PRIORITY WARRANT PURCHASE AGREEMENT
PRIORITY WARRANT PURCHASE AGREEMENT (this "Agreement") made as of
April 14, 1998 by and between JOTAN, INC., a Florida corporation (the
"Company") and RICE PARTNERS II, L.P., a Delaware limited partnership
("Rice" or "Purchaser").
W I T N E S S E T H:
WHEREAS, Rice will acquire certain rights and benefits herein and in
the Priority Shareholder Agreement (as hereinafter defined) in
consideration of providing additional financing to the Southland Container
Packaging Corp. ("Southland") pursuant to the terms of the Priority Note
Purchase Agreement entered into by and among the Company, Southland and
Rice dated of even date with this Agreement (the "Priority Note
Agreement") and as more fully described in Section 11.18 of the Priority
Shareholder Agreement;
WHEREAS, the Company, F-Southland, L.L.C. and FF-Southland, L.P.
(collectively, the "Southland Purchasers"), F-Jotan, L.L.C. ("F-Jotan")
and ▇▇▇▇ ▇. ▇▇▇▇▇ (the "Shareholder") have entered into a Priority
Shareholder Agreement dated of even date with this Agreement (the
"Priority Shareholder Agreement") with Rice; and
WHEREAS, Rice is willing to enter into and consummate the
transactions contemplated by the Priority Note Agreement only if, among
other things, the Company and Southland enter into, and perform under,
this Agreement and the Priority 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, Rice and the Company, intending to be legally bound, agree
as follows:
Article I
Definitions
As used in this Agreement, the following terms have the meanings
indicated:
Additional Securities. This term is defined in Section 2.08(a)(iv).
Adjustment Event. Any event in which (a) the Company issues any
shares of Capital Stock in an Adjustment Public Offering for
consideration per share that exceeds the amount received per share by
any Holder in connection with the exercise of the Call Option with
respect to such Holder; (b) any Person acquires Capital Stock in
connection with the acquisition of the beneficial ownership of more
than fifty percent (50%) of the voting securities of the Company, or
acquires Capital Stock and the right to elect a majority of the
members of the Company's board of directors for a consideration per
share or unit that exceeds the amount received per share by any such
Holders 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
Holders 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 Holders in connection with the exercise of such Call
Option.
Adjustment Public Offering. Each public offering of shares of any
class of Capital Stock pursuant to a registration statement filed
with the Commission.
Affiliate. With respect to any Person, (a) a Person that, directly
or indirectly or through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person; (b) any
Person of which such Person or such Person's spouse is an officer,
director, security holder, partner, or, in the case of a trust, the
beneficiary or trustee, and (c) any Person that is an officer,
director, security holder, partner, or, in the case of a trust, the
beneficiary or trustee of such Person. The term "control" as used
with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership
of voting securities, by contract, or otherwise.
Agreement. This term is defined in the preamble.
Appraised Value. The value determined in accordance with the
following procedures. For a period of thirty (30) days after the
date of a Valuation Event (the "Negotiation Period"), each party to
this Agreement agrees to negotiate in good faith to reach agreement
upon the Appraised Value of the securities or property at issue, as
of the date of the Valuation Event, which will be the fair market
value of such securities or property, without premium for control or
discount for minority interests, illiquidity, or restrictions on
transfer. In the event that the parties are unable to agree upon the
Appraised Value of such securities or other property by the end of
the Negotiation Period, then the Appraised Value of such securities
or property will be determined for purposes of this Agreement by an
Appraiser. An "Appraiser" shall be a recognized appraisal or
investment firm with experience in making determinations of value of
the type required to be made under this definition. If the Holders
and the Company cannot agree on an Appraiser within thirty (30) days
after the end of the Negotiation Period, the Company, on the one
hand, and the Holders, on the other hand, shall each select an
Appraiser within forty (40) days after the end of the Negotiation
Period and those two Appraisers shall select within fifty (50) days
after the end of the Negotiation Period an independent Appraiser to
determine the fair market value of such securities or property,
without premium for control or discount for minority interests. Such
independent Appraiser shall be directed to determine fair market
value of such securities or property as soon as practicable, but in
no event later than thirty (30) days from the date of its selection.
The determination by an Appraiser of the fair market value will be
conclusive and binding on all parties to this Agreement. Appraised
Value of each share of Common Stock at a time when (i) the Company is
not a reporting company under the Exchange Act and (ii) the Common
Stock is not traded in the organized securities markets, will, in all
cases, be calculated by determining the Appraised Value of the entire
Company taken as a whole (plus the exercise price of all options,
warrants and other rights to acquire Capital Stock of the Company
having an exercise price per share less than the Fair Market Value of
such Capital Stock) and dividing that value by the sum of (x) the
number of shares of Common Stock then outstanding plus (y) the number
of shares of Common Stock Equivalents, without premium for control or
discount for minority interests, illiquidity, or restrictions on
transfer. The costs of the Appraiser or Appraisers will be borne by
the Company. In no event will the Appraised Value of the Common
Stock or Other Securities be less than the per share consideration
received or receivable with respect to the Common Stock or securities
or property of the same class as the Other Securities, as the case
may be, in connection with a pending transaction 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 transaction. The prevailing market prices for any security
or property will not be dispositive of the Appraised Value thereof.
