AMENDED AND RESTATED SECOND SUPPLEMENTAL
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
AMENDED AND RESTATED SECOND SUPPLEMENTAL PREFERRED STOCK PURCHASE
AGREEMENT (this "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" or the "Purchaser"),
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 corporation ("F-Jotan"),
and the SHAREHOLDER named on the signature pages hereto (the
"Shareholder").
W I T N E S S E T H:
WHEREAS, the Company, Rice, the Southland Purchasers, F-Jotan and the
Shareholder named on the signature pages thereof, have entered into (i)
that certain Preferred Stock and Warrant Purchase Agreement, dated as of
February 28, 1997 (the "Preferred Stock and Warrant Purchase Agreement"),
(ii) that certain First Supplemental Preferred Stock and Warrant Purchase
Agreement dated as of September 10, 1997 (the "First Supplemental Purchase
Agreement"), and (iii) that certain Second Supplemental Preferred Stock
Purchase Agreement (the "Second Supplemental Purchase Agreement"), (the
First Supplemental Purchase Agreement, the Second Supplemental Purchase
Agreement and together with this Agreement and the Preferred Stock and
Warrant Purchase Agreement, as the same may be further modified, amended,
supplemented or restated from time to time, collectively being called, the
"Other Purchase Agreements");
WHEREAS, each party owns beneficially and of record the number of
shares or share equivalents set forth under the signature of such
Shareholder on this Agreement of the issued and outstanding capital stock
of the Company (reflecting the departure of David Freedman on December 31,
1997 from employment at the Company and the termination of his options to
purchase up to 275,000 of the Company's Common Stock but not reflecting
the issuance of a certain "Priority Warrant" in connection with the
Priority Note Agreement (as defined in the last recital below);
WHEREAS, F-Jotan is the owner of the 1,435,705 shares of the Series A
Preferred Stock of the Company as of the date hereof;
WHEREAS, the Southland Purchasers and Rice are owners of shares of
Series B Preferred Stock and Warrants exercisable into the Company's
Common Stock, as set forth under the signature of each such party below;
WHEREAS, SHC Acquisition Corp., a wholly-owned Subsidiary of the
Company, has merged with and into Southland Holding Company, with
Southland Holding Company surviving and assuming all the obligations of
SHC Acquisition Corp. under the Preferred Stock and Warrant Purchase
Agreement. On July 31, 1997, all of the subsidiaries of Southland Holding
Company and Atlantic Bag & Paper Company, a Subsidiary of the Company,
merged with and into Southland Holding Company (which concurrently changed
its name to Southland Container Packaging Corp.), with the result that
Southland Container Packaging Corp. ("Southland"), as of July 31, 1997,
had no Subsidiaries;
WHEREAS, the Company, Southland, 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 (as the same may be modified, amended,
supplemented or restated from time to time the "Original Note Agreement");
WHEREAS, the Company, Rice, Southland Purchasers, F-Jotan, and the
Shareholder have entered into (i) a Shareholder Agreement, dated as of
February 28, 1997 (the "Original Shareholder Agreement"), (ii) that
certain First Supplemental Shareholder Agreement, dated as of September
10, 1997 (the "First Supplemental Shareholder Agreement"), (iii) that
certain Second Supplemental Shareholder Agreement, dated as of November 6,
1997 (the "Second Supplemental Shareholder Agreement"), and (iii) that
certain Amended and Restated Second Supplemental Shareholder Agreement,
dated as of the date hereof (the "Restated Second Supplemental Shareholder
Agreement"), (the Original Shareholder Agreement, the First Supplemental
Shareholder Agreement, the Second Supplemental Shareholder Agreement, and
the Restated Second Supplemental Shareholder Agreement are collectively
called the "Other Shareholder Agreements");
WHEREAS, Rice and the Board of Directors of the Company determined
that, in the best interest of the Company, Rice was willing purchase, and
the Company was willing to sell to Rice, $250,000 (the "Purchase Price")
of Series B Preferred Stock, in cash at $200 per share (the "Investment")
to enable the Company to make certain payments to certain individuals who
previously owned minority interests in certain subsidiaries of Southland;
WHEREAS, although Rice was willing to enter into and consummate the
transactions contemplated hereby upon the due issuance of the Warrants and
