<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Jotan, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, Par Value $.01 Per Share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
481093 10 2
--------------------------------------------------
(CUSIP Number)
Jeffrey P. Sangalis
Rice Partners II, L.P.
5847 San Felipe
Suite 4350
Houston, Texas 77057
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
March 4, 1997
-----------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_]
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purposes of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP No. 481093 10 2
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OF ABOVE PERSON
Rice Partners II, L.P.
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
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SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [_]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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SOLE VOTING POWER
7
NUMBER OF 12,096,929 (1)
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
18,819,705
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 12,096,929 (1)
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
18,819,705
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
18,819,705/(1)/
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
79.9%/(2)/
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
12
PN
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(1) Represents shares of Common Stock of the Issuer subject to a currently
exercisable warrant.
(2) The total number of outstanding shares of Common Stock have been
increased pursuant to Rule 13d-3(d)(1)(i) to include shares issuable
pursuant to currently exercisable warrants and Series A Convertible
Preferred Stock. See Item 5(a).
<PAGE>
SCHEDULE 13D
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CUSIP No. 481093 10 2
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- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OF ABOVE PERSON
Shea Ralph.
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
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SEC USE ONLY
3
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SOURCE OF FUNDS*
4
NA
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 950,000 (1)
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
18,819,705
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 950,000 (1)
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
18,819,705
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
18,819,705/(1)/
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
79.9%/(2)/
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
12
IN
- ------------------------------------------------------------------------------
(1) Represents shares of Common Stock owned prior to the transactions
described herein.
(2) The total number of outstanding shares of Common Stock have been
increased pursuant to Rule 13d-3(d)(1)(i) to include shares issuable
pursuant to currently exercisable warrants and Series A Convertible
Preferred Stock. See Item 5(a).
<PAGE>
ITEM 1. SECURITY AND ISSUER
The class of securities to which this statement relates is the Common
Stock, par value $.01 per share (the "Common Stock"), of Jotan, Inc., a
Florida corporation (the "Issuer"), the principal executive offices of
which are located at 118 West Adams Street, Jacksonville, Florida 33201.
ITEM 2. IDENTITY AND BACKGROUND
1. (a)-(c),(f) Rice Partners II, L.P. This statement is being filed on
behalf of Rice Partners II, L.P., a Delaware limited partnership
("Rice"). Rice is engaged in the principal business of acquiring and
holding securities for investment purposes. The principal offices of
Rice are located at 5847 San Felipe, Suite 4350, Houston, Texas
77057.
Shea Ralph. Shea Ralph ("Ralph") is the Vice Chairman of the Issuer
and until March 4, 1997, the closing date of the transactions
reported herein, was the Chairman and Chief Executive Officer of the
Issuer. His address is 118 West Adams Street, Jacksonville, Florida
33201.
(d) Rice: None.
Ralph: None.
(e) Rice: None.
Ralph: None.
2. (a) Rice: Enumerated Persons:
Rice Capital Group IV, L.P., a Delaware limited
partnership, is the general partner of Rice, and is engaged
in the principal business of serving as Rice's general
partner and providing management and consulting services to
Rice and other entities. RMC Fund Management, L.P., a
Delaware limited partnership, is the general partner of
Rice Capital Group IV, L.P., and is engaged in the
principal business of being Rice Capital Group IV, L.P.'s
general partner and providing management and consulting
services to Rice Capital Group IV, L.P. and other entities.
Rice Mezzanine Corporation, a Texas corporation, is the
general partner of RMC Fund Management, L.P., and is
engaged in the principal business of being RMC Fund
Management, L.P.'s general partner and providing management
and consulting services to RMC Fund Management, L.P. The
principal offices of Rice Capital Group IV, L.P., RMC Fund
Management and Rice Mezzanine Corporation are located at
5847 San Felipe, Suite 4350, Houston, Texas 77057. Other
than Rice Capital Group IV, L.P., RMC Fund Management
<PAGE>
and Rice Mezzanine Corporation there are no other persons
for whom information is required to be given by General
Instruction C to Schedule 13D with respect to Rice.
The executive officers and directors of Rice Mezzanine
Corporation are as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Don K. Rice Director, President, Secretary and
Treasurer
Jeffrey P. Sangalis Director, Managing Director, Vice
President and Assistant Secretary
Jeffrey A. Toole Director, Managing Director, Vice
President and Assistant Secretary
James P. Wilson Director, Managing Director, Vice
President and Assistant Secretary
</TABLE>
(b) The address of each of the enumerated executive officers
and directors is the principal offices of Rice Mezzanine
Corporation.
(c) The principal employment, name of employer and principal
business of each of the enumerated Rice Mezzanine
Corporation executive officers and directors is as follows:
Messrs. Rice, Sangalis, Toole and Wilson are employed at
Rice Mezzanine Corporation in the capacities described
above.
(d) None for any of the enumerated persons.
(e) None for any of the enumerated persons.
(f) Each of the individual enumerated persons is a citizen of
the United States.
Ralph: Not applicable.
THE FOLLOWING ITEMS 3 THROUGH 6 ARE PROVIDED AS TO THE INDICATED REPORTING
PERSON AND ALL ENUMERATED PERSONS SET FORTH ABOVE.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Rice: Beneficial ownership of the reported securities was acquired by
Rice through the utilization of working capital derived from contributions
of capital by its partners and in consideration for an investment in the
Issuer as more fully described in Item 4.
Ralph: Not applicable.
<PAGE>
ITEM 4. PURPOSE OF TRANSACTION
Rice:
On March 4, 1997, the Issuer, Rice, F-Southland, L.L.C. ("FS"), FF-
Southland, L.P. ("FFS"), F-Jotan, L.L.C. ("FJ"), Ralph and David Freedman
("Freedman") entered into a Preferred Stock and Warrant Purchase Agreement
(the "Preferred Stock Agreement"), pursuant to which Rice purchased 40,000
shares of the Issuer's Series B Redeemable Preferred Stock ("Series B
Preferred Stock") for a purchase price of $8 million and was issued
warrants (the "Rice Warrants") to acquire 12,096,929 shares of Common Stock
of the Issuer, FS purchased 5,000 shares of the Series B Preferred Stock
for a purchase price of $1 million and was issued warrants (the "FS
Warrants") to acquire 1,557,031 shares of Common Stock of the Issuer and
FFS purchased 5,000 shares of the Series B Preferred Stock for a purchase
price of $1 million and was issued warrants (the "FFS Warrants") to acquire
1,557,031 shares of Common Stock of the Issuer. The Rice Warrants, the FS
Warrants and the FFS Warrants are together referred to herein as the
"Warrants." The Preferred Stock Agreement is attached hereto as Exhibit 1.
The designation of rights of the Series B Preferred Stock set forth
in Articles of Amendment to the Issuer's Articles of Incorporation, which
are attached hereto as Exhibit 3, provides, among other things, that the
holders of the Series B Preferred Stock have the right to elect a majority
of the members of the Issuer's board of directors. This right is
exercisable by action of the holders of a majority of the issued and
outstanding shares of Series B Preferred Stock.
Also on March 4, 1997, the Issuer, Rice, FS and FFS entered into a
Note Purchase Agreement (the "Note Purchase Agreement") pursuant to which
Rice purchased Senior Subordinated Notes in an aggregate principal amount
of $7 million, FS purchased Senior Subordinated Notes in an aggregate
principal amount of $1 million and FFS purchased Senior Subordinated Notes
in an aggregate principal amount of $1 million.
The Warrants provide that the aggregate exercise price for all of
the Common Stock issuable thereunder will not exceed $200 as to any of
Rice, FS or FFS, and that the Warrants will be exercisable until February
28, 2007. The Warrants are immediately exercisable. Rice currently intends
to hold the Rice Warrants for investment purposes and has no immediate
intention to exercise the Rice Warrants.
In connection with the above described transactions, Rice, the
Issuer, FS, FFS, FJ, Ralph and Freedman entered into a Shareholder
Agreement (the "Shareholder Agreement") providing, among other things, that
each of Rice, FS, FFS, FJ, Ralph and Freedman agreed to vote all shares of
capital stock of the Issuer owned by them such that a majority of the board
of directors of the issuer will consist of persons nominated by Rice, so
long as Rice owns, directly or indirectly, capital stock of the issuer that
is equal to or greater than 10% of Rice's original equity investment in
respect of the total capital stock of the Issuer (subject to certain
adjustments), and if Rice owns less than
<PAGE>
10% of Rice's original equity investment in respect of the total
capital stock of the Issuer, to elect one person nominated by Rice to
serve as a director of the Issuer so long as Rice owns any equity
interest in the Issuer. The Shareholder Agreement similarly requires
all of the named persons to vote all shares of capital stock of the
Issuer owned by them for the election of one person designated by FS
and FFS to serve as a director of the Issuer. The Shareholder
Agreement is attached hereto as Exhibit 2.
Pursuant to the rights described above, as of the closing of
the Preferred Stock Agreement and the Note Purchase Agreement, the
size of the board of directors was set at five, and three persons
designated by Rice, Philip A. Davidson, Jeffrey P. Sangalis and James
P. Wilson were elected to serve as directors of the Issuer. The
remaining two directors are Jeremiah M. Callahan, an individual
affiliated with FS, FFS and FJ, and Ralph, both of whom were
serving as directors at the time of closing.
The above transactions facilitated the completion by the Issuer
of a $12 million senior revolving credit facility and $27 million in
senior term/acquisition facilities (the "Senior Credit Facilities").
A portion of these funds, together with funds received pursuant to
the Note Purchase Agreement and the Preferred Stock Agreement, were
applied at closing to consummate the purchase by the Issuer of all
issued and outstanding shares of common stock of Southland Holding
Company ("SHC"), for an aggregate purchase price of approximately
$27.5 million, and the payment to the selling shareholders of non-
competition payments in the amount of approximately $6.5 million (the
"Southland Acquisition").
Rice is engaged in the principal business of acquiring and
holding securities for investment purposes. The above transactions
were entered into by Rice for investment purposes in order to
facilitate the financing of the Southland Acquisition and to provide
the Issuer with sufficient capital to pursue additional possible
acquisitions in the future. The described transactions have provided
Rice with control of the Issuer by virtue of its right to acquire,
upon exercise of the Rice Warrants, a majority of the outstanding
Common Stock of the Issuer and its right to designate, as described
above, persons to serve as a majority of the board of directors of
the Issuer.
Except as described above, Rice has no plans or proposals to:
(a) acquire additional securities of the Issuer or to dispose
of any securities of the Issuer;
(b) enter into, or cause the Issuer or any of its
subsidiaries to enter into, any extraordinary corporate transactions,
other than that the Issuer plans to seek other acquisition
opportunities as a means of expanding its business;
(c) enter into or cause the Issuer or any of its subsidiaries
to sell or transfer a material amount of its assets;
(d) change the present board of directors or management of
the issuer, including any plans or proposals to change the number or
term of directors or to fill any existing vacancies on the board,
except as described above and except that (1) the Issuer may seek to
hire a new Chief Executive Officer and (2) the Issuer may seek to add
an
<PAGE>
independent director to the board of directors, in which event Rice
may exercise its right to designate an additional director;
(e) change the present capitalization or dividend policy of
the Issuer;
(f) make any other material change in the Issuer's business or
corporate structure;
(g) make any change in the issuer's charter or bylaws or other
actions which may impede the acquisition of control of the Issuer by
any person;
(h) cause a class of securities of the Issuer to be delisted
from a national securities exchange or to cease to be authorized to
be quoted in an inter-dealer quotation system of a registered
national securities association;
(i) cause a class of equity securities of the Issuer to
become eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934; or
(j) any action similar to those described above.
Ralph:
Ralph has joined in this filing by virtue of his execution of
the Shareholder Agreement, which has resulted in his being deemed a
member of the "group" consisting of Rice, FS, FFS and FJ that has
resulted from the purchase of the Warrants pursuant to the Preferred
Stock Agreement and the agreement contained in the Shareholder
Agreement that the parties thereto will vote for the election of
directors of the Issuer as described above. Ralph agreed to execute
and deliver the Preferred Stock Purchase Agreement and the
Shareholder Agreement to facilitate the investments in the Issuer
made by Rice, FS and FFS and the other transactions described above.
Except as described above, Ralph has no plans or proposals to:
(a) acquire additional securities of the Issuer or to
dispose of any securities of the Issuer;
(b) enter into, or cause the Issuer or any of its
subsidiaries to enter into, any extraordinary corporate transactions,
other than that the Issuer plans to seek other acquisition
opportunities as a means of expanding its business;
(c) enter into or cause the Issuer or any of its subsidiaries
to sell or transfer a material amount of its assets;
(d) change the present board of directors or management of
the issuer, including any plans or proposals to change the number or
term of directors or to fill any existing vacancies on the board;
(e) change the present capitalization or dividend policy of
the Issuer;
(f) make any other material change in the Issuer's business or
corporate structure;
(g) make any change in the Issuer's charter or bylaws or other
actions which may impede the acquisition of control of the Issuer by
any person;
(h) cause a class of securities of the Issuer to be delisted
from a national securities exchange or to cease to be authorized to
be quoted in an inter-dealer quotation system of a registered
national securities association;
<PAGE>
(i) cause a class of equity securities of the Issuer to
become eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934; or
(j) any action similar to those described above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
As to Rice and Ralph:
Rice, Ralph, FS, FFS and FJ may be deemed to be members of a
"group" as a result of the purchase of the Warrants pursuant to the
Preferred Stock Agreement and the agreement contained in the
Shareholder Agreement that the parties thereto will vote for the
election of directors of the Issuer as described above. The other
party to those agreements, Freedman, is not included as a member of
such group, or as a reporting person, because he does not at this
time own beneficially any voting securities of the Issuer, but does
hold certain incentive stock options that may become exercisable in
the future. Each of Rice, Ralph, FS, FFS and FJ disclaims beneficial
ownership of the Warrants and all other securities of the Issuer
owned by each of the others, and also disclaims status as a "group"
upon any basis, or for any purpose, other than their being parties to
the Preferred Stock Agreement and the Shareholder Agreement as
described above.
The following table sets forth certain information regarding
the beneficial ownership of the Common Stock that would be issued to
Rice, FS and FFS assuming the immediate exercise of the Warrants,
that is owned by Ralph, and that would be issuable to FJ upon
conversion of its shares of Series A Convertible Preferred Stock of
the Issuer.
<TABLE>
<CAPTION>
Rice Partners II, L.P.(Rice Warrants) Shares of Common Stock
------------------------------------- ----------------------
<S> <C>
(a) Beneficial Ownership: 18,819,705 /(1)/
Percentage Ownership: 79.9% /(2)/
(b) Sole Voting Power: 12,096,929
Shared Voting Power: 18,819,705
Sole Disposition Power: 12,096,929
Shared Disposition Power: 18,819,705
F-Jotan (Series A Convertible Preferred Stock). Shares of Common Stock
---------------------------------------------- ----------------------
(a) Beneficial Ownership: 18,819,705
Percentage Ownership: 79.9%
(b) Sole Voting Power: 2,658,714
Shared Voting Power: 18,819,705
Sole Disposition Power: 2,658,714
Shared Disposition Power: 18,819,705
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
F-Southland, L.L.C.(FS Warrants) Shares of Common Stock
-------------------------------- ----------------------
<S> <C>
(a) Beneficial Ownership: 18,819,705
Percentage Ownership: 79.9%
(b) Sole Voting Power: 1,557,031
Shared Voting Power: 18,819,705
Sole Disposition Power: 1,557,031
Shared Disposition Power: 18,819,705
FF-Southland, L.L.C.(FFS Warrants) Shares of Common Stock
--------------------------------- ----------------------
(a) Beneficial Ownership: 18,819,705
Percentage Ownership: 79.9%
(b) Sole Voting Power: 1,557,031
Shared Voting Power: 18,819,705
Sole Disposition Power: 1,557,031
Shared Disposition Power: 18,819,705
Shea Ralph (Common Stock) Shares of Common Stock
------------------------- ----------------------
(a) Beneficial Ownership: 18,819,705
Percentage Ownership: 79.9%
(b) Sole Voting Power: 950,000
Shared Voting Power: 18,819,705
Sole Disposition Power: 950,000
Shared Disposition Power: 18,819,705
</TABLE>
The remaining enumerated persons listed in Item 2 do not hold any
beneficial ownership of the Issuer, other than through Rice.
(1) Rice Capital Group IV, as the general partner of Rice,
RMC Fund Management, L.P., as the general partner of Rice
Capital Group IV, and Rice Mezzanine Corporation, as the
general partner of RMC Fund Management, L.P. may be
deemed to beneficially own the Warrant and the Common
Stock issuable on its exercise.
(2) The total number of outstanding shares of Common Stock
most recently reported by the Issuer was 5,679,411; the
percentage ownership shown includes as outstanding the
shares of Common Stock issuable pursuant to the Warrants
and Series A Convertible Preferred Stock as described
above pursuant to Rule 13d-3(d)(1)(i).
<PAGE>
(c) No transactions in the capital stock of the Issuer were undertaken by
Rice or by Ralph during the sixty days preceding the date of this
filing except as described above at Item 4.
(d) None.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
As to Rice and Ralph:
See Item 4 above. The Preferred Stock Agreement includes provisions
that:
(i) adjust the number of shares of Common Stock issuable pursuant to the
Warrants in the event of stock splits, combinations, corporate
reorganizations, other similar transactions affecting the Common Stock and
in the event of the issuance of Common Stock or securities convertible into
Common Stock for consideration less than fair market value of the Common
Stock or the exercise price of the Warrants,
(ii) prohibit action by the Issuer to amend its bylaws in a way that would
adversely affect the rights of the holders of Warrants,
(iii) prohibit the payment of dividends or distributions, or the redemption
of securities, without the consent of the holders of the Warrants,
(iv) prohibit the sale, lease or other transfer of the Issuer's assets or
operations other than in the ordinary course of business, without the
consent of the holders of the Warrants,
(v) prohibit the Issuer from entering into any new business without the
consent of the holders of the Warrants,
(vi) prohibit the Issuer from entering into transactions with its
directors, officers, employees or shareholders, or their affiliates or
relatives, except on terms that the holders of the Warrants deem fair and
reasonable,
(vii) except for certain permitted transactions, prohibit the Issuer from
acquiring debt or equity interests in any person without the consent of the
holders of the Warrants, and
(viii) prohibit modifications to the employment agreements of certain
key employees without the consent of the holders of the Warrants.
The Preferred Stock Agreement also provides that if the board of
directors of the Issuer resolves that the Issuer should discontinue filing
reports with the Commission under the Securities Exchange Act of 1934, such
action will only become effective if approved by majority vote of the
Issuer's shareholders other than Rice, FS, FFS and FJ, provided that such
special voting rights will not apply to (a) transactions in which the
Issuer sells all or part of its capital stock, (b) transactions in which
Rice, FS, FFS or FJ sell any of their capital stock of the Issuer, or (c)
any other transaction entered into by Rice, FS, FFS or FJ.
The Shareholder Agreement includes provisions that:
(i) grant to the holders of the Warrants and FJ preemptive rights to
purchase, with certain exceptions, their pro rata shares of any issuances
by the Issuer of Common Stock or securities convertible into Common Stock,
<PAGE>
(ii) require that the holders of the Warrants be paid a dilution fee to the
extent that dividends are paid on Common Stock of the Issuer while the
Warrants are outstanding,
(iii) subject to the Senior Credit Facilities, grant to the holders of the
Warrants a "put option" to require the Issuer to purchase the Warrants or
the shares of Common Stock issued upon exercise thereof upon the earliest
to occur of (a) February 28, 2005, (b) the repayment of all indebtedness
under the Note Purchase Agreement, (c) a material change in the ownership
of the Issuer other than by Rice, FS or FFS, (d) Rice does not have the
legal right to elect a majority of the board of directors of the Issuer,
(e) except as permitted by the Issuer's senior loan agreement, the Issuer
enters into a material merger, sale of assets or similar transaction, or
(f) an event of default occurs and is continuing under the Note Purchase
Agreement; the put option price is the higher of the book value or the fair
market value of the Common Stock (provided that fair market value will be
applicable only if there is an active market at the specified level for the
Issuer's Common Stock),
(iv) grant to the Issuer a "call option" to purchase the Warrants, or
Common Stock issued upon exercise thereof, at any time after February 28,
2003 at the same price as is applicable to the put option described above,
(v) provide as between Rice, FS, FJ (in certain circumstances) and FFS
rights of first refusal and co-sale as to dispositions of their Warrants or
shares of Common Stock issued upon exercise thereof, and
(vi) grant to Rice demand registration rights on two occasions, and grant
to Rice, FS and FFS "piggyback" registration rights, at the expense of the
Issuer and grant FJ demand registration rights on at least one occasion.
The Articles of Amendment containing the designation of rights of the
Series B Preferred Stock provides, among other things, that:
(i) dividends will accrue thereon at an annual rate of 8%, and may be
paid either in cash or in additional shares of Series B Preferred
Stock,
(ii) the Issuer may redeem the Series B Preferred Stock at any time, but
only upon the payment of a premium that declines from 12.5% during the
first year after issuance to 0% following the fifth anniversary of
issuance,
(iii) the Issuer is required to redeem the Series B Preferred Stock on
March 4, 2005,
(iv) the consent of the holders of the Series B Preferred Stock is required
for the Issuer to take any of specified actions that would adversely affect
the holders of Series B Preferred Stock, including the issuance of any
senior equity securities and the making of certain restricted payments to
holders of junior securities.
The foregoing is only a summary of the Preferred Stock Agreement,
the Shareholder Agreement and the terms of the Series B Preferred Stock,
and is qualified in its entirety by reference to such Agreements, copies of
which are filed as Exhibits to this Schedule 13D, and are hereby
incorporated by reference.
To the best knowledge of the undersigned, there are no other
contracts, arrangements, understandings or relationships (legal or
otherwise) among the persons named in Item 2 and between such persons and
any person with respect to any securities of the Issuer, including but not
limited to, transfer or voting of any of the securities, finder's fees,
joint ventures, loan or option agreements, puts or calls, guarantees of
profits, division
<PAGE>
of profits or loss, or the giving or withholding of
proxies other than those contained in the Agreements referenced above.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
1. Preferred Stock and Warrant Purchase Agreement dated as of
February 28, 1997, by and between the Issuer, Rice, FS, FFS, FJ,
Ralph and Freedman and the related forms of Warrants.
2. Shareholder Agreement dated as of February 28, 1997, by and
between the Issuer, Rice, FS, FFS, FJ, Ralph and Freedman.
3. Articles of Amendment to Restated Articles of Incorporation of
Jotan, Inc.
<PAGE>
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
RICE PARTNERS II, L.P.
By: Rice Capital Group IV, L.P.,
its General Partner
By: RMC Fund Management, L.P.,
its General Partner
By: Rice Mezzanine Corporation,
its General Partner
By: /s/ Jeffrey P. Sangalis
------------------------------
Jeffrey P. Sangalis
Managing Director
/s/ Shea Ralph
----------------------------------
Shea Ralph
<PAGE>
EXHIBIT 1
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
----------------------------------------------
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement") made
---------
as of February 28, 1997, by and among JOTAN, INC., a Florida corporation (the
"Company"), RICE PARTNERS II, L.P., a Delaware limited partnership ("Rice"), F-
------- ----
SOUTHLAND, L.L.C., a North Carolina limited liability company ("F-Southland"),
-----------
FF-Southland, L.P., a Delaware limited partnership ("FF-Southland" and together
------------
with F-Southland, the "Southland Purchasers", which, together with Rice are
--------------------
individually and collectively, as the context requires, referred to herein as
the "Purchaser"), F-JOTAN, L.L.C., a North Carolina limited liability
---------
corporation ("F-Jotan"), and each of the SHAREHOLDERS named on the signature
-------
pages hereto (individually and collectively, as the context requires, the
"Shareholder").
-----------
W I T N E S S E T H:
WHEREAS, each Shareholder owns beneficially and of record the number
of shares or share equivalents set forth under the signature of such Shareholder
on this Agreement of the issued and outstanding capital stock of the Company;
WHEREAS, F-Jotan, which is the owner of the 1,329,357 shares of the
Series A Preferred Stock of the Company as of the date hereof, will acquire
certain rights and benefits herein and in the Shareholder Agreement in
consideration of terminating certain of its existing contractual rights in
respect of the Company as more fully described in Section 11.18 of the
Shareholder Agreement;
WHEREAS, the Company has entered into a Note Purchase Agreement (the
"Note Agreement") dated of even date with this Agreement with each Purchaser;
--------------
WHEREAS, the Company and the Shareholder have entered into a
Shareholder Agreement (the "Shareholder Agreement") dated of even date with this
---------------------
Agreement with each Purchaser and F-Jotan; and
WHEREAS, each Purchaser is willing to enter into and consummate the
transactions contemplated by the Note Agreement only if, among other things, the
Company, F-Jotan and each Shareholder enter into, and perform under, this
Agreement and the Shareholder Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Purchaser, F-Jotan, the Shareholder, and the Company, intending to be legally
bound, agree as follows:
Preferred Stock and Warrant Purchase Agreement - Page 1
- ----------------------------------------------
<PAGE>
Article I
Definitions
As used in this Agreement, the following terms have the meanings indicated:
Additional Securities. This term is defined in Section 2.08(a)(iv).
--------------------- -------------------
Adjustment Event. Any event in which (a) the Company issues any shares of
----------------
Capital Stock in an Adjustment Public Offering for consideration per share
that exceeds the amount received per share by any Holder in connection with
the exercise of the Call Option with respect to such Holder; (b) any Person
acquires Capital Stock in connection with the acquisition of the beneficial
ownership of more than fifty percent (50%) of the voting securities of the
Company, or acquires Capital Stock and the right to elect a majority of the
members of the Company's board of directors for a consideration per share
or unit that exceeds the amount received per share by any such Holder in
connection with the exercise of such Call Option; (c) the Company sells all
or a majority of its assets or revenue or income generating capacity for
such amount of consideration that, if the Company were liquidated on the
date that such sale is consummated, the holders of any class of Capital
Stock would receive per share distributions exceeding the amount received
per share by any such Holder in connection with the exercise of such Call
Option; or (d) the Company participates in any merger, consolidation,
reorganization, share exchange, recapitalization, or similar transaction or
series of related transactions involving a change of control of the Company
or disposition of all or a majority of its assets or revenue or income
generating capacity, directly or indirectly, in which the holders of any
class of Capital Stock receive per share consideration for, or
distributions with respect to, their shares in an amount that exceeds the
amount received per share by such Holder in connection with the exercise of
such Call Option.
Adjustment Public Offering. Each public offering of shares of any class of
--------------------------
Capital Stock pursuant to a registration statement filed with the
Commission.
Affiliate. With respect to any Person, (a) a Person that, directly or
---------
indirectly or through one or more intermediaries, controls, is controlled
by, or is under common control with, such Person; (b) any Person of which
such Person or such Person's spouse is an officer, director, security
holder, partner, or, in the case of a trust, the beneficiary or trustee,
and (c) any Person that is an officer, director, security holder, partner,
or, in the case of a trust, the beneficiary or trustee of such Person. The
term "control" as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management or policies of such Person, whether through the ownership of
voting securities, by contract, or otherwise.
Agreement. This term is defined in the preamble.
---------
Appraised Value. The value determined in accordance with the following
---------------
procedures. For a period of thirty (30) days after the date of a Valuation
Event (the "Negotiation
-----------
Preferred Stock and Warrant Purchase Agreement - Page 2
- ----------------------------------------------
<PAGE>
Period"), each party to this Agreement agrees to negotiate in good faith to
------
reach agreement upon the Appraised Value of the securities or property at
issue, as of the date of the Valuation Event, which will be the fair market
value of such securities or property, without premium for control or
discount for minority interests, illiquidity, or restrictions on transfer.
In the event that the parties are unable to agree upon the Appraised Value
of such securities or other property by the end of the Negotiation Period,
then the Appraised Value of such securities or property will be determined
for purposes of this Agreement by an Appraiser. An "Appraiser" shall be a
---------
recognized appraisal or investment firm with experience in making
determinations of value of the type required to be made under this
definition. If the Holders and the Company cannot agree on an Appraiser
within thirty (30) days after the end of the Negotiation Period, the
Company, on the one hand, and the Holders, on the other hand, shall each
select an Appraiser within forty (40) days after the end of the Negotiation
Period and those two Appraisers shall select within fifty (50) days after
the end of the Negotiation Period an independent Appraiser to determine the
fair market value of such securities or property, without premium for
control or discount for minority interests. Such independent Appraiser
shall be directed to determine fair market value of such securities or
property as soon as practicable, but in no event later than thirty (30)
days from the date of its selection. The determination by an Appraiser of
the fair market value will be conclusive and binding on all parties to this
Agreement. Appraised Value of each share of Common Stock at a time when (i)
the Company is not a reporting company under the Exchange Act and (ii) the
Common Stock is not traded in the organized securities markets, will, in
all cases, be calculated by determining the Appraised Value of the entire
Company taken as a whole (plus the exercise price of all options, warrants
and other rights to acquire Capital Stock of the Company having an exercise
price per share less than the Fair Market Value of such Capital Stock) and
dividing that value by the sum of (x) the number of shares of Common Stock
then outstanding plus (y) the number of shares of Common Stock Equivalents,
without premium for control or discount for minority interests,
illiquidity, or restrictions on transfer. The costs of the Appraiser or
Appraisers will be borne by the Company. In no event will the Appraised
Value of the Common Stock or Other Securities be less than the per share
consideration received or receivable with respect to the Common Stock or
securities or property of the same class as the Other Securities, as the
case may be, in connection with a pending trandaction involving a sale,
merger, recapitalization, reorganization, consolidation, share exchange,
dissolution of the Company, sale or transfer of all or a majority of its
assets or revenue or income generating capacity, or similar trandaction.