Appraiser. This term is defined in the definition of Appraised
Value.
Average Market Value. The average of the Closing Prices for the
security in question for the thirty (30) trading days immediately
preceding the date of determination.
Book Value. With respect to shares of Common Stock, an amount equal
to the quotient determined by dividing (a) the sum of (x) the total
consolidated assets of the Company shown on the most recent regularly
prepared consolidated balance sheet of the Company prior to the date
of the Valuation Event in question minus (y) the total consolidated
liabilities of the Company as shown on the most recent regularly
prepared consolidated balance sheet of the Company prior to the date
of the Valuation Event by (b) the aggregate number of shares of
Common Stock and Common Stock Equivalents as of the date of the
Valuation Event. For the purposes of this Agreement, the Book Value
of the shares of Common Stock will be determined by the independent
certified public accountants then retained by the Company as
described in Section 4.06.
Buyer. This term is defined in Section 6.02(a)(ii) of the Priority
Shareholder Agreement.
Call Option. This term is defined in Section 5.01 of the Priority
Shareholder Agreement.
Call Option Closing. This term is defined in Section 5.04 of the
Priority Shareholder Agreement.
Call Option Period. This term is defined in Section 5.01 of the
Priority Shareholder Agreement.
Capital Stock. As to any Person, its common stock and any other
capital stock of such Person authorized from time to time, and any
other shares, options, interests, participations, or other
equivalents (however designated) of or in such Person, whether voting
or nonvoting, including, without limitation, common stock, options,
warrant, preferred stock (including the Series A Preferred Stock and
Series B 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.
Closing Date. As of April 14, 1998.
Closing Price.
(a) If the primary market for the security in question is a
national securities exchange registered under the Exchange Act, the
National Association of Securities Dealers Automated Quotation System
-- National Market System, or other market or quotation system in
which last sale transactions are reported on a contemporaneous basis,
the last reported sales price, regular way, of such security for such
day, or, if there has not been a sale on such trading day, the
highest closing or last bid quotation therefor on such trading day
(excluding, in any case, any price that is not the result of bona
fide arm's length trading); or
(b) If the primary market for such security is not an exchange
or quotation system in which last sale transactions are
contemporaneously reported, the highest closing or last bona fide bid
or asked quotation by disinterested Persons in the over-the-counter
market on such trading day as reported by the National Association of
Securities Dealers through its Automated Quotation System or its
successor or such other generally accepted source of publicly
reported bid quotations as the Holders designate from time to time.
Common Stock. The common stock, $0.01 par value, of the Company.
Common Stock Equivalent. Any option, warrant, right, or similar
security exercisable into, exchangeable for, or convertible to Common
Stock.
Commission. The Securities and Exchange Commission and any successor
federal agency having similar powers.
Company. Jotan, Inc. and any successor or assign, and, unless the
context requires otherwise, the term Company includes any Subsidiary.
Co-Sell Shares. This term is defined in Section 6.02(d) of the
Priority Shareholder Agreement.
Co-Sellers. This term is defined in Section 6.02(d) of the Priority
Shareholder Agreement.
Dilution Fee. This term is defined in Article III of the Priority
Shareholder Agreement.
Election Notice. This term is defined in Section 6.02(b) of the
Priority Shareholder Agreement.
Excess Consideration. The amount that Holder would have realized
following the Adjustment Event had the Call Option not been exercised
by the Company until such time, minus the amount that such Holder
realized due to the exercise of the Call Option; provided, however,
that the amount of Excess Consideration will in all events be deemed
to be at least zero.
Exchange Act. The Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
Exchange Common Stock. This term is defined in Section 7.12 of the
Priority Shareholder Agreement.
Exchange Company. This term is defined in Section 7.12 of the
Priority Shareholder Agreement.
Exchange Notice. This term is defined in Section 7.12 of the
Priority Shareholder Agreement.
Exercise Price. The price per share specified in Section 2.03 as
adjusted from time to time pursuant to the provisions of this
Agreement.
Fair Market Value.
(a) As to securities regularly traded in the organized
securities markets, the Average Market Value; and
(b) As to all securities not regularly traded in the securities
markets and other property, the fair market value of such securities
or property as determined in good faith by disinterested members of
the Board of Directors of the Company at the time it authorizes the
transaction (a "Valuation Event") requiring a determination of Fair
Market Value under this Agreement; provided, however, that, at the
election of the Holders or if there are no disinterested members of
the Board of Directors of the Company, the Fair Market Value of such
securities and other property will be the Appraised Value.
Holders. Rice, and all other Persons holding Registrable Securities
so long as Rice or such other Person holds Registrable Securities,
except that none of the Company, F-Jotan, the Southland Purchasers,
Shareholder or any Affiliate of the Company, F-Jotan, the Southland
Purchasers or the Shareholder will at any time be Holders. Unless
otherwise provided in this Agreement, in each instance that Rice is
required to request or consent to or otherwise approve an action,
Rice 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 Rice hereunder so request,
consent or otherwise approve.
Indemnified Party. This term is defined in Section 6.01 hereof and
in Section 12.01 of the Priority Shareholder Agreement.
