRED --------------------------- ---------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Chinni.......... -- -- 275,000 1,350,000 $190,650 $1,030,800
Wilfred C. Stroud.......... -- -- 26,904 31,430 24,404 21,430
Robert M. Menar............ -- -- -- 250,000 -- 421,750
Harry Brown................ -- -- -- 200,000 -- 75,000
Denise Marsicano........... -- -- 30,894 18,106 29,729 11,952
Gary Van Wagner............ -- -- 4,000 31,000 2,750 21,300
Douglas C. Felderman....... 15,980 10,510 -- -- -- --
</TABLE>
- --------------------------
(1) Amount represents the difference between the aggregated exercise prices of
unexercised options and a closing price of $2.75 per share of the Common
Stock as reported on the Nasdaq Stock Market on February 25, 2000, the last
trading day in fiscal year 1999.
EMPLOYMENT AGREEMENTS
On July 7, 1997, Mr. Chinni and the Company entered into an employment
agreement (the "1997 Agreement"). Subsequently, on May 20, 1998, the Company and
Mr. Chinni amended and restated the original 1997 Agreement (the "1998
Agreement"). On October 20, 1999 (the "Commencement Date"), the Company and
Mr. Chinni further amended and restated the 1998 Agreement (the "1999
Agreement"), which expires on February 28, 2003. Pursuant to the terms of the
1999 Agreement, Mr. Chinni shall serve as the Company's Chairman of the Board of
Directors, President and Chief Executive Officer and the Company will pay
Mr. Chinni an annual base salary equal to $600,000 effective as of July 1, 1999,
provided, that, the Company will reevaluate Mr. Chinni's salary on each
anniversary of the Commencement Date. At the end of fiscal year 1999, subject to
pre-determined improvements of the Company's financial performance, Mr. Chinni
is eligible to receive certain specified cash bonus amounts. Such amounts shall
not exceed $212,500 in cash. Effective as of March 1, 2000, the Compensation
Committee will establish certain performance objectives and will provide for
payment of a cash bonus to Mr. Chinni for each fiscal year in an amount at least
50% of his then current base annual salary if such performance objectives for
Mr. Chinni are achieved. The 1999 Agreement further provides that as of the date
of employment, Mr. Chinni was granted options for the purchase of
(i) 100,000 shares of Common Stock at an exercise price equal to the fair market
value on the date of grant and (ii) an additional 900,000 shares of Common Stock
at the fair market value as of the date the Company's stockholders approve the
Second Amended and Restated 1994 Plan. Additionally, the 1999 Agreement provides
for the Company to reimburse Mr. Chinni for certain travel, out-of-pocket
business and attorney expenses and to provide Mr. Chinni with medical, hospital,
surgical, disability, accidental death, travel and/or life insurance coverage.
The Company is entitled to terminate Mr. Chinni's employment upon the
expiration of the term of the 1999 Agreement, death, disability, "for cause"
(e.g., neglect of duties, breach of covenants, failure to correct employment
deficiency, fraud, embezzlement, or acceptance of bribe or kickback), an event
of bankruptcy, reorganization or similar circumstances or "without cause"
(reasons other than for his death, disability, or for cause). Mr. Chinni may
terminate his employment with the Company for a reason other than a "good
reason" upon 60 days' written notice and at any time for a "good reason". "Good
reason" includes the occurrence of any of the following circumstances: (i) the
assignment to Mr. Chinni of any
14
<PAGE>
duties which are materially inconsistent with his position in the Company held
on the Commencement Date or any other action that results in a material
diminution in his position, duties or responsibilities, (ii) the relocation of
the Company's offices at which Mr. Chinni is principally employed on the
Commencement Date to a location outside the greater Los Angeles metropolitan
area; (iii) the Company's material breach of the provisions of the 1999
Agreement; (iv) the Company's reduction of Mr. Chinni's base salary, except for
across-the-board salary reductions; (v) the removal of Mr. Chinni from the
position of President or Chief Executive Officer; (vi) the failure of
Mr. Chinni to be elected to the Board, as Chairman; or (vii) the removal of
Mr. Chinni from the position of Chairman of the Board once he is elected to such
office. In the event of a (i) termination by the Company due to the expiration
of the term of the 1999 Agreement or "without cause" or (ii) termination by
Mr. Chinni for "good reason", Mr. Chinni is entitled to a severance payment of
his base salary and targeted bonus in effect at the time of termination for the
remaining term of the 1999 Agreement or for two years, whichever is greater. The
1999 Agreement includes provisions restricting Mr. Chinni from competing,
directly or indirectly, with the Company during employment and for two years
after the termination of employment.
