PRIORITY SHAREHOLDER AGREEMENT
PRIORITY SHAREHOLDER AGREEMENT (the "Agreement") made as of April 14,
1998, by and among JOTAN, INC., a Florida corporation (the "Company"),
RICE PARTNERS II, L.P., a Delaware limited partnership ("Rice"), and
F-SOUTHLAND, L.L.C., a North Carolina limited liability company ("F-
Southland"), FF-SOUTHLAND, L.P., a Delaware limited partnership ("FF-
Southland" and together with F-Southland, the "Southland Purchasers"), F-
JOTAN, L.L.C., a North Carolina limited liability company ("F-Jotan") and
the shareholder named on the signature pages hereto (the "Shareholder").
W I T N E S S E T H:
WHEREAS, subject to adjustment under Section 4.13 of the Priority
Purchase Agreement (as defined below), Rice will own beneficially and of
record the number of shares or share equivalents, set forth under the
signature of Rice on this Agreement arising out of the transactions
contemplated herein and in the Priority Purchase Agreement;
WHEREAS, Rice owns additional equity interests as set forth in the
Other Shareholder Agreements (defined hereinafter);
WHEREAS, the Company, Southland Container Packaging Corp., Rice and
the Southland Purchasers have entered into that certain Note Purchase
Agreement, dated as of February 28, 1997, as amended by Amendment No. 1,
dated as of August 19, 1997, Amendment No. 2, dated as of November 6,
1997, and Amendment No. 3, dated as of April 14, 1998 (the "Original Note
Agreement");
WHEREAS, the Company, Rice, Southland Purchasers, F-Jotan and the
Shareholder have entered into (i) that certain Preferred Stock and Warrant
Purchase Agreement, dated February 28, 1997 (the "Preferred Stock and
Warrant Purchase Agreement"), as supplemented by (ii) that certain First
Supplemental Preferred Stock and Warrant Purchase Agreement, dated as of
September 10, 1997 (the "First Supplemental Purchase Agreement), (iii)
that certain Second Supplemental Preferred Stock Purchase Agreement, dated
November 6, 1997 (the "Second Supplemental Purchase Agreement"), and (iv)
that certain Amended and Restated Second Supplemental Preferred Stock and
Warrant Purchase Agreement by and among the Company, Rice, the Southland
Purchasers, F-Jotan, and the Shareholder, dated as of the date hereof (the
"Amended Second Supplemental Purchase Agreement" and collectively with the
Preferred Stock and Warrant Purchase Agreement, the First Supplemental
Purchase Agreement, and the Second Supplemental Preferred Stock Purchase
Agreement being collectively called the "Other Purchase Agreements");
WHEREAS; the Company has entered into that certain Priority Note
Purchase Agreement, dated as of April 14, 1998 (the "Priority Note
Agreement") by and between the Company, Rice Partners II, L.P. ("Rice")
and Southland Container Packaging Corp., a Texas corporation (as successor
by merger to SHC Acquisition Corp., a Florida corporation, and formerly
called Southland Holding Company, herein "Southland"), pursuant to which
the Southland will issue to Rice its 12.5% Senior Subordinated Note
("Priority Senior Subordinated Note") in the aggregate principal amount of
$1,250,000; and
WHEREAS, in connection with the execution and delivery of the
Priority Note Agreement, the Company will issue a warrant ("Priority
Warrant") for the purchase of up to 42,377,173 shares of the Company's
common stock, par value $0.01 per share (the "Common Stock"), which
Priority Warrant is to be issued by the Company pursuant to a Priority
Warrant Purchase Agreement, dated as of April 14, 1998 (the "Priority
Purchase Agreement"), by and between the Company and Rice; and
WHEREAS, the Company and the Shareholder named therein entered into
(i) that certain Shareholder Agreement, dated as of February 28, 1997 (the
"Original Shareholder Agreement"), with Rice, the Southland Purchasers and
F-Jotan, as supplemented by that certain (ii) First Supplemental
Shareholder Agreement, dated as of September 10, 1997 (the "First
Supplemental Shareholder Agreement") among Company, Rice, the Southland
Purchasers, F-Jotan and each of the Shareholders named therein and (iii)
that certain Second Supplemental Shareholder Agreement, dated as of
November 6, 1997, among Company, Rice, F-Jotan, the Southland Purchasers
and each of the Shareholder named therein (the "Second Supplemental
Shareholder Agreement" and together with the Original Shareholder
Agreement, the First Supplemental Shareholder Agreement, and the Second
Supplemental Shareholder Agreement, being collectively called the "Other
Shareholder Agreements");
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 the Shareholder enter into, and perform
under, this Agreement and the Priority Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Rice, the Southland Purchasers, the Shareholder, and the
Company, intending to be legally bound, agree as follows:
Article I
Definitions
All terms used in this Agreement will have the meanings ascribed to
them in the Priority Purchase Agreement unless otherwise specifically
defined in this Agreement.
Article II
Holders' Preemptive Rights
2.01 Preemptive Right. The Company will not issue or sell any New
Securities without first complying with this Article II. The Company
hereby grants to each Holder the preemptive right to purchase, pro rata,
all or any part of the New Securities that the Company may, from time to
time, propose to sell or issue. In the event New Securities are offered
or sold as part of a unit with other New Securities, the preemptive right
granted by this Article II will apply to such units and not to the
individual New Securities composing such units. Each Holder's pro rata
share for purposes of Article II is the ratio that the number of shares of
Common Stock issuable to such Holder upon exercise of its Priority Warrant
plus the number of shares of Common Stock that are Issued Warrant Shares
owned by such Holder immediately prior to the issuance of the New
Securities, bears to the sum of (x) the total number of shares of Common
Stock then outstanding, plus (y) the number of shares of Common Stock
issuable upon exercise of all Priority Warrants.
2.02 Notice to Holders. In the event the Company proposes to issue
or sell New Securities, it will give each Holder written notice of its
intention, describing the type of New Securities and the price and terms
upon which the Company proposes to issue or sell the New Securities. Each
Holder will have fifteen (15) days from the date of receipt of any such
notice and such information as the Holders may reasonably request to
facilitate their investment decision to agree to purchase up to its
respective pro rata share of the New Securities for the price (valued at
Fair Market Value for any noncash consideration) and upon the terms
specified in the notice by giving written notice to the Company stating
the quantity of New Securities agreed to be purchased.
2.03 Allocation of Unsubscribed New Securities. In the event a
Holder fails to exercise such preemptive right within such fifteen (15)
day period, the other Holders, if any, will have an additional five (5)
day period to purchase such Holder's portion not so agreed to be purchased
in the same proportion in which such other Holders were entitled to
purchase the New Securities (excluding for such purposes such
nonpurchasing Holder). Thereafter, the Company will have ninety (90) days
to sell the New Securities not elected to be purchased by the Holders at
the same price and upon the same terms specified in the Company's notice
described in Section 2.02. In the event the Company has not sold the New
Securities within such ninety (90) day period, the Company will not
thereafter issue or sell any New Securities without first offering such
securities in the manner provided above.
