SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
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14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
URBAN OUTFITTERS, INC.
------------------------------------------------------------------------
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[INSERT NAME OF FILER WHEN APPLICABLE]
------------------------------------------------------------------------
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<PAGE>
URBAN OUTFITTERS, INC.
1809 Walnut Street
Philadelphia, Pennsylvania 19103
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
to be held at 10:30 a.m., on May 20, 1997, at the National Society of the
Colonial Dames of America, 1630 Latimer Street, Philadelphia, Pennsylvania.
The matters to be considered and voted upon are described in the 1997 Notice
of Annual Meeting of Shareholders and Proxy Statement, which accompany this
letter. It is important that your shares be represented and voted at the Annual
Meeting. Kindly read the attached Proxy Statement, date and sign the enclosed
proxy card and return the proxy card in the accompanying envelope.
I look forward to seeing you at the meeting and having the opportunity to
review the business operations of Urban Outfitters.
Sincerely,
Richard A. Hayne
President
April 21, 1997
<PAGE>
URBAN OUTFITTERS, INC.
1809 Walnut Street
Philadelphia, Pennsylvania 19103
-------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 20, 1997
------------
TO OUR SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Urban
Outfitters, Inc. will be held at the National Society of the Colonial Dames of
America, 1630 Latimer Street, Philadelphia, Pennsylvania, on May 20, 1997 at
10:30 a.m., for the following purposes:
1. To elect five Directors to serve for a term of one year.
2. To vote on a proposal to approve the Urban Outfitters, Inc. 1997
Stock Option Plan.
3. To vote on a proposal to ratify the appointment of Price
Waterhouse LLP as the Company's independent accountants for the
fiscal year ending January 31, 1998.
4. To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on April 4, 1997 are
entitled to notice of, and to vote at, the Annual Meeting or any adjournment or
postponement thereof.
By Order of the Board of Directors
Richard A. Hayne
Chairman of the Board
April 21, 1997
<PAGE>
URBAN OUTFITTERS, INC.
1809 Walnut Street
Philadelphia, Pennsylvania 19103
------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
------------
The accompanying proxy is solicited by the Board of Directors of Urban
Outfitters, Inc. (the "Company") for use at the Annual Meeting of Shareholders
(the "Meeting") to be held on Tuesday, May 20, 1997 at 10:30 a.m. at the
National Society of the Colonial Dames of America, 1630 Latimer Street,
Philadelphia, Pennsylvania, and any adjournments or postponements thereof. This
Proxy Statement and accompanying proxy card are being mailed to Shareholders on
or about April 21, 1997.
Only Shareholders of record, as shown on the transfer books of the Company,
at the close of business on April 4, 1997 (the "Record Date") are entitled to
notice of, and to vote at, the Meeting. On the Record Date, there were
17,528,698 Common Shares outstanding.
The Company's Common Shares represented by an unrevoked Proxy in the
enclosed form, which has been properly executed and received prior to the
Meeting, will be voted in accordance with the specifications made on such Proxy.
Any properly executed Proxy received on a timely basis on which no specification
has been made by the Shareholder will be voted "FOR" the election of the
nominees listed in this Proxy Statement, "FOR" the approval of the Urban
Outfitters, Inc. 1997 Stock Option Plan, "FOR" the ratification of Price
Waterhouse LLP as independent accountants for the fiscal year ending January 31,
1998 ("Fiscal 1998"), and, to the extent permitted by the rules and regulations
of the Securities and Exchange Commission, in accordance with the judgment of
the persons voting the Proxies upon such other matters as may come before the
Meeting and any adjournments. Any Shareholder giving a Proxy has the power to
revoke it prior to its exercise either by giving written notice to the Secretary
of the Company, by voting in person at the Meeting or by execution of a
subsequent Proxy.
Presence at the Meeting in person or by Proxy of the holders of a majority
of the Common Shares entitled to vote is necessary to constitute a quorum. Each
share entitles the holder to one vote. The election of directors will be
determined by a plurality vote and the five nominees receiving the most "FOR"
votes will be elected. Approval of any other proposal will require the
affirmative vote of a majority of the shares cast on the proposal. In all
matters, an abstention or broker non-vote will not be counted as a vote cast.
<PAGE>
1. ELECTION OF DIRECTORS
The Company's By-laws provide for the Board of Directors to be composed of
as many directors as are designated from time to time by the Board of Directors,
which designation is presently five. Each director shall be elected for the term
of one year and shall serve until his successor is elected and qualified.
At the Meeting, five directors will be elected. The Board of Directors has
nominated the five persons listed below for election to the Board at the
Meeting. Unless otherwise directed, the persons named on the Proxy intend to
vote all valid proxies received by them "FOR" the election of the listed
nominees. In the event any of the nominees shall be unable or unwilling to serve
as a director, it is intended that the Proxies will be voted "FOR" the election
of such person nominated by the Board of Directors in substitution. The Company
has no reason to believe that any nominee of the Board of Directors will be
unable to serve as a director if elected.
The nominees for election to the Board of Directors are Richard A. Hayne,
Scott A. Belair, Harry S. Cherken, Jr., Joel S. Lawson III and Burton M. Sapiro.
Biographical Information
The following information is submitted concerning each nominee for election
as a director:
Name Age Position
- ---- --- --------
Richard A. Hayne 50 Chairman of the Board of Directors
and President
Scott A. Belair (1)(2) 49 Director
Harry S. Cherken, Jr. 47 Director
Joel S. Lawson III(1)(2) 49 Director
Burton M. Sapiro 70 Director
- -------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Mr. Hayne co-founded the Company in 1970 and has been its President and
Chairman of the Board of Directors since the Company's incorporation in 1976.
Mr. Belair co-founded the Company, has been a director since its
incorporation in 1976 and has served as Principal of the ZAC Group, a provider
of financial services, during the last seven years. Previously he was a managing
director of Drexel Burnham Lambert Incorporated. Mr. Belair is a director and
President of Balfour Maclaine Corporation.
<PAGE>
Mr. Cherken, a director since 1989, has been a partner in the law firm of
Drinker Biddle & Reath LLP in Philadelphia, Pennsylvania since 1984 and has
served as a Managing Partner of that firm since February 1996.
Mr. Lawson, a director since 1985, has since 1980 been the Managing Partner
and Chief Executive Officer of Howard, Lawson & Co., an investment banking and
corporate finance firm located in Philadelphia, Pennsylvania.
Mr. Sapiro, a director since 1989, has been a retail marketing consultant
since his retirement in 1985. Previously, he was Senior Vice President/General
Merchandise Manager and a member of the Executive Committee of both Macy's New
York and Gimbels Philadelphia/Gimbels East. He was also a director of Macy's New
York.
Board Committees and Attendance at Meetings
The Board of Directors currently has an Audit Committee and a Compensation
Committee. The Audit Committee oversees actions by the Company's independent
accountants and reviews the Company's internal controls. The Board's
Compensation Committee, established in September 1993, is responsible for
determining salaries, incentives and other forms of compensation of the
executive officers, and also administers the Company's stock option plans. The
Board has not established a nominating or similar committee.
The Company's Board of Directors held four meetings in the fiscal year
ended January 31, 1997 ("Fiscal 1997"). The Compensation Committee and the Audit
Committee held two meetings and one meeting, respectively, during Fiscal 1997.
Each director attended 75% or more of the meetings of the Board and committees
of which they were members during Fiscal 1997.
Compensation Committee Interlocks and Insider Participation
On November 26, 1996, Harry S. Cherken, Jr., resigned as a member of the
Compensation Committee. Mr. Cherken is a partner in the law firm of Drinker
Biddle & Reath LLP, which provided legal services to the Company in Fiscal 1997
and is expected to continue to do so in the future. On November 26, 1996, Scott
A. Belair was elected to the Compensation Committee.
Compensation of Directors
The Company currently pays each director who is not also an employee of the
Company ("Outside Directors") $1,000 for each meeting of the Board of Directors
attended, excluding committee meetings. The Company also reimburses the
directors for their expenses incurred in connection with their activities as
directors. The Company's 1993 Non-Employee Directors' Non-Qualified Stock Option
Plan (the "Directors' Plan") provides for the grant of non-qualified stock
options to each director who is not also an employee.
Pursuant to the Directors' Plan, each director, other than Mr. Hayne,
received an initial grant of a non-qualified option to purchase 5,000 Common
Shares at an exercise price of $18.00 per share at the time of the Company's
initial public offering of its Common Shares in November 1993. As a
<PAGE>
result of the two-for-one stock split effected by the Company on June 1, 1996,
such initial grants to the Outside Directors of the Company were converted into
the right to purchase 10,000 Common Shares at an exercise price of $9.00 per
share. A person who subsequently becomes an Outside Director will receive an
initial grant of an option to purchase 10,000 Common Shares on the date he or
she becomes a director. Thereafter, on the first business day immediately
following each of the dates on which an incumbent Outside Director is elected or
re-elected, he or she will receive an additional grant of an option to purchase
10,000 Common Shares provided that he or she did not receive an initial grant
within the preceding six-month period. Options generally become exercisable 12
months after the date of their grant. Each Outside Director may exercise options
granted under the Directors' Plan upon the termination of his or her membership
on the Board for a reason other than death or disability for up to one year,
except where the option, by its terms, expires on an earlier date. During Fiscal
1997, each Outside Director received an option grant of 5,000 shares. As a
result of the Company's stock split, such options now represent the right to
purchase 10,000 shares. The exercise price of options granted under the Plan is
the fair market value of the Common Shares at the date of grant.