The prevailing market prices for any security or property will not be
dispositive of the Appraised Value thereof.
Appraiser. This term is defined in the definition of Appraised Value.
---------
Average Market Value. The average of the Closing Prices for the security
--------------------
in question for the thirty (30) trading days immediately preceding the date
of determination.
Book Value. With respect to shares of Common Stock, an amount equal to the
----------
quotient determined by dividing (a) the sum of (x) the total consolidated
assets of the Company shown on the most recent regularly prepared
consolidated balance sheet of the Company
Preferred Stock and Warrant Purchase Agreement - Page 3
- ----------------------------------------------
<PAGE>
prior to the date of the Valuation Event in question minus (y) the total
consolidated liabilities of the Company as shown on the most recent
regularly prepared consolidated balance sheet of the Company prior to the
date of the Valuation Event by (b) the aggregate number of shares of Common
Stock and Common Stock Equivalents as of the date of the Valuation Event.
For the purposes of this Agreement, the Book Value of the shares of Common
Stock will be determined by the independent certified public accountants
then retained by the Company as described in Section 4.06.
------------
Buyer. This term is defined in Section 6.02(a)(ii) of the Shareholder
----- -------------------
Agreement.
Call Option. This term is defined in Section 5.01 of the Shareholder
----------- ------------
Agreement.
Call Option Closing. This term is defined in Section 5.04 of the
------------------- ------------
Shareholder Agreement.
Call Option Period. This term is defined in Section 5.01 of the
------------------ ------------
Shareholder Agreement.
Capital Stock. As to any Person, its common stock and any other capital
-------------
stock of such Person authorized from time to time, and any other shares,
options, interests, participations, or other equivalents (however
designated) of or in such Person, whether voting or nonvoting, including,
without limitation, common stock, options, warrants, preferred stock
(including the Series A Preferred Stock), phantom stock, stock appreciation
rights, convertible notes or debentures, stock purchase rights, and all
agreements, instruments, documents, and securities convertible,
exercisable, or exchangeable, in whole or in part, into any one or more of
the foregoing.
Certificate. This term is defined in Section 2.01(a)(iii).
----------- --------------------
Closing Date. As of March 4, 1997.
------------
Closing Price.
-------------
(a) If the primary market for the security in question is a national
securities exchange registered under the Exchange Act, the National
Association of Securities Dealers Automated Quotation System -- National
Market System, or other market or quotation system in which last sale
transactions are reported on a contemporaneous basis, the last reported
sales price, regular way, of such security for such day, or, if there has
not been a sale on such trading day, the highest closing or last bid
quotation therefor on such trading day (excluding, in any case, any price
that is not the result of bona fide arm's length trading); or
(b) If the primary market for such security is not an exchange or
quotation system in which last sale transactions are contemporaneously
reported, the highest closing or last bona fide bid or asked quotation by
disinterested Persons in the over-the-counter market on such trading day as
reported by the National Association of Securities Dealers
Preferred Stock and Warrant Purchase Agreement - Page 4
- ----------------------------------------------
<PAGE>
through its Automated Quotation System or its successor or such other
generally accepted source of publicly reported bid quotations as the
Holders designate from time to time.
Common Stock. The common stock, $0.01 par value, of the Company.
------------
Common Stock Equivalent. Any option, warrant, right, or similar security
-----------------------
exercisable into, exchangeable for, or convertible to Common Stock.
Commission. The Securities and Exchange Commission and any successor
----------
federal agency having similar powers.
Company. Jotan, Inc. and any successor or assign, and, unless the context
-------
requires otherwise, the term Company includes any Subsidiary.
Co-Sell Shares. This term is defined in Section 6.02(d) of the Shareholder
-------------- ---------------
Agreement.
Co-Sellers. This term is defined in Section 6.02(d) of the Shareholder
---------- ---------------
Agreement.
Dilution Fee. This term is defined in Article III of the Shareholder
------------ -----------
Agreement.
Election Notice. This term is defined in Section 6.02(b) of the
--------------- ---------------
Shareholder Agreement.
Employment Agreements. This term is defined in Section 11.1 of the Note
--------------------- ------------
Agreement.
Excess Consideration. The amount that a Holder would have realized
--------------------
following the Adjustment Event had the Call Option not been exercised by
the Company until such time, minus the amount that such Holder realized due
to the exercise of the Call Option; provided, however, that the amount of
-------- -------
Excess Consideration will in all events be deemed to be at least zero.
Exchange Act. The Securities Exchange Act of 1934, as amended, and the
------------
rules and regulations thereunder.
Exchange Common Stock. This term is defined in Section 7.12 of the
--------------------- ------------
Shareholder Agreement.
Exchange Company. This term is defined in Section 7.12 of the Shareholder
---------------- ------------
Agreement.
Exchange Notice. This term is defined in Section 7.12 of the Shareholder
--------------- ------------
Agreement.
Exercise Price. The price per share specified in Section 2.03 as adjusted
-------------- ------------
from time to time pursuant to the provisions of this Agreement.
Preferred Stock and Warrant Purchase Agreement - Page 5
- ----------------------------------------------
<PAGE>
Fair Market Value.
-----------------
(a) As to securities regularly traded in the organized securities
markets, the Average Market Value; and
(b) As to all securities not regularly traded in the securities
markets and other property, the fair market value of such securities or
property as determined in good faith by disinterested members of the Board
of Directors of the Company at the time it authorizes the trandaction (a
"Valuation Event") requiring a determination of Fair Market Value under
----------------
this Agreement; provided, however, that, at the election of the Holders or
-------- -------
if there are no disinterested members of the Board of Directors of the
Company, the Fair Market Value of such securities and other property will
be the Appraised Value.
Holders. Each Purchaser, and all other Persons holding Registrable
-------
Securities so long as such Purchasers or other Person holds Registrable
Securities, except that none of the Company, F-Jotan, any Shareholder or
any Affiliate of the Company, F-Jotan (other than the Southland Purchasers)
or the Shareholder will at any time be a Holder. Unless otherwise provided
in this Agreement, in each instance that any Purchaser is required to
request or consent to or otherwise approve an action, such Purchaser will
be deemed to have requested or consented to or otherwise approved such
action if the Holders of a majority-in-interest of the Registrable
Securities initially issued to the Southland Purchasers and Rice on the
date hereof so request, consent or otherwise approve.
Indemnified Party. This term is defined in Section 6.01 hereof and in
----------------- ------------
Section 11.01 of the Shareholder Agreement.
-------------
Initial Holders. Each Purchaser and any Affiliate of such Purchaser to
---------------
which any of the Warrants or any part of or interest in the Warrants is
assigned.
Intellectual Property. This term is defined in Section 3.01(g).
--------------------- ---------------
Issuable Warrant Shares. Shares of Common Stock or Other Securities
-----------------------
issuable on exercise of the Warrants.
Issued Warrant Shares. Shares of Common Stock or Other Securities issued
---------------------
on exercise of the Warrants.
Negotiation Period. This term is defined in the definition of Fair Market
------------------
Value.
New Securities. Any Capital Stock other than Warrant Shares and other than
--------------
the Permitted Stock.
Notes. All or any portion of any of the Senior Subordinated Notes (as
-----
defined in the Note Agreement) and any and all documents evidencing the
indebtedness under the Notes and any refinancing, refunding, or replacement
of the Notes.
Preferred Stock and Warrant Purchase Agreement - Page 6
- ----------------------------------------------
<PAGE>
Note Agreement. This term is defined in the preamble and includes the Note
--------------
Purchase Agreement of even date with this Agreement among the Company and
each Purchaser and all documents evidencing indebtedness thereunder or
otherwise related to the Note Agreement as the same may be amended from
time to time, and any refinancing, refunding, or replacements of the
indebtedness under the Note Agreement.
Notice of Sale. This term is defined in Section 6.02(a) of the Shareholder
-------------- ---------------
Agreement.
Other Securities. Any stock, other securities, property, or other property
----------------
or rights (other than Common Stock) that the Holders become entitled to
receive upon exercise of the Warrants.
Permitted Stock. Common Stock or options or warrants to acquire Common
---------------
Stock, constituting, in the aggregate, 2,000,000 shares or less of the
outstanding Common Stock issued or reserved for issuance to present and
future key management and directors of the Company pursuant to a stock
incentive program approved or to be approved by the board of directors.
Person. This term will be interpreted broadly to include any individual,
------
sole proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, company, institution, entity,
party, or government (whether national, federal, state, county, city,
municipal, or otherwise, including, without limitation, any
instrumentality, division, agency, body, or department of any of the
foregoing).
Preferred Shares. This term is defined in Section 2.01.
---------------- ------------
Preferred Stock. This term means collectively, Series A Preferred Stock
---------------
and Series B Preferred Stock.
Purchase Agreement. This term is defined in the preamble to the
------------------
Shareholder Agreement and includes this Agreement and all documents related
to this Agreement as this Agreement may be amended from time to time.
Purchaser. This term is defined in the preamble.
---------
Put Option. This term is defined in Section 4.01 of the Shareholder
---------- ------------
Agreement.
Put Option Closing. This term is defined in Section 4.05 of the
------------------ ------------
Shareholder Agreement.
Put Option Period. This term is defined in Section 4.01 of the Shareholder
----------------- ------------
Agreement.
Put Price. This term is defined in Section 4.02 of the Shareholder
--------- ------------
Agreement.
Preferred Stock and Warrant Purchase Agreement - Page 7
- ----------------------------------------------
<PAGE>
Put Shares. The Warrant Shares plus any other shares of Capital Stock
----------
owned from time to time by a Holder which were issued in respect of the
Warrant Shares.
"Register," "registered," and "registration" refer to a registration
-------- ---------- ------------
effected by preparing and filing a registration statement in compliance
with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
Registrable Securities. (a) The Issuable Warrant Shares, (b) the Issued
----------------------
Warrant Shares and (c) the Preferred Shares that have not been previously
sold to the public.
Related Party. An entity wholly owned by a Selling Shareholder or one or
-------------
more Related Parties.
Selling Shareholder. This term is defined in Section 6.02 of the
------------------- ------------
Shareholder Agreement.
Securities Act. The Securities Act of 1933, as amended, and the rules and
--------------
regulations thereunder.
Senior Lenders. This term is defined in Section 11.1 of the Note
-------------- ------------
Agreement.
Series A Preferred Stock. Series A Convertible Preferred Stock, $0.01 par
------------------------
value, of the Company having the rights, restrictions, privileges and
preferences of the series of preferred stock designated as "Series A
Convertible Preferred Stock" set forth in the Certificate.
Senior Loan Agreement. This term is defined in Section 11.1 of the Note
---------------------
Agreement.
Series B Preferred Stock. Series B Preferred Stock, $0.01 par value, of
------------------------
the Company having the rights, restrictions, privileges and preferences of
the series of preferred stock designated as "Series B Preferred Stock" set
forth in the Certificate.
Shareholder. This term is defined in the preamble.
-----------
Shareholder Agreement. This term is defined in the preamble and includes
---------------------
the Shareholder Agreement dated as of February 28, 1997 between the
Company, the Shareholder, F-Jotan and the Purchaser in substantially the
form attached to this Agreement as Annex A and incorporated in this
-------
Agreement by reference.
Senior Subordination Agreement. This term is defined in Section 11.1 of
------------------------------ ------------
the Note Agreement.
Subsidiary. Each Person of which or in which the Company or its other
----------
Subsidiaries own directly or indirectly fifty percent (50%) or more of (i)
the combined voting power of all classes of stock having general voting
power under ordinary circumstances to elect a majority of the board of
directors or equivalent body of such Person, if it is a corporation
Preferred Stock and Warrant Purchase Agreement - Page 8
- ----------------------------------------------
<PAGE>
or similar person; (ii) the capital interest or profits interest of such
Person, if it is a partnership, joint venture, or similar entity; or (iii)
the beneficial interest of such Person, if it is a trust, association, or
other unincorporated organization.
Valuation Event. This term is defined in the definition of Fair Market
---------------
Value.
Warrant A-1. Warrant A-1 referred to in Section 2.01(a)(i), dated as of
----------- ------------------
February 28, 1997, issued to Rice, and all Warrants issued upon the
transfer or division of, or in substitution for, such Warrant A-1.
Warrant A-2. Warrant A-2 referred to in Section 2.01(a)(ii), dated as of
----------- --------------------
February 28, 1997, issued to Rice, and all Warrants issued upon the
transfer or division of, or in substitution for, such Warrant A-2.
Warrant B-1. Warrant B-1 referred to in Section 2.01(b)(i), dated as of
----------- -------------------
February 28, 1997, issued to F-Southland, and all Warrants issued upon the
transfer or division of, or in substitution for, such Warrant B-1.
Warrant B-2. Warrant B-2 referred to in Section 2.01(b)(ii), dated as of
----------- --------------------
February 28, 1997, issued to F-Southland, and all Warrants issued upon the
transfer or division of, or in substitution for, such Warrant B-2.
Warrant C-1. Warrant C-1 referred to in Section 2.01(c)(i), dated as of
----------- -------------------
February 28, 1997, issued to FF-Southland, and all Warrants issued upon the
transfer or division of, or in substitution for, such Warrant C-1.
Warrant C-2. Warrant C-2 referred to in Section 2.01(c)(ii), dated as of
----------- --------------------
February 28, 1997, issued to FF-Southland, and all Warrants issued upon the
transfer or division of, or in substitution for, such Warrant C-2.
Warrants. Collectively, Warrant A-1, Warrant A-2, Warrant B-1, Warrant B-
--------
2, Warrant C-1, Warrant C-2 and all Warrants issued upon the transfer or
the division of, or in substitution for, such Warrants.
Warrant Shares. The Issued Warrant Shares and the Issuable Warrant Shares.
--------------
Preferred Stock and Warrant Purchase Agreement - Page 9
- ----------------------------------------------
<PAGE>
Article II
The Warrants and the Preferred Shares
2.01 The Warrants and the Preferred Shares.
-------------------------------------
(a) On the Closing Date, Rice agrees to purchase from the Company at the
purchase price set forth below, and the Company agrees to issue to Rice, all in
accordance with the terms and conditions of this Agreement:
(i) a Warrant A-1 (relating to the Notes) in substantially the
form attached to this Agreement as Annex B and incorporated in this
-------
Agreement by reference to purchase, at a purchase price of $100, the number
of shares of Common Stock set forth beneath the name of Rice on the
signature page of this Agreement for such Warrant A-1;
(ii) a Warrant A-2 (relating to the Series B Preferred Stock) in
substantially the form attached to this Agreement as Annex C and
-------
incorporated in this Agreement by reference to purchase, at a purchase
price of $100, the number of shares of Common Stock set forth beneath the
name of Rice on the signature page of this Agreement for such Warrant A-2;
and
(iii) 40,000 shares of Series B Preferred Stock, at a purchase
price of $8,000,000, having the rights, restrictions, privileges, and
preferences set forth in the articles of amendment of the Company's
articles of incorporation attached to this Agreement as Annex H (the
-------
"Certificate").
-----------
(b) On the Closing Date, F-Southland agrees to purchase from the Company,
and the Company agrees to issue to F-Southland, all in accordance with the terms
and conditions of this Agreement:
(i) a Warrant B-1 (relating to the Notes) in substantially the
form attached to this Agreement as Annex D and incorporated in this
-------
Agreement by reference to purchase, at a purchase price of $100 the number
of shares of Common Stock set forth beneath the name of F-Southland on the
signature page of this Agreement for such Warrant B-1;
(ii) a Warrant B-2 (relating to the Series B Preferred Stock) in
substantially the form attached to this Agreement as Annex E and
-------
incorporated in this Agreement by reference to purchase, at a purchase
price of $100 the number of shares of Common Stock set forth beneath the
name of F-Southland on the signature page of this Agreement for such
Warrant B-2;
(iii) 5,000 shares of Series B Preferred Stock, at a purchase
price of $1,000,000, having the rights, restrictions, privileges, and
preferences set forth in the Certificate.
Preferred Stock and Warrant Purchase Agreement - Page 10
- ----------------------------------------------
<PAGE>
(c) On the Closing Date, the FF-Southland agrees to purchase from the
Company, and the Company agrees to issue to the FF-Southland, all in accordance
with the terms and conditions of this Agreement:
(i) a Warrant C-1 (relating to the Notes) in substantially the
form attached to this Agreement as Annex F and incorporated in this
-------
Agreement by reference to purchase, at a purchase price of $100 the number
of shares of Common Stock set forth beneath the name of F-Southland on the
signature page of this Agreement for such Warrant C-1;
(ii) a Warrant C-2 (relating to the Series B Preferred Stock) in
substantially the form attached to this Agreement as Annex G and
-------
incorporated in this Agreement by reference to purchase, at a purchase
price of $100 the number of shares of Common Stock set forth beneath the
name of F-Southland on the signature page of this Agreement for such
Warrant C-2;
(iii) 5,000 shares of Series B Preferred Stock, at a purchase
price of $1,000,000, having the rights, restrictions, privileges, and
preferences set forth in the Certificate.
The Company has, on or before the Closing Date, duly authorized the Series B
Preferred Stock being purchased and sold pursuant to the terms of this Agreement
by duly filing the Certificate with the Secretary of State of the State of
Florida. On the Closing Date, the Company will deliver to each of Rice and the
Southland Purchasers a certificate evidencing and representing the shares of
Series B Preferred Stock issued to each such Purchaser, which certificate shall
be issued in such Purchaser's name or in the name of its designee. The shares of
Series B Preferred Stock and Series A Preferred Stock subject to the terms of
this Agreement are sometimes referred to in this Agreement collectively as the
"Preferred Shares."
- -----------------
2.02 Legend. The Company will deliver to the appropriate Purchaser on the
------
Closing Date one or more certificates representing each of (i) Warrant A-1, (ii)
Warrant A-2, (iii) Warrant B-1, (iv) Warrant B-2, (v) Warrant C-1, (vi) Warrant
C-2 and (vii) the Series B Preferred Stock, purchased by Rice or the Southland
Purchasers, as the case may be, in such denominations as such Purchaser
requests. Such certificates will be issued in the respective Purchaser's name
or, subject to compliance with transfer and registration requirements under
applicable Federal and state securities laws, in the name or names of its
respective designee or designees. It is understood and agreed that the
certificates evidencing the Warrants will bear the following legends:
"THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION
WITH THE DISTRIBUTION HEREOF. THIS WARRANT AND THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, INCLUDING, WITHOUT
LIMITATION, THE NORTH CAROLINA SECURITIES ACT, AS AMENDED, THE
Preferred Stock and Warrant Purchase Agreement - Page 11
- ----------------------------------------------
<PAGE>
TEXAS SECURITIES ACT OF 1957, AS AMENDED, AND THE GEORGIA SECURITIES ACT OF
1973, AS AMENDED, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER
OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES LAWS."
"THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT
TO THE TERMS AND PROVISIONS OF A PREFERRED STOCK AND WARRANT PURCHASE
AGREEMENT AND A SHAREHOLDER AGREEMENT, EACH DATED AS OF FEBRUARY 28, 1997,
BY AND AMONG JOTAN, INC. (THE "COMPANY"), RICE PARTNERS II, L.P.,
F-SOUTHLAND, L.L.C. AND FF-SOUTHLAND, L.P., F-JOTAN, L.L.C. AND THE OTHER
PARTIES LISTED ON THE SIGNATURE PAGES TO SUCH SHAREHOLDER AGREEMENT (AS
SUCH AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM
TIME TO TIME, THE "AGREEMENTS"). COPIES OF THE AGREEMENTS ARE AVAILABLE AT
THE EXECUTIVE OFFICES OF THE COMPANY."
"THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF
CODE SECTION 10-5-9 OF THE 'GEORGIA SECURITIES ACT OF 1973,' AND MAY NOT BE
SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT
OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT."
It is further understood and agreed that the certificates evidencing the
Preferred Stock will bear substantially the same as the following legends:
"THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR
FOR SALE IN CONNECTION WITH THE DISTRIBUTION HEREOF. THESE SHARES HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS, INCLUDING, WITHOUT LIMITATION, THE NORTH CAROLINA
SECURITIES ACT, AS AMENDED, THE TEXAS SECURITIES ACT OF 1957, AS AMENDED,
AND THE GEORGIA SECURITIES ACT OF 1973, AS AMENDED, AND MAY NOT BE PLEDGED,
SOLD, OFFERED FOR SALE, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE
STATE SECURITIES LAWS."
"THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF
CODE SECTION 10-5-9 OF THE 'GEORGIA SECURITIES ACT OF 1973,' AND MAY NOT BE
SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT
OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT."
Preferred Stock and Warrant Purchase Agreement - Page 12
- ----------------------------------------------
<PAGE>
"THESE SHARES ARE SUBJECT TO THE TERMS AND PROVISIONS OF A PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT AND A SHAREHOLDER AGREEMENT, EACH DATED AS
OF FEBRUARY 28, 1997, BETWEEN JOTAN, INC. (THE "COMPANY"), RICE PARTNERS
II, L.P., F-JOTAN, L.L.C., AND F-SOUTHLAND, L.L.C., FF-SOUTHLAND, L.P. AND
THE OTHER PARTIES LISTED ON THE SIGNATURE PAGES TO SUCH SHAREHOLDER
AGREEMENT (AS SUCH AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED, AMENDED, OR
RESTATED FROM TIME TO TIME, THE "AGREEMENTS"). COPIES OF THE AGREEMENTS
ARE AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY."
2.03 Exercise Price. The Exercise Price per share will be $0.01 for each
--------------
share of Common Stock covered by the Warrants; provided, however, that in no
-------- -------
event will either (i) the aggregate Exercise Price for all of the shares of
Common Stock covered by Warrant A-1 exceed $100.00, (ii) the aggregate Exercise
Price for all of the shares of Common Stock covered by Warrant A-2 exceed
$100.00, (iii) the aggregate Exercise Price for all of the shares of Common
Stock covered by Warrant B-1 exceed $100.00, (iv) the aggregate Exercise Price
for all of the shares of Common Stock covered by Warrant B-2 exceed $100.00,
(v) the aggregate Exercise Price for all of the shares of Common Stock covered
by Warrant C-1 exceed $100.00 or (vi) the aggregate Exercise Price for all of
the shares of Common Stock covered by Warrant C-2 exceed $100.00, whether as a
result of any change in the par value of the Common Stock or Other Securities,
as a result of any change in the number of shares purchasable as provided in
this Article II, or otherwise; provided, further, that such limitation of the
---------- -------- -------
aggregate Exercise Price will have no effect whatsoever upon the amount or
number of Warrant Shares for which the Warrants may be exercised.
2.04 Exercise of Warrants.
--------------------
(a) Each of the Warrants may be exercised at any time or from time to
time on or after the Closing Date until the tenth (10th) anniversary of the
Closing Date, on any day that is a Business Day, for all or any part of the
number of Issuable Warrant Shares purchasable upon its exercise. In order
to exercise its Warrant, in whole or in part, the Holder will deliver to
the Company at the address designated by the Company pursuant to Section
-------
6.06, (i) a written notice of such Holder's election to exercise its
----
Warrant, which notice will specify the number of Issuable Warrant Shares to
be purchased pursuant to such exercise, (ii) payment of the Exercise Price,
in an amount equal to the aggregate purchase price for all Issuable Warrant
Shares to be purchased pursuant to such exercise, and (iii) the Warrant.
Such notice will be substantially in the form of the Subscription Form
appearing at the end of the Warrants. Upon receipt of such notice, the
Company will, as promptly as practicable, and in any event within ten (10)
business days, execute, or cause to be executed, and deliver to such Holder
a certificate or certificates representing the aggregate number of full
shares of Common Stock and Other Securities issuable upon such exercise, as
provided in this Agreement. The stock certificate or certificates so
delivered will be in such denominations as may be specified in such notice
and will be registered in the name of such Holder, or, subject to
compliance with transfer and
Preferred Stock and Warrant Purchase Agreement - Page 13
- ----------------------------------------------
<PAGE>
registration requirements under applicable Federal and state securities
laws, such other name as designated in such notice. A Warrant will be
deemed to have been exercised, such certificate or certificates will be
deemed to have been issued, and such Holder or any other Person so
designated or named in such notice will be deemed to have become a holder
of record of such shares for all purposes, as of the date that such notice,
together with payment of the Exercise Price and the Warrant is received by
the Company. If the Warrant has been exercised in part, the Company will,
at the time of delivery of such certificate of certificates, deliver to
such Holder a new Warrant evidencing the rights of such Holder to purchase
the number of Issuable Warrant Shares with respect to which the Warrant has
not been exercised, which new Warrant will, in all other respects, be
identical with the Warrants, or, at the request of such Holder, appropriate
notation may be made on the original Warrant and the original Warrant
returned to such Holder.
(b) Payment of the Exercise Price will be made, at the option of the
Holder, by (i) company or individual check, certified or official bank
check, (ii) cancellation of any debt owed by the Company to the Holder, or
(iii) cancellation of Warrant Shares, valued at Fair Market Value. If the
Holder surrenders a combination of cash or cancellation of any debt owed by
the Company to the Holder or Warrants, the Holder will specify the
respective number of shares of Common Stock to be purchased with each form
of consideration, and the foregoing provisions will be applied to each form
of consideration with the same effect as if the Warrant were being
separately exercised with respect to each form of consideration; provided,
--------
however, that a Holder may designate that any cash to be remitted to a
-------
Holder in payment of debt be applied, together with other monies, to the
exercise of the portion of the Warrant being exercised for cash.
2.05 Taxes. The issuance of any Common Stock or Other Securities upon the
-----
exercise of any of the Warrants will be made without charge to any Holder for
any tax, other than income taxes assessed on such Holder, in respect of such
issuance.
2.06 Register. The Company will, at all times while any of the Warrants or
--------
Preferred Shares remain outstanding, keep and maintain at its principal office a
register in which the registration, transfer, and exchange of the Warrants and
Preferred Shares will be provided for. The Company will not at any time, except
upon the dissolution, liquidation, or winding up of the Company, close such
register so as to result in preventing or delaying the exercise or transfer, as
the case may be, of any of the Warrants or Preferred Shares.
2.07 Transfer and Exchange. The Warrants, all options and rights under the
---------------------
Warrants, and the Preferred Shares are transferable, in whole or in part, in
person or by duly authorized attorney, on the books of the Company upon
surrender of the Warrants or the Preferred Shares, as the case may be, at the
principal offices of the Company, together with the form of transfer
authorization attached to the Warrants duly executed or by endorsement of the
certificates representing the Preferred Shares; provided, however, that such
-------- -------
transfer of the Warrants and Preferred Shares will be made only to Persons that
the transferor in good faith believes to be an "accredited investor" as such
term is defined in Regulation D under the Securities Act. Absent any such
transfer and subject to the Shareholder Agreement, the Company may deem and
treat the
Preferred Stock and Warrant Purchase Agreement - Page 14
- ----------------------------------------------
<PAGE>
registered Holders of the Warrants or the Preferred Shares, as the case may be,
at any time as the absolute owners of the Warrants or the Preferred Shares, as
the case may be, for all purposes and will not be affected by any notice to the
contrary. If any of the Warrants or Preferred Shares are transferred in part,
the Company will, at the time of surrender of such Warrant or Preferred Shares,
as the case may be, issue to the transferee a Warrant or a certificate for
Preferred Shares, as the case may be, covering the number of shares transferred
and to the transferor a Warrant or a certificate for Preferred Shares, as the
case may be, covering the number of shares not transferred. Notwithstanding the
foregoing, each Purchaser agrees that it will not effect a transfer of any of
the Warrants to any Person or Affiliate of such Person engaged in the type of
business set forth on Annex I attached hereto and incorporated herein by
-------
reference unless such transfer is made in connection with a transaction
resulting in a change of control of the Company.
2.08 Adjustments to Number of Shares Purchasable.
-------------------------------------------
(a) The Warrants will be exercisable for the number of shares of
Common Stock in such manner that, following the complete and full exercise
of the Warrants of each Holder, the amount of Common Stock issued to all
Holders will equal the aggregate number of shares of Common Stock set forth
beneath the name of the Purchaser on the signature pages of this Agreement,
as adjusted, to the extent necessary, to give effect to the following
events:
(i) In case at any time or from time to time, the holders of any
class of Common Stock or Common Stock Equivalent have received, or (on
or after the record date fixed for the determination of shareholders
eligible to receive) have become entitled to receive, without payment
therefor:
(A) consideration (other than cash) by way of dividend or
distribution; or
(B) consideration (including cash) by way of spin-off,
split-up, reclassification (including any reclassification in
connection with a consolidation or merger in which the Company is
the surviving corporation), recapitalization, combination of
shares into a smaller number of shares, or similar corporate
restructuring;
other than additional shares of Common Stock issued as a stock
dividend or in a stock-split (adjustments in respect of which are
provided for in Sections 2.08(a)(ii) and (iii)), then, and in each
-------------------- -----
such case, the Holders, on the exercise of Warrants, will be entitled
to receive for each share of Common Stock issuable under the Warrants
as of the record date fixed for such distribution, the greatest per
share amount of consideration received by any holder of any class of
Common Stock or Common Stock Equivalent or to which such Holder is
entitled less the amount of any Dilution Fee actually and irrevocably
paid to such Holders. All such consideration receivable upon exercise
of such Warrant with respect to such a distribution will be deemed to
be outstanding and owned by such Holder for
Preferred Stock and Warrant Purchase Agreement - Page 15
- ----------------------------------------------
<PAGE>
purposes of determining the amount of consideration to which such
Holder is entitled upon exercise of the Warrant with respect to any
subsequent distribution.
