SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission Only (as
permitted by Rule 14a-
6(e)(2))
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
JOTAN, INC.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
JOTAN, INC.
118 W. Adams Street
P.O. Box 836
Jacksonville, Florida 32201
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on July 21, 1998
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of Jotan, Inc., a Florida corporation (the "Company"), will be
held on July 21, 1998 at 1:00 p.m. Eastern Time, at the Omni Jacksonville
Hotel, 245 West Water Street, Jacksonville, Florida for the following
purposes:
1. For the holders of Common Stock and Series A Convertible
Preferred Stock, voting together as a single class, to elect three
directors and the holders of Series B Redeemable Preferred Stock to elect
three directors, each to serve a one-year term scheduled to end in
conjunction with the next Annual Meeting of Shareholders or until his
successor is elected and qualified;
2. To consider and vote upon a proposed amendment to the Company's
Articles of Incorporation that would increase the number of authorized
shares of Common Stock issuable thereunder from 40,000,000 to 150,000,000
shares;
3. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on June 10, 1998
are entitled to notice of and to vote at the Meeting.
All stockholders are cordially invited to attend the Meeting in
person. However, to assure your representation at the Meeting, you are
urged to mark, sign, date, and return the enclosed proxy for that purpose.
Any stockholder attending the Meeting may vote in person even if he or she
has returned a proxy.
By order of the Board of Directors,
/s/ Edward L. Lipscomb
Edward L. Lipscomb, Secretary
JOTAN, INC.
118 West Adams Street
P.O. Box 836
Jacksonville, Florida 32201
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 21, 1998
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Jotan, Inc., (the "Company" or "Jotan") of
proxies for use at the Annual Meeting of Shareholders of the Company (the
"Meeting") to be held Tuesday, July 21, 1998 at the Omni Hotel,
Jacksonville, Florida, commencing at 1:00 p.m., Eastern time, and any
adjournments thereof. The principal executive offices of the Company are
located at 118 West Adams Street, Jacksonville, Florida 32202. This Proxy
Statement and the accompany Proxy Card are first being mailed to the
stockholders on or about June 19, 1998.
The Company's Annual Report to Shareholders for the year ended
December 31, 1997, is being mailed to the stockholders with the mailing of
this Proxy Statement.
SOLICITATION
The costs of preparing, assembling and mailing the proxy materials
will be borne by the Company. Certain officers and regular employees of
the Company or its subsidiaries, without additional compensation, may use
their personal efforts, by telephone or otherwise, to obtain proxies in
addition to this solicitation by mail. The Company expects to reimburse
brokers, banks, custodians and other nominees for their reasonable out-of-
pocket expenses in handling proxy materials for beneficial owners of the
Common Stock.
VOTING AND REVOCABILITY OF PROXY APPOINTMENTS
Each share of common stock par value $0.01 per share (the "Common
Stock") is entitled to one vote at the Meeting, and each share of Series A
Convertible Preferred Stock, $0.01 par value (the "Series A Convertible
Preferred Stock") is entitled to two votes per share. The Board of
Directors has fixed June 10, 1998 as the record date for determining
stockholders who are entitled to vote at the meeting. At the close of
business on that date, there were outstanding and entitled to vote
21,414,013 shares of Common Stock held by approximately 125 stockholders
of record and 1,435,705 shares of Series A Convertible Preferred Stock
held by one stockholder of record. The holders of a majority of the votes
represented by the Common Stock and the Series A Convertible Preferred
Stock, voting together as a single class (the "Voting Stock"), will
constitute a quorum for the Meeting. If a quorum is present, (i) the
affirmative vote of the holders of a plurality of the votes represented by
the shares of Voting Stock present or represented at the Meeting is
required for the election of three Directors; (ii) both the affirmative
vote of the holders of a majority of the votes represented by the shares
of Voting Stock voting thereon and the affirmative vote of the holders of
a majority of the votes represented by the shares of Common Stock voting
thereon are required to approve the proposed amendment to the Company's
Articles of Incorporation; and (iii) the affirmative vote of the holders
of a majority of the votes represented by the Voting Stock present or
represented at the Meeting is required for approval of any other matter to
be voted upon. Abstentions and broker non-votes each are included in
determining the number of shares present at the Meeting, but are not
counted in tabulations of the votes cast on proposals.
All proxies will be voted in accordance with the instructions
contained therein, and, if no choice is specified, the proxies will be
voted in favor of the nominees and the proposals set forth in the
accompanying Notice of Meeting and this Proxy Statement. Any proxy may be
revoked by a stockholder at any time before it is exercised by giving
written notice to that effect to the Secretary of the Company, by
execution and delivery of a subsequent proxy or by attending the Meeting,
giving notice and voting in person. Please note that a revocation shall
not be effective as to any matter upon which, prior to such revocation, a
vote shall have been cast pursuant to the authority conferred by the
Proxy.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Two nominees for members of the Board of Directors, Jeffrey P.
