<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
DAY RUNNER, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE> 2
DAY RUNNER, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 4, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders (the
"Annual Meeting") of Day Runner, Inc., a Delaware corporation (the "Company"),
will be held Wednesday, December 4, 1996, at 9:00 a.m., California time, at The
Sutton Place Hotel located at 4500 MacArthur Boulevard, Newport Beach,
California 92660, for the following purposes, each as more fully described in
the attached Proxy Statement:
1. To elect seven directors. The names of the nominees
intended to be presented for election are: James P. Higgins, Jill Tate Higgins,
Charles Miller, Alan R. Rachlin, Mark A. Vidovich, Boyd I. Willat and Felice
Willat.
2. To approve an amendment to the Company's 1995 Stock Option
Plan to increase the aggregate number of shares authorized for issuance
thereunder from 300,000 to 500,000 shares.
3. To approve the Company's grant to each of its non-employee
directors of a warrant to purchase 25,000 shares of the Company's Common Stock.
4. To ratify the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the fiscal year ending June 30, 1997.
5. To transact such other business as may properly come before
the Annual Meeting and any adjournment(s) thereof.
Only record holders of Common Stock at the close of business on October
14, 1996 are entitled to notice of, and to vote at, the Annual Meeting and at
any adjournment(s) thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. Whether or not you expect to attend the Annual Meeting in person, in
order to ensure your representation at the Annual Meeting, please mark, sign,
date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the Annual Meeting may vote in person even if such stockholder has returned a
proxy.
By Order of the Board of Directors
Dennis K. Marquardt
Secretary
Irvine, California
October 29, 1996
<PAGE> 3
DAY RUNNER, INC.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited by and on behalf of the Board of
Directors of Day Runner, Inc. ("Day Runner" or the "Company") for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held Wednesday,
December 4, 1996, at 9:00 a.m., California time, and at any adjournment(s)
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at The Sutton
Place Hotel located at 4500 MacArthur Boulevard, Newport Beach, California
92660.
These proxy solicitation materials will first be mailed on or about
October 29, 1996 to stockholders entitled to vote at the Annual Meeting.
Only stockholders of record at the close of business on October 14,
1996 (the "Record Date") are entitled to notice of, and to vote at, the Annual
Meeting. At the Record Date, 6,329,771 shares of Common Stock were issued and
outstanding.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person.
VOTING AND SOLICITATION
On all matters, each share of Common Stock has one vote. Except as
otherwise required by law or the Company's Certificate of Incorporation or
Bylaws, the affirmative vote of a majority of shares present, in person or by
proxy, and entitled to vote at the Annual Meeting is required for the approval
of matters submitted to the stockholders for a vote. Abstentions are counted as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. Abstentions, however, do not constitute a vote "for" or
"against" any matter and thus will be disregarded in the calculation of a
plurality or of "votes cast." Broker non-votes are counted as shares that are
present and entitled to vote for purposes of determining a quorum. If a broker
indicates on the proxy that it does not have discretionary authority to vote on
a particular matter as to certain shares, those shares will be counted for
purposes of determining the presence of a quorum but will not be treated as
present and entitled to vote with respect to that matter (even though such
shares are considered present and entitled to vote for quorum purposes and may
be entitled to vote on other matters).
The costs of this solicitation will be borne by the Company. The
Company has retained the services of Corporate Investor Communications, Inc. to
assist in distributing proxy materials to brokerage houses, banks, custodians
and other nominee holders. The estimated cost of such services is $1,000 plus
out-of-pocket expenses. Although there are no formal agreements to do so, the
Company may reimburse brokerage houses and other persons representing beneficial
owners of shares for their expenses in forwarding proxy materials to such
beneficial owners. Proxies may be solicited personally or by telephone or
telegram by certain of the Company's directors, officers and regular employees,
without additional compensation.
<PAGE> 4
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's annual meeting of stockholders
to be held in 1997 must be received by the Company no later than June 27, 1997
in order that they may be included in the proxy statement and form of proxy
relating to that annual meeting. It is recommended that stockholders submitting
proposals direct them to the Secretary of the Company via certified mail, return
receipt requested, in order to ensure timely delivery. No such proposals were
received with respect to the Annual Meeting scheduled for December 4, 1996.
PROPOSAL 1 - ELECTION OF DIRECTORS
NOMINEES
A board of seven directors will be elected at the Annual Meeting.
Unless otherwise instructed, proxy holders will vote the proxies received by
them for the Company's seven nominees named below, all of whom are currently
directors of the Company. It is not expected that any nominee will be unable or
will decline to serve as a director. The term of office of each person elected
as a director will continue until the next annual meeting of stockholders and
such time as his or her successor is duly elected and qualified or until his or
her earlier resignation, removal or death.
The names of the nominees, and certain information about them, are set
forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
- ---- --- ----------------------------
<S> <C> <C>
Mark A. Vidovich 46 Chairman of the Board, Chief Executive Officer and Director
James P. Higgins 47 Director
Jill Tate Higgins 40 Director
Charles Miller 54 Director
Alan R. Rachlin 45 Director
Boyd I. Willat 53 Director
Felice Willat 52 Director
</TABLE>
Mr. Vidovich joined the Company as Chief Executive Officer and a
director in April 1986 and assumed the additional position of Chairman of the
Board in March 1990.
Mr. Higgins has been a director since February 1987. Since 1984, Mr.
Higgins has been President and Chairman of the Board of Higgins Management
Company, a financial consulting firm. Mr. Higgins is the husband of Ms. Higgins.
Ms. Higgins has been a director since June 1986. Ms. Higgins is a
private investor and is the wife of Mr. Higgins.
Mr. Miller has been a director since August 1986. Mr. Miller is a
private investor.
-2-
<PAGE> 5
Mr. Rachlin has been a director since August 1987. In November 1994,
Mr. Rachlin became Chief Executive Officer and President of Pate's Realm, Inc.,
a software developer. From November 1992 until November 1994, Mr. Rachlin was a
business consultant. From May 1987 until October 1992, Mr. Rachlin held various
executive management positions at Government Technology Services, Inc., a
reseller of computer products to the government market, and most recently served
as its Executive Vice President-- Strategic Development and General Counsel.
Mr. Willat is a co-founder of the Company, has been a director since
its incorporation and served as Chairman of the Board from May 1981 until August
1988. Mr. Willat has served as President and Chief Executive Officer of Willat
Writing Instruments, a pen manufacturer, since June 1988, and he has served as
President of Isola Bella, Inc., a real estate development company, since June
1987. Mr. Willat is the husband of Ms. Willat.
Ms. Willat is a co-founder of the Company and has been a director since
October 1980. She served as President from 1981 until June 1990 and as Vice
President, Consumer Affairs from June 1990 until July 1993 when she became
Director, Consumer Affairs. Ms. Willat is the wife of Mr. Willat.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE NOMINEES NAMED ABOVE.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held a total of five meetings during the fiscal
year ended June 30, 1996 and acted by unanimous written consent six times.
During the 1996 fiscal year, each director of the Company attended at least 75%
of the aggregate number of (i) all meetings of the Board of Directors and (ii)
all meetings held by all committees of the Board on which he or she served.
The Audit Committee, which is comprised of Messrs. Higgins, Miller and
Rachlin (Chairman), met six times during the fiscal year ended June 30, 1996.
The Audit Committee recommends the engagement of independent auditors, reviews
accounting policies, internal accounting controls, the independence of auditors
and the scope and results of audit engagements and generally performs functions
related to the financial condition and policies of the Company. The Compensation
Committee, which is comprised of Ms. Higgins (Chairperson) and Messrs. Miller
and Rachlin, met two times and acted by unanimous written consent once during
the fiscal year ended June 30, 1996. The Compensation Committee is responsible
for administering the Company's Amended and Restated 1986 Stock Option Plan and
1995 Stock Option Plan, including determining the persons to whom options are
granted and the terms of such options, and the Company's Employee Stock Purchase
Plan, determining the annual compensation to be paid to the Company's executive
officers, approving the annual officer bonus plan and performing such other
duties regarding compensation matters as may be delegated to it by the Board of
Directors from time to time.
The Company does not have a nominating committee or any committee
performing the function thereof.
-3-
<PAGE> 6
COMPENSATION OF DIRECTORS
The Company pays each non-employee director an annual fee of $10,000,
payable quarterly, plus $750 and expenses for each Board of Directors meeting
attended. The Company pays each member of the Compensation and Audit Committees
an annual fee of $8,000 ($12,000 for the Chairperson of each such Committee),
payable quarterly, plus $750 and expenses for each Committee meeting attended.
In July 1995, Mr. Rachlin entered into a two-year consulting agreement
with the Company pursuant to which he agreed to perform consulting services for
the Company in exchange for ten-year warrants to purchase 25,000 shares of the
Company's Common Stock at $19.00 per share. The consulting agreement was
approved unanimously by the Board of Directors of the Company.
EXECUTIVE OFFICERS
The executive officers of the Company, and certain information about
them, are as follows:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----
<S> <C> <C>
Mark A. Vidovich 46 Chairman of the Board, Chief Executive Officer and Director
James E. Freeman, Jr. 49 President and Chief Operating Officer
Dennis K. Marquardt 54 Executive Vice President, Finance & Administration,
Chief Financial Officer and Corporate Secretary
Dennis G. Baglama 44 Vice President, Sales
Ronald M. Bianco 49 Vice President, Product Development
Lee R. Coffey 60 Vice President, Human Resources
John P. Kirkland 52 Vice President, Operations, North America
Stan Littley 37 Vice President, International Sales
Judy Tucker 51 Vice President, Corporate Development
Richard J. Whatley 52 Vice President, Chief Information Officer
</TABLE>
Officers are appointed by and serve at the discretion of the Board of
Directors. The Company has no employment agreements with any of its officers.
For information concerning Mr. Vidovich, see "Election of Directors - Nominees"
above.
Mr. Freeman joined the Company as Chief Operating Officer in March 1993
and assumed the additional position of President in May 1995. From August 1992
until March 1993, Mr. Freeman was employed as a consultant by New Product
Insights, an Overland Park, Kansas-based marketing consulting firm. From 1986
until July 1992, he served as President, Chief Operating Officer and a director
of Stuart Hall Company, Inc., a Kansas City, Missouri-based manufacturer of
office and school supplies.
Mr. Marquardt joined the Company in April 1986 and has served as its
Chief Financial Officer since that time. He also served as Vice President,
Finance of the Company from April 1986 until March 1990 and as Executive Vice
President, Finance & Operations from March 1990 until April 1993 when he was
appointed Executive Vice President, Finance & Administration.
-4-
<PAGE> 7
Mr. Baglama joined the Company as National Sales Manager in January
1985, became National Sales Director in June 1987 and was appointed Vice
President, Sales in December 1990.
Mr. Bianco joined the Company in June 1985 and held various non-officer
positions until his appointment as Vice President, Product Development in
December 1990.
Mr. Coffey joined the Company as Senior Director, Human Resources in
January 1992 and became Vice President, Human Resources in January 1994. From
January 1991 until joining the Company, he served as Vice President of Richard
E. Nosky & Associates, a Phoenix, Arizona-based executive search and management
consulting firm.
Mr. Kirkland joined the Company as Director, Customer Service &
Distribution in February 1991 and became Senior Director, Customer Service &
Distribution in February 1992. He became Vice President, Customer Service &
Distribution in April 1993 and was appointed Vice President, Operations, North
America in March 1996.
Ms. Tucker joined the Company in September 1990 and held various
non-officer positions until her appointment as Vice President, Corporate
Development in March 1994.
Mr. Littley joined the Company in January 1986 and held various
non-officer sales positions until his appointment as Vice President,
International Sales in March 1996.
Mr. Whatley joined the Company as Senior Director, Information Services
in December 1993 and became Vice President, Chief Information Officer in
February 1995. He served as Vice President, Information Services of Authentic
Fitness Corporation, an apparel manufacturer, from October 1993 until joining
the Company, and of Taren Holdings, Inc., an apparel manufacturer, from December
1991 until its acquisition by Authentic Fitness Corporation in October 1993.
-5-
<PAGE> 8
COMMON STOCK OWNERSHIP OF
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 1, 1996 by (i) each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of the Company's Common Stock, (ii) each of the Company's
directors, (iii) the executive officers named in the Summary Compensation Table
on page 8 and (iv) all current directors and officers of the Company as a group:
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER(1) SHARES BENEFICIALLY OWNED PERCENT OF CLASS
- --------------------------- ------------------------- ----------------
<S> <C> <C>
Jill Tate Higgins(2) 1,097,540 17.3%
10153 1/2Riverside Drive, #598
Toluca Lake, CA 91602
William Blair & Company(3) 756,190 11.9
135 South LaSalle Street
Chicago, IL 60603
KAIM Non-Traditional, L.P.(4) 483,271 7.6
1800 Avenue of the Stars, 2nd Floor
Los Angeles, CA 90067
Mark A. Vidovich(5)(6) 374,034 5.7
15295 Alton Parkway
Irvine, CA 92718
Felice Willat(7) 334,252 5.3
15295 Alton Parkway
Irvine, CA 92718
Alan R. Rachlin(5) 294,184 4.5
Boyd I. Willat(8) 228,709 3.6
Dennis K. Marquardt(5)(9) 158,142 2.5
James P. Higgins(10) 81,214 1.3
James E. Freeman, Jr.(5)(11) 79,800 1.2
Ronald M. Bianco(5) 40,716 *
Dennis G. Baglama(5) 14,250 *
Charles Miller(5) 8,000 *
All current directors and officers
as a group (16 persons)(2)(5)(6)(7)(8)(9)(10)(11) 2,657,788 38.0
</TABLE>
- ------------------------------
* Less than one percent.
(footnotes continue on next page)
-6-
<PAGE> 9
(1) Such persons have sole voting and investment power with respect to all
shares of Common Stock shown as being beneficially owned by them, subject
to community property laws, where applicable, and the information
contained in the footnotes to this table.
(2) Includes 1,027,426 shares held by O.S. II, Inc., a California corporation
of which Ms. Higgins, along with one of her minor children, is the sole
owner. Also includes 70,114 shares held by Lakeside Enterprises, L.P., a
California limited partnership of which Ms. Higgins is the general partner
and a limited partner and of which O.S. II, Inc. is a limited partner.
Does not include 11,100 shares beneficially owned by James P. Higgins, Ms.