(ii) If at any time there occurs any stock split, stock dividend
or distribution, reverse stock split, or other subdivision of the
Common Stock, then the number of shares of Common Stock to be received
by the Holder of the Warrant and the Exercise Price, subject to the
limitations set forth in this Agreement, will be proportionately
adjusted.
(iii) In case of any reclassification or change of outstanding
shares of any class of Common Stock or Common Stock Equivalent (other
than a change in par value, or from par value to no par value, or from
no par value to par value), or in the case of any consolidation of the
Company with, or merger or share exchange of the Company with or into,
another Person, or in case of any sale of all or a majority of the
property, assets, business, income or revenue generating capacity, or
goodwill of the Company, the Company, or such successor or other
Person, as the case may be, will provide that the Holder of this
Warrant will thereafter be entitled to receive the highest per share
kind and amount of consideration received or receivable (including
cash) upon such reclassification, change, consolidation, merger, share
exchange, or sale by any holder of any class of Common Stock or Common
Stock Equivalent that this Warrant entitles the Holder to receive
immediately prior to such reclassification, change, consolidation,
merger, share exchange, or sale (as adjusted pursuant to Section
-------
2.08(a)(i) and otherwise in this Agreement). Any such successor
----------
Person, which thereafter will be deemed to be the Company for purposes
of the Warrants, will provide for adjustments that are as nearly
equivalent as may be possible to the adjustments provided for by this
Section 2.08.
------------
(iv) If at any time the Company issues or sells any shares of
any Common Stock or any Common Stock Equivalent at a per unit or share
consideration (which consideration will include the price paid upon
issuance plus the minimum amount of any exercise, conversion, or
similar payment made upon exercise or conversion of any Common Stock
Equivalent) less than the Exercise Price or the then current Fair
Market Value per share of Common Stock immediately prior to the time
such Common Stock or Common Stock Equivalent is issued or sold (the
"Additional Securities"), then:
----------------------
(A) the Exercise Price will be reduced (but not increased)
to the lower of the prices calculated by:
(I) dividing (x) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding on a fully
diluted basis immediately prior to such issuance or sale
multiplied by the then existing Exercise Price plus (2) the
aggregate consideration, if any, received by the Company
Preferred Stock and Warrant Purchase Agreement - Page 16
- ----------------------------------------------
<PAGE>
upon such issuance or sale, by (y) the total number of
shares of Common Stock outstanding immediately after such
issuance or sale on a fully diluted basis; and
(II) multiplying the then existing Exercise Price by a
fraction, the numerator of which is (x) the sum of (1) the
number of shares of Common Stock outstanding on a fully
diluted basis immediately prior to such issuance or sale,
multiplied by the Fair Market Value per share of Common
Stock immediately prior to such issuance or sale, plus (2)
the aggregate consideration received by the Company upon
such issuance or sale, (y) divided by the total number of
shares of Common Stock outstanding on a fully diluted basis
immediately after such issuance or sale, and the denominator
of which is the Fair Market Value per share of Common Stock
immediately prior to such issuance or sale (for purposes of
this subsection (II), the date as of which the Fair Market
---------------
Value per share of Common Stock will be computed will be the
earlier of the date upon which the Company will (aa) enters
into a firm contract for the issuance of such shares, or
(bb) issues such shares); and
(B) the number of shares of Common Stock for which any of
the Warrants may be exercised at the Exercise Price resulting
from the adjustment described in subsection (A) above will be
--------------
equal to the product of the number of shares of Common Stock
purchasable under such Warrants immediately prior to such
adjustment multiplied by a fraction, the numerator of which is
the Exercise Price in effect immediately prior to such adjustment
and the denominator of which is the Exercise Price resulting from
such adjustment.
(v) In case any event occurs as to which the preceding Sections
--------
2.08(a)(i) through (iv) are not strictly applicable, but as to which
---------- ----
the failure to make any adjustment would not fairly protect the
purchase rights represented by the Warrants in accordance with the
essential intent and principles of this Agreement, then, in each such
case, the Holders may appoint an independent investment bank or firm
of independent public accountants, which will give its opinion as to
the adjustment, if any, on a basis consistent with the essential
intent and principles established in this Agreement, necessary to
preserve the purchase rights represented by the Warrants. Upon
receipt of such opinion, the Company will promptly deliver a copy of
such opinion to the Holders and will make the adjustments described in
such opinion. The fees and expenses of such investment bank or
independent public accountants will be borne equally by the Holders
and the Company.
Preferred Stock and Warrant Purchase Agreement - Page 17
- ----------------------------------------------
<PAGE>
(b) The Company and the Shareholder will not by any action including,
without limitation, amending, or permitting the amendment of, the charter
documents, bylaws, or similar instruments of the Company or through any
reorganization, reclassification, transfer of assets, consolidation,
merger, share exchange, dissolution, issue or sale of securities, or any
other similar voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Agreement or the Warrants, but will
at all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holders against impairment or dilution. Without
limiting the generality of the foregoing, each of the Company and the
Shareholder will (i) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock and Other Securities, free
and clear of all liens, encumbrances, equities, and claims and (ii) use its
best efforts to obtain all such authorizations, exemptions, or consents
from any public regulatory body having jurisdiction as may be necessary to
enable the Company to perform its obligations under the Warrants. Without
limiting the generality of the foregoing, the Company represents and
warrants that the board of directors of the Company has determined the
Exercise Price to be adequate and the issuance of the Warrants to be in the
best interests of the Company.
(c) Any calculation under this Section 2.08 will be made to the
------------
nearest one ten-thousandth of a share and the number of Issuable Warrant
Shares resulting from such calculation will be rounded up to the next whole
share of Common Stock or Other Securities comprising Issuable Warrant
Shares.
(d) The Company will not, and will not permit any Subsidiary to, issue
any Capital Stock other than Common Stock and Common Stock Equivalents.
2.09 Lost, Stolen, Mutilated, or Destroyed Instruments. If any of the
-------------------------------------------------
Warrants or certificates for Preferred Shares are lost, stolen, mutilated, or
destroyed and if the Company receives a lost security affidavit containing an
indemnification from the Holder of such Warrant or Preferred Shares and
containing such other terms and providing for such bonding as may be reasonably
requested by the Company, the Company will issue a new Warrant or certificate
for Preferred Shares, as the case may be, of like denomination, tenor, and date
as the Warrant or certificate for Preferred Shares, as the case may be, so lost,
stolen, mutilated, or destroyed. Any such new Warrant or certificate for
Preferred Shares, as the case may be, will constitute an original obligation of
the Company, whether or not the allegedly lost, stolen, mutilated, or destroyed
Warrant or certificate for Preferred Shares, as the case may be, is at any time
enforceable by any Person.
2.10 Stock Legend. Without limiting the provisions of Section 2.02 hereof,
------------
the Warrants, the Warrant Shares and the Preferred Shares have not been
registered under the Securities Act or qualified under applicable state
securities laws. Accordingly, unless there is an effective registration
statement and qualification respecting the Warrants, the Warrant Shares or the
Preferred Shares, as the case may be, under the Securities Act or under
applicable state
Preferred Stock and Warrant Purchase Agreement - Page 18
- ----------------------------------------------
<PAGE>
securities laws, the Preferred Shares and, at the time of exercise of a Warrant,
any stock certificate issued pursuant to the exercise of a Warrant will bear the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE (A) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER
OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES LAWS,
INCLUDING, WITHOUT LIMITATION, THE NORTH CAROLINA SECURITIES ACT, AS
AMENDED, THE TEXAS SECURITIES ACT OF 1957, AS AMENDED, AND THE GEORGIA
SECURITIES ACT OF 1973, AS AMENDED, AND (B) ARE SUBJECT TO THE TERMS OF AND
PROVISIONS OF A PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT AND A
SHAREHOLDER AGREEMENT, EACH DATED AS OF FEBRUARY 28, 1997 AMONG JOTAN, INC.
(THE "COMPANY"), RICE PARTNERS II, L.P., F-SOUTHLAND, FF-SOUTHLAND, L.P.,
F-JOTAN, L.L.C. AND THE OTHER PARTIES LISTED ON THE SIGNATURE PAGES OF SUCH
SHAREHOLDER AGREEMENT (AS SUCH AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED,
AMENDED, OR RESTATED FROM TIME TO TIME, THE "AGREEMENTS"). COPIES OF THE
AGREEMENTS ARE AVAILABLE AT THE OFFICES OF THE COMPANY."
"THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF
CODE SECTION 10-5-9 OF THE 'GEORGIA SECURITIES ACT OF 1973,' AND MAY NOT BE
SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT
OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT."
All shares of Capital Stock of the Company subject to the Shareholder Agreement
will bear a legend to such effect.
Article III
Representations and Warranties
3.01 Representations and Warranties of the Company and the
-----------------------------------------------------
Shareholder. The Company and the Shareholder severally and not
- -----------
jointly represent and warrant to each Purchaser and F-Jotan that:
(a) The Company is a corporation duly organized and existing and in
good standing under the laws of its state of incorporation and is qualified
or licensed to do business in all other countries, states, and
jurisdictions the laws of which require it to be so qualified or licensed.
The Company has no Subsidiaries except as disclosed in Schedule 4.16 to the
Note Agreement or debt or equity investment in any Person. Giving effect
to the transactions contemplated herein, the Shareholder owns beneficially
and of record the number of shares in the aggregate of the issued and
outstanding capital stock or stock
Preferred Stock and Warrant Purchase Agreement - Page 19
- ----------------------------------------------
<PAGE>
equivalents of the Company on a fully converted and diluted basis as of the
Closing Date set forth under the signature of such Shareholder on this
Agreement, all being free and clear of all liens, claims and encumbrances.
Other than Purchaser and F-Jotan, and, except any other stock issuable
under any employee or director stock plan which constitutes Permitted
Stock, no Person has any rights, whether granted by the Company or any
other Person, to acquire any portion of the equity interest of the Company
or the assets of the Company.
(b) Each of the Company and the Shareholder has, and at all times that
this Agreement is in force will have, the right and power, and is duly
authorized, to enter into, execute, deliver, and perform this Agreement,
the Shareholder Agreement, and, in the case of the Company, the Warrants,
and the officers of Company executing and delivering this Agreement, the
Shareholder Agreement, and the Warrants are duly authorized to do so. This
Agreement, the Shareholder Agreement, and the Warrants have been duly and
validly executed, issued, and delivered and constitute the legal, valid,
and binding obligations of Company and the Shareholder, enforceable in
accordance with their respective terms.
(c) The execution, delivery, and performance of this Agreement, the
Shareholder Agreement, and the Warrants will not, by the lapse of time, the
giving of notice, or otherwise, constitute a violation of any applicable
provision contained in the charter, bylaws, or organizational documents of
the Company or contained in any agreement, instrument, or document to which
the Company or the Shareholder is a party or by which any of them is bound.
(d) As of the Closing Date, the authorized capital stock of the
Company consists of (i) 40,000,000 shares of Common Stock, of which
5,679,411 shares are issued and outstanding and (ii) 10,000,000 shares of
Preferred Stock, of which 1,329,357 shares of Series A Preferred Stock are
issued and outstanding and of which 50,000 shares of Series B Preferred
Stock are issued and outstanding. An aggregate of at least 14,960,003
shares of Common Stock are reserved for issuance on exercise of the
Warrants. All of the issued and outstanding shares of Common Stock are,
and upon issuance and payment therefor in accordance with the terms of this
Agreement, all of the outstanding Series B Preferred Stock will be, validly
issued, fully paid and nonassessable. The Common Stock and Preferred
Shares have been offered, issued, sold, and delivered by Company free from
preemptive rights, rights of first refusal, antidilution rights, cumulative
voting rights or similar rights (except as otherwise provided in this
Agreement or in the powers, designations, rights and preferences of the
Preferred Stock contained in the Certificate) and in compliance with
applicable federal and state securities laws. Except pursuant to this
Agreement and the Certificate and except for the Permitted Stock, the
Company is not obligated to issue or sell any Capital Stock, and, except
for this Agreement and the Shareholder Agreement, neither the Company nor
the Shareholder is party to, or otherwise bound by, any agreement affecting
the voting of any Capital Stock. Except for the Shareholder Agreement, the
Company is not, nor will it be, a party to, or otherwise bound by, any
agreement obligating it to register any of its Capital Stock.
Preferred Stock and Warrant Purchase Agreement - Page 20
- ----------------------------------------------
<PAGE>
(e) The Preferred Shares and the shares of Common Stock and other
consideration issuable on exercise of the Warrants have been duly and
validly authorized and reserved for issuance and, when issued in accordance
with the terms of this Agreement or the Warrants, as the case may be, will
be validly issued, fully paid, and nonassessable and free of preemptive
rights, rights of first refusal, or similar rights.
(f) The Company has good, indefeasible, merchantable, and marketable
title to, and ownership of, all of its assets necessary for the conduct of
its business free and clear of all liens, pledges, security interests,
claims, or other encumbrances except those of Senior Lender and those Liens
set forth in Schedule 11.1(b) to the Note Agreement.
(g) The Company has the exclusive right to use all patents, patent
rights, patent applications, licenses, inventions, trade secrets, know-how,
proprietary techniques, including processes and substances, trademarks,
service marks, trade names, and copyrights used in or necessary to its
business as presently, or presently proposed to be, conducted (the
"Intellectual Property"), and the use by the Company of the Intellectual
----------------------
Property does not infringe the rights of any other Person except that
Southland Holding Company has a non-exclusive right to use the names
"Southland" and "Southland Container" and similar trade names. No other
Person is infringing the rights of the Company in any of the Intellectual
Property in any material respect. The Company owes no royalties,
honoraria, or fees to any Person by reason of its use of any of the
Intellectual Property.
(h) There is not now, and at no time during the term of this Agreement
or the Shareholder Agreement will there be, any agreement, arrangement, or
understanding involving the Company or the Shareholder, other than this
Agreement, the Shareholder Agreement, and the documents contemplated hereby
and thereby, modifying, restricting, or in any way affecting the rights of
any security holder to vote securities of the Company.
(i) Each of the representations and warranties made by the Company
pursuant to the Note Agreement and the Shareholder Agreement and the
Shareholder pursuant to the Shareholder Agreement is true and correct in
all material respects.
(j) None of the documents, instruments, or other information furnished
to the Purchaser by the Company or the Shareholder, contains any untrue
statement of a material fact or omits to state any material fact necessary
in order to make any statements made therein not misleading. No
representation, warranty, or statement made (i) by the Company in this
Agreement, the Note Agreement, or the Shareholder Agreement, or (ii) by the
Shareholder made in this Agreement or the Shareholder Agreement, or in any
applicable document, certificate, exhibit or schedule attached hereto or
thereto or delivered in connection herewith or therewith, contains or, at
the Closing Date, will contain any untrue statement of a material fact, or,
at the Closing Date, omits or will omit to state a material fact necessary
to make any statements made herein or therein not misleading; provided,
however, that neither the Company nor the Shareholder make any
representation or warranty of any information of any type or kind
whatsoever which, at
Preferred Stock and Warrant Purchase Agreement - Page 21
- ----------------------------------------------
<PAGE>
the time it was created, was forward-looking or projected except as
expressly required by the Note Agreement. There is no fact that materially
and adversely affects the condition (financial or otherwise), results of
operations, business, properties, or prospects of the Company or any of its
Subsidiaries that has not been disclosed in the documents provided to the
Purchaser.
(k) All required filings have been, or, when required, will be, made
and all exemptions under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, remain in full force and effect under applicable
federal and state securities laws, to consummate the transactions
contemplated hereby.
3.02 Representations and Warranties of the Purchaser. Each Purchaser
-----------------------------------------------
represents and warrants severally and not jointly to the Company, F-Jotan and
the Shareholder:
(a) It is a limited partnership or limited liability company, as the
case may be, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization.
(b) It has the right and power and is duly authorized to enter into,
execute, deliver, and perform this Agreement and the Shareholder Agreement,
and its officers, managers or agents executing and delivering this
Agreement and the Shareholder Agreement are duly authorized to do so. This
Agreement and the Shareholder Agreement have been duly and validly
executed, issued, and delivered and constitute the legal, valid, and
binding obligation of such Purchaser, enforceable in accordance with their
respective terms.
(c) It (i) is an "accredited investor," as that term is defined in
Regulation D under the Securities Act; (ii) has such knowledge, skill, and
experience in business and financial matters, based on actual
participation, that it is capable of evaluating the merits and risks of an
investment in the Company and the suitability thereof as an investment for
each Purchaser; (iii) has received and reviewed all such financial and
other information and records of the Company as it considered necessary or
appropriate in deciding whether to purchase the Preferred Shares and the
Warrants and any securities issuable upon exercise of the Warrants, and the
Company and the Shareholder have made available to it the opportunity to
ask questions of, and to receive answers and to obtain additional
information from, representatives of the Company and the Shareholder; (iv)
all such additional information has been provided to and reviewed by it;
and (v) it has the ability to bear the economic risks of losing its entire
investment in the Preferred Shares and the Warrants and any securities
issuable upon exercise of the Warrants.
(d) Except as otherwise contemplated by this Agreement and the
Shareholder Agreement, each Purchaser is acquiring its Series B Preferred
Stock, its portion of the Warrants and any securities issuable upon
exercise of the Warrants for investment for its own account and not with a
view to any distribution thereof in violation of applicable securities
laws.
Preferred Stock and Warrant Purchase Agreement - Page 22
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<PAGE>
(e) It agrees that the certificates representing its Preferred Shares,
its portion of the Warrants, and any Issued Warrant Shares will bear the
legends referenced in this Agreement, and such Preferred Shares, Warrants
or securities issuable upon exercise of the Warrants and pursuant to the
Shareholder Agreement, as the case may be, will not be offered, sold, or
transferred in the absence of registration or exemption under applicable
securities laws.
(f) It is not acquiring the Preferred Shares or the Warrants or any
securities issuable upon exercise of the Warrants based upon any
representation, oral or written, by the Company or the Shareholder or any
representative of the Company or the Shareholder with respect to the future
value of, income from, or tax consequences relating to, the Preferred
Shares or the Warrants or securities issuable upon exercise of the
Warrants, but rather upon an independent examination and judgment as to the
prospects of the Company. Further, it acknowledges that no federal or
state administrative entity responsible for securities registration or
enforcement has made any recommendation or endorsement of the Preferred
Shares or the Warrants or any securities issuable upon exercise of the
Warrants or any findings as to the fairness of an investment in the
Preferred Shares of the Warrants or any securities issuable upon exercise
of the Warrants.
(g) It has no current contract, undertaking, agreement, arrangement or
understanding with any Person to sell, transfer, grant any participation
in, or otherwise distribute any of the Preferred Shares, the Warrants or
any securities issuable upon exercise of the Warrants to any Person.
3.03 Representation and Warranties of F-Jotan. F-Jotan represents and
----------------------------------------
warrants to the Company, the Shareholder and each Purchaser that, from and after
the Closing Date, it has no written or oral agreement with any Person with
respect to the Series A Preferred Stock that would be inconsistent with, or
otherwise limit or impair, the provisions or intent of this Agreement, the
Certificate or the Shareholder Agreement.
Article IV
Covenants
The Company covenants and agrees as follows:
4.01 Financial Statements. The Company will keep books of account
--------------------
and prepare financial statements and will cause to be furnished to each
Purchaser and each other Holder (all of the foregoing and following to be kept
and prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis):
(a) As soon as available, and in any event within one hundred twenty
(120) days after the end of each fiscal year of the Company, beginning with
the fiscal year ending December 31, 1996, (i) a copy of the financial
statements of the Company for such fiscal year containing a consolidated
and consolidating balance sheet, statement of income,
Preferred Stock and Warrant Purchase Agreement - Page 23
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<PAGE>
statement of shareholders' equity, and statement of cash flows, each as at
the end of such fiscal year and for the period then ended and in each case
setting forth in comparative form the figures for the preceding fiscal
year, all in reasonable detail and audited and certified by Ernst & Young,
or other independent certified public accountants of recognized standing
selected by the Company and consented to by the Holders and (ii) a
comparison of the actual results during such fiscal year to those
originally budgeted by the Company prior to the beginning of such fiscal
year and a narrative description and explanation of any budget variances.
The annual audit report required by this Agreement will not be qualified by
or make reference to any disclosure that the Company may not continue as a
going concern or otherwise be qualified or limited because of restricted or
limited examination by the accountant of any portion of any of the records
of the Company.
(b) As soon as available, and in any event within thirty (30) days
after the end of each calendar month, a copy of unaudited consolidated and
consolidating financial statements of the Company as of the end of such
calendar month and for the portion of the fiscal year then ended,
containing a balance sheet, a statement of retained earnings, statement of
income, and statement of cash flows, in each case setting forth in
comparative form the figures for the corresponding period of the preceding
fiscal year and all in reasonable detail, including, without limitation, a
comparison of the actual results during such period to those originally
budgeted by the Company prior to the beginning of such fiscal period and
for the fiscal year to date.
(c) Within forty-five (45) days after the beginning of each fiscal
year, an annual budget or business plan for such fiscal year, including a
projected consolidated and consolidating balance sheet, income statement,
and cash flow statement for such year, and, promptly during each fiscal
year, all revisions thereto approved by the board of directors of the
Company.
(d) Concurrently with the delivery of each of the financial statements
referred to in Section 4.01(a) and, on the request of any Purchaser,
---------------
Section 4.01(b), a certificate of an authorized officer of the Company in
---------------
form and substance satisfactory to the Holders (i) certifying that the
financial statements attached to such certificates have been prepared in
accordance with generally accepted accounting principles consistently
applied and fairly and accurately present (subject to year-end audit
adjustments) the consolidated and consolidating financial condition and
results of operations of the Company at the date and for the period
indicated therein, and (ii) containing a narrative report of the business
and affairs of the Company that includes, but is not limited to, a
discussion of the results of operations compared to those originally
budgeted for such period by the Company prior to the beginning of such
period.
(e) As soon as available, a copy of each (i) financial statement,
report, notice, or proxy statement sent by the Company to its shareholders;
(ii) regular, periodic, or special report, registration statement, or
prospectus filed by the Company with any securities exchange, state
securities regulator, or the Commission; (iii) material order issued by any
court, governmental authority, or arbitrator in any material proceeding to
Preferred Stock and Warrant Purchase Agreement - Page 24
- ----------------------------------------------
<PAGE>
which the Company is a party or to which any of its assets is subject; (iv)
press release or other statement made available generally by the Company or
the Shareholder to the public generally concerning material developments in
the business of the Company; and (v) a copy of all correspondence, reports,
and other information sent by the Company to any holder of any
indebtedness, including, without limitation the Senior Lender.
(f) Promptly, such additional information concerning the Company as
any Holder may request, including, without limitation, auditor management
reports and audit "waive" lists.
4.02 Laws. The Company will comply, in all material respects, with all
----
applicable statutes, regulations, and orders of the United States, domestic and
foreign states, and municipalities, agencies, and instrumentalities of the
foregoing applicable to the Company.
4.03 Inspection. The Company will permit any representative designated by
----------
a Holder to (a) visit and inspect any of the properties of the Company; (b)
examine the corporate and financial records of Company and make copies thereof
or extracts therefrom; and (c) discuss the affairs, finances, and accounts of
the Company with the directors, officers, key employees, and independent
accountants of the Company. The inspections, examinations and discussions
provided for in the preceding sentence shall be conducted during normal business
hours, shall be reasonable in scope and shall not disrupt or adversely affect
any aspect of the operations of the Company.
4.04 Certain Actions. Without the prior written consent of the Holders,
---------------
which consent may be withheld in the sole discretion of the Holders, the Company
will not, and will not permit any Subsidiary to:
(a) permit to occur any amendment, alteration, or modification of the
Bylaws of the Company, as constituted on the date of this Agreement, the
effect of which, in the sole judgment of the Holders, would be to alter,
impair, or affect adversely, either the rights and benefits of the Holders
or the duties and obligations of the Company under this Agreement, the
Warrants, the Certificate or the Shareholder Agreement or permit to occur
any amendment, alteration, or modification of the Restated Articles of
Incorporation or other charter or organizational documents of the Company,
as constituted on the date of this Agreement except to the extent necessary
to comply with Section 4.04(j) or 4.10;
--------------- ----
(b) except as otherwise permitted in the Certificate or required by
the Shareholder Agreement, (i) declare or make any dividends or
distributions of its cash, stock, property, or assets or redeem, retire,
purchase, or otherwise acquire, directly or indirectly, any of the Capital
Stock or capital stock or securities of any Affiliate or any Subsidiary of
the Company, or any securities convertible or exchangeable into Capital
Stock or capital stock or securities of any Affiliate or any Subsidiary of
the Company or otherwise make any distribution on account of the purchase,
repurchase, redemption, put, call or other retirement of any shares of
Capital Stock of the Company or any Subsidiary thereof or of any warrant,
option or other right to acquire such shares (except pursuant to
Preferred Stock and Warrant Purchase Agreement - Page 25
- ----------------------------------------------
<PAGE>
the Purchase Documents or the Certificate) (each as defined in Section 11.1
of the Note Agreement), or (ii) make any payment or distribution on account
of any Indebtedness of the Company which is subordinate to the Senior
Subordinated Notes (except that Subsidiaries may make distributions to the
Company), and (iii) except as otherwise provided for in the Note Agreement,
pay any professional consulting or management fees or any other payments to
any shareholders of Parent or any Subsidiary; provided, however, that the
-------- -------
following shall be permitted as exceptions to the preceding provisions of
this clause (b): declare and make payments of (A) dividends in cash from
Subsidiaries of the Company to the Company to the extent necessary to
permit the Company or its Subsidiaries to pay the Senior Subordinated
Obligations (as defined in Section 11.1 of the Note Agreement) due and
payable from the Company or its Subsidiaries to each Purchaser, (B)
dividends or stock repurchases permitted by the Senior Loan Agreement (as
defined in Section 11.1 of the Note Agreement), and (C) dividends on the
Preferred Stock as provided in the Certificate and payments made pursuant
to the Purchase Documents (as defined in Section 11.1 of the Note
Agreement);
(c) effect any sale, lease, assignment, transfer, or other conveyance
of any material portion of the assets or operations or the revenue or
income generating capacity of the Company (other than inventory in the
ordinary course of business and other assets reasonably and in good faith
determined by the Company to be obsolete or no longer necessary to the
business of the Company and other asset dispositions permitted by the
Senior Loan Agreement including the Asset Transfer (as defined in the
Senior Loan Agreement)) or to take any such action that has the effect of
any of the foregoing;
(d) except for issuances of stock permitted by the Senior Loan
Agreement, the Permitted Stock, the Acquisition Merger, the Subsidiary
Mergers (each as defined in Section 11.1 of the Note Agreement) and the
other mergers permitted by the Senior Loan Agreement or pursuant to the
express terms of this Agreement or the Shareholder Agreement, issue or
sell, or otherwise dispose of any Capital Stock (including the Series B
Preferred Stock) or Capital Stock of any Subsidiary, dissolve or liquidate,
or effect any consolidation or merger involving the Company or any
Subsidiary or any reclassification, corporate reorganization, stock split
or reverse stock split, or other change of any class of Capital Stock of
the Company or of any Subsidiary;
(e) enter into any business that the Company or any Subsidiary is not
conducting on the date of this Agreement or acquire any substantial
business operation or assets (through a stock or asset purchase or
otherwise except for businesses and acquisitions permitted by the Senior
Loan Agreement);
(f) except for the employment agreements disclosed in Schedule 7.10 to
the Note Agreement and except for Permitted Stock, enter into any
transaction or transactions with any director, officer, employee, or
shareholder of the Company, or any Affiliate or relative of the foregoing
except upon terms that, in the opinion of the Holders, are fair and
reasonable and that are, in any event, at least as favorable as would
result in a comparable arm's-length transaction with a Person not a
director, officer, employee, shareholder, or
Preferred Stock and Warrant Purchase Agreement - Page 26
- ----------------------------------------------
<PAGE>
Affiliate of the Company or any Affiliate or related party of the
foregoing, or advance any monies to any such Persons, except for travel
advances in the ordinary course of business;
(g) except for the employment agreements disclosed in Schedule 7.10 to
the Note Agreement, increase the amount of remuneration permitted under
Section 7.10 of the Note Agreement;
(h) except for (i) acquisitions permitted under the Note Agreement and
Section 9.2 of the Senior Loan Agreement, (ii) Permitted Indebtedness (as
defined in Section 11.1 of the Note Agreement), and (iii) other capital
contributions, permitted purchases, advances and loans permitted by the
Senior Loan Agreement, acquire any debt or equity interest in any Person or
establish or acquire a Subsidiary or make any additional capital
contribution or purchase any additional equity in any Subsidiary or make
any advances or loans to any Subsidiary or transfer any technology or
assets to any Subsidiary;
(i) except for the employment agreements disclosed in Schedule 7.10 of
the Note Agreement, modify, amend, terminate or waive any material
provision of the Employment Agreements;
(j) allow the aggregate par value of the Capital Stock subject to the
Warrants from time to time to exceed the price payable upon exercise of the
Warrants, as adjusted from time to time; or
(k) obligate itself or otherwise agree to take, permit or enter into
any of the events described in subsections (a) through (j) above.