Preferred Stock (as defined below) in connection with the payment of the
Purchase Price, the Southland Purchasers elected not to purchase Preferred
Stock in this transaction; and
WHEREAS, Rice and the Company agreed that, notwithstanding the
provisions of the Second Supplemental Purchase Agreement and in
consideration of making further financial investments in the Company, the
Company is willing to issue to Rice, and Rice shall receive Warrants in
connection with, and related to, the purchase of the Second Supplemental
Preferred Shares (as defined below), which warrants shall be issued
concurrently with the purchase by Rice of $1,250,000 of "Priority Senior
Subordinated Notes" under that certain Priority Note Purchase Agreement,
dated as of April 14, 1998, among Rice, the Company and Southland
Container Packaging Corp. ("Priority Note 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, Purchaser, Southland Purchasers, F-Jotan, the Southland
Purchasers, the Shareholder, and the Company, intending to be legally
bound, agree as follows:
Article I
Definitions
As used in this Agreement, all capitalized terms have the meanings
indicated in the Preferred Stock and Warrant Purchase Agreement unless
otherwise defined herein. Any such term used in the Preferred Stock and
Warrant Purchase Agreement, but not defined herein, shall be interpreted
to cover all corresponding terms used herein and relating to the Warrants
and Series B Preferred Stock to be issued pursuant to this Agreement, as
if such terms were set forth at length herein and applied to the
transactions contemplated hereby.
Agreement. This Amended and Restated Second Supplemental Preferred
Stock and Warrant Purchase Agreement, as the same may be modified,
amended, supplemented or restated from time to time.
Closing Date. With respect to this Agreement, as of the date first
set forth above.
First Supplemental Warrant. The First Supplemental Warrant A-2
issued concurrently with the issuance of the First Supplemental
Series B Preferred Stock.
Second Supplemental Warrant. The Second Supplemental Warrant A-3,
dated April 14, 1998, to be purchased by Rice under this Agreement
concurrently with the purchase of the Priority Senior Subordinated
Note as defined in the Priority Note Agreement.
Priority Note Agreement. The Priority Note Purchase Agreement, dated
as of April 14, 1998, by and among the Company, Southland Container
Packaging Corp., and Rice and all documents evidencing indebtedness
thereunder or otherwise related to such Agreement, as the same may be
further amended from time to time, and any refinancing, refunding or
replacements of the indebtedness under such Agreement.
Original Closing Date. The Closing Date with respect to the
Preferred Stock and Warrant Purchase Agreement, which occurred as of
February 28, 1997 with respect to the originally issued Warrants and
Preferred Shares under the Preferred Stock and Warrant Purchase
Agreement and March 4, 1997 with respect to the initial funding.
Other Shareholder Agreements. This term is defined in the Preamble.
Preferred Stock or Series B Preferred Stock. For purposes of this
Agreement (except where the context requires a reference to this
Agreement and the Preferred Stock and Warrant Purchase Agreement),
the Second Supplemental Series B Preferred Stock.
Purchase Price. This term is defined in the preamble.
Purchaser. For purposes of this Agreement, the Second Supplemental
Documents and the First Supplemental Documents (as defined in the
First Supplemental Purchase Agreement), Rice; and for purposes of the
Preferred Stock and Warrant Purchase Agreement and the transactions
contemplated thereby, Rice and the Southland Purchasers.
Second Supplemental Documents. This Agreement, the Second
Supplemental Series B Preferred Stock, the Second Supplemental
Shareholder Agreement, and the Restated Second Supplemental
Shareholder Agreement among the parties hereto and the transactions
and documents, instruments, certificates and agreements contemplated
thereby, as the same may be modified, amended, supplemented or
restated from time to time.
Second Supplemental Preferred Shares. Shares of Series B Preferred
Stock (but not any Series A Preferred Stock) issued to Purchaser
under the Second Supplemental Purchase Agreement in connection with
the Investment described therein and herein.
Second Supplemental Series B Preferred Stock. Series B Preferred
Stock issued to the applicable Purchaser under the Second
Supplemental Purchase Agreement in connection with the Investment
described therein and herein.