Higgins' husband, as to which shares Ms. Higgins disclaims beneficial
ownership (see footnote 10 below).
(3) Based on a Form 13F dated August 14, 1996, wherein William Blair & Company
reported that, as of June 30, 1996 and as an institutional investment
manager, it had sole investment discretion as to such shares and sole
voting authority as to 177,700 of such shares.
(4) Based on a Form 13F dated August 13, 1996, wherein KAIM Non-Traditional,
L.P. reported that, as of June 30, 1996 and as an institutional investment
manager, it had sole investment discretion and voting authority as to such
shares.
(5) Includes 205,261, 190,624, 42,885, 71,750, 30,000, 14,250, 8,000 and
661,145 shares for which options or warrants beneficially owned by Messrs.
Vidovich, Rachlin, Marquardt, Freeman, Bianco, Baglama and Miller and all
current directors and officers as a group, respectively, are exercisable
or become exercisable within 60 days after September 1, 1996.
(6) Does not include 2,559 and 7,600 shares held by Mr. Vidovich's children
and by a trustee for the benefit of Mr. Vidovich's children, respectively,
as to which shares Mr. Vidovich disclaims beneficial ownership.
(7) Includes 20,000 shares for which options held by Ms. Willat are
exercisable or become exercisable within 60 days after September 1, 1996.
Also includes 34,000 shares held by Mr. and Ms. Willat as trustees of
trusts for the benefit of their minor children and as to which shares Mr.
and Ms. Willat share voting and investment power. Does not include 194,709
shares beneficially owned by Boyd I. Willat, Ms. Willat's husband, as to
which shares Ms. Willat disclaims beneficial ownership (see footnote 8
below).
(8) Includes 25,000 shares for which warrants held by Mr. Willat are
exercisable or become exercisable within 60 days after September 1, 1996.
Also includes 34,000 shares held by Mr. and Ms. Willat as trustees of
trusts for the benefit of their minor children and as to which shares Mr.
and Ms. Willat share voting and investment power. Does not include 300,252
shares beneficially owned by Felice Willat, Mr. Willat's wife, as to which
shares Mr. Willat disclaims beneficial ownership (see footnote 7 above).
(9) Includes 7,600 shares held by Mr. Marquardt as trustee for Mr. Vidovich's
children.
(10) Includes 5,500 shares for which warrants held by Mr. Higgins are
exercisable or become exercisable within 60 days after September 1, 1996.
Also includes 70,114 shares held by Lakeside Enterprises, L.P., a
California limited partnership of which Mr. Higgins is a limited partner
in his individual capacity and as custodian for each of the six minor
children of Mr. Higgins and Jill Tate Higgins, Mr. Higgins' wife. Does not
include 1,027,426 shares beneficially owned by Ms. Higgins as to which
shares Mr. Higgins disclaims beneficial ownership (see footnote 2 above).
(11) Includes 2,000 shares held by Mr. Freeman's wife for the benefit of their
minor children.
-7-
<PAGE> 10
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning
compensation paid or accrued for the years indicated below by the Company and
its subsidiaries to or on behalf of the Company's Chief Executive Officer and
each of the four other most highly compensated executive officers for the fiscal
year ended June 30, 1996:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
-------------------
COMPENSATION
NAME AND AWARDS ALL OTHER
------
PRINCIPAL POSITION YEAR(1) SALARY($)(2) BONUS($)(3) OPTIONS(#) COMPENSATION($)(4)
------------------ ------- ------------ ----------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Mark A. Vidovich 1996 $300,000 $285,480 75,875 $2,966
Chief Executive Officer and 1995 200,000 122,000 50,000 3,000
Chairman of the Board 1994 100,000 83,072 100,000 1,746
James E. Freeman, Jr. 1996 250,000 230,100 50,000 2,570
President and 1995 175,000 103,250 25,000 2,625
Chief Operating Officer 1994 87,500 64,147 50,000 547
Dennis K. Marquardt 1996 150,000 131,040 10,000 2,310
Executive Vice President, 1995 150,000 84,000 10,000 2,250
Finance & Administration 1994 75,000 49,984 10,000 1,791
and Chief Financial Officer
Dennis G. Baglama 1996 132,000 111,197 10,000 1,569
Vice President, Sales 1995 132,000 71,200 5,000 1,980
1994 66,000 33,930 10,000 363
Ronald M. Bianco 1996 132,000 111,197 10,000 2,358
Vice President, 1995 125,000 52,188 5,000 1,875
Product Development 1994 62,500 24,841 10,000 1,363
</TABLE>
- --------------------------------
(1) The years 1996 and 1995 refer to the twelve months ended June 30, 1996
and 1995, respectively, and the year 1994 refers to the six months ended
June 30, 1994.
(2) Includes amounts, if any, deferred by the named officer under the
Company's 401(k) Plan.
(3) Bonuses were based on the Company's financial performance and, except
for discretionary bonuses in the amounts of $25,000, $15,000 and $10,000
included in the amounts shown for 1994 with respect to Messrs. Vidovich,
Freeman and Marquardt, respectively, were paid under the Company's
Officer Bonus Plan.
(4) All amounts shown represent Company matching contributions allocated
under the Company's 401(k) Plan to the accounts of the named officers.
-8-
<PAGE> 11
OPTION GRANTS IN FISCAL YEAR 1996
The following table sets forth certain information concerning stock
option grants in the fiscal year ended June 30, 1996 to the executive officers
named in the Summary Compensation Table:
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
--------------------------------------------------------- AT ASSUMED
ANNUAL RATES
% OF TOTAL OF STOCK PRICE
OPTIONS APPRECIATION
GRANTED TO EXERCISE FOR OPTION TERM(3)
OPTIONS EMPLOYEES PRICE EXPIRATION ------------------
NAME GRANTED (#)(1) IN FY 1996(2) ($/SHARE) DATE 5% ($) 10% ($)
---- -------------- ------------- --------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Mark A. Vidovich 75,875 45.1% $16.75 8/8/05 $799,266 $2,025,498
James E. Freeman, Jr. 50,000 29.7 16.75 8/8/05 526,699 1,334,760
Dennis K. Marquardt 10,000 5.9 16.75 8/8/05 105,340 266,952
Dennis G. Baglama 10,000 5.9 16.75 8/8/05 105,340 266,952
Ronald M. Bianco 10,000 5.9 16.75 8/8/05 105,340 266,952
</TABLE>
- ------------------------------
(1) Such options were granted under the Company's Amended and Restated 1986
Stock Option Plan (the "1986 Plan"), vest and become exercisable in 20
equal quarterly installments over five years and were granted for terms of
ten years subject to earlier termination under certain circumstances
relating to termination of employment. The exercise prices of such options
represent the reported closing sales price of the Company's Common Stock
on The Nasdaq Stock Market on the grant date.
(2) The Company granted options to purchase an aggregate of 168,375 shares of
Common Stock under the 1986 Plan to employees in the fiscal year ended
June 30, 1996.
(3) Potential values are net of exercise price and before taxes payable in
connection with the exercise of such options or the subsequent sale of
shares acquired upon the exercise of such options. These values represent
certain assumed rates of appreciation of the Company's Common Stock (i.e.,
5% and 10% compounded annually over the term of such options) based on the
SEC's rules. The actual values will depend upon, among other factors, the
future performance of the Company's Common Stock, overall market
conditions and the named officer's continued employment with the Company.
Therefore, the potential values reflected in this table may not
necessarily be achieved.
-9-
<PAGE> 12
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996 AND OPTION VALUES AT
JUNE 30, 1996
The following table sets forth certain information concerning stock
option exercises during the fiscal year ended June 30, 1996 and unexercised
options held as of June 30, 1996 by the executive officers named in the Summary
Compensation Table:
<TABLE>
<CAPTION>
SHARES NUMBER OF SHARES VALUE OF
ACQUIRED UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS AT 6/30/96 OPTIONS AT 6/30/96(2)
------------------ ---------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark A. Vidovich 48,500 $978,078 164,037 210,713 $2,243,071 $2,392,836
James E. Freeman, Jr. 20,000 157,500 49,250 118,750 589,594 1,291,406
Dennis K. Marquardt 18,000 314,820 35,575 32,525 491,784 364,178
Dennis G. Baglama 20,000 238,125 8,250 26,750 103,594 310,656
Ronald M. Bianco 10,500 182,395 24,500 25,500 340,125 292,375
</TABLE>
- --------------------------------
(1) Such value represents the difference between the market value of the
shares acquired upon exercise of such options (calculated using the
closing sales price of the Company's Common Stock on the date of exercise
as reported on The Nasdaq Stock Market) and the exercise price of such
options.
(2) Such value represents the difference between the market value of the
shares underlying such "in-the-money" options (calculated using the
closing sales price (i.e., $25.875) of the Company's Common Stock on June
30, 1996 as reported on The Nasdaq Stock Market) and the exercise price of
such options.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
OFFICER SEVERANCE PLAN
In 1993, the Company implemented an officer severance plan (the
"Severance Plan") under which officers of the Company are entitled to receive
certain severance benefits following termination of employment, if such
termination is non-temporary, involuntary and without cause. In addition, if
there is a "change in control" of the Company, an officer will receive benefits
under the Severance Plan if such officer terminates his or her employment with
the Company either for any reason within one year following the change in
control or for "good reason" (which includes the assignment to the officer of
duties significantly inconsistent with his or her prior position or a reduction
in his or her compensation or benefits) within two years following such change
in control.
Each eligible officer is entitled to severance pay based on his or her
highest annual compensation (i.e., base salary plus automobile allowance), the
number of years employed by the Company and the highest office attained prior to
termination. The amounts that would be payable under the Severance Plan to
Messrs. Vidovich, Freeman, Marquardt, Baglama and Bianco if their employment
were terminated as of September 1, 1996 and they were eligible for severance
benefits under the Severance Plan would be $384,000, $192,900, $183,400,
$103,500, and $103,500, respectively.
-10-
<PAGE> 13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee presently consists of Jill Tate Higgins
(Chairperson), Charles Miller and Alan R. Rachlin, all of whom are outside
directors. No member of the Compensation Committee is a current or former
officer or employee of the Company or any of its subsidiaries.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Election of Directors - Compensation of Directors."
The following Compensation Committee Report on Executive Compensation
and the Performance Graph on page 14 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 or under the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates such information by reference, and shall not otherwise
be deemed filed under such Acts.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for determining and approving
the annual compensation to be paid and the benefits to be provided to the
Company's executive officers and for administering the Company's stock option
plans. The Company's compensation program is designed to attract, retain and
motivate qualified executive officers who the Company believes will contribute
to its long-term success. The Company's compensation program is comprised
primarily of annual base salaries, stock option grants and cash bonuses based on
the Company's fiscal year financial performance. In addition, executive officers
are eligible to participate in the Company's employee stock purchase plan and
receive automobile allowances, group life insurance and health benefits as part
of their overall compensation. The Committee considers each component of
compensation within the context of the entire officer compensation program in
making its determinations.
The Compensation Committee of the Board of Directors during fiscal 1996
consisted of Jill Tate Higgins (Chairperson), Charles Miller and Alan R.
Rachlin, all of whom are outside directors. Although Mr. Vidovich, the Company's
Chief Executive Officer, is invited from time to time to attend meetings of the
Compensation Committee and periodically consults with and makes recommendations
to the Committee regarding officer compensation, he is not entitled to vote on
any matters under consideration by the Committee and does not participate in
discussions during Committee meetings regarding the setting of his annual base
salary, the award of any bonus to him or the grant of stock options to him.
Annual Base Salaries. The Compensation Committee reviews and approves
the annual base salaries of all executive officers (including the Chief
Executive Officer). In determining annual base salaries, the Committee considers
both subjective and objective factors, including, among others, an officer's
responsibilities, experience and qualifications, job performance, contributions
and length of service to the Company, general information concerning competitive
salaries and the Company's financial results and condition. For fiscal year
1996, principally in recognition of the Company's improved financial results and
achievement of certain corporate objectives in fiscal year 1995, the
Compensation Committee increased the annual base salaries of the Company's Chief
Executive Officer, President and Chief Operating Officer and Vice President,
Product Development by 50%, 42.9% and 5.6%, respectively, over fiscal 1995
levels. For
-11-
<PAGE> 14
fiscal 1996, the Committee did not increase annual base salaries of the
Company's other executive officers over fiscal 1995 levels principally because
of the Committee's belief that (i) such officers' base salaries were adequate
and appropriate in light of the foregoing factors and (ii) the principal
opportunity for increased compensation should be incentive-based and depend on
appreciation in the value of the Company's Common Stock subject to or acquired
upon the exercise of stock options granted to such officers and bonuses based on
the Company's financial performance.
Bonuses. The Compensation Committee believes that a significant portion
of an officer's overall compensation should be incentive-based and directly
linked to the financial performance of the Company and to the Company's goal of
increasing stockholder value. Under the terms of an officer bonus plan adopted
annually for each fiscal year and administered by the Compensation Committee,
executive officers are entitled to receive cash bonuses only if fiscal year
after bonuses net income increases by at least 20% over the prior fiscal year's
after bonuses net income. If such 20% net income growth is achieved, each
officer is entitled to receive a cash bonus based on a percentage of his or her
annual base salary, and such percentage increases as the rate of such net income
growth achieved exceeds 20%. Such bonuses are calculated and paid after
completion of the Company's annual audit. The minimum after bonuses net income
at which officers were eligible to receive bonuses under the Fiscal 1996 Officer
Bonus Plan was $9,574,000 (i.e., 120% of the Company's after bonuses net income
for the twelve months ended June 30, 1995). Based on fiscal 1996 after bonuses
net income of $11,818,000, an aggregate of $1,120,188 in bonuses was earned by
the Company's executive officers under the Fiscal 1996 Officer Bonus Plan.
Individual bonuses ranged from 54.6% to 95.2% of an officer's base salary.
Stock Options. Options to purchase the Company's Common Stock have
historically been and continue to be a key component of the Company's
compensation program. The Compensation Committee views the grant of stock
options as a valuable incentive that serves to attract, retain and motivate
executive officers and other key employees as well as to align their interests
more closely with the Company's goal of enhancing stockholder value. The
Committee reviews and considers recommendations by the Company's Chief Executive
Officer with regard to the grant of stock options to executive officers (other
than himself) and certain key employees. In determining the size, frequency and
other terms of an option grant to an executive officer, the Committee considers
a number of factors, including, among others, such officer's position,
responsibilities, job performance, prior option grants, contributions and length
of service to the Company and the value of his or her vested and unvested
previously granted stock options, if any.
