WARRANT AGREEMENT
WARRANT AGREEMENT (the "Warrant Agreement") is made and entered into
as of the Initial Closing Date between PAPER WAREHOUSE, INC., a Minnesota
corporation (the "Company"), and each Warrant Holder (as hereinafter defined).
WITNESSETH:
WHEREAS, pursuant to the terms of a Confidential Private Placement
Memorandum, dated as of November 4, 1994 (the "Private Placement Memorandum"),
the Company is issuing as of the Initial Closing Date up to an aggregate of 46
units of securities (each a "Unit"), each Unit consisting of a $50,000 10%
Subordinated Note due November 30, 2004 of the Company (a "Note") and one
Warrant (a "Warrant"), subject to certain adjustments, exercisable into 106.3
shares (the Warrant Shares") of common stock, par value $.01 per share, of the
Company (the "Common Stock") at an exercise price of $47.04 per share; and
WHEREAS, the Warrant Holders (as hereinafter defined) are willing to
have their rights with respect to the ownership of the Warrants and the Warrant
Shares (as hereinafter defined) governed by the provisions of this Agreement.
NOW, THEREFORE, in consideration of the above recitals, the mutual
promises contained herein and for other good and valuable consideration, the
parties hereto agree as follows:
1. DEFINITIONS. The following words and terms shall have the
following meanings:
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a
day on which commercial banks in Minneapolis, Minnesota are required or
authorized to be closed.
"CODE" shall mean the Internal Revenue Code of 1986, as amended and
supplemented from time to time, and shall include proposed, temporary,
interim and permanent regulations of the United States Treasury Department
applicable thereunder.
"COMPANY REDEMPTION" shall have the meaning ascribed to such term in
Section 11(b) hereof.
"EBITA" shall mean, with reference to any period, net earnings of the
Company for such period plus all deductions for interest expense, income
taxes and amortization for such period.
"EXERCISE PERIOD" shall have the meaning set forth in Section 5.
"EXERCISE PRICE" shall mean $47.04 per Warrant Share.
"INITIAL CLOSING DATE" shall mean the first date upon which the
Company shall schedule a closing with respect to the purchase of Units by
subscribers for Units.
"QUALIFIED TRANSACTION" shall mean a public offering of capital stock
by the Company or sale by the Company of all or substantially all of its
stock or assets.
"REDEMPTION PRICE" shall mean, as of any calculation date, an amount
for each share of Common Stock issuable upon exercise of the Warrant the
greater of: (i) EBITA for the immediately preceding full fiscal year
multiplied by seven less the aggregate amount of long-term and short-term
debt for such fiscal year divided by the number of shares then issued and
outstanding; or (ii) the book value of the Company as of the immediately
preceding fiscal year end divided by the number of shares then issued and
outstanding; PROVIDED, HOWEVER, that with respect to a Company Redemption
(x) in the event the Company Redemption occurs concurrently with a
Qualified Transaction, the Redemption Price shall equal the consideration
received in the Qualified Transaction and (y) in the event the Company
Redemption occurs and within 12 months thereafter the Company engages in a
Qualified Transaction, the Company shall pay to each Warrant Holder the
positive difference calculated on a per share basis, if any, between the
consideration received by the Company in the Qualified Transaction and the
amount paid to such Warrant Holder at the time of the Company Redemption.
"REGISTRATION RIGHTS AGREEMENT" shall mean that certain Registration
Right Agreement, dated as of the date hereof, among the Company and the
holders of Warrant Shares.
"WARRANT HOLDER(S)" shall mean each subscriber of Units whose
subscription is accepted by the Company and each permitted transferee of
Warrants held by such subscriber.
"WARRANT HOLDER REDEMPTION" shall have the meaning ascribed to such
term in Section 11(a) hereof.
"WARRANT SHARES" shall mean any shares of Common Stock or other
securities issuable upon exercise of the Warrants.
2. ISSUANCE OF WARRANTS: FORM OF WARRANT. The Company will issue,
sell and deliver a Warrant to each Warrant Holder upon execution of the Omnibus
Signature Page. The text of the Warrant and the form of election to purchase
shares to be attached thereto shall be substantially as set forth in Exhibit A
attached hereto. Each Warrant shall be executed on behalf of the Company by the
manual or facsimile signature of the present or any future President, Vice
President, or Chief Financial Officer of the Company, under its corporate seal,
affixed or in
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facsimile, attested by the manual or facsimile signature of the present or any
future Secretary or Assistant Secretary of the Company.
