EXERCISE OF STOCK OPTION
This Agreement is entered into this 15th day of January, 1997 by and
between Paper Warehouse, Inc., a Minnesota corporation (the "Corporation")
and LSG Corporation, a Minnesota corporation ("LSG").
WHEREAS, the Corporation and LSG are parties to a Restated Option
Agreement dated October 6, 1994 (the "Option Agreement").
WHEREAS, pursuant to the Option Agreement upon the offering of capital
stock of the Corporation pursuant to a registered public offering under the
Securities Act of 1933, as amended (the "IPO"), LSG has the right to acquire
5,863 shares of Common Stock of the Corporation (the "Shares") for the
exercise price set forth in paragraph 3 of the Option Agreement.
WHEREAS, the Corporation has notified LSG of its intent to make an IPO.
WHEREAS, LSG desires to exercise its option pursuant to the Option
Agreement contingent upon the Corporation making an IPO.
NOW, THEREFORE, the parties agree as follows:
1. CONTINGENT EXERCISE. LSG hereby agrees to purchase the Shares
pursuant to the Option Agreement upon the closing date of the IPO. The
Corporation agrees to give LSG ten (10) days advance notice of its estimate
of the closing date of the IPO. Within two (2) days of such notice, LSG
agrees to pay to the Corporation One Hundred Fifty Thousand Dollars
($150,000), which amount the parties acknowledge is the option price and full
consideration for the Shares (the "Option Price").
2. CLOSING DATE AND RETURN OF OPTION PRICE. The purchase of the Shares
shall be effective upon the closing date of the IPO. In the event that the
IPO doe not close within forty-five (45) days of the payment of the Option
Price to the Corporation, the Corporation shall return the Option Price to
LSG.
3. REPRESENTATIONS OF LSG. LSG hereby represents as follows:
a. LSG has received and carefully reviewed a copy of the Form S-1
Registration Statement with the accompanying draft prospectus dated
January 9, 1997 and the Corporation's financial statements for the years
ending on the Friday nearest January 31, 1995 and 1996 and for the nine
months ended October 31, 1996.
b. LSG recognizes that the purchase of the Shares involves
significant risks including those risks enumerated in the prospectus under
the heading "Risk Factors" and the risk associated with the fact that LSG
will be unable to sell or dispose of the Shares until it has owned the
Shares for at least two (2) years under Rule 144 and that, therefore, the
Shares are not liquid.
c. The Corporation has answered all inquires that LSG has made
concerning the Corporation, its business and financial condition.
d. The Shares are being acquired solely for investment, for LSG's
own account and not as a nominee, agent or otherwise on behalf of another
person and that the Shares are being acquired without any present intention
to re-offer, resell or fractionalize the Shares.
e. LSG realizes that the Shares will not be registered under the
Securities Act and that the Shares will be stamped or imprinted with a
conspicuous legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
ANY OTHER STATE SECURITIES OR "BLUE SKY" LAWS AND MAY NOT BE
SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT
AND BLUE SKY LAWS OR AN EXCEPTION THEREFROM IS AVAILABLE AS
ESTABLISHED BY THE WRITTEN OPINION OF COUNSEL ACCEPTABLE TO
THE CORPORATION.
f. LSG agrees to indemnify and hold harmless the Corporation from
any and all damage or loss occasioned by a breach of this Agreement.
4. AGREEMENT TO ISSUE SHARES. The Corporation agrees to issue the
Shares upon the closing date of the IPO as provided for herein and agrees to
return the Option Price as provided for within paragraph 2 hereof if the IPO
is not closed as provided for herein.
5. EFFECTIVE OF ISSUANCE. Upon the issuance of the Shares upon the
closing date of the IPO, all options granted to LSG shall be deemed satisfied
and the Restated Option Agreement shall be considered satisfied and of no
further effect. In the event that the IPO is not closed within the time
period provided for in paragraph 2 hereof, and the Option Price is returned
to LSG, this Agreement shall be considered null and void and the Restated
Option Agreement shall continue according to its terms and LSG shall not be
considered to have exercised its option pursuant to the Option Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
PAPER WAREHOUSE, INC.
By /s/ Yale X. Xxxxxxxx
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Yale X. Xxxxxxxx, its President
LSG CORPORATION
By /s/ illegible
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Its Pres
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