FIFTH AMENDMENT TO CREDIT AGREEMENT

         THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this  "Amendment") is entered
into as of  November  1, 1996,  by and  between  DAY  RUNNER,  INC.,  a Delaware
corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").


                                    RECITALS

         WHEREAS,  Borrower is currently  indebted to Bank pursuant to the terms
and conditions of that certain Credit Agreement  between Borrower and Bank dated
as of May 1, 1993, as amended from time to time ("Credit Agreement").

         WHEREAS,  Bank and Borrower have agreed to certain changes in the terms
and  conditions  set forth in the Credit  Agreement and have agreed to amend the
Credit Agreement to reflect said changes.

         NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are  hereby  acknowledged,  the  parties  hereto  agree that the Credit
Agreement shall be amended as follows:

         1. Section 1.1(a) is hereby  amended by deleting  "October 31, 1996" as
the last day on which Bank will make advances  under the Line of Credit,  and by
substituting  for said date "November 1, 1997," with such change to be effective
upon the execution and delivery to Bank of a promissory  note  substantially  in
the form of Exhibit A attached  hereto (which  promissory note shall replace and
be deemed the Line of Credit  Note  defined in and made  pursuant  to the Credit
Agreement) and all other contracts,  instruments and documents  required by Bank
to evidence such change.

         2. Section 1.1(c) is hereby amended (a) by deleting  "October 31, 1996"
as the last day on which Bank will  issue  Standby  Letters of Credit  under the
subfeature  therefor under the Line of Credit, and by substituting for said date
"November 1, 1997," and (b) by deleting  "February 1, 1997" as the last date any
such Standby Letter of Credit may expire, and by substituting for said date "May
1, 1998."

         3. Section 1.1(d) is hereby amended (a) by deleting  "October 31, 1996"
as the last day on which Bank will issue Commercial  Letters of Credit under the
subfeature  therefor under the Line of Credit, and by substituting for said date
"November 1, 1997," and (b) by deleting  "February 1, 1997" as the last date any
such Commercial  Letter of Credit may expire,  and by substituting for said date
"February 1, 1998."


<PAGE>






 
     4. The following is hereby added to the Credit Agreement as Section 7.10:
         "SECTION 7.10.  ARBITRATION.

                  (a)  Arbitration.  Upon the demand of any party,  any  Dispute
         shall be  resolved by binding  arbitration  (except as set forth in (e)
         below) in  accordance  with the terms of this  Agreement.  A  "Dispute"
         shall  mean any  action,  dispute,  claim or  controversy  of any kind,
         whether  in  contract  or  tort,  statutory  or  common  law,  legal or
         equitable,  now existing or hereafter  arising  under or in  connection
         with, or in any way  pertaining to, any of the Loan  Documents,  or any
         past,  present or future  extensions  of credit  and other  activities,
         transactions or obligations of any kind related  directly or indirectly
         to any of the Loan Documents,  including without limitation, any of the
         foregoing  arising in  connection  with the exercise of any  self-help,
         ancillary or other remedies pursuant to any of the Loan Documents.  Any
         party  may by  summary  proceedings  bring an action in court to compel
         arbitration  of a Dispute.  Any party who fails or refuses to submit to
         arbitration following a lawful demand by any other party shall bear all
         costs  and  expenses   incurred  by  such  other  party  in  compelling
         arbitration of any Dispute.

                  (b)  Governing  Rules.   Arbitration   proceedings   shall  be
         administered by the American  Arbitration  Association  ("AAA") or such
         other  administrator  as the  parties  shall  mutually  agree  upon  in
         accordance  with the AAA  Commercial  Arbitration  Rules.  All Disputes
         submitted  to  arbitration  shall be  resolved in  accordance  with the
         Federal   Arbitration   Act  (Title  9  of  the  United  States  Code),
         notwithstanding  any conflicting  choice of law provision in any of the
         Loan  Documents.  The  arbitration  shall be conducted at a location in
         California selected by the AAA or other administrator.  If there is any
         inconsistency  between the terms  hereof and any such rules,  the terms
         and  procedures  set  forth  herein  shall  control.  All  statutes  of
         limitation  applicable  to any Dispute  shall apply to any  arbitration
         proceeding.  All  discovery  activities  shall be expressly  limited to
         matters  directly  relevant to the Dispute being  arbitrated.  Judgment
         upon any award rendered in an  arbitration  may be entered in any court
         having  jurisdiction;  provided however,  that nothing contained herein
         shall be  deemed  to be a  waiver  by any  party  that is a bank of the
         protections  afforded  to it  under  12  U.S.C.  ss.91  or any  similar
         applicable state law.