The exercise price of options is not less than the market price on the
date of grant and, therefore, options will only have value if the stock price
increases over the option exercise price. Options generally vest in equal
quarterly installments over five years as long as the optionee remains an
employee of the Company and, therefore, encourage an optionee to remain in the
employ of the Company. In fiscal 1996, options to purchase an aggregate of
163,375 shares of Common Stock were granted to all executive officers as a group
and represented approximately 97% of all options granted to the Company's
employees in fiscal 1996.
Compensation of Chief Executive Officer. The Compensation Committee
generally considers the same factors in determining the Chief Executive
Officer's compensation as it considers with respect to the Company's other
executive officers. Mr. Vidovich's fiscal 1996 compensation combined an annual
base salary with a cash bonus based on the Company's after bonuses net income
growth and a stock option grant, and thus reflects the Compensation Committee's
philosophy that a significant portion of the Chief Executive Officer's overall
compensation should be incentive-based.
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<PAGE> 15
Deductibility of Executive Compensation. Under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), a publicly held
corporation such as the Company will generally not be allowed a federal income
tax deduction for otherwise deductible compensation paid to the executive
officers named in the Summary Compensation Table to the extent that compensation
(including stock-based compensation) paid to a particular officer exceeds $1
million in any fiscal year. Qualifying performance-based compensation (including
compensation attributable to the exercise of stock options) will not be subject
to the deductibility limitation if certain conditions are met. Based upon the
Company's current compensation plans and policies and the regulations under
Section 162(m), it appears unlikely that the compensation to be paid to the
Company's executive officers for fiscal 1997 would exceed the $1 million
limitation per officer.
COMPENSATION COMMITTEE
Jill Tate Higgins, Chairperson
Charles Miller
Alan R. Rachlin
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<PAGE> 16
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the
Company's Common Stock with the cumulative total return of the Nasdaq Market
Index and of a selected peer group of publicly traded companies (the "Selected
Peer Group") having the same four-digit standard industrial code (SIC) as the
Company (SIC Code 2782 -- Blankbooks, Looseleaf Binders and Devices) for the
period commencing March 11, 1992 (i.e., the date of the Company's initial public
offering) and ended June 30, 1996. The Selected Peer Group is comprised of
Deluxe Corp., Franklin Quest Co., C. R. Gibson Co., John H. Harland Co., The
Holson Burnes Group, Kleer Vu Industries Inc. and Day Runner.
The stock price performance shown on the graph below is not necessarily
indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG DAY RUNNER, THE NASDAQ MARKET INDEX AND SELECTED PEER GROUP
[GRAPH]
<TABLE>
<CAPTION>
3/11/92 6/30/92 6/30/93 6/30/94 6/30/95 6/30/96
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Day Runner $100 $ 64.79 $ 54.93 $ 104.23 $ 97.18 $145.77
Nasdaq Market Index 100 91.77 112.65 123.53 144.88 182.38
Selected Peer Group 100 103.31 104.41 87.57 98.89 108.60
</TABLE>
- ---------------------------
* Assumes (i) $100 invested on March 11, 1992 in each of the Company's
Common Stock, the Nasdaq Market Index and the Selected Peer Group and
(ii) immediate reinvestment of all dividends, if any.
-14-
<PAGE> 17
PROPOSAL 2 - APPROVAL OF AMENDMENT TO
THE COMPANY'S 1995 STOCK OPTION PLAN
In 1995, the Board of Directors of the Company adopted and the
Company's stockholders approved the 1995 Stock Option Plan (the "1995 Plan")
under which 300,000 shares of Common Stock were reserved for issuance pursuant
to the exercise of stock options granted thereunder.
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the 1995 Plan to increase the number of shares authorized for
issuance thereunder by 200,000 shares. If such amendment is approved, a total of
500,000 shares will have been authorized for issuance under the 1995 Plan since
its inception. As of October 1, 1996, no shares had been issued upon the
exercise of options under the 1995 Plan, 232,500 shares were subject to
outstanding options, and 67,500 shares (not including the 200,000-share increase
subject to stockholder approval) remained available for option grants under the
1995 Plan. To the extent options are granted to purchase any of such additional
200,000 shares prior to obtaining stockholder approval of such amendment, such
options will be expressly conditioned upon obtaining such approval.
AT THE ANNUAL MEETING, THE STOCKHOLDERS WILL BE REQUESTED TO CONSIDER
AND APPROVE THE AMENDMENT TO THE 1995 PLAN INCREASING THE NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE THEREUNDER BY 200,000 SHARES. THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE SHARES OF THE COMPANY'S COMMON STOCK PRESENT OR REPRESENTED AND
ENTITLED TO VOTE AT THE ANNUAL MEETING WILL BE REQUIRED TO APPROVE THE AMENDMENT
TO THE 1995 PLAN. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR APPROVAL OF THE AMENDMENT TO THE 1995 PLAN.
NEW PLAN BENEFITS
Grants under the 1995 Plan are made at the discretion of the
Compensation Committee to whom the Board of Directors has delegated the
administration of the 1995 Plan. Because future optionees, the number of shares
subject to option grants and exercise prices have not yet been determined,
future grants under the 1995 Plan are not yet determinable.
A summary of the principal provisions of the 1995 Plan is set forth
below and is qualified in its entirety by reference to the 1995 Plan. A copy of
the 1995 Plan is available from the Company's Secretary upon request.
PURPOSE
The purposes of the 1995 Plan are to (i) attract and retain the
services of selected key employees of the Company who are in a position to make
a material contribution to the successful operation of the Company's business;
(ii) motivate such persons, by means of performance-related incentives, to
achieve the Company's business goals; and (iii) enable such persons to
participate in the long-term growth and financial success of the Company by
providing them with an opportunity to purchase stock of the Company.
ADMINISTRATION
The 1995 Plan may be administered by the Board of Directors or, upon
appointment by the Board, by a committee composed of two or more Board members.
The 1995 Plan is currently administered by the Compensation Committee, comprised
of outside directors, which has been authorized to approve the grant
-15-
<PAGE> 18
and terms of options. The interpretation and construction of any provision of
the 1995 Plan is within the sole discretion of the members of the Board or its
committee, whose determination is final and binding.
ELIGIBILITY
The 1995 Plan provides that non-statutory stock options and incentive
stock options may be granted only to employees (including officers and directors
who are also employees) of and consultants to the Company. As administrator of
the 1995 Plan, the Compensation Committee selects the optionees and determines
the type of option (i.e., incentive or non-statutory) and the number of shares
to be subject to each option. In making such determination, there is taken into
account a number of factors, including an employee's position and
responsibilities, individual job performance, prior stock option grants (if
any), contributions and length of service to the Company, the value of his or
her vested and unvested previously granted options, if any, and other relevant
factors. As of October 1, 1996, approximately 840 persons were eligible to
receive options and 17 optionees were holding options under the 1995 Plan.
TERMS OF OPTIONS
Options granted under the 1995 Plan may be either "incentive stock
options" as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code), or non-statutory stock options. Each option is evidenced by
a written stock option agreement between the Company and the optionee and is
subject to the following additional terms and conditions:
(a) Number of Shares: The aggregate fair market value (determined
as of the grant date) of the stock for which an employee may
be granted incentive stock options that first become
exercisable during any one calendar year under all the
Company's plans may not exceed $100,000. In addition, the
maximum number of shares which may be awarded as options under
the 1995 Plan during any calendar year to any one optionee may
not exceed 100,000 shares.
(b) Exercise of the Option: The optionee must earn the right to
exercise the option by continuing to work for the Company.
Options granted under the 1995 Plan vest and become
exercisable at such times and in such cumulative installments
as the Board of Directors or its committee determines subject
to earlier termination of the option upon termination of the
optionee's employment for any reason. The form of payment for
shares to be issued upon the exercise of an option may, in the
discretion of the Board of Directors or its committee, consist
of cash, check, the delivery of shares of Common Stock, a
combination thereof or such other consideration as is
determined by the Board of Directors or its committee.
(c) Exercise Price: The exercise price per share for the shares to
be issued pursuant to the exercise of an option is determined
by the Board of Directors or its committee and may not be less
than 100% of the fair market value of the Common Stock on the
grant date with respect to both non-statutory and incentive
stock options. The fair market value of the Common Stock on
the date of an option grant is equal to the closing sales
price of the Common Stock on the date of the option grant as
reported on The Nasdaq Stock Market. On October 1, 1996, the
closing sales price of the Company's Common Stock on The
Nasdaq Stock Market was $28.50 per share.
(d) Termination of Employment: If an optionee's employment with
the Company is terminated for any reason, other than death,
total and permanent disability or termination "for cause" (as
defined in the 1995 Plan), his or her options may be exercised
at any time within 90 days
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<PAGE> 19
after such termination as to all or part of the shares as to
which the optionee was entitled to exercise the options at the
time of termination. If the optionee's employment with the
Company is terminated for cause, his or her options may be
exercised at any time within 30 days after such termination to
the extent such options are vested and not exercised as of
such date.
(e) Death or Disability: If an optionee should die or become
permanently and totally disabled while employed by the
Company, his or her options may be exercised at any time
within 180 days after such death or disability, but only to
the extent the optionee was entitled to exercise the options
at the date of his or her termination of employment due to
such death or disability.
(f) Expiration of Options: Options may not have a term greater
than ten years from the grant date for an incentive stock
option or ten years plus one day from the grant date for a
non-statutory stock option. No option may be exercised after
its expiration.
(g) Nontransferability of Options: An option is nontransferable by
the optionee, other than by will or by the laws of descent and
distribution or transfers between spouses incident to a
divorce, and is exercisable only by the optionee or his or her
legal guardian during the lifetime of the optionee or, in the
event of death of the optionee, by the estate of the optionee
or by a person who acquires the right to exercise the option
by bequest or inheritance.
(h) Other Provisions: The option agreement may contain such other
terms, provisions and conditions not inconsistent with the
1995 Plan as may be determined by the Board of Directors or
its committee.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event that a change, such as a stock split or stock dividend, is
made in the Company's capitalization which affects the stock for which options
are exercisable under the 1995 Plan, appropriate adjustment will be made in the
exercise price of and the number of shares covered by outstanding options and in
the number of shares available for issuance under the 1995 Plan. In the event of
a dissolution or liquidation of the Company, a sale of all or substantially all
of the assets of the Company, or the merger or consolidation of the Company with
or into another corporation as a result of which the Company is not the
surviving and controlling corporation, outstanding options will be assumed by
the successor corporation or the Board of Directors will declare that any option
will terminate as of a date fixed by the Board which is at least 30 days after
notice thereof is given to optionees and permit each optionee to exercise his or
her options as to all or any portion of the shares covered by such options,
including shares as to which the options would not otherwise be exercisable.
AMENDMENT AND TERMINATION
The Board of Directors or its committee may amend or terminate the 1995
Plan at any time or from time to time without the approval of the Company's
stockholders; provided, however, that approval of the holders of voting shares
represented or present and entitled to vote is required for any amendment to the
1995 Plan which would: (i) materially increase the number of shares which may be
issued thereunder other than in connection with an adjustment upon changes in
capitalization; (ii) materially change the designation of the class of persons
eligible to participate in the 1995 Plan; (iii) remove the administration of the
1995 Plan from the Board of Directors or its committee; (iv) extend the term of
the 1995 Plan beyond its initial
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<PAGE> 20
ten-year term; (v) materially increase the benefits to participants under the
1995 Plan; or (vi) materially modify the requirements as to eligibility for
participation in the 1995 Plan. In any event, the 1995 Plan will terminate on
the tenth anniversary of its approval by the stockholders of the Company (i.e.,
December 5, 2005) provided that any options then outstanding will remain
outstanding until they expire by their terms.
TAX INFORMATION
The federal tax consequences of options are complex and subject to
change. The following discussion is only a brief summary of the general federal
income tax rules currently in effect which are applicable to stock options. A
taxpayer's particular situation may be such that some variation of the general
rules may apply. This summary does not cover the state, local or foreign tax
consequences of the grant or exercise of options under the 1995 Plan or the
disposition of shares acquired upon exercise of such options or federal estate
tax or state estate, inheritance or death taxes.
INCENTIVE STOCK OPTIONS
If an option granted under the 1995 Plan is treated as an "incentive
stock option" as defined in Section 422 of the Code, then the optionee will not
recognize any income for regular income tax purposes upon either the grant or
the exercise of the option and the Company will not be allowed a deduction for
federal tax purposes. Upon a sale of the shares, the tax treatment to the
optionee and the Company will depend primarily upon whether the optionee has met
certain holding period requirements at the time of sale. In addition, as
discussed below, the exercise of an incentive stock option may subject the
optionee to alternative minimum tax liability in the year of exercise.
If an optionee exercises an incentive stock option and does not dispose
of the shares received within two years of the date of the grant of such option
and within one year after the exercise of the option, whichever period ends
later, any gain realized upon disposition will be characterized as long-term
capital gain, and any loss will be long-term capital loss. In either such case,
the Company will not be entitled to a federal income tax deduction.
If the optionee disposes of the shares either within two years after
the date the option is granted or within one year after the exercise of the
option, such disposition will be treated as a disqualifying disposition and an
amount equal to the lesser of (i) the fair market value of the shares on the
date of exercise less the purchase price or (ii) the amount realized on the
disposition less the purchase price will be taxed as ordinary income in the
taxable year in which the disposition occurs. Any such ordinary income will
increase the optionee's tax basis for purposes of determining gain or loss on
the sale or exchange of such shares. The excess, if any, of the amount realized
over the fair market value of the shares at the time of the exercise of the
option will be treated as short-term or long-term capital gain, as the case may
be, and any loss realized upon the disposition will be treated as a capital
loss. An optionee will generally be considered to have disposed of shares if he
or she sells, exchanges, makes a gift of or transfers legal title to such shares
(except by pledge, in certain non-taxable exchanges, a transfer in insolvency
proceedings, incident to a divorce, or upon death). If the amount realized is
less than the purchase price, generally the optionee will not recognize income.