Consulting Agreement
Burton M. Sapiro, a director of the Company, and the Company entered into
an agreement pursuant to which Mr. Sapiro agreed to provide up to 36 days of
consulting services per year to the Company relating to retail marketing. In
consideration for such services, Mr. Sapiro is paid a daily fee of $1,100 and is
reimbursed for his expenses. The agreement was approved by the Company's
disinterested directors. The total amount paid to Mr. Sapiro in Fiscal 1997
pursuant to these arrangements, exclusive of directors' fees but including
expenses, was $46,400.
2. APPROVAL OF THE URBAN OUTFITTERS, INC.
1997 STOCK OPTION PLAN
At the Meeting, the shareholders also will be asked to approve the
Company's 1997 Stock Option Plan (the "1997 Plan"). The 1997 Plan was approved
by the Company's Board of Directors on March 19, 1997, subject to shareholder
approval. As discussed in more detail in the following paragraphs, the Board of
Directors believes that the 1997 Plan is necessary for the Company to attract,
retain and motivate capable officers, other key management level employees,
non-employee directors and consultants.
The Company currently has three plans which provide for the granting of
options: (1) a plan established in 1987 for the granting incentive stock options
(the "1987 Plan"); (2) a plan established in 1992 for the granting of
non-qualified stock options to employees and consultants (the "1992 Plan"); and
(3) a plan established in 1993 for the granting of non-qualified stock options
to non-employee directors (the "1993 Plan").
The 1997 Plan is intended to replace and supplement the 1987, 1992 and 1993
Plans for the following reasons: (1) the 1987 Plan, by its terms, does not
permit any incentive stock options to be granted after October 14, 1997; (2) as
of March 31, 1997, only 35,004 shares were available for the granting of future
non-qualified stock options under the 1992 Plan; and (3) as of May 22, 1997,
only
<PAGE>
32,000 shares will be available for the granting of future non-qualified stock
options to non-employee directors under the 1993 Plan.
In order to enable the Company to continue to attract, retain and motivate
key employees, non-employee directors and consultants through the grant of
options to purchase Common Shares of the Company, the Board strongly recommends
approval of the 1997 Plan.
Summary of the 1997 Plan
The text of the 1997 Plan is attached as an Appendix to this proxy
statement. The following description of the 1997 Plan is intended merely as a
summary of its principal features and is qualified in its entirety by reference
to the provisions of the 1997 Plan itself.
1. Stock Available Under Plan. The 1997 Plan authorizes up to an aggregate
of 1,250,000 Common Shares for the granting of incentive stock options (within
the meaning of Section 422 of the Internal Revenue Code) ("ISOs") and
non-qualified stock options ("NQSOs"). No more than 400,000 Common Shares are
available for options granted to any one key employee over the life of the 1997
Plan. Authorized but unissued shares or treasury shares may be issued under the
Plan.
The closing price of the Common Shares on the NASDAQ National Market System
on March 31, 1997 was 11 5/8.
2. Eligible Individuals. Key employees of the Company and certain related
corporations are eligible to receive ISOs and NQSOs under the 1997 Plan. There
are approximately 45 key employees currently eligible for participation in the
1997 Plan. Non-employee directors of the Company are eligible to receive NQSOs
under the 1997 Plan in accordance with a formula discussed below. There are
currently four non-employee directors eligible for participation in the 1997
Plan. The Compensation Committee may also grant NQSOs to consultants. It is not
possible to determine the number of consultants potentially eligible to
participate in the 1997 Plan.
3. Administration. The 1997 Plan is administered by the Compensation
Committee. The Compensation Committee is given considerable discretion with
respect to options granted to key employees and consultants under the 1997 Plan.
The Compensation Committee has no discretion with respect to NQSOs granted to
non-employee directors, because non-employee director grants are made under a
formula discussed below.
4. Options Granted to Key Employees and Consultants. The exercise price of
options granted to key employees and consultants under the 1997 Plan is
determined by the Compensation Committee, and must be at least equal to the fair
market value of the Common Shares on the date of grant (110% of fair market
value for an ISO granted to a more than 10% shareholder).
Options granted to key employees and consultants under the 1997 Plan may
not extend for more than ten years (five years for an ISO granted to a more than
10% shareholder), and become exercisable in such installments as the
Compensation Committee may specify, but not earlier than six months from the
date of grant, except in limited circumstances. The Compensation Committee may
also establish performance criteria which, if met, accelerate the date on which
options become exercisable. Options generally terminate no more than 30 days
after the termination of the optionee's
<PAGE>
employment or consultancy, unless such termination is as a result of death or
disability, in which case options remain exercisable for up to six months
thereafter. The Compensation Committee also has discretion under the 1997 Plan
to accelerate the exercisability of all or part of the unvested portion of an
optionee's options.
The exercise price of an option is payable in cash. The Compensation
Committee, in its discretion, may also permit a key employee or consultant to
pay the exercise price by surrendering Common Shares, or through a so-called
broker-financed transaction. The 1997 Plan also permits the withholding of
shares issuable upon exercise of options or the delivery of previously acquired
Common Shares to satisfy withholding taxes.
ISOs and, unless otherwise permitted by the Compensation Committee, NQSOs
granted to key employees and consultants under the 1997 Plan are not
transferable other than by will or pursuant to the laws of descent and
distribution.
5. Options Granted to Non-Employee Directors. The 1997 Plan carries forward
the formula grants that are in place under the 1993 Plan. All grants to
non-employee directors prior to the 1998 annual shareholders meeting will be
made under the 1993 Plan. Grants on and after the 1998 annual shareholders
meeting will be made under the 1997 Plan.
Non-employee directors may receive two types of NQSO grants under the 1997
Plan. A non-employee director will receive an initial grant of an NQSO to
purchase 10,000 Common Shares on the date he or she first becomes a non-employee
director. In addition, on the first business day immediately following each of
the dates on which an incumbent non-employee director is elected or re-elected,
he or she will receive an additional grant of an NQSO to purchase 10,000 Common
Shares if he or she did not receive an initial grant within the preceding six
months.
NQSOs granted to non-employee directors will become exercisable on the day
before the annual meeting of shareholders that follows the option grant
(generally one year after the date of grant). The exercise price of NQSOs
granted to non-employee directors is the fair market value of the Common Shares
at the time of grant. The exercise price may be paid in cash or by surrendering
Common Shares to the Company. Options granted to non-employee directors expire
on the earlier of (1) ten years from the date of grant, or (2) one year from the
date the optionee ceases to be a director for any reason.
A non-employee director may transfer his or her NQSO to an immediate family
member, or a partnership or trust established solely for the benefit of
immediate family members.
6. New Plan Benefits. The following table identifies the number of Common
Shares underlying options which would be awarded each fiscal year under the 1997
Plan to the Company's non-employee directors. The number of Common Shares
underlying options which would be awarded under the 1997 Plan to the Company's
key employees and consultants will be at the discretion of the Compensation
Committee.
<PAGE>
New Plan Benefits
1997 Stock Option Plan
------------------------------
Number of
Dollar Value Options
------------ ---------
Executive Group -- *
Non-Executive Directors Group $0 40,000
Non-Executive Employee Group -- *
- ---------------
* Not determinable.
7. Capital Adjustments. The limits on the number of shares issuable under
the 1997 Plan will be adjusted in the event of a stock split, stock dividend or
similar change in the capitalization of the Company. The 1997 Plan also provides
that, in the event of a merger, consolidation or other specified corporate
transactions, options will be assumed by the surviving or successor corporation,
if any. However, the 1997 Plan also authorizes the Compensation Committee to
terminate options granted to key employees and consultants in the event of such
a corporate transaction. The exercise date of any options to be so terminated
may be accelerated by the Compensation Committee, in its discretion. In the
event of a corporate transaction where shareholders are to receive cash, stock
or other property, and NQSOs granted to non-employee directors are not assumed
by the surviving or successor corporation, all NQSOs held by non-employee
directors will be terminated, and each non-employee director will receive cash
equal to the difference between (1) the exercise price of the shares not yet
exercised under the NQSO, and (2) the per share value to be received by
shareholders in connection with such transaction.
8. Effective Date; Duration. The 1997 Plan became effective on March 19,
1997, subject to shareholder approval. If the requisite shareholder approval is
not obtained by March 18, 1998, the 1997 Plan and all options granted under the
1997 Plan will be null and void. The 1997 Plan automatically terminates on March
18, 2002, and no further options may be granted under the 1997 Plan thereafter.
The 1997 Plan may be amended, suspended or terminated at any time by the Board,
provided that, without shareholder approval, no such amendment may: (1) change
the class of persons eligible to receive ISOs, or (2) increase the maximum
number of Common Shares authorized for issuance of ISOs. Requisite shareholder
approval is also required for any amendment that would require shareholder
approval under Section 162(m) of the Internal Revenue Code, or under the rules
of the market on which Common Shares are listed.
Federal Income Tax Treatment of Options
The Company has been advised that, under present federal tax laws and
regulations, the federal income tax consequences to the Company, to employees
receiving ISOs, and to employees, non-employee directors and consultants
receiving NQSOs pursuant to the 1997 Plan are as described below.
