<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D/A
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 4)
KAFUS INDUSTRIES LTD.
---------------------
(Name of Issuer)
COMMON STOCK, WITHOUT PAR VALUE
-------------------------------
(Title of Class of Securities)
482910 10 6
----------------
(CUSIP Number)
Julia Murray
General Counsel - Finance
Enron North America Corp.
1400 Smith Street
Houston, Texas 77002
(713) 853-6161
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
December 20, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box: [ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 (the "Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 15
<PAGE> 2
SCHEDULE 13D
- ---------------------------------
CUSIP NO.: 482910 10 6
- ---------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSON
Sundance Assets, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES --------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 9,504,859
REPORTING --------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
9,504,859
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,504,859
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
N/A
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
26.5%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- --------------------------------------------------------------------------------
Page 2 of 15
<PAGE> 3
SCHEDULE 13D
- ---------------------------------
CUSIP NO.: 482910 10 6
- ---------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSON
Enron North America Corp.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES --------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 10,992,359
REPORTING --------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
10,992,359
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,992,359
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
N/A
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
30.2%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
Page 3 of 15
<PAGE> 4
SCHEDULE 13D
- ---------------------------------
CUSIP NO.: 482910 10 6
- ---------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSON
Enron Corp.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Oregon
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES --------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 12,992,358
REPORTING --------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
12,992,358
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
12,992,358
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
N/A
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
35.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
Page 4 of 15
<PAGE> 5
STATEMENT ON SCHEDULE 13D
NOTE: This Schedule 13D/A amendment is being filed by (i) Sundance Assets, L.P.
("Sundance"), (ii) Enron North America Corp. ("ENA"; formerly named Enron
Capital & Trade Resources Corp.) and (iii) Enron Corp. ("Enron"), which are
collectively referred to as the "Reporting Entities." All information with
respect to Kafus Industries, Ltd., a British Columbia corporation (the
"Issuer"), is presented to the best knowledge and belief of the Reporting
Entities. The joint Schedule 13D of Enron and ENA dated July 27, 1997 (the "July
filing"), as amended by a Schedule 13D/A dated September 4, 1998 (the "September
filing"), as further amended by a Schedule 13D/A dated January 12, 1999 (the
"January filing"), as further amended by a Schedule 13D/A dated March 22, 1999
(the "March filing"), is further amended by the following:
ITEM 1. IDENTITY AND BACKGROUND.
The Schedules to this statement report current information regarding
the officers and directors of Enron Ponderosa Management Holdings, Inc.
("EPMH"), ENA, and Enron. None of the Reporting Entities nor, to their
knowledge, any person listed on the Schedules hereto, has been, during the last
five years (i) convicted in a criminal proceeding (excluding traffic violations
or
Page 5 of 15
<PAGE> 6
similar misdemeanors) or (ii) a party to a civil proceeding and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violation of, or prohibiting or mandating activities subject to, U.S.
federal or state securities laws or finding any violation with respect to such
laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION; ITEM 4. PURPOSE OF
TRANSACTION AND ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Several events have occurred since the date of the March filing which
collectively necessitate the filing of this statement on Schedule 13D. First,
Sundance transferred to ENA on December 21, 1999, and ENA immediately thereafter
transferred to SE Thunderbird L.P. ("Thunderbird") in a private placement,
1,999,999 shares of common stock, no par value per share ("Common Stock") and
certain registration rights associated therewith. Thunderbird is a Delaware
limited partnership that is partially owned and indirectly controlled by Enron.
Thunderbird funded the $7.50 per share purchase price for this investment from
its working capital.
Second, there accrued to Sundance pursuant to the terms of the Series I
Preference Shares ("Preference Shares") a right to acquire 102,358 shares of
Common Stock as a dividend for the semiannual period ended June 30, 1999. Third,
ENA's waiver pursuant to the Waiver and Amendment Agreement dated August 18,
1998 between it and The Samarac Corporation Ltd. of its right to convert a 5,000
share portion of the Preference Shares will continue only through February 18,
2000, which is less than sixty days from the date this statement is filed.
Fourth, approximately $1,020,000 in interest will have accrued through December
31, 1999 on the Convertible Promissory Note (Term Loan A) issued by the Issuer
to ENA in the original principal amount of $10 million (the "Term Loan A Note").