Sangalis and James P. Wilson are principals in, and one director nominee,
Philip A. Davidson, is a managing director of, Rice, Sangalis, Toole &
Wilson, the manager of Rice Partners, II, L.P. ("Rice"). As of April 14,
1998, in connection with the purchase by Rice of $250,000 of the Company's
Series B Redeemable Preferred Stock in January, 1998 and the purchase of
$1,250,000 of senior subordinated notes as of April 14, 1998, the Company
issued to Rice warrants (the "April Warrants") to purchase 8,475,638
shares and 42,377,173 shares, respectively, of the Company's common stock
at a nominal exercise price. The number of shares of common stock
issuable under the April Warrants may be reduced if a fairness opinion
that has been requested by the Company indicates that the number of shares
issuable under the April Warrants is not fair to the Company's
shareholders. The exercise of the April Warrants is conditioned upon
approval of the proposal to amend the Company's Articles of Incorporation
to increase the Company's authorized shares from 40,000,000 to 150,000,000
by the holders of a majority of the Company's common stock and by the
holders of a majority of Voting Stock. As of April 14, 1998, Rice, by
exercising a warrant issued by the Company to Rice as of February 27,
1998, acquired 15,717,402 shares of the Company's common stock. If Rice
votes all of its shares in favor of the proposal to so amend the Company's
Articles of Incorporation, this vote alone will constitute the vote
required to approve this proposal.
CHANGE OF CONTROL
As of February 28, 1997, the Company issued senior subordinated debt,
senior preferred stock and warrants to purchase shares of Common Stock in
a transaction (the "Change of Control Transaction") which resulted in a
change of control of the Company as more fully described in an Information
Statement Pursuant to Section 14(f) of the Securities and Exchange Act of
1934 and Rule 14f-1 thereunder which was mailed to holders of the
Company's common stock and Series A Convertible Preferred Stock on or
about February 18, 1997. The Company issued to Rice Partners II, L.P., a
Delaware limited partnership ("Rice") $7 million of senior subordinated
debt and $8 million of its newly created Series B Redeemable Preferred
Stock. The Company also issued to F-Southland, L.L.C., a North Carolina
limited liability company, and FF-Southland, L.P., a North Carolina
limited partnership (collectively, the "Southland Purchasers"), entities
affiliated with Franklin Street/Fairview Capital, L.L.C. ("Fairview"), an
aggregate of $2 million of senior subordinated debt and $2 million of its
Series B Redeemable Preferred Stock. The Company also issued to Rice
warrants which, if exercised for an aggregate purchase price of less than
$200, would result in Rice owning approximately 51.4% of the Company's
issued and outstanding Common Stock, on a fully diluted basis after
conversion of the Series A Convertible Preferred Stock. The Company also
issued to the Southland Purchasers warrants which, if exercised for an
aggregate purchase price of less than $200, and together with the
conversion of the Series A Convertible Preferred Stock, would result in
affiliates of Fairview owning approximately 24.5% of the Company's issued
and outstanding Common Stock, on a fully diluted basis. The funds
received by the Company in the Change of Control Transaction, together
with funds obtained through credit facilities established with Banque
Paribas, were used by the Company to acquire all of the outstanding
capital stock of Southland Holding Company ("Southland") for an aggregate
purchase price of approximately $27.5 million and non-competition fees to
the shareholders of Southland in the aggregate amount of $6,570,249 and to
provide a funding base for additional possible acquisitions.
In connection with the Change of Control Transaction, Rice was given
the right to elect a majority of the members of the Company's Board of
Directors for so long as Rice owns at least 10% of the equity interest in
the Company that it acquired on February 28, 1997. In addition, the
Southland Purchasers were given the right to elect one member of the
Company's Board of Directors. The Company's Restated Articles of
Incorporation were amended to provide that the Series B Redeemable
Preferred Stock (voting separately as a class) has the right to elect a
majority of the Board of Directors.
Rice and the Southland Purchasers were paid a pro rata fee of
$225,000 for providing the subordinated debt financing and a pro rata fee
of $250,000 for providing the senior redeemable preferred stock financing.
Two members of the Board of Directors of the Company which approved
the Change of Control Transaction, James D. Lumsden and Jeremiah M.
Callahan, are members of Fairview, the controlling entity of each of the
Southland Purchasers. Fairview also is the controlling entity of F-Jotan,
L.L.C., the holder of the Company's Series A Convertible Preferred Stock,
the consent of which was required and obtained in order to consummate the
Change of Control Transaction.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 15,
1998, concerning beneficial ownership of voting securities of the Company
by (i) each person known by the Company to be the owner of more than 5% of
each outstanding class of the Company's voting securities, (ii) all
directors and nominees, (iii) the individuals named in the Summary
Compensation Table elsewhere herein, and (iv) all executive officers and
directors as a group.