<PAGE>
Upon the grant or exercise of an ISO, no income will be realized by the
optionee for federal income tax purposes (although the excess of the fair market
value of the shares over the exercise price will generally be included in the
optionee's alternative minimum taxable income), and the Company will not be
entitled to any deduction. If the shares received on the exercise of an ISO are
not disposed of within one year following the date of the transfer of such
shares to the optionee, or within two years following the date of the grant of
the option, any profit realized by the optionee upon the disposition of such
shares will generally be taxed as long-term capital gain. In such event, no
deduction will be allowed to the Company.
Upon the grant of an NQSO, no income will be realized by the optionee for
federal income tax purposes. Upon the exercise of an NQSO, the amount by which
the fair market value of the shares at the time of exercise exceeds the exercise
price will be taxed as ordinary income to the optionee, and the Company will be
entitled to a corresponding deduction.
Various additional tax consequences apply to the granting and exercise of
options and to the disposition of shares acquired thereunder, but such
consequences are beyond the scope of this summary.
THE BOARD OF DIRECTORS BELIEVES THAT THE ADOPTION OF THE 1997 PLAN IS IN
THE BEST INTEREST OF THE COMPANY AND RECOMMENDS A VOTE FOR APPROVAL OF THE 1997
PLAN.
3. RATIFICATION OF INDEPENDENT ACCOUNTANTS
On May 21, 1996, the Shareholders ratified the appointment of Price
Waterhouse LLP, independent accountants, to audit the Company's accounts for
Fiscal 1997.
The Board of Directors recommends that the Shareholders ratify the
selection of Price Waterhouse LLP as the Company's independent accountants for
Fiscal 1998. If the Shareholders do not ratify the selection of Price Waterhouse
LLP, the Board of Directors will reconsider the selection of Price Waterhouse
LLP to serve as the Company's accountants for Fiscal 1998.
A representative of Price Waterhouse LLP is expected to be present at the
Annual Meeting to answer appropriate questions and to make a statement if he so
desires.
4. OTHER MATTERS
The Board of Directors knows of no matters to be presented for action at
the Meeting, other than those set forth in the attached Notice and customary
procedural matters. However, if any other matters should properly come before
the Meeting or any adjournments thereof, the proxies solicited hereby will be
voted on such matters, to the extent permitted by the rules and regulations of
the Securities and Exchange Commission, in accordance with the judgement of the
persons voting such proxies.
<PAGE>
EXECUTIVE COMPENSATION
Summary Executive Compensation
The following Summary Compensation Table sets forth certain information
concerning the compensation paid or accrued by the Company for services rendered
during Fiscal 1997 and the Company's fiscal years ended January 31, 1996
("Fiscal 1996") and January 31, 1995 ("Fiscal 1995") by the Company's President
and the Company's most highly compensated other executive officers whose total
annual salary and bonus exceeded $100,000 (collectively, the "Named Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation (1) Long -Term
---------------------- Compensation
- ---------------------------------------------------------------------------------------------------------
Name and Principal Year Salary Bonus Options # All Other (2)
Position Compensation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Richard A. Hayne 1997 $233,384 $ 400 -0- $13,195
Chairman and President 1996 225,000 300 -0- 14,995
1995 225,000 111,000 -0- 13,732
---------------------------------------------------------------------------
Kenneth K. Cleeland 1997 200,000 400 10,000 16,781
Chief Financial Officer 1996 175,000 300 -0- 18,581
and Treasurer 1995 175,000 108,500 -0- 17,318
---------------------------------------------------------------------------
Michael A. Schultz 1997 220,000 3,400 20,000 1,188
President 1996 218,333 300 -0- 2,988
Urban Outfitters, 1995 200,000 81,000 -0- 1,724
Wholesale, Inc.
---------------------------------------------------------------------------
Glen T. Senk 1997 200,000 400 -0- 1,188
President, 1996 152,800 300 300,000(3) 2,988
Anthropologie, Inc. 1995 150,000 104,250 -0-(3) 1,724
---------------------------------------------------------------------------
Freeman Zausner (4) 1997 104,318 2,400 -0- 902
Secretary and 1996 100,000 300 -0- 2,390
Director of Inventory 1995 107,692 36,000 -0- 1,620
Management
---------------------------------------------------------------------------
</TABLE>
<PAGE>
(1) The compensation described in this table does not include medical, group
life insurance or other benefits received by the Named Officers that are
generally available to all salaried employees of the Company, and certain
perquisites and other personal benefits, securities or property received by
the Named Officers that do not exceed the lesser of $50,000 or 10% of any
such officer's salary and bonus disclosed in this table.
(2) Represents life insurance premiums paid by the Company for Messrs. Hayne
and Cleeland in the amounts of $12,007 and $15,593 in Fiscal 1997
respectively and forfeiture allocations made to the Company's
Profit-Sharing Fund (in Common Shares) with respect to Fiscal 1997 for the
accounts of Messrs. Hayne, Cleeland, Schultz, Senk and Zausner in the
amounts of $1188, $1188, $1188, $1188 and $902 respectively .
(3) Adjusted to reflect the two-for-one stock split effected by the Company on
June 1, 1996, the stock option granted to Mr. Senk in Fiscal 1996 under the
Company's 1992 Non-Qualified Stock Option Plan replaced a stock option
granted to Mr. Senk in Fiscal 1995 under the same Plan, which has been
canceled.
(4) Mr. Zausner resigned as Secretary and Director of Inventory Management of
the Company effective December 31, 1996.
Stock Option Information
Options Grant Table: The following table sets forth certain information
concerning grants of stock options made to the Named Officers during Fiscal
1997.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Option Grants in Last Fiscal Year
- -----------------------------------------------------------------------------------------------------------------
Individual Grants
- -----------------------------------------------------------------------------------------------------------------
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
% of Total Option Term
Options Granted -----------------------------
to Employees in Exercise or Expiration
Name Options Granted Fiscal 1997 Base Price Date 5% 10%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth K.Cleeland 10,000 (1) 5.41% $15.1875 11/25/01 $41,960 $ 92,721
Michael A. Schultz 20,000(2) 10.81% $15.1875 11/25/01 $83,920 $185,442
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This option becomes exercisable as to 6,000 shares on 11/25/97 and 4,000
shares on 11/25/98.
(2) This option becomes exercisable as to 6,000 shares on 11/25/97, 6,000
shares on 11/25/98, 6,000 shares on 11/25/99 and 2,000 shares on 11/25/00.
<PAGE>
Aggregate Option Exercises and Fiscal Year-End Option Value Table: The following
table sets forth certain information concerning options exercised by the Named
Officers during Fiscal 1997, information concerning the number of stock options
held by the Named Officers on January 31, 1997, and the value of the
in-the-money options outstanding as of such date.
Aggregated Option Exercises
in Fiscal 1997 and
Fiscal 1997 Year-End Option Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Number of In-the-Money
Shares Acquired Value Unexercised Options Options at
Name on Exercise Realized (1) at Fiscal Year End Fiscal Year End (2)
- ---- ----------- ------------ ------------------ -------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard
Hayne 76,666 (3) $1,047,833 0 0 $0 $0
Kenneth
Cleeland 255,332 (3) $4,045,062 0 10,000 $0 $0
Glen Senk 0 $0 80,000 220,000 $80,000 $220,000
Michael
Schultz 0 $0 0 20,000 $0 $0
Freeman
Zausner 0 $0 0 0 $0 $0
</TABLE>
(1) Represents the aggregate excess of the fair market value of a Common Share
on the date of exercise over the applicable exercise prices multiplied by
the number of Common Shares issued upon the exercise of the stock options.
(2) Represents the aggregate excess of the fair market value of a Common Share
on January 31, 1997 of $12.125 over the applicable exercise prices
multiplied by the number of Common Shares issuable upon the exercise of the
stock options.
(3) Adjusted for the two-for-one stock split effected by the Company on June 1,
1996.
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE
BOARD OF DIRECTORS
Under rules established by the Securities and Exchange Commission (the
"SEC"), the Company is required to provide certain data and information in
regard to the compensation and benefits provided to the Company's executive
officers. In fulfillment of this requirement, the Compensation Committee at the
direction of the Board of Directors has prepared the following report for
inclusion in this Proxy Statement.
The Compensation Committee is composed of two non-management directors of
the Company. The Compensation Committee determines the compensation for the
executive officers of the Company named in the Summary Compensation Table and
other officers of the Company. The Compensation Committee also administers the
Company's Stock Option Plans.
The Compensation Committee's philosophy is that executive compensation
should be designed to:
o reflect the Company's entrepreneurial orientations;
o assist the Company in attracting and retaining superior executive
talent while incentivizing a long-term commitment to the Company;
o align the interests of management with those of shareholders
through a significant equity-based component; and
o reward an executive's individual contribution toward achievement
of the Company's long- and short-term business goals.
The Company's overall executive compensation program consists of three
principal elements: base salaries; discretionary bonuses; and stock options and
other equity-based compensation. Base salaries are ordinarily established at the
beginning of the fiscal year, while discretionary bonuses are awarded following
the completion of the fiscal year. Stock options and other equity-based
compensation may be granted at any time during the fiscal year. The Company also
maintains a broadly based employee stock ownership plan in which the executive
officers are permitted to participate on the same terms as other employees.
The Compensation Committee consults with the Company's President in
determining base salary levels for each executive officer other than the
Company's President. The base salaries for the Company's executive officers in
Fiscal 1997 were competitively established by the Compensation Committee based
upon such consultation and a general assessment of the compensation paid by
other companies in the retail clothing industry. In evaluating compensation paid
by other companies, the Compensation Committee relied on the general knowledge
that its members have obtained from informal reviews of various press and
industry reports.