Initial Holders. Rice and any Affiliate of Rice to which the Warrant
or any part of or interest in the Warrant is assigned.
Intellectual Property. This term is defined in Section 3.01(g).
Issuable Warrant Shares. Shares of Common Stock or Other Securities
issuable on exercise of the Warrant.
Issued Warrant Shares. Shares of Common Stock or Other Securities
issued on exercise of the Warrant.
Negotiation Period. This term is defined in the definition of Fair
Market Value.
New Securities. Any Capital Stock other than the Warrant Shares,
Warrant Shares as defined in the Other Purchase Agreements (as
defined in the preamble of the Priority Shareholder Agreement) and
other than the Permitted Stock.
Notice of Sale. This term is defined in Section 6.02(a) of the
Priority Shareholder Agreement.
Other Securities. Any stock, other securities, property, or other
property or rights (other than Common Stock) that the Holders become
entitled to receive upon exercise of the Warrant.
Permitted Stock. Common Stock or options or warrants to acquire
Common Stock, constituting, in the aggregate, 2,000,000 shares or
less of the outstanding Common Stock issued or reserved for issuance
to present and future key management and directors of the Company
pursuant to a stock incentive program approved or to be approved by
the board of directors.
Person. This term will be interpreted broadly to include any
individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, company,
institution, entity, party, or government (whether national, federal,
state, county, city, municipal, or otherwise, including, without
limitation, any instrumentality, division, agency, body, or
department of any of the foregoing).
Preferred Shares. This term is defined in Section 2.01 of the Other
Purchase Agreements.
Preferred Stock. This term means collectively, Series A Preferred
Stock and Series B Preferred Stock.
Priority Note. All or any portion of the Priority Senior
Subordinated Note (as defined in the Priority Note Agreement) and any
and all documents evidencing the indebtedness under the Priority Note
and any refinancing, refunding, or replacement of the Priority Note.
Priority Note Agreement. This term is defined in the preamble and
includes the Priority Note Purchase Agreement of even date with this
Agreement among the Company, Southland and Rice and all documents
evidencing indebtedness thereunder or otherwise related to the
Priority Note Agreement as the same may be amended from time to time,
and any refinancing, refunding, or replacements of the indebtedness
under the Priority Note Agreement.
Priority Purchase Agreement. This term is defined in the preamble to
the Priority Shareholder Agreement and includes this Agreement and
all documents related to this Agreement as this Agreement may be
amended from time to time.
Priority Shareholder Agreement. This term as used and defined in the
preamble means the Priority Shareholder Agreement dated as of April
14, 1998, among the Company, the Shareholder, F-Jotan, the Southland
Purchasers and the Purchaser in substantially the form attached to
this Agreement as Annex A and incorporated in this Agreement by
reference.
Purchaser. This term is defined in the preamble.
Put Option. This term is defined in Section 4.01 of the Priority
Shareholder Agreement.
Put Option Closing. This term is defined in Section 4.05 of the
Priority Shareholder Agreement.
Put Option Period. This term is defined in Section 4.01 of the
Priority Shareholder Agreement.
Put Price. This term is defined in Section 4.02 of the Priority
Shareholder Agreement.
Put Shares. The Warrant Shares plus any other shares of Capital
Stock owned from time to time by a Holder which were issued in
respect of the Warrant Shares.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement.
Registrable Securities. (a) The Issuable Warrant Shares, and (b) the
Issued Warrant Shares.
Related Party. An entity wholly owned by a Selling Shareholder or
one or more Related Parties.
Rice. The term is defined in the Preamble.
Selling Shareholder. This term is defined in Section 6.02 of the
Priority Shareholder Agreement.
Securities Act. The Securities Act of 1933, as amended, and the
rules and regulations thereunder.
Senior Lender. This term is defined in Section 11.1 of the Priority
Note Agreement.
Senior Loan Agreement. This term is defined in Section 11.1 of the
Priority Note Agreement.
Senior Subordination Agreement. This term is defined in Section 11.1
of the Priority Note Agreement.
Series A Preferred Stock. Series A Convertible Preferred Stock,
$0.01 par value, of the Company having the rights, restrictions,
privileges and preferences of the series of preferred stock
designated as "Series A Convertible Preferred Stock" set forth in the
Restated Articles of Incorporation of the Company, as amended.
Series B Preferred Stock. Series B Preferred Stock, $0.01 par value,
of the Company having the rights, restrictions, privileges and
preferences of the series of preferred stock designated as "Series B
Preferred Stock" set forth in the Restated Articles of Incorporation
of the Company, as amended.
Shareholder. This term is defined in the preamble.
Southland. Southland Container Packaging Corp., a Texas corporation,
is the wholly-owned subsidiary of the Company, successor by merger to
SHC Acquisition Corp. and formerly called Southland Holding Company
(also successor by merger to Atlantic Bag & Paper Company and all the
subsidiaries of Southland Holding Company existing on February 28,
1997).