Amount and Percent
Nature of Percent of
Name and Address Title of Beneficial of Voting
of Beneficial Owner Class Ownership(1) Class(2) Stock(3)
------------------- -------- ------------ -------- --------
Rice Partners II, L.P.(4) Common 66,570,213 92.1% 88.6%
5847 San Felipe, Suite 4350 B Preferred 54,375 84.5
Houston, TX 77057
Jeffrey P. Sangalis (5) Common 66,570,213 92.1 88.6
5847 San Felipe, Suite 4350 B Preferred 54,375 84.5
Houston, TX 77057
Philip A. Davidson (5) Common 66,570,213 92.1 88.6
5847 San Felipe, Suite 4350 B Preferred 54,375 84.5
Houston, TX 77057
James P. Wilson (5) Common 66,570,213 92.1 88.6
5847 San Felipe, Suite 4350 B Preferred 54,375 84.5
Houston, TX 77057
F-Jotan, L.L.C. Common 5,985,472 21.9 21.9
F-Southland, L.L.C. and A Preferred 1,435,705 100.0
FF-Southland, L.P. (6) B Preferred 10,000 15.5
702 Oberlin Road, Suite 150
Raleigh, NC 27605
Jeremiah Callahan(6)(7) Common 5,988,072 21.9 21.9
702 Oberlin Road, Suite 150 A Preferred 1,435,705 100.0
Raleigh, NC 27605 B Preferred 10,000 15.6
James D. Lumsden(6)(7) Common 5,988,072 21.9 21.9
702 Oberlin Road, Suite 150 A Preferred 1,435,705 100.0
Raleigh, NC 27605 B Preferred 10,000 15.6
Shea E. Ralph (8) Common 983,000 4.6 4.1
118 West Adams Street
Jacksonville, FL 32201
William Ames - 0 0 0
Raleigh C. Minor - 0 0 0
All directors and executive Common 73,538,685 94.0 94.0
officers as a group A Preferred 1,435,705 100.00
B Preferred 64,375 100.00
(1) Pursuant to rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), beneficial ownership of a security
consists of sole or shared voting power (including the power to vote
or direct the vote) and/or the sole or shared investment power
(including the power to dispose or direct the disposition) with
respect to a security. The number of shares of Common Stock includes
the number of shares of Common Stock that are subject to the exercise
of options or warrants within 60 days of the date of this Proxy
Statement and the number of shares of Common Stock issuable upon
conversion of such beneficial owner's shares of Series A Convertible
Preferred Stock (each of which is immediately convertible into two
shares of Common Stock), excluding accrued dividends thereon.
(2) Percent of Class of Common Stock with respect to each beneficial
owner of Common Stock was calculated based on the ratio of the number
of shares of Common Stock beneficially owned by such beneficial owner
to the sum of (a) the total number of outstanding shares of Common
Stock as of April 15, 1998, (b) the number of shares of Common Stock
issuable upon conversion of shares of Series A Convertible Preferred
Stock (each of which is immediately convertible into two shares of
Common Stock) held by the applicable beneficial owner and (c) the
number of shares of Common Stock issuable upon exercise of options or
warrants held by the applicable beneficial owner exercisable within
60 days of the date of this Proxy Statement. Percent of Class of
Series A Convertible Preferred Stock was calculated based on the
ratio of the number of shares of Series A Convertible Preferred Stock
beneficially owned by such beneficial owner to the total number of
outstanding shares of Series A Convertible Preferred Stock. Percent
of Class of Series B Redeemable Preferred Stock was calculated based
on the ratio of the number of shares of Series B Redeemable Preferred
Stock beneficially owned by such beneficial owner to the total number
of outstanding shares of Series B Redeemable Preferred Stock.
(3) Percent of Voting Stock with respect to each beneficial owner was
calculated based on the ratio of the number of shares of Common Stock
beneficially owned by such beneficial owner to the sum of (a) the
total number of outstanding shares of Common Stock as of April 15,
1998, (b) the number of shares of Common Stock issuable upon
conversion of shares of Series A Convertible Preferred Stock (each of
which is immediately convertible into two shares of Common Stock) and
(c) the number of shares of Common Stock issuable upon exercise of
options or warrants held by the applicable beneficial owner
exercisable within 60 days of the date of this Proxy Statement.
(4) Includes 50,852,811 shares of Common Stock issuable under warrants
owned by Rice Partners, II, L.P. The number of shares of Common
Stock issuable under these warrants may be reduced if a fairness
opinion which has been requested by the Company indicates that the
number of shares issuable under the warrants is not fair to the
Company's shareholders. The exercise of such warrants is also
subject to approval by the holders of Voting Stock and the holders of
Common Stock of an amendment to the Articles of Incorporation of the
Registrant increasing its authorized common stock and the filing of
such an amendment with the Florida Secretary of State. The
affirmative vote of Rice alone will constitute the vote required for
such shareholder approval.
(5) Jeffrey P. Sangalis and James P. Wilson, directors of the Company,
are principals of Rice, Sangalis, Toole & Wilson, the manager of Rice
Partners II, L.P. Philip A. Davidson is a Managing Director of Rice,
Sangalis, Toole & Wilson, the manager of Rice Partners II, L.P. The
shares shown as owned by Messrs. Sangalis, Davidson and Wilson are
the same shares and consist in each case of the shares owned by Rice
Partners II, L.P., which are deemed to be beneficially owned by
Messrs. Sangalis, Davidson, and Wilson due to their ability to
control Rice Partners II, L.P. with regard to the voting and
disposition of such shares.
(6) Includes (i) 5,000 shares of Series B Redeemable Preferred Stock
beneficially owned by F-Southland, L.L.C., (ii) 5,000 shares of
Series B Redeemable Preferred Stock beneficially owned by FF-
Southland, L.P., (iii) 1,557,031 shares of Common Stock issuable
under warrants owned by F-Southland, L.L.C., (iv) 1,557,031 shares of
Common Stock issuable under warrants owned by FF-Southland, L.P., and
(v) 2,871,410 shares of Common Stock issuable to F-Jotan, L.L.C. on
conversion of 1,435,705 shares of Series A Convertible Preferred
Stock owned by F-Jotan, L.L.C. Shares owned by F-Southland, L.L.C.,
FF-Southland, L.P. and F-Jotan, L.L.C. (the "Fairview Shareholders")
are deemed to be beneficially owned by all Fairview Shareholders by
virtue of having a common manager.
