EXHIBIT 1
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
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PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement") made
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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-
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SOUTHLAND, L.L.C., a North Carolina limited liability company ("F-Southland"),
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FF-Southland, L.P., a Delaware limited partnership ("FF-Southland" and together
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with F-Southland, the "Southland Purchasers", which, together with Rice are
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individually and collectively, as the context requires, referred to herein as
the "Purchaser"), F-JOTAN, L.L.C., a North Carolina limited liability
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corporation ("F-Jotan"), and each of the SHAREHOLDERS named on the signature
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pages hereto (individually and collectively, as the context requires, the
"Shareholder").
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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;
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WHEREAS, the Company and the Shareholder have entered into a
Shareholder Agreement (the "Shareholder Agreement") dated of even date with this
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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
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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).
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Adjustment Event. Any event in which (a) the Company issues any shares of
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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
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Capital Stock pursuant to a registration statement filed with the
Commission.
Affiliate. With respect to any Person, (a) a Person that, directly or
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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.
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Appraised Value. The value determined in accordance with the following
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procedures. For a period of thirty (30) days after the date of a Valuation
Event (the "Negotiation
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Preferred Stock and Warrant Purchase Agreement - Page 2
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Period"), each party to this Agreement agrees to negotiate in good faith to
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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
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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.
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Average Market Value. The average of the Closing Prices for the security
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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
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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
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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.
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Buyer. This term is defined in Section 6.02(a)(ii) of the Shareholder
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Agreement.
Call Option. This term is defined in Section 5.01 of the Shareholder
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Agreement.
Call Option Closing. This term is defined in Section 5.04 of the
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Shareholder Agreement.
Call Option Period. This term is defined in Section 5.01 of the
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Shareholder Agreement.
Capital Stock. As to any Person, its common stock and any other capital
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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).
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Closing Date. As of March 4, 1997.
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Closing Price.
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(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
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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.
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Common Stock Equivalent. Any option, warrant, right, or similar security
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exercisable into, exchangeable for, or convertible to Common Stock.
Commission. The Securities and Exchange Commission and any successor
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federal agency having similar powers.
Company. Jotan, Inc. and any successor or assign, and, unless the context
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requires otherwise, the term Company includes any Subsidiary.
Co-Sell Shares. This term is defined in Section 6.02(d) of the Shareholder
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Agreement.
Co-Sellers. This term is defined in Section 6.02(d) of the Shareholder
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Agreement.
Dilution Fee. This term is defined in Article III of the Shareholder
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Agreement.
Election Notice. This term is defined in Section 6.02(b) of the
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Shareholder Agreement.
Employment Agreements. This term is defined in Section 11.1 of the Note
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Agreement.
Excess Consideration. The amount that a Holder would have realized
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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
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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
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rules and regulations thereunder.
Exchange Common Stock. This term is defined in Section 7.12 of the
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Shareholder Agreement.
Exchange Company. This term is defined in Section 7.12 of the Shareholder
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Agreement.
Exchange Notice. This term is defined in Section 7.12 of the Shareholder
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Agreement.
Exercise Price. The price per share specified in Section 2.03 as adjusted
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from time to time pursuant to the provisions of this Agreement.
Preferred Stock and Warrant Purchase Agreement - Page 5
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Fair Market Value.
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(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
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this Agreement; provided, however, that, at the election of the Holders or
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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
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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
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Section 11.01 of the Shareholder Agreement.
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Initial Holders. Each Purchaser and any Affiliate of such Purchaser to
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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).
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Issuable Warrant Shares. Shares of Common Stock or Other Securities
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issuable on exercise of the Warrants.
Issued Warrant Shares. Shares of Common Stock or Other Securities issued
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on exercise of the Warrants.
Negotiation Period. This term is defined in the definition of Fair Market
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Value.
New Securities. Any Capital Stock other than Warrant Shares and other than
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the Permitted Stock.
Notes. All or any portion of any of the Senior Subordinated Notes (as
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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
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Note Agreement. This term is defined in the preamble and includes the Note
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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
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Agreement.
Other Securities. Any stock, other securities, property, or other property
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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
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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,
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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.
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Preferred Stock. This term means collectively, Series A Preferred Stock
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and Series B Preferred Stock.
Purchase Agreement. This term is defined in the preamble to the
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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.
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Put Option. This term is defined in Section 4.01 of the Shareholder
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Agreement.
Put Option Closing. This term is defined in Section 4.05 of the
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Shareholder Agreement.
Put Option Period. This term is defined in Section 4.01 of the Shareholder
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Agreement.
Put Price. This term is defined in Section 4.02 of the Shareholder
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Agreement.