2.04 Preemptive Right and Other Waivers. F-Jotan, the Shareholder,
and the Southland Purchasers each hereby waives (a) its preemptive rights,
if any, hereunder and under the Other Shareholder Agreements and the Other
Purchase Agreements with respect to the issuance of the Priority Warrant
and (b) any dilution or other equity adjustment rights arising under or
relating to the Company's Restated Articles of Incorporation or any
agreement to which the Southland Purchasers, F-Jotan and the Shareholder
are a party with the Company and Rice, with respect to the execution,
delivery and performance of the Other Purchase Documents.
Article III
Dilution Fee
In the event that, during the term of the Priority Warrant, the
Company pays any cash dividend or makes any cash distribution to any
holder of any class of its Capital Stock with respect to such Capital
Stock, each Holder of the Priority Warrant will be entitled to receive in
respect of its Priority Warrant a dilution fee in cash (the "Dilution
Fee") on the date of payment of such dividend or distribution, which
Dilution Fee will be equal to the difference between (a) the highest
amount per share paid to any class of Capital Stock times the number of
Issued Warrant Shares then owned by such Holder plus the number of
Issuable Warrant Shares then owned by such Holder, and (b) the amount of
such dividend or distribution otherwise paid to such Holder as a result of
its ownership of Common Stock. This provision shall not apply to the
payment of cash dividends on the Series B Preferred Stock.
Article IV
Put Option
4.01 Grant of Option. The Company hereby grants to each Holder an
option to sell to the Company, and the Company is obligated to purchase
from each Holder under such option (the "Put Option"), all (or such
portion as is designated by any such Holder pursuant to Section 4.03
below) of the Put Shares, subject to Section 4.06 below. The Put Option
will be effective at any time or times after March 4, 2005, or at any time
or times after the occurrence of any of the following events (the "Put
Option Period"):
(a) the payment or prepayment of all indebtedness, liabilities
and obligations owing by the Company to Rice under the Priority Note
Agreement;
(b) (i) a material change in the ownership in the Company other
than by Rice and the Southland Purchasers (for purposes of this
subsection a "change of ownership" means the circumstance that F-
Jotan shall own, directly or indirectly, five percent (5%) (subject
to adjustments as contemplated in Section 2.08(a) (ii) and (iii) of
the Priority Purchase Agreement) less than (A) the Registrable
Securities so owned by F-Jotan on March 4, 1997 or (B) the number of
shares of issued and outstanding voting stock of the Company (without
giving effect to the issuance of any shares of Common Stock under the
Priority Warrants) so owned by F-Jotan on March 4, 1997), or (ii)
Rice shall not have the legal right or ability, directly or through
its Subsidiaries, to elect a majority of the members of the board of
directors of the Company; or
(c) except as permitted by the Senior Loan Agreement as in
effect on the date hereof, a merger, consolidation, share exchange,
or similar transaction involving the Company or sale in one or more
related transactions of all or a substantial portion of the assets,
business, or revenue or income generating operations of the Company
or any substantial change in the type of business conducted by the
Company; or
(d) after the occurrence and during the continuance of an Event
of Default (as defined in the Priority Note Agreement) pursuant to
Sections 8.1(a), (b), (f) and (h) of the Priority Note Agreement or
any failure of the Company in any material respect to perform any of
its obligations hereunder or under the Priority Purchase Agreement;
provided, however, that the Put Option Period will continue with
respect to such Event of Default or other failure, even after the
same has been cured, if notice of exercise of the Put Option by such
Holder is provided pursuant to this Article IV during the continuance
of such Event of Default or such other failure, as the case may be.
The Company's obligations under this Article IV and the notes issued
pursuant to Section 4.04 hereof are subject to the provisions of the
Senior Subordination Agreement (as defined in Section 11.1 of the Priority
Note Agreement), and constitute Subordinate Debt (as defined in the Senior
Subordination Agreement) thereunder.
4.02 Put Price. In the event that any Holder exercises the Put
Option, the price (the "Put Price") to be paid to each such Holder
pursuant to this Agreement will be cash in the sum of the amount
determined by multiplying the higher of (a) the Book Value or (b) the Fair
Market Value per share of Common Stock as of the end of the month
immediately preceding the date notice is given of the exercise of the Put
Option pursuant to Section 4.03 times the number of shares of Common Stock
for which the Put Option is being exercised by such Holder plus the higher
of (a) the Book Value or (b) the Fair Market Value of the Other Securities
issuable upon exercise of the portion of the Priority Warrants subject to
the Put Option; provided, however, the Fair Market Value (as opposed to
the Book Value) shall only be utilized in determining such Put Price if,
for the thirty (30) consecutive days prior to the exercise of the Put
Option, the Common Stock has been trading on a national securities
exchange as its primary market (as contemplated in clause (a) of the
definition of Closing Price) with an average trading volume of at least
150,000 shares per day and an average market capitalization of the Company
of at least $50,000,000 (calculated on the basis of the product of (i)
the number of shares of registered Common Stock outstanding on the date of
determination and (ii) the reported closing prices of Common Stock quoted
on such exchange over the period of thirty (30) days prior to the date of
determination).
4.03 Exercise of Put Option. The Put Option may be exercised during
the Put Option Period with respect to all or any portion of the Put
Shares. Such option shall be exercised by such Holder giving notice to
the Company and each other Holder during the Put Option Period of the
Holder's election to exercise the Put Option, and the date of the Put
Option Closing, which will be not less than fifteen (15) nor more than
ninety (90) days after the date of such notice. The Company will provide
each Holder desiring to exercise its Put Option the name and address of
each other Holder. Notwithstanding the foregoing, if a Holder receives
such notice of another Holder's exercise of such other Holder's Put
Option, the Holder receiving such notice may elect to exercise its Put
Option and designate a Put Option Closing simultaneous and pari passu with
that of such other Holder.
4.04 Certain Remedies. In the event that the Company defaults in its
obligation to purchase all or any portion of the Put Shares upon exercise
of the Put Option, in addition to any other rights or remedies of each
Holder, the unpaid portion of the Put Price will bear interest at the
highest rate permitted by applicable law. The Company will, upon the
request of any Holder, execute and deliver to such Holder a promissory
note in form and substance satisfactory to such Holder evidencing such
obligation.
4.05 Put Option Closing. The closing for the purchase and sale of
all or such portion of the Put Shares as to which the Holder has notified
the Company of its intention to exercise the Put Option, will take place
at the office of the Company on the date specified in such notice of
exercise (a "Put Option Closing"). At any Put Option Closing, to the
extent applicable, the Holder of the Put Shares will deliver the
certificate or certificates evidencing the Put Shares being purchased,
duly endorsed in blank. In consideration therefor, the Company will
deliver to the Holder the Put Price, which will be payable in cash.