--------------- ---
4.05 Records. The Company and each of its Subsidiaries will keep books and
-------
records of account in which full, true, and correct entries will be made of all
dealings and transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.
4.06 Accountants. The Company will retain independent public accountants
-----------
who will certify the consolidated and, at Purchaser's request, consolidating
financial statements of the Company and its Subsidiaries at the end of each
fiscal year, and in the event that the services of the independent public
accountants so selected, or any firm of independent public accounts hereafter
employed by Company or any Subsidiary, are terminated, the Company will promptly
thereafter notify each Holder and upon the Holders' request, the Company will
request the firm of independent public accountants whose services are terminated
to deliver (without liability for such firm) to each Holder a letter of such
firm setting forth the reasons for the termination of their services and in its
notice to each Holder the Company or such Subsidiary will state whether the
change of accountants was recommended or approved by the board of directors of
the Company or any Subsidiaries or any committee thereof.
Preferred Stock and Warrant Purchase Agreement - Page 27
- ----------------------------------------------
<PAGE>
4.07 Existence. Except as otherwise expressly required or permitted by the
---------
Note Agreement or this Agreement, the Company will maintain in full force and
effect its corporate existence, rights, and franchises and all licenses and
other rights to use Intellectual Property.
4.08 Notice.
------
(a) In the event of (i) any setting by the Company of a record date
with respect to the holders of any class of Capital Stock for the purpose
of determining which of such holders are entitled to dividends, repurchases
of securities or other distributions, or any right to subscribe for,
purchase or otherwise acquire any shares of Capital Stock or other property
or to receive any other right; or (ii) any capital reorganization of the
Company, or reclassification or recapitalization of the Capital Stock or
any transfer of all or a majority of the assets, business, or revenue or
income generating capacity of the Company, or consolidation, merger, share
exchange, reorganization, or similar transaction involving the Company; or
(iii) any voluntary or involuntary dissolution, liquidation, or winding up
of the Company; or (iv) any proposed issue or grant by the Company of any
Capital Stock, or any right or option to subscribe for, purchase, or
otherwise acquire any Capital Stock (other than the issue of Issuable
Warrant Shares upon exercise of the Warrants), then, in each such event,
the Company will deliver or cause to be delivered to the Holders a notice
specifying, as the case may be, (A) the date on which any such record is to
be set for the purpose of such dividend, distribution, or right, and
stating the amount and character of such dividend, distribution, or right;
(B) the date as of which the holders of record will be entitled to vote on
any reorganization, reclassification, recapitalization, transfer,
consolidation, merger, share exchange, conveyance, dissolution,
liquidation, or winding-up; (C) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger, share
exchange, conveyance, dissolution, liquidation, or winding-up is to take
place and the time, if any is to be fixed, as of which the holders of
record of any class of Capital Stock will be entitled to exchange their
shares of Capital Stock for securities or other property deliverable upon
such event; and (D) the amount and character of any Capital Stock,
property, or rights proposed to be issued or granted, the consideration to
be received therefor, and, in the case of rights or options, the exercise
price thereof, and the date of such proposed issue or grant and the Persons
or class of Persons to whom such proposed issue or grant will be offered or
made. Any such notice will be deposited in the United States mail, postage
prepaid, at least thirty (30) days prior to the date therein specified, and
notwithstanding anything in this Agreement or the Warrants to the contrary
the Holders may exercise the Warrants within thirty (30) days from the
mailing of such notice. The Company shall, promptly on request of a
Holder, provide such other information as the Holders may reasonably
request.
(b) If there is any adjustment as provided above in Article II, or if
----------
any Other Securities become issuable in lieu of shares of such Common Stock
upon exercise of the Warrants, the Company will immediately cause written
notice thereof to be sent to each Holder, which notice will be accompanied
by a certificate of the independent public accountants of the Company
setting forth in reasonable detail the basis for the Holders' becoming
entitled to receive such Other Securities, the facts requiring any such
adjustment
Preferred Stock and Warrant Purchase Agreement - Page 28
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<PAGE>
in the number of shares receivable after such adjustment, or the kind and
amount of any Other Securities so purchasable upon the exercise of the
Warrants, as the case may be. At the request of any Holder and upon
surrender of the Warrant of such Holder, the Company will reissue such
Warrant of such Holder in a form conforming to such adjustments.
4.09 Taxes. The Company will, and will cause its Subsidiaries to, file all
-----
required tax returns, reports, and requests for refunds on a timely basis and
will, and will cause its Subsidiaries to, pay on a timely basis all taxes
imposed on either it or its Subsidiaries, as the case may be, or upon any of its
assets, income or franchises or those of its Subsidiaries, as the case may be;
provided, however, that neither the Company nor any Subsidiary shall be required
to pay or discharge any tax, levy, assessment, or governmental charge (a) which
is being contested in good faith by appropriate proceedings diligently pursued,
and for which adequate reserves in accordance with GAAP (as defined in Section
11.1 of the Note Agreement) have been established or (b) if the failure to pay
the same would not (i) result in a material Lien (as defined in Section 11.1 of
the Note Agreement) on the property of the Company or any Subsidiary and (ii)
would not otherwise result in a Material Adverse Effect (as defined in Section
11.1 of the Note Agreement).
4.10 Warrant Rights. The Company covenants and agrees that during the term
--------------
of this Agreement and so long as any of the Warrants are outstanding, (a) the
Company will at all times have authorized and reserved a sufficient number of
shares of Common Stock and Other Securities, to provide for the exercise in full
of the rights represented by the Warrants and the exercise in full of the rights
of the Holders under the Shareholder Agreement; (b) the Company will not
increase or permit to be increased the par value per share or stated capital of
the Issuable Warrant Shares or the consideration receivable upon issuance of its
Issuable Warrant Shares; and (c) in the event that the exercise of the Warrants
would require the payment by the Holder of consideration for the Common Stock or
Other Securities receivable upon such exercise of less than the par or stated
value of such Issuable Warrant Shares, the Company and the Shareholder will
promptly take such action as may be necessary to change the par or stated value
of such Issuable Warrant Shares to an amount less than or equal to such
consideration.
4.11 Board Observation and Membership. The Company will deliver to each
--------------------------------
Holder a copy of the minutes of and all materials distributed at or prior to all
meetings of the board of directors (including the executive, compensation or
other committee thereof) or shareholders of the Company, certified as true and
accurate by the Secretary of the Company, promptly following each such meeting.
The Company will (a) permit each Holder to designate one (1) person to attend
all meetings of the Company's board of directors (including executive,
compensation or other committee meetings), (b) provide such designees not less
than twenty-one (21) calendar days' actual notice of all regular meetings and
seven (7) calendar days' actual notice of all special meetings of the Company's
board of directors (including the executive, compensation or other committees
thereof) or shareholders, (c) permit such designees to attend such meetings as
an observer, (d) permit Rice (or Rice's representatives), so long as Rice is a
Holder or owns any stock, warrants or other equity interest in the Company, to
designate not more than a majority in number of the members of the board of
directors and a majority in number of the members of each
Preferred Stock and Warrant Purchase Agreement - Page 29
- ----------------------------------------------
<PAGE>
committee thereof, (e) permit the Southland Purchasers (or the Southland
Purchasers' representative which may be F-Jotan or its representatives), so long
as the Southland Purchasers are Holders or otherwise own, directly or
indirectly, any Common Stock, Warrants or other beneficial or equity interest in
respect of the Capital Stock of the Company, to designate one (1) individual to
serve as a member of the Company's board of directors, and provide to such
designees a copy of all materials distributed at such meetings or otherwise to
the board of directors of the Company.
For so long as any Purchaser is a Holder or owns any stock, warrants or
other equity interest in the Company, at all times the board of directors will
consist of no more than seven (7) members (at least one of whom will be an
independent director selected by the board of directors); provided, however,
-------- -------
that if a majority of the board of directors shall at any time not consist of
Rice designees, the board of directors shall, on Rice's request, immediately be
increased in size so as to permit Rice to elect a majority of the board of
directors as contemplated herein and in paragraph B.4 of Section 4.2 of Article
IV of the Articles of Amendment of the Restated Articles of Incorporation of the
Company as in effect as of the Closing Date (as amended from time to time with
the approval of the board of directors) ("Articles"). Rice may designate one or
more of its designees (but not necessarily all of its designees at any one time)
to serve on the Board of Directors at such time or times as its shall determine
in its sole discretion (such appointments, if Rice so determines, at all times,
to constitute at least a majority of the board of directors).
Notwithstanding anything contained herein or in the Articles, if Rice shall
at any time own, directly or indirectly, less than ten (10%) percent of the
beneficial or other equity interest in respect of the Capital Stock of the
Company (subject to adjustments therein as contemplated by Section 2.08(a)(ii)
and (iii) hereof) that it acquires on the Closing Date, then the rights of Rice,
set forth in this Agreement, the Shareholder Agreement and the Articles (as a
Holder of Series B Preferred Stock), to designate a majority in number of the
board of directors shall expire and terminate on the first day of the month next
following such change in ownership, except that Rice may designate one (1)
individual to continue to serve as a member of the Company's board of directors
and as a member of each committee thereof, with all rights and privileges
attendant thereto, as contemplated herein, so long as Rice owns, directly or
indirectly, any beneficial or other equity interest in respect of the Capital
Stock of the Company.
Such meetings shall be held in person at least quarterly, and the Company
will cause its board of directors to call a meeting at any time upon the request
of any such designated observer on not more than two (2) occasions per calendar
year upon seven (7) calendar days' actual notice to the Company. The Company
agrees to compensate designees of Rice referred to in Subsection (d) and
--------------
designees of the Southland Purchasers referred to in Subsection (e) above in the
same manner as each of the other members of the Company's board of directors and
agrees to reimburse each individual referred to in Subsections (a), (d) and (e)
--------------- --- ---
above for all reasonable expenses incurred in traveling to and from such
meetings and attending such meetings
4.12 Going Private Vote. If the Board of Directors shall resolve that it
------------------
is in the best interests of the Company to discontinue reporting to the
Securities and Exchange Commission as
Preferred Stock and Warrant Purchase Agreement - Page 30
- ----------------------------------------------
<PAGE>
a public company in accordance with the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder ("going private"),
-------------
such resolution shall take effect if and only if the majority of the
shareholders of the Company exclusive of Rice, the Southland Purchasers and F-
Jotan (the "Non-Purchaser Shareholders") shall also approve such action.
--------------------------
Notwithstanding the foregoing, such special voting rights of the Non-Purchaser
Shareholders shall not apply to any transaction in which (a) the Company may
sell all or any part of its assets or Capital Stock, (b) Rice, the Southland
Purchasers and/or F-Jotan may sell all or any part of their respective Capital
Stock of the Company, or (c) any of Rice, the Southland Purchasers and/or F-
Jotan may enter into any similar or related transaction of any kind or
description, it being the intent of the parties hereto to address, in this
Section 4.12, only the vote required by the Non-Purchaser Shareholders for the
- ------------
consummation by the Company of a going private transaction.
Article V
Conditions
The obligations of each Purchaser to effect the transactions
contemplated by this Agreement are subject to the following conditions
precedent:
5.01 Opinion. Each Purchaser will have received favorable opinions,
-------
dated the Closing Date, from Alston & Bird and Foley & Lardner counsel for
Company covering matters raised by this Agreement, the Shareholder Agreement,
and such other matters as any Purchaser or its counsel may request, and
otherwise in form and substance satisfactory to each Purchaser and its counsel.
5.02 Note Agreement Conditions. All of the conditions precedent to
-------------------------
the obligations of Purchaser under the Note Agreement will have been satisfied
in full.
5.03 Material Change. There will have occurred no material adverse
---------------
change in the business, prospects, results of operations, or condition,
financial or otherwise, of the Company.
5.04 Shareholder Agreement. The Company, F-Jotan and the Shareholder
---------------------
will have entered into the Shareholder Agreement with Purchaser.
5.05 Representations and Agreements. Each representation and
------------------------------
warranty of the Company and the Shareholder set forth in this Agreement will be
true and correct in all material respects when made and as of the Closing Date,
and the Company and the Shareholder will have fully performed all their
covenants and agreements set forth in this Agreement in all material respects.
5.06 Proceedings; Consents. All proceedings taken in connection
---------------------
with the transactions contemplated by this Agreement, and all documents
necessary to the consummation of this Agreement, will be satisfactory in form
and substance to the Purchaser and its counsel, and the Purchaser and its
counsel will have received certificates of compliance and copies (executed or
certified as may be appropriate) of all documents, instruments, and agreements
that the Purchaser or its counsel reasonably may request in connection with the
consummation of such transactions.
Preferred Stock and Warrant Purchase Agreement - Page 31
- ----------------------------------------------
<PAGE>
All consents of any Person necessary to the consummation of the transactions
contemplated by this Agreement and the Shareholder Agreement will have been
received, be in full force and effect, and not be subject to any onerous
condition.
5.07 Reservation of Common Stock. The Purchaser will have received
---------------------------
evidence satisfactory to the Purchaser that the Company has reserved a
sufficient number of shares of Common Stock for the Purchaser to exercise the
Warrants and convert the Preferred Shares.
5.08 Origination Fee. The Company shall have paid to Rice an
---------------
origination fee of $200,000.00, F-Southland an origination fee of $25,000 and
FF-Southland an origination fee of $25,000, in immediately available funds, on
the Closing Date, which fee shall be deemed fully earned and nonrefundable on
the Closing Date.
5.09 Government Filings. All filings under (a) the Hart-Scott-Rodino
------------------
Act and (b) all applicable state and federal securities laws, rules and
regulations shall have been made and all requirements in connection therewith
shall have been met by the Company, each Purchaser and the Shareholder.
Article VI
Miscellaneous
6.01 Indemnification. In addition to any other rights or remedies to
---------------
which the Purchaser and the Holders may be entitled, the Company and the
Shareholder (solely with respect to the representations and warranties made by
him) severally and not jointly agree to and will indemnify and hold harmless the
Purchaser and F-Jotan, the Holders, and their Affiliates and their respective
successors, assigns, officers, directors, managers, employees, attorneys, and
agents (individually and collectively, an "Indemnified Party") from and against
-----------------
any and all losses, claims, obligations, liabilities, deficiencies, penalties,
causes of action, damages, costs, and expenses (including, without limitation,
costs of investigation and defense, attorneys' fees, and expenses), including,
without limitation, those arising out of the contributory negligence of any
Indemnified Party, that the Indemnified Party may suffer, incur, or be
responsible for, arising or resulting from, to the extent applicable, any
misrepresentation, breach of warranty, or nonfulfillment of any covenant or
agreement on the part of the Company or the Shareholder (solely with respect to
the representations and warranties made by him) under this Agreement, the
Shareholder Agreement, or under any other agreement to which the Company or the
Shareholder is a party in connection with this transaction, or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished to the Purchaser or the Holders under this
Agreement.
6.02 Default. It is agreed that a violation by any party of the
-------
terms of this Agreement cannot be adequately measured or compensated in money
damages, and that any breach or threatened breach of this Agreement by a party
to this Agreement would do irreparable injury to the nondefaulting party. It is,
therefore, agreed that in the event of any breach or threatened breach by a
party to this Agreement of the terms and conditions set forth in this Agreement,
the nondefaulting party will be entitled, in addition to any and all other
rights and remedies that it may have in law or in equity, to apply for and
obtain injunctive relief requiring the defaulting party to
Preferred Stock and Warrant Purchase Agreement - Page 32
- ----------------------------------------------
<PAGE>
be restrained from any such breach or threatened breach or to refrain from a
contiuation of any actual breach.
6.03 Integration. This Agreement, the Warrants and the
-----------
Shareholder Agreement constitute the entire agreement between the parties with
respect to the subject matter hereof and thereof and supersede all previous
written, and all previous or contemporaneous oral, negotiations, understandings,
arrangements, and agreements. This Agreement may not be amended or supplemented
except by a writing signed by Company, the Shareholder, and each Holder.
6.04 Headings. The headings in this Agreement are for convenience
--------
and reference only and are not part of the substance of this Agreement.
References in this Agreement to Sections and Articles are references to the
Sections and Articles of this Agreement unless otherwise specified.
6.05 Severability. The parties to this Agreement expressly agree
------------
that it is not the intention of any of them to violate any public policy,
statutory or common law rules, regulations, or decisions of any governmental or
regulatory body. If any provision of this Agreement is judicially or
administratively interpreted or construed as being in violation of any such
policy, rule, regulation, or decision, the provision, section, sentence, word,
clause, or combination thereof causing such violation will be inoperative (and
in lieu thereof there will be inserted such provision, sentence, word, clause,
or combination thereof as may be valid and consistent with the intent of the
parties under this Agreement) and the remainder of this Agreement, as amended,
will remain binding upon the parties, unless the inoperative provision would
cause enforcement of the remainder of this Agreement to be inequitable under the
circumstances.
6.06 Notices. Whenever it is provided herein that any notice,
-------
demand, request, consent, approval, declaration, or other communication be given
to or served upon any of the parties by another, such notice, demand, request,
consent, approval, declaration, or other communication will be in writing and
addressed to the party to be notified as set forth below. Notices shall be
deemed to have been validly served, given or delivered (and "the date of such
notice" or words of similar effect shall mean the date) five (5) days after
deposit in the United States mails, certified mail, return receipt requested,
with proper postage prepaid, or upon actual receipt thereof with written
acknowledgment of receipt (whether by noncertified mail, telecopy, telegram,
facsimile, express delivery, hand delivery or otherwise), whichever is earlier.
If to Rice, at: Address of Rice beneath the name of Rice on the
signature pages of this Agreement
If to the Southland
Purchasers, at: Address of the Southland Purchasers beneath the
name of the Southland Purchasers on the
signature pages of this Agreement
with courtesy copies to: Wyrick, Robins, Yates & Ponton, L.L.P.
Preferred Stock and Warrant Purchase Agreement - Page 33
- ----------------------------------------------
<PAGE>
4101 Lake Boone Trail, Suite 300
Raleigh, North Carolina 27607-7506
Attn: James M. Yates, Jr.
Facsimile: (919) 781-4865
If to F-Jotan, at: Address of F-Jotan beneath the name of
F-Jotan on the signature pages of this
Agreement
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attn: Larry A. Makel, Esq.
FAX: 214-939-6100
If to the Company, at: Jotan, Inc.
118 West Adams Street
Jacksonville, Florida 32202
Attn: President
Fax: 904-353-0075
with courtesy copies to: Alston & Bird
One Atlantic Center
1201 W. Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Stephen A. Opler, Esq.
Fax: 404-881-7777
If to the Shareholder, Address of such Shareholder beneath
his/her name on the signature pages
of this Agreement
or to such other address as each party may designate for itself by like notice.
Notice to any Holder other than the Purchaser will be delivered as set forth
above to the address shown on the stock transfer books of the Company or the
Warrant Register unless such Holder has advised the Company in writing of a
different address to which notices are to be sent under this Agreement.
Failure or delay in delivering courtesy copies of any notice, demand,
request, consent, approval, declaration, or other communication to the persons
designated above to receive copies of the actual notice will in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration, or other communication.
Preferred Stock and Warrant Purchase Agreement - Page 34
- ----------------------------------------------
<PAGE>
No notice, demand, request, consent, approval, declaration or other
communication will be deemed to have been given or received unless and until it
sets forth all items of information required to be set forth therein pursuant to
the terms of this Agreement.
6.07 Successors. This Agreement will be binding upon and inure
----------
to the benefit of the parties and their respective successors and assigns;
provided, however, that no sale, assignment or other transfer by any party to
- -------- -------
this Agreement of any of its Capital Stock or rights hereunder to another Person
will be valid and effective unless and until the transferee or assignee first
agrees in writing to be bound by the terms and conditions of this Agreement and
the Shareholders Agreement, and the agreements and instruments related hereto
and thereto, in a form and substance reasonably satisfactory to the Company.
6.08 Remedies. The failure of any party to enforce any right or
--------
remedy under this Agreement, or promptly to enforce any such right or remedy,
will not constitute a waiver thereof, nor give rise to any estoppel against
such party, nor excuse any other party from its obligations under this
Agreement. Any waiver of any such right or remedy by any party must be in
writing and signed by the party against which such waiver is sought to be
enforced.
6.09 Survival. All warranties, representations, and covenants
--------
made by any party in this Agreement or in any certificate or other instrument
delivered by such party or on its behalf under this Agreement will be considered
to have been relied upon by the party to which it is delivered and will survive
the Closing Date, regardless of any investigation made by such party or on its
behalf. All statements in any such certificate or other instrument will
constitute warranties and representations under this Agreement.
6.10 Fees. Any and all fees, costs, and expenses, of whatever
----
kind and nature, including attorneys' fees and expenses, incurred by the Holders
in connection with the defense or prosecution of any actions or proceedings
arising out of or in connection with this Agreement will be borne and paid by
the Company within ten (10) days of demand by the Holders.
6.11 Counterparts. This Agreement may be executed in any number
------------
of counterparts, which will individually and collectively constitute one
agreement.
6.12 Other Business. It is understood and accepted that the
--------------
Purchaser, F-Jotan, the Holders, and their Affiliates have interests in other
business ventures that may be in conflict with the activities of the Company and
that nothing in this Agreement will limit the current or future business
activities of such parties whether or not such activities are competitive with
those of the Company. The Company and the Shareholder agree that all business
opportunities that may be available to such parties in any field substantially
related to the business of the Company will be pursued exclusively through the
Company.
6.13 Choice of Law. THIS AGREEMENT WILL BE INTERPRETED AND THE
-------------
RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED
STATES APPLICABLE THERETO AND THE INTERNAL LAWS OF
Preferred Stock and Warrant Purchase Agreement - Page 35
- ----------------------------------------------
<PAGE>
THE STATE OF FLORIDA APPLICABLE TO AN AGREEMENT EXECUTED, DELIVERED AND
PERFORMED THEREIN WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW RULES THEREOF OR
ANY OTHER PRINCIPLE THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF
ANY OTHER JURISDICTION.
6.14 Duties Among Holders. Each Holder agrees that no other
--------------------
Holder will by virtue of this Agreement be under any fiduciary or other duty to
give or withhold any consent or approval under this Agreement or to take any
other action or omit to take any action under this Agreement, and that each
other Holder may act or refrain from acting under this Agreement as such other
Holder may, in its discretion, elect.
6.15 Waiver of Jury Trial. AFTER REVIEWING THIS SECTION 6.15 WITH
--------------------
ITS COUNSEL, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY, F-
JOTAN, EACH PURCHASER AND EACH SHAREHOLDER HEREBY KNOWINGLY, INTELLIGENTLY AND
INTENTIONALLY, IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENTS ENTERED
INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY
OR THE ACTIONS OF THE COMPANY, F-JOTAN, EACH PURCHASER AND EACH SHAREHOLDER IN
THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT HEREOF OR THEREOF. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR EACH PURCHASER TO PURCHASE THE WARRANTS
AND PREFERRED STOCK FROM THE COMPANY.
6.16 Continuation of Directors' and Officers' Insurance and
------------------------------------------------------
Indemnification. For a period of two (2) years from the Closing Date, the
- ---------------
Company shall maintain in effect $1,000,000 of directors' and officers'
insurance for the benefit of directors serving in the capacity of directors of
the Company immediately prior to the Closing Date. Such insurance shall be
provided to the extent that (a) such insurance remains commercially available,
(b) the Company may purchase substantially similar coverage as exists at the
Closing Date and (c) such insurance may be obtained at a reasonable cost to the
Company not to exceed $30,000 per annum. The Company shall also retain, in
effect for the same period, those written indemnification provisions that exist
in the articles of incorporation or bylaws of the Company on the Closing Date
for the benefit of such directors (or other written provisions reasonably
equivalent thereto in effect on the Closing Date that are acceptable to
Purchaser). All such insurance and indemnifications shall apply only to the
actual period of service of each director.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Preferred Stock and Warrant Purchase Agreement - Page 36
- ----------------------------------------------
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
COMPANY:
-------
JOTAN, INC.
BY:/s/ Shea E. Ralph
---------------------------
Shea E. Ralph & President
Chief Executive Officer
118 West Adams Street
Jacksonville, Florida 32201
Attn: President
Fax: (904) 343-0075
Preferred Stock and Warrant Purchase Agreement - Page 37
- ----------------------------------------------
<PAGE>
RICE:
----
RICE PARTNERS II, L.P.
By: Rice Capital Group IV, L.P.,
Its general partner
By: RMC Fund Management, L.P.,
Its general partner
By: Rice Mezzanine Corporation,
Its general partner
By:/s/ Jeffrey P. Sangalis
--------------------------
Name: Jeffrey P. Sangalis
Its: Managing Director
5847 San Felipe, Suite 4350
Houston, Texas 77057
Attn: Jeffrey P. Sangalis
Fax: (713) 783-9750
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred Stock
40,000 Shares of Series B
Redeemable Preferred Stock
None Shares of Common Stock
2,515,203 Warrant A-1 Shares
9,581,726 Warrant A-2 Shares
Preferred Stock and Warrant Purchase Agreement - Page 38
- ----------------------------------------------
<PAGE>
F-JOTAN, L.L.C.
By: Franklin Street/Fairview Capital, L.L.C.,
its Manager
By: /s/ Jeremiah M. Callahan
-----------------------------
Jeremiah M. Callahan,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
OWNED ON CLOSING DATE:
1,329,357 Shares of Series A
Convertible Preferred Stock
None Shares of Common Stock
None Other Equity Interests
Preferred Stock and Warrant Purchase Agreement - Page 39
- ----------------------------------------------
<PAGE>
THE SOUTHLAND PURCHASERS:
F-SOUTHLAND, L.L.C.
By: Franklin Street/Fairview Capital, L.L.C.,
its Manager
By: /s/ Jeremiah M. Callahan
----------------------------------
Jeremiah M. Callahan, Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred Stock
5,000 Shares of Series B
Redeemable Preferred Stock
None Shares of Common Stock
359,315 Warrant B-1 Shares
1,197,716 Warrant B-2 Shares
Preferred Stock and Warrant Purchase Agreement - Page 40
- ----------------------------------------------
<PAGE>
FF-SOUTHLAND, L.P.
By: FSFC Associates, L.P.,
Its general partner
By: Franklin Capital, L.L.C.,
Its general partner
By: /s/ Jeremiah M. Callahan
-------------------------------
Jeremiah M. Callahan,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred Stock
5,000 Shares of Series B
Redeemable Preferred Stock
None Shares of Common Stock
359,315 Warrant C-1 Shares
1,197,716 Warrant C-2 Shares
Preferred Stock and Warrant Purchase Agreement - Page 41
- ----------------------------------------------
<PAGE>
SHAREHOLDER:
-----------
David Freedman
/s/ David Freedman
--------------------------
OWNED ON CLOSING DATE:
None Shares of Common Stock
Owned on Closing Date
275,000 Common Stock Options
Shea E. Ralph
/s/ Shea E. Ralph
----------------------------
OWNED ON CLOSING DATE:
950,000 Shares of Common Stock
Owned on Closing Date
33,000 Other Equity Interests
Preferred Stock and Warrant Purchase Agreement - Page 42
- ----------------------------------------------
<PAGE>
ANNEX B
WARRANT A-1
-----------
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION
WITH THE DISTRIBUTION HEREOF. THIS WARRANT AND THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, INCLUDING, WITHOUT
LIMITATION, THE NORTH CAROLINA SECURITIES ACT, AS AMENDED, THE TEXAS
SECURITIES ACT OF 1957, AS AMENDED, AND THE GEORGIA SECURITIES ACT OF 1973,
AS AMENDED, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE, TRANSFERRED, OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER OR EXEMPTION
FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES LAWS.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT
TO THE TERMS AND PROVISIONS OF A PREFERRED STOCK AND WARRANT PURCHASE
AGREEMENT AND A SHAREHOLDER AGREEMENT, EACH DATED AS OF FEBRUARY 28, 1997,
BY AND AMONG JOTAN, INC. (THE "COMPANY"), RICE PARTNERS II, L.P., F-
SOUTHLAND, L.L.C. AND FF-SOUTHLAND, L.P., F-JOTAN, L.L.C. AND THE OTHER
PARTIES LISTED ON THE SIGNATURE PAGES TO SUCH SHAREHOLDER AGREEMENT (AS
SUCH AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM
TIME TO TIME, THE "AGREEMENTS"). COPIES OF THE AGREEMENTS ARE AVAILABLE AT
THE EXECUTIVE OFFICES OF THE COMPANY.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF
CODE SECTION 10-5-9 OF THE "GEORGIA SECURITIES ACT OF 1973," AND MAY NOT BE
SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT
OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
2,515,203 shares of
Common Stock,
$0.01 par value,
of the Company Warrant No. A-1
WARRANT A-1 - Page 1
- -----------
<PAGE>
WARRANT TO PURCHASE COMMON STOCK OF
JOTAN, INC.