                  (c)   No   Waiver;   Provisional   Remedies,   Self-Help   and
         Foreclosure.  No provision hereof shall limit the right of any party to
         exercise self-help remedies such as setoff, foreclosure against or sale
         of any real or personal property  collateral or security,  or to obtain
         provisional  or  ancillary   remedies,   including  without  limitation
         injunctive  relief,  sequestration,   attachment,  garnishment  or  the
         appointment  of a  receiver,  from a court  of  competent  jurisdiction
         before,  after or  during  the  pendency  of any  arbitration  or other
         proceeding.  The  exercise of any such remedy shall not waive the right
         of any party to compel arbitration or reference hereunder.

                  (d) Arbitrator Qualifications and Powers; Awards.  Arbitrators
         must be active members of the California State Bar or retired judges of
         the state or federal  judiciary of  California,  with  expertise in the
         substantive  laws  applicable  to the  subject  matter of the  Dispute.
         Arbitrators  are  empowered to resolve  Disputes by summary  rulings in
         response  to  motions  filed  prior to the final  arbitration  hearing.
         Arbitrators  (i) shall  resolve  all  Disputes in  accordance  with the
         substantive  law of the state of California,  (ii) may grant any remedy
         or relief that a court of the state of California  could order or grant
         within the scope  hereof and such  ancillary  relief as is necessary to
         make  effective  any  award,  and (iii)  shall  have the power to award
         recovery of all costs and fees,  to impose  sanctions  and to take such
         other  actions as they deem  necessary to the same extent a judge could
         pursuant to the Federal Rules of Civil Procedure,  the California Rules
         of Civil  Procedure or other  applicable  law. Any Dispute in which the
         amount in  controversy  is  $5,000,000  or less  shall be  decided by a
         single  arbitrator  who  shall  not  render  an award of  greater  than
         $5,000,000 (including damages, costs, fees and expenses). By submission
         to a single arbitrator,  each party expressly waives any right or claim
         to recover  more than  $5,000,000.  Any  Dispute in which the amount in
         controversy  exceeds  $5,000,000 shall be decided by majority vote of a
         panel  of  three   arbitrators;   provided  however,   that  all  three
         arbitrators   must   actively   participate   in   all   hearings   and
         deliberations.

                  (e) Judicial  Review.  Notwithstanding  anything herein to the
         contrary, in any arbitration in which the amount in controversy exceeds
         $25,000,000,  the  arbitrators  shall  be  required  to make  specific,
         written  findings of fact and conclusions of law. In such  arbitrations
         (i) the arbitrators shall not have the power to make any award which is
         not supported by substantial evidence or which is based on legal error,
         (ii) an award shall not be binding upon the parties unless the findings
         of fact are supported by  substantial  evidence and the  conclusions of
         law are  not  erroneous  under  the  substantive  law of the  state  of
         California, and (iii) the parties shall have in addition to the grounds
         referred to in the Federal  Arbitration Act for vacating,  modifying or
         correcting  an award the right to  judicial  review of (A)  whether the
         findings  of  fact  rendered  by  the   arbitrators  are  supported  by
         substantial  evidence,  and  (B)  whether  the  conclusions  of law are
         erroneous  under  the  substantive  law of  the  state  of  California.
         Judgment  confirming an award in such a proceeding  may be entered only
         if a court  determines the award is supported by  substantial  evidence
         and not based on legal error under the  substantive law of the state of
         California.