4.06 Limitations on Puts. No Holder other than Rice may, without the
prior written consent of Rice, exercise its Put Option unless and until
Rice shall also exercise its Put Option under this Article IV. Rice shall
have the right, but not the obligation, if it does exercise its Put Option
under this Article IV, to require each other Holder, on twenty (20) days
prior written notice to such Holder, to exercise such Holder's Put Option
on a pro rata basis, with respect to all of the shares of Put Shares then
owned, directly or indirectly, by such Holder, on the same terms and at
the same Put Option Closing to be set forth in such notice.
Article V
Call Option
5.01 Grant of Option. Each Holder hereby severally grants to the
Company an option to require such Holder to sell to the Company, and each
Holder is obligated to sell to the Company under this option (the "Call
Option"), all (but not less than all) of its Priority Warrant and its
Warrant Shares. The Call Option will be effective after March 4, 2003
(the "Call Option Period").
5.02 Call Price. In the event that the Company exercises the Call
Option, the exercise price to be paid in cash to each Holder will be equal
to the Put Price determined in accordance with Section 4.02, except that
the Call Option will be exercised with respect to all of the Priority
Warrants and all Warrant Shares, and will be increased by an amount in
cash equal to any Excess Consideration received within one hundred eighty
(180) days following the exercise of the Call Option due to an Adjustment
Event.
5.03 Exercise of Call Option. The Call Option may be exercised
during the Call Option Period with respect to all of the Priority Warrants
and the Warrant Shares of the Holders, by the Company giving notice to
each Holder during the Call Option Period of the election of the Company
to exercise the Call Option, and the date of the Call Option Closing (as
defined below), which in all events will be within at least ten (10) days
after the date of such notice.
5.04 Call Option Closing. The closing for the purchase and sale of
all of the Priority Warrants and Warrant Shares that the Company has
elected to purchase under this Agreement, will take place at the office of
the Company, on the date specified in such notice of exercise (the "Call
Option Closing"). At the Call Option Closing, the Holders of the Priority
Warrants will deliver the Priority Warrants and the certificate or
certificates representing the Warrant Shares, duly endorsed in blank. In
consideration therefor, the Company will deliver to each Holder the Call
Price, which will be payable in immediately available funds.
Article VI
First Refusal; and Co-Sale Rights
6.01 Rights of Co-Sale. In the event that Shareholder intends to
sell or transfer, directly or indirectly, any shares of any class of
Capital Stock held by it to any Person other than a Related Party, each
Holder will have the right to participate in such sale or transfer on the
terms set forth in this Article VI; provided, however, none of the
provisions of this Agreement will apply to any sale by a Shareholder of
shares of Capital Stock in a bona fide underwritten public offering under
the Securities Act, so long as all Holders have had an opportunity to
participate in such offering pursuant to the registration rights under
this Agreement.
6.02 Method of Electing Sale; Allocation of Sales. No sale or
transfer by any Shareholder of any shares of Capital Stock will be valid
unless the transferee of such Capital Stock first agrees in writing to be
bound by the same terms and conditions that apply to the Shareholder under
this Agreement and the Priority Purchase Agreement. In addition, before
any shares of Capital Stock held, directly or indirectly, by any
Shareholder may be sold or transferred to a Person other than a Related
Party, the Shareholder (as such, the "Selling Shareholder") will comply
with the following provisions:
(a) The Selling Shareholder will deliver or cause to be
delivered a written notice (the "Notice of Sale") to each Holder at
least fifteen (15) days prior to making any such sale or transfer.
The Company agrees to provide the Selling Shareholder with a list of
the names and addresses of each such Holder for such purpose. The
Notice of Sale will include (i) a statement of the Selling
Shareholder's bona fide intention to sell or transfer; (ii) the name
and address of the prospective transferee (the "Buyer"); (iii) the
number of shares of Capital Stock of the Company to be sold or
transferred; (iv) the terms and conditions of the contemplated sale
or transfer; (v) the purchase price in cash that the Buyer will pay
for such shares of Capital Stock; (vi) the expected closing date of
the transaction; and (vii) such other information as the Holders may
reasonably request to facilitate their decision as to whether or not
to exercise the rights granted by this Article VI.
(b) Any Holder receiving the Notice of Sale may elect to
participate in the contemplated sale or transfer by exercising either
(i) its right of first refusal to purchase such Capital Stock
pursuant to Section 6.02(c) or (ii), its right to co-sell its Capital
Stock pursuant to Section 6.02(d). Either of such rights may be
exercised in the sole discretion of the Holder by delivering a
written notice (an "Election Notice") to the Company and the Selling
Shareholder within fifteen (15) days after receipt of such Notice of
Sale stating the election of the Holder to exercise either its right
of first refusal pursuant to Section 6.02(c) or its right of co-sale
pursuant to Section 6.02(d).
(c) Each Holder may elect to treat the Notice of Sale as an
irrevocable offer to sell to the Holder up to its pro rata share
(determined in a manner consistent with Article II, and including the
pro rata share of Capital Stock not purchased by other Holders) of
the number of shares of Capital Stock proposed to be sold to the
Buyer on the same per share terms and conditions as stated in the
Notice of Sale. Such offer will remain open for a period of fifteen
(15) days from delivery to the Shareholder of the Election Notice.
Within such fifteen (15) day period, the Holder may elect to accept
such offer in whole or in part by delivering to the Selling
Shareholder written notice of its irrevocable election to accept such
offer. If the Holder irrevocably accepts such offer, the closing of
the purchase and sale will occur on or before the twentieth (20th)
business day following delivery of the notice of acceptance. At such
closing, the Holder will deliver the consideration payable to the
order of the Selling Shareholder, against delivery by the Selling
Shareholder of the Capital Stock being so purchased, free and clear
of all liens, claims, and encumbrances, other than this Agreement,
endorsed in good form for transfer to the Holder or its designees.
If a Holder does not accept such offer within the fifteen (15) day
period specified above, the offer to such Holder will be deemed to
have been rejected, and the Selling Shareholder, subject to Section
6.02(d), will be free to sell or transfer such Capital Stock not
purchased by the Holders to the Buyer on the same terms set forth in
the Notice of Sale within ninety (90) days of the expiration of such
fifteen (15) day period. If the sale to the Buyer is not so
consummated, the terms of this Article VI will again be applicable to
any sale or transfer of Capital Stock by the Shareholder.