This is to certify that, in consideration of one hundred dollars
($100.00) and other valuable consideration, which is hereby acknowledged as
received, Rice Partners II, L.P., its successors and registered assigns, is
entitled at any time after the Closing Date (as defined in the Agreements) and
prior to 12:00 midnight on the tenth anniversary of the Agreements, to exercise
this Warrant to purchase Two Million Five Hundred Fifteen Thousand Two Hundred
Fifty-Three (2,515,203) shares of the common stock, $0.01 par value per share,
of Jotan, Inc., a Florida corporation (the "Company"), as the same shall be
-------
adjusted from time to time pursuant to the provisions of the Agreements at a
price per share as specified in the Agreements and to exercise the other rights,
powers, and privileges hereinafter provided, all on the terms and subject to the
conditions specified in this Warrant and in the Agreements.
This Warrant is issued under, and the rights represented hereby are
subject to the terms and provisions contained in the Agreements, to all terms
and provisions of which the registered holder of this Warrant, by acceptance of
this Warrant, assents. Reference is hereby made to the Agreements for a more
complete statement of the rights and limitations of rights of the registered
holder of this Warrant and the rights and duties of the Company under this
Warrant. Copies of the Agreements are on file at the office of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed.
Dated as of February 28, 1997.
JOTAN, INC.
By: /s/ Shea E. Ralph
------------------------------------------
Shea E. Ralph,
Chief Executive Officer & President
WARRANT A-1 - Page 2
- -----------
<PAGE>
SUBSCRIPTION FORM
-----------------
(To be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases _________ of the number of shares of Common Stock
of Jotan, Inc. purchasable with this Warrant, and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant and requests that certificates for the shares of Common Stock hereby
purchased (and any securities or other property issuable upon such exercise) be
issued in the name of and delivered to ___________ whose address is
__________________________, and if such shares of Common Stock do not include
all of the shares of Common Stock issuable as provided in this Warrant, that a
new Warrant of like tenor and date for the balance of the shares of Common Stock
issuable thereunder to be delivered to the undersigned.
Dated: ________________, 199 ______.
______________________________________________
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
Address: _____________________________________
_____________________________________
_____________________________________
WARRANT A-1 - Page 3
- -----------
<PAGE>
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares Name and Address of Assignee
------------- ----------------------------
and does hereby irrevocably constitute and appoint as attorney _____________ to
register such transfer on the books of _________________ maintained for the
purpose, with full power of substitution in the premises.
Dated: ________, 199____.
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
WARRANT A-1 - Page 4
- -----------
<PAGE>
ANNEX C
WARRANT A-2
-----------
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION
WITH THE DISTRIBUTION HEREOF. THIS WARRANT AND THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, INCLUDING, WITHOUT
LIMITATION, THE NORTH CAROLINA SECURITIES ACT, AS AMENDED, THE TEXAS
SECURITIES ACT OF 1957, AS AMENDED, AND THE GEORGIA SECURITIES ACT OF 1973,
AS AMENDED, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE, TRANSFERRED, OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER OR EXEMPTION
FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES LAWS.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT
TO THE TERMS AND PROVISIONS OF A PREFERRED STOCK AND WARRANT PURCHASE
AGREEMENT AND A SHAREHOLDER AGREEMENT, EACH DATED AS OF FEBRUARY 28, 1997,
BY AND AMONG JOTAN, INC. (THE "COMPANY"), RICE PARTNERS II, L.P., F-
SOUTHLAND, L.L.C. AND FF-SOUTHLAND, L.P., F-JOTAN, L.L.C. AND THE OTHER
PARTIES LISTED ON THE SIGNATURE PAGES TO SUCH SHAREHOLDER AGREEMENT (AS
SUCH AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM
TIME TO TIME, THE "AGREEMENTS"). COPIES OF THE AGREEMENTS ARE AVAILABLE AT
THE EXECUTIVE OFFICES OF THE COMPANY.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF
CODE SECTION 10-5-9 OF THE "GEORGIA SECURITIES ACT OF 1973," AND MAY NOT BE
SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT
OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
9,581,726 shares of
Common Stock,
$0.01 par value,
of the Company Warrant No. A-2
WARRANT A-2 - Page 1
- -----------
<PAGE>
WARRANT TO PURCHASE COMMON STOCK OF
JOTAN, INC.
This is to certify that, in consideration of one hundred dollars
($100.00) and other valuable consideration, which is hereby acknowledged as
received, Rice Partners II, L.P., its successors and registered assigns, is
entitled at any time after the Closing Date (as defined in the Agreements) and
prior to 12:00 midnight on the tenth anniversary of the Agreements, to exercise
this Warrant to purchase Nine Million Five Hundred Eighty-One Thousand Seven
Hundred Twenty-Six (9,581,726) shares of the common stock, $0.01 par value per
share, of Jotan, Inc., a Florida corporation (the "Company"), as the same shall
-------
be adjusted from time to time pursuant to the provisions of the Agreements at a
price per share as specified in the Agreements and to exercise the other rights,
powers, and privileges hereinafter provided, all on the terms and subject to the
conditions specified in this Warrant and in the Agreements.
This Warrant is issued under, and the rights represented hereby are
subject to the terms and provisions contained in the Agreements, to all terms
and provisions of which the registered holder of this Warrant, by acceptance of
this Warrant, assents. Reference is hereby made to the Agreements for a more
complete statement of the rights and limitations of rights of the registered
holder of this Warrant and the rights and duties of the Company under this
Warrant. Copies of the Agreements are on file at the office of the Company.
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
WARRANT A-2 - Page 2
- -----------
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed.
Dated as of February 28, 1997.
JOTAN, INC.
By: /s/ Shea E. Ralph
------------------------------------------
Shea E. Ralph,
Chief Executive Officer & President
WARRANT A-2 - Page 3
- -----------
<PAGE>
SUBSCRIPTION FORM
-----------------
(To be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases _________ of the number of shares of Common Stock
of Jotan, Inc. purchasable with this Warrant, and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant and requests that certificates for the shares of Common Stock hereby
purchased (and any securities or other property issuable upon such exercise) be
issued in the name of and delivered to ___________ whose address is
__________________________, and if such shares of Common Stock do not include
all of the shares of Common Stock issuable as provided in this Warrant, that a
new Warrant of like tenor and date for the balance of the shares of Common Stock
issuable thereunder to be delivered to the undersigned.
Dated: ________________, 199 ______.
______________________________________________
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
Address: _____________________________________
_____________________________________
_____________________________________
WARRANT A-2 - Page 4
- -----------
<PAGE>
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares Name and Address of Assignee
------------- ----------------------------
and does hereby irrevocably constitute and appoint as attorney _____________ to
register such transfer on the books of _________________ maintained for the
purpose, with full power of substitution in the premises.
Dated: ________, 199____.
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
WARRANT A-2 - Page 5
- -----------
<PAGE>
EXHIBIT 2
SHAREHOLDER AGREEMENT
---------------------
SHAREHOLDER AGREEMENT (the "Agreement") made as of February 28, 1997,
by and among JOTAN, INC., a Florida corporation (the "Company"), the
-------
SHAREHOLDERS of the Company listed on the signature pages hereof (individually
and collectively, as the context requires, the "Shareholder"), RICE PARTNERS II,
-----------
L.P., a Delaware limited partnership ("Rice"), and F-SOUTHLAND, L.L.C., a North
Carolina limited liability company ("F-Southland"), FF-SOUTHLAND, L.P., a
-----------
Delaware limited partnership ("FF-Southland" and together with F-Southland, the
------------
"Southland Purchasers", which, together with Rice are individually and
--------------------
collectively, as the context requires, referred to herein as the "Purchaser"),
---------
F-JOTAN, L.L.C., a North Carolina limited liability company ("F-Jotan") and each
-------
of the shareholders named on the signature pages hereto (individually and
collectively, as the context requires, the "Shareholder").
-----------
W I T N E S S E T H:
WHEREAS, each Shareholder owns beneficially and of record the number
of shares or share equivalents, set forth under the signature of such
Shareholder on this Agreement of the issued and outstanding capital stock of the
Company;
WHEREAS, F-Jotan, which is the owner of the 1,329,357 shares of the
Series A Preferred Stock of the Company as of the date hereof, will acquire
certain rights and benefits herein and in the Purchase Agreement (as defined
below) in consideration of terminating certain of its existing contractual
rights in respect of the Company as more fully described in Section 11.18 of
this Agreement;
WHEREAS, the Company has entered into a Note Purchase Agreement (the
"Note Agreement") dated of even date with this Agreement with the Purchaser;
- ---------------
WHEREAS, the Company, each Purchaser, F-Jotan and the Shareholder have
entered into a Preferred Stock and Warrant Purchase Agreement (the "Purchase
--------
Agreement") dated of even date with this Agreement with the Purchaser;
- ---------
WHEREAS, the Purchaser is willing to enter into and consummate the
transactions contemplated by the Note Agreement only if, among other things, the
Company and the Shareholder enter into, and perform under, this Agreement and
the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Purchaser, the Shareholder, and the Company, intending to be legally bound,
agree as follows:
Shareholder Agreement - Page 1
- ---------------------
<PAGE>
Article I
Definitions
All terms used in this Agreement will have the meanings ascribed to
them in the Purchase Agreement unless otherwise specifically defined in this
Agreement.
For purposes of Articles II and VII of this Agreement only, the term
----------- ---
"Holder" (as defined in the Purchase Agreement) shall also mean and include
- -------
F-Jotan and the term "Registrable Securities" shall mean and include the
----------------------
Series A Preferred Stock and the Common Stock issuable upon conversion of the
Series A Preferred Stock.
Article II
Holders' Preemptive Rights
2.01 Preemptive Right. The Company will not issue or sell any New
----------------
Securities without first complying with this Article II. The Company hereby
----------
grants to each Holder the preemptive right to purchase, pro rata, all or any
--------
part of the New Securities that the Company may, from time to time, propose to
sell or issue. In the event New Securities are offered or sold as part of a unit
with other New Securities, the preemptive right granted by this Article II will
----------
apply to such units and not to the individual New Securities composing such
units. Each Holder's pro rata share for purposes of Article II is the ratio that
----------
the number of shares of Common Stock issuable to such Holder upon exercise of
its Warrant and, in the case of F-Jotan, the number of shares of Common Stock
issuable upon conversion of its Series A Preferred Stock, plus the number of
shares of Common Stock that are Issued Warrant Shares or, in the case of
F-Jotan, converted Series A Preferred Stock, owned by such Holder immediately
prior to the issuance of the New Securities, bears to the sum of (x) the total
number of shares of Common Stock then outstanding, plus (y) the number of shares
of Common Stock issuable upon (1) exercise of all Warrants and (2) the
conversion of the Series A Preferred Stock then outstanding.
2.02 Notice to Holders. In the event the Company proposes to issue or
-----------------
sell New Securities, it will give each Holder written notice of its intention,
describing the type of New Securities and the price and terms upon which the
Company proposes to issue or sell the New Securities. Each Holder will have
fifteen (15) days from the date of receipt of any such notice and such
information as the Holders may reasonably request to facilitate their investment
decision to agree to purchase up to its respective pro rata share of the New
Securities for the price (valued at Fair Market Value for any noncash
consideration) and upon the terms specified in the notice by giving written
notice to the Company stating the quantity of New Securities agreed to be
purchased.
2.03 Allocation of Unsubscribed New Securities. In the event a Holder
-----------------------------------------
fails to exercise such preemptive right within such fifteen (15) day period, the
other Holders, if any, will have an additional five (5) day period to purchase
such Holder's portion not so agreed to be purchased in the same proportion in
which such other Holders were entitled to purchase the New Securities (excluding
for such purposes such nonpurchasing Holder). Thereafter, the Company will have
ninety (90) days to sell the New Securities not elected to be purchased by the
Holders at the same
Shareholder Agreement - Page 2
- ---------------------
<PAGE>
price and upon the same terms specified in the Company's notice described in
Section 2.02. In the event the Company has not sold the New Securities within
- ------------
such ninety (90) day period, the Company will not thereafter issue or sell any
New Securities without first offering such securities in the manner provided
above.
Article III
Dilution Fee
In the event that, during the term of the Warrants, the Company pays
any cash dividend or makes any cash distribution to any holder of any class of
its Capital Stock with respect to such Capital Stock, each Holder of the
Warrants will be entitled to receive in respect of its Warrant a dilution fee in
cash (the "Dilution Fee") on the date of payment of such dividend or
------------
distribution, which Dilution Fee will be equal to the difference between (a) the
highest amount per share paid to any class of Capital Stock times the number of
Issued Warrant Shares then owned by such Holder plus the number of Issuable
Warrant Shares then owned by such Holder, and (b) the amount of such dividend or
distribution otherwise paid to such Holder as a result of its ownership of
Common Stock. This provision shall not apply to the payment of cash dividends
on the Series B Preferred Stock.
Article IV
Put Option
4.01 Grant of Option. The Company hereby grants to each Holder an
---------------
option to sell to the Company, and the Company is obligated to purchase from
each Holder under such option (the "Put Option"), all (or such portion as is
----------
designated by any such Holder pursuant to Section 4.03 below) of the Put Shares,
------------
subject to Section 4.06 below. The Put Option will be effective at any time or
------------
times after the eighth (8th) anniversary of the date of this Agreement, or at
any time or times after the occurrence of any of the following events (the "Put
---
Option Period"):
- -------------
(a) the payment or prepayment of all indebtedness, liabilities
and obligations owing by the Company to the Purchaser under the Note
Agreement;
(b) (i) a material change in the ownership in the Company other
than by Rice and the Southland Purchasers (for purposes of this
subsection a "change of ownership" means the circumstance that F-Jotan
shall own, directly or indirectly, five percent (5%) (subject to
adjustments therein as contemplated in Section 2.08(a) (ii) and (iii)
of the Purchase Agreement) less than (A) the Registrable Securities so
owned by such party on the Closing Date or (B) the number of shares of
issued and outstanding voting stock of the Company (without giving
effect to the issuance of any shares of Common Stock under the
Warrants) so owned by such party on the Closing Date, or (ii) Rice
shall not have the legal right or ability, directly or through its
Subsidiaries, to elect a majority of the members of the board of
directors of the Company); or
(c) except as permitted by the Senior Loan Agreement as in
effect on the date hereof, a merger, consolidation, share exchange, or
similar transaction involving the
Shareholder Agreement - Page 3
- ---------------------
<PAGE>
Company or sale in one or more related transactions of all or a
substantial portion of the assets, business, or revenue or income
generating operations of the Company or any substantial change in the
type of business conducted by the Company; or
(d) after the occurrence and during the continuance of an Event
of Default (as defined in the Note Agreement) pursuant to Sections
--------
8.1(a), (b), (f) or (h) of the Note Agreement or any failure of the
------ --- --- ---
Company in any material respect to perform any of its obligations
hereunder or under the Purchase Agreement; provided, however, that the
-------- -------
Put Option Period will continue with respect to such Event of Default
or other failure, even after the same has been cured, if notice of
exercise of the Put Option by such Holder is provided pursuant to this
Article IV during the continuance of such Event of Default or such
----------
other failure, as the case may be.
The Company's obligations under this Article IV and the notes issued
pursuant to Section 4.04 hereof are subject to the provisions of the Senior
Subordination Agreement (as defined in Section 11.1 of the Note Agreement).
4.02 Put Price. In the event that any Holder exercises the Put
---------
Option, the price (the "Put Price") to be paid to each such Holder pursuant to
---------
this Agreement will be cash in the sum of the amount determined by multiplying
the higher of (a) the Book Value or (b) the Fair Market Value per share of
Common Stock as of the end of the month immediately preceding the date notice is
given of the exercise of the Put Option pursuant to Section 4.03 times the
------------
number of shares of Common Stock for which the Put Option is being exercised by
such Holder plus the higher of (a) the Book Value or (b) the Fair Market Value
of the Other Securities issuable upon exercise of the portion of the Warrants
subject to the Put Option; provided, however, the Fair Market Value (as opposed
-------- -------
to the Book Value) shall only be utilized in determining such Put Price if, for
the thirty (30) consecutive days prior to the exercise of the Put Option, the
Common Stock has been trading on a national securities exchange as its primary
market (as contemplated in clause (a) of the definition of Closing Price) with
an average trading volume of at least 150,000 shares per day and an average
market capitalization of the Company of at least $50,000,000 (calculated on the
basis of the product of (i) the number of shares of registered Common Stock
outstanding on the date of determination and (ii) the reported closing prices of
Common Stock quoted on such exchange over the period of thirty (30) days prior
to the date of determination).
4.03 Exercise of Put Option. The Put Option may be exercised during
----------------------
the Put Option Period with respect to all or any portion of the Put Shares. Such
option shall be exercised by such Holder giving notice to the Company and each
other Holder during the Put Option Period of the Holder's election to exercise
the Put Option, and the date of the Put Option Closing, which will be not less
than fifteen (15) nor more than ninety (90) days after the date of such notice.
The Company will provide each Holder desiring to exercise its Put Option the
name and address of each other Holder. Notwithstanding the foregoing, if a
Holder receives such notice of another Holder's exercise of such other Holder's
Put Option, the Holder receiving such notice may elect to exercise its Put
Option and designate a Put Option Closing simultaneous and pari passu with that
of such other Holder.
Shareholder Agreement - Page 4
- ---------------------
<PAGE>
4.04 Certain Remedies. In the event that the Company defaults in its
----------------
obligation to purchase all or any portion of the Put Shares upon exercise of the
Put Option, in addition to any other rights or remedies of each Holder, the
unpaid portion of the Put Price will bear interest at the highest rate permitted
by applicable law. The Company will, upon the request of any Holder, execute
and deliver to such Holder a promissory note in form and substance satisfactory
to such Holder evidencing such obligation.
4.05 Put Option Closing. The closing for the purchase and sale of all
------------------
or such portion of the Put Shares as to which the Holder has notified the
Company of its intention to exercise the Put Option, will take place at the
office of the Company on the date specified in such notice of exercise (a "Put
---
Option Closing"). At any Put Option Closing, to the extent applicable, the
- --------------
Holder of the Put Shares will deliver the certificate or certificates evidencing
the Put Shares being purchased, duly endorsed in blank. In consideration
therefor, the Company will deliver to the Holder the Put Price, which will be
payable in cash.
4.06 Limitations on Puts. No Holder other than Rice may, without the
-------------------
prior written consent of Rice, exercise its Put Option unless and until Rice
shall also exercise its Put Option under this Article IV. Rice shall have the
right, but not the obligation, if it does exercise its Put Option under this
Article IV, to require each other Holder, on twenty (20) days prior written
notice to such Holder, to exercise such Holder's Put Option on a pro rata basis,
with respect to all of the shares of Put Shares then owned, directly or
indirectly, by such Holder, on the same terms and at the same Put Option Closing
to be set forth in such notice.
Article V
Call Option
5.01 Grant of Option. Each Holder hereby severally grants to the
---------------
Company an option to require such Holder to sell to the Company, and each Holder
is obligated to sell to the Company under this option (the "Call Option"), all
-----------
(but not less than all) of its Warrant and its Warrant Shares. The Call Option
will be effective after the sixth (6th) anniversary of the date of this
Agreement (the "Call Option Period").
------------------
5.02 Call Price. In the event that the Company exercises the Call
----------
Option, the exercise price to be paid in cash to each Holder will be equal to
the Put Price determined in accordance with Section 4.02, except that the Call
------------
Option will be exercised with respect to all of the Warrants and all Warrant
Shares, and will be increased by an amount in cash equal to any Excess
Consideration received within one hundred eighty (180) days following the
exercise of the Call Option due to an Adjustment Event.
5.03 Exercise of Call Option. The Call Option may be exercised during
-----------------------
the Call Option Period with respect to all of the Warrants and the Warrant
Shares of the Holders, by the Company giving notice to each Holder during the
Call Option Period of the election of the Company to exercise the Call Option,
and the date of the Call Option Closing (as defined below), which in all events
will be within at least ten (10) days after the date of such notice.
Shareholder Agreement - Page 5
- ---------------------
<PAGE>
5.04 Call Option Closing. The closing for the purchase and sale of
-------------------
all of the Warrants and Warrant Shares that the Company has elected to purchase
under this Agreement, will take place at the office of the Company, on the date
specified in such notice of exercise (the "Call Option Closing"). At the Call
-------------------
Option Closing, the Holders of the Warrants will deliver the Warrants and the
certificate or certificates representing the Warrant Shares, duly endorsed in
blank. In consideration therefor, the Company will deliver to each Holder the
purchase price, which will be payable in immediately available funds.
Article VI
First Refusal; and Co-Sale Rights
6.01 Rights of Co-Sale. In the event that any Shareholder intends to
-----------------
sell or transfer, directly or indirectly, any shares of any class of Capital
Stock held by it to any Person other than a Related Party, each Holder will have
the right to participate in such sale or transfer on the terms set forth in this
Article VI; provided, however, none of the provisions of this Agreement will
- ---------- -------- -------
apply to any sale by a Shareholder of shares of Capital Stock in a bona fide
underwritten public offering under the Securities Act, so long as all Holders
have had an opportunity to participate in such offering pursuant to the
registration rights under this Agreement.
6.02 Method of Electing Sale; Allocation of Sales. No sale or
--------------------------------------------
transfer by any Shareholder of any shares of Capital Stock will be valid unless
the transferee of such Capital Stock first agrees in writing to be bound by the
same terms and conditions that apply to the Shareholder under this Agreement and
the Purchase Agreement. In addition, before any shares of Capital Stock held,
directly or indirectly, by any Shareholder may be sold or transferred to a
Person other than a Related Party, the Shareholder (as such, the "Selling
-------
Shareholder") will comply with the following provisions:
- -----------
(a) The Selling Shareholder will deliver or cause to be
delivered a written notice (the "Notice of Sale") to each Holder and
--------------
F-Jotan at least fifteen (15) days prior to making any such sale or
transfer. The Company agrees to provide the Selling Shareholder with a
list of the names and addresses of each such Holder and F-Jotan for
such purpose. The Notice of Sale will include (i) a statement of the
Selling Shareholder's bona fide intention to sell or transfer; (ii)
the name and address of the prospective transferee (the "Buyer");
-----
(iii) the number of shares of Capital Stock of the Company to be sold
or transferred; (iv) the terms and conditions of the contemplated sale
or transfer; (v) the purchase price in cash that the Buyer will pay
for such shares of Capital Stock; (vi) the expected closing date of
the transaction; and (vii) such other information as the Holders may
reasonably request to facilitate their decision as to whether or not
to exercise the rights granted by this Article VI.
----------
(b) Any Holder receiving the Notice of Sale may elect to
participate in the contemplated sale or transfer by exercising either
(i) its right of first refusal to purchase such Capital Stock pursuant
to Section 6.02(c) or (ii), its right to co-sell its Capital Stock
---------------
pursuant to Section 6.02(d). Either of such rights may be exercised in
---------------
the sole discretion of the Holder by delivering a written notice (an
"Election Notice") to the Company and
---------------
Shareholder Agreement - Page 6
- ---------------------
<PAGE>
the Selling Shareholder within fifteen (15) days after receipt of such Notice of
Sale stating the election of the Holder to exercise either its right of first
refusal pursuant to Section 6.02(c) or its right of co-sale pursuant to Section
-------
6.02(d).
- -------
(c) Each Holder may elect to treat the Notice of Sale as an
irrevocable offer to sell to the Holder up to its pro rata share (determined in
a manner consistent with Article II, and including the pro rata share of Capital
----------
Stock not purchased by other Holders) of the number of shares of Capital Stock
proposed to be sold to the Buyer on the same per share terms and conditions as
stated in the Notice of Sale. Such offer will remain open for a period of
fifteen (15) days from delivery to the Shareholder of the Election Notice.
Within such fifteen (15) day period, the Holder may elect to accept such offer
in whole or in part by delivering to the Selling Shareholder written notice of
its irrevocable election to accept such offer. If the Holder irrevocably accepts
such offer, the closing of the purchase and sale will occur on or before the
twentieth (20th) business day following delivery of the notice of acceptance. At
such closing, the Holder will deliver the consideration payable to the order of
the Selling Shareholder, against delivery by the Selling Shareholder of the
Capital Stock being so purchased, free and clear of all liens, claims, and
encumbrances, other than this Agreement, endorsed in good form for transfer to
the Holder or its designees. If a Holder does not accept such offer within the
fifteen (15) day period specified above, the offer to such Holder will be deemed
to have been rejected, and the Selling Shareholder, subject to Section 6.02(d),
---------------
will be free to sell or transfer such Capital Stock not purchased by the Holders
to the Buyer on the same terms set forth in the Notice of Sale within ninety
(90) days of the expiration of such fifteen (15) day period. If the sale to the
Buyer is not so consummated, the terms of this Article VI will again be
----------
applicable to any sale or transfer of Capital Stock by the Shareholder.
(d) Each Holder may elect to sell or transfer in the contemplated
transaction up to the total of the number of shares of Capital Stock then held
by it (including the Issuable Warrant Shares). Promptly after the receipt of an
Election Notice exercising such right, the Selling Shareholder will use its best
efforts to cause the Buyer to amend its offer so as to provide for the Buyer's
purchase, upon the same terms and conditions as those contained in the Notice of
Sale, of all of the shares of Capital Stock (including the Issuable Warrant
Shares) elected to be sold (the "Co-Sell Shares") in such Election Notices. In
--------------
the event that the Buyer is unwilling to amend its offer to purchase all of the
Co-Sell Shares in addition to the shares of Capital Stock described in the
related Notice of Sale, if the Selling Shareholder desires to proceed with the
sale, the total number of shares that such Buyer is willing to purchase will be
allocated to the Selling Shareholder and each Holder having given an Election
Notice exercising its right pursuant to this Section 6.02(d) (the "Co-Sellers")
-------------- ----------
in proportion to the aggregate number of shares of Capital Stock (including
Issuable Warrant Shares) held by each such Person; provided, however, that no
-------- -------
such Person will be so allocated a number of shares greater than the number of
shares that it has sought to sell to such Buyer in the related Notice of Sale or
Election Notice. All Capital Stock sold or transferred by the Selling
Shareholder and the Co-Sellers with respect to a single Notice of Sale under
Section 6.02(b) will be sold or transferred to the Buyer in a single closing on
- ---------------
the terms described in such Notice of Sale, and each such share will
Shareholder Agreement - Page 7
- ---------------------
<PAGE>
receive the same per share consideration. In the event that the Buyer
for whatever reason, declines to purchase any shares from any Holder
delivering an Election Notice, then (x) the Selling Shareholder will not
be permitted to sell or transfer any shares of Capital Stock to such
Buyer and (y) the shares of Capital Stock of the Selling Shareholder
that were to have been sold or transferred to the Buyer will be subject
to the Holders' right of first refusal pursuant to Section 6.02(c) for a
---------------
period of fifteen (15) days thereafter on the terms and conditions that
the Buyer would have purchased such shares of Capital Stock from the
Selling Shareholder had it not declined to purchase shares from the Co-
Seller under this Section 6.02(d).
---------------
6.03 Sales to Related Parties. No sale or transfer of shares of Capital
------------------------
Stock by the Shareholder to a Related Party will be subject to the provisions of
Section 6.02; provided, however, that such Related Party first agrees to assume
- ------------ -------- -------
the obligations of the Shareholder (without relieving the Shareholder of any
obligations under this Agreement) under this Agreement with respect to the
shares of Capital Stock thereby acquired by it and to be bound by the same terms
and conditions that apply to the Shareholder under this Agreement and the
Purchase Agreement in a written instrument in a form and substance satisfactory
to the Holders.
6.04 Limitations on Co-Sales; F-Jotan Participation.
----------------------------------------------
(a) Notwithstanding the foregoing, no Holder other than Rice
may, without the prior written consent of Rice, exercise its rights to
co-sell all or any part of its Capital Stock under this Article VI
----------
unless and until Rice shall have been given any notice described in
Section 6.01 hereof (the "co-sale notice") prior to or concurrently with
------------ --------------
any other Holder and shall have been given at least ten (10) days from
receipt of the co-sale notice to consult with the other Holders about
consummating the contemplated sale of their respective Capital Stock on
a pro rata basis.
(b) During such consultations, each Holder shall use reasonable
efforts to inform F-Jotan whether such Holder intends to offer its Co-
Sell Shares for sale; and, as soon as practicable, such Holder shall
advise F-Jotan in writing if it determines not to sell all of the Co-
Sale Shares which it is entitled to so sell (such shares to not be sold,
the "Opt-Out Shares") under this Article VI. F-Jotan shall then be
-------------- ----------
afforded the opportunity to sell a portion of its shares of Capital
Stock to the extent of such Opt-Out Shares as though F-Jotan is a Holder
under this Article IV with respect thereto and solely for the purposes
----------
contemplated in this Section 6.04(b);
---------------
6.05 Termination. This Article VI shall terminate solely with respect
----------- ----------
to any Shareholder who is an employee of the Company on the first day of the
month next following the date that the Company terminates the employment of such
Shareholder, as such an employee, without cause.