Preferred Stock and Warrant Purchase Agreement - Page 7
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Put Shares. The Warrant Shares plus any other shares of Capital Stock
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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
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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
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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
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more Related Parties.
Selling Shareholder. This term is defined in Section 6.02 of the
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Shareholder Agreement.
Securities Act. The Securities Act of 1933, as amended, and the rules and
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regulations thereunder.
Senior Lenders. This term is defined in Section 11.1 of the Note
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Agreement.
Series A Preferred Stock. Series A Convertible Preferred Stock, $0.01 par
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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
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Agreement.
Series B Preferred Stock. Series B Preferred Stock, $0.01 par value, of
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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.
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Shareholder Agreement. This term is defined in the preamble and includes
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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
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Agreement by reference.
Senior Subordination Agreement. This term is defined in Section 11.1 of
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the Note Agreement.
Subsidiary. Each Person of which or in which the Company or its other
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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
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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
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Value.
Warrant A-1. Warrant A-1 referred to in Section 2.01(a)(i), dated as of
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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
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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
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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
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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
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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
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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 ▇-▇, ▇▇▇▇▇▇▇ ▇-▇, ▇▇▇▇▇▇▇ ▇-▇, Warrant B-
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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.
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Preferred Stock and Warrant Purchase Agreement - Page 9
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Article II
The Warrants and the Preferred Shares
2.01 The Warrants and the Preferred Shares.
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(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
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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
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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
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"Certificate").
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(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
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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
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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
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(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
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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
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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."
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2.02 Legend. The Company will deliver to the appropriate Purchaser on the
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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
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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
----------------------------------------------
"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
----------------------------------------------
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
----------------------------------------------
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
----------------------------------------------
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
----------------------------------------------
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
----------------------------------------------
(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
----------------------------------------------
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
----------------------------------------------
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
----------------------------------------------
(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
----------------------------------------------
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 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ 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
----------------------------------------------
(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
----------------------------------------------
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
----------------------------------------------
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
----------------------------------------------
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
----------------------------------------------
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
----------------------------------------------
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
----------------------------------------------
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
----------------------------------------------
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
----------------------------------------------
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 ▇▇▇▇▇▇ & Bird and ▇▇▇▇▇ & 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
----------------------------------------------
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 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
------------------
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
----------------------------------------------
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, ▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
Preferred Stock and Warrant Purchase Agreement - Page 33
----------------------------------------------
4101 ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to F-Jotan, at: Address of F-Jotan beneath the name of
F-Jotan on the signature pages of this
Agreement
▇▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
FAX: ▇▇▇-▇▇▇-▇▇▇▇
If to the Company, at: Jotan, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with courtesy copies to: ▇▇▇▇▇▇ & Bird
One Atlantic Center
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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
----------------------------------------------
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
----------------------------------------------
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
----------------------------------------------
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
COMPANY:
-------
JOTAN, INC.
BY:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
▇▇▇▇ ▇. ▇▇▇▇▇ & President
Chief Executive Officer
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Preferred Stock and Warrant Purchase Agreement - Page 37
----------------------------------------------
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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Managing Director
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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
----------------------------------------------
F-JOTAN, L.L.C.
By: Franklin Street/Fairview Capital, L.L.C.,
its Manager
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Manager
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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
----------------------------------------------
THE SOUTHLAND PURCHASERS:
F-SOUTHLAND, L.L.C.
By: Franklin Street/Fairview Capital, L.L.C.,
its Manager
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Manager
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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
----------------------------------------------
FF-SOUTHLAND, L.P.
By: FSFC Associates, L.P.,
Its general partner
By: Franklin Capital, L.L.C.,
Its general partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Manager
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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
----------------------------------------------
SHAREHOLDER:
-----------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
OWNED ON CLOSING DATE:
None Shares of Common Stock
Owned on Closing Date
275,000 Common Stock Options
▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
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
----------------------------------------------
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 ▇▇▇▇▇▇▇ ▇▇. ▇-▇
▇▇▇▇▇▇▇ ▇-▇ - Page 1
-----------
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/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇,
Chief Executive Officer & President
WARRANT A-1 - Page 2
-----------
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
-----------
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
-----------
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 ▇▇▇▇▇▇▇ ▇▇. ▇-▇
▇▇▇▇▇▇▇ ▇-▇ - Page 1
-----------
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
-----------
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed.
Dated as of February 28, 1997.
JOTAN, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇,
Chief Executive Officer & President
WARRANT A-2 - Page 3
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SUBSCRIPTION FORM
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(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
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ASSIGNMENT FORM
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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
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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
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