The exercise of an incentive stock option may subject an optionee to
alternative minimum tax liability in the year of exercise because the excess of
the fair market value of the shares at the time an incentive stock option is
exercised over the option price is an adjustment in determining an optionee's
alternative minimum taxable income for such year. Consequently, an optionee may
be obligated to pay alternative minimum tax in the year he or she exercises an
incentive stock option. If a disqualifying disposition occurs in the same year
as an option is exercised, the amount of ordinary income resulting from such
disposition may offset any
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<PAGE> 21
adjustment to alternative minimum taxable income for the year of exercise. In
the case of a disqualifying disposition which occurs after the year of exercise,
an individual would be required to recognize an adjustment to alternative
minimum taxable income in the year of exercise and ordinary income in the year
of such disqualifying disposition in an amount determined under the rules
described above. An optionee's alternative minimum tax liability is affected by
the availability of a special credit, a basis adjustment and other complex
rules. Optionees are urged to consult their tax advisors concerning the
applicability of the alternative minimum tax to their own circumstances.
In general, there will be no federal tax consequences to the Company
upon the grant, exercise or termination of an incentive stock option. However,
in the event an optionee sells or disposes of stock received upon the exercise
of an incentive stock option prior to satisfying the two-year and one-year
holding periods described above, the Company will be entitled to a deduction for
federal income tax purposes in an amount equal to the ordinary income, if any,
recognized by the optionee upon disposition of the shares.
NON-STATUTORY STOCK OPTIONS
Non-statutory stock options granted under the 1995 Plan do not qualify
as "incentive stock options" and, accordingly, do not qualify for any special
tax benefits to the optionee. An optionee will not recognize any income at the
time he or she is granted a non-statutory option. However, upon its exercise,
the optionee will generally recognize ordinary income for federal income tax
purposes measured by the excess of the then fair market value of the shares over
the option price. The income realized by the optionee will be subject to income
tax withholding by the Company out of the compensation paid to the optionee. If
such earnings are insufficient to pay the withholding tax, the optionee will be
required to make a direct payment to the Company to cover the withholding tax
liability.
Upon a sale of any shares acquired pursuant to the exercise of a
non-statutory stock option, the difference between the sale price and the
optionee's basis in the shares will be treated as a long-term or short-term
capital gain or loss, as the case may be. The optionee's basis for determination
of such gain or loss will ordinarily be the sum of the amount paid for such
shares plus any ordinary income recognized as a result of the exercise of such
option.
In general, there will be no federal tax consequences to the Company
upon the grant or termination of a non-statutory stock option or the sale or
disposition of the shares acquired upon exercise of a non-statutory stock
option. However, upon the exercise of a non-statutory stock option, the Company
will be entitled to a deduction to the extent and in the year that ordinary
income from the exercise of the option is recognized by the optionee, provided
the Company has satisfied its withholding obligations under the Code.
PROPOSAL 3 - APPROVAL OF GRANT OF WARRANTS
TO THE COMPANY'S NON-EMPLOYEE DIRECTORS
In October 1996, the Board of Directors of the Company approved the
grant, subject to the approval of the Company's stockholders and effective as of
the date of the Annual Meeting, of warrants to purchase 25,000 shares of the
Company's Common Stock to each of the non-employee directors of the Company
elected at the Annual Meeting (each, a "Director Warrant" and, collectively, the
"Director Warrants"). The Company has not, since 1991, granted any options,
warrants or other equity securities of the Company to any of its non-employee
directors in connection with services rendered to the Company in their
capacities as directors.
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<PAGE> 22
AT THE ANNUAL MEETING, THE STOCKHOLDERS WILL BE REQUESTED TO APPROVE
THE GRANT OF THE DIRECTOR WARRANTS TO THE COMPANY'S NON-EMPLOYEE DIRECTORS. THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF THE COMPANY'S COMMON STOCK
PRESENT OR REPRESENTED AND ENTITLED TO VOTE AT THE ANNUAL MEETING WILL BE
REQUIRED TO APPROVE THE GRANT OF THE DIRECTOR WARRANTS. THE BOARD OF DIRECTORS
RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF THE GRANT OF THE DIRECTOR
WARRANTS TO THE COMPANY'S NON-EMPLOYEE DIRECTORS.
NEW PLAN BENEFITS
The following table sets forth the number of Director Warrants which
will be granted as of the date of the Annual Meeting to the current non-employee
directors of the Company, which grants are subject to the approval of the
Company's stockholders and to the election of such directors at the Annual
Meeting. Only non-employee directors of the Company who are elected as members
of the Company's Board of Directors at the Annual Meeting will be granted
Director Warrants. Since the exercise price of the Director Warrants will be
equal to the market value of the Common Stock on the date of grant (i.e., the
date of the Annual Meeting), the dollar value of such benefits is reflected as
zero.
DIRECTOR WARRANTS
<TABLE>
<CAPTION>
Number of Shares
Name and Position Dollar Value($)(1) Underlying Warrants(#)
----------------- ------------------ ----------------------
<S> <C> <C>
Non-Executive Director Group (five persons) $ 0 125,000
</TABLE>
- -----------------------------
(1) If approved by the Company's stockholders at the Annual Meeting, such
Director Warrants will be granted at an exercise price per share equal to
the closing sales price per share of the Company's Common Stock on the date
of grant (i.e., the date of the Annual Meeting) as reported on The Nasdaq
Stock Market.
A summary of the principal terms and provisions of the Director
Warrants is set forth below and is qualified in its entirety by reference to the
written warrant certificates evidencing the Director Warrants. The terms and
provisions of the Director Warrants are the same in all material respects as the
terms and provisions of the 25,000-share warrants granted in 1991 to the
non-employee directors of the Company.
PURPOSE
The purposes of the Director Warrants are to attract and retain the
best available candidates for the Board of Directors of the Company, to provide
additional incentive to non-employee members of the Board to promote the success
of the Company's business and to enable non-employee members of the Board to
share in the growth and prosperity of the Company.
ELIGIBILITY
Any person who at the close of business on the date of the Annual
Meeting is a member of the Company's Board of Directors and who is not an
employee of the Company is eligible to receive a Director Warrant. As of October
1, 1996, the Company had five non-employee directors (i.e., James P. Higgins,
Jill Tate Higgins, Charles Miller, Alan R. Rachlin and Boyd I. Willat) who will
be eligible to receive a Director Warrant if they are elected to the Board at
the Annual Meeting.
-20-
<PAGE> 23
TERMS OF DIRECTOR WARRANTS
The Company's Board of Directors in October 1996 adopted resolutions
that provide for the grant on the date of the Annual Meeting of a Director
Warrant to each non-employee director elected at the Annual meeting in
consideration for such person's serving on the Board of Directors (such
directors also receive the fees described under "PROPOSAL 1 - ELECTION OF
DIRECTORS -- COMPENSATION OF DIRECTORS" above). Such grants are subject to the
approval of the Company's stockholders at the Annual Meeting and will not be
made if such approval is not obtained. Each Director Warrant will be evidenced
by a written warrant certificate executed by the Company and will be subject to
the following terms and conditions:
(a) Exercise of Director Warrants: Each Director Warrant will vest and
become exercisable cumulatively in 60 equal monthly installments, with the first
installment vesting on January 1, 1997 and an additional installment vesting on
the first day of each calendar month thereafter. A Director Warrant will vest
only so long as a director continues to serve as a director of the Company. A
Director Warrant will be exercisable by giving written notice of exercise to the
Company, specifying the number of shares of Common Stock to be purchased and
tendering payment to the Company of the purchase price. Payment for shares to be
issued upon exercise of a Director Warrant may be made by certified or cashier's
check.
(b) Exercise Price: The exercise price of a Director Warrant will be
equal to 100% of the fair market value of the Common Stock on the date of the
Annual Meeting based upon the closing sales price of the Common Stock on The
Nasdaq Stock Market as of such date. On October 1, 1996, the closing sales price
of the Company's Common Stock on The Nasdaq Stock Market was $28.50 per share.
(c) Term of Director Warrants. Director Warrants will have a term of
seven years.
(d) Termination as Director: If a director who receives a Director
Warrant ceases to serve as a director for any reason, whether voluntarily or
involuntarily, or permanently or temporarily, then after the date of such
termination and through the end of the term of the Director Warrant granted to
such director, the holder of such Director Warrant may exercise the Director
Warrant to purchase all or a part of the shares that the holder of the Director
Warrant was entitled to purchase at the date on which the director ceased
serving as a director.
(e) Expiration of Director Warrants: The Director Warrants may not be
exercised after their seven-year terms have expired.
(f) Transferability of Director Warrants: The Director Warrants are
transferable by the holders thereof subject to compliance with applicable
securities laws.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR CONTROL
In the event any change, such as a stock split or stock dividend, is
made in the Company's capitalization which affects the Common Stock, an
appropriate adjustment will be made in the exercise price of and the number of
shares subject to outstanding Director Warrants. In the event of the proposed
sale of all or substantially all of the assets of the Company or the merger,
consolidation or reorganization of the Company with or into another corporation
(any of which shall constitute a "Reorganization"), then the Director Warrants
shall thereafter evidence the right to purchase such number and kind of
securities and other property as would have been issuable or distributable on
account of such Reorganization upon or with respect to the securities which were
purchasable or would have become purchasable under the Director Warrants
immediately prior to such Reorganization; provided, however, that in the event
that upon completion of any such Reorganization, the stockholders of the Company
immediately prior to such event
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<PAGE> 24
do not own at least 50% of the equity interest of the corporation resulting from
such Reorganization, the Director Warrants shall expire upon completion of the
Reorganization.
TAX INFORMATION
The federal tax consequences of Director Warrants are complex and
subject to change. Such consequences will be comparable to the tax consequences
arising in connection with the grant and exercise of a non-statutory stock
option and the sale of shares subject thereto. For a general discussion of the
tax consequences upon the grant and exercise of a non-statutory stock option and
the sale of shares acquired upon exercise of a non-statutory stock option, see
"PROPOSAL 2 - APPROVAL OF AMENDMENT TO THE COMPANY'S 1995 STOCK OPTION PLAN --
TAX INFORMATION -- NON-STATUTORY STOCK OPTIONS" above.
PROPOSAL 4 - RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP, independent
auditors, to audit the Company's consolidated financial statements for the
fiscal year ending June 30, 1997, and recommends that stockholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection. A
representative of Deloitte & Touche LLP is expected to be present at the Annual
Meeting, will have an opportunity to make a statement if he or she desires to do
so and is expected to be available to respond to appropriate questions.
OTHER MATTERS
The Company currently knows of no matters to be submitted at the Annual
Meeting other than those described herein. If any other matters properly come
before the Annual Meeting, it is the intention of the persons named on the
enclosed proxy card to vote the shares they represent as the Board of Directors
may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
Dennis K. Marquardt
Secretary
Irvine, California
October 29, 1996
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<PAGE> 25
DAY RUNNER, INC.
1995 STOCK OPTION PLAN
1. ESTABLISHMENT AND PURPOSE OF THE PLAN.
Day Runner, Inc. hereby establishes this 1995 Stock Option Plan to
promote the interests of the Company and its stockholders by (i) helping to
attract and retain the services of selected key employees of the Company who
are in a position to make a material contribution to the successful operation
of the Company's business, (ii) motivating such persons, by means of
performance-related incentives, to achieve the Company's business goals and
(iii) enabling such persons to participate in the long-term growth and
financial success of the Company by providing them with an opportunity to
purchase stock of the Company.
2. DEFINITIONS.
The following definitions shall apply throughout the Plan:
a. "AFFILIATE" shall mean any entity that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, the Company.
b. "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company.
c. "CODE" shall mean the Internal Revenue Code of 1986, as
amended. References in the Plan to any section of the Code shall be deemed to
include any amendment or successor provisions to such section and any
regulations issued under such section.
d. "COMMITTEE" shall mean the committee of the Board of Directors
appointed in accordance with Section 4(a) of the Plan or, if no such committee
shall be appointed or in office, the Board of Directors.
e. "COMPANY" shall mean Day Runner, Inc., a Delaware corporation
(or any successor corporation), and any "subsidiary" corporation, whether now
or hereafter existing, as defined in Sections 424(f) and (g) of the Code.
f. "CONTINUOUS EMPLOYMENT" shall mean the absence of any
interruption or termination of employment by the Company. Continuous
Employment shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the Committee or in
the case of transfers between locations of the Company.
g. "DISABILITY" shall mean the inability of the Optionee to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or has lasted or can be expected to last for a continuous period of not
less than 12 months. In determining the Disability of an Optionee, the
Committee may
<PAGE> 26
require the Optionee to furnish proof of the existence of Disability and may
select a physician to examine the Optionee. The final determination as to the
Disability of the Optionee shall be made by the Committee.
h. "DISINTERESTED PERSON" shall mean an administrator of the Plan
who, during the one year prior to service as an administrator of the Plan, has
not been granted or awarded and, during such service, is not granted or awarded
stock, stock options or stock appreciation rights pursuant to the Plan or any
other plan of the Company or any of its Affiliates entitling the participants
therein to acquire stock, stock options or stock appreciation rights of the
Company or any Affiliates, except for any plan under which the award of stock,
stock options or stock appreciation rights is not subject to the discretion of
any person or persons. The term "Disinterested Person" shall be interpreted in
a manner consistent with the meaning of such term under Rule 16-3 promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended.
i. "EMPLOYEE" shall mean any employee of the Company, including
officers and directors who are also employees.
j. "FAIR MARKET VALUE" shall mean, with respect to Shares, the
fair market value per Share on the date an option is granted and, so long as
the Shares are quoted on the National Association of Securities Dealers
Automated Quotations ("NASDAQ") System, the Fair Market Value per Share shall
be the closing price on The Nasdaq Stock Market as of the date of grant of the
Option, as reported in The Wall Street Journal or, if there are no sales on
such date, on the immediately preceding day on which there were reported sales.
k. "INCENTIVE STOCK OPTION" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
l. "NON-STATUTORY STOCK OPTION" shall mean an Option which is not
an Incentive Stock Option.
m. "OPTION" shall mean the grant of the right to an Employee or
consultant pursuant to the Plan to purchase a specified number of Shares at a
specified exercise price.
n. "OPTION AGREEMENT" means a written agreement substantially in
one of the forms attached hereto as Exhibit A, or such other form or forms as
the Committee (subject to the terms and conditions of the Plan) may from time
to time approve, evidencing and reflecting the terms of an Option.
o. "OPTIONED STOCK" shall mean the Shares subject to an Option
granted pursuant to the Plan.
p. "OPTIONEE" shall mean an Employee or consultant of the Company
who is granted an Option under the Plan.