Shareholder Agreement - Page 8
- ---------------------
<PAGE>
Article VII
Liquidity
7.01 Required Registration. At any time, Rice may, upon not more than
---------------------
two (2) occasions, make a written request to the Company requesting that the
Company effect the registration of a certain number of Registrable Securities
pro rata for the accounts of Rice and the Southland Purchasers based upon the
respective number of Registrable Securities held by them. If and when Rice makes
any such request for registration, it shall use its best efforts to also have
included therein the Registrable Securities held by F-Jotan; provided, however,
that if the managing underwriter or underwriters, if any, of the offering of the
Registrable Securities for which registration has been demanded by Rice advises
the Holders that the success of the offering would be materially and adversely
affected by the inclusion of Registrable Securities of F-Jotan, then the amount
of securities to be registered for the accounts of the Holders shall be reduced
first by reducing the Registrable Securities of F-Jotan to be so included in
such registration and then by reducing pro rata the Registrable Securities held
by Rice and the Southland Purchasers. Notwithstanding the first sentence of this
Section 7.01, the Southland Purchasers or F-Jotan may, by such a written
- ------------
request, exercise any such demand that Rice has not so requested for the benefit
of Rice and the Southland Purchasers under this Section 7.01 on the earliest
------------
date to occur (the "Cut-Off Date") of (i) the date that Rice no longer owns,
------------
directly or indirectly, any beneficial or other equity interest in respect of
the Capital Stock of the Company, (ii) the date which is one hundred eighty
(180) days after all of Rice's Issuable Warrant Shares have been duly registered
to permit disposition thereof in the public equity markets, and (iii) March 1,
2002. F-Jotan may, upon not more than one (1) occasion, make an independent
written request to the Company requesting that the Company effect the
registration of a certain number of Registrable Securities; provided, however,
-------- -------
that the Cut-Off Date shall have occurred prior to making such request.
After receipt of any such a request, the Company will, as soon as
practicable, notify all Holders of such request and use its best efforts to
effect the registration of all Registrable Securities that the Company has been
so requested to register by Rice or F-Jotan for sale, all to the extent required
to permit the disposition (in accordance with the intended method or methods
thereof) of the Registrable Securities so registered. In no event will any
Person other than a Holder be entitled to include any shares of Capital Stock in
any registration statement filed pursuant to this Section 7.01.
------------
7.02 Incidental Registration. If the Company at any time proposes to
-----------------------
file on its behalf or on behalf of any of its security holders a registration
statement under the Securities Act on any form (other than a registration
statement on Form S-4 or S-8 or any successor form unless such forms are being
used in lieu of or as the functional equivalent of, registration rights) for any
class that is the same or similar to Registrable Securities, it will give
written notice setting forth the terms of the proposed offering and such other
information as the Holders may reasonably request to all holders of Registrable
Securities at least thirty (30) days before the initial filing with the
Commission of such registration statement, and offer to include in such filing
such Registrable Securities as any Holder may request. Each Holder of any such
Registrable Securities desiring to have Registrable Securities registered under
this Section 7.02 will advise the Company in writing within thirty (30) days
------------
after the date of receipt of such notice from the Company, setting forth the
Shareholder Agreement - Page 9
- ---------------------
<PAGE>
amount of such Registrable Securities for which registration is requested. The
Company will thereupon include in such filing the number of Registrable
Securities for which registration is so requested, and will use its best efforts
to effect registration under the Securities Act of such Registrable Securities.
Notwithstanding the foregoing, if the managing underwriter or
underwriters, if any, of such offering deliver a written opinion to each Holder
of such Registrable Securities that the success of the offering would be
materially and adversely affected by the inclusion of the Registrable Securities
requested to be included, then the amount of securities to be offered for the
accounts of Holders will be reduced first by reducing the Registrable Securities
-----
of F-Jotan to be registered in such offering and second pro rata (according to
------
the Registrable Securities proposed for registration) to the extent necessary to
reduce the total amount of securities to be included in such offering to the
amount recommended by such managing underwriter or underwriters; provided,
--------
however, that if securities are being offered for the account of other Persons
- -------
as well as the Company, then with respect to the Registrable Securities intended
to be offered by Holders, the proportion by which the amount of such class of
securities intended to be offered by Holders is reduced will not exceed the
proportion by which the amount of such class of securities intended to be
offered by such other Persons (other than the Company) is reduced.
7.03 Form S-3 Registrations. In addition to the registration rights
----------------------
provided in Sections 7.01 and 7.02 above, if at any time the Company is eligible
------------- ----
to use Form S-3 (or any successor form) for registration of secondary sales of
Registrable Securities, Rice or, after the Cut-Off Date, any Holder of
Registrable Securities may request in writing that the Company register shares
of Registrable Securities on such form. Upon receipt of such request, the
Company will promptly notify all holders of Registrable Securities in writing of
the receipt of such request and each such Holder may elect (by written notice
sent to the Company within thirty (30) days of receipt of the Company's notice)
to have its Registrable Securities included in such registration pursuant to
this Section 7.03. Thereupon, the Company will, as soon as practicable, use its
------------
best efforts to effect the registration on Form S-3 of all Registrable
Securities that the Company has so been requested to register by such Holder for
sale. The Company will use its best efforts to qualify and maintain its
qualification for eligibility to use Form S-3 for such purposes.
7.04 Rule 144 Availability. Notwithstanding the foregoing, the Company
---------------------
will not be obligated to register any Registrable Securities as to which counsel
acceptable to the Holders renders an opinion in form and substance satisfactory
to the Holders to the effect that such Registrable Securities are freely
saleable without limitation as to volume, manner of sale, or otherwise under
Rule 144 under the Securities Act.
7.05 Registration Procedures. In connection with any registration of
-----------------------
Registrable Securities under this Article VII, the Company will, as soon as
-----------
practicable:
(a) prepare and file with the Commission a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration statement to become and remain effective until the
earlier of such time as all Registrable Securities
Shareholder Agreement - Page 10
- ---------------------
<PAGE>
subject to such registration statement have been disposed of or the
expiration of one hundred eighty (180) days.
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all Registrable Securities
covered by such registration statement until the earlier of such time as
all of such Registrable Securities have been disposed of or the expiration
of one hundred eighty (180) days (except with respect to registrations
effected on Form S-3 or any successor form, as to which no such period
shall apply);
(c) furnish to each Holder such number of copies of the registration
statement and prospectus (including, without limitation, a preliminary
prospectus) in conformity with the requirements of the Securities Act (in
each case including all exhibits) and each amendment or supplement thereto,
together with such other documents as any Holder may reasonably request;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United States
and Puerto Rico as each Holder reasonably requests, and do such other acts
and things as may be reasonably required of it to enable such holder to
consummate the disposition in such jurisdiction of the securities covered
by such registration statement;
(e) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as practicable, an earnings statement covering the period
of at least twelve months beginning with the first month after the
effective date of such registration statement, which earnings statement
will satisfy the provisions of Section 11(a) of the Securities Act;
(f) provide and cause to be maintained a transfer agent and registrar
for Registrable Securities covered by such registration statement from and
after a date not later than the effective date of such registration
statement;
(g) if requested by the underwriters for any underwritten offering of
Registrable Securities on behalf of a Holder of Registrable Securities
pursuant to a registration requested by Rice under Section 7.01, the
------------
Company will enter into an underwriting agreement with such underwriters
for such offering, such agreement to contain such representations and
warranties by the Company and such other terms and provisions as are
customarily contained in underwriting agreements with respect to secondary
distributions, including, without limitation, provisions with respect to
indemnities and contribution as are reasonably satisfactory to such
underwriters and the Holders; the Holders on whose behalf Registrable
Securities are to be distributed by such underwriters will be parties to
any such underwriting agreement and the representations
Shareholder Agreement - Page 11
- ---------------------
<PAGE>
and warranties by, and the other agreements on the part of, the Company to
and for the benefit of such underwriters, will also be made to and for the
benefit of such Holders of Registrable Securities; and no Holder of
Registrable Securities will be required by the Company to make any
representations or warranties to or agreements with the Company or the
underwriters other than reasonable and customary representations,
warranties, or agreements regarding such Holder, such Holder's Registrable
Securities, such Holder's intended method or methods of disposition, and
any other representation required by law;
(h) furnish, at the written request of any Holder, on the date that
such Registrable Securities are delivered to the underwriters for sale
pursuant to such registration, or, if such Registrable Securities are not
being sold through underwriters, on the date that the registration
statement with respect to such Registrable Securities becomes effective,
(i) an opinion in form and substance reasonably satisfactory to such
Holders, and addressing matters customarily addressed in underwritten
public offerings, of the counsel representing the Company for the purposes
of such registration (who will not be an employee of the Company and who
will be satisfactory to such Holders), addressed to the underwriters, if
any, and to the selling Holders; and (ii) a letter (the "comfort letter")
in form and substance reasonably satisfactory to such Holders, from the
independent certified public accountants of the Company, addressed to the
underwriters, if any, and to the selling Holders making such request (and,
if such accountants refuse to deliver the comfort letter to such Holders,
then the comfort letter will be addressed to the Company and accompanied by
a letter from such accountants addressed to such Holders stating that they
may rely on the comfort letter addressed to the Company); and
(i) during the period when the registration statement is required to
be effective, notify each selling Holder of the happening of any event as a
result of which the prospectus included in the registration statement
contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading.
It will be a condition precedent to the obligation of the Company to take
any action pursuant to this Article VII in respect of the Registrable Securities
-----------
that are to be registered at the request of any Holder of Registrable Securities
that such Holder furnish to the Company such information regarding the
Registrable Securities held by such Holder and the intended method of
disposition thereof as is legally required in connection with the action taken
by the Company. The managing underwriter or underwriters, if any, for any
offering of Registrable Securities to be registered pursuant to Section 7.01 or
------------
7.03 will be selected by the Holders of a majority of the Registrable Securities
- ----
being so registered.
7.06 Allocation of Expenses. Except as provided in the following sentence,
----------------------
the Company will bear all expenses arising or incurred in connection with any of
the transactions
Shareholder Agreement - Page 12
- ---------------------
<PAGE>
contemplated by this Article VII, including, without limitation, (a) all
-----------
expenses incident to filing with the National Association of Securities Dealers,
Inc.; (b) registration fees; (c) printing expenses; (d) accounting and legal
fees and expenses; (e) expenses of any special audits or comfort letters
incident to or required by any such registration or qualification; and (f)
expenses of complying with the securities or blue sky laws of any jurisdictions
in connection with such registration or qualification. Each Holder will
severally bear the expense of its underwriting fees, discounts, or commissions
relating to its sale of Registrable Securities.
7.07 Listing on Securities Exchange. If the Company lists any shares of
------------------------------
Capital Stock on any securities exchange or on the National Association of
Securities Dealers, Inc. Automated Quotation System or similar system, it will,
at its expense, list thereon, maintain and, when necessary, increase such
listing of, all Registrable Securities.
7.08 Holdback Agreements.
-------------------
(a) If any registration pursuant to Section 7.02 is in connection with
------------
an underwritten public offering, each Holder of Registrable Securities
agrees, if so required by the managing underwriter, not to effect any
public sale or distribution of Registrable Securities (other than as part
of such underwritten public offering) during the period beginning seven (7)
days prior to the effective date of such registration statement and ending
on the one hundred eightieth (180th) day after the effective date of such
registration statement; provided, that each Shareholder and each Person
--------
that is an officer, director, or beneficial owner of five percent (5%) or
more of the outstanding shares of any class of Capital Stock enters into
such an agreement.
(b) The Company and the Shareholder agree (i) not to effect any public
sale or distribution during the period seven (7) days (or such longer
period as may be prescribed by Rule 10b-6 under the Exchange Act) prior to
the effective date of the registration statement employed in any
underwritten public offering and ending on the one hundred eightieth
(180th) day after any such registration statement contemplated by Sections
--------
7.01 or 7.03 has become effective, except as part of such underwritten
---- ----
public offering pursuant to such registration statement and except pursuant
to securities registered on Forms S-4 or S-8 of the Commission or any
successor forms, and (ii) use their best efforts to cause each holder of
its equity securities or any securities convertible into or exchangeable or
exercisable for any of such securities, in each case purchased from the
Company at any time after the date of this Agreement (other than in a
public offering), to agree not to effect any such public sale or
distribution of such securities during such period.
7.09 Rule 144. At all times, the Company will take such action as any
--------
Holder may reasonably request, all to the extent required from time to time to
enable such Holder to sell shares of Registrable Securities without registration
pursuant to and in accordance with (a) Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation adopted by the Commission. Upon the request of any Holder of
Registrable Securities, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
Shareholder Agreement - Page 13
- ---------------------
<PAGE>
7.10 Rule 144A. The Company agrees that, upon the request of any Holder or
---------
any prospective purchaser of a Warrant or Warrant Shares designated by a Holder,
the Company will promptly provide (but in any case within fifteen (15) days of a
request) to such Holder or potential purchaser, the following information:
(a) a brief statement of the nature of the business of the Company and
any Subsidiaries and the products and services they offer;
(b) the most recent consolidated balance sheets and profit and losses
and retained earnings statements, and similar financial statements of the
Company for such part of the two preceding fiscal years prior to such
request as the Company has been in operation (such financial information
will be audited, to the extent reasonably available); and
(c) such other information about the Company, any Subsidiaries, and
their business, financial condition, and results of operations as the
requesting Holder or purchaser of such Warrants requests in order to comply
with Rule 144A, as amended, and the antifraud provisions of the federal and
state securities laws.
The Company hereby represents and warrants to any such requesting Holder and any
prospective purchaser of Warrants or Warrant Shares from such Holder that the
information provided by the Company pursuant to this Section 7.10 will not
------------
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading.
7.11 Limitations on Subsequent Registration Rights. From and after the
---------------------------------------------
date of this Agreement, the Company will not, without the prior written consent
of the Holders, enter into any agreement with any holder or prospective holder
of any securities of the Company that would allow such holder or prospective
holder (a) to include such securities in any registration filed under Section
-------
7.01, unless under the terms of such agreement, such holder or prospective
- ----
holder may include such securities in any such registration only to the extent
that the inclusion of its securities will not reduce the amount of the
Registrable Securities of the Holders that is included or (b) to make a demand
registration that could result in such registration statement being declared
effective prior to the effectiveness of the first registration statement
effected under Section 7.01 or within one hundred twenty (120) days of the
------------
effective date of any registration effected pursuant to Section 7.01.
------------
7.12 Exchange Rights. At the option of any Holder, any such Holder may
---------------
exchange its Warrant or Warrant Shares for fully paid and nonassessable shares
(calculated as to each exchange to the nearest one-thousandth (1/1000) of a
share and rounded upward) of common stock of any Affiliate or Subsidiary of the
Company that on the date of receipt of the Exchange Notice has a class of
capital stock registered under section 12 of the Exchange Act or within one year
and 120 days will have a class of capital stock so registered (not subject to an
effective stock pledge to an agent for the benefit of the Senior Lenders) (such
Affiliate or Subsidiary will be
Shareholder Agreement - Page 14
- ---------------------
<PAGE>
referred to in this Agreement as the "Exchange Company" and the common stock
----------------
of such Affiliate or Subsidiary will be referred to in this Agreement as
"Exchange Common Stock"). Each $1,000 worth of Warrants or Warrant Shares
---------------------
(valued at Fair Market Value on the date the Exchange Notice was sent), will be
exchangeable for $1,000 worth of Exchange Common Stock (valued at Fair Market
Value on the date that the Exchange Notice was sent). To exchange Warrants or
Warrant Shares into Exchange Common Stock, the Holder will surrender at the
principal office of the Exchange Company the Warrants or certificate or
certificates evidencing the Warrant Shares duly endorsed or assigned to the
Company, and give written notice to the Company at such office that it elects to
exchange such Warrants or Warrant Shares (the "Exchange Notice"). Warrants or
---------------
Warrant Shares will be deemed to have been exchanged immediately prior to the
close of business on the day of the surrender for exchange in accordance with
the foregoing provisions, and the Person or Persons entitled to receive the
Exchange Common Stock issuable upon any such exchange will thereupon be treated
for all purposes as the record holder or holders of the Exchange Common Stock.
As promptly as practicable on or after the exchange date, the Exchange Company
will issue and deliver a certificate or certificates for the number of full
shares of Exchange Common Stock issuable upon exchange to the Person or Persons
entitled to receive such shares. Upon exchange of any Issued Warrant Shares, the
Company will pay or make with respect to Issued Warrant Shares any dividends or
other distributions that have been declared on the Warrant Shares in kind or
cash, as the case may be. If any Holder exchanges its Warrants or Warrant Shares
for shares of Exchange Common Stock pursuant to this Section 7.12, such Holder
------------
will have all of the rights set forth in this Article VII except that for the
-----------
purposes of this Article VII the term "Company" will refer instead to the
-----------
Exchange Company and the term "Registrable Securities" will refer to the shares
of Exchange Common Stock held by such Holder.
7.13 Other Rights. The Company will not grant to any person any
------------
registration rights without the consent of the Holders.
Article VIII
Directors
8.01 Voting Agreement. To ensure compliance with this Article VIII,
---------------- ------------
each of the Shareholder, Rice, the Southland Purchasers and F-Jotan hereby
irrevocably covenants and agrees to vote, or give or withhold consent with
respect to, all shares of Capital Stock now owned or later acquired by each of
them, all in accordance with the terms of this Article VIII. A counterpart of
------------
this Agreement will be deposited with the Company at its principal place of
business or registered office and will be subject to the same right of
examination by a shareholder of the Company, in person or by agent or attorney,
as are the books and records of the Company.
8.02 Board of Directors. (a) So long as the provisions of this
------------------
Article VIII remain in effect, each (now or hereafter) party to this Agreement
- ------------
other than Rice will, at the request of Rice or its designees, vote, or give or
withhold consent with respect to, all shares of Capital Stock now owned or later
acquired by such party so that at all times each and every individual designated
by Rice or its respective designees in accordance with (and subject to the
limitations in) Section 4.11 of the Purchase Agreement will be a director of the
------------
Company; provided, however, that Rice will not have any obligation to designate
-----------------
or cause any individual to serve on
Shareholder Agreement - Page 15
- ---------------------
<PAGE>
the board of directors of the Company. No director designated by Rice or its
designee may be removed without the prior written consent of Rice.
(b) So long as the provisions of this Article VIII remain in
------------
effect, each (now or hereafter) party to this Agreement other than the Southland
Purchasers will, at the request of the Southland Purchasers or its designee,
vote, or give or withhold consent with respect to, all shares of Capital Stock
now owned or later acquired by such party so that at all times the one
individual designated by the Southland Purchasers or their respective designee
in accordance with Section 4.11 of the Purchase Agreement (which may be
------------
F-Jotan or its designee) will be a director of the Company; provided, however,
-------- -------
that the Southland Purchasers will not have any obligation to designate or cause
any individual to serve on the board of directors of the Company. No director
designated by the Southland Purchasers or its designee may be removed without
the prior written consent of the Southland Purchasers and F-Jotan.
(c) Any Purchaser or F-Jotan may, at any time, terminate its rights
under this Article VIII by providing written notice of such termination to the
------------
Company.
8.03 Termination. The obligations contained in this Article VIII shall
-----------
terminate, solely with respect to any Shareholder who is an employee of the
Company, on the first day of the month next following the date that the Company
terminates the employment of such Shareholder, as such an employee, without
cause.
Article IX
Representations and Warranties; Covenants
9.01 Representations and Warranties and Covenants of the Company and the
-------------------------------------------------------------------
Shareholder. Each of the representations and warranties set forth in Section
- ----------- -------
3.01 of the Purchase Agreement and each of the covenants set forth in Article IV
- ---- ----------
of the Purchase Agreement are hereby restated and incorporated by reference in
this Agreement as though set forth in this Agreement, and is made by the Company
and the Shareholder as made in the Purchase Agreement for the benefit of each
Purchaser.
9.02 Representations and Warranties of the Purchaser. Each of the
-----------------------------------------------
representations and warranties of each Purchaser set forth in Section 3.02 of
------------
the Purchase Agreement is hereby restated and incorporated by reference in this
Agreement as though set forth in this Agreement for the benefit of the Company
and the Shareholder.
Article X
Conditions
The obligations of each Purchaser to effect the transactions
contemplated by this Agreement are subject to the following conditions:
Shareholder Agreement - Page 16
- ---------------------
<PAGE>
10.01 Note Agreement and Purchase Agreement Conditions. All of the
------------------------------------------------
conditions precedent to the obligations of each Purchaser under the Note
Agreement and the Purchase Agreement will have been satisfied in full or waived.
10.02 Proceedings. All proceedings taken in connection with the
-----------
transactions contemplated by this Agreement, and all documents necessary to the
consummation thereof, will be reasonably satisfactory in form and substance to
each Purchaser and its counsel, and each Purchaser and its counsel will have
received copies (executed or certified as may be appropriate) of all documents,
instruments, and agreements that such Purchaser or its counsel may request in
connection with the consummation of such transactions.
Article XI
Miscellaneous
11.01 Indemnification. In addition to any other rights or remedies to
---------------
which each Purchaser and the Holders may be entitled, the Company and the
Shareholder (solely with respect to the representations and warranties made by
him herein) severally but not jointly agree to and will indemnify and hold
harmless each Purchaser, the Holders, and their Affiliates and their respective
successors, assigns, officers, directors, managers, employees, attorneys, and
agents (individually and collectively, an "Indemnified Party") from and against
-----------------
any and all losses, claims, obligations, liabilities, deficiencies, diminutions
in value, penalties, causes of action, damages, out-of-pocket costs, including,
without limitation, all such costs of directors of the Company incurred in
performing duties or services for or on behalf of the Company, reasonable
attorneys' fees, and expenses (including, without limitation, costs and expenses
of investigation and defense, attorneys' fees and expenses) including, without
limitation, those arising out of the contributory negligence of any Indemnified
Party, that any Indemnified Party may suffer, incur, or be responsible for,
arising or resulting from, to the extent applicable, any misrepresentation,
breach of warranty, or nonfulfillment of any agreement made by or on the part of
the Company or made by the Shareholder (solely with respect to the
representations and warranties made by him herein) under this Agreement, the
Purchase Agreement, or the other Purchase Documents, the Acquisition Agreement
(each as defined in Section 11.1 of the Note Agreement) or under any other
agreement to which the Company or the Shareholder is a party in connection with
the transactions contemplated by this transaction, or from any misrepresentation
in or omission from any certificate or other instrument furnished or to be
furnished by the Company to the Purchaser or the Holders under this Agreement.
The foregoing indemnification includes any such claims, actions, damages, costs
and expenses incurred by reason of the contributory negligence of the Person to
be indemnified, but excludes any of the same incurred by reason of such Person's
gross negligence or willful misconduct and shall survive the expiration of this
Agreement or the irrevocable sale by each Purchaser of its interests in, or the
repayment of its loans to, the Company.
11.02 Default. It is agreed that a violation by any party of the terms
-------
of this Agreement cannot be adequately measured or compensated in money damages,
and that any breach or threatened breach of this Agreement by a party to this
Agreement would do irreparable injury to the nonbreaching party. It is,
therefore, agreed that in the event of any breach or threatened
Shareholder Agreement - Page 17
- ---------------------
<PAGE>
breach by a party to this Agreement of the terms and conditions set forth in
this Agreement, the nondefaulting party will be entitled, in addition to any and
all other rights and remedies that it may have in law or in equity, to apply for
and obtain injunctive relief requiring the defaulting party to be restrained
from any such breach, or threatened breach or to refrain from a continuation of
any actual breach.
11.03 Integration. This Agreement, the Note Agreement and the Purchase
-----------
Agreement constitute the entire agreement among the parties with respect to the
subject matter hereof and thereof and supersede all previous written, and all
previous or contemporaneous oral, negotiations, understandings, arrangements,
and agreements. This Agreement may not be amended or supplemented except by a
writing signed by Company, the Shareholder, and each Holder.
11.04 Headings. The headings in this Agreement are for convenience and
--------
reference only and are not part of the substance of this Agreement. References
in this Agreement to Sections and Articles are references to the Sections and
Articles of this Agreement unless otherwise specified.
11.05 Severability. The parties to this Agreement expressly agree that
------------
it is not their intention to violate any public policy, statutory or common law
rules, regulations, or decisions of any governmental or regulatory body. If any
provision of this Agreement is judicially or administratively interpreted or
construed as being in violation of any such policy, rule, regulation, or
decision, the provision, section, sentence, word, clause, or combination thereof
causing such violation will be inoperative (and in lieu thereof there will be
inserted such provision, sentence, word, clause, or combination thereof as may
be valid and consistent with the intent of the parties under this Agreement) and
the remainder of this Agreement, as amended, will remain binding upon the
parties to this Agreement, unless the inoperative provision would cause
enforcement of the remainder of this Agreement to be inequitable under the
circumstances.
11.06 Notices. Whenever it is provided herein that any notice, demand,
-------
request, consent, approval, declaration, or other communication be given to or
served upon any of the parties by another, such notice, demand, request,
consent, approval, declaration, or other communication will be in writing and
will be deemed to have been validly served, given, or delivered (and "the date
of such notice" or words of similar effect will mean the date) five (5) days
after deposit in the United States mails, certified mail, return receipt
requested, with proper postage prepaid, or upon receipt thereof with written
acknowledgment of receipt (whether by non-certified mail, telecopy, telegram,
express or hand delivery, or otherwise), whichever is earlier, and addressed to
the party to be notified as follows:
If to the Rice, at: Address of Rice beneath the name of Rice on the
signature pages of this Agreement
If to F-Jotan, at: Address of F-Jotan beneath the name of F-Jotan on the
signature pages of this Agreement
Shareholder Agreement - Page 18
- ---------------------
<PAGE>
with courtesy copies to: Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attn: Larry A. Makel, Esq.
Fax: 214-939-6100
If to the Company, at: Jotan, Inc.
118 West Adams Street
Jacksonville, Florida 32202
Attn: President
Fax: (904) 353-0075
with courtesy copies to: Wyrick, Robins, Yates & Ponton, L.L.P.
4101 Lake Boone Trail, Suite 300
Raleigh, North Carolina 27607-7506
Attn: James M. Yates, Jr.
Fax: (919) 781-4865
with courtesy copies to: Alston & Bird, L.L.P.
One Atlanta Center
1201 W. Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Stephen A. Opler
Fax: (404) 881-7777
If to the Shareholder, at: Address of such Shareholder beneath the name
of such Shareholder on the signature pages of
this Agreement
or to such other address as each party may designate for itself by like notice.
Notice to any Holder other than the Purchaser will be delivered as set forth
above to the address shown on the stock transfer books of the Company or the
Warrant Register unless such Holder has advised the Company in writing of a
different address to which notices are to be sent under this Agreement.
Failure or delay in delivering the courtesy copies of any notice, demand,
request, consent, approval, declaration, or other communication to the persons
designated above to receive copies of the actual notice will in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration, or other communication.
No notice, demand, request, consent, approval, declaration, or other
communication will be deemed to have been given or received unless and until it
sets forth all items of information required to be set forth therein pursuant to
the terms of this Agreement.
Shareholder Agreement - Page 19
- ---------------------
<PAGE>
11.07 Successors. This Agreement will be binding upon and inure to the
----------
benefit of the parties and their respective successors and permitted assigns;
provided, however, that no sale, assignment or other transfer by any party to
- -------- -------
this Agreement of any of its Capital Stock or rights hereunder to another Person
will be valid and effective unless and until the transferee or assignee first
agrees in writing to be bound by the terms and conditions of this Agreement and
the Purchase Agreement, and the agreements and instruments related hereto and
thereto, in a form and substance reasonably satisfactory to the Company.
11.08 Remedies. The failure of any party to enforce any right or remedy
--------
under this agreement, or to enforce any such right or remedy promptly, will not
constitute a waiver thereof, nor give rise to any estoppel against such party,
nor excuse any other party from its obligations under this Agreement. Any
waiver of any such right or remedy by any party must be in writing and signed by
the party against which such waiver is sought to be enforced.
11.09 Survival. All warranties, representations, and covenants made by
--------
any party in this Agreement or in any certificate or other instrument delivered
by such party or on its behalf under this Agreement will be considered to have
been relied upon by the party to which it is delivered and will survive the
Closing Date, regardless of any investigation made by such party or on its
behalf. All statements in any such certificate or other instrument will
constitute warranties and representations under this Agreement.
11.10 Fees. Any and all fees, costs, and expenses, of whatever kind and
----
nature, including attorneys' fees and expenses, incurred by the Holders in
connection with the defense or prosecution of any actions or proceedings arising
out of or in connection with this Agreement will, to the extent provided in this
Agreement, be borne and paid by the Company within ten (10) days of demand by
the Holders.
11.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, which will individually and collectively constitute one agreement.
11.12 Other Business. It is understood and accepted that each Purchaser,
--------------
the Holders, and their Affiliates have interests in other business ventures that
may be in conflict with the activities of the Company and that nothing in this
Agreement will limit the current or future business activities of such parties
whether or not such activities are competitive with those of the Company. The
Company and the Shareholder agree that all business opportunities available to
them in any field substantially related to the business of the Company will be
pursued exclusively through the Company.