The Compensation Committee is also involved in establishing the level of
discretionary
<PAGE>
bonuses and option awards to the Company's executive officers. Discretionary
cash bonuses to the President and other executive officers are awarded based
upon the Compensation Committee's subjective assessment of the Company's overall
financial performance and the Compensation Committee's subjective assessment of
the President's and other executive officer's individual contributions to that
overall performance. Factors considered by the Compensation Committee in
awarding cash bonuses include the officer's initiative, managerial ability, his
level of responsibilities, development of subordinates, fairness with respect to
bonuses of other executives and his handling of special projects, but no
particular weight is ascribed by the Compensation Committee to any one or more
of these factors. The Compensation Committee does not rely upon or utilize any
particular hurdles, benchmarks or other objective criteria to determine the
amount of the bonuses, nor does the Compensation Committee compare the
compensation of the President or other executive officers to any peer group for
purposes of awarding bonuses.
During Fiscal 1997, options to purchase 10,000 Common Shares were granted
to Kenneth Cleeland, options to purchase 20,000 Common Shares were granted to
Michael Schultz and options to purchase 75,000 Common Shares were granted to Jay
Hammer in conjunction with his being hired by the Company.
This report is submitted by the Compensation Committee.
Scott A. Belair
Joel S. Lawson III
<PAGE>
STOCK PERFORMANCE CHART
The following graph compares the cumulative total shareholder return on the
Company's Common Shares with the cumulative total return on the Standard and
Poor's 500 Composite Stock Index and the Standard and Poor's Retail
Specialty-Apparel Index* for the period beginning November 9, 1993, the date the
trading first began in the Common Shares of the Company on the NASDAQ National
Market System following the Company's initial public offering, and ending
January 31, 1997, assuming the reinvestment of any dividends and assuming an
initial investment of $100 in each. The comparisons in this table are required
by the Securities and Exchange Commission and are not intended to forecast or be
indicative of possible future performance of the Common Shares or the referenced
indexes.
Total Shareholder Returns -- Dividends Reinvested
Indexed Returns
Years Ending
[GRAPHIC]
In the printed version of the document, a line graph
appears which depicits the following plot points:
Nov. 9, 93 Jan.-94 Jan.-95 Jan.-96 Jan.-97
---------- ------- ------- ------- -------
Urban Outfitters, Inc. $100.00 $109.47 $108.42 $103.68 $102.10
S&P 500 Index $100.00 $104.98 $105.54 $146.34 $184.89
Retail (Specialty-Apparel)-500 $100.00 $ 96.25 $ 77.12 $ 91.84 $116.28
* S & P Retail Specialty-Apparel Index begins at November 3, 1993.
<PAGE>
BENEFICIAL OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Shares as of April 1, 1997 (December 31, 1996
with respect to Wellington Management Company) by: (a) each person known to the
Company who beneficially owns more than five percent of the Company's
outstanding Common Shares, (b) each director and Named Officer who owns
beneficially any Common Shares, and (c) all directors and executive officers of
the Company as a group.
Beneficial Ownership(2)
Name and Address (1) Shares Percentage
- -------------------- ------ ----------
Richard A. Hayne (3) 7,775,965 44.4%
Wellington Management Company, LLP(4) 1,672,300 9.5%
75 State Street
Boston, Massachusetts 02109
Scott A. Belair (5) 702,000 4.0%
143 Sunset Avenue
Ridgewood, New Jersey 07450
Michael A. Schultz (6) 356,497 2.0%
Glen T. Senk (7) 140,487 *
Kenneth K. Cleeland(8) 140,295 *
Joel S. Lawson III (9) 48,800 *
Two Penn Center Plaza
Philadelphia, Pennsylvania 19102
Harry S. Cherken, Jr.(10) 33,000 *
1345 Chestnut Street
Philadelphia National Bank Bldg.
Philadelphia, Pennsylvania 19107
Burton M. Sapiro (11) 32,000 *
Freeman Zausner (12) 18,473 *
All directors and officers as a group 9,247,517 52.0%
(10 persons) (3)(5)(6)(7)(8)(9)(10)(11)(12)
- -----------------
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is 1809 Walnut Street, Philadelphia, Pennsylvania 19103.
(2) Unless otherwise indicated, each person has sole voting and investment
power with respect to all such shares.
(3) Includes 553,334 shares owned by the Irrevocable Trust of Richard A. Hayne,
553,334 shares owned by the Irrevocable Trust of Elizabeth Van Vleck,
50,000 shares owned by the Hayne Foundation and 2,965 shares allocated
under the Company's Profit-Sharing Fund. Excludes 149,998 shares
beneficially owned by Mr. Hayne's spouse, as to which he disclaims
beneficial ownership.
(4) All information derived for Wellington Management Company, LLP was obtained
from a Form 13G filed with the SEC for the period ending December 31, 1996,
a copy of which was mailed to the Company. Wellington Management Company,
LLP has shared voting
<PAGE>
power as to 709,800 shares and shared dispositive/investment power as to
1,672,300 shares.
(5) Excludes 393,334 shares owned by Trust U/A/D April 16, 1993 by Scott A.
Belair as grantor and Steven D. Burton as Trustee, as to which he disclaims
beneficial ownership. Includes 22,000 shares subject to presently
exercisable options and 10,000 shares subject to options that will become
exercisable within 60 days.
(6) Includes 2,965 shares allocated under the Company's Profit-Sharing Fund.
(7) Includes 140,000 shares subject to presently exercisable options and 487
shares allocated under the Company's Profit-Sharing Fund.
(8) Includes 2,965 shares allocated under the Company's Profit-Sharing Fund.
(9) Includes 22,000 shares subject to presently exercisable options, 10,000
shares subject to options that become exercisable within 60 days and 1,800
shares held by a trust of which he is a trustee.
(10) Includes 22,000 shares subject to presently exercisable options and 10,000
shares subject to options that become exercisable within 60 days.
(11) Includes 22,000 shares subject to presently exercisable options and 10,000
shares subject to options that become exercisable within 60 days. Excludes
1,000 shares beneficially owned by Mr. Sapiro's spouse, as to which he
disclaims beneficial ownership.
(12) Includes 2,277 shares allocated under the Company's Profit-Sharing Fund.
* Less than 1%.
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals for the 1998 Annual Meeting of Shareholders must
comply with applicable Securities and Exchange Commission rules and regulations
and must be received by the Company prior to December 20, 1997 to be considered
for inclusion in the Company's Proxy Statement.
CERTAIN TRANSACTIONS
In April of 1994, Mr. Glen T. Senk joined the Company as President of
Anthropologie. Upon commencing employment, Urban Outfitters provided Mr. Senk
with a four-year interest free loan of $50,000. $25,000 will be forgiven over
the course of the four years; $15,625 is currently outstanding.
ADDITIONAL INFORMATION
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of
the Securities Exchange Act of 1934 requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities ("10% Shareholders"), to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Officers,
directors and 10% Shareholders are required to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms received
by it and a written representation from certain reporting persons that no Forms
5 were required for those persons, the Company believes that, during the period
February 1, 1996 through January 31, 1997 all filing requirements applicable to
its officers, directors and 10% Shareholders were complied with on a timely
basis with the exception of Mr. Schultz who incorrectly reported transactions
occurring in February and March of Fiscal 1997. These errors were corrected by
Mr. Schultz in a subsequent Form 5.
Proxy Solicitation Costs. The cost of soliciting proxies will be borne by
the Company. Solicitation may be made by mail, personal interview or telephone
by certain officers and other employees of the Company who will receive no
additional compensation therefor. The Company will reimburse banks, brokers and
other nominees for their reasonable expenses in forwarding proxy materials to
the beneficial owners for whom they hold shares.
Annual Report. This Proxy Statement is accompanied by the Company's Annual
Report to Shareholders for Fiscal 1997.
Each person solicited can obtain without charge, except for exhibits, a
copy of the Company's Annual Report on Form 10-K for Fiscal 1997 as filed with
the Securities and Exchange Commission by sending a written request to:
<PAGE>
URBAN OUTFITTERS, INC.
1809 Walnut Street
Philadelphia, Pennsylvania 19103
Attention: Investor Relations
By Order of the Board of Directors
Richard A. Hayne
Chairman of the Board
April 21, 1997
<PAGE>
Appendix
URBAN OUTFITTERS, INC.
1997 STOCK OPTION PLAN
SECTION 1 - Purpose and Definitions
(a) Purpose. This URBAN OUTFITTERS, INC. 1997 STOCK OPTION PLAN is intended
to provide a means whereby URBAN OUTFITTERS, INC. may, through the grant of
Options to purchase Common Stock to Key Employees and Consultants, attract and
retain such Key Employees and Consultants, and motivate such Key Employees and
Consultants to exercise their best efforts on behalf of the Company and of any
Related Corporation. Moreover, the Company may, through the grant of
Non-Qualified Stock Options to Non-Employee Directors under a formula, attract
and retain Non-Employee Directors and motivate such Non-Employee Directors to
exercise their best efforts on behalf of the Company and any Related
Corporation.
(b) Definitions.
(1) Board. The term "Board" shall mean the Board of Directors of the
Company.
(2) Common Stock. The term "Common Stock" shall mean the common stock
of the Company, par value $0.0001 per share.
(3) Code. The term "Code" shall mean the Internal Revenue Code of
1986, as amended.