The holder can convert the accrued interest on this note into Common Stock at
the lesser of (a) U.S. $8.00 (subject to certain adjustments) or (b) the 30 day
trade weighted average of the sales prices of the Common Stock. Therefore, the
accrued interest represents the right to acquire, at minimum, 127,500 shares of
Common Stock (the "Interest Shares").
Fifth, the Issuer amended a warrant held by Sundance, originally issued
on August 18, 1998, to acquire 250,000 shares of Common Stock. This warrant is
now exercisable immediately, instead of being exercisable December 31, 2000,
with no change in its expiration date of July 31, 2008, and its exercise price
was changed to $5.00 per share. Finally, the parties have entered into an
Amendment to Registration Rights Agreements which (i) waives certain rights to
liquidated damages against the Issuer,
Page 6 of 15
<PAGE> 7
(ii) sets new deadlines with respect to the registration statements to be filed
pursuant to certain of the parties' existing registration rights agreements, and
(iii) confirms the scope of the Registration Rights Agreement dated July 16,
1997 between ENA and the Issuer.
Thunderbird directly owns 1,999,999 shares of Common Stock, which are
being held for investment purposes. Thunderbird will review its investment in
the Issuer on a continuing basis, and, depending upon the price of the Common
Stock, other market conditions relating to it, subsequent developments affecting
the Issuer, the Issuer's business and prospects, other investment and business
opportunities available to Thunderbird, general stock market and economic
conditions, tax considerations and other factors deemed relevant, Thunderbird
may decide to increase or decrease the size of its investment in the Issuer.
Sundance directly owns 1,730,001 shares of Common Stock. It also holds
the following instruments that, subject to antidilution adjustments, are
exercisable or convertible within the next sixty days into an aggregate of
7,774,858 shares of Common Stock: (i) five warrants to purchase 1,000,000,
500,000, 750,000, 45,000 and 250,000 shares of Common Stock, respectively, which
are immediately exercisable, (ii) 10,000 Preference Shares, which may be
converted into 2,500,000 shares of Common Stock at any time, (iii) 5,000
Preference Shares, which may be converted into 2,500,000 shares on or after
February 18, 1999, (iv) the Term Loan A Note, which has (a) a principal balance
of $10 million that may be converted into 1,250,000 shares of Common Stock at
any time and (b) an interest component which, after December 31, 1999, may be
converted into a minimum of 127,500 shares, and (v) a right to accrued dividends
on the Preference Shares in the amount of 102,358 shares of Common Stock.
If Sundance converted or exercised all instruments and securities held
by it that are convertible or exercisable within sixty days into Common Stock,
the 9,504,859 shares of Common Stock it would hold would represent approximately
26.5% of the Issuer's outstanding Common Stock.
Because of their control relationships, Enron may be deemed to
beneficially own the shares held
Page 7 of 15
<PAGE> 8
by ENA and Thunderbird, and ENA may be deemed to beneficially own the 9,504,859
shares beneficially owned by Sundance as well as the 737,500 shares beneficially
owned by ECT Merchant Investments Corp. ("ECT Merchant"). Further, ENA, Enron,
Ponderosa Assets, L.P., which is Sundance's general partner ("Ponderosa"), and
EPMH, which is Ponderosa's general partner, may be deemed to share voting and
dispositive power over the Common Stock beneficially owned by Sundance.
Likewise, Blue Heron I LLC, the general partner of Thunderbird ("Blue Heron"),
Whitewing Associates L.P., the sole member of Blue Heron ("Whitewing
Associates"), Whitewing Management LLC, the general partner of Whitewing
Associates ("Whitewing Management"), Egret I LLC, the managing member of
Whitewing Management ("Egret"), and Enron, the managing member of Egret, may be
deemed to share voting and dispositive power over the Common Stock beneficially
owned by Thunderbird. Similarly, ENA and Enron could be deemed to share voting
and dispositive power over the 737,500 shares of Common Stock beneficially owned
ECT Merchant. Enron and ENA each hereby disclaims beneficial ownership of all
Common Stock which it does not directly own, and the filing of this statement on
Schedule 13D shall not be construed as an admission that Thunderbird, Blue
Heron, Whitewing Associates, Whitewing Management, Egret, ECT Merchant,
Sundance, Ponderosa, EPMH, ENA, Enron or any person listed on Schedules I, II,
III or IV hereto is, for the purposes of Section 13(d) or 13(g) of the Act, the
beneficial owner of any securities covered by this statement. All percentage
ownership calculations utilized herein are calculated in accordance with Rule
13d-3(d)(1)(i)(D) and assume that 28,043,359 shares of Common Stock are
actually outstanding on the date of this statement.