Southland. This term is defined in the Preamble.
Warrants or Second Supplemental Warrant. For purposes of this
Agreement (except where the context requires a reference to this
Agreement, the First Supplemental Purchase Agreement and the
Preferred Stock and Warrant Purchase Agreement), the Second
Supplemental Warrant (as defined below).
Warrant Shares. For purposes of this Agreement (except where the
context requires a reference to this Agreement, the First
Supplemental Purchase Agreement and the Preferred Stock and Warrant
Purchase Agreement), the shares of Common Stock issuable and issued
on exercise of the Second Supplemental Warrant (defined below), and
all Warrants issued upon the transfer or division of, or in
substitution for, such Warrant.
Article II
The Preferred Shares; Warrants; Warrants
2.01 The Preferred Shares; Warrants. On or prior to the Closing
Date, Rice agrees to purchase from the Company at the purchase price set
forth below, and the Company agrees to issue to Rice, all in accordance
with the terms and conditions of this Agreement:
(a) for a purchase price of $100, a Second Supplemental
Warrant A-3 (relating to the Series B Preferred Stock) in
substantially the form attached to this Agreement as Annex B and
incorporated in this Agreement by reference to purchase, at the
exercise price provided in Section 2.03, the number of shares of
Common Stock set forth beneath the name of Rice on the signature
page of this Agreement (the "Second Supplemental Warrant"); and
(b) 1,250 shares of Series B Preferred Stock, at a
purchase price of $200 per share (for a total of $250,000)
having the rights, restrictions, privileges, and preferences set
forth in the articles of amendment of the Company's articles of
incorporation attached to the Preferred Stock and Warrant
Purchase Agreement as Annex H (the "Certificate").
The Company has duly authorized the Series B Preferred Stock being
purchased and sold pursuant to the terms of this Agreement by duly filing
the Certificate with the Secretary of State of the State of Florida.
Within forty-five (45) business days after the Closing Date, the Company
will deliver to Rice a certificate evidencing and representing the shares
of Second Supplemental Series B Preferred Stock issued to such Purchaser,
which certificate shall be issued in such Purchaser's name or in the name
of its designee.
2.02 Legend. The Company will deliver to Purchaser pursuant to
Section 2.01, one or more certificates representing each of (i) Second
Supplemental Warrant and (ii) the Second Supplemental Series B Preferred
Stock purchased by Rice in such denominations as such Purchaser requests.
Such certificates will be issued in such Purchaser's name or, subject to
compliance with transfer and registration requirements under applicable
Federal and state securities laws, in the name or names of its respective
designee or designees.
It is understood and agreed that the certificates evidencing the
Warrants will bear the following legends:
"THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN
CONNECTION WITH THE DISTRIBUTION HEREOF. THIS WARRANT AND THE
SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS, INCLUDING, WITHOUT LIMITATION, 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 WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE
SUBJECT TO THE TERMS AND PROVISIONS OF A PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT AND A SHAREHOLDER AGREEMENT, EACH DATED AS OF
FEBRUARY 28, 1997, BY AND AMONG JOTAN, INC. (THE "COMPANY"), RICE
PARTNERS II, L.P., F-SOUTHLAND, L.L.C. AND FF-SOUTHLAND, L.P., F-
JOTAN, L.L.C. AND THE OTHER PARTIES LISTED ON THE SIGNATURE PAGES TO
SUCH SHAREHOLDER AGREEMENT (AS SUCH AGREEMENTS MAY BE SUPPLEMENTED,
MODIFIED, AMENDED, OR RESTATED FROM TIME TO TIME, THE "AGREEMENTS").
COPIES OF THE AGREEMENTS ARE AVAILABLE AT THE EXECUTIVE OFFICES OF
THE COMPANY."
It is further understood and agreed that the certificates evidencing the
Second Supplemental Series B Preferred Stock will bear substantially the
same as the following legends:
"THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO OR FOR SALE IN CONNECTION WITH THE DISTRIBUTION HEREOF. THESE
SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS, INCLUDING, WITHOUT LIMITATION,
THE 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."