On August 9, 1999, the Company entered into an employment agreement with
Robert M. Menar pursuant to which the Company employed Mr. Menar as its Chief
Operating Officer for a period of three years. If Mr. Menar's employment has not
earlier terminated due to death, disability or by the Company for cause, at the
end of the initial three year term, his employment will be extended for
successive 1 year periods unless either party provides written notice at least
90 days prior to the end of the applicable term of such party's intention not to
extend the employment agreement. Mr. Menar will receive an annual base salary of
$350,000, less payroll deductions and other required withholdings, which will be
increased by $25,000 on August 9, 2000. Thereafter, the Company will review
annually Mr. Menar's salary and determine in its discretion any increase in such
salary. Mr. Menar will be eligible to receive a bonus equal to 50% of his base
salary each year during his employment in accordance with the Company's
management bonus plan if certain performance targets are met by the Company and
Mr. Menar. Mr. Menar will be entitled to participate in all incentive, saving
and other retirement plans and programs of the Company and will receive standard
benefits, including medical, hospital, surgical, disability, accidental death,
travel and/ or life insurance coverage generally available to other senior
executive officers of the Company. In addition, the Company granted Mr. Menar
options to purchase 250,000 shares of Common Stock under the Company's 1999
Special Purpose Stock Option Plan. The exercise price per share of such options
equaled the fair market value of one share of the Company's Common Stock on
August 9, 1999. On each of the first and second anniversaries of the date of the
employment agreement, Mr. Menar will be granted additional options to purchase
150,000 shares of the Company's Common Stock which shall have an exercise price
per share of the fair market value of one share of the Company's Common Stock on
the date of the grant of such subsequent options. The Company is entitled to
terminate Mr. Menar's employment upon the expiration of the term of the
employment agreement, death, disability, "for cause", an event of bankruptcy,
reorganization or similar circumstances, or "without cause". Mr. Menar may
terminate his employment with the Company for a reason other than a "good
reason" upon 60 days' written notice and at any time for a "good reason". "Good
reason" includes the occurrence of any of the following circumstances: (i) the
assignment to Mr. Menar of any duties which are materially inconsistent with his
position in the Company held on the Commencement Date or any other action that
results in a material diminution in his position, duties or responsibilities,
(ii) the relocation of the Company's offices at which Mr. Menar is principally
employed on the Commencement Date to a location outside the greater Los Angeles
metropolitan area; (iii) the Company's material breach of the provisions of the
employment agreement; (iv) the Company's reduction of Mr. Menar's base salary,
except for across-the-board salary reductions; or (v) the removal of Mr. Menar
from the position of Chief Operating Officer. In the event of a (i) termination
by the Company due to an event of bankruptcy, reorganization or similar
circumstances or "without cause" or (ii) termination by Mr. Menar for "good
reason", Mr. Menar is entitled to a severance payment of his base salary and
targeted bonus in effect at the time of termination for the remaining term of
his employment agreement or for eighteen months, whichever is greater. The
employment agreement
15
<PAGE>
includes provisions restricting Mr. Menar from competing, directly or
indirectly, with the Company during employment and for two years after the
termination of employment.
On November 1, 1999, the Company entered into an employment agreement with
Harry Brown pursuant to which the Company employed Mr. Brown as its Executive
Vice President, Merchandising and Marketing for a period of two years.
Mr. Brown will receive an annual base salary of $300,000, less payroll
deductions and other required withholdings. The Company will review annually
Mr. Brown's salary and determine in its discretion any increase in such salary.