In addition to the shares of Common Stock reported herein, the
Reporting Persons hold convertible promissory notes and other instruments that
entitle or require the Reporting Entities to purchase a substantial number of
shares of Common Stock. Such shares are not reported herein as being
beneficially owned because the instruments do not entitle the holder to acquire
shares within 60
Page 8 of 15
<PAGE> 9
days after the filing of this statement, except upon the occurrence of
extraordinary and unpredictable events, such as a default on indebtedness. These
arrangements are described in greater detail in the Deferred Payment Purchase
Agreement and the Income Participation Certificate Purchase Agreement contained
in the July filing and in the $11.25 million Exchangeable Promissory Note, the
Subordinated Loan Conversion Agreement, the Income Participation Certificate
Purchase Agreement, and the $12.5 million Convertible Promissory Note (Advancing
Credit Facility) contained in the March filing. Other than the transactions
described herein, none of the Reporting Entities, nor, to their knowledge, Blue
Heron, Whitewing Associates, Whitewing Management, Egret, ECT Merchant,
Ponderosa, EPMH or any of the persons named in Schedule I hereto, has effected
any transaction in the Common Stock during the preceding sixty days.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1. Purchase and Sale Agreement dated December 21, 1999
Exhibit 2. Partial Assignment and Assumption Agreement dated
December 21, 1999
Exhibit 3. Amendment to Registration Rights Agreements dated
December 23, 1999
Page 9 of 15
<PAGE> 10
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certify that the information set forth in this
statement is true, complete and correct.
Date: December 29, 1999 SUNDANCE ASSETS, L.P.
By: Ponderosa Assets, L.P.
its general partner
By: Enron Ponderosa Management
Holdings, Inc. its general partner
By /s/ JULIA HEINTZ MURRAY
--------------------------------------
Julia Heintz Murray
Vice President
Date: December 29, 1999 ENRON NORTH AMERICA CORP.
By /s/ JULIA HEINTZ MURRAY
--------------------------------------
Julia Heintz Murray
Vice President
Date: December 29, 1999 ENRON CORP.
By /s/ RICHARD B. BUY
--------------------------------------
Richard B. Buy
Executive Vice President
Page 10 of 15
<PAGE> 11
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
ENRON PONDEROSA MANAGEMENT HOLDINGS, INC.
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
Each of the following
persons' business address is
1400 Smith Street, Houston,
TX 77002
James V. Derrick, Jr. U.S.A. Director
J. Clifford Baxter U.S.A. Director and Chairman, Chief
Executive Officer and Managing Director
Kevin P. Hannon U.S.A. Director, President and Managing Director
Richard B. Buy U.S.A. Managing Director
Andrew S. Fastow U.S.A. Managing Director
Mark E. Haedicke U.S.A. Managing Director and General Counsel
Michael J. Kopper U.S.A. Managing Director
Jeffrey McMahon U.S.A. Managing Director, Finance and Treasurer
</TABLE>
Page 11 of 15
<PAGE> 12
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS
ENRON NORTH AMERICA CORP.
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
Each of the following person's
business address is 1400 Smith
Street, Houston, TX 77002
J. Clifford Baxter U.S.A. Director; Chairman of the Board, Chief
Mark E. Haedicke U.S.A. Director; Managing Director and General Counsel
Kevin P. Hannon U.S.A. Director; President and Chief Operating Officer
Philippe A. Bibi U.S.A. Managing Director
W. Craig Childers U.S.A. Managing Director
David W. Delainey U.S.A. Managing Director
Richard G. DiMichele U.S.A. Managing Director
Jay L. Fitzgerald U.S.A. Managing Director
Michael J. Kopper U.S.A. Managing Director
John J. Lavorato U.S.A. Managing Director
Danny J. McCarty U.S.A. Managing Director
Michael McConnell U.S.A. Managing Director
J. Kevin McConville U.S.A. Managing Director
Jere C. Overdyke, Jr. U.S.A. Managing Director
Gregory F. Piper U.S.A. Managing Director
Brian L. Redmond U.S.A. Managing Director
Jeffrey A. Shankman U.S.A. Managing Director
John R. Sherriff U.S.A. Managing Director
Colleen Sullivan-Shaklovitz U.S.A. Managing Director
Lawrence G. Whalley U.S.A. Managing Director
</TABLE>
Page 12 of 15
<PAGE> 13
SCHEDULE III
DIRECTORS AND EXECUTIVE OFFICERS
ENRON CORP.