(4) Committee. The term "Committee" shall mean a committee which
consists of not fewer than two (2) directors of the Company who are Outside
Directors. The members of the Committee shall be appointed by, and serve at
the pleasure of, the Board.
(5) Company. The term "Company" shall mean Urban Outfitters, Inc.
(6) Consultant. The term "Consultant" shall mean an individual who is
not an employee of the Company or a Related Corporation, and who has
entered into a consulting arrangement with the Company or a Related
Corporation.
(7) Fair Market Value. The term "Fair Market Value" shall mean the
fair market value of the optioned shares of Common Stock, which shall be
arrived at by a good faith determination of the Committee and shall be:
(A) The arithmetic average of the highest and lowest quoted
selling price, if there is a market for the Common Stock on a
registered
<PAGE>
securities exchange or in an over the counter market, on the date of
grant; or
(B) Such other method of determining fair market value as shall
be authorized by the Code, or the rules or regulations thereunder, and
adopted by the Committee.
(8) Incentive Stock Option. The term "Incentive Stock Option" ("ISO")
shall mean an option which, at the time such option is granted under the
Plan, qualifies as an ISO within the meaning of section 422 of the Code and
is designated as an ISO in the Option Agreement.
(9) Key Employees. The term "Key Employees" shall mean officers and
other key employees of the Company or a Related Corporation.
(10) Non-Employee Directors. The term "Non-Employee Directors" shall
mean directors of the Company who:
(A) Are not employees of the Company or any Related Corporation;
and
(B) Have not been employees of the Company or any Related
Corporation during the immediately preceding 12-month period.
(11) Non-Qualified Stock Option. The term "Non-Qualified Stock Option"
("NQSO") shall mean an option which, at the time such option is granted,
does not qualify as an ISO, and/or is designated as an NQSO in the Option
Agreement.
(12) Option Agreement. The term "Option Agreement" shall mean a
written document evidencing the grant of an Option, as described in Section
9.
(13) Optionee. The term "Optionee" shall mean a Key Employee or
Consultant to whom an Option has been granted.
(14) Options. The term "Options" shall mean Incentive Stock Options
and Non-Qualified Stock Options.
(15) Outside Director. The term "Outside Director" shall mean a
director who:
(A) Is not currently an officer (as defined in 17 CFR
240.16a-1(f)) of, or otherwise currently employed by, the Company or
a parent or
<PAGE>
subsidiary of the Company within the meaning of 17 CFR
240.16b-3(b)(3),
(B) Does not receive compensation, either directly or indirectly,
from the Company or a parent or subsidiary of the Company within the
meaning of 17 CFR 240.16b-3(b)(3) for services rendered as a
consultant or in any other capacity other than as a director, except
for an amount that does not exceed the dollar amount for which
disclosure would be required under 17 CFR 229.404(a),
(C) Does not possess an interest in any other transaction for
which disclosure would be required pursuant to 17 CFR 229.404(a),
(D) Is not engaged in a business relationship for which
disclosure would be required pursuant to 17 CFR 229.404(b), and
(E) Is an outside director within the meaning of Treas. Reg.
(section)1.162-27(e)(3), or any successor thereto.
(16) Plan. The term "Plan" shall mean the Urban Outfitters, Inc. 1997
Stock Option Plan, as set forth herein and as amended from time to time.
(17) Related Corporation. The term "Related Corporation" shall mean
either a corporate subsidiary of the Company, as defined in section 424(f)
of the Code or the corporate parent of the Company, as defined in section
424(e) of the Code.
Notwithstanding Sections 1(b)(8) and (11) if an Option granted to a Key
Employee is not designated in the Option Agreement as an ISO or NQSO, the option
shall constitute an ISO if it complies with the terms of section 422 of the
Code, and otherwise, it shall constitute an NQSO.
SECTION 2 - Administration
The Plan shall be administered by the Committee. Each member of the
Committee, while serving as such, shall be deemed to be acting in his or her
capacity as a director of the Company.
The Committee shall have full authority, subject to the terms of the Plan,
to select the Key Employees to be granted ISOs and/or NQSOs under the Plan, to
select the Consultants to be granted NQSOs under the Plan, to grant Options on
behalf of the Company and to set the date of grant and the other terms of such
Options. The Committee may correct any defect, supply any omission and reconcile
any inconsistency in this Plan and in any Option granted hereunder in the
<PAGE>
manner and to the extent it shall deem desirable. The Committee also shall have
the authority to establish such rules and regulations, not inconsistent with the
provisions of the Plan, for the proper administration of the Plan, and to amend,
modify or rescind any such rules and regulations, and to make such
determinations and interpretations under, or in connection with, the Plan, as it
deems necessary or advisable. All such rules, regulations, determinations and
interpretations shall be binding and conclusive upon the Company, its
shareholders and all employees, and upon their respective legal representatives,
beneficiaries, successors and assigns and upon all other persons claiming under
or through any of them.
Notwithstanding the foregoing, the terms and conditions of grants of NQSOs
to Non-Employee Directors are intended to be fixed in advance. Consequently, the
grants of NQSOs to Non-Employee Directors shall be as set forth in Section 7 and
neither the Committee nor the Board shall have any discretionary authority with
respect thereto.
No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option granted
under it.
SECTION 3 - Eligibility
Key Employees shall be eligible to receive Options under the Plan.
Non-Employee Directors shall be eligible to receive NQSOs (but not ISOs)
pursuant to Section 7. Consultants shall be eligible to receive NQSOs (but not
ISOs) pursuant to Section 8. More than one Option may be granted to a Key
Employee, Non-Employee Director or Consultant under the Plan.
<PAGE>
SECTION 4 - Stock
Options may be granted under the Plan to purchase up to a maximum of one
million two hundred and fifty thousand (1,250,000) shares of Common Stock
subject to adjustment as hereinafter provided; provided, however, that no Key
Employee shall receive Options for more than four hundred thousand (400,000)
shares of Common Stock over the life of the Plan. Shares issuable under the Plan
may be authorized but unissued shares or reacquired shares, and the Company may
purchase shares required for this purpose, from time to time, if it deems such
purchase to be advisable.
If any Option granted under the Plan expires or otherwise terminates for
any reason whatever (including, without limitation, the Key Employee's,
Non-Employee Director's or Consultant's surrender thereof) without having been
exercised, the shares subject to the unexercised portion of such Option shall
continue to be available for the granting of Options under the Plan as fully as
if such shares had never been subject to an Option; provided, however, that
(a) if an Option is canceled, the canceled Option is counted against the maximum
number of shares for which Options may be granted to a Key Employee, and (b) if
the Option price is reduced after the date of grant, the transaction is treated
as a cancellation of an Option and the grant of a new Option for purposes of
counting the maximum number of shares for which Options may be granted to a Key
Employee.
SECTION 5 - Granting of Options
From time to time until the expiration or earlier suspension or
discontinuance of the Plan, the Committee may, on behalf of the Company, grant
to Key Employees and Consultants under the Plan such Options as it determines
are warranted; provided, however, that grants of ISOs and NQSOs shall be
separate and not in tandem; and further provided that Consultants shall not be
eligible to receive grants of ISOs. The granting of an Option under the Plan
shall not be deemed either to entitle the Key Employee or Consultant to, or to
disqualify the Key Employee or Consultant from, any participation in any other
grant of Options under the Plan. In making any determination as to whether a Key
Employee or Consultant shall be granted an Option and as to the number of shares
to be covered by such Option, the Committee shall take into account the duties
of the Key Employee or Consultant, his or her present and potential
contributions to the success of the Company or a Related Corporation, and such
other factors as the Committee shall deem relevant in accomplishing the purposes
of the Plan. Moreover, the Committee may provide in a Key Employee's or
Consultant's Option Agreement that said Option may be exercised only if certain
conditions, as determined by the Committee, are fulfilled.
The Committee shall grant NQSOs to Non-Employee Directors in accordance
with Section 7.
<PAGE>
SECTION 6 - Annual Limit
(a) ISOs. The aggregate Fair Market Value (determined as of the date the
ISO is granted) of the Common Stock with respect to which ISOs are exercisable
for the first time by a Key Employee during any calendar year (under this Plan
and any other ISO plan of the Company or a Related Corporation) shall not exceed
one hundred thousand dollars ($100,000).
(b) NQSOs. The annual limit set forth above for ISOs shall not apply to
NQSOs.
SECTION 7 - Options for Non-Employee Directors
(a) Granting of NQSOs to Non-Employee Directors
(1) Initial Grant. An NQSO to purchase 10,000 shares of Common Stock
(as adjusted pursuant to Section 10) automatically shall be granted to a
Non-Employee Director, who was not a Non-Employee Director prior to the
Company's 1998 annual shareholders' meeting, on the date he or she becomes
a Non-Employee Director, whether by reason of his or her election by
shareholders or appointment by the Board to be a director, or, if
applicable, the expiration of the 12-month period specified in Section
1(b)(10)(B) with respect to a present or future director who had previously
been an employee of the Company or any Related Corporation; provided, that
if a Non-Employee Director who previously received an NQSO grant under
Section 5(a) of the Urban Outfitters, Inc. 1993 Non-Employee Directors'
Non-Qualified Stock Option Plan or Section 7(a)(1) of this Plan terminates
service as a director and is subsequently elected or appointed to the Board
again, such director shall not be eligible to receive an NQSO grant under
this Section 7(a)(1).