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<PAGE> 27
q. "PLAN" shall mean this Day Runner 1995 Stock Option Plan as
the same may be amended from time to time.
r. "SHARES" shall mean shares of the Common Stock of the Company,
par value per share of $0.001, or any shares into which such Shares may be
converted in accordance with Section 10 of the Plan.
s. "TERMINATION FOR CAUSE" shall mean termination of employment
as a result of (i) any act or acts by the Optionee constituting a felony under
any federal, state or local law; (ii) the Optionee's willful and continued
failure to perform the duties assigned to him or her as an Employee or
consultant; (iii) any material breach by the Optionee of any agreement with the
Company concerning his or her employment or other understanding concerning the
terms and conditions of employment by the Company; (iv) dishonesty, gross
negligence or malfeasance by the Optionee in the performance of his or her
duties as an Employee or consultant or any conduct by the Optionee which
involves a material conflict of interest with any business of the Company or
Affiliate; or (v) the Optionee's taking or knowingly omitting to take any other
action or actions in the performance of Optionee's duties as an Employee or
consultant without informing appropriate members of management to whom such
Optionee reports, which action or actions, in the determination of the
Committee, have caused or substantially contributed to the material
deterioration in the business of the Company or any Affiliate, taken as a
whole.
3. SHARES RESERVED.
The maximum aggregate number of Shares reserved for issuance pursuant
to the Plan shall be 300,000 Shares or the number of shares of stock to which
such Shares shall be adjusted as provided in Section 10 of the Plan. Such
number of Shares may be set aside out of authorized but unissued Shares not
reserved for any other purpose, or out of issued Shares acquired for and held
in the treasury of the Company from time to time.
Shares subject to, but not sold or issued under, any Option
terminating, expiring or canceled for any reason prior to its exercise in full,
shall again become available for Options thereafter granted under the Plan, and
the same shall not be deemed an increase in the number of Shares reserved for
issuance under the Plan. Any Shares which may be tendered, actually or by
attestation, by an Optionee as full or partial payment in connection with the
exercise of any Option under the Plan shall again be available for Stock
Options thereafter granted during the remainder of the term of the Plan.
4. ADMINISTRATION OF THE PLAN.
a. The Plan shall be administered by a Committee designated by
the Board of Directors to administer the Plan and comprised of not less than
two directors, each of whom is a Disinterested Person and an "outside director"
as defined in the Treasury regulations issued pursuant to Section 162(m) of the
Code. Members of the Committee shall serve for such period of time as the
Board of Directors may determine or until their resignation, retirement,
removal or death, if sooner. From time to time the Board of Directors may
increase the size of the
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<PAGE> 28
Committee and appoint additional members thereto, remove members (with or
without cause) and appoint new members in substitution therefor or fill
vacancies however caused.
b. Subject to the provisions of the Plan, the Committee shall
have the sole and complete discretionary authority: (i) to grant Incentive
Stock Options, in accordance with Section 422 of the Code, or Non-Statutory
Stock Options; (ii) to determine, upon review of relevant information, the Fair
Market Value per Share; (iii) to determine the exercise price of the Options to
be granted to Employees and consultants in accordance with Section 6(d) of the
Plan; (iv) to determine the Employees and consultants to whom, and the time or
times at which, Options shall be granted, and the number of Shares subject to
each Option; (v) to prescribe, amend and rescind rules and regulations relating
to the Plan subject to the limitations set forth in Section 12 of the Plan;
(vi) to determine the terms and provisions of each Option granted to Optionees
under the Plan and each Option Agreement (which need not be identical with the
terms of other Options and Option Agreements) and to modify or amend an
outstanding Option or Option Agreement; (vii) to accelerate the exercise date
of any Option; (viii) to determine whether any Optionee will be required to
execute a stock repurchase agreement or other agreement as a condition to the
exercise of an Option, and to determine the terms and provisions of any such
agreement (which need not be identical with the terms of any other such
agreement) and to amend any such agreement; (ix) to interpret the Plan or any
agreement entered into with respect to the grant or exercise of Options and to
determine the eligibility of an Employee or consultant for benefits hereunder
and the amount thereof; (x) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted or to take such other actions as may be necessary or appropriate with
respect to the Company's rights pursuant to Options or agreements relating to
the grant or exercise thereof; (xi) to cancel any outstanding Option and grant
to an Optionee in replacement thereof such number of Options on such terms and
conditions as the Committee shall determine; and (xii) to make such other
determinations and establish such other procedures as it deems necessary or
advisable for the administration of the Plan.
c. All decisions, determinations and interpretations of the
Committee shall be final and binding on all Optionees and any other holders of
any Options granted under the Plan.
d. The Committee shall keep minutes of its meetings and of the
actions taken by it without a meeting. A majority of the Committee shall
constitute a quorum, and the actions of a majority at a meeting, including a
telephone meeting, at which a quorum is present, or acts approved in writing by
a majority of the members of the Committee without a meeting, shall constitute
acts of the Committee.
e. The Company shall pay all original issue and transfer taxes
with respect to the grant of Options and/or the issue and transfer of Shares
pursuant to the exercise thereof, and all other fees and expenses necessarily
incurred by the Company in connection therewith; provided, however, that the
person exercising an Option shall be responsible for all payroll, withholding,
income and other taxes incurred by such person on the date of exercise of an
Option or transfer of Shares.
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<PAGE> 29
5. ELIGIBILITY.
Options may be granted under the Plan only to Employees and
consultants. An Employee or consultant who has been granted an Option may be
granted, if he or she is otherwise eligible, additional Options.
6. TERMS AND CONDITIONS OF OPTIONS.
Options granted pursuant to the Plan by the Committee shall be either
Incentive Stock Options or Non-Statutory Stock Options and shall be evidenced
by an Option Agreement providing, in addition to such other terms as the
Committee may deem advisable, the following terms and conditions:
a. Time of Granting Options. The date of grant of an Option
shall be, for all purposes, the date on which the Committee makes the
determination granting such Option; provided, however, that if the Committee
determines that such grant shall be effective as of some future date, the date
of grant shall be as of such future date. Notice of the determination shall be
given to each Optionee within a reasonable time after the date of such grant.
b. Number of Shares. Each Option Agreement shall state the
number of Shares to which it pertains and whether such Option is intended to
constitute an Incentive Stock Option or a Non-Statutory Stock Option. The
maximum number of Shares which may be awarded as Options under the Plan during
any calendar year to any Optionee is 100,000 Shares. If an Option held by an
Employee or consultant of the Company is canceled, the canceled Option shall
continue to be counted against the maximum number of Shares for which Options
may be granted to such Employee or consultant and any replacement Option
granted to such Employee or consultant shall also count against such limit.
c. Vesting. Options granted under the Plan shall vest as
determined by the Committee, in its sole and absolute discretion, from time to
time, which may include installment or performance vesting or other contingent
vesting provisions.
d. Exercise Price. The exercise price per Share for the Shares
to be issued pursuant to the exercise of an Option, whether an Incentive Stock
Option or a Non-Statutory Stock Option, shall be such price as is determined by
the Committee; provided, however, such price shall in no event be less than
100% of the Fair Market Value per Share on the date of grant.
Notwithstanding anything to the contrary herein, in the case
of an Incentive Stock Option granted to an Employee or consultant who, at the
time the Incentive Stock Option is granted, owns or is deemed to own (by reason
of the attribution rules applicable under Section 424(d) of the Code) stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company, the exercise price per Share shall be no less
than 110% of the Fair Market Value per Share on the date of grant.
e. Medium and Time of Payment. The consideration to be paid for
the Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by
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<PAGE> 30
the Committee on the date of grant and may consist entirely of cash, check or
Shares having a Fair Market Value on the date of surrender (either actually or
by attestation) equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised, or any combination of such methods of payment,
or such other consideration and method of payment permitted under any laws to
which the Company is subject which is approved by the Committee in its
discretion; provided, however, that the Optionee shall be required to pay in
cash an amount necessary to satisfy the Company's tax withholding obligations.
Payment of the exercise price specified in the Option may also be made in
accordance with the procedures for a "cashless exercise" (including the
delivery of an irrevocable notice of exercise) as the same may be established
from time to time by the Company to facilitate exercises of Options and sales
of Shares under this Plan.
If the consideration for the exercise of an Option is the
actual surrender of previously acquired and owned Shares, the Optionee will be
required to make representations and warranties satisfactory to the Company
regarding his or her title to the Shares used to effect the purchase, including
without limitation representations and warranties that the Optionee has good
and marketable title to such Shares free and clear of any and all liens,
encumbrances, charges, equities, claims, security interests, options or
restrictions, and has full power to deliver such Shares without obtaining the
consent or approval of any person or governmental authority other than those
which have already given consent or approval in a manner satisfactory to the
Company. The value of the Shares used to effect the purchase shall be the Fair
Market Value of such Shares on the date of exercise as determined by the
Committee in its sole discretion, exercised in good faith.
f. Term of Options. The term of an Incentive Stock Option may be
up to ten years from the date of grant thereof; provided, however, that the
term of an Incentive Stock Option granted to an Employee or consultant who, at
the time the Incentive Stock Option is granted, owns or is deemed to own (by
reason of the attribution rules of Section 424(d) of the Code) stock possessing
more than ten percent of the total combined voting power of all classes of
stock of the Company, shall be five years from the date of grant thereof or
such shorter term as may be approved by the Committee.
The term of a Non-Statutory Stock Option may be up to ten
years and one day from the date of grant thereof.
The term of any Option may be less than the maximum term
provided for herein as specified by the Committee upon grant of the Option and
as set forth therein.
g. Maximum Amount of Incentive Stock Options. To the extent that
the aggregate Fair Market Value (determined at the time an Incentive Stock
Option is granted) of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by an Optionee during any calendar year
under all incentive stock option plans of the Company exceeds $100,000, the
Options in excess of such limit shall be treated as Non-Statutory Stock
Options.
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<PAGE> 31
7. EXERCISE OF OPTION.
a. In General. Any Option granted hereunder to an Employee or
consultant shall be exercisable at such times and under such conditions as may
be determined by the Committee and as shall be permissible under the terms of
the Plan, including any performance or other criteria with respect to the
Company and/or the Optionee as may be determined by the Committee.
An Option may be exercised in accordance with the provisions
of the Plan as to all or any portion of the Shares then exercisable under an
Option from time to time during the term of the Option. However, an Option may
not be exercised for a fraction of a Share.
b. Procedure. An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company at its principal
business office in accordance with the terms of the Option Agreement by the
person entitled to exercise the Option and full payment for the Shares with
respect to which the Option is exercised has been received by the Company,
accompanied by any other agreements required by the terms of the Plan and/or
Option Agreement or as required by the Committee and payment by the Optionee of
all payroll, withholding or income taxes incurred in connection with such
Option exercise (or arrangements for the collection or payment of such tax
satisfactory to the Committee are made). Full payment may consist of such
consideration and method of payment allowable under Section 6(e) of the Plan.
c. Decrease in Available Shares. Exercise of an Option in any
manner shall result in a decrease in the number of Shares which thereafter may
be available, both for purposes of the Plan and for sale under the Option, by
the number of Shares as to which the Option is exercised, except if the Option
is exercised by tendering Shares, either actually or by attestation.
d. Exercise of Stockholder Rights. Until the Option is properly
exercised in accordance with the terms of this section, no right to vote or
receive dividends or any other rights as a stockholder shall exist with respect
to the Optioned Stock. No adjustment shall be made for a dividend or other
right for which the record date is prior to the date the Option is exercised,
except as provided in Section 10 of the Plan.
e. Termination of Continuous Employment. If an Optionee's
Continuous Employment with the Company terminates for any reason other than
death, Disability or Termination for Cause, he or she may exercise his or her
Option to the extent such Option was exercisable as of the date of such
termination, but only within 90 days following the date of such termination
(subject to any earlier termination of the Option as provided by its terms).
Notwithstanding the foregoing, an Option shall not be exercisable
after the expiration of the term of such Option, as set forth in the Option
Agreement, and, unless otherwise amended by the Committee, an Option may be
exercised only to the extent the Optionee was entitled to exercise it on the
date his or her Continuous Employment with the Company terminated. To the
extent the Optionee does not exercise his or her Option, to the extent
exercisable, within the time specified herein, the Option shall terminate.
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<PAGE> 32
f. Death or Disability Of Optionee. If an Optionee's Continuous
Employment with the Company terminates due to the death or Disability of the
Optionee, the Option may be exercised, in the case of death, by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, or, in the case of Disability, by the Optionee, within six
months following the date of such termination (subject to any earlier
termination of the Option as provided by its terms).
Notwithstanding the foregoing, an Option shall not be exercisable
after the expiration of the term of such Option, as set forth in the Option
Agreement, and, unless otherwise amended by the Committee, an Option may be
exercised only to the extent the Optionee was entitled to exercise it on the
date his or her Continuous Employment with the Company terminated. To the
extent the Optionee does not exercise his or her Option, to the extent
exercisable, within the time specified herein, the Option shall terminate.
g. Termination for Cause. If an Optionee's Continuous
Employment with the Company terminates due to his or her Termination for Cause,
he or she may exercise his or her Option to the extent such Option was
exercisable as of the date of such termination, but only within 30 days
following the date of such Termination for Cause (subject to any earlier
termination of the Option as provided by its terms).
Notwithstanding the foregoing, an Option shall not be exercisable
after the expiration of the term of such Option, as set forth in the Option
Agreement, and, unless otherwise amended by the Committee, an Option may be
exercised only to the extent the Optionee was entitled to exercise it on the
date his or her Continuous Employment with the Company terminated. To the
extent the Optionee does not exercise his or her Option, to the extent
exercisable, within the time specified herein, the Option shall terminate.
h. Expiration of Option. Notwithstanding any provision in the
Plan, including but not limited to the provisions set forth in Sections 7(e)
and 7(f), an Option may not be exercised, under any circumstances, after the
expiration of its term.
i. Conditions on Exercise and Issuance. As soon as practicable
after any proper exercise of an Option in accordance with the provisions of the
Plan, the Company shall deliver to the Optionee at the principal executive
office of the Company or such other place as shall be mutually agreed upon
between the Company and the Optionee, a certificate or certificates
representing the Shares for which the Option shall have been exercised. The
time of issuance and delivery of the certificate or certificates representing
the Shares for which the Option shall have been exercised may be postponed by
the Company for such period as may be required by the Company, with reasonable
diligence, to comply with any law or regulation applicable to the issuance or
delivery of such Shares.