3. REGISTERED FORM. The Warrant shall be registered in a Warrant
Register as they are issued. The Company shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person.
4. TRANSFER OF WARRANTS. The Warrant and Warrant Shares will not be
transferable, in part or in whole, except only on the books of the Company upon
delivery thereof duly endorsed by the Warrant Holder or by his duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. The Warrant Holder shall provide the
Company with five Business Days prior written notice of a proposed transfer. In
all cases of transfer by an attorney, the original power of attorney, duly
approved, or an official copy thereof, duly certified, shall be deposited with
the Company. In case of transfer by executors, administrators, guardians or
other legal representatives, duly authenticated evidence of their authority
shall be produced, and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants to the persons entitled thereto. The Warrants may be
exchanged at the option of the then Warrant Holder thereof, for another Warrant,
or other Warrant of different denominations, of like tenor and representing in
the aggregate the right to purchase a like number of Warrant Shares upon
surrender to the Company or its duly authorized agent. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrants to be
transferred on its books to any person, unless the Warrant Holder or Warrant
Holders thereof shall furnish to the Company reasonably satisfactory evidence of
compliance with the Securities Act of 1933, as amended (the "Act"), in
accordance with the provisions of Section 13 of this Agreement.
5. TERM OF WARRANTS; EXERCISE OF WARRANTS. Each Warrant entitles
the Warrant Holder thereof to purchase 106.3 shares of Common Stock at the
Exercise Price at any tune after November 30, 1995 (the "Effective Date") and
before 5:00 p.m., prevailing Central Time, on November 30, 2004 (the "Expiration
Date"). On the Expiration Date, all rights evidenced by the Warrants shall
cease and the Warrants shall become void. The period from the Effective Date to
the Expiration Date is sometimes hereinafter referred to as the "Exercise
Period." The Exercise Price and the Warrant Shares issuable upon exercise of
the Warrant Shares are subject to adjustment upon the occurrence of certain
events, pursuant to the provisions of Section 9 of this Agreement. Subject to
the provisions of this Agreement and upon five Business Days prior written
notice to the Company, each Warrant Holder shall have the right, which may be
exercised as set forth in such Warrants to purchase from the Company (and the
Company shall issue and sell to such Warrant Holder) the number of fully paid
and nonassessable shares of Common Stock specified in such Warrant, upon
surrender to the Company, or its duly authorized agent, of such Warrants, with
the form of election to purchase attached thereto duly completed and signed,
with signatures guaranteed by a member firm of a
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national securities exchange, a commercial bank (not a savings bank or savings
and loan association) or trust company located in the United States or a member
of the NASD, and upon payment to the Company of the Exercise Price, as adjusted
in accordance with the provisions of Section 9 of this Agreement, for the number
of Warrant Shares in respect of which such Warrants are then exercised. Payment
of such Exercise Price may be made in cash or by check payable to the order of
the Company or by the surrender and delivery of Notes in an aggregate principal
amount equal to the Exercise Price. Upon each surrender of Warrants and payment
of the Exercise Price as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of the
Warrant Holder of such Warrants and (subject to receipt of evidence of
compliance with the Act in accordance with the provisions of Section 13 of this
Agreement) in such name or names as such Warrant Holder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of such Warrants, together with cash, as provided in Section
12 of this Agreement, in respect of any fractional Warrant Shares otherwise
issuable upon such surrender. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of Warrants and payment of the Exercise Price as aforesaid;
PROVIDED, HOWEVER, that if, at the date of surrender of such Warrants and
payment of such Exercise Price, the transfer books for the Common Stock or other
class of stock purchasable upon the exercise of such Warrants shall be closed,
the certificates for the shares shall be issuable as of the next succeeding date
on which such books shall be opened and until such date the Company shall be
under no duty to deliver any certificate for such Warrant Shares; PROVIDED,
FURTHER, that the transfer books, unless otherwise required by law, shall not be
closed at any one time for a period longer than 20 days. The rights of purchase
represented by the Warrants shall be exercisable, at the election of the Warrant
Holders thereof, in full.
6. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes, if any, attributable to the issuance of Warrant Shares upon the exercise
of Warrants; PROVIDED, HOWEVER, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue or delivery of any certificates for Warrant Shares in a name other than
that of the Warrant Holder of Warrants in respect of which such Warrant Shares
are issued.