Subsidiary. Each Person of which or in which the Company or its
other Subsidiaries own directly or indirectly fifty percent (50%) or
more of (i) the combined voting power of all classes of stock having
general voting power under ordinary circumstances to elect a majority
of the board of directors or equivalent body of such Person, if it is
a corporation or similar person; (ii) the capital interest or profits
interest of such Person, if it is a partnership, joint venture, or
similar entity; or (iii) the beneficial interest of such Person, if
it is a trust, association, or other unincorporated organization.
Valuation Event. This term is defined in the definition of Fair
Market Value.
Warrant or Priority Warrant. The Priority Warrant referred to in
Section 2.01(a) issued to Rice pursuant to Sections 2.01(a) and 4.13
hereof, and all Warrants issued upon the transfer or division of, or
in substitution for, such Warrant.
Warrant Shares. The Issued Warrant Shares and the Issuable Warrant
Shares in respect of the Priority Warrant.
Article II
The Warrant
2.01 The Warrant.
(a) On the Closing Date, Rice agrees to purchase from the Company at
the purchase price of $100, and the Company agrees to issue to Rice for
such price, all in accordance with the terms and conditions of this
Agreement, including Section 4.13 hereof, a Warrant (relating to the
Priority Note) in substantially the form attached to this Agreement as
Annex B and incorporated in this Agreement by reference, to purchase the
number of shares of Common Stock set forth beneath the name of Rice on the
signature page of this Agreement for such Warrant, which may be adjusted
pursuant to Section 4.13 below;
2.02 Legend. The Company will deliver to Rice on the Closing Date
one or more certificates representing the Warrant purchased by Rice in
such denominations as Rice requests. Such certificates will be issued in
the name of Rice 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 Warrant will bear the
following legends:
"THIS PRIORITY 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 PRIORITY
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, AND THE TEXAS SECURITIES ACT OF
1957, 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 PRIORITY WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF ARE SUBJECT TO THE TERMS AND PROVISIONS OF A PRIORITY WARRANT
PURCHASE AGREEMENT, DATED AS OF APRIL 14, 1998, BETWEEN RICE PARTNERS
II, L.P. ("RICE") AND JOTAN, INC. (THE "COMPANY"), AND A PRIORITY
SHAREHOLDER AGREEMENT, DATED AS OF APRIL 14, 1998, BY AND AMONG THE
COMPANY, RICE, F-SOUTHLAND, L.L.C., FF-SOUTHLAND, L.P., F-JOTAN,
L.L.C. AND THE OTHER PARTIES LISTED ON THE SIGNATURE PAGES TO SUCH
PRIORITY 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 Warrant; provided, however, that
in no event will the aggregate Exercise Price for all of the shares of
Common Stock covered by the Warrant 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 Warrant may be exercised.
2.04 Exercise of Warrant.
(a) The Warrant may be exercised at any time or from time to
time on or after the Closing Date until March 4, 2005, 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 Holders of such Warrant 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 Warrant. 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 Holders 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 Holders, or, subject to compliance
with transfer and registration requirements under applicable Federal
and state securities laws, such other name as designated in such
notice. The Warrant will be deemed to have been exercised, such
certificate or certificates will be deemed to have been issued, and
such Holders or any other Person so designated or named in such
notice will be deemed to have become holders 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 Holders a new Warrant evidencing the rights of such
Holders 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 Warrant,
or, at the request of such Holders, appropriate notation may be made
on the original Warrant and the original Warrant returned to such
Holders.
(b) Payment of the Exercise Price will be made, at the option
of the Holders, by (i) company or individual check, certified or
official bank check, (ii) cancellation of any debt owed by the
Company to the Holders, or (iii) cancellation of Warrant Shares,
valued at Fair Market Value. If the Holders surrenders a combination
of cash or cancellation of any debt owed by the Company to the
Holders of the Warrant, the Holders 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 Holders may designate that any
cash to be remitted to Holders 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 the Warrant will be made without charge to any
Holders for any tax, other than income taxes assessed on such Holders, in
respect of such issuance.
2.06 Register. The Company will, at all times while the Warrant
remains outstanding, keep and maintain at its principal office a register
in which the registration, transfer, and exchange of the Warrant 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 the Warrant.
2.07 Transfer and Exchange. The Warrant and all options and rights
under the Warrant are transferable in whole or in part, as to all or any
part of the Issuable Warrant Shares purchasable upon its exercise, by the
Holders of the Warrant, in person or by duly authorized attorney, on the
books of the Company upon surrender of the Warrant at the principal
offices of the Company, together with the form of transfer authorization
attached to the Warrant duly executed; provided, however, that such
transfer of the Warrant 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 Priority Shareholder Agreement, the Company
may deem and treat the registered Holders of the Warrant at any time as
the absolute owners of the Warrant for all purposes and will not be
affected by any notice to the contrary. If the Warrant is transferred in
part, the Company will, at the time of surrender of such Warrant issue to
the transferee a Warrant covering the number of shares transferred and to
the transferor a Warrant covering the number of shares not transferred.