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
Robert A. Belfer U.S.A. Director; Chairman, President and Chief Executive
Belco Oil and Gas Corp. Officer, Belco Oil & Gas Corp.
767 Fifth Avenue, 46th Fl.
New York, NY 10153
Norman P. Blake, Jr. U.S.A. Director; Chairman, President and CEO of Promus Hotel
Promus Hotel Corp. Corporation
705 Crossover Lane
Memphis, TN 58117-4900
Ronnie C. Chan U.S.A. Director; Chairman of Hang Lung Development Group
Hang Lung Development
Company Limited
28/F, Standard Chartered
Bank Building
4 Des Vouex Road Central
Hong Kong
John H. Duncan U.S.A. Director; Investments
5851 San Felipe, Suite 850
Houston, TX 77057
Paulo V. Ferraz Pereira Brazil Director; President and Chief Executive Officer of
Meridonal Financial Group Meridional Financial Group
Av. Rio Branco, 138-15th andar
20057-900 Rio de Janeiro - RJ
Brazil
Joe H. Foy U.S.A. Director; Retired Senior Partner,
Bracewell & Patterson
2900 South Tower Pennzoil Place
711 Louisiana
Houston, TX 77002
Wendy L. Gramm U.S.A. Director; Former Chairman, U.S. Commodity Futures
P. O. Box 39134 Trading Commission
Washington, D.C. 20016
Ken L. Harrison U.S.A. Director; Chairman and Chief Executive Officer,
121 S. W. Salmon Street Portland General Electric Company
Portland, OR 97204
Robert K. Jaedicke U.S.A. Director; Professor (Emeritus), Graduate School of
Graduate School of Business Business Stanford University
Stanford University
Stanford, CA 94305
</TABLE>
Page 13 of 15
<PAGE> 14
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
Charles A. LeMaistre U.S.A. Director; President (Emeritus), University of Texas
P.O. Box 15247 M.D. Anderson Cancer Center
San Antonio, TX 78212
John Mendelsohn U.S.A. Director; President, University of Texas
University of Texas M.D. Anderson Cancer Center
M.D. Anderson Cancer Center
1515 Holcombe
Houston, Texas 77030
Jerome J. Meyer U.S.A. Director; Chairman and Chief Executive Officer,
26600 S.W. Parkway Tektronix, Inc.
Building 63; P. O. Box 1000
Wilsonville, OR 97070-1000
Frank Savage U.S.A. Director; Chairman, Alliance Capital Management
1345 Avenue of the Americas International
39th Floor
New York, New York 10105
John A. Urquhart U.S.A. Director; Senior Advisor to the Chairman of Enron
John A. Urquhart Assoc. Corp.; President, John A. Urquhart Associates
111 Beach Road
Fairfield, CT 06430
John Wakeham U.K. Director; Former U.K. Secretary of State for Energy
1 Salisbury Square and Leader of the Houses of Commons and Lords
London EC4Y 8JB
United Kingdom
Herbert S. Winokur, Jr. U.S.A. Director; President, Winokur & Associates, Inc.
Capricorn Management, G.P.