                  (f)   Real   Property    Collateral;    Judicial    Reference.
         Notwithstanding  anything  herein to the contrary,  no Dispute shall be
         submitted to arbitration if the Dispute concerns  indebtedness  secured
         directly  or  indirectly,  in whole or in  part,  by any real  property
         unless  (i) the  holder  of the  mortgage,  lien or  security  interest
         specifically elects in writing to proceed with the arbitration, or (ii)
         all parties to the arbitration  waive any rights or benefits that might
         accrue  to  them  by  virtue  of the  single  action  rule  statute  of
         California,  thereby  agreeing that all indebtedness and obligations of
         the parties,  and all mortgages,  liens and security interests securing
         such  indebtedness  and  obligations,  shall  remain  fully  valid  and
         enforceable.  If any such Dispute is not submitted to arbitration,  the
         Dispute  shall be referred to a referee in accordance  with  California
         Code of Civil Procedure Section 638 et seq., and this general reference
         agreement is intended to be specifically enforceable in accordance with
         said Section 638. A referee with the qualifications required herein for
         arbitrators   shall  be  selected   pursuant  to  the  AAA's  selection
         procedures.  Judgment upon the decision  rendered by a referee shall be
         entered  in the  court  in  which  such  proceeding  was  commenced  in
         accordance with  California  Code of Civil  Procedure  Sections 644 and
         645.

                  (g) Miscellaneous. To the maximum extent practicable, the AAA,
         the  arbitrators  and the  parties  shall take all action  required  to
         conclude any  arbitration  proceeding  within 180 days of the filing of
         the  Dispute  with  the  AAA.  No  arbitrator  or  other  party  to  an
         arbitration  proceeding may disclose the existence,  content or results
         thereof,  except for  disclosures of information by a party required in
         the ordinary  course of its business,  by applicable law or regulation,
         or to the extent  necessary to exercise any judicial  review rights set
         forth herein.  If more than one agreement for arbitration by or between
         the parties potentially applies to a Dispute, the arbitration provision
         most directly  related to the Loan  Documents or the subject  matter of
         the Dispute shall control.  This  arbitration  provision  shall survive
         termination,  amendment or expiration  of any of the Loan  Documents or
         any relationship between the parties."

         5. Except as specifically  provided herein, all terms and conditions of
the  Credit  Agreement  remain  in full  force  and  effect,  without  waiver or
modification.  All terms  defined  in the Credit  Agreement  shall have the same
meaning when used in this  Amendment.  This  Amendment and the Credit  Agreement
shall be read together, as one document.

         6. Borrower hereby remakes all representations and warranties contained
in the Credit Agreement and reaffirms all covenants set forth therein.  Borrower
further certifies that as of the date of this Amendment there exists no Event of
Default  as defined in the Credit  Agreement,  nor any  condition,  act or event
which with the giving of notice or the passage of time or both would  constitute
any such Event of Default.

         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written above.

DAY RUNNER, INC.                                          WELLS FARGO BANK,
                                                          NATIONAL ASSOCIATION


By: /s/ Dennis Marquardt                                   /s/Clare Gurbach 
    --------------------                                   ----------------
Title: Executive Vice President                            Clare Gurbach
        Finance & Administration                           Vice President



<PAGE>



REVOLVING LINE OF CREDIT NOTE


$5,000,000.00                                           Los Angeles, California

                                                        November 1, 1996

         FOR VALUE  RECEIVED,  the  undersigned  DAY RUNNER,  INC.  ("Borrower")
promises to pay to the order of WELLS FARGO BANK, NATIONAL  ASSOCIATION ("Bank")
at its office at Los Angeles  RCBO,  333 South Grand  Avenue,  Third Floor,  Los
Angeles,  California, or at such other place as the holder hereof may designate,
in lawful  money of the United  States of America and in  immediately  available
funds,  the principal sum of Five Million  Dollars  ($5,000,000.00),  or so much
thereof as may be advanced and be  outstanding,  with  interest  thereon,  to be
computed on each advance from the date of its disbursement as set forth herein.