Options granted under the Plan are conditioned upon the
Company obtaining any required permit or order from appropriate governmental
agencies, authorizing the Company to issue such Options and Shares issuable
upon exercise thereof. Shares shall not be issued pursuant to the exercise of
an Option unless the exercise of such Option and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
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<PAGE> 33
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, applicable state law, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the Shares may then be listed, and may be further subject
to the approval of counsel for the Company with respect to such compliance.
j. Withholding or Deduction for Taxes. The grant of Options
hereunder and the issuance of Shares pursuant to the exercise thereof is
conditioned upon the Company's reservation of the right to withhold, in
accordance with any applicable law, from any compensation or other amounts
payable to the Optionee any taxes required to be withheld under Federal, state
or local law as a result of the grant or exercise of such Option or the sale of
the Shares issued upon exercise thereof. To the extent that compensation and
other amounts, if any, payable to the Optionee are insufficient to pay any
taxes required to be so withheld, the Company may, in its sole discretion,
require the Optionee, as a condition of the exercise of an Option, to pay in
cash to the Company an amount sufficient to cover such tax liability or
otherwise to make adequate provision for the delivery to the Company of cash
necessary to satisfy the Company's withholding obligations under Federal, state
and local law.
8. NONTRANSFERABILITY OF OPTIONS.
Options granted under the Plan may not be sold, pledged, assigned,
hypothecated, gifted, transferred or disposed of in any manner, either
voluntarily or involuntarily by operation of law, other than by will or by the
laws of descent or distribution or transfers between spouses incident to a
divorce, and any such attempt may result, at the discretion of the Committee,
in the termination of such Options. During the lifetime of the Optionee, his
or her Option may be exercised only by the Optionee or his or her legal
guardian.
9. HOLDING PERIOD.
In the case of Options granted to officers and directors of the
Company, at least six months must elapse from the date of grant of the Option
to the date of disposition of the underlying Shares.
10. ADJUSTMENT UPON CHANGE IN CORPORATE STRUCTURE.
a. Subject to any required action by the stockholders of the
Company, the number of Shares covered by each outstanding Option, and the
number of Shares which have been authorized for issuance under the Plan but as
to which no Options have yet been granted or which have been returned to the
Plan upon cancellation or expiration of an Option, as well as the exercise or
purchase price per Share covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a stock split or combination, the payment of a stock
dividend, recapitalization, merger, consolidation, exchange, spin-off or any
other increase or decrease in the number of issued Shares effected without
receipt of consideration by the Company (other than stock awards to Employees
and consultants), as may be necessary to prevent dilution or enlargement of
rights; provided, however, that the conversion of any convertible securities of
the Company shall not be deemed to have been effected without the receipt of
consideration. Any such adjustment shall
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<PAGE> 34
be made by the Committee, in its sole discretion, whose determination in that
respect shall be final, binding and conclusive. The existence of the Plan and
outstanding Options shall not limit or affect in any way the right or power of
the Company to engage in any such transactions.
b. In the event of the proposed dissolution or liquidation of the
Company, or in the event of a proposed sale of all or substantially all of the
assets or stock of the Company (other than in the ordinary course of business),
or the merger or consolidation of the Company with or into another corporation,
as a result of which the Company is not the surviving and controlling
corporation, the Board of Directors shall (i) make provision for the assumption
of all outstanding options by the successor corporation or (ii) declare that
any Option shall terminate as of a date fixed by the Board of Directors which
is at least 30 days after the notice thereof to the Optionee and shall give
each Optionee the right to exercise his or her Option as to all or any part of
the Optioned Stock, including Shares covered by the Option as to which the
Option would not otherwise be exercisable, provided such exercise does not
violate Section 7(e) of the Plan.
c. No fractional Shares shall be issuable on account of any
action aforesaid, and the aggregate number of shares into which Shares then
covered by the Option, when changed as the result of such action, shall be
reduced to the largest number of whole shares resulting from such action,
unless the Board of Directors, in its sole discretion, shall determine to issue
scrip certificates in respect to any fractional shares, which scrip
certificates, in such event shall be in a form and have such terms and
conditions as the Board of Directors in its discretion shall prescribe.
11. STOCKHOLDER APPROVAL.
Effectiveness of the Plan shall be subject to approval by the
stockholders of the Company within 12 months before or after the date the Plan
is adopted; provided, however, that Options may be granted pursuant to the Plan
subject to subsequent approval of the Plan by such stockholders. Stockholder
approval shall be obtained by the affirmative votes of the holders of a
majority of voting Shares present or represented and entitled to vote at a
meeting of stockholders duly held in accordance with the laws of the state of
Delaware.
12. AMENDMENT AND TERMINATION OF THE PLAN.
a. Amendment and Termination. The Committee may amend or
terminate the Plan from time to time in such respects as the Committee may deem
advisable and may make any other amendments which may be required so that
Options intended to be Incentive Stock Options shall at all times continue to
be Incentive Stock Options for the purpose of Section 422 of the Code;
provided, however, that without approval of the holders of a majority of the
voting Shares represented or present and entitled to vote at a valid meeting of
stockholders, no such revision or amendment shall (i) materially increase the
benefits accruing to participants under the Plan; (ii) materially increase the
number of Shares which may be issued under the Plan, other than in connection
with an adjustment under Section 10 of the Plan; (iii) materially modify the
requirements as to eligibility for participation in the Plan; (iv) materially
change the designation of the class of persons eligible to be granted Options;
(v) remove the administration of the Plan
-10-
<PAGE> 35
from the Board of Directors or its Committee; or (vi) extend the term of the
Plan beyond the maximum term set forth in Section 15 hereunder.
b. Effect of Amendment or Termination. Except as otherwise
provided in Section 10 of the Plan, any amendment or termination of the Plan
shall not affect Options already granted and such Options shall remain in full
force and effect as if the Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Company, which agreement
must be in writing and signed by the Optionee and the Company. Notwithstanding
anything to the contrary herein, this 1995 Stock Option Plan shall not
adversely affect, unless mutually agreed in writing by the Company and an
Optionee, the terms and provisions of any Option granted prior to the date the
Plan was approved by stockholders as provided in Section 11 of the Plan.
13. INDEMNIFICATION.
No member of the Committee or of the Board shall be liable for any act
or action taken, whether of commission or omission, except in circumstances
involving actual bad faith, or for any act or action taken, whether of
commission or omission, by any other member or by any officer, agent, or
Employee. In addition to such other rights of indemnification they may have as
members of the Board of Directors, or as members of the Committee, the
Committee shall be indemnified by the Company against reasonable expenses,
including attorneys' fees actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken, by commission or omission, in connection with the Plan or any Option
taken thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any action, suit
or proceeding, except in relation to matters as to which it shall be adjudged
in such action, suit or proceeding that such Committee or Board member is
liable for actual bad faith in the performance of his or her duties; provided
that within 60 days after institution of any such action, suit or proceeding, a
Committee or Board member shall in writing offer the Company the opportunity,
at its own expense, to handle and defend the same.
14. GENERAL PROVISIONS.
a. Other Plans. Nothing contained in the Plan shall prohibit the
Company from establishing additional incentive compensation arrangements.
b. No Enlargement of Rights. Neither the Plan, nor the granting
of Shares, nor any other action taken pursuant to the Plan shall constitute or
be evidence of any agreement or understanding, express or implied, that the
Company will retain an Employee or consultant in employment for any period of
time, or at any particular rate of compensation. Nothing in the Plan shall be
deemed to limit or affect the right of the Company or any Affiliate to
terminate the employment of any Employee or consultant thereof at any time for
any reason or no reason.
-11-
<PAGE> 36
No Employee or consultant shall have any right to or interest
in Options authorized hereunder prior to the grant thereof to such eligible
person, and upon such grant he or she shall have only such rights and interests
as are expressly provided herein and in the related Option Agreement, subject,
however, to all applicable provisions of the Company's Certificate of
Incorporation, as the same may be amended from time to time.
c. Notice. Any notice to be given to the Company pursuant to the
provisions of the Plan shall be addressed to the Company in care of its
Secretary (or such other person as the Company may designate from time to time)
at its principal office, and any notice to be given to an Optionee whom an
Option is granted hereunder shall be delivered personally or addressed to him
or her at the address given beneath his or her signature on his or her Stock
Option Agreement, or at such other address as such Optionee or his or her
transferee (upon the transfer of the Optioned Stock) may hereafter designate in
writing to the Company. Any such notice shall be deemed duly given when
enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
registered or certified, and deposited, postage and registry or certification
fee prepaid, in a post office or branch post office regularly maintained by the
United States Postal Service. It shall be the obligation of each Optionee
holding Shares purchased upon exercise of an Option to provide the Secretary of
the Company, by letter mailed as provided hereinabove, with written notice of
his or her direct mailing address.
d. Applicable Law. To the extent that Federal laws do not
otherwise control, the Plan shall be governed by and construed in accordance
with the laws of the state of Delaware, without regard to the conflict of laws
rules thereof.
e. Incentive Stock Options. The Company shall not be liable to
an Optionee or other person if it is determined for any reason by the Internal
Revenue Service or any court having jurisdiction that any Incentive Stock
Options are not incentive stock options as defined in Section 422 of the Code.
f. Information to Optionees. The Company shall provide, upon
request, without charge to each Optionee copies of such annual and periodic
reports as are provided by the Company to its stockholders generally.
g. Availability of Plan. A copy of the Plan shall be delivered
to the Secretary of the Company and shall be shown by him or her to any
eligible person making reasonable inquiry concerning it.
h. Severability. In the event that any provision of the Plan is
found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability shall not be construed as rendering any other
provisions contained herein as invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though
the invalid or unenforceable provision was not contained herein.
-12-
<PAGE> 37
15. EFFECTIVE DATE AND TERM OF PLAN.
The Plan shall become effective upon stockholder approval as provided
in Section 11 of the Plan. The Plan shall continue in effect for a term of ten
years unless sooner terminated under Section 12 of the Plan.
-13-
<PAGE> 38
EXHIBIT A
<PAGE> 39
EXHIBIT A-1
DAY RUNNER, INC.
1995 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
DAY RUNNER, INC., a Delaware corporation (the "Company"), hereby
grants to ______________________ (the "Optionee") an option (the "Option") to
purchase a total of __________ ( ) shares of common stock of the Company (the
"Shares"), at the price and on the terms set forth herein, and in all respects
subject to the terms and provisions of the Company's 1995 Stock Option Plan
(the "Plan") applicable to Incentive Stock Options, which terms and provisions
are hereby incorporated by reference herein. Unless the context herein
otherwise requires, capitalized terms used in this Agreement shall have the
same meanings ascribed to them in the Plan.
1. NATURE OF THE OPTION. The Option is intended by the Company
and the Optionee to qualify as an Incentive Stock Option, as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
2. DATE OF GRANT; TERM OF OPTION. The Option is granted as of
______________, and it may not be exercised later than _______________.
3. OPTION EXERCISE PRICE. The exercise price of the Option is
$________ per Share, which price is not less than the Fair Market Value per
Share on the date the Option was granted.
4. EXERCISE OF OPTION. The Option shall be exercisable during
its term only in accordance with the terms and provisions of the Plan and the
Option as follows:
(a) RIGHT TO EXERCISE. The Option shall vest and be
exercisable, cumulatively, [specify vesting schedule, e.g., in 20 equal
quarterly installments, commencing on January 1, 199_, and continuing to vest
as to one additional installment on the first day of each calendar quarter
thereafter]. An Optionee who has been in Continuous Employment with the
Company since the grant of the Option may exercise the exercisable portion of
his or her Option in whole or in part at any time during his or her employment.
However, an Option may not be exercised for a fraction of a Share. In the
event of the Optionee's termination of employment with the Company or
disability or death, the provisions of Section 5 below shall apply to the right
of the Optionee to exercise the Option.
(b) METHOD OF EXERCISE. The Option shall be exercisable
by written notice in the form of the Notice of Exercise of Incentive Stock
Option utilized by the Company from time to time, which notice shall state the
election to exercise the Option and the number of
<PAGE> 40
Shares in respect to which the Option is being exercised. Such written notice
shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Chief Financial Officer of the Company or such other
person as may be designated by the Company. The written notice shall be
accompanied by payment of the exercise price. Payment of the exercise price
shall be by cash or by check or by such other method of payment as is
authorized by the Committee pursuant to the Plan. The certificate or
certificates for the Shares as to which the Option shall be exercised shall be
registered in the name of the Optionee and may bear a legend as required under
the Plan and/or under applicable law.
(c) RESTRICTIONS ON EXERCISE. The Option may not be
exercised if the issuance of the Shares upon such exercise would constitute a
violation of any applicable federal or state securities laws or other laws or
regulations. As a condition to the exercise of the Option, the Company may
require the Optionee to make any representation and warranty to the Company as
may be required by any applicable law or regulation.
(d) NO STOCKHOLDER RIGHTS BEFORE EXERCISE AND ISSUANCE.
No rights as a stockholder shall exist with respect to the Shares as a result
of the grant of the Option. Such rights shall exist only after issuance of a
stock certificate in accordance with Section 7 of the Plan following the
exercise of the Option as provided in this Agreement and the Plan.
5. TERMINATION OF CONTINUOUS EMPLOYMENT.
(a) If the Optionee's Continuous Employment with the
Company terminates for any reason other than death, Disability or Termination
for Cause, as such terms are defined in the Plan, then the Optionee shall have
the right to exercise the Option at any time within 90 days after the date of
such termination to the extent that the Optionee was entitled to exercise the
Option at the date of such termination (subject to any earlier termination of
the Option as provided by its terms).
(b) If the Optionee's Continuous Employment with the
Company terminates due to the death or Disability of the Optionee, then the
Option may be exercised at any time within six months after the date of such
termination, in the case of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, or, in the
case of Disability, by the Optionee (subject to any earlier termination of the
Option as provided by its terms).