30 East Elm Ct.
Greenwich, CT 06830
Kenneth L. Lay U.S.A. Director; Chairman and Chief Executive Officer
1400 Smith Street
Houston, TX 77002
J. Clifford Baxter U.S.A. Chairman of the Board, Chief Executive Officer and
1400 Smith Street Managing Director, Enron North America Corp.
Houston, TX 77002
Richard B. Buy U.S.A. Executive Vice President and Chief Risk Officer
1400 Smith Street
Houston, TX 77002
Richard A. Causey U.S.A. Executive Vice President and Chief Accounting Officer
1400 Smith Street
Houston, TX 77002
</TABLE>
Page 14 of 15
<PAGE> 15
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
James V. Derrick, Jr. U.S.A. Executive Vice President and General Counsel
1400 Smith Street
Houston, TX 77002
Andrew S. Fastow U.S.A. Executive Vice President and Chief Financial Officer
1400 Smith Street
Houston, TX 77002
Mark A. Frevert U.S.A. President and Chief Executive Officer, Enron Europe,
1400 Smith Street Ltd.
Houston, TX 77002
Stanley C. Horton U.S.A. Chairman and Chief Executive Officer, Enron Gas
1400 Smith Street Pipeline Group
Houston, TX 77002
Rebecca P. Mark U.S.A. Director; Chairman and Chief Executive Officer,
1400 Smith Street Azurix Corp.
Houston, TX 77002
J. Mark Metts U.S.A. Executive Vice President, Corporate Development
1400 Smith Street
Houston, TX 77002
Lou L. Pai U.S.A. Chairman, President and Chief Executive Officer,
1400 Smith Street Enron Energy Services, Inc.
Houston, TX 77002
Kenneth D. Rice U.S.A. Co-Chairman and Co-Chief Executive Officer and President,
1400 Smith Street Enron Communications Inc.
Houston, TX 77002
Jeffrey K. Skilling U.S.A. Director; President and Chief Operating Officer, Enron
1400 Smith Street Corp.
Houston, TX 77002
Joseph W. Sutton U.S.A. Vice Chairman, Enron Corp.
1400 Smith Street
Houston, TX 77002
</TABLE>
Page 15 of 15
<PAGE> 16
INDEX TO EXHIBITS
Exhibit 1. Purchase and Sale Agreement dated December 21, 1999
Exhibit 2. Partial Assignment and Assumption Agreement dated
December 21, 1999
Exhibit 3. Amendment to Registration Rights Agreements dated
December 23, 1999
<PAGE> 1
EXHIBIT 1
[Execution Version]
PURCHASE AND SALE AGREEMENT
DATED AS OF DECEMBER 21, 1999
BETWEEN
SE THUNDERBIRD L.P.
AS PURCHASER
AND
ENRON NORTH AMERICA CORP.
AS SELLER
<PAGE> 2
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into as
of December 21, 1999 and is by and among SE THUNDERBIRD L.P., a Delaware limited
partnership (the "Purchaser"), and ENRON NORTH AMERICA CORP., a Delaware
corporation (the "Seller").
R E C I T A L S:
A. The Seller owns the Kafus Shares and the Quanta Convertible Note,
both as defined below, and certain rights associated therewith.
B. Subject to the terms and conditions of this Agreement and in
exchange for the consideration set forth herein, the Seller hereby agrees to
sell to the Purchaser, and the Purchaser hereby agrees to purchase from the
Seller, such assets.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements set forth herein, and for good and valuable consideration, the
receipt and sufficiency of which is acknowledged by all parties, the parties
hereto agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1 Definitions. Unless the context otherwise requires, the
following capitalized terms used in this Agreement shall have the following
meanings:
"Affiliate" means any other Person that directly or indirectly, through
one or more intermediaries, controls, or is controlled by, or is under
common control with, a Person.
"Ancillary Agreements" means the agreements and instruments to be
delivered pursuant to Section 2.1(a) of this Agreement.
"Disputed Claims" is defined in Section 6.7(a).
"Kafus" means Kafus Industries, Ltd., a British Columbia corporation.
"Kafus Shares" means 1,999,999 shares of common stock, without par
value, of Kafus.
"Person" means an individual, a corporation, a partnership, an
association, a limited liability company, a joint stock company, a
trust or other unincorporated organization.
"Closing Date" is defined in Section 2.1(a)
"Companies" means Kafus and Quanta.
<PAGE> 3
"Purchase Price" means the aggregate of the purchase prices set forth
in Sections 2.1(a)(1) and (2).
"Purchased Assets" means the Kafus Shares and the Quanta Convertible
Note, and all rights to be transferred to the Purchaser pursuant to the
Ancillary Agreements.
"Purchase Price" means the sum of the amounts payable pursuant to
Sections 2.1(a).
"Quanta" means Quanta Services, Inc., a Delaware corporation.
"Quanta Convertible Note" means the Convertible Promissory Note due
2010 dated October 5, 1998 issued by Quanta Services, Inc. to Enron
Capital & Trade Resources Corp. in the original principal amount of
Twelve Million Three Hundred Thirty-Seven Thousand Five Hundred Dollars
($12,337,500).
"Securities Act" means the Securities Act of 1933, as amended, and all
the rules and regulations promulgated thereunder.
ARTICLE 2.