Notwithstanding the foregoing, Rice agrees that it will not effect a
transfer of the Warrant to any Person or Affiliate of such Person engaged
in the type of business set forth on Annex I attached to the Other
Purchase Agreement (as defined in the Priority Shareholder Agreement) 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 Warrant will be exercisable for the number of shares of
Common Stock in such manner that, following the complete and full
exercise of the Warrant, 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 the
Warrant, will be entitled to receive for each share of Common
Stock issuable under the Warrant as of the record date fixed for
such distribution, the greatest per share amount of
consideration received by any holders of any class of Common
Stock or Common Stock Equivalent or to which such Holders 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
Holders for purposes of determining the amount of consideration
to which such Holders 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 Holders 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 Holders of the
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 holders of
any class of Common Stock or Common Stock Equivalent that the
Warrant entitles the Holders 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 Warrant, 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 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 the Warrant 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 Warrant
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
Warrant 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 Warrant.
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.
(b) The Company 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 Warrant, 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, the Company will (i) take all such
action as may be necessary or appropriate in order that the Company
may validly and legally issue in respect of the Warrant 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 Warrant. Without limiting the generality of the foregoing,
the Company represents and warrants that the board of directors of
the Company has determined, subject to compliance with Section 4.13
hereof, the Exercise Price to be adequate and the issuance of the
Warrant 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.
(e) Notwithstanding the issuance of the Priority Warrant, there
shall be no adjustments under this Section 2.08 or the Certificate
(as defined in Section 4.04 below) with respect to such issuance.
2.09 Lost, Stolen, Mutilated, or Destroyed Instruments. If the
Warrant is lost, stolen, mutilated, or destroyed and if the Company
receives a lost security affidavit containing an indemnification from the
Holders of such Warrant 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 of like denomination, tenor, and date as the
Warrant so lost, stolen, mutilated, or destroyed. Any such new Warrant
will constitute an original obligation of the Company, whether or not the
allegedly lost, stolen, mutilated, or destroyed Warrant is at any time
enforceable by any Person.
2.10 Stock Legend. Without limiting the provisions of Section 2.02
hereof, the Warrant, and the Warrant 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 Warrant and the Warrant Shares under the
Securities Act or under applicable state securities laws, 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, AND THE TEXAS SECURITIES ACT OF 1957, AS AMENDED,
AND (B) ARE SUBJECT TO THE TERMS OF AND PROVISIONS OF A PRIORITY
WARRANT PURCHASE AGREEMENT BETWEEN JOTAN, INC. (THE "COMPANY") AND
RICE PARTNERS II, L.P. ("RICE"), DATED AS OF APRIL 14, 1998, AND A
PRIORITY SHAREHOLDER AGREEMENT, DATED AS OF APRIL 14, 1998, AMONG
COMPANY, RICE, F-SOUTHLAND, L.L.C., FF-SOUTHLAND, L.P., F-JOTAN,
L.L.C. AND THE OTHER PARTIES LISTED ON THE SIGNATURE PAGES OF SUCH
PRIORITY 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."
All shares of Capital Stock of the Company subject to the Priority
Shareholder Agreement will bear a legend to such effect.
Article III
Representations and Warranties
3.01 Representations and Warranties of the Company. The Company
represents and warrants to Rice 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 except where the failure to qualify or be
licensed could have a Material Adverse Effect (as defined in the
Priority Note Agreement). The Company has no Subsidiaries (other
than Southland) or debt or equity investment in any other Person.
Other than Rice, the Southland Purchasers 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.
(b) The Company 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
Priority Shareholder Agreement, the Priority Warrant, and the
officers of Company executing and delivering this Agreement, the
Priority Shareholder Agreement, and the Priority Warrant are duly
authorized to do so; provided, however that the exercise of the
Priority Warrant and the performance of the Company's obligations in
connection therewith are subject to (i) approval of the holders of
Common Stock voting as a class to an amendment to the Restated
Articles of Incorporation of the Company increasing the authorized
Common Stock to an appropriate amount in accordance with applicable
state and securities laws (the "Common Shareholder Approval"); and
(ii) approval of two-thirds of holders of Preferred Stock of the
Company voting as a class in accordance with applicable state and
securities laws ("Preferred Shareholder Approval") and the filing of
such amendment with the Florida Secretary of State; and (iii) the
consent to and waiver of certain rights of F-Jotan and the Southland
Purchasers (collectively, the "Fairview Entities") under the Other
Shareholder Agreements (as defined the Priority Shareholder
Agreement), as amended from time to time (including any preemptive
rights contained therein) and under the Other Purchase Agreements (as
defined in the Priority Shareholder Agreement) of concurrent date
therewith and related agreements, as all have been amended from time
to time. Subject to the foregoing, this Agreement, the Priority
Shareholder Agreement, and the Priority Warrant have been, or will
be, duly and validly executed, issued, and delivered and constitute
the legal, valid, and binding obligations of Company, enforceable in
accordance with their respective terms.
(c) The execution, delivery, and performance of this Agreement,
the Priority Shareholder Agreement, and the Priority Warrant 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; provided that, the Common Shareholder Approval and the
Preferred Shareholder Approval are obtained and the Company's
Restated Articles of Incorporation are amended in accordance with the
Common Shareholder Approval and the Preferred Shareholder Approval.