Mr. Brown will receive a bonus equal to $75,000 to be paid on May 1, 2000 and
effective as of March 1, 2000, he will be eligible to participate in the
Company's bonus plans. Mr. Brown will be entitled to participate in all
incentive, saving and other retirement plans and programs of the Company and
will receive standard benefits, including medical, hospital, surgical,
disability, accidental death, travel and/or life insurance coverage generally
available to other senior executive officers of the Company. In addition, the
Company granted Mr. Brown options to purchase 200,000 shares of Common Stock
under the Company's 1999 Special Purpose Stock Option Plan. The exercise price
per share of such options equaled the fair market value of one share of the
Company's Common Stock on November 1, 1999. On each of the first anniversary of
the date of the employment agreement, Mr. Brown will be granted an additional
option to purchase 100,000 shares of the Company's Common Stock which shall have
an exercise price per share of the fair market value of one share of the
Company's Common Stock on the date of the grant of such subsequent options. The
Company is entitled to terminate Mr. Brown's employment upon the expiration of
the term of the employment agreement, death, disability, "for cause", an event
of bankruptcy, reorganization or similar circumstances, or "without cause".
Mr. Brown may terminate his employment with the Company for a reason other than
a "good reason" upon 60 days' written notice and at any time for a "good
reason". "Good reason" includes the occurrence of any of the following
circumstances: (i) the assignment to Mr. Brown of any duties which are
materially inconsistent with his position in the Company held on the
Commencement Date or any other action that results in a material diminution in
his position, duties or responsibilities, (ii) the relocation of the Company's
offices at which Mr. Brown is principally employed on the Commencement Date to a
location outside the greater Los Angeles metropolitan area; (iii) the Company's
material breach of the provisions of the employment agreement; (iv) the
Company's reduction of Mr. Brown's base salary, except for across-the-board
salary reductions; or (v) the removal of Mr. Brown from the position of
Executive Vice President, Merchandising and Marketing. In the event of a
(i) termination by the Company due to an event of bankruptcy, reorganization or
similar circumstances or "without cause" or (ii) termination by Mr. Brown for
"good reason", Mr. Brown is entitled to a severance payment of his base salary
and targeted bonus in effect at the time of termination for a period of twelve
months. The employment agreement includes provisions restricting Mr. Brown from
competing, directly or indirectly, with the Company during employment and for
two years after the termination of employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee presently is comprised of Messrs. Weiss, Achabal
and Geller, neither of whom is or has been an officer or employee of the Company
or any of its subsidiaries. Mr. Weiss serves as the chair of the Compensation
Committee. For a description of the background of each of these individuals, see
"Proposal 1--Election of Directors to the Board of Directors."
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
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 SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (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.
* * * * * *
16
<PAGE>
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. During the fiscal year ended
February 26, 2000, the Compensation Committee was involved in the reviewing and
negotiating of the employment agreements with Messrs. Chinni, Menar and Brown.
Total compensation of each executive officer of the Company consists of four
components: (i) base salary, (ii) annual incentive in the form of a cash bonus,
(iii) long-term incentive in the form of equity based stock options and
(iv) 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 other public specialty retailers in comparable lines of trade and
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
competitive in the industry. The base salary for Mr. Chinni, the Chairman of the
Board of Directors, President and CEO, for the fiscal year ended February 26,
2000 was $538,750. Mr. Chinni's base salary was established in accordance with
the terms of his employment agreement with the Company.
Executive officers are eligible to receive annual incentives in the form of
a combination of cash bonuses and stock options. For the fiscal year ended
February 26, 2000, the cash bonuses were targeted at 15-50% of base salary and
were based on the Company's financial performance against certain pre-defined
goals. 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 cash bonuses will be based on
achievement of pre-defined net income levels, as well as an executive's personal
performance (although the Compensation Committee can approve exceptions for
outstanding individual performances). For the fiscal year ended February 26,
2000, the pre-defined financial performance targets were not met. Accordingly,
the Compensation Committee did not award incentive cash bonuses to executive
officers for the fiscal year ended February 26, 2000. Mr. Chinni received a
bonus of $195,000 in the current fiscal year ended February 26, 2000 for the
previous fiscal year ended February 27, 1999.
The other bonus 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 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 February 26,
2000 were 1,225,000.