CONVEYANCE OF THE PURCHASED ASSETS
Section 2.1 Conveyance of Purchased Assets. On the date first set forth
above (the "Closing Date"):
(a) The Seller shall sell, transfer, assign, set over and otherwise
convey to the Purchaser, and the Purchaser shall purchase from the Seller, all
of the right, title and interest of the Seller in and to the Purchased Assets in
exchange for payment, in immediately available funds, of the Purchase Price, as
follows.
(1) The Purchaser shall pay to the Seller $14,999,992.50 in
consideration of the Purchased Assets that relate to Kafus, and the Seller shall
deliver to the Purchaser (i) the stock certificates representing the Kafus
Shares, (ii) a duly executed Partial Assignment and Assumption Agreement in form
and substance satisfactory to the parties and (iii) a duly executed Transfer of
Shares in form and substance satisfactory to the parties.
(2) The Purchaser shall pay to the Seller $25,136,826.59 in
consideration of the Purchased Assets that relate to the Quanta Convertible
Note, and the Seller shall deliver to the Purchaser (i) the Quanta Convertible
Note, indorsed over to the Purchaser by the Seller, but without recourse to the
Seller and without transfer warranties to the Purchaser (other than those set
forth in Section 3.1 hereof), (ii) a duly executed Partial Assignment and
Assumption Agreement in form and substance satisfactory to the parties and (iii)
a duly executed Allonge to Convertible Promissory Note in form and substance
satisfactory to the parties.
-2-
<PAGE> 4
(b) The parties expressly intend that this is an absolute sale of the
Purchased Assets and both parties agree to account for the transactions
contemplated hereunder in this manner.
(c) Payments for the Purchased Assets shall be made by wire transfer of
immediately available federal funds to the following account: ECT- Finance 1400
Smith Street, Houston, Texas 77002-7361, CitiBank NY, NY, Account: 4075-9492,
ABA#: 021000089, Tax ID#: 76-0318139.
Section 2.2 Closing. The closing for the sale of the Purchased Assets
shall occur at the offices of Bracewell & Patterson, L.L.P. at Pennzoil Place,
South Tower, 711 Louisiana Street, Houston, Texas 77002 on the Closing Date or
at such other time or place as the Purchaser and the Seller may agree.
Section 2.3 Costs and Expenses. All costs and expenses (including legal
fees, professional fees, and other transaction costs) incurred by either party
hereto in connection with the transfer and delivery of the Purchased Assets in
the manner contemplated herein shall be borne by the party that incurred such
costs and/or expenses.
Section 2.4 Payments to Purchaser. The Seller hereby agrees that from
and after the Closing Date it shall pay over to the Purchaser, as assignee of
the Purchased Assets, all amounts received by the Seller with respect to the
Purchased Assets. Any amounts received by the Seller contrary to the preceding
sentence shall be received by the Seller in trust for the benefit of the
Purchaser and shall be immediately paid by the Seller to and as directed by the
Purchaser.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Seller. The
Seller hereby represents and warrants to the Purchaser that as of the Closing
Date:
(a) The Seller has taken all steps necessary to transfer all
of the Seller's right, title and interest in and to the Purchased Assets to the
Purchaser.
(b) Immediately prior to the transfers contemplated by this
Agreement, the Seller was the sole owner and holder of the Purchased Assets,
free and clear of any and all liens, pledges, charges or security interests of
any nature.
(c) The Seller (i) is duly organized, validly existing and in
good standing under the laws of Delaware, (ii) has the full right, power and
authority to enter into and perform its obligations under this Agreement and the
Ancillary Agreements and to consummate the transactions contemplated hereby and
(iii) has obtained all requisite company or similar authorizations, consents or
approvals applicable to do so.
(d) This Agreement and the Ancillary Agreements have been duly
executed and delivered by the Seller and constitute the legal, valid and binding
obligations of the Seller enforceable against it in accordance with their terms,
except as the enforceability thereof may be limited by any
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<PAGE> 5
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and by general principles of equity.
(e) The outstanding principal balance of the Quanta
Convertible Note is $12,337,500, all interest payments due thereunder have been
paid when due and no principal or interest thereunder has been prepaid, forgiven
or postponed, and to the knowledge of Seller there exists no material default or
event of default thereunder.
(f) Since September 30, 1999, to the knowledge of the Seller
there has not occurred any material adverse change or any threatened material
adverse change in the business, operations, properties, assets or condition
(financial or otherwise) of the Companies, other than those disclosed to the
public and those disclosed to the Purchaser in writing prior to the date hereof.