"THESE SHARES ARE SUBJECT TO THE TERMS AND PROVISIONS OF A PREFERRED
STOCK AND WARRANT PURCHASE AGREEMENT AND A SHAREHOLDER AGREEMENT,
EACH DATED AS OF FEBRUARY 28, 1997, BETWEEN JOTAN, INC. (THE
"COMPANY"), RICE PARTNERS II, L.P., F-JOTAN, L.L.C., AND F-SOUTHLAND,
L.L.C., FF-SOUTHLAND, L.P. AND THE OTHER PARTIES LISTED ON THE
SIGNATURE PAGES TO SUCH SHAREHOLDER AGREEMENT (AS SUCH AGREEMENTS MAY
BE SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM TIME TO TIME,
THE "AGREEMENTS"). COPIES OF THE AGREEMENTS ARE AVAILABLE AT THE
EXECUTIVE OFFICES OF THE COMPANY."
2.03 Exercise Price. The Exercise Price per share will be $0.01 for
each share of Common Stock covered by the Second Supplemental Warrant;
provided, however, that in no event shall the aggregate Exercise Price for
all of the shares of Common Stock covered by the Second Supplemental
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 Warrants may be exercised.
2.04 Exercise of Warrant. The Second Supplemental Warrant may be
exercised at any time or from time to time on or after the Closing Date
until the tenth (10th) anniversary of the Original Closing Date (March 4,
2007), 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 the Second Supplemental Warrant, in whole or in part, the
Holder will comply with the applicable provisions in Section 2.04 of the
Preferred Stock and Warrant Purchase Agreement as if such provisions were
incorporated herein at length.
2.05 Stock Legend. Without limiting the provisions of Section 2.02
hereof, the Second Supplemental Warrant and the Second Supplemental
Preferred Shares have not been registered under the Securities Act or
qualified under applicable state securities laws. Accordingly, unless
there is an effective registration statement and qualification respecting
the Second Supplemental Warrant or the Second Supplemental Preferred
Shares, as the case may be, under the Securities Act or under applicable
state securities laws, the Second Supplemental Preferred Shares and, at
the time of exercise of a Second Supplemental Warrant, any stock
certificate issued pursuant to the exercise of a Second Supplemental
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 PREFERRED
STOCK AND WARRANT PURCHASE AGREEMENT AND A SHAREHOLDER AGREEMENT,
EACH DATED AS OF FEBRUARY 28, 1997, AMONG JOTAN, INC. (THE
"COMPANY"), RICE PARTNERS II, L.P., F-SOUTHLAND, L.L.C., FF-
SOUTHLAND, L.P., F-JOTAN, L.L.C. AND THE OTHER PARTIES LISTED ON THE
SIGNATURE PAGES OF SUCH SHAREHOLDER AGREEMENT (AS SUCH AGREEMENTS MAY
BE SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM TIME TO TIME,
THE "AGREEMENTS"). COPIES OF THE AGREEMENTS ARE AVAILABLE AT THE
OFFICES OF THE COMPANY."
All shares of Capital Stock of the Company subject to the Other
Shareholder Agreements will bear a legend to such effect.
2.06 Preferred Stock and Warrant Purchase Agreement Provisions
Incorporated into this Agreement. Except as set forth above, all other
provisions in Article II of the Preferred Stock and Warrant Purchase
Agreement shall be incorporated herein as if set forth at length herein
with full application to the Second Supplemental Warrant and the Second
Supplemental Preferred Shares; and all such Preferred Shares issued
pursuant to this Agreement shall be included in all adjustments and other
calculations under Section 2.08 of the Other Purchase Agreements relating
to Preferred Shares issued as of the Original Closing Date under the
Second Supplemental Warrant and the Second Supplemental Preferred Shares
as if such were issued on the Original Closing Date. Notwithstanding the
issuance of securities contemplated herein, there will be no adjustments
under Section 2.08 of the Preferred Stock and Warrant Purchase Agreement
or under the Certificate (in respect of the issuance of the First
Supplemental Warrant, the Second Supplemental Warrant and the Second
Supplemental Preferred Stock to Rice) and such adjustment rights are
hereby waived with respect to such issuances.