11.13 Choice of Law. THIS AGREEMENT WILL BE DEEMED TO HAVE BEEN MADE IN
-------------
JACKSONVILLE, FLORIDA AND WILL BE INTERPRETED AND THE RIGHTS OF THE PARTIES
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES APPLICABLE THERETO
AND THE INTERNAL LAWS OF THE STATE OF FLORIDA APPLICABLE TO AN AGREEMENT
EXECUTED, DELIVERED AND PERFORMED THEREIN WITHOUT GIVING EFFECT TO THE CHOICE-
OF-LAW RULES THEREOF OR ANY OTHER
Shareholder Agreement - Page 20
- ---------------------
<PAGE>
PRINCIPLE THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY
OTHER JURISDICTION.
11.14 Nominees for Beneficial Owners. In the event that any Registrable
------------------------------
Securities are held by a nominee for the beneficial owner of such Registrable
Securities, the beneficial owner of Registrable Securities may, at its election,
be treated as the Holder of such Registrable Securities for purposes of any
request or other action by any Holder or Holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
shares of Registrable Securities held by any Holder or Holders of Registrable
Securities contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities. In no event will a Holder be required to exercise its Warrant as a
condition to the registration of such Warrant or Registrable Securities
thereunder.
11.15 Fiduciary Duties. The Company acknowledges and agrees that, for so
----------------
long as any Warrant is outstanding and regardless of whether the Holder has
exercised any portion of this its Warrant, (a) the officers and directors of the
Company will owe the same duties (fiduciary and otherwise) to the Holder as are
owed to a stockholder of the Company and (b) the Holder will be entitled to all
rights and remedies with respect to such duties or that are otherwise available
to a stockholder of the Company under the Florida General Corporation Law, as
amended from time to time.
11.16 Duties Among Holders. Each Holder agrees that no other Holder will
--------------------
by virtue of this Agreement be under any fiduciary or other duty to give or
withhold any consent or approval under this Agreement or to take any other
action or omit to take any action under this Agreement, and that each other
Holder may act or refrain from acting under this Agreement as such other Holder
may, in its discretion, elect.
11.17 Confidentiality. Each Holder agrees to keep confidential any
---------------
information delivered by the Company to such Holder under this Agreement that
the Company clearly indicates in writing to be confidential information;
provided, however, that nothing in this Section 11.17 will prevent such Holder
- -------- ------- -------------
from disclosing such information (a) to any Affiliate of such Holder or any
actual or potential purchaser, participant, assignee, or transferee of such
Holder's rights or obligations hereunder that agrees to be bound by the terms of
this Section 11.17, (b) upon order of any court or administrative agency, (c)
-------------
upon the request or demand of any regulatory agency or authority having
jurisdiction over such Holder, (d) that is in the public domain, (e) that has
been obtained from any Person that is not a party to this Agreement or an
Affiliate of any such party without breach by such Person of a confidentiality
obligation known to such Holder, (f) in connection with the exercise of any
remedy under this Agreement, or (g) to the certified public accountants for such
Holder. The Company agrees that such Holder will be presumed to have met its
obligations under this Section 11.17 to the extent that it exercises the same
-------------
degree of care with respect to information provided by the Company as it
exercises with respect to its own information of similar character.
Shareholder Agreement - Page 21
- ---------------------
<PAGE>
11.18 Termination and Release of Prior F-Jotan Agreements. F-Jotan, the
---------------------------------------------------
Company and the Investors (as defined below) hereby agree that, for good and
valuable consideration, receipt of which is hereby acknowledged, including
obtaining the rights set forth hereinabove and in the other Purchase Documents,
each of them hereby terminates, as of the date hereof, all of its rights,
remedies, indemnities, benefits, priorities and privileges, howsoever described,
in respect of the Company under the Prior Series A Documents and forever
releases the Company, as of the date hereof, from all obligations to it
thereunder. The "Prior Series A Documents" shall mean and refer to (i) that
certain Series A Convertible Preferred Stock Purchase Agreement, dated as of May
16, 1996, among the Company, F-Jotan and the Investors listed in Exhibit A to
such agreement (the "Investors"), (ii) that certain Investors Rights Agreement,
dated as of May 16, 1996, among the Company, the holders of the Series A
Convertible Preferred Stock and the Investors, (iii) that certain Stockholder
Agreement, dated as of May 16, 1996, among the Company, the holders of the
Company's common stock listed on the signature pages to such agreement and the
Investors, and (iv) all agreements, instruments, documents and certificates,
including Stock Certificate Pa-1 For 1,265,823 Shares Of Series A Preferred,
executed and delivered and/or filed in connection therewith, including without
limitation, the Articles of Amendment of the Restated Articles of Incorporation
of the Company dated May 15, 1996.
Shareholder Agreement - Page 22
- ---------------------
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
COMPANY:
-------
JOTAN, INC.
BY: /s/ Shea E. Ralph
------------------------
NAME: Shea E. Ralph
----------------------
TITLE: President
---------------------
118 West Adams Street
Jacksonville, Florida 32201
Attn: President
Fax: (904) 343-0075
Shareholder Agreement - Page 23
- ---------------------
<PAGE>
RICE:
----
RICE PARTNERS II, L.P.
By: Rice Capital Group IV, L.P.,
Its general partner
By: RMC Fund Management, L.P.,
Its general partner
By: Rice Mezzanine Corporation,
Its general partner
By: /s/ Jeffrey P. Sangalis
-------------------------
Name: Jeffrey P. Sangalis
Its: Managing Director
5847 San Felipe, Suite 4350
Houston, Texas 77057
Attn: Jeffrey P. Sangalis
Fax: (713) 783-9750
OWNED ON CLOSING DATE:
None Shares of Series A Convertible
Preferred Stock
40,000 Shares of Series B Redeemable
Preferred Stock
None Shares of Common Stock
2,515,203 Warrant A-1 Shares
9,581,726 Warrant A-2 Shares
Shareholder Agreement - Page 24
- ---------------------
<PAGE>
F-JOTAN, L.L.C.
By: Franklin Street/Fairview Capital, L.L.C.,
its manager
By: Franklin Capital, L.L.C.,
its manager
By: /s/ Jeremiah M. Callahan
-------------------------
Jeremiah M. Callahan,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
OWNED ON CLOSING DATE:
1,329,357 Shares of Series A Convertible
Preferred Stock
None Shares of Common Stock
None Other Equity Interests
Shareholder Agreement - Page 25
- ---------------------
<PAGE>
THE SOUTHLAND PURCHASERS:
F-SOUTHLAND, L.L.C.
By: Franklin Street/Fairview Capital, L.L.C.,
its manager
By: Franklin Capital, L.L.C,
its manager
By: /s/ Jeremiah M. Callahan
----------------------------
Jeremiah M. Callahan,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
OWNED ON CLOSING DATE:
None Shares of Series A Convertible
Preferred Stock
5,000 Shares of Series B Redeemable
Preferred Stock
None Shares of Common Stock
359,315 Warrant B-1 Shares
1,197,716 Warrant B-2 Shares
Shareholder Agreement - Page 26
- ---------------------
<PAGE>
FF-SOUTHLAND, L.P.
By:FSFC Associates, L.P.,
Its general partner
By: Franklin Capital, L.L.C.,
Its general partner
By: /s/ Jeremiah M. Callahan
--------------------------
Jeremiah M. Callahan,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred Stock
5,000 Shares of Series B
Redeemable Preferred Stock
None Shares of Common Stock
359,315 Warrant C-1 Shares
1,197,716 Warrant C-2 Shares
Shareholder Agreement - Page 27
- ---------------------
<PAGE>
SHAREHOLDER:
-----------
David Freedman
/s/ David Freedman
--------------------------------
OWNED ON CLOSING DATE:
None Shares of Common Stock
Owned on Closing Date
275,000 Common Stock Options
Shea E. Ralph
/s/ Shea E. Ralph
--------------------------------
OWNED ON CLOSING DATE:
950,000 Shares of Common Stock
Owned on Closing Date
33,000 Common Stock Options
Shareholder Agreement - Page 28
- ---------------------
<PAGE>
EXHIBIT 3
ARTICLES OF AMENDMENT
---------------------
TO RESTATED ARTICLES OF INCORPORATION
-------------------------------------
OF JOTAN, INC.
--------------
1. The name of the corporation is Jotan, Inc.
2. Article IV of the Restated Articles of Incorporation of the
Corporation is amended by deleting Section 4.2 therefrom in its entirety and
substituting therefor a new Section 4.2 in the form attached as Exhibit A hereto
and incorporated herein by reference.
3. These Articles of Amendment were duly adopted by the Board of
Directors of the Corporation, without shareholder action, on February 27, 1997
and shall be effective as of February 28, 1997. Shareholder action was not
required for the adoption of these Articles of Amendment.
IN WITNESS WHEREOF, the undersigned President of Jotan, Inc. has
executed these Articles of Amendment this 28th day of February, 1997.
/s/ Shea E. Ralph
------------------------------------
Shea E. Ralph, Director
President of Jotan, Inc.
ATTEST:
/s/ David Freedman
- ----------------------------
David Freedman
Secretary of Jotan, Inc.
<PAGE>
EXHIBIT A
---------
TO
--
ARTICLES OF AMENDMENT
---------------------
OF RESTATED ARTICLES OF INCORPORATION
-------------------------------------
OF JOTAN, INC.
--------------
[Series A Convertible Preferred Stock and Series B Redeemable Preferred Stock]
A. Series A Convertible Preferred Stock
1. Designation and Amount. Pursuant to the authority set forth in Section
----------------------
4.1 of these Restated Articles of Incorporation of Jotan, Inc., the Board of
Directors of the Corporation established a series of the authorized preferred
stock of the Corporation on May 14, 1996, designated as Series A Convertible
Preferred Stock ("Series A Convertible Preferred Stock"), consisting of
------------------------------------
5,000,000 shares, and having the powers, preferences and relative participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as set forth herein. Such number of shares may be
increased or decreased from time to time by resolution of the Board of
Directors; provided, however, that no decrease shall reduce the number of shares
-------- -------
of Series A Convertible Preferred Stock to a number less than the number of
shares of such series then issued and outstanding, plus the number of shares of
such series reserved for issuance upon the exercise of outstanding rights,
options or warrants or upon the conversion or exchange of outstanding securities
issued by the Corporation.
2. Dividends on Series A Convertible Preferred Stock.
-------------------------------------------------
(a) The record holders of the outstanding Series A Convertible
Preferred Stock shall receive on each Series A PIK Dividend Payment Date
during the Series A PIK Dividend Payment Period per share dividends in
additional fully paid and nonassessable shares of Series A Convertible
Preferred Stock legally available therefor (such dividend being herein
called "Series A PIK Dividends"). The Series A PIK Dividends shall be paid
----------------------
by delivering to each record holder of Series A Convertible Preferred Stock
a number of shares of Series A Convertible Preferred Stock (which number of
shares shall be rounded to the nearest one-thousandth of a share) equal to
the number of shares of Series A Convertible Preferred Stock held by such
holder on the applicable Series A PIK Record Date, multiplied by the Series
A Annual Per Share PIK Dividend Amount. Any additional shares of Series A
Convertible Preferred Stock issued pursuant to this paragraph shall be
governed by this Section 4.2 and shall be subject in all respects, except
as to the date of issuance and date from which Series A PIK Dividends
accrue and cumulate as set forth in paragraph A.2(b) of this Section 4.2,
to the same terms as the shares of Series A Convertible Preferred Stock
issued on the Initial Issue Date.
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 1
- ----------------------------------
<PAGE>
(b) On the Series A PIK Record Date immediately preceding each Series
A PIK Dividend Payment Date, the Board of Directors of the Corporation
shall be deemed to have declared Series A PIK Dividends on the Series A
Convertible Preferred Stock in accordance with paragraph A.2(a) of this
Section 4.2, payable on the next Series A PIK Dividend Payment Date.
Series A PIK Dividends on shares of Series A Convertible Preferred Stock
shall accrue at a rate per annum equal to eight percent (8.0%) of one share
of Series A Convertible Preferred Stock, cumulated annually, and be
cumulative from the date of issuance of such shares through the Series A
PIK Dividend Payment Period. Series A PIK Dividends shall be payable in
arrears during the Series A PIK Dividend Payment Period on each Series A
PIK Dividend Payment Date, commencing on the first Series A PIK Dividend
Payment Date, and for shares issued as Series A PIK Dividends, commencing
on the first Series A PIK Dividend Payment Date occurring after such shares
are issued. If any Series A PIK Dividend Payment Date occurs on a day that
is not a Business Day, any accrued Series A PIK Dividends otherwise payable
on such Series A PIK Dividend Payment Date shall be paid on the next
succeeding Business Day. Series A PIK Dividends shall be paid to holders
of record of the Series A Convertible Preferred Stock on each Series A PIK
Dividend Payment Date as their names shall appear on the share register of
the Corporation on the Series A PIK Record Date immediately preceding such
Series A PIK Dividend Payment Date. Series A PIK Dividends on Series A PIK
Dividends that are in arrears for any past Series A PIK Dividend Periods
shall accumulate as if the earlier Series A PIK Dividends had been issued
as provided above, and shall be accrued. Unpaid Series A PIK Dividends may
be paid at any time to holders of record on the Series A PIK Record Date
therefor.
(c) Each share of Series A Convertible Preferred Stock shall rank
junior to each share of Series B Redeemable Preferred Stock (the "Series B
--------
Redeemable Preferred Stock") but prior to each share of Common Stock with
--------------------------
respect to the payment of dividends.
3. Liquidation Preference.
----------------------
(a) Liquidation Preference. Each share of Series A Convertible
----------------------
Preferred Stock shall be treated as being pari passu with each share of
---- -----
Series B Redeemable Preferred Stock and prior to each share of Common Stock
with respect to the distribution of assets or surplus funds upon any
Liquidation. In the event of any Liquidation, the assets and funds of the
Corporation shall be ratably distributed among the holders of the Series A
Convertible Preferred Stock and the Series B Redeemable Preferred Stock
based on the total number of shares of such Preferred Stock then held by
all such holders. Upon any Liquidation and after both the holders of the
Series A Convertible Preferred Stock shall have been paid the full Series A
Preferential Amount and the Series B Redeemable Preferred Stock shall have
been paid the full Series B Preferential Amount, the entire
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 2
- ----------------------------------
<PAGE>
remaining assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of the Common
Stock.
(b) Consolidation; Merger. A consolidation, merger or share exchange
---------------------
of the Corporation shall be treated as a Liquidation in accordance with
paragraph B.3(b) of Section 4.2.
(c) Valuation of Securities. Any securities to be delivered upon
-----------------------
Liquidation shall be valued as follows:
(i) securities not subject to investment letter or other similar
restrictions on free marketability covered by paragraph A.3(c)(ii) of
this Section 4.2:
(A) if traded on a securities exchange, the value shall be
deemed to be the average of the closing prices of the securities
on such exchange over the 30-day period ending three business days
prior to the date of the Notice (as defined in paragraph C.5 of
this Section 4.2),
(B) if actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices
(whichever are applicable) over the 30-day period ending three
business days prior to the date of the Notice; and
(C) if there is no active public market, the value shall be
the fair market value thereof, as reasonably determined by the
Board of Directors in good faith; and
(ii) the method of valuation of securities subject to investment
letter or other restrictions on free marketability other than
restrictions arising solely by virtue of a shareholder's status as an
affiliate or former affiliate of the issuer or other participant in a
transaction subject to Rule 145 promulgated under the Securities
Exchange Act of 1934, as amended, shall be to make an appropriate
discount from the market value determined as provided in clauses (A),
(B) or (C) of paragraph 3(c)(i) of this Section 4.2, to reflect the
adjusted fair market value thereof, as reasonably determined by the
Board of Directors in good faith.
(d) Notice. Written Notice of any Liquidation shall state the
------
proposed effective date of any such transaction and the date on which
Conversion Rights (as defined in paragraph A.5 of this Section 4.2)
terminate as to such shares. Such notice shall be given not more thirty
(30) days prior to the effective date stated therein to the then holders of
record of the Preferred Stock.
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 3
- ----------------------------------
<PAGE>
4. Voting Right of Series A Convertible Preferred Stock. Except as
----------------------------------------------------
otherwise expressly provided herein or as required by law, the holder of each
share of Series A Convertible Preferred Stock shall be entitled to the number of
votes equal to the number of shares of Common Stock into which such share of
Series A Convertible Preferred Stock could then be converted and shall have
voting rights and powers equal to the voting rights and powers of the Common
Stock (except as otherwise expressly provided herein or as required by law,
voting together with the Common Stock as a single class) and shall be entitled
to notice of any shareholders' meeting in accordance with the Bylaws of the
Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares of Common Stock into which shares of Series A Convertible Preferred Stock
held by each holder could be converted) shall be rounded to the nearest whole
number (with one-half being rounded upward).
5. Conversion. The holders of Series A Convertible Preferred Stock shall
----------
have conversion rights as follows (the "Conversion Rights"):
-----------------
(a) Right to Convert. Each share of Series A Convertible Preferred
----------------
Stock (including those issued pursuant to Series A PIK Dividends) shall be
convertible, at the option of the holder thereof, at any time after the
date of issuance of such share (but prior to (i) the date(s) that
Conversion Rights terminate as set forth in the Notice issued pursuant to
paragraph A.3(d) of this Section 4.2, if any, and (ii) the redemption of
such share by the Corporation pursuant to paragraph A.6 of this Section
4.2), at the office of the Corporation or any transfer agent for such
stock, into such number of fully paid and nonassessable shares of Common
Stock as is determined by dividing the Series A Initial Purchase Price Per
Share, plus all declared but unpaid dividends on each such share other than
Series A PIK Dividends, by the Series A Conversion Price (as defined
below), determined as hereinafter provided, in effect on the date the share
is surrendered for conversion. The initial conversion price per share for
the Series A Convertible Preferred Stock (the "Series A Conversion Price")
-------------------------
shall be $0.78. Such initial Series A Conversion Price shall be adjusted
as hereinafter provided.
(b) Automatic Conversion. Each share of Series A Convertible
--------------------
Preferred Stock shall automatically be converted, at the then applicable
conversion rate, into shares of Common Stock immediately upon the vote or
written consent thereto of the holders of at least a majority of the then-
outstanding shares of Series A Convertible Preferred Stock.
(c) Mechanics of Voluntary Conversion. Before any holder of Series A
---------------------------------
Convertible Preferred Stock shall be entitled to convert the same into
shares of Common Stock, such holder shall surrender the certificate or
certificates thereof, duly endorsed, at the office of the Corporation, or
of any transfer agent for such stock, and shall give written notice to the
Corporation at such office that it elects to convert the same and shall
state therein the name or names in which it wishes the certificate or
certificates for shares of Common Stock to be issued. The Corporation
shall, as soon as practicable thereafter
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 4
- ----------------------------------
<PAGE>
and at its expense, issue and deliver at such office to such holder a
certificate or certificates for the number of shares of Common Stock to
which it shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of
surrender of the shares of Series A Convertible Preferred Stock to be
converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on
such date.
(d) Adjustments for Combinations or Subdivisions of Common Stock. In
------------------------------------------------------------
the event that the Corporation at any time or from time to time after the
Series A Initial Issue Date shall declare or pay any dividend on the Common
Stock payable in Common Stock or in any right to acquire Common Stock, or
shall effect a subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by stock split, stock dividend,
reclassification or otherwise), or in the event the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, in each case
without a corresponding adjustment to the Series A Convertible Preferred
Stock, then the Series A Conversion Price in effect immediately prior to
such event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate.
(e) Adjustments to Conversion Price for Diluting Issues.
---------------------------------------------------
(i) Special Definitions. For purposes of this paragraph A.5(e)
-------------------
of this Section 4.2, the following definitions apply:
(A) "Options" shall mean rights, options or warrants to
-------
subscribe for, purchase or otherwise acquire either Common Stock
or Convertible Securities, as hereinafter defined.
(B) "Convertible Securities" shall mean any evidences of
----------------------
indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
(C) "Additional Shares of Common Stock" shall mean all
---------------------------------
shares of Common Stock issued (or, pursuant to paragraph
A.5(e)(iii) of this Section 4.2, deemed to have been issued) by
the Corporation after the Series A Initial Issue Date, other than
shares of Common Stock issued or issuable:
(1) upon conversion of shares of Series A Convertible
Preferred Stock;
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 5
- ----------------------------------
<PAGE>
(2) by way of dividend or other distribution on shares
excluded from the definition of Additional Shares of Common
Stock by the foregoing clause (1);
(3) by way of any other issues consented to by the
holders of at least two-thirds (2/3) of the then outstanding
shares of the Preferred Stock;
(4) upon the issuance of the Series B Redeemable
Preferred Stock; or
(5) upon the issuance of Capital Stock in respect of
any Warrant (as defined in the Preferred Stock and Warrant
Purchase Agreement dated as of February 28, 1997, among the
Corporation, Rice Partners II, L.P., F - Jotan, L.L.C., F -
Southland, L.L.C., FF - Southland, L.P. and the shareholders
which are party signatories thereto).
(ii) No Adjustment of Conversion Price. No adjustment in the
---------------------------------
Series A Conversion Price shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share
for an Additional Share of Common Stock issued or deemed to be issued
by the Corporation is less than the Series A Conversion Price in
effect on the date of, and immediately prior to such issue.
(iii) Deemed Issue of Additional Shares of Common Stock. In the
-------------------------------------------------
event the Corporation at any time or from time to time after the
Series A Initial Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination of holders
of any class of securities then entitled to receive any such Options
or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such
number) of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed
to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the
close of business on such record date, provided that Additional Shares
of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to paragraph A.5(e)(v) of
this Section 4.2) of such Additional Shares of Common Stock would be
less than the Series A Conversion Price in effect on the date of and
immediately prior to such issue, or such record date, as the case may
be. In any such case in which Additional Shares of Common Stock are
deemed to be issued:
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 6
- ----------------------------------
<PAGE>
(A) no further adjustments in the Series A Conversion Price
shall be made upon the subsequent issue of Convertible Securities
or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any change in
the consideration payable to the Corporation, or change in the
number of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Series A Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date
with respect thereto), and any subsequent adjustments based
thereon, shall, upon any such change becoming effective, be
recomputed to reflect such change insofar as it affects such
Options or the rights of conversion or exchange under such
Convertible Securities (provided, however, that no such adjustment
-------- -------
of the Series A Conversion Price shall affect Common Stock
previously issued upon conversion of the Series A Convertible
Preferred Stock);
(C) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities that
shall not have been exercised, the Series A Conversion Price
computed upon the original issue thereof (or upon the occurrence
of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be
recomputed as if:
(1) in the case of Convertible Securities or Options,
the only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of
such Convertible Securities and the consideration received
therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not
exercised, plus the consideration actually received by the
Corporation upon such exercise, or for the issue of all such
Convertible Securities that actually were converted or
exchanged, plus the additional consideration, if any,
actually received by the Corporation upon such conversion or
exchange; and
(2) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon
the exercise thereof were issued at the time of issue of such
Options and the consideration received by the Corporation for
the
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 7
- ----------------------------------
<PAGE>
Additional Shares of Common Stock deemed to have been then
issued was the consideration actually received by the
Corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been
received by the Corporation (determined pursuant to paragraph
A.5(e)(v) of this Section 4.2) upon the issue of the
Convertible Securities with respect to which such Options
were actually exercised;
(D) no readjustment pursuant to clauses (B) or (C)
above shall have the effect of increasing the Series A Conversion
Price to an amount that exceeds the lower of (1) such Series A
Conversion Price on the original adjustment date, or (2) such
Series A Conversion Price that would have resulted from any
issuance of Additional Shares of Common Stock between the original
adjustment date and such readjustment date;
(E) in the case of any Options that expire by their
terms not more than 30 days after the date of issue thereof, no
adjustment of the Series A Conversion Price shall be made until
the expiration or exercise of all such Options, whereupon such
adjustment shall be made in the same manner provided in clause (C)
above; and
(F) if any such record date shall have been fixed and
such Options or Convertible Securities are not issued on the date
fixed therefor, the adjustment previously made in the Series A
Conversion Price that became effective on such record date shall
be canceled as of the close of business on such record date, and
shall instead be made on the actual date of issuance, if any.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
----------------------------------------------------------
Shares of Common Stock. In the event the Corporation shall issue
----------------------
Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to paragraph A.5(e)(iii) of
this Section 4.2) without consideration or for a consideration per
share less than the Series A Conversion Price in effect on the date of
and immediately prior to such issue, then and in such event, such
Series A Conversion Price shall be reduced concurrently with such
issue to a price (calculated to the nearest cent) determined by the
following formula:
N + C
---------
CP' = CP * N + AS
where:
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 8
- ----------------------------------
<PAGE>
CP' = the Series A Conversion Price as so adjusted;
CP = the former Series A Conversion Price;
N = the number of shares of Common Stock outstanding
immediately prior to such issuance (or deemed issuance)
assuming exercise or conversion of all outstanding
securities exercisable for or convertible into Common
Stock;
C = the number of shares of Common Stock that the aggregate
consideration received or deemed to be received by the
Corporation for the total number of additional
securities so issued or deemed to be issued would
purchase if the purchase price per share were equal to
the then existing Conversion Price;
AS = the number of shares of Common Stock so issued or
deemed to be issued.
Notwithstanding the foregoing, the Series A Conversion Price shall not
be so reduced at such time if the amount of such reduction would be an
amount less than $0.01, but any such amount shall be carried forward
and deduction with respect thereto made at the time of and together
with any subsequent reduction that, together with such amount and any
other amount or amounts so carried forward, shall aggregate $0.01 or
more.
(v) Determination of Consideration. For purposes of this
------------------------------
paragraph A.5(e) of this Section 4.2, the consideration received by
the Corporation for the issue of any Additional Shares of Common Stock
shall be computed as follows:
(A) Cash and Property. Such consideration shall:
-----------------
(1) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation (before
commissions or expenses) excluding amounts paid or payable
for accrued interest or accrued dividends;
(2) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of such
issue, as reasonably determined in good faith by the Board
of Directors; and
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 9
- ----------------------------------
<PAGE>
(3) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other
assets of the Corporation for consideration that covers
both, be the proportion of such consideration so received,
computed as provided in clauses (1) and (2) above, as
reasonably determined in good faith by the Board of
Directors; and
(B) Options and Convertible Securities. The consideration
----------------------------------
per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to paragraph
A.5(e)(iii) of this Section 4.2 relating to Options and
Convertible Securities shall be determined by dividing:
(1) the total amount, if any, received or receivable by
the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum
aggregate amount of additional consideration (as set forth
in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of
such number) payable to the Corporation upon the exercise of
such Options or the conversion or exchange of such
Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of
such Convertible Securities by
(2) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of
such Options or the conversion or exchange of such
Convertible Securities.
(f) Other Distributions. In the event the Corporation shall at any
-------------------
time or from time to time make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in securities of the Corporation or any of its
subsidiaries, other than additional shares of Common Stock, then in each
such event provision shall be made so that the holders of Series A
Convertible Preferred Stock shall receive, upon the conversion thereof, the
securities of the Corporation that they would have received had their stock
been converted into Common Stock immediately prior to such event.
(g) Adjustments. In case of any reorganization or any
-----------
reclassification of the capital stock of the Corporation, any consolidation
or merger of the Corporation with or into another entity or entities or the
conveyance of all or substantially all of the assets of
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 10
- ----------------------------------
<PAGE>
the Corporation, each share of Series A Convertible Preferred Stock (other
than shares of Series A Convertible Preferred Stock for which the holder
thereof has elected to receive the Series A Preferential Amount pursuant to
paragraph A.3 above) shall thereafter be convertible into the number of
shares of stock or other securities or property (including cash) to which a
holder of the number of shares of Common Stock deliverable upon conversion
of such share of Series A Convertible Preferred Stock would have been
entitled upon the record date of (or date of, if no record date is fixed)
such reorganization, reclassification, consolidation, merger or conveyance;
and, in any case, appropriate adjustment (as reasonably determined by the
Board of Directors) shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
holders of such Series A Convertible Preferred Stock, to the end that the
provisions set forth herein shall thereafter be applicable, as nearly as
equivalent as is practicable, in relation to any shares of stock or the
securities or property (including cash) thereafter deliverable upon the
conversion of the shares of such Series A Convertible Preferred Stock.
(h) Certificates as to Adjustments. Upon the occurrence of each
------------------------------
adjustment or readjustment of the Series A Conversion Price pursuant to
this paragraph A.5 of this Section 4.2, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance with
the terms hereof and prepare and furnish to each holder of Series A
Convertible Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at
any time of any holder of Series A Convertible Preferred Stock furnish or
cause to be furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, (ii) the Series A Conversion Price at
the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property that at the time would be received upon
the conversion of Series A Convertible Preferred Stock.
(i) Issue Taxes. The Corporation shall pay any and all issue and
-----------
other taxes that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of shares of Series A Convertible
Preferred Stock pursuant hereto; provided, however, that the Corporation
-------- -------
shall not be obligated to pay any transfer, stamp or income taxes resulting
from any transfer requested by any holder in connection with any such
conversion.