17
<PAGE>
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 $1.0 million in any
taxable year of the corporation beginning after 1993. Compensation which
constitutes "performance-based compensation" is excludable in applying the
$1.0 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
Marco F. Weiss, Chairman
Dale D. Achabal
Marshall Geller
June 2, 2000
18
<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.
The historical stock market performance of the Common Stock shown below is
not necessarily indicative of future stock performance.
COMPARISON OF 52 MONTH CUMULATIVE TOTAL RETURN(1)
AMONG STROUDS, INC., A PEER GROUP(2) AND THE NASDAQ STOCK MARKET--US INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NASDAQ STOCK
<S> <C> <C> <C>
STROUDS, INC. PEER GROUP MARKET (U.S.)
02/25/1995 $100.00 $100.00 $100.00
03/02/1996 $60.00 $104.93 $137.97
03/01/1997 $51.67 $125.16 $166.85
02/28/1998 $26.25 $241.12 $228.06
02/27/1999 $25.83 $253.22 $297.00
02/26/2000 $36.67 $186.32 $589.60
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------
2/25/95 3/2/96 3/1/97 2/28/98 2/27/99 2/26/00
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
STROUDS, INC.................................... 100 60 52 26 26 37
PEER GROUP...................................... 100 105 125 241 253 186
NASDAQ STOCK MARKET (U.S.)...................... 100 138 167 228 297 590
</TABLE>
- --------------------------
(1) Assumes $100.00 was invested on February 25, 1995 in stock or index and
assumes dividends are reinvested.
(2) The Peer Group companies consist of Barnes & Noble, Inc., Bed Bath & Beyond
Inc., Bombay Company, Inc., Goodguys, Inc. Lechters, Inc., Linens 'n Things,
Inc., Pier 1 Imports, Inc. and Williams-Sonoma, Inc.
19
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT
The table below sets forth the beneficial ownership of the Company's Common
Stock as of May 1, 2000 for (1) each of the Named Executive Officers (as defined
under "Executive Compensation--Summary Compensation Table"), (2) each person who
is, as of May 1, 2000, a director on the Board of Directors of the Company,
including all nominees to the Board of Directors, and (3) all current directors
and current executive officers as of May 1, 2000 as a group. Pursuant to the
rules of the Securities and 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>
NUMBER OF SHARES
OF COMMON STOCK PERCENT OF
NAME OF BENEFICIAL OWNER POSITION BENEFICIALLY OWNED CLASS
- -------------------------- ------------------------------------------ ------------------ ----------
<S> <C> <C> <C>
Charles R. Chinni......... Chairman of the Board of Directors, 806,142(a) 10.4%
President, and Chief Executive Officer
Wilfred C. Stroud......... Founder, Chairman Emeritus and Director 867,018(b) 12.1%
Robert M. Menar........... Director, Chief Operating Officer and 18,850 *
Secretary
Harry Brown............... Executive Vice President--General -- *
Merchandise Manager
Denise Marsicano.......... Senior Vice President--Stores 35,826(e) *
Gary Van Wagner........... Vice President--Chief Financial Officer 4,000(c) *
Douglas C. Felderman(d)... Senior Vice President--Finance, Chief 2,500 *
Financial Officer and Secretary
Dale D. Achabal........... Director 64,500(f) *
Larry R. Bemis............ Director 19,950(f) *
Marshall S. Geller........ Director 770,140(g) 10.8
Marco F. Weiss............ Director 28,000(h) *
All directors and 2,614,426(i) 33.2%
executive officers as a
group
(10 persons)............
</TABLE>
- --------------------------
* Less than 1%.
(a) Beneficial ownership includes 656,250 shares of Common Stock which may be
acquired upon exercise of stock options exercisable within the next 60 days.
(b) Beneficial ownership includes 37,380 shares of Common Stock which may be
acquired upon exercise of stock options exercisable within the next 60 days.
(c) Beneficial ownership includes 4,000 shares of Common Stock which may be
acquired upon exercise of stock options exercisable within the next 60 days.
(d) Mr. Felderman resigned as an officer of the Company, effective May 27, 1999.