(d) Each Holder may elect to sell or transfer in the
contemplated transaction up to the total of the number of shares of
Capital Stock then held by it (including the Issuable Warrant
Shares). Promptly after the receipt of an Election Notice exercising
such right, the Selling Shareholder will use its best efforts to
cause the Buyer to amend its offer so as to provide for the Buyer's
purchase, upon the same terms and conditions as those contained in
the Notice of Sale, of all of the shares of Capital Stock (including
the Issuable Warrant Shares) elected to be sold (the "Co-Sell
Shares") in such Election Notices. In the event that the Buyer is
unwilling to amend its offer to purchase all of the Co-Sell Shares in
addition to the shares of Capital Stock described in the related
Notice of Sale, if the Selling Shareholder desires to proceed with
the sale, the total number of shares that such Buyer is willing to
purchase will be allocated to the Selling Shareholder and each Holder
having given an Election Notice exercising its right pursuant to this
Section 6.02(d) (the "Co-Sellers") in proportion to the aggregate
number of shares of Capital Stock (including Issuable Warrant Shares)
held by each such Person; provided, however, that no such Person will
be so allocated a number of shares greater than the number of shares
that it has sought to sell to such Buyer in the related Notice of
Sale or Election Notice. All Capital Stock sold or transferred by
the Selling Shareholder and the Co-Sellers with respect to a single
Notice of Sale under Section 6.02(b) will be sold or transferred to
the Buyer in a single closing on the terms described in such Notice
of Sale, and each such share will receive the same per share
consideration. In the event that the Buyer for whatever reason,
declines to purchase any shares from any Holder delivering an
Election Notice, then (x) the Selling Shareholder will not be
permitted to sell or transfer any shares of Capital Stock to such
Buyer and (y) the shares of Capital Stock of the Selling Shareholder
that were to have been sold or transferred to the Buyer will be
subject to the Holders' right of first refusal pursuant to Section
6.02(c) for a period of fifteen (15) days thereafter on the terms and
conditions that the Buyer would have purchased such shares of Capital
Stock from the Selling Shareholder had it not declined to purchase
shares from the Co-Seller under this Section 6.02(d).
6.03 Sales to Related Parties. No sale or transfer of shares of
Capital Stock by the Shareholder to a Related Party will be subject to the
provisions of Section 6.02; provided, however, that such Related Party
first agrees to assume the obligations of the Shareholder (without
relieving the Shareholder of any obligations under this Agreement) under
this Agreement with respect to the shares of Capital Stock thereby
acquired by it and to be bound by the same terms and conditions that apply
to the Shareholder under this Agreement and the Priority Purchase
Agreement in a written instrument in a form and substance satisfactory to
the Holders.
6.04 Limitations on Co-Sales. Notwithstanding the foregoing, no
Holder other than Rice may, without the prior written consent of Rice,
exercise its rights to co-sell all or any part of its Capital Stock under
this Article VI unless and until Rice shall have been given any notice
described in Section 6.01 hereof (the "Co-Sale Notice") prior to or
concurrently with any other Holder and shall have been given at least ten
(10) days from receipt of the Co-Sale Notice to consult with the other
Holders about consummating the contemplated sale of its respective Capital
Stock on a pro rata basis.
6.05 Termination. This Article VI shall terminate solely with
respect to any Shareholder who is an employee of the Company on the first
day of the month next following the date that the Company terminates the
employment of such Shareholder, as such an employee, with or without
cause.
Article VII
Liquidity
7.01 Required Registration. At any time, Rice may, upon not more
than two (2) occasions, make a written request to the Company requesting
that the Company effect the registration of a certain number of
Registrable Securities for the accounts of Rice and any other Holder based
upon the respective number of Registrable Securities held by them;
provided, however, that if the managing underwriter or underwriters, if
any, of the offering of the Registrable Securities for which registration
has been demanded by Rice advises the Holders that the success of the
offering would be materially and adversely affected by the inclusion of
Registrable Securities of a Holder other than Rice, then the amount of
securities to be registered for the accounts of such Holders shall be
reduced first by reducing the Registrable Securities of such Holder to be
so included in such registration and then by reducing pro rata the
Registrable Securities held by Rice.
After receipt of any such a request, the Company will, as soon as
practicable, notify each Holder of such request and use its best efforts
to effect the registration of all Registrable Securities that the Company
has been so requested to register by Rice for sale, all to the extent
required to permit the disposition (in accordance with the intended method
or methods thereof) of the Registrable Securities so registered. In no
event will any Person other than a Holder be entitled to include any
shares of Capital Stock in any registration statement filed pursuant to
this Section 7.01.
7.02 Incidental Registration. If the Company at any time proposes to
file on its behalf or on behalf of any of its security holders a
registration statement under the Securities Act on any form (other than a
registration statement on Form S-4 or S-8 or any successor form unless
such forms are being used in lieu of or as the functional equivalent of,
registration rights) for any class that is the same or similar to
Registrable Securities, it will give written notice setting forth the
terms of the proposed offering and such other information as the Holders
may reasonably request to all Holders of Registrable Securities at least
thirty (30) days before the initial filing with the Commission of such
registration statement, and offer to include in such filing such
Registrable Securities as any Holder may request. Each Holder of any such
Registrable Securities desiring to have Registrable Securities registered
under this Section 7.02 will advise the Company in writing within thirty
(30) days after the date of receipt of such notice from the Company,
setting forth the amount of such Registrable Securities for which
registration is requested. The Company will thereupon include in such
filing the number of Registrable Securities for which registration is so
requested, and will use its best efforts to effect registration under the
Securities Act of such Registrable Securities.
Notwithstanding the foregoing, if the managing underwriter or
underwriters, if any, of such offering deliver a written opinion to each
Holder of such Registrable Securities that the success of the offering
would be materially and adversely affected by the inclusion of the
Registrable Securities requested to be included, then the amount of
securities to be offered for the accounts of Holders will be reduced first
by reducing the Registrable Securities of F-Jotan to be registered in such
offering and second pro rata (according to the Registrable Securities
proposed for registration) to the extent necessary to reduce the total
amount of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters; provided,
however, that if securities are being offered for the account of other
Persons as well as the Company, then with respect to the Registrable
Securities intended to be offered by Holders, the proportion by which the
amount of such class of securities intended to be offered by Holders is
reduced will not exceed the proportion by which the amount of such class
of securities intended to be offered by such other Persons (other than the
Company) is reduced.
7.03 Form S-3 Registrations. In addition to the registration rights
provided in Sections 7.01 and 7.02 above, if at any time the Company is
eligible to use Form S-3 (or any successor form) for registration of
secondary sales of Registrable Securities, Rice or, after the Cut-Off
Date, any Holder of Registrable Securities may request in writing that the
Company register shares of Registrable Securities on such form. Upon
receipt of such request, the Company will promptly notify all holders of
Registrable Securities in writing of the receipt of such request and each
such Holder may elect (by written notice sent to the Company within thirty
(30) days of receipt of the Company's notice) to have its Registrable
Securities included in such registration pursuant to this Section 7.03.
Thereupon, the Company will, as soon as practicable, use its best efforts
to effect the registration on Form S-3 of all Registrable Securities that
the Company has so been requested to register by such Holder for sale.
The Company will use its best efforts to qualify and maintain its
qualification for eligibility to use Form S-3 for such purposes.