(d) As of the Closing Date, the authorized capital stock of the
Company will consist of (i) 40,000,000 shares of Common Stock, of
which 21,396,813 shares are issued and outstanding and (ii)
10,000,000 shares of Preferred Stock, of which 1,437,705 shares of
Series A Preferred Stock are issued and outstanding and of which
64,375 shares of Series B Preferred Stock are issued and outstanding.
An aggregate of at least 3,620,473 shares of Common Stock are
reserved for issuance on exercise of the First Supplemental Warrant;
an aggregate of at least 8,475,638 shares of Common Stock are
reserved for issuance on exercise of the Second Supplemental Warrant;
an aggregate of at least 42,377,173 shares of Common Stock, subject
to compliance with the Section 4.13(b) below, will be reserved for
issuance on exercise of the Priority Warrant. All of the issued and
outstanding shares of Common Stock are validly issued, fully paid and
nonassessable. The Common Stock has 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 (w) as otherwise provided in this Agreement, or (x) in
the powers, designations, rights and preferences of the Preferred
Stock contained in the Restated Articles of Incorporation of the
Company, as amended, or (y) as provided in the Shareholder Agreement,
dated as of February 28, 1997, as amended, among F-Jotan, the
Southland Purchasers, the Shareholder, the Company and Rice, as
amended and supplemented (the "Other Shareholder Agreements") and in
compliance with applicable federal and state securities laws. Except
(1) pursuant to this Agreement, the Other Purchase Agreements (as
defined in the preamble of the Priority Shareholder Agreement) and
related Warrants and the Other Shareholder Agreements and (2) for the
Permitted Stock, (A) the Company is not obligated to issue or sell
any Capital Stock, and, except for this Agreement and the Other
Shareholder Agreements, and (B) the Company is not a party to, or
otherwise bound by, any agreement affecting the voting of any Capital
Stock. Except for the Priority Shareholder Agreement and the Other
Shareholder Agreements, 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.
(e) The shares of Common Stock and other consideration issuable
on exercise of the Priority Warrant when issued in accordance with
the terms of this Agreement or the Warrant, 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 Permitted Liens (as defined the Priority 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 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 Priority Shareholder Agreement will there be, any
agreement, arrangement, or understanding involving the Company, other
than this Agreement, the Priority Shareholder Agreement, the Other
Shareholder Agreements 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 Priority Note Agreement is true and correct
in all material respects.
(j) None of the documents, instruments, or other information
furnished to Rice by the Company, 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 by the Company in this
Agreement, the Priority Note Agreement, or the Priority 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 the time it was created, was forward-looking or projected except
as expressly required by the Priority 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 Rice.
3.02 Representations and Warranties of Rice. Rice represents and
warrants to the Company:
(a) Rice is a limited partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its organization.
(b) Rice has the right and power and is duly authorized to
enter into, execute, deliver, and perform this Agreement and the
Priority Shareholder Agreement, and its officers, managers or agents
executing and delivering this Agreement and the Priority Shareholder
Agreement are duly authorized to do so. This Agreement and the
Priority Shareholder Agreement have been duly and validly executed,
issued and delivered and constitute the legal, valid, and binding
obligation of Rice, enforceable in accordance with their respective
terms.
(c) Rice (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, (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 Warrant and any securities issuable upon exercise of the Warrant,
and the Company has made available to it the opportunity to ask
questions of, and to receive answers and to obtain additional
information from, representatives of the Company; (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 the Warrant and any securities issuable upon
exercise of the Warrant.
(d) Except as otherwise contemplated by this Agreement and the
Priority Shareholder Agreement, Rice is acquiring the Priority
Warrant and any securities issuable upon exercise of the Priority
Warrant for investment for its own account and not with a view to any
distribution thereof in violation of applicable securities laws.
(e) Rice agrees that the certificates representing the Priority
Warrant and any Issued Warrant Shares will bear the legends
referenced in this Agreement, and the Priority Warrant or securities
issuable upon exercise of the Priority Warrant and pursuant to the
Priority 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) Rice is not acquiring the Priority Warrant or any
securities issuable upon exercise of the Priority Warrant based upon
any representation, oral or written, by the Company or any
representative of the Company with respect to the future value of,
income from, or tax consequences relating to, the Priority Warrant or
securities issuable upon exercise of the Priority Warrant, 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 the Priority
Warrant or any securities issuable upon exercise of the Priority
Warrant or any findings as to the fairness of an investment of the
Priority Warrant or any securities issuable upon exercise of the
Priority Warrant.
(g) Rice has no current contract, undertaking, agreement,
arrangement or understanding with any Person to sell, transfer, grant
any participation in, or otherwise distribute the Priority Warrant or
any securities issuable upon exercise of the Priority Warrant to any
Person.
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 Rice
and each other Holders (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, 1997, (i) a copy
of the financial statements of the Company for such fiscal year
containing a consolidated and consolidating balance sheet, statement
of income, 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 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
Rice, 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 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 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 holders of any indebtedness,
including, without limitation the Senior Lender.