7. MUTILATED OR MISSING WARRANTS. In case any of the Warrants shall
be mutilated, lost, stolen or destroyed, the Company may, in its discretion,
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen
or destroyed, a new Warrant for the number of Warrants represented by the
Warrant so mutilated, lost, stolen or destroyed but only receipt of evidence of
such loss, theft or destruction of such Warrant, and of the ownership thereof,
and the indemnity, if requested, all satisfactory to the Company. An applicant
for such substitute Warrants shall also comply with such other reasonable
regulations and pay such other reasonable charges incidental thereto as the
Company may prescribe.
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8. RESERVATION OF WARRANT SHARES. ETC. The Company shall at all
times after the Effective Date keep reserved, out of the authorized and unissued
Common Stock, a number of shares of Common Stock sufficient to provide for the
exercise of the rights of purchase represented by the outstanding Warrants. The
Company will keep a copy of this Agreement on file at its principal offices.
All Warrants surrendered in the exercise of the rights thereby evidenced shall
be cancelled, and such cancelled Warrants shall constitute sufficient evidence
of the number of shares of Common Stock that have been issued upon the exercise
of such Warrants. No shares of Common Stock shall be subject to reservation in
respect of unexercised Warrants subsequent to the Expiration Date.
9. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price and the number and kind of securities purchasable upon exercise
of each Warrant shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
(i) In case the Company shall (a) declare a dividend on its Common
Stock in shares of Common Stock or make a distribution in shares of Common
Stock, (b)subdivide its outstanding shares of Common Stock into a greater
number of shares, (c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (d) issue by reclassification
of its shares of Common Stock other securities of the Company (including
any such reclassification in connection with a consolidation or merger in
which the Company is the continuing corporation), the number of Warrant
Shares purchasable upon exercise of each Warrant immediately prior thereto
shall be adjusted so that the Warrant Holder of each Warrant shall be
entitled to receive the kind and number of Warrant Shares or other
securities of the Company which he would have owned or have been entitled
to receive after the happening of any of the events described above, had
such Warrant been exercised immediately prior to the happening of such
event or any record date with respect thereto. An adjustment made pursuant
to this clause (i) shall become effective immediately after the effective
date of such event retroactive to immediately after the record date, if
any, for such event.
(ii) Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant is adjusted, as provided in this Section 9, the
Exercise Price shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which the numerator
shall be the number of shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment, and of which the denominator shall be
the number of Warrant Shares so purchasable immediately thereafter.
(iii) For the purpose of this Section 9, the term "shares of
Common Stock" shall mean (a) the class of stock, designated as the Common
Stock of the Company at the date of this Agreement or (b) any other class
of stock resulting from successive changes or reclassification of such
shares consisting solely of changes in par value, or from par value to no
par value, or from no par value to par value. In the event that at any
tune, as a
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result of an adjustment made pursuant to clause (i) above, the Warrant
Holders shall become entitled to purchase any shares of capital stock of
the Company other than shares of Common Stock, thereafter the number of
such other shares so purchasable upon exercise of each Warrant and the
Exercise Price of such shares shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in clauses (i) and
(ii), inclusive, above, and clauses (iv) through (vii), inclusive, of this
Section 9, and the provisions of Sections 5, 6, 8 and 16, with respect to
the Warrant Shares, shall apply on like terms to any such other shares.
(iv) The Company may at its option, at any time during the term of the
Warrants, reduce the then current Exercise Price to any amount deemed
appropriate by the Board of Directors of the Company; PROVIDED, HOWEVER,
that in no event shall the Exercise Price be adjusted below the par value
per share of the Common Stock.
(v) In case of any consolidation or merger of the Company with or
into another corporation or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially
as an entirety, the Company or such successor or purchasing corporation (or
an affiliate of such successor or purchasing corporation), as the case may
be, agrees that each Warrant Holder shall have the right thereafter upon
payment of the Exercise Price in effect immediately prior to such action to
purchase upon exercise of each Warrant the kind and amount of shares and
other securities and property (including cash) which he would have owned or
have been entitled to receive after the happening of such consolidation,
merger, sale or conveyance had such Warrant been exercised immediately
prior to such action. The provisions of this clause (v) shall similarly
apply to successive consolidations, mergers, sales or conveyances.
(vi) Notwithstanding any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants
pursuant to this Section 9 of Agreement, certificates for Warrants issued
prior or subsequent to such adjustments may continue to express the same
price and number and kind of shares as are stated in the Warrants initially
issuable pursuant to this Agreement.