DEFINITIONS:

         As used herein,  the following  terms shall have the meanings set forth
after each,  and any other term  defined in this Note shall have the meaning set
forth at the place defined:

         (a) "Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in California are authorized or required by law to
close.

         (b) "Fixed Rate Term" means a period  commencing  on a Business Day and
continuing for one (1), two (2),  three (3) or six (6) months,  as designated by
Borrower,  during which all or a portion of the outstanding principal balance of
this Note bears interest determined in relation to LIBOR; provided however, that
no Fixed Rate Term may be selected for a principal amount less than Five Hundred
Thousand Dollars  ($500,000.00);  and provided further,  that no Fixed Rate Term
shall extend beyond the scheduled  maturity date hereof.  If any Fixed Rate Term
would end on a day which is not a Business  Day, then such Fixed Rate Term shall
be extended to the next succeeding Business Day.

         (c) "LIBOR" means the rate per annum (rounded upward, if necessary,  to
the nearest whole 1/8 of 1%) and determined pursuant to the following formula:

         LIBOR =           Base LIBOR
                           -----------------------------------
                           100% - LIBOR Reserve Percentage



<PAGE>
  
     (i) "Base LIBOR" means the rate per annum for United States dollar deposits
quoted by Bank as the  Inter-Bank  Market Offered Rate,  with the  understanding
that such rate is quoted by Bank for the purpose of calculating  effective rates
of interest for loans making reference thereto, on the first day of a Fixed Rate
Term for delivery of funds on said date for a period of time approximately equal
to the  number of days in such  Fixed  Rate Term and in an amount  approximately
equal to the principal  amount to which such Fixed Rate Term  applies.  Borrower
understands and agrees that Bank may base its quotation of the Inter-Bank Market
Offered  Rate upon such  offers or other  market  indicators  of the  Inter-Bank
Market as Bank in its discretion deems  appropriate  including,  but not limited
to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.

    (ii) "LIBOR Reserve  Percentage" means the reserve percentage  prescribed by
the Board of  Governors of the Federal  Reserve  System (or any  successor)  for
"Eurocurrency  Liabilities"  (as defined in Regulation D of the Federal  Reserve
Board,  as  amended),  adjusted  by Bank for  expected  changes in such  reserve
percentage during the applicable Fixed Rate Term.

         (d) "Prime Rate" means at any time the rate of interest  most  recently
announced  within  Bank at its  principal  office  as its Prime  Rate,  with the
understanding  that the Prime Rate is one of Bank's base rates and serves as the
basis upon which  effective  rates of interest  are  calculated  for those loans
making reference  thereto,  and is evidenced by the recording  thereof after its
announcement in such internal publication or publications as Bank may designate.

INTEREST:

         (a) Interest. The outstanding principal balance of this Note shall bear
interest  (computed on the basis of a 360-day year,  actual days elapsed) either
(i) at a fluctuating  rate per annum equal to the Prime Rate in effect from time
to time,  or (ii) at a fixed  rate per  annum  determined  by Bank to be one and
three  quarters  percent  (1.75%)  above LIBOR in effect on the first day of the
applicable Fixed Rate Term. When interest is determined in relation to the Prime
Rate, each change in the rate of interest  hereunder  shall become  effective on
the date each Prime Rate change is announced  within Bank.  With respect to each
LIBOR selection hereunder, Bank is hereby authorized to note the date, principal
amount,  interest rate and Fixed Rate Term  applicable  thereto and any payments
made  thereon on Bank's  books and records  (either  manually  or by  electronic
entry) and/or on any schedule  attached to this Note,  which  notations shall be
prima facie evidence of the accuracy of the information noted.