(2) Subsequent Grants. In addition to the initial grant, pursuant to
Section 5(a) of the Urban Outfitters, Inc. 1993 Non-Employee Directors'
Non-Qualified Stock Option Plan or Section 7(a)(1) of this Plan, on the
first business day immediately following each of the dates on which an
incumbent Non-Employee Director is elected or re-elected to the Board by
shareholders subsequent to the 1997 annual shareholders' meeting, he or she
shall automatically be granted an NQSO to purchase 10,000 shares of Common
Stock (as adjusted pursuant to Section 10), except that in the case of the
first election or reelection following the date of the Non-Employee
Director's initial election or appointment to the Board, no grant shall be
made on account of such first election or re-election unless at least six
months have elapsed since such initial election or appointment.
<PAGE>
(b) Terms and Conditions of Options. Options granted to Non-Employee
Directors shall expressly specify that they are NQSOs. In addition, such NQSOs
shall include expressly or by reference the following terms and conditions, as
well as such other provisions not inconsistent with the provisions of the Plan:
(1) Number of Shares. A statement of the number of shares of Common
Stock to which the NQSO pertains.
(2) Price. A statement of the NQSO exercise price, which shall be the
higher of one hundred percent (100%) of the Fair Market Value per share of
the Common Stock, or the par value thereof, on the date the NQSO is
granted.
(3) Term. Subject to earlier termination as provided in Section
7(b)(5), (6), and (7) and Section 10 below, the term of each NQSO granted
under this Section 7 shall be ten (10) years from the date of grant.
(4) Exercise. NQSOs granted under this Section 7 shall be exercisable
on the business day immediately preceding the annual meeting of
shareholders next succeeding the date of grant of such NQSOs. Except as
otherwise provided in Sections 7(b)(5), (6) and (7) below, NQSOs shall only
be exercisable by a Non-Employee Director while he or she remains a
director of the Company. Any NQSO shares, the right to the purchase of
which has accrued, may be purchased at any time up to the expiration or
termination of the NQSO. Exercisable NQSOs may be exercised, in whole or in
part, from time to time by giving written notice of exercise to the Company
at its principal office, specifying the number of shares to be purchased
and accompanied by payment in full of the aggregate price for such shares.
Only full shares shall be issued under the Plan, and any fractional share
which might otherwise be issuable upon exercise of an NQSO granted
hereunder shall be forfeited.
The NQSO exercise price shall be payable:
(A) In cash or its equivalent; or
(B) Unless in the opinion of counsel to the Company to do so may
result in a possible loss of an exemption from short-swing profit
liability, in whole or in part through the transfer of Common Stock
newly acquired upon exercise of the NQSO or Common Stock previously
acquired by the Non-Employee Director, provided the previously
acquired Common Stock so transferred has been held by the Non-Employee
Director for more than six (6) months on the date of exercise.
<PAGE>
In the event such NQSO exercise price is paid, in whole or in part,
with Common Stock, the portion of the NQSO exercise price so paid shall
equal the Fair Market Value of Common Stock so surrendered (determined in
accordance with Section 1(b)(7), but on the date of exercise rather than on
the date of grant).
(5) Expiration of Term or Removal as Director. If a Non-Employee
Director's service as a director of the Company terminates prior to the
expiration date fixed for his or her NQSO under this Section 7 for any
reason (such as, without limitation, failure to be re-elected by the
Company's shareholders) other than by disability or death, such NQSO may be
exercised, to the extent of the number of shares of Common Stock with
respect to which he or she could have exercised it on the date of such
termination, by the Non-Employee Director at any time prior to the earlier
of:
(A) The expiration date specified in such NQSO; or
(B) One (1) year after the date of such termination of service as
a director.
(6) Exercise upon Disability of Non-Employee Director. If a Non-
Employee Director shall become disabled (within the meaning of section
22(e)(3) of the Code) during his or her term as a director of the Company
and, prior to the expiration date fixed for his or her NQSO, his or her
term as a director is terminated as a consequence of such disability, such
NQSO may be exercised, to the extent of the number of shares of Common
Stock with respect to which the Non-Employee Director could have exercised
it on the date of such termination, by the Non-Employee Director at any
time prior to the earlier of:
(A) The expiration date of such NQSO; or
(B) One (1) year after the date of such termination of service as
a director.
In the event of the Non-Employee Director's legal disability, such
NQSO may be so exercised by his or her legal representative.
(7) Exercise upon Death of Non-Employee Director. If a Non-Employee
Director shall die during his or her term as a director of the Company and
prior to the expiration date fixed for his or her NQSO, or if a
Non-Employee Director whose term as a director has been terminated for any
reason shall die following his or her termination as a director, but prior
to the earlier of:
(A) The expiration date fixed for his or her NQSO; or
<PAGE>
(B) The expiration of the period determined under Section 7(b)(5)
and (6) above;
such NQSO may be exercised, to the extent of the number of shares with
respect to which the Non-Employee Director could have exercised it on the
date of his or her death, by the Non-Employee Director's estate, personal
representative or beneficiary who acquired the right to exercise such NQSO
by bequest or inheritance or by reason of the death of the Non-Employee
Director, at any time prior to the earlier of:
(i) The expiration date specified in such NQSO (which may be
the expiration date determined under Section 7(b)(5) and (6)
above); or
(ii) One (1) year after the date of death.
(c) Transferability. A Non-Employee Director may transfer an NQSO
granted pursuant to this Section 7 to (1) a member of his or her immediate
family, (2) a partnership of which the only partners are members of his or
her immediate family, or (3) a trust established solely for the benefit of
his or her immediate family members. Except as provided in the preceding
sentence, or by will or the laws of descent and distribution, NQSOs granted
pursuant to this Section 7 shall not be assignable or transferable by the
Non-Employee Director, and during the lifetime of the Non-Employee
Director, the NQSO shall be exercisable only by him or her or by his or her
guardian or legal representative. Any NQSO transferred by a Non-Employee
Director shall not be assignable or transferable by the transferee. If the
Non-Employee Director is married at the time of exercise and if the
Non-Employee Director so requests at the time of exercise, the certificate
or certificates shall be registered in the name of the Non-Employee
Director and the Non-Employee Director's spouse, jointly, with right of
survivorship.
SECTION 8 - Terms and Conditions of Options for Key Employees and Consultants
The Options granted to Key Employees pursuant to the Plan shall expressly
specify whether they are ISOs or NQSOs; however, if the Option is not designated
in the Option Agreement as an ISO or NQSO, the Option shall constitute an ISO if
it complies with the terms of section 422 of the Code, and otherwise, it shall
constitute an NQSO. The Options granted to Consultants pursuant to the Plan
shall expressly state that they are NQSOs. In addition, the Options granted to
Key Employees and Consultants pursuant to the Plan shall include expressly or by
reference the following terms and conditions, as well as such other provisions
not inconsistent with the provisions of this Plan and, for ISOs granted under
this Plan, the provisions of section 422(b) of the Code, as the Committee shall
deem desirable:
<PAGE>
(a) Number of Shares. A statement of the number of shares to which the
Option pertains.
(b) Price. A statement of the Option price which shall be determined
and fixed by the Committee in its discretion but shall not be less than the
higher of one hundred percent (100%) (one hundred ten percent (110%) in the
case of an ISO granted to a Key Employee who is a more than ten percent
(10%) shareholder as discussed in (I) below) of the Fair Market Value per
share of Common Stock, or the par value thereof, on the date the Option is
granted.
(c) Term. Subject to earlier termination as provided in Subsections
(e), (f) and (g) below and in Section 10 hereof, the term of each Option
shall be not more than ten (10) years (five (5) years in the case of an ISO
granted to a Key Employee who is a more than ten percent (10%) shareholder
as discussed in (I) below) from the date of grant.
(d) Exercise.
(1) General. Options shall be exercisable in such installments
and on such dates, not less than six (6) months from the date of
grant, and not more than seven (7) years from the date of grant, as
the Committee may specify, provided that:
(A) In the case of new Options granted in replacement for
options (whether granted under the Plan or otherwise) held by the
Key Employee or Consultant, the new Options may be made
exercisable, if so determined by the Committee, in its
discretion, at the earliest date the replaced options were
exercisable, but not earlier than three (3) months from the date
of grant of the new Options; and
(B) The Committee may accelerate the exercise date of any
outstanding Options (including, without limitation, the three (3)
month exercise date referred to in (A) above), in its discretion,
if it deems such acceleration to be desirable.
Any Option shares, the right to the purchase of which has
accrued, may be purchased at any time up to the expiration or
termination of the Option. Exercisable Options may be exercised, in
whole or in part, from time to time by giving written notice of
exercise to the Company at its principal office, specifying the number
of shares to be purchased and accompanied by payment in full of the
aggregate Option price for such shares. Only full shares shall be
issued under the Plan, and any fractional share which might otherwise
be issuable upon exercise of an Option granted hereunder shall be
forfeited.