(f) Promptly, such additional information concerning the
Company as any Holders 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. For so long as the Second Supplemental Warrant
or the Warrant Shares remain outstanding, 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 Warrant, the Restated Articles of
Incorporation of the Company (sometimes called the "Certificate") or
the Priority 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(h) or 4.10;
(b) except as otherwise permitted in the Certificate or
required by the Priority Shareholder Agreement or the Other
Shareholder Agreements, (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 the Purchase
Documents) (as defined in Section 11.1 of the Priority Note Agreement
or the Certificate), or (ii) make any payment or distribution on
account of any Indebtedness (as defined in such Priority Note
Agreement) of the Company which is subordinate to the Senior
Subordinated Notes (as defined in Section 11.1 of the Original Note
Agreement (as defined in the Priority Shareholder Agreement)), and
the Priority Note (except that Subsidiaries may make distributions to
the Company), and (iii) except as otherwise provided for in the
Priority Note Agreement or the Original Note Agreement, pay any
professional consulting or management fees or any other payments to
any shareholder 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 Priority Senior Subordinated Obligations (as defined in Section
11.1 of the Priority Note Agreement) and the Senior Subordinated
Obligations (as defined in Section 11.1 of the Original Note
Agreement) due and payable from the Company or its Subsidiaries to
Rice, and (B) dividends or stock repurchases permitted by the Senior
Loan Agreement (as defined in Section 11.1 of the Priority 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 or any
Subsidiary 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, or pursuant to the express terms of
this Agreement or the Other Shareholder Agreement, issue or sell, or
otherwise dispose of any Capital 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 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 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 (i) Permitted Indebtedness (as defined in
Section 11.1 of the Priority Note Agreement), and (ii) 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;
(h) allow the aggregate par value of the Capital Stock subject
to the Warrant from time to time to exceed the price payable upon
exercise of the Warrant, as adjusted from time to time; or
(i) obligate itself or otherwise agree to take, permit or enter
into any of the events described in subsections (a) through (h)
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 Rice'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.
4.07 Existence. Except as otherwise expressly required or permitted
by the Priority 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 Warrant), 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 Warrant to the contrary the Holders may
exercise the Warrant 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 Holder 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 Warrant, 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 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 Warrant,
as the case may be. At the request of any Holders and upon surrender
of the Warrant of such Holders, the Company will reissue such Warrant
of such Holders 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 Priority 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 Priority 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 Priority Note
Agreement).
4.10 Warrant Rights. The Company covenants and agrees that during
the term of this Agreement and so long as the Priority Warrant is
outstanding, (a) the Company will at all times have (except as described
in the next clause of this Subsection (a)) 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 Priority
Warrant and the exercise in full of the rights of the Holders under the
Other Shareholder Agreements and Priority Shareholder Agreement; and to
that end will use its diligent best efforts to obtain the approvals
described in Section 4.13(b) below to amend the Certificate increasing the
number of authorized shares of Common Stock as contemplated in Section
4.13 below as soon as possible, but in no event later than July 15, 1998,
and to issue the Priority Warrant to Rice; (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 Priority Warrant would require the payment by the
Holders 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. Rice is a party to the Other
Purchase Agreements. Section 4.11 of such other agreements shall govern
this Section 4.11 as if such other Section 4.11 were set forth herein at
length.
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 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.
4.13 Issuance of Warrant.
(a) This Agreement is being executed and delivered and the
Priority Warrant is being issued herein prior to the completion of a
"fairness opinion" requested by the Company from ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ of Dallas, Texas. Such opinion is expected to address the
question of whether the number of shares of Common Stock of the Company
issuable on exercise of the Priority Warrant of 42,377,173 shares of
Common Stock in consideration of Rice's subordinated debt being advanced
to Southland by Rice and evidenced by the Priority Note is fair to the
shareholders of the Company from a financial point of view. If the
substance of the fairness opinion indicates that the "fair" number of
shares of Common Stock issuable on exercise of the Priority Warrant as
consideration for such financing to Southland under the Priority Note
Agreement would be equal to or greater than the number of shares issuable
on exercise of the Priority Warrant actually issued to Rice hereunder,
then no change shall be made to the number of shares issuable under the
Priority Warrant. However, if such fairness opinion indicates that the
number of shares of Common Stock issuable on exercise of the Priority
Warrant issuable to Rice is not fair to the shareholders of the Company,
then (i) the number of shares of Common Stock that may be issued on
exercise of the Priority Warrant shall be reduced to the number which the
fairness opinion determines is fair (if so stated), (ii) Rice shall
exchange the Priority Warrant issued originally hereunder for a new,
appropriate Priority Warrant reflecting the "fair" number of Issuable
Warrant Shares, and (iii) the provisions of this Agreement and the Other
Purchase Agreements shall be adjusted to reflect such reduction, all with
the purpose and intent of reflecting the conclusions reached in such
fairness opinion. Notwithstanding the foregoing, if either the Company or
Rice disagree with the methodology or findings of the "fairness opinion"
or such opinion shall not state what number of shares should be issued to
be "fair", the Company and Rice shall negotiate in good faith to agree
upon an appropriate number of Issuable Warrant Shares to be owned by Rice.
If the Company and Rice are unable to so agree within thirty (30) days
after receipt of the "fairness opinion" (or a determination that a
fairness level will not be available from the opining firm), then, on
Rice's request and at the Company's expense, such parties shall select an
Appraiser (in accordance with the procedure set forth in the definition of
Appraised Value) to determine the number of Warrant Shares that should be
issued to Rice to fairly compensate Rice for its $1,250,000 subordinated
debt advance made to Southland pursuant to this Priority Note Agreement.