(e) Beneficial ownership includes 35,666 shares of Common Stock which may be
acquired upon exercise of stock options exercisable within the next 60 days.
(f) Beneficial ownership includes 12,500 shares of Common Stock which may be
acquired upon exercise of stock options exercisable within the next 60 days.
(g) Beneficial ownership includes 5,000 shares of Common Stock which may be
acquired upon exercise of stock options exercisable within the next 60 days.
(h) Beneficial ownership includes 10,000 shares of Common Stock which may be
acquired upon exercise of stock options exercisable within the next 60 days.
(i) Beneficial ownership includes 773,296 shares of Common Stock which may be
acquired upon exercise of stock options exercisable within the next 60 days.
20
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below sets forth certain information regarding the beneficial
owners of more than 5% of the Company's Common Stock, other than the Company's
directors and executive officers, as of May 1, 2000:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- ------------------------------------------------------------ ------------------ -----------
<S> <C> <C>
West Highland Capital, Inc. ("WHC") ........................ 680,000(1) 9.5%
300 Drake's Landing Road, Suite 290
Greenbrace, CA 94904
J.R. Zone, as Trustee of the ............................... 539,779(2) 7.6%
J.R. Zone 1983 Trust Agreement
20700 Ventura Boulevard, #335
Woodland Hills, CA 91364
Dimensional Fund Advisors Inc. ("DFAI") .................... 600,900(3) 8.4%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
U.S. Bancorp ("Bancorp") ................................... 438,000(4) 6.1%
111 S.W. Fifth Avenue
Portland, OR 97204
Bedford Oak Partners, L.P. ................................. 651,000(5) 9.1%
100 South Bedford Road
Mount Kisco, New York 10549
</TABLE>
- --------------------------
(1) 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.
(2) Information based solely on the Schedule 13G dated February 1, 1995 filed by
J.R. Zone with the Securities and Exchange Commission.
(3) Information based solely on the Schedule 13G dated February 11, 2000 filed
by DFAI with the Securities and Exchange Commission. DFAI has (i) sole
voting power with respect to 600,900 shares of Common Stock and (ii) sole
dispositive power with respect to 600,900 shares of Common Stock. Schedule
13G of DFAI states that all securities reported in the Schedule 13G are
owned by DFAI's advisory clients, including commingled group trusts, none of
which, to the knowledge of DFAI, owns more that 5% of the class.
(4) Information based solely on the Schedule 13G dated February 14, 1997 filed
by Bancorp with the Securities and Exchange Commission. Qualivest Capital
Management, Inc., a registered investment advisor and a wholly owned
subsidiary of United States National Bank of Oregon, a wholly owned
subsidiary of Bancorp, is deemed to have beneficial ownership of 235,300
shares, or 2.8% of the Common Stock. The remaining 202,700 shares or 2.3% of
the Common Stock are deemed to be beneficially held by the Trust Group of
Bancorp. Bancorp has (i) sole voting power with respect to 438,000 shares of
Common Stock, (ii) sole dispositive power with respect to 199,500 shares of
Common Stock and (iii) shared dispositive power with respect to 1,200 shares
of Common Stock.
(5) Information based solely on Amendment No. 1 to the Schedule 13G dated
February 11, 2000 filed with the Securities and Exchange Commission jointly
by Bedford Oak Partners, L.P., a Delaware limited partnership ('BOP'),
Bedford Oak Advisors, LLC, a Delaware limited liability company and the
investment manager of BOP ('BOA'), and Harvey Eisen ('Eisen'), the managing
member of BOA (collectively, the 'Reporting Persons'). The business address
of each of the Reporting Persons is 100 South Bedford Road, Mount Kisco, New
York 10549. Eisen is a United States citizen.
21
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS RELATING TO CHF AND REFLECTIONS
In 1979, Mr. Stroud, the Founder, Chairman Emeritus and a director of the
Company, invested in Reflections Fine Bedding Attire, Inc. ("Reflections"), a
manufacturer of bedding merchandise and accessories. Until 1993, Mr. Stroud had
been a director of Reflections and had beneficially owned (along with his
spouse) 45% of the stock of Reflections. In the fiscal year ended February 26,
2000, Reflections sold approximately $30,000 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 2.6% 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 ten 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.