10. SPECIAL ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT
SHARES.
(a) In the event the Company shall issue shares of Common Stock to
USG Corporation ("LSG") pursuant to the Restated Option Agreement, dated October
6, 1994, between the Company and LSG, the number of Warrant Shares purchasable
upon exercise of each Warrant immediately prior thereto shall be adjusted so
that the Warrant Holder of each Warrant shall be entitled to receive an
additional 10.6 Warrant Shares of the Company. An adjustment made pursuant to
this clause (a) shall become effective immediately after the
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effective date of such event retroactive to immediately after the record date,
if any, for such event.
(b) Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant is adjusted, as provided in Section 10(a), the Exercise
Price shall be adjusted by multiplying such Exercise Price immediately prior to
such adjustment by a fraction, of which the numerator shall be the number of
shares purchasable upon the exercise of each Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant Shares
so purchasable immediately thereafter.
(c) Notwithstanding any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants pursuant
to Section 10 of this Agreement, certificates for Warrants issued prior or
subsequent to such adjustments may continue to express the same price and number
and kind of shares as are stated in the Warrants initially issuable pursuant to
this Agreement.
11. REDEMPTION OF WARRANT.
(a) Commencing on November 30, 1998, and at any time thereafter,
subject to the terms and conditions hereof the Warrant Holder may, at its
option, require the Company to redeem its Warrant (a "Holder Redemption") at the
Redemption Price. In the event of a Holder Redemption, the Warrant Holder shall
notify the Company in writing of its election not more than 60 or less than 30
days prior to the date fixed by the Warrant Holder for redemption (the "Warrant
Holder Redemption Date").
(b) The Company, at its option, may redeem all of the Warrants (a
"Company Redemption") at the Redemption Price (i) commencing on November 30,
1999 and at any time thereafter; or (ii) at any time after the date hereof, if a
proposed transfer of a Warrant in accordance with Section 4 hereof, or a
proposed exercise of a Warrant in accordance with Section 3 hereof, would, in
either case, jeopardize the Company's ejection to be treated as an S Corporation
in accordance with Section 1362 of the Code. In the event of a Company
Redemption, the Company shall notify the Warrant Holder in writing of its
election not more than 60 or less than 30 days prior to the date fixed by
Company for redemption; PROVIDED, HOWEVER, that circumstances of the Company
Redemption results from an event described in clause (ii) of the immediately
preceding sentence, then the Company shall notify the Warrant Holder in writing
of its election at least two days prior to the date of the proposed transfer and
shall redeem the Warrant on or prior to the date of the proposed transfer (the
"Company Redemption Date").
(c) On a Warrant Holder Redemption Date or a Company Redemption Date,
the Warrant Holder shall surrender the Warrant to the Company and the Company
shall deliver payment of the Redemption Price in full, in cash or certified or
cashier's check to the Warrant Holder.
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12. FRACTIONAL INTERESTS. The Company shall not be required to issue
fractions of shares of Common Stock on the exercise of Warrants. If more than
one Warrant shall be presented for exercise in full at the same time by the same
Warrant Holder, the number of Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a share of Common Stock would, except for the provisions of this
Section 12, be issuable on the exercise of any Warrant (or specified portions
thereof), the Company shall purchase such fraction for an amount in cash equal
to the same fraction of the current market price per share of Common Stock on
the date of exercise which price shall be the last sale price, or in case no
sale takes place on such day, the average of the closing bid and asked prices on
the principal national securities exchange on which the Common Stock of the
Company is traded, or if not traded on any national exchange, then the average
of the closing bid and asked prices as quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or as reported by the
National Quotation Bureau, Inc., or similar reporting organization. If the
Common Stock is not then listed or admitted to trading on any United States
national securities exchange and if no closing bid and asked prices thereof are
so quoted or published in the over-the-counter market, market price shall mean
the higher of (x) the book value per share of Common Stock, as determined on a
fully diluted basis in accordance with generally accepted accounting principles
by a firm of independent public accountants of recognized standing (which may be
its regular auditors) selected by the Board of Directors of the Company as of
the last day of any month ending within 60 days preceding the date as of which
the determination is to be made or (y) the fair value per share of Common Stock,
as determined on a fully diluted basis in good faith by an investment banking
firm (as selected by the Board of Directors of the Company), as of a date which
is 15 days preceding the date as of which the determination is to be made.