         (b) Selection of Interest Rate Options. At any time any portion of this
Note bears  interest  determined  in relation to LIBOR,  it may be  continued by
Borrower  at the end the Fixed  Rate Term  applicable  thereto  so that all or a
portion  thereof bears  interest  determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower.  At any time any portion
of this Note bears interest  determined in relation to the Prime Rate,  Borrower
may convert all or a portion  thereof so that it bears  interest  determined  in
relation to LIBOR for a Fixed Rate Term designated by Borrower.  At such time as
Borrower  requests an advance  hereunder  or wishes to select a LIBOR option for
all or a portion of the outstanding  principal balance hereof, and at the end of
each Fixed Rate  Term,  Borrower  shall  give Bank  notice  specifying:  (i) the
interest rate option  selected by Borrower;  (ii) the principal  amount  subject
thereto; and (iii) for each LIBOR selection,  the length of the applicable Fixed
Rate Term. Any such notice may be given by telephone so long as, with respect to
each LIBOR selection,  (A) Bank receives written  confirmation from Borrower not
later than three (3) Business Days after such telephone notice is given, and (B)
such notice is given to Bank prior to 10:00 a.m.,  California time, on the first
day of the Fixed Rate Term. For each LIBOR option requested hereunder, Bank will
quote the  applicable  fixed  rate to  Borrower  at  approximately  10:00  a.m.,
California  time,  on the first day of the Fixed Rate Term. If Borrower does not
immediately  accept  the rate  quoted  by Bank,  any  subsequent  acceptance  by
Borrower shall be subject to a  redetermination  by Bank of the applicable fixed
rate; provided however,  that if Borrower fails to accept any such rate by 11:00
a.m.,  California  time, on the Business Day such  quotation is given,  then the
quoted  rate shall  expire and Bank shall have no  obligation  to permit a LIBOR
option to be selected on such day.  If no  specific  designation  of interest is
made at the time any advance is  requested  hereunder or at the end of any Fixed
Rate Term, Borrower shall be deemed to have made a Prime Rate interest selection
for such advance or the principal amount to which such Fixed Rate Term applied.

         (c)      Additional LIBOR Provisions.

         (i) If Bank at any time shall  determine  that for any reason  adequate
and  reasonable  means do not  exist for  ascertaining  LIBOR,  then Bank  shall
promptly give notice thereof to Borrower. If such notice is given and until such
notice has been withdrawn by Bank,  then (A) no new LIBOR option may be selected
by Borrower,  and (B) any portion of the  outstanding  principal  balance hereof
which bears interest  determined in relation to LIBOR,  subsequent to the end of
the Fixed Rate Term  applicable  thereto,  shall  bear  interest  determined  in
relation to the Prime Rate.

    (ii) If any law,  treaty,  rule,  regulation or  determination of a court or
governmental  authority  or  any  change  therein  or in the  interpretation  or
application  thereof  (each,  a "Change in Law") shall make it unlawful for Bank
(A) to make LIBOR options available hereunder, or (B) to maintain interest rates
based  on  LIBOR,  then in the  former  event,  any  obligation  of Bank to make
available such unlawful LIBOR options shall immediately be cancelled, and in the
latter event,  any such unlawful  LIBOR-based  interest  rates then  outstanding
shall be  converted,  at Bank's  option,  so that interest on the portion of the
outstanding  principal  balance subject thereto is determined in relation to the
Prime Rate;  provided  however,  that if any such Change in Law shall permit any
LIBOR-based interest rates to remain in effect until the expiration of the Fixed
Rate Term applicable  thereto,  then such permitted  LIBOR-based  interest rates
shall continue in effect until the expiration of such Fixed Rate Term.  Upon the
occurrence  of  any  of  the  foregoing  events,  Borrower  shall  pay  to  Bank
immediately  upon demand such amounts as may be certified to Borrower by Bank in
writing as necessary to compensate Bank for any fines, fees, charges,  penalties
or other  costs  incurred  or payable by Bank as a result  thereof and which are
attributable to any LIBOR options made available to Borrower hereunder,  and any
reasonable  allocation made by Bank among its operations shall be conclusive and
binding upon Borrower.