(c) If the Optionee's Continuous Employment with the
Company terminates due to his or her Termination for Cause, then the Optionee
shall have the right to exercise the Option at any time within 30 days after
the date of such termination to the extent that the Optionee was entitled to
exercise the Option at the date of such termination (subject to any earlier
termination of the Option as provided by its terms).
(d) Notwithstanding the foregoing regarding the exercise
of the Option after the termination of Continuous Employment, the Option shall
not be exercisable after the expiration of its term, as set forth in Section 2
herein, and, unless otherwise amended by the Committee, the Option may be
exercised only to the extent the Optionee was entitled to exercise
-2-
<PAGE> 41
it on the date the Optionee's Continuous Employment with the Company
terminated. To the extent that the Optionee was not entitled to exercise the
Option at the date of termination, or to the extent the Option is not exercised
within the time specified herein, the Option shall terminate.
6. NONTRANSFERABILITY OF OPTION. The Option may not be sold,
pledged, assigned, hypothecated, gifted, transferred or disposed of in any
manner either voluntarily or involuntarily by operation of law, other than by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order, as defined by the Code or the rules thereunder, and
may be exercised during the lifetime of the Optionee only by the Optionee.
Subject to the foregoing and the terms of the Plan, the terms of the Option
shall be binding upon the executors, administrators, heirs, successors and
assigns of the Optionee.
7. NO ENLARGEMENT OF RIGHTS. Neither the Plan nor the Option
granted hereunder shall confer upon the Optionee any right to continue as an
employee or consultant of the Company or limit in any respect the right of the
Company to discharge the Optionee as an employee or consultant at any time,
with or without cause and with or without notice. The Optionee shall have only
such rights and interests as are expressly provided in this Agreement and the
Plan.
8. WITHHOLDING TAX LIABILITY. In connection with the exercise of
the Option, the Company and the Optionee will incur liability for applicable
state and federal income withholding tax on the difference, if any, between the
aggregate purchase price and the then fair market value of the Shares acquired
upon such exercise. The Optionee understands and agrees that the Company may
be required to withhold part or all of the Optionee's regular compensation to
pay the withholding tax, and that if such regular compensation is insufficient
the Company may require the Optionee, as a condition of exercise of the Option,
to pay in cash the amount of such withholding tax liability.
9. EFFECT OF THE PLAN ON OPTION. The Option is subject to, and
the Company and the Optionee agree to be bound by, all of the terms and
conditions of the Plan, as such may be amended from time to time in accordance
with the terms thereof, provided that no such amendment shall deprive the
Optionee, without his or her consent, of the Option or any rights hereunder.
Pursuant to the Plan, the Committee appointed by the Board of Directors of the
Company is authorized to adopt rules and regulations, consistent with the Plan
and as it shall deem appropriate and proper, with regard to the Plan. A copy
of the Plan in its present form is available for inspection at the Company's
principal office during the Company's business hours by the Optionee or the
persons entitled to exercise the Option.
10. ENTIRE AGREEMENT. The terms of this Agreement and the
Plan constitute the entire agreement between the Company and the Optionee with
respect to the subject matter hereof and supersede any and all previous
agreements between the Company and the Optionee.
11. SEVERABILITY. If any provision of this Agreement, or the
application of such provision to any person or circumstances, is held valid or
unenforceable, the remainder of this
-3-
<PAGE> 42
Agreement, or the application of such provision to persons or circumstances
other than those as to which it is held valid or unenforceable, shall not be
affected thereby.
Date: _____________________ DAY RUNNER, INC.
By:____________________________________
Title:_________________________________
-4-
<PAGE> 43
The Optionee acknowledges receipt of a copy of the Plan, a copy of
which is attached hereto, and represents that he or she has read and is
familiar with the terms and provisions thereof, and hereby accepts the Option
subject to all of the terms and provisions thereof. The Optionee hereby agrees
to accept as binding, conclusive and final all decisions or interpretations of
the Board of Directors or the Committee with respect to any questions arising
with respect to the Option and the Plan.
Date: ________________
_______________________________________
Signature of Optionee
_______________________________________
Address
_______________________________________
City State Zip Code
-5-
<PAGE> 44
EXHIBIT A-2
DAY RUNNER, INC.
1995 STOCK OPTION PLAN
NON-STATUTORY STOCK OPTION AGREEMENT
DAY RUNNER, INC., a Delaware corporation (the "Company"), hereby
grants to ______________________ (the "Optionee") an option (the "Option") to
purchase a total of __________ ( ) shares of common stock of the Company (the
"Shares"), at the price and on the terms set forth herein, and in all respects
subject to the terms and provisions of the Company's 1995 Stock Option Plan
(the "Plan") applicable to Non- Statutory Stock Options, which terms and
provisions are incorporated by reference herein. Unless the context herein
otherwise requires, capitalized terms used in this Agreement shall have the
same meanings ascribed to them in the Plan.
1. NATURE OF THE OPTION. The Option is intended to be a
Non-Statutory Stock Option and is not intended to be an Incentive Stock Option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
2. DATE OF GRANT; TERM OF OPTION. The Option is granted as of
______________, and it may not be exercised later than _______________.
3. OPTION EXERCISE PRICE. The exercise price of the Option is
$________ per Share, which price is not less than the Fair Market Value per
Share on the date the Option was granted.
4. EXERCISE OF OPTION. The Option shall be exercisable during
its term only in accordance with the terms and provisions of the Plan and the
Option as follows:
(a) RIGHT TO EXERCISE. The Option shall vest and be
exercisable, cumulatively, [specify vesting schedule, e.g., in 20 equal
quarterly installments, commencing on January 1, 199_, and continuing to vest
as to one additional installment on the first day of each calendar quarter
thereafter]. An Optionee who has been in Continuous Employment with the
Company since the grant of the Option may exercise the exercisable portion of
his or her Option in whole or in part at any time during his or her employment.
However, an Option may not be exercised for a fraction of a Share. In the
event of the Optionee's termination of employment with the Company or
disability or death, the provisions of Section 5 below shall apply to the right
of the Optionee to exercise the Option.
(b) METHOD OF EXERCISE. The Option shall be exercisable
by written notice in the form of the Notice of Exercise of Non- Statutory Stock
Option utilized by the Company from time to time, which notice shall state the
election to exercise the Option and the number
<PAGE> 45
of Shares in respect to which the Option is being exercised. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Chief Financial Officer of the Company or such other
person as may be designated by the Company. The written notice shall be
accompanied by payment of the exercise price. Payment of the exercise price
shall be by cash or by check or by such other method of payment as is
authorized by the Committee pursuant to the Plan. The certificate or
certificates for the Shares as to which the Option shall be exercised shall be
registered in the name of the Optionee and may bear a legend as required under
the Plan and/or under applicable law.
(c) RESTRICTIONS ON EXERCISE. The Option may not be
exercised if the issuance of the Shares upon such exercise would constitute a
violation of any applicable federal or state securities laws or other laws or
regulations. As a condition to the exercise of the Option, the Company may
require the Optionee to make any representation and warranty to the Company as
may be required by any applicable law or regulation.
(d) NO STOCKHOLDER RIGHTS BEFORE EXERCISE AND ISSUANCE.
No rights as a stockholder shall exist with respect to the Shares as a result
of the grant of the Option. Such rights shall exist only after issuance of a
stock certificate in accordance with Section 7 of the Plan following the
exercise of the Option as provided in this Agreement and the Plan.
5. TERMINATION OF CONTINUOUS EMPLOYMENT.
(a) If the Optionee's Continuous Employment with the
Company terminates for any reason other than death, Disability or Termination
for Cause, as such terms are defined in the Plan, then the Optionee shall have
the right to exercise the Option at any time within 90 days after the date of
such termination to the extent that the Optionee was entitled to exercise the
Option at the date of such termination (subject to any earlier termination of
the Option as provided by its terms).
(b) If the Optionee's Continuous Employment with the
Company terminates due to the death or Disability of the Optionee, then the
Option may be exercised at any time within six months after the date of such
termination, in the case of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, or, in the
case of Disability, by the Optionee (subject to any earlier termination of the
Option as provided by its terms).
(c) If the Optionee's Continuous Employment with the
Company terminates due to his or her Termination for Cause, then the Optionee
shall have the right to exercise the Option at any time within 30 days after
the date of such termination to the extent that the Optionee was entitled to
exercise the Option at the date of such termination (subject to any earlier
termination of the Option as provided by its terms).
(d) Notwithstanding the foregoing regarding the exercise
of the Option after the termination of Continuous Employment, the Option shall
not be exercisable after the expiration of its term, as set forth in Section 2
herein, and, unless otherwise amended by the Committee, the Option may be
exercised only to the extent the Optionee was entitled to exercise
-2-
<PAGE> 46
it on the date the Optionee's Continuous Employment with the Company
terminated. To the extent that the Optionee was not entitled to exercise the
Option at the date of termination, or to the extent the Option is not exercised
within the time specified herein, the Option shall terminate.
6. NONTRANSFERABILITY OF OPTION. The Option may not be sold,
pledged, assigned, hypothecated, gifted, transferred or disposed of in any
manner either voluntarily or involuntarily by operation of law, other than by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order, as defined by the Code or the rules thereunder, and
may be exercised during the lifetime of the Optionee only by the Optionee.
Subject to the foregoing and the terms of the Plan, the terms of the Option
shall be binding upon the executors, administrators, heirs, successors and
assigns of the Optionee.
7. NO ENLARGEMENT OF RIGHTS. Neither the Plan nor the Option
granted hereunder shall confer upon the Optionee any right to continue as an
employee or consultant of the Company or limit in any respect the right of the
Company to discharge the Optionee as an employee or consultant at any time,
with or without cause and with or without notice. The Optionee shall have only
such rights and interests as are expressly provided in this Agreement and the
Plan.
8. WITHHOLDING TAX LIABILITY. In connection with the exercise of
the Option, the Company and the Optionee will incur liability for applicable
state and federal income withholding tax on the difference, if any, between the
aggregate purchase price and the then fair market value of the Shares acquired
upon such exercise. The Optionee understands and agrees that the Company may
be required to withhold part or all of the Optionee's regular compensation to
pay the withholding tax, and that if such regular compensation is insufficient
the Company may require the Optionee, as a condition of exercise of the Option,
to pay in cash the amount of such withholding tax liability.
9. EFFECT OF THE PLAN ON OPTION. The Option is subject to, and
the Company and the Optionee agree to be bound by, all of the terms and
conditions of the Plan, as such may be amended from time to time in accordance
with the terms thereof, provided that no such amendment shall deprive the
Optionee, without his or her consent, of the Option or any rights hereunder.
Pursuant to the Plan, the Committee appointed by the Board of Directors of the
Company is authorized to adopt rules and regulations, consistent with the Plan
and as it shall deem appropriate and proper, with regard to the Plan. A copy
of the Plan in its present form is available for inspection at the Company's
principal office during the Company's business hours by the Optionee or the
persons entitled to exercise the Option.
10. ENTIRE AGREEMENT. The terms of this Agreement and the
Plan constitute the entire agreement between the Company and the Optionee with
respect to the subject matter hereof and supersede any and all previous
agreements between the Company and the Optionee.
11. SEVERABILITY. If any provision of this Agreement, or the
application of such provision to any person or circumstances, is held valid or
unenforceable, the remainder of this
-3-
<PAGE> 47
Agreement, or the application of such provision to persons or circumstances
other than those as to which it is held valid or unenforceable, shall not be
affected thereby.
Date: _____________________ DAY RUNNER, INC.
By:____________________________________
Title:_________________________________
-4-
<PAGE> 48
The Optionee acknowledges receipt of a copy of the Plan, a copy of
which is attached hereto, and represents that he or she has read and is
familiar with the terms and provisions thereof, and hereby accepts the Option
subject to all of the terms and provisions thereof. The Optionee hereby agrees
to accept as binding, conclusive and final all decisions or interpretations of
the Board of Directors or the Committee with respect to any questions arising
with respect to the Option and the Plan.
Date: ________________
_______________________________________
Signature of Optionee
_______________________________________
Address
_______________________________________
City State Zip Code
-5-
<PAGE> 49
AMENDMENT NO. 1 TO
DAY RUNNER, INC.
1995 STOCK OPTION PLAN*
Section 3 of the Day Runner, Inc. 1995 Stock Option Plan is
hereby amended to read in its entirety as follows:
"3. SHARES RESERVED. The maximum aggregate
number of Shares reserved for issuance pursuant to the Plan
shall be 500,000 Shares or the number of shares of stock to
which such Shares shall be adjusted as provided in Section 10
of the Plan. Such number of Shares may be set aside out of
authorized but unissued Shares not reserved for any other
purpose, or out of issued Shares acquired for and held in the
treasury of the Company from time to time.
Shares subject to, but not sold or issued under, any
Option terminating, expiring or canceled for any reason prior
to its exercise in full, shall again become available for
Options thereafter granted under the Plan, and the same shall
not be deemed an increase in the number of Shares reserved for
issuance under the Plan. Any Shares which may be tendered,
actually or by attestation, by an Optionee as full or partial
payment in connection with the exercise of any Option under
the Plan shall again be available for Options thereafter
granted during the remainder of the term of the Plan."
Dated: October 21, 1996
________________________
* This amendment is subject to approval by the Company's stockholders at
their next annual meeting scheduled to be held on December 4, 1996.
<PAGE> 50
WARRANT TO PURCHASE COMMON STOCK
OF
DAY RUNNER, INC.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Warrant to Purchase
25,000 Shares of Common Stock
DAY RUNNER, INC.
INCORPORATED UNDER THE LAWS OF THE STATE
OF DELAWARE
Void after December 3, 2006
THE WARRANT evidenced by this Certificate has been issued for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.
THIS CERTIFICATE evidences the right of ____________________ (the
"Holder") to purchase 25,000 shares of Common Stock, par value $0.001 per share
(the "Shares"), of Day Runner, Inc., a Delaware corporation (the "Company"), at
a price of _______________ ($________) per Share, subject, however, to the
terms and conditions hereinafter set forth.
1. Definitions. As used in this Certificate:
(a) "Warrant" shall mean the rights evidenced by this
Certificate.
(b) "Warrant Price" shall mean _______________
($________), as adjusted in accordance with Section 5 hereof.
2. Term of Warrant. The Warrant may be exercised only during the
period commencing on December 4, 1996 through the close of business on December
3, 2006 (the "Warrant Term") and may be exercised only in accordance with the
terms and conditions hereinafter set forth.