13. RESTRICTIONS ON DISPOSITIONS. The Warrants and the Warrant
Shares have not been registered under the Securities Act of 1933, as amended.
The Warrant Holder represents and warrants to the Company that it understands
that neither the Warrants nor the Warrant Shares may be transferred except
pursuant to (i) an effective Registration Statement under the Act, or (ii) any
available rule or exemption from registration under the Act permitting such
disposition of securities and an opinion of counsel, reasonably satisfactory to
counsel for the Company, that an exemption from such registration is available.
14. CERTIFICATES TO BEAR LEGENDS. The Warrants shall be subject to a
stop-transfer order and the certificate or certificates therefor shall bear the
following legend:
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR CERTAIN STATE SECURITIES LAWS, AND MAY
NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THEY
ARE SO REGISTERED OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND THIS
COMPANY
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SHALL HAVE RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL
FOR THIS COMPANY, THAT SUCH AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
The Warrant Shares or other securities issued upon exercise of the
Warrants shall be subject to a stop transfer order and the certificate or
certificates evidencing any such Warrant Shares or securities shall bear a
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
CERTAIN STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED
FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THEY
ARE SO REGISTERED OR AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE AND THIS COMPANY SHALL HAVE RECEIVED AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THIS
COMPANY, THAT SUCH AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT IS AVAILABLE.
15. REGISTRATION RIGHTS AGREEMENT. Each Warrant Holder is entitled
to the benefits of the Registration Rights Agreement and by purchases of the
Units each Warrant Holder agrees to be bound by the terms of the Registration
Rights Agreement.
16. NOTICES TO WARRANT HOLDERS.
(a) Nothing contained in this Agreement or in any of the Warrants
shall be construed as conferring upon the Warrant Holders thereof the right to
vote or to receive dividends or to consent or to receive notice as stockholders
in respect of the meetings of stockholders or the election of directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company; PROVIDED, HOWEVER, that in the event that a meeting of stockholders
shall be called to consider and take action on a proposal for the voluntary
dissolution of the Company, then and in that event the Company shall cause a
notice thereof to be sent by first class mail, postage prepaid, at least 10 days
prior to the date fixed as a record date or the date of closing the transfer
books in relation to such meeting, to each registered Warrant Holder of Warrants
at such Warrant Holder's address appearing on the Warrants at such Warrant
Holder's address appearing on the Warrant register; but failure to mail or to
receive such notice or any defect therein or in the mailing thereof shall not
affect the validity of any action taken in connection with such voluntary
dissolution. If such notice shall have been so given and if such a voluntary
dissolution shall be authorized at such meeting or any adjournment thereof, then
from and after the date on which such voluntary dissolution shall have been duly
authorized by the shareholders and all other rights with respect thereto shall
cease and terminate.
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(b) In the event the Company intends to make any distribution on its
Common Stock (or other securities which may be purchasable in lieu thereof upon
the exercise of Warrants), including, without limitation, any such distribution
to be made in connection with a consolidation or merger in which the Company is
the continuing corporation, or to issue subscription rights or warrants to
holders of its Common Stock the Company shall cause a notice of its intention to
make such distribution, to each registered Warrant Holder of Warrants at such
Warrant Holder's address appearing on the Warrant register, but failure to mail
or to receive such notice or any defect therein or in the mailing thereof shall
not affect the validity of any action taken in connection with such
distribution.
17. NOTICES. Any notice pursuant to this Agreement to be given or
made by the Warrant Holder of any Warrant to or on the Company shall be
sufficiently given or made if sent by first class mail, postage prepaid,
addressed as follows:
Paper Warehouse, Inc.
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
Attention: Yale X. Xxxxxxxx
Notices or demands authorized by this Agreement to be given or made by
the Company to the Warrant Holder of any Warrants and/or Warrant Shares shall be
sufficiently given or made (except as otherwise provided in this Agreement) if
sent by first class mail, postage prepaid, addressed to such Warrant Holder at
the address of such Warrant Holder as shown on the Warrant Register.
Each such notice shall be effective if given by mail, three (3) days
after such communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid.
18. AMENDMENT. This Agreement may be amended only if the Company
shall have obtained the prior written consent to such amendment of the Warrant
Holders holding a majority of the Warrant Shares, whether or not the Warrants
have been exercised. Each Warrant Holder at the time or thereafter outstanding
shall be hound by any consent authorized by this section 18, whether or not the
Warrants shall have been marked to indicate such consent.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so. executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
20. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT ISSUED HEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF
THE STATE OF MINNESOTA.