All shares of Capital Stock of the Company subject to the Other
Shareholder Agreements 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 the Southland Purchasers, Purchaser and F-Jotan
that:
(a) The Company is a corporation duly organized and existing
and in good standing under the laws of its state of incorporation and
is qualified or licensed to do business in all other countries,
states, and jurisdictions the laws of which require it to be so
qualified or licensed except where the failure to qualify to be
licensed could have a Material Adverse Effect (as defined in the
Original 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
Restated Second Supplemental Shareholder Agreement, the Second
Supplemental Warrant, and the officers of Company executing and
delivering this Agreement, the Restated Second Supplemental
Shareholder Agreement, and the Second Supplemental Warrant are duly
authorized to do so; provided, however, that the exercise of the
Second Supplemental 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 the filing of such amendment with the Florida
Secretary of State; 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 (iii) the consent to and waiver of certain rights of
F-Jotan and the Southland Purchasers (collectively, the "Fairview
Entities") under the Restated Second Supplemental Shareholder
Agreement, as amended from time to time (including any preemptive
rights contained therein) and under the Restated Second Supplemental
Purchase Agreement of concurrent date therewith and related
agreements, as all have been amended from time to time. Subject to
the foregoing, this Agreement, the Restated Second Supplemental
Shareholder Agreement, and the Second Supplemental 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 Restated Second Supplemental Shareholder Agreement, and the
Second Supplemental 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 in
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 or,
subject to compliance with the Section 4.02 below, will be reserved
for issuance on exercise of the "Priority Warrant" issued in
connection with the Priority Note Agreement. 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 Certificate, as amended, or (y) as provided in
the Second Supplemental Shareholder Agreement) and in compliance with
applicable federal and state securities laws. Except (1) pursuant to
this Agreement, the Second Supplemental Purchase Agreement and
related Warrants and the Second Supplemental Shareholder Agreement
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 Restated Second Supplemental
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 Second Supplemental 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 Original Note
Agreement).
(g) The Company has the exclusive right to use all patents,
patent rights, patent applications, licenses, inventions, trade
secrets, know-how, proprietary techniques, including processes and
substances, trademarks, service marks, trade names, and copyrights
used in or necessary to its business as presently, or presently
proposed to be, conducted (the "Intellectual Property"), and the use
by the Company of the Intellectual Property does not infringe the
rights of any other Person except that Southland Holding Company has
a non-exclusive right to use the names "Southland" and "Southland
Container" and similar trade names. No other Person is infringing
the rights of the Company in any of the Intellectual Property in any
material respect. The Company owes no royalties, honoraria, or fees
to any Person by reason of its use of any of the Intellectual
Property.
(h) There is not now, and at no time during the term of this
Agreement or the Restated Second Supplemental Shareholder Agreement
will there be, any agreement, arrangement, or understanding involving
the Company, other than this Agreement, the Restated Second
Supplemental Shareholder Agreement, the Restated Second Supplemental
Shareholder Agreement and the documents contemplated hereby and
thereby, modifying, restricting, or in any way affecting the rights
of any security holder to vote securities of the Company.
(i) Each of the representations and warranties made by the
Company pursuant to the 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 Restated Second
Supplemental 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 Purchaser. Rice represents and
warrants to the Company, F-Jotan, the Southland Purchasers and the
Shareholder:
(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
Restated Second Supplemental Shareholder Agreement, and its officers,
managers or agents executing and delivering this Agreement and the
Restated Second Supplemental Shareholder Agreement are duly
authorized to do so. This Agreement and the Restated Second
Supplemental 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 for Purchaser; (iii) has received and
reviewed all such financial and other information and records of the
Company as it considered necessary or appropriate in deciding whether
to purchase the Second Supplemental Preferred Shares, and the Second
Supplemental Warrant and any securities issuable upon exercise of the
Second Supplemental Warrant and the Company and the Shareholder have
made available to it the opportunity to ask questions of, and to
receive answers and to obtain additional information from,
representatives of the Company and the Shareholder; (iv) all such
additional information has been provided to and reviewed by it; and
(v) it has the ability to bear the economic risks of losing its
entire investment in the Second Supplemental Preferred Shares and the
Second Supplemental Warrant and any securities issuable upon exercise
of such Warrants.