<PAGE>
(2) Manner of Payment. The Option price shall be payable:
(A) In cash or its equivalent;
(B) If the Committee, in its discretion, so provides in the
Option Agreement or, in the case of Options which are not ISOs,
if the Committee, in its discretion, so determines at or prior to
the time of exercise, in whole or in part, in Common Stock
previously acquired by the Optionee, provided that if such shares
of Common Stock were acquired through the exercise of an ISO and
are used to pay the Option price of an ISO, such shares have been
held by the Key Employee for a period of not less than the
holding period described in section 422(a)(1) of the Code on the
date of exercise, or if such shares of Common Stock were acquired
through exercise of an NQSO or of an option under a similar plan
or through exercise of an ISO and are used to pay the Option
price of an NQSO, such shares have been held by the Optionee for
a period of more than six (6) months on the date of exercise;
(C) If the Committee, in its discretion, so provides in the
Option Agreement or, in the case of Options which are not ISOs,
if the Committee, in its discretion, so determines at or prior to
the time of exercise, in whole or in part, in Common Stock newly
acquired by the Optionee upon exercise of such Option (which
shall constitute a disqualifying disposition in the case of an
Option which is an ISO);
(D) If the Committee, in its discretion, so provides in the
Option Agreement or, in the case of Options which are not ISOs,
if the Committee, in its discretion, so determines at or prior to
the time of exercise, in any combination of (A), (B) and (C)
above; or
(E) If the Committee, in its discretion, so provides in the
Option Agreement or, in the case of Options which are not ISOs,
if the Committee, in its discretion, so determines at or prior to
the time of exercise, by permitting the Optionee to deliver a
properly executed notice of exercise of the Option to the Company
and a broker, with irrevocable instructions to the broker
promptly to deliver to the Company the amount of sale or loan
proceeds necessary to pay the exercise price of the Option.
In the event such Option price is paid, in whole or in part, with
shares of Common Stock, the portion of the Option price so paid shall
be equal to the Fair Market Value of Common Stock so surrendered
(determined in accordance with Section 1(b)(7), but on the date of
exercise rather than on the date of grant).
<PAGE>
(e) Termination of Employment. If a Key Employee's employment by,
or a Consultant's consulting arrangement with, the Company (and
Related Corporations) is terminated by either party prior to the
expiration date fixed for his or her Option for any reason other than
death or disability, such Option may be exercised, to the extent of
the number of shares with respect to which the Optionee could have
exercised it on the date of such termination, or to any greater extent
permitted by the Committee, by the Optionee at any time prior to the
earlier of:
(1) The expiration date specified in such Option; or
(2) An accelerated termination date determined by the
Committee, in its discretion, except that, subject to Section 10
hereof, such accelerated termination date shall not be earlier
than the date of the Optionee's termination of employment or
consultancy, and such termination date shall not be later than
thirty (30) days after the date of such termination of employment
or consultancy.
(f) Exercise upon Disability. If a Key Employee or Consultant
shall become disabled (within the meaning of section 22(e)(3) of the
Code) during his or her employment or consultancy and, prior to the
expiration date fixed for his or her Option, his or her employment or
consultancy is terminated as a consequence of such disability, such
Option may be exercised, to the extent of the number of shares with
respect to which the Optionee could have exercised it on the date of
such termination, or to any greater extent permitted by the Committee,
by the Optionee at any time prior to the earlier of:
(1) The expiration date specified in such Option; or
(2) An accelerated termination date determined by the
Committee, in its discretion, except that, subject to Section 10
hereof, such accelerated termination date shall not be earlier
than the date of the Optionee's termination of employment or
consultancy by reason of disability, and such date shall not be
later than six (6) months after the date of such termination of
employment or consultancy. In the event of the Optionee's legal
disability, such Option may be so exercised by the Optionee's
legal representative.
(g) Exercise upon Death. If a Key Employee or Consultant shall
die during his or her employment or consultancy, and prior to the
expiration date fixed for his or her Option, or if an Optionee whose
employment or consultancy is terminated for any reason, shall die
following his or her termination of employment or consultancy but
prior to the earliest of:
(1) The expiration date fixed for his or her Option;
(2) The expiration of the period determined under
Subsections (e) and
<PAGE>
(f) above; or
(3) In the case of an ISO, three (3) months following
termination of employment,
such Option may be exercised, to the extent of the number of shares
with respect to which the Optionee could have exercised it on the date
of his or her death, or to any greater extent permitted by the
Committee, by the Optionee's estate, personal representative or
beneficiary who acquired the right to exercise such Option by bequest
or inheritance or by reason of the death of the Optionee, at any time
prior to the earlier of:
(A) The expiration date specified in such Option; or
(B) An accelerated termination date determined by the Committee,
in its discretion except that, subject to Section 10 hereof, such
accelerated termination date shall not be later than six (6) months
after the date of death.
(h) Transferability.
(1) ISOs. No ISO shall be assignable or transferable by the Key
Employee otherwise than by will or by the laws of descent and distribution,
and during the lifetime of the Key Employee, the ISO shall be exercisable
only by him or her or by his or her guardian or legal representative. If
the Key Employee is married at the time of exercise and if the Key Employee
so requests at the time of exercise, the certificate or certificates shall
be registered in the name of the Key Employee and the Key Employee's
spouse, jointly, with right of survivorship.
(2) NQSOs. Except as otherwise provided in any Option Agreement, no
NQSO shall be assignable or transferable by the Key Employee or Consultant
otherwise than by will or by the laws of descent and distribution, and
during the lifetime of the Optionee, the NQSO shall be exercisable only by
him or her or by his or her guardian or legal representative. If an
Optionee's Option Agreement provides that the NQSO is transferrable, such
Option Agreement shall set forth any limitations on the transfer of the
NQSO. If the Optionee is married at the time of exercise and if the
Optionee so requests at the time of exercise, the certificate or
certificates shall be registered in the name of the Optionee and the
Optionee's spouse, jointly, with right of survivorship.
(I) Ten Percent Shareholder. If the Key Employee owns more than ten percent
(10%) of the total combined voting power of all shares of stock of the Company
or of a Related Corporation at the time an ISO is granted to such Key Employee,
the Option price for the ISO shall be not less than one hundred ten percent
(110%) of the Fair
<PAGE>
Market Value of the optioned shares of Common Stock on the date the ISO is
granted, and such ISO, by its terms, shall not be exercisable after the
expiration of five (5) years from the date the ISO is granted. The conditions
set forth in this Subsection (I) shall not apply to NQSOs.
(j) Withholding and Use of Shares to Satisfy Tax Obligations. The
obligation of the Company to deliver shares of Common Stock upon the
exercise of any Option shall be subject to applicable federal, state and
local tax withholding requirements.
If the exercise of any Option is subject to the withholding
requirements of applicable federal, state and/or local tax laws, the
Committee, in its discretion (and subject to such withholding rules
("Withholding Rules") as shall be adopted by the Committee), may permit the
Key Employee to satisfy the minimum required federal, state and/or local
withholding tax, in whole or in part, by electing to have the Company
withhold (or by returning to the Company) shares of Common Stock, which
shares shall be valued, for this purpose, at their Fair Market Value
(determined in accordance with Section 1(b)(7), but on the date of exercise
(rather that the date of grant), or if later, the date on which the
Optionee recognizes ordinary income with respect to such exercise) (the
"Determination Date"). An election to use shares of Common Stock to satisfy
tax withholding requirements must be made in compliance with and subject to
the Withholding Rules. The Committee may not withhold shares in excess of
the number necessary to satisfy the minimum federal, state and/or local
income tax withholding requirements. In the event shares of Common Stock
acquired under the exercise of an ISO are used to satisfy such withholding
requirement, such shares of Common Stock must have been held by the Key
Employee for a period of not less than the holding period described in
section 422(a)(1) of the Code on the Determination Date.
SECTION 9 - Option Agreements - Other Provisions
Options granted under the Plan shall be evidenced by Option Agreements in
such form as the Committee shall, from time to time, approve, which Option
Agreements shall contain such provisions, not inconsistent with the provisions
of the Plan for NQSOs granted pursuant to the Plan, and such conditions, not
inconsistent with section 422(b) of the Code or the provisions of the Plan for
ISOs granted pursuant to the Plan, as the Committee shall deem advisable, and
which Option Agreements shall specify whether the Option is an ISO or NQSO;
provided, however, if an Option granted to a Key Employee is not designated in
the Option Agreement as an ISO or NQSO, the Option shall constitute an ISO if it
complies with the terms of section 422 of the Code, and otherwise, it shall
constitute an NQSO. Each Key Employee, Non-Employee Director and Consultant
shall enter into, and be bound by, such Option Agreement.
<PAGE>
SECTION 10 - Capital Adjustments
The number of shares which may be issued under the Plan, and the maximum
number of shares with respect to which Options may be granted during a specified
period to any Key Employee under the Plan, both as stated in Section 4 hereof,
the number of shares with respect to which NQSOs are granted to Non-Employee
Directors under Section 7(a), and the number of shares issuable upon exercise of
outstanding Options under the Plan (as well as the Option price per share under
such outstanding Options), shall, subject to the provisions of section 424(a) of
the Code, be adjusted proportionately, to reflect any stock dividend, stock
split, share combination, or similar change in the capitalization of the
Company.
In the event of a corporate transaction (as that term is described in
section 424(a) of the Code and the Treasury Regulations issued thereunder as,
for example, a merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation), each outstanding Option shall be
assumed by the surviving or successor corporation; provided, however, that, in
the event of a proposed corporate transaction, the Committee may terminate all
or a portion of the outstanding Options issued to Key Employees and Consultants
if it determines that such termination is in the best interests of the Company.
If the Committee decides to terminate outstanding Options issued to Key
Employees and Consultants, the Committee shall give each Key Employee and
Consultant holding an Option to be terminated not less than seven (7) days'
notice prior to any such termination by reason of such a corporate transaction,
and any such Option which is to be so terminated may be exercised (if and only
to the extent that it is then exercisable) up to, and including the date
immediately preceding such termination. Further, as provided in Section 8(d)
hereof the Committee, in its discretion, may accelerate, in whole or in part,
the date on which any or all Options issued to Key Employees and Consultants
become exercisable.