(7) James D. Lumsden, a director of the Company, Jeremiah Callahan, a
former director and former chief executive officer of the company,
are each a member of Franklin Street/Fairview Capital, L.L.C., the
manager of F-Jotan, F-Southland, L.L.C. and FF-Southland, L.P. The
shares shown as owned by Mr. Lumsden are the same shares and consist
in each case of the shares beneficially owned by F-Jotan,
F-Southland, L.L.C. and FF-Southland, L.P. over which Mr. Lumsden and
Mr. Callahan have shared voting investment power (except for 2,600
and 2,800 shares of common stock owned directly by Mr. Lumsden and
Mr. Callahan, respectively, which were received for services provided
as directors of the Company prior to February 28, 1997.
(8) Includes 33,000 shares of Common Stock issuable upon exercise of
employee stock options.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of the Company has nominated Shea E. Ralph,
Raleigh C. Minor and James D. Lumsden as directors to stand for election
by the holders of the Voting Stock, and the holders of the Series B
Redeemable Preferred Stock, who have the right to elect a majority of the
Board of Directors, have nominated Jeffrey P. Sangalis, Philip A. Davidson
and James P. Wilson to stand for reelection by such holders
(collectively, the "Series B Nominees"). Pursuant to a separate
Shareholder Agreement among the Company, F-Jotan, Rice, the Southland
Purchasers and Shea E. Ralph, Mr. Lumsden has been nominated as the
designee of the Southland Purchasers and Messrs. Sangalis, Davidson and
Wilson have been nominated as the designees of Rice, and the parties to
the Shareholder Agreement have agreed to vote in favor of such designees.
Under such Shareholder Agreement and the Company's Articles of
Incorporation, Rice has the right, but not the obligation, to designate a
majority of the members of the Board of Directors and its failure to do so
at this time is not a waiver of its right to designate an additional
director at a later date in accordance with the provisions of the
Shareholder Agreement. All of the individuals nominated except Mr. Minor
are currently directors of the Company. Only the holders of Series B
Redeemable Preferred Stock have the right to vote for the election of
directors to fill the positions held by the Series B Nominees. The
holders of the Voting Stock have the right to vote for the election of the
remaining directors. Proxies solicited by the Board of Directors relate
only to the election of Mr. Ralph, Mr. Minor and Mr. Lumsden as its
nominees for such directorships. The Company expects each of the nominees
to be available to serve as a Director. If, however, Mr. Ralph, Mr. Minor
or Mr. Lumsden is unable or declines to serve for any reason, proxies will
be voted (in the absence of any contrary specification by a stockholder)
for the election of a substitute nominee selected by the proxy holders.
All directors hold office until the next annual meeting of
Shareholders and until their successors have been duly elected and
qualified. For each nominee's beneficial ownership of Common Stock, see
"Security Ownership of Certain Beneficial Owners and Management." The
business experience during the past five years of each of the nominees is
as follows:
The names and ages of the directors, director nominees and executive
officers of the Company and the business experience during the past five
years of each of the directors and executive officers of the Company are
as follows:
SHEA E. RALPH, age 37, has been a director of the Company since March
1994. From March 1994 until February 1997, Mr. Ralph was President and
Chief Executive Officer of the Company. He served as Vice President of
Atlantic Bag & Paper Company (a former subsidiary of the Company) from
1988 to 1993.
JEFFREY P. SANGALIS, age 39, has been a director of the Company since
February 1997. He is a founding principal of Rice, Sangalis, Toole &
Wilson, a private investment firm based in Houston, Texas, which manages
Rice Partners II, L.P., a private investment fund organized to invest in
subordinated debt and equity securities of middle market companies, and
has served in that capacity since 1989. Mr. Sangalis serves as a director
of Bayou Steel Corporation, a producer of light structural steel products.
PHILIP A. DAVIDSON, age 33, has been a director of the Company since
February 1997. He has been a Managing Director since 1993 of Rice,
Sangalis, Toole & Wilson, a private investment firm based in Houston,
Texas, which manages Rice Partners II, L.P., a private investment fund
organized to invest in subordinated debt and equity securities of middle
market companies.
JAMES P. WILSON, age 39, has been a director of the Company since
February 1997. He is a founding Principal of Rice, Sangalis, Toole &
Wilson, a private investment firm based in Houston, Texas, which manages
Rice Partners II, L.P., a private investment fund organized to invest in
subordinated debt and equity securities of middle market companies, and
has served in that capacity since 1989.
JAMES D. LUMSDEN, age 44, has been a director of the Company since
March, 1998 and served as a director of the Company from May, 1996 until
February, 1997. Mr. Lumsden is President and Managing Principal of
Franklin Street/Fairview Capital, L.L.C., a private investment fund.
Prior to that time, Mr. Lumsden was President and co-founder of Fairview
Advisors, Inc., a regional investor in assets held by the Resolution Trust
Corporation.
RALEIGH C. MINOR, age 61, is a director nominee and has been
President and Chief Executive Officer of the Company since April, 1998.