7.04 Rule 144 Availability. Notwithstanding the foregoing, the
Company will not be obligated to register any Registrable Securities as to
which counsel acceptable to the Holders renders an opinion in form and
substance satisfactory to the Holders to the effect that such Registrable
Securities are freely saleable without limitation as to volume, manner of
sale, or otherwise under Rule 144 under the Securities Act.
7.05 Registration Procedures. In connection with any registration of
Registrable Securities under this Article VII, the Company will, as soon
as practicable:
(a) prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become and
remain effective until the earlier of such time as all Registrable
Securities subject to such registration statement have been disposed
of or the expiration of one hundred eighty (180) days.
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all
Registrable Securities covered by such registration statement until
the earlier of such time as all of such Registrable Securities have
been disposed of or the expiration of one hundred eighty (180) days
(except with respect to registrations effected on Form S-3 or any
successor form, as to which no such period shall apply);
(c) furnish to each Holder such number of copies of the
registration statement and prospectus (including, without limitation,
a preliminary prospectus) in conformity with the requirements of the
Securities Act (in each case including all exhibits) and each
amendment or supplement thereto, together with such other documents
as any Holder may reasonably request;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United
States and Puerto Rico as each Holder reasonably requests, and do
such other acts and things as may be reasonably required of it to
enable such holder to consummate the disposition in such jurisdiction
of the securities covered by such registration statement;
(e) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make
available to its securities holders, as soon as practicable, an
earnings statement covering the period of at least twelve months
beginning with the first month after the effective date of such
registration statement, which earnings statement will satisfy the
provisions of Section 11(a) of the Securities Act;
(f) provide and cause to be maintained a transfer agent and
registrar for Registrable Securities covered by such registration
statement from and after a date not later than the effective date of
such registration statement;
(g) if requested by the underwriters for any underwritten
offering of Registrable Securities on behalf of a Holder of
Registrable Securities pursuant to a registration requested by Rice
under Section 7.01, the Company will enter into an underwriting
agreement with such underwriters for such offering, such agreement to
contain such representations and warranties by the Company and such
other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions,
including, without limitation, provisions with respect to indemnities
and contribution as are reasonably satisfactory to such underwriters
and the Holders; the Holders on whose behalf Registrable Securities
are to be distributed by such underwriters will be parties to any
such underwriting agreement and the representations and warranties
by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters, will also be made to and for the
benefit of such Holders of Registrable Securities; and no Holder of
Registrable Securities will be required by the Company to make any
representations or warranties to or agreements with the Company or
the underwriters other than reasonable and customary representations,
warranties, or agreements regarding such Holder, such Holder's
Registrable Securities, such Holder's intended method or methods of
disposition, and any other representation required by law;
(h) furnish, at the written request of any Holder, on the date
that such Registrable Securities are delivered to the underwriters
for sale pursuant to such registration, or, if such Registrable
Securities are not being sold through underwriters, on the date that
the registration statement with respect to such Registrable
Securities becomes effective, (i) an opinion in form and substance
reasonably satisfactory to such Holders, and addressing matters
customarily addressed in underwritten public offerings, of the
counsel representing the Company for the purposes of such
registration (who will not be an employee of the Company and who will
be satisfactory to such Holders), addressed to the underwriters, if
any, and to the selling Holders; and (ii) a letter (the "comfort
letter") in form and substance reasonably satisfactory to such
Holders, from the independent certified public accountants of the
Company, addressed to the underwriters, if any, and to the selling
Holders making such request (and, if such accountants refuse to
deliver the comfort letter to such Holders, then the comfort letter
will be addressed to the Company and accompanied by a letter from
such accountants addressed to such Holders stating that they may rely
on the comfort letter addressed to the Company); and
(i) during the period when the registration statement is
required to be effective, notify each selling Holder of the happening
of any event as a result of which the prospectus included in the
registration statement contains an untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading,
and prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading.
It will be a condition precedent to the obligation of the Company to
take any action pursuant to this Article VII in respect of the Registrable
Securities that are to be registered at the request of any Holder of
Registrable Securities that such Holder furnish to the Company such
information regarding the Registrable Securities held by such Holder and
the intended method of disposition thereof as is legally required in
connection with the action taken by the Company. The managing underwriter
or underwriters, if any, for any offering of Registrable Securities to be
registered pursuant to Section 7.01 or 7.03 will be selected by the
Holders of a majority of the Registrable Securities being so registered.
7.06 Allocation of Expenses. Except as provided in the following
sentence, the Company will bear all expenses arising or incurred in
connection with any of the transactions contemplated by this Article VII,
including, without limitation, (a) all expenses incident to filing with
the National Association of Securities Dealers, Inc.; (b) registration
fees; (c) printing expenses; (d) accounting and legal fees and expenses;
(e) expenses of any special audits or comfort letters incident to or
required by any such registration or qualification; and (f) expenses of
complying with the securities or blue sky laws of any jurisdictions in
connection with such registration or qualification. Each Holder will
severally bear the expense of its underwriting fees, discounts, or
commissions relating to its sale of Registrable Securities.
7.07 Listing on Securities Exchange. If the Company lists any shares
of Capital Stock on any securities exchange or on the National Association
of Securities Dealers, Inc. Automated Quotation System or similar system,
it will, at its expense, list thereon, maintain and, when necessary,
increase such listing of, all Registrable Securities.
7.08 Holdback Agreements.
(a) If any registration pursuant to Section 7.02 is in
connection with an underwritten public offering, each Holder of
Registrable Securities agrees, if so required by the managing
underwriter, not to effect any public sale or distribution of
Registrable Securities (other than as part of such underwritten
public offering) during the period beginning seven (7) days prior to
the effective date of such registration statement and ending on the
one hundred eightieth (180th) day after the effective date of such
registration statement; provided, that each Shareholder and each
Person that is an officer, director, or beneficial owner of five
percent (5%) or more of the outstanding shares of any class of
Capital Stock enters into such an agreement.
(b) The Company and the Shareholder agree (i) not to effect any
public sale or distribution during the period seven (7) days (or such
longer period as may be prescribed by Rule 10b-6 under the Exchange
Act) prior to the effective date of the registration statement
employed in any underwritten public offering and ending on the one
hundred eightieth (180th) day after any such registration statement
contemplated by Sections 7.01 or 7.03 has become effective, except as
part of such underwritten public offering pursuant to such
registration statement and except pursuant to securities registered
on Forms S-4 or S-8 of the Commission or any successor forms, and
(ii) use their best efforts to cause each holder of its equity
securities or any securities convertible into or exchangeable or
exercisable for any of such securities, in each case purchased from
the Company at any time after the date of this Agreement (other than
in a public offering), to agree not to effect any such public sale or
distribution of such securities during such period.
