SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [X ]
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 S 240.14a-11(c) or S 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 STOCKHOLDERS
To be held on May 6, 1997
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Jotan, Inc., a Florida corporation (the "Company"), will be held
on May 6, 1997 at 12:00 Noon, 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 Preferred Stock,
voting together as a single class, to elect three directors and the holders of
Series B Preferred Stock to elect three directors, each to serve a one-year
term scheduled to end in conjunction with the next Annual Meeting of
Stockholders or until his successor is elected and qualified;
2. To consider and vote upon a proposed amendment to the 1996 Long-
Term Incentive Plan that would increase the number of shares of Common Stock
issuable thereunder to 2,000,000 shares and establish a 300,000 share limit on
the number of options that may be granted to any individual during any
calendar year;
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 April 7, 1997 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,
David Freedman, Secretary
JOTAN, INC.
118 West Adams Street
P.O. Box 836
Jacksonville, Florida 32201
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 1997
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 Stockholders of the Company (the "Meeting")
to be held Tuesday, May 6, 1997 at the Omni Hotel, Jacksonville, Florida,
commencing at 12:00 Noon, 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 April 16,
1997.
The Company's Annual Report to Stockholders for the year ended December
31, 1996, 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 Preferred
Stock, $0.01 par value (the "Series A Preferred Stock") is entitled to two
votes per share. The Board of Directors has fixed April 7, 1997, as the
record date for determining stockholders who are entitled to vote at the
meeting. At the close of business on April 7, 1997, there were outstanding
and entitled to vote 5,679,411 shares of Common Stock held by approximately
155 stockholders of record and 1,329,357 shares of Series A 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 Preferred Stock, voting
together as a single class (the "Voting Stock"), will constitute a quorum for
the Meeting. If a quorum is present, 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;
the affirmative vote of the holders of a majority of the votes represented by
the shares of Voting Stock voting thereon is required to approve the proposed
amendment to the 1996 Long-Term Incentive Plan; and 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 7, 1997,
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 individual named in the Summary Compensation Table
elsewhere herein, and (iv) all executive officers and directors as a group.
Amount and
Nature of Percent of
Name and Address Beneficial Percent of Voting
of Beneficial Owner Title of Class Ownership(1) Class(2) Stock(3)
___________________________ ______________ ____________ ___________ __________
Rice Partners II, L.P. (4)
5847 San Felipe, Suite 4350 Common B 12,096,929 68.0% 59.2%
Houston, TX 77057 Preferred 40,000 80.0
Jeffrey P. Sangalis (5)
5847 San Felipe, Suite 4350 Common 12,096,929 68.0 59.2
Houston, TX 77057 B Preferred 40,000 80.0
Philip A. Davidson (5)
5847 San Felipe, Suite 4350 Common 12,096,929 68.0 59.2
Houston, Texas 77057 B Preferred 40,000 80.0
James P. Wilson (5)
5847 San Felipe, Suite 4350 Common 12,096,929 68.0 59.2
Houston, Texas 77057 B Preferred 40,000 80.0
F-Jotan, L.L.C.