<PAGE> 51
3. Exercise of Warrant. The Warrant shall be exercisable as
follows:
(a) Right to Exercise. The Warrant shall vest and become
exercisable cumulatively in 60 equal monthly installments with the first
installment vesting on January 1, 1997 and one additional installment vesting
on the first day of each month thereafter so long as _______________ remains a
member of the Company's Board of Directors.
Notwithstanding the foregoing, if ___________________
____________________ shall cease to be a director of the Company for any reason
or no reason ("Termination"), whether such Termination is permanent or
temporary, then after the effective date of such Termination and through the
end of the Warrant Term the Holder may exercise the Warrant to purchase only
such number of Shares that the Holder would have been entitled to purchase on
the effective date of such Termination in accordance with the foregoing. To
the extent that the Holder shall not have been entitled to exercise any portion
of the Warrant on the effective date of such Termination, such portion shall be
deemed to have expired unexercised on such effective date.
(b) Method of Exercise; Payment; Issuance of New Warrant;
Transfer and Exchange. The Warrant may be exercised by the Holder, in whole or
in part, by the surrender of this Certificate, properly endorsed, with the form
of subscription attached to this Certificate duly executed by the Holder, at
the principal office of the Company, and by the payment to the Company by
certified or cashier's check of the then applicable Warrant Price. In the
event of any exercise of the Warrant, certificates for the Shares so purchased
shall be delivered to the Holder within a reasonable time after the Warrant has
been so exercised and, unless the Warrant has expired, a new certificate
representing the right to purchase the number of Shares, if any, with respect
to which this Warrant shall not then have been exercised shall also be issued
to the Holder within such time. All such new certificates shall be dated the
date hereof and shall be identical to this Certificate except as to the number
of Shares issuable pursuant thereto.
(c) Restrictions on Exercise. The Warrant may not be
exercised if the issuance of the Shares upon such exercise would constitute a
violation of any applicable federal or state securities laws or other laws or
regulations. As a condition to the exercise of the Warrant, the Company may
require the Holder to make such representations and warranties to the Company
as may be required by applicable law or regulation.
4. Shares Fully Paid; Reservation of Shares. The Company
covenants and agrees that all Shares will, upon issuance and payment in
accordance herewith, be fully paid, validly issued and nonassessable. The
Company further covenants and agrees that during the Warrant Term the Company
will at all times have authorized and reserved for the purpose of issue upon
exercise of the Warrant at least the maximum number of Shares as are issuable
upon the exercise of the Warrant.
5. Adjustment of Purchase Price and Number of Shares. The number
and kind of securities purchasable upon the exercise of the Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
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<PAGE> 52
(a) Consolidation, Merger or Reclassification. If the
Company at any time while the Warrant remains outstanding and unexpired shall
consolidate with or merge into any other corporation, or sell all or
substantially all of its assets to another corporation, or reclassify or in any
manner change the securities then purchasable upon the exercise of the Warrant
(any of which shall constitute a "Reorganization"), then lawful and adequate
provision shall be made whereby this Certificate shall thereafter evidence the
right to purchase such number and kind of securities and other property as
would have been issuable or distributable on account of such Reorganization
upon or with respect to the securities which were purchasable or would have
become purchasable under the Warrant immediately prior to such Reorganization.
The Company shall not effect any such Reorganization unless prior to or
simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such Reorganization shall assume by
written instrument executed and mailed or delivered to the Holder, at the last
address of the Holder appearing on the books of the Company, the obligation to
deliver to the Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Holder may be entitled to
purchase. Notwithstanding anything in this Section 5(a) to the contrary, the
prior two sentences shall be inoperative and of no force and effect if upon the
completion of any such Reorganization the stockholders of the Company
immediately prior to such event do not own at least 50% of the equity interest
of the corporation resulting from such Reorganization, in which case the
Warrant or any unexercised portion thereof shall expire upon the completion of
such Reorganization if the notice required by Section 5(e) hereof has been duly
given.
(b) Subdivision or Combination of Shares. If the Company
at any time while the Warrant remains outstanding and unexpired shall subdivide
or combine its Common Stock, the Warrant Price shall be adjusted to that price
determined by multiplying the Warrant Price in effect immediately prior to such
subdivision or combination by a fraction (i) the numerator of which shall be
the total number of shares of Common Stock outstanding immediately prior to
such subdivision or combination and (ii) the denominator of which shall be the
total number of shares of Common Stock outstanding immediately after such
subdivision or combination.
(c) Certain Dividends and Distributions. If the Company
at any time while the Warrant is outstanding and unexpired shall take a record
of the holders of its Common Stock for the purpose of:
(i) Stock Dividends. Entitling them to receive a
dividend payable in, or other distribution without
consideration of, Common Stock, then the Warrant Price shall
be adjusted to that price determined by multiplying the
Warrant Price in effect immediately prior to each dividend or
distribution by a fraction (A) the numerator of which shall be
the total number of shares of Common Stock outstanding
immediately prior to such dividend or distribution and (B) the
denominator of which shall be the total number of shares of
Common Stock outstanding immediately after such dividend or
distribution; or
(ii) Distribution of Assets, Securities, etc.
Making any distribution without consideration with respect to
its Common Stock (other than a cash dividend) payable other
than in its Common Stock, the Holder shall, upon the
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<PAGE> 53
exercise hereof, be entitled to receive, in addition to the
number of Shares receivable upon such exercise, and without
payment of any additional consideration therefor, such assets
or securities as would have been payable to the Holder as
owner of that number of Shares receivable by exercise of the
Warrant had the Holder been the holder of record of such
Shares on the record date for such distribution, and an
appropriate provision therefor shall be made a part of any
such distribution.
(d) Adjustment of Number of Shares. Upon each adjustment
in the Warrant Price pursuant to Subsections (b) or (c)(i) of this Section 5,
the number of Shares purchasable hereunder shall be adjusted to that number
determined by multiplying the number of Shares purchasable upon the exercise of
the Warrant immediately prior to such adjustment by a fraction, the numerator
of which shall be the Warrant Price immediately prior to such adjustment and
the denominator of which shall be the Warrant Price immediately following such
adjustment.
(e) Notice. In case at any time during the Warrant Term:
(i) The Company shall pay any dividend payable in
stock upon its Common Stock or make any distribution,
excluding a cash dividend, to the holders of its Common Stock;
(ii) The Company shall offer for subscription pro
rata to the holders of its Common Stock any additional shares
of stock of any class or other rights;
(iii) There shall be any reclassification of the
Common Stock of the Company, or consolidation or merger of the
Company with, or sale of all or substantially all of its
assets to, another corporation; or
(iv) There shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to the Holder at
least ten days' prior written notice (or, in the event of notice pursuant to
Section 5(e)(iii), at least 30 days' prior written notice) of the date on which
the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect to any such reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up. Such notice shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto, and such notice
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be. Each such written
notice shall be given personally or by first-class, registered or certified
mail or similar delivery service, postage prepaid, addressed to the Holder at
the address of the Holder as shown on the books of the Company.
-4-
<PAGE> 54
(f) No Change in Certificate. The form of this
Certificate need not be changed because of any adjustment in the Warrant Price
or in the number of Shares purchasable upon exercise of any or all of the
Warrant. The Warrant Price or the number of Shares shall be considered to have
been so changed as of the close of business on the date of adjustment.
6. Fractional Shares. No fractional Shares will be issued in
connection with any exercise of the Warrant, rather, in lieu of such fractional
Shares, the Company shall make a cash payment therefor upon the basis of the
fair market value of the Shares at the time of such exercise, as determined in
good faith by the Company's Board of Directors.
7. Transfer and Exchange of Warrant. Subject to the terms
hereof, including, without limitation, Section 8, the Warrant and all rights
hereunder are transferable, in whole or in part, on the books of the Company
maintained for such purpose at its principal office referred to above by the
registered holder hereof in person or by its duly authorized attorney, upon
surrender of the Warrant properly endorsed and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer. Upon any
partial transfer, the Company will issue and deliver to such holder a new
Warrant or Warrants with respect to the shares of Common Stock not so
transferred. Each taker and holder of the Warrant, by taking or holding the
same, consents and agrees that the Warrant when endorsed in blank shall be
deemed negotiable and that when the Warrant shall have been so endorsed, the
holder hereof may be treated by the Company and all other persons dealing with
the Warrant, as the absolute owner hereof for any purpose and as the person
entitled to exercise the rights represented hereby, or to the transfer hereof
on the books of the Company, any notice to the contrary notwithstanding; but
until such transfer on such books, the Company may treat the registered holder
hereof as the owner for all purposes.
The Warrant is exchangeable at such office for a Warrant or Warrants
for the same aggregate number of shares of Common Stock, all new Warrants to
represent the right to purchase such number of shares as the holder hereof
shall designate at the time of such exchange.
8. Restrictions on Transfer of Warrant. The Holder of the
Warrant, by acceptance hereof, agrees that, absent an effective notification
under Regulation A or a registration statement, in either case under the
Securities Act of 1933, covering the disposition of the Warrant or Common Stock
issued, or issuable upon exercise hereof, such Holder will not sell, transfer,
pledge or hypothecate any or all of such Warrant or Common Stock, as the case
may be, unless such sale or transfer will be exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933 and applicable
state securities laws, and such Holder consents to the Company making a
notification on its records or giving instructions to any transfer agent of the
Warrant or such Common Stock in order to implement such restriction on
transferability.
9. No Rights as Stockholder. The holder of the Warrant, as such,
shall not be entitled to vote or receive dividends or be considered a
stockholder of the Company for any purpose, nor shall anything in the Warrant
be construed to confer on such holder, as such, any rights of a stockholder of
the Company or any right to vote, give or withhold consent to any
-5-
<PAGE> 55
corporate action, to receive notice of meetings of stockholders, to receive
dividends or subscription rights or otherwise.
10. Miscellaneous Provisions.
(a) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
the Warrant and, in the case of loss, theft or destruction, on delivery of any
indemnity agreement or bond reasonably satisfactory in form and amount to the
Company or, in the case of mutilation, on surrender and cancellation of the
Warrant, the Company at its expense will execute and deliver, in lieu of the
Warrant, a new Warrant of like tenor.
(b) Governing Law. The Warrant shall be governed by and
construed and enforced in accordance with the internal laws, and not the laws
pertaining to choice or conflicts of laws, of the State of Delaware.
Dated as of December 4, 1996.
DAY RUNNER, INC.
By:_____________________________________
____________, Chief Executive Officer
ATTEST:
_______________________________
___________________, Secretary
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<PAGE> 56
DAY RUNNER, INC.
SUBSCRIPTION FORM
(To be completed and signed only upon exercise of the Warrant)
TO: Day Runner, Inc.
15295 Alton Parkway
Irvine, CA 92718
Attention: Secretary
The undersigned, the holder of the attached Warrant, hereby
irrevocably elects to exercise the right of purchase represented by such
Warrant for, and to purchase thereunder, _______* shares of Day Runner, Inc.
Common Stock and herewith makes payment of $___________ for those shares, and
requests that the certificate(s) for those shares be issued in the name of and
delivered to:
(Please print name and address)
___________________________________
___________________________________
___________________________________
___________________________________
Dated: _____________________ ___________________________________
Signature
___________________________________
Print Name
__________________________________
* Insert here the number of shares called for on the face of the
Warrant (or in the case of partial exercise, that portion as to which the
Warrant is being exercised), without making any adjustment for additional
Common Stock or any other securities or property which, under the adjustment
provisions of the Warrant, may be deliverable upon exercise.
<PAGE> 57
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DAY RUNNER, INC.
1996 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Day Runner, Inc., a Delaware corporation (the
"Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated October 29, 1996, and hereby
appoints Mark A. Vidovich and Dennis K. Marquardt, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the Annual Meeting of
Stockholders of the Company to be held Wednesday, December 4, 1996, at 9:00
a.m., California time, at The Sutton Place Hotel located at 4500 MacArthur
Boulevard, Newport Beach, California 92660, and at any adjournment(s) thereof,
and to vote all shares of Common Stock to which the undersigned would be
entitled, if then and there personally present, on the matters set forth below:
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS
/ / FOR ALL nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below). to vote for ALL nominees listed below.
</TABLE>
(Instruction: To WITHHOLD the authority to vote for any individual nominee,
mark the box next to the nominee's name below.)
Name of Nominee:
<TABLE>
<S> <C> <C> <C>
/ / James P. Higgins / / Alan R. Rachlin / / Boyd I. Willat
/ / Jill Tate Higgins / / Mark A. Vidovich / / Felice Willat
/ / Charles Miller
</TABLE>
2. APPROVAL OF AMENDMENT TO 1995 STOCK OPTION PLAN
/ / FOR / / AGAINST / / ABSTAIN
To approve an amendment to the Company's 1995 Stock Option Plan to increase
the aggregate number of shares authorized for issuance thereunder from
300,000 to 500,000 shares, as described in the Proxy Statement.
3. APPROVAL OF GRANT OF WARRANTS TO NON-EMPLOYEE DIRECTORS
/ / FOR / / AGAINST / / ABSTAIN
To approve the Company's grant to each of its non-employee directors of a
warrant to purchase 25,000 shares of the Company's Common Stock, as described
in the Proxy Statement.
(Continued on other side)
<PAGE> 58
(Continued from other side)
4. APPOINTMENT OF INDEPENDENT AUDITORS
/ / FOR / / AGAINST / / ABSTAIN
To ratify the appointment of Deloitte & Touche LLP as independent auditors of
the Company for the fiscal year ending June 30, 1997, as described in the
Proxy Statement.
5. OTHER BUSINESS
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment(s) thereof.
Any one of such attorneys-in-fact or substitutes as shall be present and
shall act at said meeting or any adjournment(s) thereof shall have and may
exercise all powers of said attorneys-in-fact hereunder.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR PROPOSALS 1, 2, 3
--------------
AND 4 AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING.
Dated: , 1996
-------------------------
(Signature)
-------------------------
(Signature)
(This Proxy should be
marked, dated and signed
by the stockholder(s)
EXACTLY as his or her
name appears hereon and
returned promptly in the
enclosed envelope.
Persons signing in a
fiduciary capacity should
so indicate. If shares
are held by joint tenants
or as community property,
both should sign.)
DO NOT FOLD, STAPLE OR MUTILATE