7.09 Rule 144. At all times, the Company will take such action as
any Holder may reasonably request, all to the extent required from time to
time to enable such Holder to sell shares of Registrable Securities
without registration pursuant to and in accordance with (a) Rule 144 under
the Securities Act, as such Rule may be amended from time to time, or (b)
any similar rule or regulation adopted by the Commission. Upon the
request of any Holder of Registrable Securities, the Company will deliver
to such Holder a written statement as to whether it has complied with such
requirements.
7.10 Rule 144A. The Company agrees that, upon the request of any
Holder or any prospective purchaser of a Priority Warrant or Warrant
Shares designated by a Holder, the Company will promptly provide (but in
any case within fifteen (15) days of a request) to such Holder or
potential purchaser, the following information:
(a) a brief statement of the nature of the business of the
Company and any Subsidiaries and the products and services they
offer;
(b) the most recent consolidated balance sheets and profit and
losses and retained earnings statements, and similar financial
statements of the Company for such part of the two preceding fiscal
years prior to such request as the Company has been in operation
(such financial information will be audited, to the extent reasonably
available); and
(c) such other information about the Company, any Subsidiaries,
and their business, financial condition, and results of operations as
the requesting Holder or purchaser of such Priority Warrants requests
in order to comply with Rule 144A, as amended, and the antifraud
provisions of the federal and state securities laws.
The Company hereby represents and warrants to any such requesting Holder
and any prospective purchaser of Priority Warrants or Warrant Shares from
such Holder that the information provided by the Company pursuant to this
Section 7.10 will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not
misleading.
7.11 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company will not, without the prior
written consent of the Holders, enter into any agreement with any holder
or prospective holder of any securities of the Company that would allow
such holder or prospective holder (a) to include such securities in any
registration filed under Section 7.01, unless under the terms of such
agreement, such holder or prospective holder may include such securities
in any such registration only to the extent that the inclusion of its
securities will not reduce the amount of the Registrable Securities of the
Holders that is included or (b) to make a demand registration that could
result in such registration statement being declared effective prior to
the effectiveness of the first registration statement effected under
Section 7.01 or within one hundred twenty (120) days of the effective date
of any registration effected pursuant to Section 7.01.
7.12 Exchange Rights. At the option of any Holder, any such Holder
may exchange its Priority Warrant or Warrant Shares for fully paid and
nonassessable shares (calculated as to each exchange to the nearest
one-thousandth (1/1000) of a share and rounded upward) of common stock of
any Affiliate or Subsidiary of the Company that on the date of receipt of
the Exchange Notice has a class of capital stock registered under section
12 of the Exchange Act or within one year and 120 days will have a class
of capital stock so registered (not subject to an effective stock pledge
to an agent for the benefit of the Senior Lenders) (such Affiliate or
Subsidiary will be referred to in this Agreement as the "Exchange Company"
and the common stock of such Affiliate or Subsidiary will be referred to
in this Agreement as "Exchange Common Stock"). Each $1,000 worth of
Priority Warrants or Warrant Shares (valued at Fair Market Value on the
date the Exchange Notice was sent), will be exchangeable for $1,000 worth
of Exchange Common Stock (valued at Fair Market Value on the date that the
Exchange Notice was sent). To exchange Priority Warrants or Warrant
Shares into Exchange Common Stock, the Holder will surrender at the
principal office of the Exchange Company the Priority Warrants or
certificate or certificates evidencing the Warrant Shares duly endorsed or
assigned to the Company, and give written notice to the Company at such
office that it elects to exchange such Priority Warrants or Warrant Shares
(the "Exchange Notice"). Priority Warrants or Warrant Shares will be
deemed to have been exchanged immediately prior to the close of business
on the day of the surrender for exchange in accordance with the foregoing
provisions, and the Person or Persons entitled to receive the Exchange
Common Stock issuable upon any such exchange will thereupon be treated for
all purposes as the record holder or holders of the Exchange Common Stock.
As promptly as practicable on or after the exchange date, the Exchange
Company will issue and deliver a certificate or certificates for the
number of full shares of Exchange Common Stock issuable upon exchange to
the Person or Persons entitled to receive such shares. Upon exchange of
any Issued Warrant Shares, the Company will pay or make with respect to
Issued Warrant Shares any dividends or other distributions that have been
declared on the Warrant Shares in kind or cash, as the case may be. If
any Holder exchanges its Priority Warrants or Warrant Shares for shares of
Exchange Common Stock pursuant to this Section 7.12, such Holder will
have all of the rights set forth in this Article VII, except that for the
purposes of this Article VII the term "Company" will refer instead to the
Exchange Company and the term "Registrable Securities" will refer to the
shares of Exchange Common Stock held by such Holder.
7.13 Other Rights. The Company will not grant to any person any
registration rights without the consent of the Holders.
Article VIII
Directors
8.01 Original Shareholder Agreement Provisions of Article VIII
Incorporated into this Agreement. The provisions of Article VIII of the
Original Shareholder Agreement are hereby incorporated herein at length
with full application to this Agreement.
Article IX
Representations and Warranties; Covenants
9.01 Representations and Warranties and Covenants of the Company.
Each of the representations and warranties set forth in Section 3.01 of
the Priority Purchase Agreement and each of the covenants set forth in
Article IV of the Priority Purchase Agreement are hereby restated and
incorporated by reference in this Agreement as though set forth in this
Agreement, and is made by the Company as made in the Priority Purchase
Agreement for the benefit of Rice.
9.02 Representations and Warranties of Rice. Each of the
representations and warranties of Rice set forth in Section 3.02 of the
Priority Purchase Agreement is hereby restated and incorporated by
reference in this Agreement as though set forth in this Agreement for the
benefit of the Company.
Article X
Conditions
The obligations of Rice to effect the transactions contemplated by
this Agreement are subject to the following conditions:
10.01 Priority Note Agreement and Priority Purchase Agreement
Conditions. All of the conditions precedent to the obligations of Rice
under the Priority Note Agreement and the Priority Purchase Agreement will
have been satisfied in full or waived.
10.02 Proceedings. All proceedings taken in connection with the
transactions contemplated by this Agreement, and all documents necessary
to the consummation thereof, will be reasonably satisfactory in form and
substance to Rice and its counsel, and Rice and its counsel will have
received copies (executed or certified as may be appropriate) of all
documents, instruments, and agreements that Rice or its counsel may
request in connection with the consummation of such transactions.
Article XI
Priority Rights Over Other Shareholder Agreements; No Duplication of
Rights, Etc.