Such determination shall be made by such Appraiser in a manner which, to
the greatest extent applicable, utilizes the principles and methodologies
described in the definition of "Appraised Value" in Article I above.
(b) The Warrant described in Section 2.01 hereof shall be
issued on the Closing Date, but shall be authorized and exercisable in
accordance with and subject to the following conditions:
(i) The Common Shareholder Approval authorizing an
increase in the authorized shares of Common Stock to not less than
150,000,000 shares and the Preferred Shareholder Approval authorizing
the issuance of the Priority Warrant shall be obtained; and
(ii) The Company shall have issued a proxy statement to its
shareholders of record referring to the transactions contemplated in
this Agreement;
(iii) The Amendment to the Certificate to increase the
authorized shares of Common Stock to the level set forth in Section
4.13(b)(i) above shall have duly approved and filed with the
Secretary of State in the State of Florida; and
(iv) the "fairness opinion" described above shall have been
issued or a final agreement or resolution shall have been reached by
the Company and Rice under Section 4.13(a) above with respect to the
number of shares issuable on exercise of the Priority Warrant.
(c) Notwithstanding the provisions of Section 4.13(a) above,
the maximum number of shares issuable upon exercise of the Priority
Warrant and the Second Supplemental Warrant (as defined in the Purchase
Stock and Warrant Purchase Agreement) in the aggregate, shall not exceed
sixty-five percent (65%) of the Capital Stock outstanding (excluding, for
purposes of such percentage calculation, the shares issuable upon exercise
of the Priority Warrant issued in respect of the Priority Note Agreement
and the Second Supplemental Warrant), as of the date the conditions in
paragraph (b) above are fully satisfied.
Article V
Conditions
The obligations of Rice and the Company to effect the transactions
contemplated by this Agreement are subject to the following conditions
precedent (unless waived by Rice):
5.01 Priority Note Agreement Conditions. All of the conditions
precedent to the obligations of Rice and the Company under the Priority
Note Agreement will have been satisfied in full.
5.02 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.
5.03 Execution of this Agreement and Priority Shareholder Agreement.
The Company, the Southland Purchasers, F-Jotan and the Shareholder will
have entered into this Agreement and the Priority Shareholder Agreement
with Rice.
5.04 Representations and Agreements. Each representation and
warranty of the Company and Rice 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 Rice will have fully performed all their covenants and
agreements set forth in this Agreement in all material respects.
5.05 Issuance of Priority Warrant. The Priority Warrant described in
Section 4.13(a) above shall have been duly issued to Rice (subject to (a)
the adjustment provisions in such section, and (b) the conditions to
authorize the exercise of such Priority Warrant shares described in
Section 4.13(b) above).
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 Rice and its counsel and to the Company and its
counsel and Rice and its counsel and the Company 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
Rice or its counsel and the Company and its counsel reasonably may request
in connection with the consummation of such transactions. All consents of
any Person necessary to the consummation of the transactions contemplated
by this Agreement and the Priority 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. Rice will have received evidence
satisfactory to Rice that the Company has reserved a sufficient number of
shares of Common Stock for Rice to exercise the Warrant (subject to
meeting the conditions set forth in Section 4.13(b)).
5.08 Government Filings. All filings under 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 and Rice.
Article VI
Miscellaneous
6.01 Indemnification. In addition to any other rights or remedies to
which Rice and the Holders may be entitled, the Company agrees to and will
indemnify and hold harmless Rice, and the other 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 under this Agreement, the Priority
Shareholder Agreement, or under any other agreement to which the Company
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 Rice 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 be restrained from any such breach or
threatened breach or to refrain from a continuation of any actual breach.
6.03 Integration. This Agreement, the Priority Warrant, the Priority
Shareholder Agreement, the Other Shareholder Agreements, the Other
Purchase Agreements and the documents, agreements, notes and instruments
executed in connection therewith 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, Rice and other Holders.
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
with courtesy copies to: ▇▇▇▇▇▇ ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
FAX: ▇▇▇-▇▇▇-▇▇▇▇
If to the Southland, at their counsel's office at:
Wyrick, Robins, ▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company, at: Jotan, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with courtesy copies to: ▇▇▇▇▇ & ▇▇▇▇▇▇▇
The ▇▇▇▇▇▇▇▇▇ Building
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
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 Holders other than Rice 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 Holders have 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.
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 Priority Shareholder 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 Rice 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 Rice and its
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 other parties hereto 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 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 Holder may act or refrain from acting under this Agreement as such
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 AND RICE 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 OR RICE, IN THE
NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT HEREOF OR THEREOF. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR RICE TO PURCHASE THE PRIORITY
WARRANT FROM THE COMPANY.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
COMPANY:
JOTAN, INC.
BY:_____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chief Financial Officer
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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:______________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Managing Director
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Priority Warrant Shares Issued On Closing Date: 42,377,173
ANNEX A
FORM OF PRIORITY SHAREHOLDER AGREEMENT
ANNEX B
FORM OF PRIORITY WARRANT A-3