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
22
<PAGE>
year ended February 26, 2000, purchases by Strouds from Reflections and CHF
equaled 0.02% of the Company's total cost of sales, including buying and
occupancy.
During the contract year ended May 31, 1999, total sales of the Reflections
Business were $1.5 million, of which $0.2 million were sales to Strouds.
Pursuant to the formula described above, Mr. Stroud received a payment of $5,000
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, 1999, a total of $553,000 (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.
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.
OTHER RELATIONSHIP
Mr. Bemis, a director on the Company's Board of Directors, is a partner in
the law firm of Millar, Hodges & Bemis which has provided legal services to the
Company since the Company's formation and continues to provide such services on
an ongoing basis to the Company. Mr. Bemis's firm receives customary legal fees
for such services. For the fiscal year ended February 26, 2000, the aggregate
fees paid by the Company to the law firm of Millar, Hodges and Bemis was
approximately $12,700.
23
<PAGE>
OTHER INFORMATION
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of 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 (collectively, "Insiders"), to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of the Common Stock. Insiders are required by the Securities and
Exchange 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 February 26,
2000, all Insiders complied with all Section 16(a) filing requirements
applicable to them.
OTHER MATTERS AT THE MEETING
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those mentioned in this Proxy Statement. If any other
matters are properly brought before the Annual Meeting, or any adjournment or
postponement thereof, 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., 77 Water Street, New
York, New York 10005, telephone (212) 269-5550, to assist in the solicitation of
proxies with respect to the shares of Common Stock held of record by brokers,
nominees and institutions. The estimated cost of the services of D.F. King &
Co., Inc. is $4,000, plus expenses.
STOCKHOLDER PROPOSALS FOR 2001 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 2001 Annual Meeting. 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 February 1, 2001. 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. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the annual meeting is given or made to the
stockholders, the stockholder's notice, to be timely, must be received no later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting
24
<PAGE>
was mailed or such public disclosure was made, whichever first occurs. A
stockholder's notice to the secretary of the Company shall set forth: (a) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (b)
the name and record address of the stockholder proposing such business, (c) the
class, series and number of shares of the Corporation which are beneficially
owned by the stockholder and (d) any material interest of the stockholder in
such business.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the 1934 Act
and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission. Reports, proxy
statements and other information filed by the Company may be inspected without
charge and copies obtained upon payment of prescribed fees from the Public
Reference Section of the Securities and Exchange Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, or at the
Securities and Exchange Commission's regional offices located at 7 World Trade
Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60621-2511, or by way of the
Securities and Exchange Commission's Internet address, http://www.sec.gov.
The Company's Annual Report to Stockholders, including the Company's audited
financial statements, for the fiscal year ended February 26, 2000 is being
mailed to all stockholders of record. The Company will provide without charge to
each person to whom a copy of the Proxy Statement is delivered, upon the written
or oral request of any such persons, copies of the Company's Annual Report on
Form 10-K for the fiscal year ended February 26, 2000 filed with the Securities
and Exchange Commission. Requests for such copies should be addressed to:
Strouds, Inc., 780 South Nogales Street, City of Industry, California 91748,
Attn: Secretary, telephone (626) 912-2866.
ALL STOCKHOLDERS ARE URGED TO IMMEDIATELY COMPLETE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
[SIGNATURE]
Charles R. Chinni
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
City of Industry, California
June 2, 2000
25
<PAGE>
P R O X Y
STROUDS, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JULY 12, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Charles R. Chinni or Robert M. Menar, 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, at 10:00 a.m., local time
on Wednesday, July 12, 2000 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
<PAGE>
(1) ELECTION OF SEVEN DIRECTORS / / VOTE for ALL (EXCEPT AS MARKED TO THE
CONTRARY BELOW) / / WITHHELD for ALL
Charles R. Chinni Wilfred C. Stroud Larry R. Bemis Dale D. Achabal Marco
F. Weiss Marshall S. Geller Robert M. Menar
(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 LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS.
/ / FOR / / AGAINST / / ABSTAIN
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement dated June 2, 2000.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
Dated: ______________________, 2000
___________________________________
(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.