   (iii)  If any  Change  in Law or  compliance  by Bank  with  any  request  or
directive  (whether  or not  having the force of law) from any  central  bank or
other governmental authority shall:

         (A)      subject Bank to any tax,  duty or other charge with respect to
                  any LIBOR options, or change the basis of taxation of payments
                  to Bank of  principal,  interest,  fees  or any  other  amount
                  payable  hereunder  (except  for changes in the rate of tax on
                  the overall net income of Bank); or

         (B)      impose,  modify  or  hold  applicable  any  reserve,   special
                  deposit, compulsory loan or similar requirement against assets
                  held by,  deposits or other  liabilities in or for the account
                  of, advances or loans by, or any other acquisition of funds by
                  any office of Bank; or

         (C)      impose on Bank any other condition;

and the  result  of any of the  foregoing  is to  increase  the  cost to Bank of
making, renewing or maintaining any LIBOR options hereunder and/or to reduce any
amount  receivable  by Bank in  connection  therewith,  then in any  such  case,
Borrower  shall pay to Bank such amounts as may be certified to Borrower by Bank
in writing as  necessary,  immediately  upon receipt of such  certification,  to
compensate Bank for any additional  costs incurred by Bank and/or  reductions in
amounts  received  by Bank  which are  attributable  to such LIBOR  options.  In
determining  which costs incurred by Bank and/or  reductions in amounts received
by Bank are  attributable  to any  LIBOR  options  made  available  to  Borrower
hereunder,  any reasonable allocation made by Bank among its operations shall be
conclusive and binding upon Borrower.

     (d) Payment of Interest.  Interest accrued on this Note shall be payable in
arrears on the first day of each month, commencing December 1, 1996.

     (e) Default  Interest.  From and after the maturity  date of this Note,  or
such earlier date as all principal  owing  hereunder  becomes due and payable by
acceleration or otherwise,  the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year,  actual days  elapsed)  equal to two percent (2%) above
the rate of interest from time to time applicable to this Note.

BORROWING AND REPAYMENT:

         (a) Borrowing and Repayment.  Borrower may from time to time during the
term of this Note borrow,  partially or wholly repay its outstanding borrowings,
and reborrow,  subject to all of the  limitations,  terms and conditions of this
Note and of any document  executed in  connection  with or governing  this Note;
provided  however,  that the total  outstanding  principal  amount of borrowings
under this Note shall not at any time exceed the principal  amount stated above.
The unpaid  principal  balance of this obligation at any time shall be the total
amounts  advanced  hereunder  by the holder  hereof less the amount of principal
payments  made  hereon by or for any  Borrower,  which  balance  may be endorsed
hereon from time to time by the holder.  The  outstanding  principal  balance of
this Note shall be due and payable in full on November 1, 1997.

         (b) Advances.  Advances hereunder, to the total amount of the principal
sum stated  above,  may be made by the holder at the oral or written  request of
(i) Dennis K. Marquardt or James Freeman,  Jr. or Kevin Marquez or Mark Vidovich
or Tom McCullough,  any one acting alone, who are authorized to request advances
and  direct  the  disposition  of  any  advances  until  written  notice  of the
revocation of such authority is received by the holder at the office  designated
above, or (ii) any person,  with respect to advances  deposited to the credit of
any account of any Borrower with the holder, which advances,  when so deposited,
shall be  conclusively  presumed to have been made to or for the benefit of each
Borrower  regardless  of the fact that persons  other than those  authorized  to
request  advances may have  authority to draw against such  account.  The holder
shall have no obligation to determine  whether any person  requesting an advance
is or has been authorized by any Borrower.

         (c)  Application  of Payments.  Each payment made on this Note shall be
credited  first,  to any  interest  then  due  and  second,  to the  outstanding
principal  balance hereof.  All payments  credited to principal shall be applied
first,  to the outstanding  principal  balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the outstanding
principal  balance of this Note which bears  interest  determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.

PREPAYMENT:

     (a) Prime Rate.  Borrower may prepay  principal on any portion of this Note
which bears  interest  determined  in relation to the Prime Rate at any time, in
any amount and without penalty.