(d) Except as otherwise contemplated by this Agreement and the
Shareholder Agreement, Rice is acquiring its Second Supplemental
Series B Preferred Stock, the Second Supplemental Warrant and any
securities issuable upon exercise of the Second Supplemental 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 Second
Supplemental Preferred Shares, the Second Supplemental Warrant, and
any Issued Warrant Shares will bear the legends referenced in this
Agreement or the Preferred Stock and Warrant Purchase Agreement, as
the case may be, and such Preferred Shares, Warrants or securities
issuable upon exercise of such Warrants and pursuant to the Restated
Second Supplemental 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 Second Supplemental Preferred
Shares or the Second Supplemental Warrant or any securities issuable
upon exercise of such Warrants based upon any representation, oral or
written, by the Company or the Shareholder or any representative of
the Company or the Shareholder with respect to the future value of,
income from, or tax consequences relating to, such Preferred Shares
or such Warrants of securities issuable upon exercise of such
Warrants, but rather upon an independent examination and judgment as
to the prospects of the Company. Further, Rice acknowledges that no
federal or state administrative entity responsible for securities
registration or enforcement has made any recommendation or
endorsement of such Preferred Shares or such Warrants or any
securities issuable upon exercise of such Warrants or any findings as
to the fairness of an investment in the Preferred Shares of such
Warrants or any securities issuable upon exercise of such Warrants.
(g) Rice has no current contract, undertaking, agreement,
arrangement or understanding with any Person to sell, transfer, grant
any participation in, or otherwise distribute any of, the Second
Supplemental Preferred Shares, the Second Supplemental Warrant or any
securities issuable upon exercise of the Second Supplemental Warrant
to any Person.
Article IV
Covenants
4.01 Preferred Stock and Warrant Purchase Agreement Covenants
Incorporated Into This Agreement. For so long as the Second Supplemental
Warrant or the Warrant Shares remain outstanding, he Company will comply
with all covenants in Article IV of the Preferred Stock and Warrant
Purchase Agreement as if set forth herein at length.
4.02 Issuance of Warrant.
(a) This Agreement is being executed and delivered and the
Second Supplemental Warrant is being issued herein prior to the completion
of a "fairness opinion" requested by the Company from Hoak, Breedlove and
Wesneski 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 Second Supplemental Warrant of 8,475,402
shares of Common Stock in consideration of Rice's investment of 1,250
shares of Second Supplemental Preferred Stock in the Company 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 Second Supplemental
Warrant as consideration for such investment in the Company would be equal
to or greater than the number of shares issuable on exercise of the Second
Supplemental Warrant actually issued to Rice hereunder, then no change
shall be made to the number of shares issuable under the Second
Supplemental Warrant. However, if such fairness opinion indicates that
the number of shares of Common Stock issuable on exercise of the Second
Supplemental 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 Second Supplemental Warrant shall be reduced to
the number which the fairness opinion determines is fair (if so stated),
(ii) Rice shall exchange the Second Supplemental Warrant issued originally
hereunder for a new, appropriate Second Supplemental 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 $250,000 Preferred Stock investment made in the Company pursuant to
this Agreement (and the Second Supplemental Purchase 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 of the
Preferred Stock and Warrant Purchase Agreement.
(b) The Warrant described in Section 4.01 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
4.02(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 this Section with respect to the number of
shares issuable on exercise of the Priority Warrant.
(c) Notwithstanding the provisions of Section 4.02(a) above,
the maximum number of shares issuable upon exercise of the Priority
Warrant and the Second Supplemental Warrant (as defined in the Other
Purchase Agreements) 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 and the Second Supplemental Warrant), as of the date the
conditions in paragraph (b) above are fully satisfied.
4.03 Rights of Priority. The Other Purchase Agreements and the Other
Shareholder Agreements, as amended as of the date hereof, are subject to
the priority provisions set forth in Article XI of the Priority
Shareholder Agreement (as defined in the Priority Note Purchase
Agreement), and parties covenant and agreed to carry out the terms and
intent thereof in good faith.