Since 1986, Mr. Minor was a principal and Chairman of the Board of Allomet
Partners, Ltd., a general management consulting firm engaged by the
Company and which specializes in turnarounds and crisis management. As a
principal of Allomet, Mr. Minor served as Interim Chief Executive Officer
of the Company from January, 1998 until his election as President and
Chief Executive Officer.
EDWARD L. LIPSCOMB, age 48, joined the Company in October, 1997.
Prior to that time, he was Vice President and Chief Financial Officer of
Bancroft Bag, Inc. He has held financial and operating management
positions with Domtar, Inc. (Vice President Administration) and Stone
Container.
None of the officers, directors, or control persons of the Company have
been an executive officer or partner of any business which filed or was
subject to any bankruptcy petition, been convicted in or been the subject
of any pending criminal proceedings, have been the subject of any order,
judgement, or decree involving the violation of any state or federal
securities or commodities laws or limiting his involvement in any type of
business, securities, or banking activities.
The Board of Directors unanimously recommends a vote "FOR" Mr. Ralph,
Mr. Minor and Mr. Lumsden as its nominees for reelection by the holders of
the Voting Stock.
PROPOSAL NO. 2
PROPOSED AMENDMENT TO ARTICLES OF INCORPORATION
The Board of Directors also has proposed that Section 4.1 of the
Company's Articles of Incorporation be amended to increase the number of
authorized shares of Common Stock from 40 million to 150 million shares.
As of the date of the Proxy Statement, the Company had outstanding
21,414,013 shares of Common Stock and additionally had reserved for
issuance (i) 3,114,062 shares issuable on exercise of warrants held by the
Southland Purchasers; (ii) 2,871,410 shares issuable upon the conversion
of the Series A Convertible Preferred Stock held by F-Jotan; and
(iii) 2,000,000 shares reserved for issuance under the Company's 1996
Long-Term Incentive Plan. In addition, the Company has issued to Rice
(i) a warrant (the "Second Supplemental Warrant A-3") for the purchase of
8,475,638 shares of common stock and (ii) a warrant (the "Priority
Warrant" and, collectively with the Second Supplemental Warrant A-3, the
"Rice Warrants") for the purchase of 42,377,173 shares of Common Stock.
The number of shares issuable under the Second Supplemental Warrant A-3
and the Priority Warrant may be reduced if a fairness opinion which has
been requested by the Company from a third party indicates that the number
of shares issuable thereunder is not fair to the Company's shareholders.
The exercise of the Second Supplemental Warrant A-3 and the Priority
Warrant are conditioned on approval of the proposed amendment to the
Company's Articles of Incorporation. Currently, the Company does not have
sufficient authorized common stock to issue the number of shares issuable
under the Rice Warrants. The Company agreed with Rice to use its diligent
best efforts to obtain the required shareholder approval of the proposed
amendment. The Board of Directors believes that it is in the best
interest of the Company to have sufficient authorized but unissued Common
Stock to enable the Company to meet its obligations to Rice and to have
additional authorized shares for other general corporate purposes as
described below.
The text of the proposed amendment is included as part of Exhibit A.
The additional authorized shares may be used for any proper corporate
purpose approved by the Board of Directors. The availability of
additional authorized shares would enable the Board of Directors to act
with flexibility and dispatch when favorable opportunities arise to
enhance the Company's capital structure. Additional shares may be issued
in connection with acquisitions of properties or businesses, raising
additional capital for the Company, employee benefit plans, and stock
dividends. The issuance of additional shares of Common Stock will likely
result in dilution of the interest of existing shareholders. The Company
has no present plans, agreements, commitments, undertakings or proposals
with respect to the issuance and sale of additional authorized shares of
Common Stock except with respect to the shares reserved for future
issuance under the Rice Warrants as described above. Shareholders do not
have preemptive rights to purchase any additional shares issued except for
preemptive rights of Rice, F-Jotan and the Southland Purchasers arising
under certain Shareholder Agreements entered into by the Company which
rights have been waived.
Both the affirmative vote of a majority of the total votes cast
represented by the holders of Voting Stock voting on Proposal 2 and the
affirmative vote of a majority of the total votes cast represented by
holders of Common Stock voting on Proposal 2 are required to approve the
proposed Amendment to Section 4.1 increasing the number of authorized
shares of Common Stock from 40 million to 150 million. For this purpose,
broker non-votes and abstentions will not be counted.
The Company's Board of Directors unanimously recommends a vote "FOR"
the proposal to amend Section 4.1 of the Articles of Incorporation to
increase the number of authorized shares of Common Stock to 150 million.
All proxies solicited by the Board of Directors will be so voted unless
shareholders specify in their proxies a contrary choice.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held 16 meetings during the
year ended December 31, 1997. Each director attended at least 75% of the
total number of Board and Committee meetings that they were eligible to
attend. The Company's Board of Directors has two standing committees --
the Audit Committee and the Compensation Committee. The Board of
Directors does not have a standing nominating committee, such function
being reserved to the full Board of Directors.
The Audit Committee presently consists of Mr. Ralph and Mr. Davidson.