Notwithstanding the foregoing, in the event of a corporate transaction (as
described above) in which holders of Common Stock are to receive cash,
securities or other property, and provision is not made for the continuance and
assumption of NQSOs granted to Non-Employee Directors, all such outstanding
NQSOs shall terminate as of the last business day immediately preceding the
closing date of such corporate transaction and the Company shall pay to each
Non-Employee Director an amount in cash with respect to each share to which a
terminated NQSO pertains equal to the difference between the NQSO exercise price
and the value of the consideration to be received by the holders of Common Stock
in connection with such transaction.
SECTION 11 - Amendment or Discontinuance of the Plan
(a) General. The Board from time to time may suspend or discontinue
the Plan or amend it in any respect whatsoever, except that the following
amendments shall require shareholder approval (given in the manner set
forth in Section 11(b) below):
<PAGE>
(1) With respect to ISOs, any amendment which would:
(A) Change the class of employees eligible to participate in
the Plan;
(B) Except as permitted under Section 10 hereof, increase
the maximum number of shares of Common Stock with respect to
which ISOs may be granted under the Plan; or
(C) Extend the duration of the Plan under Section 12 hereof
with respect to any ISOs granted hereunder;
(2) With respect to Options to be granted to Key Employees, any
amendment which would require shareholder approval pursuant to Treas.
Reg. (section) 1.162-27(e)(4)(vi) or any successor thereto; and
(3) Any amendment for which shareholder approval is required
under the rules of an exchange or market on which Common Stock is
listed.
Notwithstanding the foregoing, no such suspension, discontinuance or
amendment shall materially impair the rights of any holder of an
outstanding Option without the consent of such holder.
(b) Shareholder Approval Requirements. Shareholder approval must meet
the following requirements:
(1) The approval of shareholders must be by a majority of the
outstanding shares of Common Stock present, or represented, and
entitled to vote at a meeting duly held in accordance with the
applicable laws of the Commonwealth of Pennsylvania;
(2) The approval of shareholders must be by a majority of the
votes cast on the issue (including abstentions to the extent
abstentions are counted as voting under applicable state law); and
(3) The approval of shareholders must comply with all applicable
provisions of the corporate charter, bylaws, and applicable state law
prescribing the method and degree of shareholder approval required for
the issuance of corporate stock or options. If the applicable state
law does not prescribe a method and degree of shareholder approval in
such case, the approval of shareholders must be effected:
(A) By a method and in a degree that would be treated as
<PAGE>
adequate under applicable state law in the case of an action
requiring shareholder approval (i.e., an action on which
shareholders would be entitled to vote if the action were
taken at a duly held shareholders' meeting); or
(B) By a majority of the votes cast at a duly held
shareholders' meeting at which a quorum representing a majority
of all outstanding voting stock is, either in person or by proxy,
present and voting on the Plan.
(c) Amendments Affecting Non-Employee Directors. Notwithstanding the
foregoing, no amendment to any provision of the Plan that would affect
NQSOs to be awarded to Non-Employee Directors shall be made if such
amendment would cause the terms and conditions of grants made pursuant to
Section 7 of the Plan to fail to be fixed in advance, within the meaning of
Securities and Exchange Commission interpretations under Section 16(b) of
the Securities Exchange Act of 1934.
SECTION 12 - Termination of Plan
Unless earlier terminated as provided in the Plan, the Plan and all
authority granted hereunder shall terminate absolutely at 12:00 midnight on
March 18, 2002, which date is five (5) years after the date the Plan was adopted
by the Board (or the date the Plan was approved by the shareholders of the
Company, whichever is earlier), and no Options hereunder shall be granted
thereafter. Nothing contained in this Section 12, however, shall terminate or
affect the continued existence of rights created under Options issued hereunder
and outstanding on March 18, 2002, which by their terms extend beyond such date.
SECTION 13 - Shareholder Approval
This Plan shall become effective on March 19, 1997 (the date the Plan was
adopted by the Board); provided, however, that if the Plan is not approved by
the shareholders in the manner described in Section 11(b), within twelve (12)
months before or after said date, the Plan and all Options granted hereunder
shall be null and void.
SECTION 14 - Miscellaneous
(a) Governing Law. With respect to any ISOs granted pursuant to the
Plan and the Option Agreements thereunder, the Plan, such Option Agreements
and any ISOs granted pursuant thereto shall be governed by the applicable
Code provisions to the maximum extent possible. Otherwise, the operation
of, and the rights of Key Employees,
<PAGE>
Non-Employee Directors and Consultants under, the Plan, the Option
Agreements and any Options granted thereunder shall be governed by
applicable federal law and otherwise by the laws of the Commonwealth of
Pennsylvania.
(b) Rights. Neither the adoption of the Plan nor any action of the
Board or the Committee shall be deemed to give any individual any right to
be granted an Option, or any other right hereunder, unless and until the
Committee shall have granted such individual an Option, and then his or her
rights shall be only such as are provided by the Option Agreement.
Any Option under the Plan shall not entitle the holder thereof to any
rights as a shareholder of the Company prior to the exercise of such Option
and the issuance of the shares pursuant thereto. Further, notwithstanding
any provisions of the Plan or the Option Agreement with a Key Employee, the
Company shall have the right, in its discretion, to retire a Key Employee
at any time pursuant to its retirement rules or otherwise to terminate his
or her employment at any time for any reason whatsoever.
(c) Indemnification of Board and Committee. Without limiting any other
rights of indemnification which they may have from the Company and any
Related Corporation, the members of the Board and the members of the
Committee shall be indemnified by the Company against all costs and
expenses reasonably incurred by them in connection with any claim, action,
suit, or proceeding to which they or any of them may be a party by reason
of any action taken or failure to act under, or in connection with, the
Plan, or any Option granted thereunder, and against all amounts paid by
them in settlement thereof (provided such settlement is approved by legal
counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit, or proceeding, except a judgment based
upon a finding of willful misconduct or recklessness on their part. Upon
the making or institution of any such claim, action, suit, or proceeding,
the Board or Committee member shall notify the Company in writing, giving
the Company an opportunity, at its own expense, to handle and defend the
same before such Board or Committee member undertakes to handle it on his
or her own behalf.
(d) Application of Funds. The proceeds received by the Company from
the sale of Common Stock pursuant to Options granted under the Plan shall
be used for general corporate purposes. Any cash received in payment for
shares upon exercise of an Option to purchase Common Stock shall be added
to the general funds of the Company and shall be used for its corporate
purposes. Any Common Stock received in payment for shares upon exercise of
an Option to purchase Common Stock shall become treasury stock.
(e) No Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon a Key Employee, Non-Employee Director or
Consultant to exercise such Option.
<PAGE>
(f) Listing and Registration of Shares. Each Option shall be subject
to the requirement that, if at any time the Committee shall determine, in
its discretion, that the listing, registration or qualification of the
shares covered thereby upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with,
the granting of such Option or the purchase of shares thereunder, or that
action by the Company, Key Employee, Non-Employee Director or Consultant
should be taken in order to obtain an exemption from any such requirement,
no such Option may be exercised, in whole or in part, unless and until such
listing, registration, qualification, consent, approval, or action shall
have been effected, obtained, or taken under conditions acceptable to the
Committee. Without limiting the generality of the foregoing, each Key
Employee, Non-Employee Director or Consultant or his or her legal
representative or beneficiary may also be required to give satisfactory
assurance that shares purchased upon exercise of an Option are being
purchased for investment and not with a view to distribution, and
certificates representing such shares may be legended accordingly.
(g) Rights as a Shareholder. A Key Employee, Non-Employee Director, or
Consultant shall have no rights as a shareholder with respect to any shares
covered by his or her Option until the issuance of a stock certificate to
him or her for such shares.
<PAGE>
URBAN OUTFITTERS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints Richard A.
Hayne and Kenneth K. Cleeland, or either of them, with full power of
substitution, as the undersigned's proxies to vote at the Annual Meeting of
Shareholders of Urban Outfitters, Inc. (the "Company") called for May 20, 1997
and at any adjournment thereof.
1. ELECTION OF DIRECTORS
[ ] FOR the nominees listed below [ ] WITHHOLD AUTHORITY
to vote for the nominees
listed below
Nominees: Richard A. Hayne, Scott A. Belair, Harry S. Cherken, Jr.,
Joel S. Lawson III, Burton M. Sapiro.
(Instruction: To withhold authority to vote for any individual nominee(s),
write that name(s) of such nominee(s) on the line below.)
--------------------------------------------------------------------------
2. APPROVAL OF THE URBAN OUTFITTERS, INC. 1997 STOCK OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPOINTMENT OF PRICE WATERHOUSE, LLP AS INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE COMPANY FOR THE FISCAL YEAR ENDING JANUARY 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
(Continued on reverse side)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2 AND FOR
PROPOSAL 3.
You are urged to sign and return this
proxy so that you may be sure that your
shares will be voted.
Dated:
--------------------------, 1997
--------------------------------------
Signature of Shareholder
--------------------------------------
Signature of Shareholder
Please sign exactly as your name
appears hereon, date and return promptly.
When shares are held by joint tenants,
both should sign. Executors,
administrators, trustees and other
fiduciaries should indicate their
capacity when signing.