Article V
Conditions
The obligations of Purchaser and the Company to effect the
transactions contemplated by this Agreement are subject to the following
conditions precedent:
5.01 Restated Second Supplemental Shareholder Agreement. The
Company, F-Jotan, the Southland Purchasers and the Shareholder will have
entered into the Restated Second Supplemental Shareholder Agreement with
Purchaser.
5.02 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.
5.03 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 Purchaser and its counsel, and Purchaser and its
counsel will have received certificates of compliance and copies (executed
or certified as may be appropriate) of all documents, instruments, and
agreements that Purchaser or 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 Restated Second Supplemental Shareholder
Agreement will have been received, be in full force and effect, and not be
subject to any onerous condition.
5.05 Issuance of Second Supplemental Warrant. The Warrant described
in Section 4.02(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 Second Supplemental Warrant described in
Section 4.02(b) above).
5.06 Reservation of Common Stock. The Purchaser will have received
evidence satisfactory to the Purchaser that the Company has reserved a
sufficient number of shares of Common Stock for the Purchaser to exercise
the Warrants.
5.07 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, Purchaser and the Shareholder.
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, if any, and their
respective Affiliates and its 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 Other
Shareholder Agreements, 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 the Purchaser 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 Warrants, the Restated Second
Supplemental Shareholder Agreement, the Other Purchase Agreements, Other
Shareholder Agreements and all 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, the Shareholder, and each Holder.
6.04 Headings. The headings in this Agreement are for convenience
and reference only and are not part of the substance of this Agreement.
References in this Agreement to Sections and Articles are references to
the Sections and Articles of this Agreement unless otherwise specified.
6.05 Severability. The parties to this Agreement expressly agree
that it is not the intention of any of them to violate any public policy,
statutory or common law rules, regulations, or decisions of any
governmental or regulatory body. If any provision of this Agreement is
judicially or administratively interpreted or construed as being in
violation of any such policy, rule, regulation, or decision, the
provision, section, sentence, word, clause, or combination thereof causing
such violation will be inoperative (and in lieu thereof there will be
inserted such provision, sentence, word, clause, or combination thereof as
may be valid and consistent with the intent of the parties under this
Agreement) and the remainder of this Agreement, as amended, will remain
binding upon the parties, unless the inoperative provision would cause
enforcement of the remainder of this Agreement to be inequitable under the
circumstances.
6.06 Notices. Whenever it is provided herein that any notice,
demand, request, consent, approval, declaration, or other communication be
given to or served upon any of the parties by another, such notice,
demand, request, consent, approval, declaration, or other communication
will be in writing and addressed to the party to be notified as set forth
below. Notices shall be deemed to have been validly served, given or
delivered (and "the date of such notice" or words of similar effect shall
mean the date) five (5) days after deposit in the United States mails,
certified mail, return receipt requested, with proper postage prepaid, or
upon actual receipt thereof with written acknowledgment of receipt
(whether by noncertified mail, telecopy, telegram, facsimile, express
delivery, hand delivery or otherwise), whichever is earlier.
If to Rice, at: Address of Rice beneath the name of Rice on the
signature pages of this Agreement
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 the Southland
Purchasers, at: Address of the Southland Purchasers beneath the
name of the Southland Purchasers on the signature
pages of this Agreement
with courtesy copies to: Wyrick, Robins, Yates & Ponton, L.L.P.
4101 Lake Boone Trail, Suite 300
Raleigh, North Carolina 27607-7506
Attn: James M. Yates, Jr.
Facsimile: (919) 781-4865
If to F-Jotan, at: Address of F-Jotan beneath the name of F-Jotan on
the signature pages of this Agreement
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.
Facsimile: (919) 781-4865
If to the Company, at: Jotan, Inc.
118 West Adams Street
Jacksonville, Florida 32202
Attn: President
Fax: 904-353-0075
If to the Shareholder, Address of such Shareholder beneath his/her
name on the signature pages of this
Agreement
or to such other address as each party may designate for itself by like
notice. Notice to any Holder other than the parties listed above will be
delivered as set forth above to the address shown on the stock transfer
books of the Company or the Warrant Register unless such Holder has
advised the Company in writing of a different address to which notices are
to be sent under this Agreement.
