RESTATED OPTION AGREEMENT
THIS RESTATED OPTION AGREEMENT, is made this 6th day of October, 1994 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 an Option Agreement dated
December 1, 1992 (the "Option Agreement");
WHEREAS, the Option Agreement contained material inconsistencies and
ambiguities regarding the amount of capital stock of the Corporation obtainable
by LSG pursuant to the options granted thereunder; and
WHEREAS, the Corporation and LSG each desire to clarify the ambiguities
contained in the Option Agreement by restating the Option Agreement in its
entirety.
NOW, THEREFORE, the Corporation and LSG hereby agree as follows:
1. GRANT OF OPTIONS TO ACQUIRE COMMON STOCK. The Corporation hereby
grants LSG a conditional option (the "Event Option") to acquire 5,863 shares of
common stock of the Corporation (which represent 10% of common stock of the
Corporation outstanding as of the date of the Option Agreement) upon the
occurrence of a Triggering Event. "Triggering Event" as used herein shall mean
the effective date of any merger between the Corporation and any unrelated
entity or the offering of capital stock of the Corporation pursuant to a public
offering registered under the Securities Act of 1933, as amended. The
Corporation also grants to LSG, effective January 1, 1998 a conditional option
(the "1998 Option") to acquire 5,863 shares of common stock of the Corporation
(the "1998 Option Shares") which represent 10% of the common stock
of the Corporation outstanding as of the date of Option Agreement. The
effectiveness of the 1998 Option is conditioned on the non-exercise of the Event
Option.
2. PUT OPTION. Upon receipt of the 1998 Option Shares, LSG has the
right to put the 1998 Option Shares back to the Corporation (the "Put Option")
at a price equal to the aggregate book value per share of the 1998 Option Shares
calculated as of the end of the immediately preceding fiscal year of the
Corporation (the "Put Price"). The first $150,000 of the Put Price shall be
paid in cash and the balance, if any, shall be paid pursuant to a three-year,
unsecured promissory note of the Corporation bearing interest at a rate equal to
the lessor of the referenced rate established by First Bank, National
Association or the Federal short-term rate as defined in Section 1274(d) of the
Internal Revenue Code of 1986, as amended.
3. EXERCISE PRICE OF THE 1998 OPTION AND EVENT OPTION. Upon exercise of
either the 1998 Option or the Event Option, LSG shall pay the Corporation
$150,000 PLUS an amount equal to ten percent (10%) of all capital and equity
contributions made to the Corporation between December 1, 1992 and the date of
such exercise.
4. MISCELLANEOUS. All notices, instructions and other communications
provided for herein to the Corporation shall be deemed valid, made and served if
in writing and either delivered personally or sent by certified or registered
mail, postage prepaid, and addressed to the Corporation as follows:
Paper Warehouse, Inc.
c/o Yale ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
-2-
LSG shall provide 60 days written notice to the Corporation of a date upon
which it will exercise either the Event Option, the Put Option or the 1998
Option. All transactions provided for herein shall occur no later than five (5)
business days from the date notice is received by the Corporation of the
intention of LSG to exercise either the Event Option or the 1998 Option. The
closing of any transaction provided for herein shall occur at the office of the
Corporation at such time as may be agreed upon by the parties hereto. The terms
of this agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs. This agreement is not assignable without the
prior written consent of the other party. This agreement shall be governed by
construed in accordance with the laws of the State of Minnesota. This agreement
supersedes and replaces in its entirety the Option Agreement, no term of which
shall have any further force or effect.
5. TERMINATION OF OPTIONS. The Event Option shall terminate on
November 30, 1997. The 1998 Option and the Put Option shall become effective
January 1, 1998 and shall terminate on December 31, 1998. The 1998 Option shall
also immediately terminate upon the exercise by LSG of the Event Option.
-3-
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 ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
Its President
--------------------------------------
LSG CORPORATION
By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------------
Its Vice President
--------------------------------------
-4-