11.01 Rice Priority. Notwithstanding anything contained herein or
in the Other Purchase Agreements or in the Other Purchase Agreements or in
the Other Shareholder Agreements, Rice shall have the right to exercise
any and all the rights, privileges and benefits under this Agreement with
respect to the Priority Warrant as a Holder or otherwise, including,
without limitation, pursuant to Articles II, III, IV, V, VI and VII
hereof, in preference and priority to, any other Holder, the Southland
Purchasers, F-Jotan, Shareholder or any Affiliate of any thereof under any
provision of this Agreement, the Priority Purchase Agreement, the Other
Shareholder Agreements and the Other Purchase Agreements, except as set
forth in Article VIII with respect to the Board of Directors. Such
preference and priority of Rice shall be exercised exclusively by Rice up
to Rice's Priority Share in Rice's sole discretion. Rice's "Priority
Share", for purposes of this Agreement, shall mean all or any portion such
rights, privileges and benefits attributable to the number of shares of
Common Stock issuable to Rice upon exercise of Rice's Priority Warrant
plus the number of shares of Common Stock that are Issued Warrant Shares
owned by Rice at the date of exercise of such rights. Rice shall have the
right, but not the obligation, to exercise such preference and priority
with respect to all or any part of such shares and may waive any or all of
such rights only by a written instrument signed by Rice.
11.02 No Duplication of Rights or Obligations. The rights,
privileges and obligations of the parties hereto are intended to be
consistent with, and not to alter, expand or duplicate the rights,
privileges or obligations under the Other Shareholder Agreements, except
as and to the extent set forth in of Section 11.01 above and with respect
to Rice's rights hereunder relating to the Priority Warrant. Except with
respect to Section 11.01 above, the parties shall, to the fullest extent
possible, treat this Priority Shareholder Agreement and the Other
Shareholder Agreements as a single agreement with respect to provisions
having the same intent and purpose herein and therein, including with
respect to Registrable Securities (as defined herein and therein) and the
rights of the Holders thereof. If a conflict arises between the
provisions hereof and thereof, the provisions herein shall govern solely
with respect to the Priority Warrant and the rights, privileges and
obligations thereof.
Article XII
Miscellaneous
12.01 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 Holders, and their
Affiliates and their respective successors, assigns, officers, directors,
managers, employees, attorneys, and agents (individually and collectively,
an "Indemnified Party") from and against any and all losses, claims,
obligations, liabilities, deficiencies, diminutions in value, penalties,
causes of action, damages, out-of-pocket costs, including, without
limitation, all such costs of directors of the Company incurred in
performing duties or services for or on behalf of the Company, reasonable
attorneys' fees, and expenses (including, without limitation, costs and
expenses of investigation and defense, attorneys' fees and expenses)
including, without limitation, those arising out of the contributory
negligence of any Indemnified Party, that any Indemnified Party may
suffer, incur, or be responsible for, arising or resulting from, to the
extent applicable, any misrepresentation, breach of warranty, or
nonfulfillment of any agreement made by or on the part of the Company
under this Agreement, the Priority Purchase Agreement, or the Other
Purchase Documents (as defined in Section 11.1 of the Priority Note
Agreement) or under any other agreement to which the Company is a party in
connection with the transactions contemplated by this transaction, or from
any misrepresentation in or omission from any certificate or other
instrument furnished or to be furnished by the Company to Rice or the
Holders under this Agreement. The foregoing indemnification includes any
such claims, actions, damages, costs and expenses incurred by reason of
the contributory negligence of the Person to be indemnified, but excludes
any of the same incurred by reason of such Person's gross negligence or
willful misconduct and shall survive the expiration of this Agreement or
the irrevocable sale by Rice of its interests in, or the repayment of its
loans to, the Company.
12.02 Default. It is agreed that a violation by any party of the
terms of this Agreement cannot be adequately measured or compensated in
money damages, and that any breach or threatened breach of this Agreement
by a party to this Agreement would do irreparable injury to the
nonbreaching party. It is, therefore, agreed that in the event of any
breach or threatened 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.
12.03 Integration. This Agreement, the Priority Note Agreement,
the Priority Purchase Agreement, the Other Purchase Agreements, the Other
Shareholder Agreements and the documents, agreements, notes and
instruments executed in connection therewith constitute the entire
agreement among the parties with respect to the subject matter hereof and
thereof and supersede all previous written, and all previous or
contemporaneous oral, negotiations, understandings, arrangements, and
agreements. This Agreement may not be amended or supplemented except by a
writing signed by the Company, the Southland Purchasers, the Shareholder,
F-Jotan and each Holder.
12.04 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.
12.05 Severability. The parties to this Agreement expressly
agree that it is not their intention to violate any public policy,
statutory or common law rules, regulations, or decisions of any
governmental or regulatory body. If any provision of this Agreement is
judicially or administratively interpreted or construed as being in
violation of any such policy, rule, regulation, or decision, the
provision, section, sentence, word, clause, or combination thereof causing
such violation will be inoperative (and in lieu thereof there will be
inserted such provision, sentence, word, clause, or combination thereof as
may be valid and consistent with the intent of the parties under this
Agreement) and the remainder of this Agreement, as amended, will remain
binding upon the parties to this Agreement, unless the inoperative
provision would cause enforcement of the remainder of this Agreement to be
inequitable under the circumstances.
12.06 Notices. Whenever it is provided herein that any notice,
demand, request, consent, approval, declaration, or other communication be
given to or served upon any of the parties by another, such notice,
demand, request, consent, approval, declaration, or other communication
will be in writing and will be deemed to have been validly served, given,
or delivered (and "the date of such notice" or words of similar effect
will mean the date) five (5) days after deposit in the United States
mails, certified mail, return receipt requested, with proper postage
prepaid, or upon receipt thereof with written acknowledgment of receipt
(whether by non-certified mail, telecopy, telegram, express or hand
delivery, or otherwise), whichever is earlier, and addressed to the party
to be notified as follows:
If to the Rice, at: Address of Rice beneath the name of Rice on
the signature pages of this Agreement
with courtesy copies to: Patton Boggs, L.L.P.
2200 Ross Avenue
Suite 900
Dallas, Texas 75201
Attn: Larry A. Makel, Esq.
Fax: 214-871-2688
If to F-Jotan, at: Address of F-Jotan beneath the name of F-
Jotan on the signature pages of this
Agreement
with courtesy copies to: Wyrick, Robins, Yates & Ponton, L.L.P.
4101 Lake Boone Trail, Suite 300
Raleigh, North Carolina 27607-7506
Attn: James M. Yates, Jr.
Fax: (919) 781-4865
If to the Company, at: Jotan, Inc.
118 West Adams Street
Jacksonville, Florida 32202
Attn: President
Fax: (904) 353-0075
with courtesy copies to: Foley & Lardner, L.L.P.
The Greenleaf Building
200 Laura Street
Jacksonville, Florida 32292
Attn: Gardner F. Davis, Esq.
Fax: (904) 359-8700
If to the Shareholder, at: Address of such Shareholder beneath the
name of such Shareholder on the
signature pages of this Agreement
or to such other address as each party may designate for itself by like
notice. Notice to any Holder other than 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 Holder has advised the Company
in writing of a different address to which notices are to be sent under
this Agreement.
Failure or delay in delivering the courtesy copies of any notice,
demand, request, consent, approval, declaration, or other communication to
the persons designated above to receive copies of the actual notice will
in no way adversely affect the effectiveness of such notice, demand,
request, consent, approval, declaration, or other communication.