The Audit Committee has been assigned the principal functions of: (i)
recommending the independent auditors; (ii) reviewing and approving the
annual report of the independent auditors; (iii) approving the annual
financial statements; and (iv) reviewing and approving summary reports of
the auditors' findings and recommendations. During the year ended
December 31, 1997, the Audit Committee conducted its business at meetings
of the full Board of Directors and held no separate
meetings.
The Compensation Committee presently consists of Mr. Davidson and Mr.
Sangalis. The Compensation Committee has been assigned the functions of
approving and monitoring the remuneration arrangements for senior
management. In addition, the Compensation Committee administers the
Company's stock option plans. During the year ended December 31, 1997,
the Compensation Committee conducted its business at meetings of the full
Board of Directors and held no separate meetings.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
regulations of the Securities Exchange Commission thereunder require the
Company's executive officers, directors and persons who own more than 10%
of the Company's common stock, as well as certain affiliates of such
persons, to file reports of beneficial ownership of the Company's common
stock and changes in such ownership with the Securities and Exchange
Commission.
The Company is not aware of whether Richard M. Gray, Gert Schumann,
Suzi Hernandez, William A. Hightower, James D. Lumsden and Jeremiah M.
Callahan, all of whom resigned as directors of the Company effective
February 7, 1997 (except Mr. Callahan who resigned effective March 4,
1998) engaged in any post-termination transactions reportable under SEC
rules. In particular, the Company is not aware of whether any of such
persons reported on a Form 5 between 2600 and 3000 shares of the Company's
common stock acquired by each of these persons in April, 1997 as
consideration for services provided to the Company as directors prior to
February 7, 1997 (see "Director Compensation" below). The acquisition of
such shares would have been exempt from immediate reporting under an SEC
rule permitting the deferred reporting of small acquisitions.
Edward L. Lipscomb filed a late Form 3 Initial Statement of
Beneficial Ownership showing that he holds employee stock options to
purchase 30,000 shares of the Company's common stock granted to him
pursuant to his Employment Agreement with the Company.
The Company is taking a number of steps to ensure that its directors,
executive officers and greater than 10% shareholders are aware of and
comply promptly with the reporting requirements of Section 16(a).
EXECUTIVE OFFICERS
The following table sets forth the names of the executive officers of
the Company their ages, their positions with the Company and their
principal occupations and employers for at least the last five years, and
any other directorships held by them in certain other companies. The term
of the current executive officers expires on the date of the first meeting
of the Board of Directors held following the 1998 Annual Meeting of
shareholders. For information concerning executive officers' ownership of
Common Stock, see "Security Ownership of Certain Beneficial Owners" above.
Executive officers are appointed annually by the Board of Directors,
and each executive officer serves at the discretion of the Board of
Directors.
EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation
paid by the Company for services rendered for the fiscal years ended
December 31, 1997, 1996 and 1995 to all individuals serving as the
Company's Chief Executive Officer or President (the "Named Executive
Officer"). No other executive officer of the Company received a salary in
excess of $100,000 annually for the period depicted.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Name and All other
Principal Position Year Salary Bonus Compensation
------------------ ---- ------ ----- ------------
Shea E. Ralph, 1997 $118,748 $36,500(1) $9,178(2)
Chairman, President 1996 70,519 0 3,600(3)
and Chief Executive 1995 60,599 0 720(3)
Officer (prior to
2/28/97)
Jeffrey P. Sangalis, 1997 $ 0 $ 0 $ 0
Chief Executive
Officer (2/28/97 -
6/11/97)
Jeremiah Callahan, 1997 $ 0 $ 0 $ 0
Chief Executive
Officer (6/11/97 -
10/1/97)
William H. Ames 1997 $114,478 $ 0 $3,324(4)
President
(6/11/97 - 1/5/98)
(1) Bonus paid in connection with acquisition of Southland Holding
Company.
(2) Includes $1,978 paid as a matching contribution under the Company's
401(k) Plan and $7,200 paid as a car allowance.
(3) Car allowance.
(4) Matching contribution under the Company's 401(k) Plan.
Since February 28, 1997, the Company has not compensated its
directors for services provided as a director other than reimbursement for
expenses incurred in connection with board and committee meetings
attended. Prior to February 28, 1997 each director received 1,800 shares
of the Company's common stock annually plus 100 additional shares of
common stock for each meeting of the Board attended.
EMPLOYMENT AGREEMENTS
During 1996, the Company entered into a three-year employment
agreement with Shea E. Ralph pursuant to which he will receive an annual
salary of $85,000 subject to adjustment by the Board of Directors. The
employment agreement prohibits the employee from directly or indirectly
competing with the Company during and for a period of two years following
termination of his employment with the Company. In addition, the
employment agreement requires the Company to pay Mr. Ralph his salary for
the remaining portion of the three-year term in the event Mr. Ralph's
employment is terminated without cause (as such term is defined in the
employment agreement).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the Company's last two fiscal years, there have been no
transactions between the Company and any officer, directors, nominees for
election as director, or any shareholder owning greater than five percent
(5%) of any class of the Company's voting securities, nor any member of
any such person's immediate family, except as set forth below:
Mr. Sidney Ralph, father of Shea E. Ralph, owns all of the
outstanding shares of common stock of Total Supply Systems, Inc. ("Total
Supply"), a private corporation. Total Supply has made certain financial
advances to the Company pursuant to an arrangement similar to a line of
credit with interest charged at prime plus one percent.
On December 31, 1993, the Company purchased all of the outstanding
capital stock of Atlantic Bag and Paper Company ("Atlantic Bag") from
Total Supply in exchange for a $750,000 note payable to Total Supply. On
September 8, 1994, the Company refinanced its short-term line of credit
arrangement and the $750,000 note payable to Total Supply into a
convertible subordinated debenture. On February 22, 1995, the Company
entered into an agreement with Total Supply whereby the previous debt
agreements were canceled and a new agreement put in their place. The
revised agreement converted a portion of the face value ($919,833) into
shares of Common Stock at fair value (determined to be $3.00) and the
balance of $750,000 was payable over an 81-week period at $10,000 per week
including interest at 9.25%. The balance due under the agreement was paid
in full during September, 1996.
The Company also leases a warehouse from Sidney Ralph and another
warehouse from Total Supply. These two leases each have a term which
expires in 2004 and a monthly lease payment of $4,000 and $1,000
respectively.
On May 16, 1996, F-Jotan, L.L.C., a North Carolina limited liability
company ("F-Jotan"), invested $2,000,000 in the Company in exchange for
100% of the outstanding Series A Convertible Preferred Stock. James D.
Lumsden and Jeremiah M. Callahan are members of Franklin Street/Fairview
Capital L.L. C. ("Fairview"), the manager of F-Jotan, and were elected to
the Company's Board of Directors in 1996 in connection with the investment
by F-Jotan. James D. Lumsden currently serves as a member of the Board of
Directors of the Company.
As of February 28, 1997, the Company issued to Rice Partners II,
L.P., a Delaware limited partnership ("Rice") and to F-Southland, L.L.C.,
a North Carolina limited liability company, and FF-Southland, L.P., a
North Carolina limited partnership (collectively, the "Southland
Purchasers"), entities affiliated with F-Jotan, senior subordinated debt,
senior preferred stock and warrants to purchase shares of Common Stock in
a transaction (the "February 1997 Transaction") which resulted in a change
of control of the Company. In connection with the February 1997
Transaction, Rice was given the right to elect a majority of the members
of the Company's Board of Directors for so long as Rice owned at least 10%
of the equity interest in the Company that it acquired on February 28,
1997. In addition, the Southland Purchasers were given the right to elect
one member of the Company's Board of Directors. The Company's Restated
Articles of Incorporation were amended to provide that the Series B
Redeemable Preferred Stock (voting separately as a class) has the right to
elect a majority of the Board of Directors.
In the February 1997 Transaction, Rice and the Southland Purchasers
were paid a pro rata fee of $225,000 for providing the subordinated debt
financing and a pro rata fee of $225,000 for providing the senior
redeemable preferred stock financing.
Two members of the Board of Directors of the Company which approved
the February 1997 Transaction, James D. Lumsden and Jeremiah M. Callahan,
are members of Fairview, the controlling entity of each of the Southland
Purchasers. Fairview also is the controlling entity of F-Jotan, the
holder of the Company's Series A Convertible Preferred Stock, the consent
of which was required and obtained in order to consummate this
transaction.
As of September 10, 1997, the Company issued to Rice an additional
$2,625,000 of Series B Redeemable Preferred Stock and additional warrants
to acquire 3,620,473 shares of the Company's common stock (the "September
1997 Transaction"). The funds received by the Company in the September
1997 Transaction facilitated the Company's acquisition of substantially
all the assets of Cove Container Corporation.
As of January 23, 1998 the Company issued to Rice $250,000 of Series
B Redeemable Preferred Stock for cash the ("January 1998 Transaction").
The funds received were used by the Company to make payments to certain
individuals who previously owned minority interests in certain Southland
subsidiaries.
As of April 14, 1998, as a condition to the most current amendment of
the credit agreement with the Company's senior lenders, Rice loaned the
Company an additional $1,250,000. In exchange for this loan, the Company
issued to Rice its 12.5% priority senior subordinated notes and additional
warrants for the purchase of 42,377,173 shares of the Company's common
stock (the "April 1998 Transaction"). The Company also issued to Rice
additional warrants to purchase 8,475,638 shares of the Company's common
stock as additional consideration for Rice's purchase of $250,000 of
Series B Redeemable Preferred Stock in January, 1998. The total number of
shares of common stock provided under these warrants may be reduced if a
fairness opinion which has been requested from an independent financial
advisor indicates that the number of shares issuable under the warrants is
not fair to the Company's shareholders.
Three members of the Board of Directors of the Company that approved
the September 1997 Transaction, the January 1998 Transaction and the April
1998 Transaction are principals of Rice, Sangalis, Toole & Wilson, the
manager of Rice.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of Ernst & Young LLP served as the Company's independent
public accountants for the fiscal year ended December 31, 1997, and, upon
the unanimous recommendation of the Company's Board of Directors and its
Audit Committee, the Company has selected them to act for the current
fiscal year.
Representatives of Ernst & Young LLP are expected to be present at
the Meeting. They will be available to respond to appropriate questions
from shareholders and will have the opportunity to make a statement if
they so desire.
DEADLINE FOR SUBMISSION OF SHAREHOLDERS PROPOSALS
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Company at its principal
office in Jacksonville, Florida, not later than January 31, 1999.
