Non Employee Director Stock Option Plan

Exhibit 10.2


DAY RUNNER, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN 1. Establishment and Purpose of the Plan.


Day Runner, Inc. hereby establishes this Non-Employee Director Stock Option Plan to promote the interests of the Company and its stockholders by (i) helping to attract and retain the services of persons of the highest caliber to serve as non-employee directors of the Company, (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 apply throughout the Plan:


(a) "Board" shall mean the Board of Directors of the Company.


(b) "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.


(c) "Committee" shall mean the committee of the Board of Directors appointed in accordance with Section 4(a) of the Plan, if one is appointed.


(d) "Company" shall mean Day Runner, Inc., a Delaware corporation (or any successor corporation), and any "subsidiary" corporation, whether now or hereafter existing, as deemed in Sections 424(f) and (g) of the Code.


(e) "Director" shall mean a person who serves on the Board as of the date the Plan is adopted by the Board or who is thereafter duly elected or appointed to serve as a member of the Board.


(f) "Eligible Director" shall mean a Director who is not an employee (within the meaning of Section 3401 of the Code and the regulations thereunder) of the Company. The payment of directors' fees or consulting fees to a Director shall not be sufficient to constitute "employment" by the Company.


(g) "Fair Market Value" shall mean, with respect to Shares on a particular date, the fair market value per Share on such date, which value shall be the average of the closing bid and asked prices of the Common Stock on such date, as reported in The Wall Street Journal (or, if not so reported, as otherwise reported by the National Association of Securities Dealers Automated Quotations ("Nasdaq") System) or, if there are no such prices on such date, on the most recent preceding day on which there were reported closing bid and asked prices, or, if the Shares are listed on a stock exchange or on The Nasdaq Stock Market as a National Market System security, shall be the closing price on the exchange or on The Nasdaq Stock Market as of such date, as reported in The Wall Street Journal or, if there are no sales on such date, on the most recent preceding day on which there were reported sales.


(h) "First Grant Date" shall mean the date of the Company's first Annual Meeting of Stockholders following the Board's adoption of this Plan.


(i) "Grant Date" shall mean each of (i) the First Grant Date and (ii) the dates of the Company's Annual Meetings of Stockholders held during the term of this Plan but after the First Grant Date.


(j) "Option" shall mean the grant of the right to an Eligible Director pursuant to the Plan to purchase a specified number of Shares at a specified exercise price.


(k) "Option Agreement" shall mean a written certificate substantially in the form attached hereto as Exhibit A, or such other form or forms as the Board or its Committee (subject to the terms and conditions of the Plan) may from time to time approve, evidencing and reflecting the terms of an Option.


(l) "Optionee" shall mean an Eligible Director who is granted an Option under the Plan or any permitted transferee of such Eligible Director.


(m) "Plan" shall mean this Day Runner, Inc. Non-Employee Director Stock Option Plan as the same may be amended from time to time.


(n) "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 9 of the Plan.


3. Shares Reserved


The maximum aggregate number of Shares reserved for issuance pursuant to the Plan shall be 250,000 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.


4. Administration of the Plan.


(a) The Plan shall be administered by the Board. The Board may at any time appoint a Committee comprised of not less than two directors to administer the Plan on behalf of the Board. 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 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 Board or its Committee shall have the sole and complete discretionary authority: (i) to prescribe, amend and rescind rules and regulations relating to the Plan subject to the limitations set forth in Section 11 of the Plan; (ii) to interpret the Plan or any Option Agreement or document executed or entered into with respect to the grant or exercise of Options; (iii) 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; and (iv) to make such other determinations and establish such other procedures as it deems necessary or advisable for the administration of the Plan; provided, however, that the Board or its Committee shall have no discretion to determine the selection of persons to whom Options will be granted, the frequency of Option grants, the number of Shares subject to Option grants (except in accordance with Sections 5 and 6 hereof) the exercise prices of Options or any other material terms of Options (except in accordance with Section 9(b) hereof).


(c) All decisions, determinations and interpretations of the Board or its Committee shall be final and binding on all Optionees under the Plan.


(d) The Board or its Committee shall keep minutes of its meetings and of the actions taken by it without a meeting. A majority of the Board or its 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 Board or its Committee without a meeting, shall constitute acts of the Board or its 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 an Option or Shares.