F-Southland, L.L.C. and Common 5,772,776 50.4 50.4
FF-Southland, L.P. (6) A Preferred 1,329,357 100.0
702 Oberlin Road, Suite 150 B Preferred 10,000 20.0
Raleigh, NC 27605
Jeremiah M. Callahan (7) Common 5,772,776 50.4 50.4
702 Oberlin Road, Suite 150 A Preferred 1,329,357 100.0
Raleigh, NC 27605 B Preferred 10,000 20.0
Shea E. Ralph
118 West Adams Street
Jacksonville, FL 32201 Common 950,000 16.7 11.4
Sidney Ralph (8)
70 Fishermans Lane
Ponte Vedra Beach, FL 32082 Common 456,611 8.0 5.5
Thomas P. Fitzpatrick (9) -- -- -- --
All directors and Common 18,834,705 80.0 71.9
executive officers as A Preferred 1,329,357 100.0
a group (8 persons) B Preferred 10,000 20.0
___________________________
(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 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 7,
1997, (b) the number of shares of Common Stock issuable upon conversion
of shares of Series A 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 Preferred Stock was calculated based on the
ratio of the number of shares of Series A Preferred Stock beneficially
owned by such beneficial owner to the total number of outstanding shares
of Series A Preferred Stock. Percent of Class of Series B Preferred
Stock was calculated based on the ratio of the number of shares of Series
B Preferred Stock beneficially owned by such beneficial owner to the
total number of outstanding shares of Series B 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 7, 1997, (b) the
number of shares of Common Stock issuable upon conversion of shares of
Series A 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 12,096,929 shares of Common Stock issuable under warrants owned
by Rice Partners, II, L.P.
(5) Jeffrey P. Sangalis and James P. Wilson 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 Preferred Stock beneficially owned
by FF-Southland, L.P., (ii) 5,000 shares of Series B Preferred Stock
beneficially owned by F-Southland, L.L.C., (iii) 1,557,031 shares of
Common Stock issuable under warrants owned by FF-Southland, L.L.C.,
(iv) 1,557,031 shares of Common Stock issuable under warrants owned by F-
Southland, L.P., and (v) 2,658,714 shares of Common Stock issuable to
F-Jotan, L.L.C. on conversion of 1,329,357 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) Jeremiah M. Callahan, a director of the Company, is 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. Callahan
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. Callahan has shared voting investment power.
(8) Sidney Ralph is the father of Shea A. Ralph, President of the Company.
(9) Nominee for director.
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 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 Preferred Stock, the consent of which was
required and obtained in order to consummate the Change of Control Transaction.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of the Company has nominated Shea E. Ralph,
Jeremiah M. Callahan and Thomas P. Fitzpatrick as directors to stand for
election by the holders of the Voting Stock, and the holders of the Series B
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, Shea E. Ralph and David Freedman,
Mr. Callahan 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, 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. Fitzpatrick are currently directors of the Company. Only
the holders of Series B 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. Callahan and Mr. Fitzpatrick 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. Callahan or
Mr. Fitzpatrick 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 Stockholders
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:
JEREMIAH M. CALLAHAN is a Principal of Fairview Capital, L.L.C. and has
been a director of the Company since July 1996. He has been President of Blue
Rhino Corp., a propane distribution company, from June 1994 to December 1995.
From 1992 to 1994, Mr. Callahan was also President of DynaPower/Stratopower, a
unit of General Signal Corporation and a manufacturer of hydraulic pumps,
motors and equipment for the aerospace and industrial markets from 1992 to
1994.
SHEA E. RALPH has been President, Chief Executive Officer and a director
of the Company since March 1994. He has served as Chairman of the Board of
the Company since 1994 and served as Vice President of Atlantic Bag & Paper
Company from 1988 to 1993. Mr. Ralph founded Jotan in 1993.
JEFFREY P. SANGALIS 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 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. Prior to
1993, Mr. Davidson was completing his Masters of Business Administration at
the University of Texas in Austin.
JAMES P. WILSON 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.
THOMAS P. FITZPATRICK has been a senior partner at the accounting firm of
Coopers and Lybrand since 1973. Mr. Fitzpatrick has been primarily focused in
advising domestic and foreign clients on increasing shareholder wealth. His
specialties include strategic planning, mergers, acquisitions, divestitures,
due diligence, valuation, and other related activities. He has served as a
member of the Executive Committee of the firm, as well as Partner-in-Charge of
the Investment Committee and of the New York Financial Advisory Services
practice. Mr. Fitzpatrick received a B.B.A. from Saint John's University and
is a CPA. Effective May 1, 1997, he will become Vice President and Chief
Financial Officer of Engelhard Corporation.
The Board of Directors unanimously recommends a vote "FOR" Mr. Callahan,
Mr. Ralph and Mr. Fitzpatrick as its nominees for reelection by the holders of
the Voting Stock.
PROPOSAL NO. 2
PROPOSED AMENDMENTS TO LONG-TERM INCENTIVE PLAN
At their 1996 Annual Meeting, the Company's stockholders approved the
Company's Long-Term Incentive Plan (the "Stock Option Plan" or the "Plan"),
which provides for the grant of stock options and restricted stock awards to
key employees. The Stock Option Plan is intended to advance the Company's
interests by providing to the Company's officers and other key employees who
have substantial responsibility for the direction and management of the
Company or any of its subsidiaries additional incentives to promote the
success of the Company's business, to increase their proprietary interest in
the success of the Company, and to encourage them to remain in the Company's
employ. Management believes that the Stock Option Plan is a necessary tool to
help the Company compete effectively with other enterprises for the services
of new employees and the retention of key employees who may be required for
the future development of the Company's business.
Initially, 740,000 shares were reserved for issuance under the Stock
Option Plan. In February 1997, the Company consummated a major business
combination through the acquisition of Southland. Equity funding for the
acquisition was provided by the sale of Series B Preferred Stock together with
warrants to acquire a total of 15,210,991 shares of Common Stock (which would
constitute 72.8% of the outstanding Common Stock immediately following
issuance and 64.6% on a fully diluted basis after conversion of the Series A
Preferred Stock). See "Change of Control." In view of the significant
increase in the Company's equity, the Board of Directors believes that it is
appropriate to increase the number of shares reserved for issuance under the
Stock Option Plan from 740,000 shares to 2 million shares.
The Board believes that increasing the number of shares issuable pursuant
to the Stock Option Plan will give the Company more flexibility in granting
options to attract new employees and to retain key employees. Given (i) the
substantial increase in the number of Company employees as a result of the
acquisition and (ii) the Company's future growth plans, the Board believes
that an increase in shares available for issuance under the Stock Option Plan
is desirable if the Plan is to provide meaningful incentives to existing and
future employees. Accordingly, the Board of Directors recommends that
shareholders vote in favor of amending the Stock Option Plan to allow the
issuance of a total of 2 million shares thereunder.
The Board of Directors also has recommended amending the Plan to include
a 300,000 share annual limit on the number of options that may be granted to
any single individual under the Plan. A limit on the number of options that
may be granted to any single individual was omitted through inadvertence from
the Plan as originally adopted. Such a limit is a requirement in order for
non-qualified stock options to qualify as performance-based compensation under
162(m) of the Internal Revenue Code of 1986, as amended. Section 162(m)
prevents a publicly held corporation from deducting compensation expenses in
excess of $1 million per year paid to its chief executive officer or any of
its other four most highly compensated officers unless such compensation is
performance-based. While the Company's compensation levels are such that the
Section 162(m) limits presently do not apply, a significant increase in the
fair market value of the Common Stock conceivably could make Section 162(m)
applicable upon the exercise by a senior executive officer of a significant
number of options. Accordingly, the Board has recommended that the Plan be
amended to include a 300,000 limit on the number of options that may be
granted to any individual during any calendar year.
Summary of Stock Option Plan
Set forth below is a summary of the major features of the Stock Option
Plan.
Common Stock Subject to the Plan. At present, the maximum number of
shares of Common Stock issuable pursuant to the Plan is 740,000 shares. On
April 14, 1997, the last sale price for the Common Stock on the Nasdaq OTC
Bulletin Board was $1.50 per share. As of the date of this Proxy Statement,
stock option awards covering a total of 389,150 shares have been made under
the Plan, 274,150 with exercise price of $1.00 per share and 115,000 with an
exercise price of $1.43 per share.
Term of the Plan. Options may be granted under the Stock Option Plan at
any time up to and including December 31, 2005, but grants theretofore granted
may extend beyond such date. The Stock Option Plan may be abandoned or
terminated at any time by the Company's Board of Directors, except with
respect to options then outstanding under the Plan.
Eligibility. Employees of the Company and the Company's subsidiaries are
eligible to participate in the Plan (any employee receiving an award under the
Plan is hereinafter referred to as a "Participant"). The terms "subsidiary"
or "subsidiaries" means any corporation now existing or hereafter organized or
acquired (other than the Company) in an unbroken chain of corporations
beginning with the Company, if, at the time of option grant, each of the
corporations (including the Company) other than the last corporation in the
unbroken chain owns stock possessing 80% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
As of the date of this Proxy Statement, approximately 179 persons are eligible
to receive awards under the Plan. Participants are selected by the Committee
(as defined below), in its discretion, based on, among other things, the
committee's assessment of those employees who are in a position to contribute
materially to the Company's growth and success.
Administration of the Plan. The Plan is administered by the Compensation
Committee or its successor (the "Committee") of the Board of Directors of the
Company consisting solely of two or more directors meeting the definition of
disinterested person under Rule 16b-3 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), who are also outside directors within the
meaning of Treasury Regulation S 1.162-27(e)(3) promulgated under the Internal
Revenue Code of 1986, as amended.
The Committee has full and final authority in its discretion, subject to
the provisions of the Plan: (1) to determine individuals to whom and the time
or times at which options or restricted stock shall be granted and the number
of shares of the Common Stock, $.01 par value per share, of the Company,
covered by each option or grant of restricted stock; (2) to determine the
terms of the option or restricted stock agreements, which need not be
identical, including, without limitation, terms covering vesting, and exercise
dates and exercise prices of options; (3) to decide all questions of fact
arising in the application of the Plan; and (4) to administer and interpret
the Plan in all respects. Except as provided herein, all determinations made
by the Committee shall be final and conclusive.
The Committee shall meet once each fiscal year, and at such additional
times as it may determine or as is requested by the chief executive officer of
the Company, to designate the eligible employees, if any, to be granted awards
under the Plan and the type and amount of such awards and the time when awards
will be granted. No such designation by the Committee shall be effective as a
grant of an award under the Plan until approved by the Board of Directors;
provided, however, that the Board may empower the Committee to grant such
awards without approval by the Board. All awards granted under the Plan shall
be on the terms and subject to the conditions hereinafter provided.
Terms and Conditions of Options and Restricted Stock
Executive Stock Options. Subject to the following provisions, all
Executive Stock Options shall be in such form and upon such terms and
conditions as the Committee determines. The exercise price per share shall be
at least 100% of the fair market value of the Common Stock on the date of
grant. Executive Stock Options must be exercised not later than ten years
from the date of grant (or such shorter period of time as designated by the
Committee at the time of grant). Subject to certain conditions and the
agreement governing the grant of any particular Executive Stock Option,
options may be exercised in whole or in part throughout the term of the
Executive Stock Option. Payment for shares upon exercise of an Executive
Stock Option shall be made as provided by the Committee at the time of grant
in either (i) cash or its equivalent or (ii) by tendering shares of previously
acquired Common Stock having a fair market value equal to the exercise price
or (iii) by a combination of (i) and (ii). In the absence of a Committee
specification, and subject to certain provisions relating to exercisability
upon termination of employment, 25% of the shares subject to an Executive
Stock Option shall have been earned and become exercisable on each of the
first four annual anniversaries of the date of grant.
Upon a Participant's termination of employment for any reason other than
death, disability or retirement, his or her Executive Stock Option shall
expire three months after such termination and shall be limited to the shares
of Common Stock which could have been purchased by the Participant at the date
of termination. Upon termination by reason of death, disability or
retirement, all Executive Stock Options held by the Participant at the time of
termination shall become immediately and fully exercisable and shall expire
one year following the date of termination. In the case of termination of
employment by reason of death, disability or retirement, the Committee may
extend the exercise period up to sixty months following the Participant's
termination of employment provided that, in no event, shall the exercise
period extend beyond ten years from the date of the Executive Stock Option's
grant. In the case of a Participant's early retirement, his or her Executive
Stock Options can be exercised only with respect to the shares which could
have been purchased by the Participant at the date of such early retirement.
This limitation is subject to waiver by the Committee. In the case of early
retirement, the Participant's Executive Stock Option shall expire within one
year from the date of such early retirement. The Committee may limit the time
periods within which an Executive Stock Option may be exercised if a
limitation on exercise is deemed necessary in order to effect compliance with
applicable law.
Incentive Stock Options. Generally, Incentive Stock Options are subject
to the same terms and conditions as Executive Stock Options; provided however,
in the case of a Participant who owns Common Stock representing more than 10%
of the total combined voting power of all classes of stock of the Company or
any of its subsidiaries, then the terms of the Incentive Stock Option shall
specify that the option price shall at the time of grant be at least 110% of
the fair market value of the stock subject to the Incentive Stock Option and
such option shall not be exercisable after the expiration of five years from
the date such option is granted. Further, Incentive Stock Options shall be
subject to any other condition under Section 422 of the Internal Revenue Code
or any successor section and the regulations promulgated thereunder.
Restricted Stock. The Committee may grant shares of stock under a
restricted stock agreement, with or without payment by the Participant, as
specified by the Committee. Restricted Stock shall be issued in the name of
the Participant and deposited with a trust administered by the Committee (and
subject to the claims of the Company's creditors) during the restriction
period unless the Participant makes an election under Section 83(b) of the
Internal Revenue Code. Until the restrictions have lapsed, the shares of
Restricted Stock may not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated. The Committee may impose such other restrictions
as are required by law. Subject to certain provisions, the restrictions shall
lapse upon completion of such periods of service or achievement of such
conditions as the Committee shall specify in the restricted stock agreement
between the Company and the Participant. If a Participant's employment is
terminated prior to the lapsing of the restrictions as a result of death,
retirement or disability, then the restrictions on such Participant's
Restricted Stock shall immediately lapse. If any Participant's employment is
terminated prior to the lapsing of restrictions for any reason other than
death, disability or retirement, then the shares of Restricted Stock granted
to such Participant shall be forfeited and shall revert to the Company.
Federal Tax Consequences of the Stock Option Plan
Under current federal income tax laws, options granted under the Stock
Option Plan will generally have the following consequences. The holder of an
Executive Stock Option will recognize no income for federal income tax
purposes upon the grant of such non-qualified stock option, and the Company,
therefore, receives no deduction at such time. At the time of exercise,
however, the holder generally will recognize income, taxable as ordinary
income, to the extent that the fair market value of the shares received on the
exercise date exceeds the exercise price of the non-qualified stock option.
The Company will be entitled to a corresponding deduction for federal income
tax purposes in the year in which the non-qualified stock option is exercised
so long as either Section 162(m) is inapplicable or its requirements are met.
If the shares are held for at least one year and one day after exercise, long-
term capital gain will be realized upon disposition of such shares to the
extent the amount realized on such disposition exceeds their fair market value
on the exercise date.
If an optionee is awarded an Incentive Stock Option, no income will be
recognized for federal income tax purposes at the time of grant or exercise,
and the Company will, therefore, not receive any corresponding deduction.
However, the excess of the fair market value of the shares of Common Stock
received at the date of exercise over the option exercise price will become an
item of tax preference to the optionee for purposes of the optionee's
alternative minimum tax in the year of exercise. The optionee will be subject
to federal income tax when the optionee sells the shares acquired upon the
exercise of the Incentive Stock Option. If the optionee holds the shares for
more than two years from the date of grant and more than one year from the
date the shares were transferred to that person, any gain will be taxed as
long-term capital gain. The Company will not be entitled to any deduction for
federal income tax purposes as to any amount taxed as long-term capital gain
in connection with the sale of shares acquired upon the exercise of an
Incentive Stock Option.
Stock Option Plan Amendment
The Board of Directors may discontinue the Plan at any time and may amend
it from time to time, but no amendment, without approval by shareholders, may
(i) increase the total number of shares that may be issued under the Plan
(except adjustments made in order to prevent substantial dilution or
enlargement of rights under the Plan as a result of a reorganization,
recapitalization, stock split, stock dividend, combination of shares, etc.),
(ii) materially modify the eligibility requirements for Participants, (iii)
materially increase the benefits accruing to Participants, or (iv) cause the
Plan to no longer comply with Rule 16b-3 of the Securities Exchange Act of
1934 or any other federal or state statutory or regulatory requirements.
Plan Benefits
The following table sets forth information concerning options granted as
of the date of this Proxy Statement to the persons and groups listed therein.
Number of
Employee Options Awarded
_______________________________ _______________
Shea E. Ralph
President 33,000
David Freedman
Vice President and CFO 275,000
Alton E. Thompson
Vice President of Sales &
Operations 28,000
Executive officers as a group 347,500
Non-executive officer
employees as a group 41,650
____________________
(1) Directors who are not employed by the Company are not
eligible to participate in the Plan. No recipients of
awards are associates of either directors or executive
officers of the Company.
Future option grants under the Plan are not determinable at this time,
nor are the benefits that would have been allocable during the last fiscal
year determinable.
Required Vote; Recommendation
The affirmative vote of a majority of the Voting Stock voting on the
proposal is required for the approval of the proposal to increase the number
of shares issuable under the Stock Option Plan to 2 million shares and to
establish a 300,000 share limit on the number of options that may be granted
to any individual during any calendar year. Abstentions and broker non-votes
will have no effect on such vote.
The Board of Directors Unanimously Recommends
That the Stockholders Vote "FOR" the Amendments to the Stock Option Plan.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held 14 meetings during the year
ended December 31, 1996. 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. The Audit Committee (which during 1996
consisted of Mr. Ralph and then director Richard M. Gray) held two meetings
during the year ended December 31, 1996.
The Compensation Committee consists of Mr. Callahan and Mr. Wilson. 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. The
Compensation Committee (which during 1996 consisted of then directors James D.
Lumsden and William A. Hightower) held three meetings during the year ended
December 31, 1996.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
regulations of the Securities and Exchange Commission thereunder require the
Company's executive officers and 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 initial ownership of the Company's Common Stock and changes
in such ownership with the Securities and Exchange Commission. Executive
officers, Directors and persons owning more than 10% of the Company's Common
Stock are required by the Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on representations that no reports were required for these persons, the
Company believes that, during the fiscal year ended December 31, 1996, all
filing requirements applicable to its executive officers, Directors, and
owners of more than 10% of the Company's Common Stock were complied within a
timely manner.
EXECUTIVE OFFICERS
The following table sets forth the names of the executive officers of the
Company in addition to Mr. Shea E. Ralph, 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 1997 Annual
Meeting of shareholders. For information concerning executive officers'
ownership of Common Stock, see "Security Ownership of Certain Beneficial
Owners" above.
Name Age Positions with the Company
_______________________ ___ _____________________________________
David Freedman 47 Vice President and Chief Financial
Officer
Alton E. Thompson, Jr. 36 Vice President of Sales & Operations
John P. Moore 37 Controller
DAVID FREEDMAN has been Vice President and Chief Financial Officer of
Jotan since May 1994. From October 1993 to May 1994, he was founder and
President of Tax Concepts, a tax research and consulting company. From 1979
to October 1993, Mr. Freedman was Assistant Vice President-Tax, CSX
Corporation.
ALTON E. THOMPSON, JR. was promoted to Vice President of Sales &
Operations in August 1995. He joined Jotan, Inc. as General Manager of its
Auburndale distribution center in September 1993. Prior to joining Jotan he
worked for over 19 years with Jefferson Smurfit Corp., a producer of
corrugated products, in various manufacturing and sales capacities.
JOHN P. MOORE was hired as corporate controller in April 1995. Prior to
joining Jotan, he was controller of Connerty & Associates, a regional
franchiser of Outback Steakhouse and Hooters restaurants.
Executive officers are appointed annually by the Board of Directors, and
each executive officers 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,
1996, 1995 and 1994, to the Company's Chief Executive Officer (the "Named
Executive Officer"). No other executive officer of the Company received a
salary in excess of $100,000 annually for the periods depicted. No options or
SARs were granted during the periods depicted.
Summary Compensation Table
Annual Compensation
All Other
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($)
_____________________________ ____ __________ _________ ________________
Shea E. Ralph, Chairman,
President and Chief Executive
Officer 1996 $70,519 $ -0- $3,600.(1)
1995 $60,599 $ -0- $ 720.(1)
1994 $70,484 $ -0- $ -0-.
______________________
(1) Car allowance.
Director Compensation
All directors are reimbursed for expenses incurred in connection with
board and committee meetings attended. No other cash compensation is paid to
directors for their services as directors. In lieu of cash compensation, each
director receives 1,800 shares of Common Stock annually plus 100 additional
shares of Common Stock for each meeting of the Board attended. The director
Common Stock compensation is based on the period between annual meetings of
the shareholders of the Company.
EMPLOYMENT AGREEMENTS
The Company does not have a bonus, profit sharing, or deferred
compensation plan for the benefit of its employees, officers or directors.
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, director, nominee 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 the Company's President, 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 with Total Supply. On
September 8, 1994, the Company refinanced its short-term line-of-credit
arrangement and the $750,000 note payable with Total Supply into a convertible
subordinated debenture. On February 22, 1995, the Company entered into an
agreement with Total Supply whereby the old previous debt agreements
(convertible debenture, security, etc.) were canceled and a new agreement put
in their place. The revised agreement converts a portion of the face value
($919,833) into shares of Common Stock at fair value (determined to be $3.00
by valuation) 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 two warehouses from Sidney Ralph. The two leases
have a term until 2004 and a monthly lease payment of $4,000 and $2,000,
respectively.
On May 16, 1996, F-Jotan invested $2,000,000 in the Company in exchange
for 100% of the outstanding Series A Preferred Stock. James D. Lumsden and
Jeremiah M. Callahan are members of Fairview, the manager of F-Jotan, and were
elected to the Company's Board of Directors in connection with the investment
by F-Jotan.
Effective February 28, 1997, certain related party transactions occurred
with respect to the Company and certain directors in connection with the
Change of Control Transaction described earlier in this Proxy Statement. (See
"Change of Control.")
In the opinion of management the terms of the aforementioned related
transactions are comparable to the terms that would be obtained with
unaffiliated third parties.
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, 1996, 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
stockholders and will have the opportunity to make a statement if they so
desire.
DEADLINE FOR SUBMISSION OF STOCKHOLDERS PROPOSALS
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal
office in Jacksonville, Florida, not later than December 17, 1997.
By Order of the Board of Directors
David Freedman
Secretary
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS 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 Shea E. Ralph or David Freedman, 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 April 7, 1997, at the 1997
Annual Meeting of its Stockholders, 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 Stockholders
or until his successor is elected and qualified:
[ ] For: Shea E. Ralph, Jeremiah H. Callahan and Thomas P. Fitzpatrick
[ ] 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 Long-Term Incentive Plan to
increase the number of shares issuable thereunder to 2 million shares and
establish a 300,000 share per person annual option grant limit.
[ ] 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: _____________________________, 1997
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED SELF-ADDRESSED ENVELOPE.