(j) Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Series A Convertible Preferred Stock, such
number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series A
Convertible Preferred Stock; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 11
- ----------------------------------
<PAGE>
outstanding shares of Series A Convertible Preferred Stock, the Corporation
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase the authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose, including,
without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to the Corporation's
Articles of Incorporation.
Before taking any action that would cause an adjustment reducing
the Series A Conversion Price below the then par value of the shares of
Common Stock, as applicable, issuable upon conversion of the Series A
Convertible Preferred Stock or that would cause the effective purchase
price for the Series A Convertible Preferred Stock to be less than the par
value of the shares of Series A Convertible Preferred Stock, the
Corporation will take any corporate action that may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of such Common Stock at such
adjusted Series A Conversion Price or effective purchase price, as the case
may be.
(k) Fractional Shares. No fractional shares shall be issued upon the
-----------------
conversion of any share or shares of Series A Convertible Preferred Stock.
All shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Series A Convertible Preferred Stock
by a holder thereof shall be aggregated for purposes of determining whether
the conversion would result in the issuance of any fractional share. If,
after the aforementioned aggregation, the conversion would result in the
issuance of a fraction of a share of Common Stock, the Corporation shall,
in lieu of issuing any fractional share, pay the holder otherwise entitled
to such fraction a sum in cash equal to the fair market value of such
fraction on the date of conversion (as determined in good faith by the
Board of Directors).
6. Redemption.
----------
(a) After (but only after) the redemption of all Series B Redeemable
Preferred Stock (as hereafter provided) or with the prior written consent
of two-thirds (2/3) of the holders of the Series B Redeemable Preferred
Stock, the Corporation, at its sole option, may redeem all, but not less
than all, of the then-outstanding shares of the Series A Convertible
Preferred Stock (including those issued as Series A PIK Dividends) upon
sixty (60) days' advance written notice to the holders of the Series A
Convertible Preferred Stock at a price per share equal to the Series A
Preferential Amount, after any time when (a) the Average Price reflects as
25% premium over the initial Series A Conversion Price (as adjusted for any
combinations, consolidations, recapitalizations, reorganizations,
reclassifications, stock dividends other than Series A PIK Dividends, stock
splits and the like) and (b) a credible financial advisor either
underwrites the redemption of the Series A Convertible Preferred Stock or
opines that such redemption and/or voluntary conversion of the Series A
Convertible Preferred Stock prior thereto
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 12
- ----------------------------------
<PAGE>
pursuant to paragraph A.5(a) of this Section 4.2 and the sale of all the
Common Stock issued upon such conversion in a commercially reasonable
manner would not significantly impact the market price of the Common Stock.
If the redemption notice has been duly given, each holder of shares of
Series A Convertible Preferred Stock to be redeemed shall be entitled to
convert, on or prior to the redemption date, such shares of Series A
Convertible Preferred Stock into shares of Common Stock in accordance with
the terms of these Restated Articles of Incorporation.
(b) The Company shall mail an appropriate Redemption Notice stating
the information to be set forth therein.
B. Series B Redeemable Preferred Stock
1. Designation and Amount. Pursuant to the authority set forth in
----------------------
Section 4.1 of these Restated Articles of Incorporation of Jotan, Inc., the
Board of Directors of the Corporation established a series of the authorized
preferred stock of the Corporation, designated as Series B Redeemable Preferred
Stock ("Series B Redeemable Preferred Stock"), consisting of 5,000,000 shares,
-----------------------------------
and having the powers, preferences and relative participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as set
forth herein. Such number of shares may be increased or decreased from time to
time by resolution of the Board of Directors; provided, however, that no
-------- -------
decrease shall reduce the number of shares of Series B Redeemable Preferred
Stock to a number less than the number of shares of such series then issued and
outstanding, plus the number of shares of such series reserved for issuance upon
the exercise of outstanding rights, options or warrants or upon the conversion
or exchange of outstanding securities issued by the Corporation.
2. Dividends Series B Redeemable Preferred Stock.
---------------------------------------------
(a) The record holders of the outstanding Series B Redeemable
Preferred Stock shall receive be entitled to receive, as and when declared
by the Board of Directors out of funds legally available therefor, on each
Series B Dividend Payment Date during each Series B Dividend Payment
Period, cumulative cash dividends equal to the applicable Series B Dividend
Amount for such period. Past due payments of the applicable Series B
Dividend Amount shall bear interest at a rate of 8% per annum or, if less,
the highest rate then permitted by applicable law. Notwithstanding the
foregoing, the Board of Directors in its discretion may decide to pay the
accrued Series B Dividend Amount in the form of Series B PIK Dividends as
set forth below.
(b) If and to the extent that cash dividends are not declared and
paid as set forth in paragraph B.2(a) of this Section 4.2:
(i) The record holders of the outstanding Series B Redeemable
Preferred Stock shall receive on each Series B Dividend Payment Date
during the
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 13
- ----------------------------------
<PAGE>
Series B Dividend Payment Period per share dividends in additional
fully paid and nonassessable shares of Series B Redeemable Preferred
Stock legally available therefor (such dividend being herein called
"Series B PIK Dividends"). The Series B PIK Dividends shall be paid by
----------------------
delivering to each record holder of Series B Redeemable Preferred
Stock a number of shares of Series B Redeemable Preferred Stock (which
number of shares shall be rounded to the nearest one-thousandth of a
share) equal to the number of shares of Series B Redeemable Preferred
Stock held by such holder on the applicable Series B Record Date,
multiplied by the applicable Series B Dividend Amount. Any additional
shares of Series B Redeemable Preferred Stock issued pursuant to this
paragraph shall be governed by this Section 4.2 and shall be subject
in all respects, except as to the date of issuance and date from which
Series B PIK Dividends accrue and cumulate as set forth in paragraph
B.2(b) of this Section 4.2, to the same terms as the shares of Series
B Redeemable Preferred Stock issued on the Initial Issue Date.
(ii) On the Series B Record Date immediately preceding each
Series B Dividend Payment Date, the Board of Directors of the
Corporation shall be deemed to have declared Series B PIK Dividends on
the Series B Redeemable Preferred Stock in accordance with paragraph
B.2(a) of this Section 4.2, payable on the next Series B Dividend
Payment Date. Series B PIK Dividends on shares of Series B Redeemable
Preferred Stock shall accrue at the applicable Series B Dividend
Amount through the Series B Dividend Payment Period. Series B PIK
Dividends shall be payable in arrears during the Series B Dividend
Payment Period on each Series B Dividend Payment Date, commencing on
the first Series B Dividend Payment Date, and for shares issued as
Series B PIK Dividends, commencing on the first Series B Dividend
Payment Date occurring after such shares are issued.
(c) If any Series B Dividend Payment Date occurs on a day that is
not a Business Day, any accrued Series B Dividend Amount otherwise payable
on such Series B Dividend Payment Date shall be paid on the next succeeding
Business Day. The applicable Series B Dividend Amount shall be paid to
holders of record of the Series B Redeemable Preferred Stock on each Series
B Dividend Payment Date as their names shall appear on the share register
of the Corporation on the Series B Record Date immediately preceding such
Series B Dividend Payment Date. Series B PIK Dividends on Series B PIK
Dividends that are in arrears for any past Series B Dividend Periods shall
accumulate as if the earlier Series B PIK Dividends had been issued as
provided above, and shall be accrued. Unpaid Series B PIK Dividends may be
paid at any time to holders of record on the Series B Record Date therefor.
(d) If in respect of any past quarterly dividend period or periods
full dividends upon the outstanding shares of Series B Redeemable Preferred
Stock shall not have been
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 14
- ----------------------------------
<PAGE>
paid, the amount of the deficiency shall be fully paid or declared and set
apart for payment before any dividend shall be paid or set apart for
payment upon any shares of Junior Stock.
(e) Each share of Series B Redeemable Preferred Stock shall rank
prior to each share of Junior Stock, including Series A Convertible
Preferred Stock and Common Stock, with respect to the payment of dividends.
3. Liquidation Preference.
----------------------
(a) Liquidation Preference. Except as provided in paragraph A.3(a)
----------------------
of this Section 4.2, each share of Series B Redeemable Preferred Stock
shall rank prior to each share of Junior Stock with respect to the
distribution of assets or surplus funds of the Corporation upon any
Liquidation. In the event of any Liquidation the holders of the Series B
Redeemable Preferred Stock shall be entitled to receive any distribution of
the assets or surplus funds of the Corporation as provided in paragraph
A.3(a) of this Section 4.2.
(b) Consolidation; Merger. A consolidation, merger or share
---------------------
exchange of the Corporation with or into any other corporation or other
business entity in which the shareholders of the Corporation immediately
prior to the transaction do not own at least fifty percent (50%) of the
outstanding voting power of the surviving corporation or other business
entity immediately after such consolidation, merger or share exchange, or a
sale by the Corporation of all or substantially all of its assets (other
than to a corporation or other business entity in which the shareholders of
the Corporation immediately prior to the transaction own at least fifty
percent (50%) of the outstanding voting power of the purchasing corporation
or other business entity immediately after the sale), shall, upon the
receipt of written election by the Holders of at least two thirds (2/3) of
the outstanding shares of the Series B Redeemable Preferred Stock, be
deemed to be a Liquidation.
(c) Valuation of Securities. Any securities to be delivered upon
-----------------------
Liquidation shall be valued as set forth in paragraph A.3(c) of this
Section 4.2.
(d) Notice. Notice of any Liquidation shall be given in accordance
------
with paragraph A.3(d) of this Section 4.2.
4. Election of Directors by Holders of Series B Redeemable
-------------------------------------------------------
Preferred Stock.
- ---------------
(a) The holders of the Series B Redeemable Preferred Stock shall
have at all times the exclusive right (voting separately as a class) to
elect a majority in number of the directors of the Corporation (the
"Series B Directors"). Such right may be exercised by action of the holders
------------------
of a majority of the issued and outstanding shares of Series B Redeemable
Preferred Stock at a duly called meeting of the holders of the Series B
Redeemable Preferred Stock or by written consent of at least a majority of
the issued and outstanding Series B
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 15
- ----------------------------------
<PAGE>
Redeemable Preferred Stock. Upon written notice of exercise of the right to
elect Series B Directors pursuant to this paragraph B.4 of this Section 4.2
signed by the holders of a majority of the issued and outstanding Series B
Redeemable Preferred Stock, or upon such action taken at a meeting of the
holders of the Series B Redeemable Preferred Stock, that action has been
taken to elect Series B Directors, the maximum authorized number of members
of the Board of Directors shall, to the extent necessary, automatically be
increased by the number of directors so elected (but not more than a
majority of the resulting number of directors) and the designees so elected
shall be deemed elected to fill the vacancies so created by vote of the
holders of the Series B Redeemable Preferred Stock.
(b) The President of the Corporation shall, within twenty (20) days
after delivery to the Corporation at its principal office of a written
request for a special meeting signed by the holders of a majority of the
issued and outstanding Series B Redeemable Preferred Stock, call a special
meeting of the holders of Series B Redeemable Preferred Stock to be held as
promptly as is practicable within ninety (90) days after the delivery of
such request for the purpose of electing Series B Directors.
(c) Each Series B Director shall hold office until the earliest to
occur of (i) the time at which no shares of Series B Preferred stock are
outstanding, (ii) his or her death, (iii) his or her resignation, (iv) his
or her removal, (v) his or her disqualification, (vi) his or her
retirement, or (vii) election by the holder of Series B Redeemable
Preferred Stock of a duly qualified successor at any annual or special
meeting of shareholders. Subject to the limitations of the preceding
sentence, Series B Directors shall serve until the next annual meeting of
the shareholders of the Corporation, at which time the holders of Series B
Redeemable Preferred Stock may elect successors to the Series B Directors.
(d) If the office of any Series B Director becomes vacant by reason
of death, resignation, retirement, disqualification, removal from office or
otherwise, the remaining Series B Director or Directors may choose a
successor who shall hold office for the unexpired term in respect of which
such vacancy occurred. Any Series B Director may be removed by, and shall
not be removed otherwise than by, vote of the Series B Redeemable Preferred
Stock. Until the exercise by the holder of the Series B Redeemable
Preferred Stock of the rights and privileges set forth in this paragraph
B.4 of Section 4.2, the number of directors shall be such number as may be
provided for in the Bylaws, in a resolution of the Board of Directors
adopted in accordance with the Bylaws or by any action or agreement under a
shareholder or similar agreement.
5. Redemptions.
-----------
(a) Optional Redemption. The Series B Redeemable Preferred Stock
-------------------
may be redeemed at the Company's option (subject to the legal availability
of funds) at any time
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 16
- ----------------------------------
<PAGE>
and from time to time, in whole or in part, but in any event in increments
of not less than the lesser of (a) $500,000.00 or (b) the amount necessary
to redeem all Series B Redeemable Preferred Stock, at a redemption price
per share equal to the following amounts, determined on the date of
redemption:
<TABLE>
<CAPTION>
Redemption Date Price
------------------------------------------------- ------------------------
<S> <C>
(i) On or after the Initial Issue Date and 112.5% of the Series B
before the first anniversary of the Preferential Amount
Initial Issue Date
(ii) On or after the first anniversary of the 110.71% of the Series B
Initial Issue Date and before the second Preferential Amount
anniversary of the Initial Issue Date
(iii) On or after the second anniversary of the 108.92% of the Series B
Initial Issue Date and before the third Preferential Amount
anniversary of the Initial Issue Date
(iv) On or after the third anniversary of the 107.14% of the Series B
Initial Issue Date and before the fourth Preferential Amount
anniversary of the Initial Issue Date
(v) On or after the fourth anniversary of the 105.36% of the Series B
Initial Issue Date and before the fifth Preferential Amount
anniversary of the Initial Issue Date
(vi) On or after the fifth anniversary of the 100% of the Series B
Initial Issue Date Preferential Amount
</TABLE>
(b) Mandatory Redemptions. On the eighth (8th) anniversary of the
---------------------
Initial Issue Date, the Company shall redeem (subject to the legal
availability of funds) all shares of the Series B Redeemable Preferred
Stock issued and outstanding from time to time; provided, however, that if
-------- -------
the Company fails to redeem any such shares at such anniversary, the
holders of such shares shall be entitled to all rights and remedies at law
or in equity.
(c) Continuing Obligations. In the event any redemption required by
----------------------
this paragraph 5 is not completed for any reason, the obligation of the
Company to redeem all or a portion of the Series B Redeemable Preferred
Stock will continue until the earliest time as the circumstance preventing
such redemption no longer exists, at which time the
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 17
- ----------------------------------
<PAGE>
Company will redeem the Series B Redeemable Preferred Stock. The Company
will use its best efforts to make funds legally available for such
redemptions, including, without limitation, revaluing assets of the
Company.
(d) Redemption Notice. The Company shall mail an appropriate
-----------------
Redemption Notice stating the information to be set forth therein.
(e) Surrender of Stock. On or before the Redemption Date, each
------------------
holder of Series B Redeemable Preferred Stock to be redeemed shall
surrender the certificate or certificates (if any) representing such shares
to the Company, in the manner and at the place designated in the Redemption
Notice, and thereupon the Series B Preferential Amount for such shares
shall be payable to the order of the person whose name appears on such
certificate or certificates (or that is entitled to such payment if there
is no certificate) as the owner thereof or such person's designee, and each
surrendered certificate shall be canceled and retired. In the event fewer
than all of the shares represented by such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(f) Termination of Rights. If the Redemption Notice is duly given,
---------------------
and if by the Redemption Date the Series B Preferential Amount is either
paid or made irrevocably available for payment, then notwithstanding that
the certificates evidencing any of the shares of Series B Redeemable
Preferred Stock so called for redemption have not been surrendered, all
rights with respect to such shares shall forthwith after the Redemption
Date cease, except only the right of the holders to receive the Series B
Preferential Amount without interest upon surrender of their certificates
therefor.
(g) Redemption Pro Rata. In the event that fewer than all of the
-------------------
outstanding shares of Series B Redeemable Preferred Stock are to be
redeemed, such shares to be redeemed shall be redeemed pro rata among all
holders thereof in accordance with the number of shares of Series B
Redeemable Preferred Stock owned.
(h) No Reissuance of Series B Redeemable Preferred Stock. No
----------------------------------------------------
Series B Redeemable Preferred Stock acquired by the Company by reason of
redemption, purchase, or otherwise will be reissued, and all such shares
will be canceled, retired and eliminated from the shares that the Company
will be authorized to issue.
(i) Priority of Series B Redeemable Preferred Stock. Each share of
-----------------------------------------------
Junior Stock (including the Series A Convertible Preferred Stock and Common
Stock) shall rank junior to each share Series B Redeemable Preferred Stock
of with respect to the payment of redemptions, purchases or other
acquisitions of shares of stock and no monies shall be paid into or set
aside or made available for a sinking fund for such redemptions, purchases
or other acquisitions until and unless the Series B Preferential Amount has
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 18
- ----------------------------------
<PAGE>
been paid in full in connection with the redemption of all issued and
outstanding Series B Redeemable Preferred Stock.
C. Restrictive and General Provisions
1. Protective Provisions. Notwithstanding paragraph B.4 of this
---------------------
Section 4.2, except as otherwise required by law, so long as any Preferred Stock
remains outstanding (as adjusted, to the extent applicable, for any
combinations, consolidations, recapitalizations, reorganizations,
reclassifications, stock distributions, stock splits, stock dividends other than
Series A PIK Dividends and Series B PIK Dividends, if any, and the like), the
Corporation shall not, without the vote or written consent by the holders of at
least 2/3 (two-thirds) of the outstanding shares of Preferred Stock (voting as
one class):
(a) take any action that adversely alters or changes the rights,
preferences or privileges of the Preferred Stock as set forth in this
Amendment;
(b) increase or decrease the total number of authorized shares of
the preferred stock of the Corporation or the total number of such shares
of Preferred Stock designated as Series A Convertible Preferred Stock and
Series B Redeemable Preferred Stock;
(c) authorize or make any Restricted Payment except repurchases of
stock in accordance with the permissions granted in the Note Purchase
Agreement dated as February 28, 1997 among the Company, SHC Acquisition
Corp., and other parties named therein (as the same may be amended,
modified or supplemented from time to time);
(d) create or authorize any class or series of Capital Stock ranking
prior to or pari passu with the Series B Redeemable Preferred Stock with
---- -----
respect of the payment of dividends or the distribution of assets upon a
Liquidation, or create or authorize any rights, options or warrants
exercisable for, or securities convertible into or exchangeable for, shares
of any such class or series of Capital Stock;
(e) except for Permitted Stock (as defined below), authorize the
issuance of the Corporation's equity securities at a price per share of
less than any of (i) the Series B Initial Purchase Price Per Share, (ii)
the Series A Initial Purchase Price Per Share or (iii) the Average Price of
such equity securities as of the date of the sale or grant, as determined
in good faith by the Board of Directors (taking into consideration the
terms of such sale or grant, the amount of securities involved in the
transaction, the liquidity of the investment, and such other factors as the
Board of Directors deems in good faith to be appropriate); or
(f) in any manner, whether by amendment hereof or of its Bylaws,
merger, reorganization, recapitalization, consolidation, sales of assets,
sale of stock, tender offer, dissolution or otherwise, take any action, or
permit any action to be taken, solely or
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 19
- ----------------------------------
<PAGE>
primarily for the purpose of increasing the value of any class of stock of
the Corporation if the effect of such action is to reduce the value of the
Preferred Stock.
For purposes of clause (e) above, "Permitted Stock" means Common Stock or
---------------
options or warrants to acquire Common Stock, constituting, in the aggregate, of
2,000,000 shares or less of such stock as of February 28, 1997, issued or
reserved for issuance to present and future key management and directors of the
Corporation pursuant to a stock incentive program approved or to be approved by
the Board of Directors.
2. Common Stock Dividends. Subject to compliance with paragraph A.2(a)
----------------------
and B.2 of this Section 4.2, the holders of the outstanding Common Stock shall
be entitled, when and if declared by the Board of Directors of the Corporation,
consistent with Florida law, to cash dividends and distributions out of any
assets of the Corporation at the time legally available for that purpose. The
right to dividends on any class of Common Stock shall not be cumulative.
3. Voting of Common Stock Holders. Except as otherwise required by law
------------------------------
or as hereinafter provided, the Common Stock shall have one vote per share.
4. No Impairment. The Corporation will not, by amendment of its Articles
-------------
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4.2 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of Series A
Convertible Preferred Stock and other rights of the Preferred Stock set forth
herein against impairment.
5. Communications; Other Notices. Any notice or communication ("Notice")
----------------------------- ------
required by the provisions of this Section 4.2 to be given to the holders of
shares of the Preferred Stock shall be deemed given upon confirmed transmission
by facsimile or telecopy or five (5) days after deposit in the United States
mail, postage prepaid, and addressed to each holder of record at its address
appearing on the books of the Corporation. Notwithstanding the foregoing, if a
shareholder to whom notice is to be given has an address of record that is
outside of the United States, than any notice to such shareholder hereunder
shall be deemed given upon confirmed transmission by facsimile or telecopy or
seven (7) days after deposit in the United States mail, postage prepaid, and
addressed to such holder at its address appearing on the books of the
Corporation.
6. Notice of Record Date. In the event of any taking by the Corporation
---------------------
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, any security or right convertible into or entitling the
holder thereof to receive additional shares of Common Stock, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other
Exhibit A to Articles of Amendment of Restated
- ----------------------------------------------
Articles of Incorporation of Jotan - Page 20
- ----------------------------------
<PAGE>
securities or property, or to receive any other right, the Corporation shall
mail to each holder of Preferred Stock, at least twenty (20) days prior to the
date specified therein, a notice specifying the date (including the Series A PIK
Record Date or the Series B Record Date) on which any such record is to be taken
for the purpose of such dividend, distribution, security or right, and the
amount and character of such dividend, distribution, security or right.
7. General Priority. Except as provided in paragraph A.3 of this Section
----------------
4.2, Series B Redeemable Preferred Stock shall rank senior to all other Capital
Stock.
D. DEFINITIONS.
Unless the context otherwise requires, the terms defined in this paragraph
D shall have, for all purposes of this Section 4.2, the meanings herein
specified (with terms defined in the singular having comparable meanings when
used in the plural).
"Average Price" shall mean the average of the closing prices of the Common
-------------
Stock over a period of thirty (30) consecutive days on the primary securities
exchange or market on which the Common Stock is traded.
"Business Day" shall mean a day other than a Saturday, a Sunday or any
------------
other day on which banking institutions in Florida generally are not open for
business.
"Capital Stock" shall mean any and all shares, interests and participations
-------------
or other equivalents (however designated) of capital stock of the Corporation,
and includes all Common Stock and Preferred Stock.
"Junior Stock" shall mean Common Stock and any other class or series of
------------
capital stock of the Corporation which ranks junior to the Series B Redeemable
Preferred Stock with respect to the payment of dividends or the distribution of
assets upon a Liquidation.
"Liquidation" shall mean any liquidation, dissolution or winding up of the
-----------
affairs of the Corporation (voluntary or involuntary).
"Preferred Stock" shall mean, collectively, the Series A Convertible
---------------
Preferred Stock and the Series B Redeemable Preferred Stock.
"Redemption Notice" shall mean a notice in writing, to be sent by the
-----------------
Company not less than seven (7) days nor more than fourteen (14) days prior to
the date fixed for any redemption pursuant to paragraph A.6 or B.5(a) of this
Section 4.2, with postage prepaid, return receipt requested, to each holder of
shares of record of Series A Convertible Preferred Stock and/or Series B
Redeemable Preferred Stock to be redeemed, as the case may be, at such holder's
address last shown on the records of the Company. Such notice shall state:
Exhibit A to Articles of Amendment of Restated
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Articles of Incorporation of Jotan - Page 21
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<PAGE>
(1) The total number of shares of Series A Convertible
Preferred Stock and/or Series B Redeemable Preferred Stock, as the
case may be, that the Company intends to redeem;
(2) The number of shares of Series A Convertible Preferred
Stock and/or Series B Redeemable Preferred Stock, as the case may be,
held by the holder thereof that the Company intends to redeem;
(3) The Redemption Date of the Series A Convertible Preferred
Stock and/or Series B Redeemable Preferred Stock, as the case may be,
and the Series A Preferential Amount and Series B Preferential Amount,
as the case may be; and
(4) The time, place and manner in which the holder is to
surrender to the Company the certificate or certificates representing
the shares of Series A Convertible Preferred Stock and/or Series B
Redeemable Preferred Stock to be redeemed, as the case may be.
"Restricted Payment" means any purchase, redemption, retirement or other
------------------
acquisition for value by the Corporation of its Capital Stock, except as
expressly permitted in this Amendment.
"Series A Annual Per Share PIK Dividend Amount" shall mean a fraction of
---------------------------------------------
one share of Series A Convertible Preferred Stock equal to eight percent (8.0%)
per annum of one share of the Series A Convertible Preferred Stock, prorated for
any partial year.
"Series A Initial Issue Date" shall mean May 16, 1996, which is the date
---------------------------
that shares of Series A Convertible Preferred Stock were first issued by the
Corporation.
"Series A Initial Purchase Price Per Share" shall mean $1.58 per share of
-----------------------------------------
Series A Convertible Preferred Stock.
"Series A PIK Dividends" shall mean the "paid-in-kind" dividends as set
----------------------
forth in paragraph A.2 of this Section 4.2.
"Series A PIK Dividend Payment Date" shall mean the first day of each
----------------------------------
January in each year during the Series A PIK Dividend Payment Period.
"Series A PIK Dividend Payment Period" shall mean the period from, and
------------------------------------
including, the Initial Issue Date to, but not including, the date all the
outstanding Series A Convertible Preferred Stock is (a) converted into Common
Stock or (b) redeemed and the redemption price is paid in full pursuant to
paragraph 6 of this Section 4.2.
Exhibit A to Articles of Amendment of Restated
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Articles of Incorporation of Jotan - Page 22
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<PAGE>
"Series A PIK Dividend Period" shall mean the period from and including,
----------------------------
the Initial Issue Date to, but not including, the first Series A PIK Dividend
Payment Date and thereafter, each annual period, including any Series A PIK
Dividend Payment Date to, but not including, the next Series A PIK Dividend
Payment Date.
"Series A PIK Record Date" shall mean the date that is fifteen (15)
------------------------
Business Days prior to any Series A PIK Dividend Payment Date.
"Series A Preferential Amount" shall mean, with respect to each share of
----------------------------
Series A Convertible Preferred Stock outstanding (including shares issued or
accrued as Series A PIK Dividends), the amount equal to the Series A Initial
Purchase Price Per Share (as adjusted for any combinations, consolidations,
recapitalizations, reorganizations, reclassifications, stock distributions,
stock splits, stock dividends and the like) plus all declared but unpaid
dividends thereon (excluding Series A PIK Dividends), and no more.
"Series B Dividend Amount" shall mean, (i) with respect to Series B PIK
------------------------
Dividends, a fraction of one share of Series B Redeemable Preferred Stock equal
to eight percent (8.0%) per annum of one share of the Series B Redeemable
Preferred Stock prorated for any partial year, and (ii) with respect to Series B
Redeemable Preferred Stock cash dividends, a cash amount equal to eight percent
(8.0%) per annum of the Series B Initial Purchase Price Per Share of all issued
and outstanding shares of the Series B Redeemable Preferred Stock, in each case
computed on the basis of the actual days elapsed in a year 360 days and
cumulated quarterly.
"Series B Dividend Payment Date" shall mean the first day of each January,
------------------------------
March, June and September in each year during the Series B Dividend Payment
Period, commencing March 1, 1997.
"Series B Dividend Payment Period" shall mean the period from, and
--------------------------------
including, the Initial Issue Date of such series to, but not including, the date
all the outstanding Series B Redeemable Preferred Stock is redeemed and the
redemption price is paid in full pursuant to paragraph B.6 of this Section 4.2.
"Series B Dividend Period" shall mean the period from and including, the
------------------------
Series B Initial Issue Date of such series to, but not including, the first
Dividend Payment Date and thereafter, each calendar quarter period, including
any Series B Dividend Payment Date to, but not including, the next Series B
Dividend Payment Date.
"Series B Initial Issue Date" shall mean the date that shares of Series B
---------------------------
Redeemable Preferred Stock are first issued by the Corporation.
"Series B Initial Purchase Price Per Share" shall mean $200 per share of
-----------------------------------------
Series B Redeemable Preferred Stock.
Exhibit A to Articles of Amendment of Restated
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Articles of Incorporation of Jotan - Page 23
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<PAGE>
"Series B PIK Dividends" shall mean the "paid-in-kind" dividends as set
----------------------
forth in paragraph B.2 of this Section 4.2.
"Series B Record Date" shall mean the date that is fifteen (15) Business
--------------------
Days prior to any Dividend Payment Date.
"Series B Preferential Amount" shall mean, with respect to each share of
----------------------------
Series B Redeemable Preferred Stock outstanding (including shares issued or
accrued as PIK Dividends), the amount equal to the Series B Initial Purchase
Price Per Share plus all accrued but unpaid dividends thereon (excluding
Series B PIK Dividends).
Exhibit A to Articles of Amendment of Restated
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Articles of Incorporation of Jotan - Page 24
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