No notice, demand, request, consent, approval, declaration, or other
communication will be deemed to have been given or received unless and
until it sets forth all items of information required to be set forth
therein pursuant to the terms of this Agreement.
12.07 Successors. This Agreement will be binding upon and inure
to the benefit of the parties and their respective successors and
permitted assigns; provided, however, that no sale, assignment or other
transfer by any party to this Agreement of any of its Capital Stock or
rights hereunder to another Person will be valid and effective unless and
until the transferee or assignee first agrees in writing to be bound by
the terms and conditions of this Agreement and the Priority Purchase
Agreement, and the agreements and instruments related hereto and thereto,
in a form and substance reasonably satisfactory to the Company.
.
12.08 Remedies. The failure of any party to enforce any right or
remedy under this agreement, or to enforce any such right or remedy
promptly, will not constitute a waiver thereof, nor give rise to any
estoppel against such party, nor excuse any other party from its
obligations under this Agreement. Any waiver of any such right or remedy
by any party must be in writing and signed by the party against which such
waiver is sought to be enforced.
12.09 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.
12.10 Fees. Any and all fees, costs, and expenses, of whatever
kind and nature, including attorneys' fees and expenses, incurred by the
Holders in connection with the defense or prosecution of any actions or
proceedings arising out of or in connection with this Agreement will, to
the extent provided in this Agreement, be borne and paid by the Company
within ten (10) days of demand by the Holders.
12.11 Counterparts. This Agreement may be executed in any number
of counterparts, which will individually and collectively constitute one
agreement.
12.12 Other Business. It is understood and accepted that Rice,
the Holders, and their Affiliates have interests in other business
ventures that may be in conflict with the activities of the Company and
that nothing in this Agreement will limit the current or future business
activities of such parties whether or not such activities are competitive
with those of the Company. The Company and the Shareholder agree that all
business opportunities available to them in any field substantially
related to the business of the Company will be pursued exclusively through
the Company.
12.13 Choice of Law. THIS AGREEMENT WILL BE DEEMED TO HAVE BEEN
MADE IN JACKSONVILLE, FLORIDA AND WILL BE INTERPRETED AND THE RIGHTS OF
THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES
APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF FLORIDA
APPLICABLE TO AN AGREEMENT EXECUTED, DELIVERED AND PERFORMED THEREIN
WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW RULES THEREOF OR ANY OTHER
PRINCIPLE THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY
OTHER JURISDICTION.
12.14 Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner of
such Registrable Securities, the beneficial owner of Registrable
Securities may, at its election, be treated as the Holder of such
Registrable Securities for purposes of any request or other action by any
Holder or Holders of Registrable Securities pursuant to this Agreement or
any determination of any number or percentage of shares of Registrable
Securities held by any Holder or Holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require assurances
reasonably satisfactory to it of such owner's beneficial ownership of such
Registrable Securities. In no event will a Holder be required to exercise
its Priority Warrant as a condition to the registration of such Priority
Warrant or Registrable Securities thereunder.
12.15 Fiduciary Duties. The Company acknowledges and agrees
that, for so long as any Priority Warrant is outstanding and regardless of
whether the Holder has exercised any portion of this its Priority Warrant,
(a) the officers and directors of the Company will owe the same duties
(fiduciary and otherwise) to the Holder as are owed to a stockholder of
the Company and (b) the Holder will be entitled to all rights and remedies
with respect to such duties or that are otherwise available to a
stockholder of the Company under the Florida General Corporation Law, as
amended from time to time.
12.16 Duties Among Holders. Each Holder agrees that no other
Holder will by virtue of this Agreement be under any fiduciary or other
duty to give or withhold any consent or approval under this Agreement or
to take any other action or omit to take any action under this Agreement,
and that each other Holder may act or refrain from acting under this
Agreement as such other Holder may, in its discretion, elect.
12.17 Confidentiality. Each Holder agrees to keep confidential
any information delivered by the Company to such Holder under this
Agreement that the Company clearly indicates in writing to be confidential
information; provided, however, that nothing in this Section 12.17 will
prevent such Holder from disclosing such information (a) to any Affiliate
of such Holder or any actual or potential purchaser, participant,
assignee, or transferee of such Holder's rights or obligations hereunder
that agrees to be bound by the terms of this Section 12.17, (b) upon order
of any court or administrative agency, (c) upon the request or demand of
any regulatory agency or authority having jurisdiction over such Holder,
(d) that is in the public domain, (e) that has been obtained from any
Person that is not a party to this Agreement or an Affiliate of any such
party without breach by such Person of a confidentiality obligation known
to such Holder, (f) in connection with the exercise of any remedy under
this Agreement, or (g) to the certified public accountants for such
Holder. The Company agrees that such Holder will be presumed to have met
its obligations under this Section 12.17 to the extent that it exercises
the same degree of care with respect to information provided by the
Company as it exercises with respect to its own information of similar
character.
Article XIII
Consent of Other Parties
13.1 Consent of Other Parties. All the parties hereto, after review
of the transactions contemplated herein, hereby acknowledge, approve and
consent to the execution, delivery and performance of the Priority Note
Agreement, the Priority Purchase Agreement and all documents, agreements,
notes and instruments executed and delivered in connection therewith or
herewith for purposes of this Agreement and otherwise. Such parties
further agree that no dilution or other adjustment in any equity interest
they may have arising in connection with the Other Shareholder
Agreements, the Restated Articles of Incorporation of the Company or
otherwise, shall be made in connection with, or as a result of, the
issuance of the Priority Warrant or the transactions contemplated herein
or therein, and such adjustment rights are hereby waived.
[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:____________________________
Name: Edward L. Lipscomb
Title: Chief Financial Officer
118 West Adams Street
Jacksonville, Florida 32201
Attn: President
Fax: (904) 343-0075
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: Jeffrey P. Sangalis
Its: Managing Director
5847 San Felipe, Suite 4350
Houston, Texas 77057
Attn: Jeffrey P. Sangalis
Fax: (713) 783-9750
OWNED ON CLOSING DATE:
42,377,173 Warrant Shares (subject to adjustment under Section 4.13 of the
Priority Purchase Agreement)
F-JOTAN, L.L.C.
By: Franklin Street/Fairview
Capital, L.L.C., its manager
By: Franklin Capital, L.L.C.,
its manager
By:____________________________
James D. Lumsden,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
THE SOUTHLAND PURCHASERS:
F-SOUTHLAND, L.L.C.
By: Franklin Street/Fairview
Capital, L.L.C.,
its manager
By: Franklin Capital, L.L.C,
its manager
By:____________________________
James D. Lumsden,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
FF-SOUTHLAND, L.P.
By: FSFC Associates, L.P.,
Its general partner
By: Franklin Capital, L.L.C.,
Its general partner
By:____________________________
James D. Lumsden,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
SHAREHOLDER:
_______________________________
Shea E. Ralph