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21. SIGNATURE. THIS WARRANT AGREEMENT WILL BE DEEMED TO HAVE BEEN
EXECUTED FOR ALL PURPOSES WHEN THE SUBSCRIBER SIGNS AND DATES THE OMNIBUS
SIGNATURE PAGE.
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EXHIBIT A
(Form of Warrant Certificate)
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR CERTAIN STATE SECURITIES LAWS; AND MAY
NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THEY
ARE SO REGISTERED OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND THIS
COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO
COUNSEL FOR THIS COMPANY, THAT SUCH AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT IS AVAILABLE.
No. _______________
VOID AFTER 5:00 P.M. CENTRAL TIME
On November 30, 2004
PAPER WAREHOUSE, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received ___________, or registered
assigns, is the registered holder of the number of Warrants set forth above,
each of which entitles the owner thereof to purchase upon giving five (5)
Business Days prior written notice to the Company at any time after November 30,
1995 (the "Effective Date") until (5:00 P.M. prevailing Central Time on November
30, 2004 (the "Expiration Date"), one hundred six and three tenths fully paid
and nonassessable shares of the common stock, par value $.01 per share (the
"Common Stock"), of Paper Warehouse, Inc., a Minnesota corporation (the
"Company"), at the exercise price of $47.04 per share (the "Exercise Price"),
subject to certain adjustments, upon presentation and surrender of this Warrant
Certificate with the Form of Election to Purchase duly executed. Upon the
Expiration Date, all rights evidenced by this Warrant shall cease and the
Warrants shall become void. The number of Warrants evidenced by this Warrant
Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Exercise Price per share set forth above, are
the number and Exercise Price as of the date of original issuance of the
Warrants, based on the shares of Common Stock of the Company as constituted at
such date. As provided in the Warrant Agreement referred to below, the Exercise
Price and the number or kind of shares which may be purchased upon the exercise
of the Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of an agreement dated as of the
date hereof (the "Warrant
Agreement") between the Company, the registered holder hereof and certain other
holders of Warrant Certificates, which Warrant Agreement is hereby incorporated
herein by reference and made a part hereof and to which Warrant Agreement
reference is hereby made for a full description of the rights, limitations of
rights, duties and immunities hereunder of the Company and the holders of the
Warrant Certificates. Copies of the Warrant Agreement are on file at the
principal office of the Company.
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Company, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor and date
evidencing Warrants entitling the holder to purchase a like aggregate number of
shares of Common Stock as the Warrants evidenced by the Warrant Certificate or
Warrant Certificates surrendered entitled such holder to purchase. If this
Warrant Certificate shall be exercised in part, the holder hereof shall be
entitled to receive upon surrender hereof another Warrant Certificate or Warrant
Certificates for the number of whole Warrants not exercised.
No fractional shares of Common Stock will be issued upon the exercise
of any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made, as provided in the Warrant Agreement.
No holder of this Warrant Certificate shall be entitled to vote or
receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained in the Warrant Agreement
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issue of stock, reclassification of stock, change of par value
or change of stock to no par value, consolidation, merger, conveyance, or
otherwise) or, except as provided in the Warrant Agreement, to receive notice of
meetings, or to receive dividends or subscription rights or otherwise, until.
the Warrant or Warrants evidenced by this Warrant Certificate shall have been
exercised and the shares of Common Stock shall have become deliverable as
provided in the Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise within
any period during which the transfer books for the Company's Common Stock or
other class of stock purchasable upon the exercise of this Warrant are closed
for any purpose, the Company shall not be required to make delivery of
certificates for shares purchasable upon such exercise until the date of the
reopening of said transfer books.
This Warrant Certificate may be redeemed under the circumstances
described in the Warrant Agreement.
114087-1
FORM OF
ELECTION TO EXERCISE CONVERSION RIGHTS
(To be executed if holder desires to convert the Warrant Certificate.)
TO PAPER WAREHOUSE, INC.:
The undersigned, subject to the terms of that certain Warrant Conversion
Agreement, hereby irrevocably elects to exercise the Conversion Rights with
respect to all Warrant Shares represented by the Warrant effective on the
closing date of the IPO to acquire the shares of Common Stock issuable upon the
exercise of such conversion right and requests that certificates for such shares
be issued in the name of:
Please insert social security or other identifying number
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(Please print name and address)
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Signature
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate)
Signature Guaranteed:
