EXHIBIT 2
First Supplemental Shareholder Agreement
FIRST SUPPLEMENTAL SHAREHOLDER AGREEMENT
FIRST SUPPLEMENTAL SHAREHOLDER AGREEMENT (the "Agreement") made as of
September 10, 1997, by and among JOTAN, INC., a Florida corporation (the
"Company"), the SHAREHOLDERS of the Company listed on the signature pages
hereof (individually and collectively, as the context requires, the
"Shareholder"), RICE PARTNERS II, L.P., a Delaware limited partnership ("Rice"
or "Purchaser"), and F-SOUTHLAND, L.L.C., a North Carolina limited liability
company ("F-Southland", FF-SOUTHLAND , L.P., a Delaware limited partnership
("FF-Southland" and together with F-Southland, the "Southland Purchasers"), F-
JOTAN, L.L.C., a North Carolina limited liability company ("F-Jotan") and each
of the shareholders named on the signature pages hereto (individually and
collectively, as the context requires, the "Shareholder").
W I T N E S S E T H:
WHEREAS, each Shareholder owns beneficially and of record the number of
shares or share equivalents, set forth under the signature of such Shareholder
on this Agreement of the issued and outstanding capital stock of the Company;
WHEREAS, F-Jotan is the owner of the 1,329,357 shares of the Series A
Preferred Stock of the Company as of the date hereof;
WHEREAS, SHC Acquisition Corp., a wholly-owned Subsidiary of the
Company, has merged with and into Southland Holding Company, with Southland
Holding Company surviving and assuming all the obligations of SHC Acquisition
Corp. under the Original Purchase Agreement. On July 31, 1997, all of the
subsidiaries of Southland Holding Company and Atlantic Bag & Paper Company, a
Subsidiary of the Company, merged with and into Southland Holding Company
(which concurrently changed its name to Southland Container Packaging Corp.),
with the result that Southland Container Packaging Corp.("Southland"), as of
July 31, 1997, had no Subsidiaries;
WHEREAS, the Company, Southland, Rice and the Southland Purchasers have
entered into that certain Note Purchase Agreement, dated as of February 28,
1997, as amended by Amendment No. 1, dated as of August 19, 1997 (the "Note
Agreement");
WHEREAS, the Company and the Shareholder have entered into a Shareholder
Agreement, dated as of February 28, 1997 (the "Original Shareholder
Agreement"), with each Purchaser and F-Jotan and the First Supplemental
Preferred Stock and Warrant Purchase Agreement as of the date hereof,
(together with the Original Purchase Agreement as therein defined, the
"Purchase Agreement"), by and Company, Rice, F-Southland, FF-Southland and F-
Jotan and each of the Shareholders; and
WHEREAS, on June 23, 1997, Rice unconditionally committed to the Senior
Lender (as defined in the Note Agreement) and FF-Southland committed to the
Senior Lender subject to certain approvals, to purchase up to $2,625,000 (the
"Purchase Price") of Series B Preferred Stock, in cash, in connection with the
acquisition by the Southland Holding Company (now known as Southland Container
Packaging Corp.) of substantially all of the assets of Cove Container
Corporation (the "Cove Acquisition");
WHEREAS, such commitment requires that the proceeds of such purchase
shall be used by the Company to repay the Senior Lender a like amount advanced
on June 23, 1997 by the Senior Lender under the Senior Loan Agreement on
behalf of the Southland to enable the Southland to pay the purchase price of
the Cove Acquisition;
WHEREAS, although Rice is willing to enter into and consummate the
transactions contemplated hereby upon the due issuance of its Warrants and
Preferred Stock against the payment of the Purchase Price, FF-Southland did
not receive appropriate approvals for its portion of such purchase
transaction; and
WHEREAS, the parties hereto desire to amend and confirm portions of the
Original Shareholder Agreement (as amended and confirmed hereby, this
"Agreement").
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Purchaser, the
Shareholder, and the Company, intending to be legally bound, agree as follows:
Article I
Definitions
All terms used in this Agreement will have the meanings ascribed to them
in the Purchase Agreement unless otherwise specifically defined in this
Agreement.
For purposes of Articles II and VII of this Agreement only, the term
"Holder" (as defined in the Purchase Agreement) shall also mean and include F-
Jotan and the term "Registrable Securities" shall mean and include the Series
A Preferred Stock and the Common Stock issuable upon conversion of the Series
A Preferred Stock.
Article II
Waiver Certain Preemptive Rights of the Holders
2.1 Preemptive Right Waiver. The Company will not issue or sell
any New Securities without first complying with this Article II of the
Original Shareholder Agreement; provided, however, that for purposes of this
Agreement and the Purchase Agreement, each such Holder hereby waives its
preemptive rights with respect to the issuance of the First Supplemental Warrant
and the First Supplemental Preferred Shares.
Article III
Confirmation and Incorporation of Original Shareholder Agreement
3.01 Original Shareholder Agreement Provisions Incorporated into this
Agreement. Except as set forth above, all other provisions of the Original
Shareholder Agreement are hereby confirmed as if incorporated herein at length
herein with full application to the First Supplemental Warrant and the First
Supplemental Preferred Shares (it being agreed that such securities shall
treated in all respects as Capital Stock). Accordingly, the First
Supplemental Warrant and the First Supplemental Preferred Shares shall be
treated as if such securities were issued on the Original Closing Date and are
Registrable Securities hereunder and under the Original Shareholder Agreement
for all purposes.
Article IV
Conditions
The obligations of each Purchaser to effect the transactions
contemplated by this Agreement are subject to the following conditions:
4.01 Purchase Agreement Conditions. All of the conditions precedent to
the obligations of the Purchaser under the First Supplemental Purchase
Agreement will have been satisfied in full or waived.
4.02 Proceedings. All proceedings taken in connection with the
transactions contemplated by this Agreement, and all documents necessary to
the consummation thereof, will be reasonably satisfactory in form and
substance to each Purchaser and its counsel, and each Purchaser and its
counsel will have received copies (executed or certified as may be
appropriate) of all documents, instruments, and agreements that such Purchaser
or its counsel may request in connection with the consummation of such
transactions.
Article V
Miscellaneous
5.01 Indemnification. In addition to any other rights or remedies to
which each Purchaser and the Holders may be entitled, the Company and the
Shareholder (solely with respect to the representations and warranties made by
him herein) severally but not jointly agree to and will indemnify and hold
harmless each Purchaser, the Holders, and their Affiliates and their
respective successors, assigns, officers, directors, managers, employees,
attorneys, and agents (individually and collectively, an "Indemnified Party")
from and against any and all losses, claims, obligations, liabilities,
deficiencies, diminutions in value, penalties, causes of action, damages,
out-of-pocket costs, including, without limitation, all such costs of
directors of the Company incurred in performing duties or services for or on
behalf of the Company, reasonable attorneys' fees, and expenses (including,
without limitation, costs and expenses of investigation and defense,
attorneys' fees and expenses) including, without limitation, those arising out
of the contributory negligence of any Indemnified Party, that any Indemnified
Party may suffer, incur, or be responsible for, arising or resulting from, to
the extent applicable, any misrepresentation, breach of warranty, or
nonfulfillment of any agreement made by or on the part of the Company or made
by the Shareholder (solely with respect to the representations and warranties
made by him herein) under this Agreement, the Purchase Agreement, or the other
Purchase Documents, the Acquisition Agreement (each as defined in Section 11.1
of the Note Agreement together with all supplements and amendments to each
such agreement or document as of the date hereof) or under any other agreement
to which the Company or the Shareholder is a party in connection with the
transactions contemplated by this transaction, or from any misrepresentation
in or omission from any certificate or other instrument furnished or to be
furnished by the Company to the Purchaser or the Holders under this Agreement.
The foregoing indemnification includes any such claims, actions, damages,
costs and expenses incurred by reason of the contributory negligence of the
Person to be indemnified, but excludes any of the same incurred by reason of
such Person's gross negligence or willful misconduct and shall survive the
expiration of this Agreement or the irrevocable sale by each Purchaser of its
interests in, or the repayment of its loans to, the Company.
5.02 Default. It is agreed that a violation by any party of the terms
of this Agreement cannot be adequately measured or compensated in money
damages, and that any breach or threatened breach of this Agreement by a party
to this Agreement would do irreparable injury to the nonbreaching party. It
is, therefore, agreed that in the event of any breach or threatened breach by
a party to this Agreement of the terms and conditions set forth in this
Agreement, the nondefaulting party will be entitled, in addition to any and
all other rights and remedies that it may have in law or in equity, to apply
for and obtain injunctive relief requiring the defaulting party to be
restrained from any such breach, or threatened breach or to refrain from a
continuation of any actual breach.
5.03 Integration. This Agreement, the Original Shareholder
Agreement, the Other Agreements, the First Supplemental Warrant and all other
Warrants, the Purchase Agreement, and the Original Purchase Agreement
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all previous written, and all previous
or contemporaneous oral, negotiations, understandings, arrangements, and
agreements. This Agreement may not be amended or supplemented except by a
writing signed by Company, the Shareholder, and each Holder.
5.04 Headings. The headings in this Agreement are for convenience and
reference only and are not part of the substance of this Agreement.
References in this Agreement to Sections and Articles are references to the
Sections and Articles of this Agreement unless otherwise specified.
5.05 Severability. The parties to this Agreement expressly agree that
it is not their intention to violate any public policy, statutory or common
law rules, regulations, or decisions of any governmental or regulatory body.
If any provision of this Agreement is judicially or administratively
interpreted or construed as being in violation of any such policy, rule,
regulation, or decision, the provision, section, sentence, word, clause, or
combination thereof causing such violation will be inoperative (and in lieu
thereof there will be inserted such provision, sentence, word, clause, or
combination thereof as may be valid and consistent with the intent of the
parties under this Agreement) and the remainder of this Agreement, as amended,
will remain binding upon the parties to this Agreement, unless the inoperative
provision would cause enforcement of the remainder of this Agreement to be
inequitable under the circumstances.
5.06 Notices. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration, or other communication be given to or
served upon any of the parties by another, such notice, demand, request,
consent, approval, declaration, or other communication will be in writing and
will be deemed to have been validly served, given, or delivered (and "the date
of such notice" or words of similar effect will mean the date) five (5) days
after deposit in the United States mails, certified mail, return receipt
requested, with proper postage prepaid, or upon receipt thereof with written
acknowledgment of receipt (whether by non-certified mail, telecopy, telegram,
express or hand delivery, or otherwise), whichever is earlier, and addressed
to the party to be notified as follows:
If to the Rice, at: Address of Rice beneath the name of Rice on the
signature pages of this Agreement
with courtesy copies to: Xxxxxx Xxxxx, L.L.P.
0000 Xxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxx, Esq.
Fax: 000-000-0000
If to F-Jotan, at: Address of F-Jotan beneath the name of F-Jotan
on the signature pages of this Agreement
with courtesy copies to: The Southland Purchasers
If to the Company, at: Jotan, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attn: President
Fax: (000) 000-0000
with courtesy copies to: Wyrick, Robins, Xxxxx & Xxxxxx, L.L.P.
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxx, Xx.
Fax: (000) 000-0000
If to the Shareholder, at: Address of such Shareholder beneath the
name of such Shareholder on the signature
pages of this Agreement
If to the Southland
Purchasers: Address of such Southland Purchasers under
their respective names on the signature
pages of this Agreement
with courtesy copies to: F-Jotan
or to such other address as each party may designate for itself by like
notice. Notice to any Holder other than the Purchaser will be delivered as
set forth above to the address shown on the stock transfer books of the
Company or the Warrant Register unless such Holder has advised the Company in
writing of a different address to which notices are to be sent under this
Agreement.
Failure or delay in delivering the courtesy copies of any notice,
demand, request, consent, approval, declaration, or other communication to the
persons designated above to receive copies of the actual notice will in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration, or other communication.
No notice, demand, request, consent, approval, declaration, or other
communication will be deemed to have been given or received unless and until
it sets forth all items of information required to be set forth therein
pursuant to the terms of this Agreement.
5.07 Successors. This Agreement will be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns;
provided, however, that no sale, assignment or other transfer by any party to
this Agreement of any of its Capital Stock or rights hereunder to another
Person will be valid and effective unless and until the transferee or assignee
first agrees in writing to be bound by the terms and conditions of this
Agreement and the Purchase Agreement, and the agreements and instruments
related hereto and thereto, in a form and substance reasonably satisfactory to
the Company.
5.08 Remedies. The failure of any party to enforce any right or remedy
under this agreement, or to enforce any such right or remedy promptly, will
not constitute a waiver thereof, nor give rise to any estoppel against such
party, nor excuse any other party from its obligations under this Agreement.
Any waiver of any such right or remedy by any party must be in writing and
signed by the party against which such waiver is sought to be enforced.
5.09 Survival. All warranties, representations, and covenants made by
any party in this Agreement or in any certificate or other instrument
delivered by such party or on its behalf under this Agreement will be
considered to have been relied upon by the party to which it is delivered and
will survive the Closing Date, regardless of any investigation made by such
party or on its behalf. All statements in any such certificate or other
instrument will constitute warranties and representations under this
Agreement.
5.10 Fees. Any and all fees, costs, and expenses, of whatever kind and
nature, including attorneys' fees and expenses, incurred by the Holders in
connection with the defense or prosecution of any actions or proceedings
arising out of or in connection with this Agreement will, to the extent
provided in this Agreement, be borne and paid by the Company within ten (10)
days of demand by the Holders.
5.11 Counterparts. This Agreement may be executed in any number of
counterparts, which will individually and collectively constitute one
agreement.
5.12 Other Business. It is understood and accepted that each
Purchaser, the Holders, and their Affiliates have interests in other business
ventures that may be in conflict with the activities of the Company and that
nothing in this Agreement will limit the current or future business activities
of such parties whether or not such activities are competitive with those of
the Company. The Company and the Shareholder agree that all business
opportunities available to them in any field substantially related to the
business of the Company will be pursued exclusively through the Company.
5.13 Choice of Law. THIS AGREEMENT WILL BE DEEMED TO HAVE BEEN MADE IN
JACKSONVILLE, FLORIDA AND WILL BE INTERPRETED AND THE RIGHTS OF THE PARTIES
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES APPLICABLE THERETO
AND THE INTERNAL LAWS OF THE STATE OF FLORIDA APPLICABLE TO AN AGREEMENT
EXECUTED, DELIVERED AND PERFORMED THEREIN WITHOUT GIVING EFFECT TO THE CHOICE-
OF-LAW RULES THEREOF OR ANY OTHER PRINCIPLE THAT COULD REQUIRE THE APPLICATION
OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION.
5.14 Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner of such Registrable
Securities, the beneficial owner of Registrable Securities may, at its
election, be treated as the Holder of such Registrable Securities for purposes
of any request or other action by any Holder or Holders of Registrable
Securities pursuant to this Agreement or any determination of any number or
percentage of shares of Registrable Securities held by any Holder or Holders
of Registrable Securities contemplated by this Agreement. If the beneficial
owner of any Registrable Securities so elects, the Company may require
assurances reasonably satisfactory to it of such owner's beneficial ownership
of such Registrable Securities. In no event will a Holder be required to
exercise its Warrant as a condition to the registration of such Warrant or
Registrable Securities thereunder.
5.15 Fiduciary Duties. The Company acknowledges and agrees that, for
so long as any Warrant is outstanding and regardless of whether the Holder has
exercised any portion of this its Warrant, (a) the officers and directors of
the Company will owe the same duties (fiduciary and otherwise) to the Holder
as are owed to a stockholder of the Company and (b) the Holder will be
entitled to all rights and remedies with respect to such duties or that are
otherwise available to a stockholder of the Company under the Florida General
Corporation Law, as amended from time to time.
5.16 Duties Among Holders. Each Holder agrees that no other Holder
will by virtue of this Agreement be under any fiduciary or other duty to give
or withhold any consent or approval under this Agreement or to take any other
action or omit to take any action under this Agreement, and that each other
Holder may act or refrain from acting under this Agreement as such other
Holder may, in its discretion, elect.
5.17 Confidentiality. Each Holder agrees to keep confidential any
information delivered by the Company to such Holder under this Agreement that
the Company clearly indicates in writing to be confidential information;
provided, however, that nothing in this Section 5.17 will prevent such Holder
from disclosing such information (a) to any Affiliate of such Holder or any
actual or potential purchaser, participant, assignee, or transferee of such
Holder's rights or obligations hereunder that agrees to be bound by the terms
of this Section 5.17, (b) upon order of any court or administrative agency,
(c) upon the request or demand of any regulatory agency or authority having
jurisdiction over such Holder, (d) that is in the public domain, (e) that has
been obtained from any Person that is not a party to this Agreement or an
Affiliate of any such party without breach by such Person of a confidentiality
obligation known to such Holder, (f) in connection with the exercise of any
remedy under this Agreement, or (g) to the certified public accountants for
such Holder. The Company agrees that such Holder will be presumed to have met
its obligations under this Section 5.17 to the extent that it exercises the
same degree of care with respect to information provided by the Company as it
exercises with respect to its own information of similar character.
5.18 Confirmation of Original Shareholder Agreement. Except as amended
and supplemented hereby, the Original Shareholder Agreements shall remain in
full force and effect, and, as so amended and supplemented, such agreement is
hereby confirmed in its entirety.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
COMPANY:
JOTAN, INC.
BY: ____________________________
NAME: ____________________________
TITLE:____________________________
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attn: President
Fax: (000) 000-0000
RICE:
RICE PARTNERS II, L.P.
By: Rice Capital Group IV, L.P.,
Its general partner
By: RMC Fund Management, L.P.,
Its general partner
By: Rice Mezzanine Corporation,
Its general partner
By: __________________________
Name: Xxxxxxx X. Xxxxxxxx
Its: Managing Director
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred
Stock
40,000 Shares of Series B
Preferred Stock
13,125 Shares of First
Supplemental Series B
Preferred Stock
None Shares of Common Stock
2,515,203 Warrant A-1 Shares
9,581,726 Warrant A-2 Shares
3,620,473 First Supplemental
Warrant
A-2 Shares
F-JOTAN, L.L.C.
By: Franklin Street/Fairview Capital, L.L.C.,
its manager
By: Franklin Capital, L.L.C.,
its manager
By: ____________________________
Xxxxx X. Xxxxxxx,
Manager
000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
OWNED ON CLOSING DATE:
1,329,357 Shares of Series A
Convertible Preferred
Stock
None Shares of Common Stock
None Other Equity Interests
THE SOUTHLAND PURCHASERS:
F-SOUTHLAND, L.L.C.
By: Franklin Street/Fairview Capital, L.L.C.,
its manager
By: Franklin Capital, L.L.C,
its manager
By: ____________________________
Xxxxx X. Xxxxxxx,
Manager
000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred
Stock
5,000 Shares of Series B
Redeemable Preferred
Stock
None Shares of Common Stock
359,315 Warrant B-1 Shares
1,197,716 Warrant B-2 Shares
FF-SOUTHLAND, L.P.
By: FSFC Associates, L.P.,
Its general partner
By: Franklin Capital, L.L.C.,
Its general partner
By: _______________________________
Xxxxx X. Xxxxxxx,
Manager
000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred
Stock
5,000 Shares of Series B
Redeemable Preferred
Stock
None Shares of Common Stock
359,315 Warrant C-1 Shares
1,197,716 Warrant C-2 Shares
SHAREHOLDER:
Xxxxx Xxxxxxxx
______________________________________
OWNED ON CLOSING DATE:
None Shares of Common Stock
Owned on Closing Date
275,000 Common Stock Options
Xxxx X. Xxxxx
______________________________________
OWNED ON CLOSING DATE:
950,000 Shares of Common Stock
Owned on Closing Date
33,000 Common Stock Options