5. Eligibility.


Options may be granted under the Plan only to Eligible Directors. An Eligible Director who has been granted an Option may be granted, if he or she is otherwise eligible, additional Options.


6. Terms and Conditions of Options.


Each person who (i) is an Eligible Director at the close of business on a Grant Date shall, on such Grant Date, automatically be granted an Option to purchase the number of shares specified in Section 6(a)(i) hereof and (ii) is not an Eligible Director on a Grant Date but who is elected or appointed to the Board subsequent to such Grant Date and prior to the next Grant Date, if any, shall automatically be granted, as of the date of his or her election or appointment to the Board, an Option to purchase the number of Shares specified in Section 6(a)(ii) hereof. Notwithstanding anything to the contrary herein, no Options shall be granted under this Plan prior to the First Grant Date. Options granted pursuant to the Plan shall be evidenced by an Option Agreement providing the following terms and conditions:


(a) Number of Shares.


(i) Grants on a Grant Date. The number of Shares subject to an Option granted to an Eligible Director on the First Grant Date shall be 10,000, and the number of shares subject to an Option granted to an Eligible Director on subsequent Grant Dates shall be 5,000.


(ii) Grants Other Than on a Grant Date. The number of Shares subject to an Option granted to an Eligible Director on a date other than a Grant Date shall be equal to 5,000 minus the product of 1,250 and the number of installments that would have vested under an Option granted to an Eligible Director on the most recent Grant Date preceding the date of such grant.


(iii) Pro Rata Adjustment. If the total number of Shares to be granted pursuant to Options on a specific grant date in accordance with this Section 6 would exceed the number of Shares then available for grant under the Plan, then the Shares remaining available for grant pursuant to Options shall be allocated pro rata among those Eligible Directors who are entitled on such grant date to be granted Options under the Plan.


(b) Vesting.


(i) Grants on a Grant Date. Subject to Section 7(e) of the Plan, each Option granted to an Eligible Director on a Grant Date shall vest and become exercisable in four equal quarterly installments with the first of such installments vesting on the first day of the calendar quarter following the quarter in which the grant is made and one additional installment vesting on the first day of each calendar quarter thereafter. If an Eligible Director receives an Option covering a reduced number of Shares due to an adjustment pursuant to Section 6(a)(iii) hereof, the Option shall vest in quarterly installments of 1,250 shares (provided that the last installment to vest may be less than 1,250 shares), with the first such installment vesting on the first day following the calendar quarter in which the grant is made and one additional installment vesting, subject to Section 7(e) of the Plan, on the first day of each calendar quarter thereafter until such Option is fully vested.


(ii) Grants Other Than on a Grant Date. Subject to Section 7(e) of the Plan, if an Eligible Director is granted an Option covering fewer than 5,000 shares (the "Prorated Shares") pursuant to Section 6(a)(ii) hereof, such Option shall vest and become exercisable in equal quarterly installments of 1,250 shares with the first of such installments vesting on the first day of the calendar quarter following the quarter in which the grant is made and one additional installment vesting on the first day of each calendar quarter thereafter. If such Eligible Director receives an Option covering less than the Prorated Shares due to an adjustment pursuant to Section 6(a)(iii) hereof, the Option shall vest in quarterly installments of 1,250 shares (provided that the last installment to vest may be less than 1,250 shares), with the first such installment vesting on the first day following the calendar quarter in which the grant is made and one additional installment vesting, subject to Section 7(e) of the Plan, on the first day of each calendar quarter thereafter until such Option is fully vested.


(c) Exercise Price. The exercise price per Share for the Shares to be issued pursuant to the exercise of an Option shall be 100% of the Fair Market Value per Share on the date of grant.


(d) Medium and Time of Payment. The consideration to be paid for the Shares to be issued upon exercise of an Option may consist of cash or check; provided, however, that the Optionee shall be required to pay in cash an amount necessary to satisfy any tax withholding obligations of the Company.


(e) Term of Options. The term of each Option shall be ten years from the date of grant thereof.


7. Exercise of Option.


(a) In General. Any Option granted hereunder to an Eligible Director shall be exercisable at such times and under such conditions as shall be permissible under the terms of the Plan. 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 the 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 payment by the Optionee of all payroll, withholding or income taxes incurred in connection with such Option exercise (or arrangements for the collectio ...