Failure or delay in delivering courtesy copies of any notice, demand,
request, consent, approval, declaration, or other communication to the
persons designated above to receive copies of the actual notice will in no
way adversely affect the effectiveness of such notice, demand, request,
consent, approval, declaration, or other communication.
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 agrees in writing to be bound by the terms and conditions of
this Agreement and the Shareholders Agreement, and the agreements and
instruments related hereto and thereto, in a form and substance reasonably
satisfactory to the Company.
6.08 Remedies. The failure of any party to enforce any right or
remedy under this Agreement, or promptly to enforce any such right or
remedy, will not constitute a waiver thereof, nor give rise to any
estoppel against such party, nor excuse any other party from its
obligations under this Agreement. Any waiver of any such right or remedy
by any party must be in writing and signed by the party against which such
waiver is sought to be enforced.
6.09 Survival. All warranties, representations, and covenants made
by any party in this Agreement or in any certificate or other instrument
delivered by such party or on its behalf under this Agreement will be
considered to have been relied upon by the party to which it is delivered
and will survive the Closing Date, regardless of any investigation made by
such party or on its behalf. All statements in any such certificate or
other instrument will constitute warranties and representations under this
Agreement.
6.10 Fees. Any and all fees, costs, and expenses, of whatever kind
and nature, including attorneys' fees and expenses, incurred by 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 Purchaser
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 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,
if any, will by virtue of this Agreement be under any fiduciary or other
duty to give or withhold any consent or approval under this Agreement or
to take any other action or omit to take any action under this Agreement,
and that each other Holder may act or refrain from acting under this
Agreement as such other Holder may, in its discretion, elect.
6.15 Waiver of Jury Trial. AFTER REVIEWING THIS SECTION 6.15 WITH
ITS COUNSEL, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE
COMPANY, F-JOTAN, PURCHASER, THE SOUTHLAND PURCHASERS AND SHAREHOLDER
HEREBY KNOWINGLY, INTELLIGENTLY AND INTENTIONALLY, IRREVOCABLY AND
EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENTS ENTERED INTO IN
CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR
THE ACTIONS OF THE COMPANY, F-JOTAN, PURCHASER, THE SOUTHLAND PURCHASERS
AND SHAREHOLDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT HEREOF
OR THEREOF. THIS PROVISION IS A MATERIAL INDUCEMENT FOR PURCHASER TO
PURCHASE THE WARRANTS AND PREFERRED STOCK FROM THE COMPANY.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
COMPANY:
JOTAN, INC.
BY:_____________________________________
Edward L. Lipscomb
Vice President and 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:___________________________________
Jeffrey P. Sangalis
Managing Director
5847 San Felipe, Suite 4350
Houston, Texas 77057
Attn: Jeffrey P. Sangalis
Fax: (713) 783-9750
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred Stock
40,000 Shares of Series B Preferred
Stock
13,125 Shares of First Supplemental
Series B Preferred Stock
1,250 Shares of Second Supplemental
Series B Preferred Stock
15,717,402 Shares of Common Stock
8,475,638 Second Supplemental Warrant
A-3 Shares
F-JOTAN, L.L.C.
By: Franklin Street/Fairview 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
OWNED ON CLOSING DATE:
1,435,705 Shares of Series A
Convertible Preferred Stock
None Shares of Common Stock
None Other Equity Interests
THE SOUTHLAND PURCHASERS:
F-SOUTHLAND, L.L.C.
By: Franklin Street/Fairview 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
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred Stock
5,000 Shares of Series B
Preferred Stock
None Shares of Common Stock
359,315 Warrant B-1 Shares
1,197,716 Warrant B-2 Shares
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
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred Stock
5,000 Shares of Series B
Preferred Stock
None Shares of Common Stock
359,315 Warrant C-1 Shares
1,197,716 Warrant C-2 Shares
SHAREHOLDER:
________________________________________
Shea E. Ralph
OWNED ON CLOSING DATE:
950,000 Shares of Common Stock Owned
on Closing Date
33,000 Other Equity Interests
ANNEX A
[Second Supplemental Shareholder Agreement]