THE BOARD OF DIRECTORS HOPES THAT SHAREHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT
RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE METING AND YOUR
COOPERATION WILL BE APPRECIATED.
JOTAN, INC.
118 W. Adams Street
Jacksonville, Florida 32201
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
KNOW ALL MEN BY THESE PRESENTS that I, the undersigned stockholder of
Jotan, Inc., a Florida corporation, do hereby nominate, constitute, and
appoint Raleigh C. Minor or Edward L. Lipscomb or any one or more of them,
my true and lawful attorney(s) with full power of substitution for me and
in my name, place and stead, to vote all of the Common Stock, par value
$.01 per share, of the Company, standing in my name on its books on June
10, 1998, at the 1998 Annual Meeting of its Shareholders, or at any
adjournment thereof.
Proposal No. 1: To elect the following as directors to serve one-year
terms scheduled to end in conjunction with the next Annual Meeting of
Shareholders or until his successor is elected and qualified:
[ ] For: Shea E. Ralph, Raleigh C. Minor and James D. Lumsden
[ ] Against all nominees
To withhold authority as to any nominee(s), write name(s) in the
space provided:
________________________________________________________________.
Proposal No. 2: To approve amending the Company's Articles of
Incorporation to increase the number of authorized shares from 40,000,000
to 150,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
I hereby revoke any proxy or proxies heretofore given by me to any
person or persons whatsoever. Shares represented by this proxy will be
voted in accordance with the specifications so made. IF NO DIRECTION IS
GIVEN, SUCH SHARES WILL BE VOTED "FOR" PROPOSALS 1 AND 2 AND IN THE
DISCRETION OF THE PROXIES AS TO ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE MEETING.
_____________________________________________
Signature
_____________________________________________
Signature if jointly held
Dated: ______________________, 1998
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED SELF-ADDRESSED ENVELOPE.
JOTAN, INC.
118 W. Adams Street
Jacksonville, Florida 32201
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
KNOW ALL MEN BY THESE PRESENTS that I, the undersigned stockholder of
Jotan, Inc., a Florida corporation, do hereby nominate, constitute, and
appoint Raleigh C. Minor or Edward L. Lipscomb or any one or more of them,
my true and lawful attorney(s) with full power of substitution for me and
in my name, place and stead, to vote all of the Series A Convertible
Preferred Stock, par value $.01 per share, of the Company, standing in my
name on its books on June 10, 1998, at the 1998 Annual Meeting of its
Shareholders, or at any adjournment thereof.
Proposal No. 1: To elect the following as directors to serve one-year
terms scheduled to end in conjunction with the next Annual Meeting of
Shareholders or until his successor is elected and qualified:
[ ] For: Shea E. Ralph, Raleigh C. Minor and James D. Lumsden
[ ] Against all nominees
To withhold authority as to any nominee(s), write name(s) in the
space provided:
_____________________________________________________.
Proposal No. 2: To approve amending the Company's Articles of
Incorporation to increase the number of authorized shares from 40,000,000
to 150,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
I hereby revoke any proxy or proxies heretofore given by me to any
person or persons whatsoever. Shares represented by this proxy will be
voted in accordance with the specifications so made. IF NO DIRECTION IS
GIVEN, SUCH SHARES WILL BE VOTED "FOR" PROPOSALS 1 AND 2 AND IN THE
DISCRETION OF THE PROXIES AS TO ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE MEETING.
_____________________________________________
Signature
_____________________________________________
Signature if jointly held
Dated: _______________________, 1998
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED SELF-ADDRESSED ENVELOPE.
EXHIBIT A
ARTICLES OF AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
of
JOTAN, INC.
These Articles of Amendment are filed pursuant to Section 607.1006 of
the Florida Business Corporation Act:
1. The name of the Corporation is Jotan, Inc.
2. Section 4.1 of the Restated Articles of Incorporation of Jotan,
Inc. has been amended in its entirety to read as follows:
Section 4.1 Authorized Capital. The maximum
number of shares of stock which the Corporation
is authorized to have outstanding at any one time
is one hundred fifty million (150,000,000) shares
of voting common stock having a par value of one
cent ($0.01) per share, and ten million
(10,000,000) shares of preferred stock having a
par value of one cent ($0.01) per share. The
Board of Directors shall have the authority to
establish series of the preferred stock and, by
filing the appropriate Articles of Amendment with
the Department of State of the State of Florida,
to establish the designation of each series and
the variations in rights, preferences and
limitations for each series.
3. The above amendment was adopted by the Corporation's Board of
Directors on ______________, 1998, by unanimous written consent
pursuant to 607.0821, Florida Statutes, by the holders of the
Corporation's Common Stock, voting separately as a class, and by
the holders of the Corporation's Common Stock and Series A
Convertible Preferred Stock, voting together as a class, on
________, 1998, at the annual meeting of shareholders. The
number of votes cast for the amendment in each voting group
entitled to vote thereon was sufficient for approval by that
voting group.
IN WITNESS WHEREOF, Jotan, Inc., has caused these Articles of
Amendment to be signed by Edward L. Lipscomb, its Vice President, Chief
Financial Officer and Secretary, on this ______ day of ____________, 1998.
JOTAN, INC.
By:__________________________________________
Edward L. Lipscomb
Vice President, Chief Financial Officer
and Secretary