         (b) LIBOR.  Borrower  may prepay  principal on any portion of this Note
which  bears  interest  determined  in  relation to LIBOR at any time and in the
minimum amount of One Hundred Thousand Dollars ($100,000.00);  provided however,
that if the outstanding  principal  balance of such portion of this Note is less
than said amount,  the minimum prepayment amount shall be the entire outstanding
principal  balance  thereof.  In consideration of Bank providing this prepayment
option to  Borrower,  or if any such  portion of this Note shall  become due and
payable  at any time  prior to the last day of the Fixed  Rate  Term  applicable
thereto by  acceleration  or otherwise,  Borrower shall pay to Bank  immediately
upon demand a fee which is the sum of the  discounted  monthly  differences  for
each month from the month of  prepayment  through  the month in which such Fixed
Rate Term matures, calculated as follows for each such month:

         (i)      Determine the amount of interest which would have accrued each
                  month on the amount prepaid at the interest rate applicable to
                  such amount had it remained  outstanding until the last day of
                  the Fixed Rate Term applicable thereto.

        (ii)      Subtract from the amount determined in (i) above the amount of
                  interest  which  would have  accrued for the same month on the
                  amount  prepaid for the remaining term of such Fixed Rate Term
                  at LIBOR in  effect  on the date of  prepayment  for new loans
                  made for  such  term and in a  principal  amount  equal to the
                  amount prepaid.

       (iii)      If the result  obtained in (ii) for any month is greater  than
                  zero, discount that difference by LIBOR used in (ii) above.

Borrower  acknowledges  that  prepayment  of  such  amount  may  result  in Bank
incurring  additional  costs,  expenses  and/or  liabilities,  and  that  it  is
difficult  to  ascertain  the  full  extent  of  such  costs,   expenses  and/or
liabilities.  Borrower,  therefore, agrees to pay the above-described prepayment
fee and  agrees  that  said  amount  represents  a  reasonable  estimate  of the
prepayment costs,  expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall  thereafter
bear  interest  until paid at a rate per annum two percent  (2%) above the Prime
Rate in effect  from  time to time  (computed  on the  basis of a 360-day  year,
actual days  elapsed).  Each change in the rate of interest on any such past due
prepayment  fee shall  become  effective  on the date each Prime Rate  change is
announced within Bank.

EVENTS OF DEFAULT:

         This  Note  is  made  pursuant  to and is  subject  to  the  terms  and
conditions of that certain Credit  Agreement  between Borrower and Bank dated as
of May 1,  1993,  as amended  from time to time (the  "Credit  Agreement").  Any
default in the payment or performance of any obligation  under this Note, or any
defined event of default under the Credit Agreement,  shall constitute an "Event
of Default" under this Note.

MISCELLANEOUS:

         (a) Remedies.  Upon the occurrence of any Event of Default,  the holder
of this Note,  at the holder's  option,  may declare all sums of  principal  and
interest  outstanding  hereunder  to be  immediately  due  and  payable  without
presentment,  demand,  notice of nonperformance,  notice of protest,  protest or
notice of  dishonor,  all of which are  expressly  waived by  Borrower,  and the
obligation,  if any, of the holder to extend any further credit  hereunder shall
immediately  cease and terminate.  Borrower shall pay to the holder  immediately
upon  demand  the full  amount of all  payments,  advances,  charges,  costs and
expenses,  including reasonable attorneys' fees (to include outside counsel fees
and all allocated costs of the holder's in-house counsel),  expended or incurred
by the holder in connection  with the  enforcement of the holder's rights and/or
the  collection  of any amounts  which become due to the holder under this Note,
and the  prosecution  or defense of any action in any way  related to this Note,
including  without  limitation,  any  action  for  declaratory  relief,  whether
incurred  at the trial or  appellate  level,  in an  arbitration  proceeding  or
otherwise,  and including any of the foregoing  incurred in connection  with any
bankruptcy proceeding  (including without limitation,  any adversary proceeding,
contested  matter or motion  brought by Bank or any other  person)  relating  to
Borrower or any other person or entity.

     (b)  Governing  Law.  This  Note  shall be  governed  by and  construed  in
accordance with the laws of the State of California.

     IN WITNESS  WHEREOF,  the undersigned has executed this Note as of the date
first written above.

DAY RUNNER, INC.

By: /s/Dennis Marquardt
-----------------------
Title: Executive Vice President
          Finance & Administration