(g) To the knowledge of Seller, no action, suit or proceeding
has been commenced against any of the Companies before any court or arbitrator
or any governmental body, agency or official except for such action, suit or
proceeding that could not reasonably be expected to have a material and adverse
effect on the business, operations, properties, assets or condition (financial
or otherwise) of such Company.
(h) All material information given by the Seller to the
Purchaser in connection with the transactions contemplated by this Agreement was
true and correct in all material respects on the date such information was given
and on the date hereof.
(i) Any approvals, filings and consents relating to the
transfer of the Purchased Assets from the Seller to the Purchaser required to be
obtained from or made with any governmental or quasi-governmental agency,
entity, or body from whom approval is required under applicable law have been
made or obtained.
(j) Assuming that the Purchaser's representations set forth in
this Agreement are true and correct, the sale of the Purchased Assets in the
manner contemplated by this Agreement by the Seller will be exempt from the
registration requirements of the Securities Act by reason of Section 4(2)
thereof.
(k) No agent, broker or other Person acting pursuant to
authority of the Seller is entitled to any commission or finder's fee in
connection with the transactions contemplated by this Agreement.
Except as set forth in this Section 3.1, the Seller makes no
representation or warranty whatsoever to the Purchaser concerning the Purchased
Assets. Without limiting the generality of the foregoing, the Seller makes no
representation or warranty concerning the Companies, their respective assets,
financial performance, financial condition, and prospects, or any other matter
affecting them.
Section 3.2 Representations and Warranties of the Purchaser.
The Purchaser hereby makes the following representations and warranties to the
Seller:
(a) The Purchaser is an "accredited investor" within the
meaning of Rule 501
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under the Securities Act and is acquiring the Purchased Assets for its own
account and not with a view toward their distribution.
(b) The Purchaser is able to bear the economic risk of an
investment in the Purchased Assets and can afford to sustain a total loss of
such investment and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the proposed
investment in the Companies. The Purchaser has had an adequate opportunity to
ask questions and receive answers from the officers of the Companies and the
Seller concerning all matters relating to the transactions described herein. The
Purchaser has asked all questions in the nature described in the preceding
sentence, and such questions have been answered to their satisfaction.
(c) The Purchaser is aware of all facts, risks and other
matters disclosed in the periodic financial and other reports filed by Quanta
with U.S. Securities and Exchange Commission and by Kafus and its subsidiaries
with its Canadian equivalent. The Purchaser acknowledges that copies of the same
have been made available to it, either directly or through the www.sedar.com and
www.sec.com website.
(d) The Purchaser is aware that the Kafus Shares and the
shares issuable pursuant to the Quanta Convertible Note are restricted
securities within the meaning of Rule 144 under the Securities Act and therefore
may not be sold, transferred or otherwise disposed of unless they are registered
and/or qualified under the Securities Act and applicable state securities laws,
or unless an exemption from the registration or qualification requirements is
otherwise available.
(e) The Purchaser (i) is duly organized, validly existing and
in good standing under the laws of the State of Delaware, (ii) has the full
right, power and authority to enter into and perform its obligations under this
Agreement and the Ancillary Agreements and to consummate the transactions
contemplated hereby, and (iii) has obtained all requisite company and similar
authorizations, consents or approvals applicable to do so.
(f) This Agreement and the Ancillary Agreements have been duly
executed and delivered by the Purchaser and constitute the legal, valid and
binding obligations of the Purchaser enforceable against the Purchaser in
accordance with their terms, except as the enforceability thereof may be limited
by any applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and by general principles of equity.
(g) No agent, broker or other Person acting pursuant to
authority of the Purchaser is entitled to any commission or finder's fee in
connection with the transactions contemplated by this Agreement.
(h) The Purchaser is not a Prohibited Person within the
meaning of the Stockholders and Warrantholders Agreement.
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ARTICLE 4.
CONDITIONS TO CLOSING
Section 4.1 Condition to the Obligations of Each Party. The
obligations of the Purchaser and the Seller to consummate the transactions
contemplated by this Agreement are subject to the satisfaction of the following
conditions:
(a) As of the Closing Date, all approvals, filings, waivers
and consents relating to the transfer of the Purchased Assets from the Seller to
the Purchaser required to be made or obtained pursuant to any applicable
documents or agreements shall have been made or obtained.
(b) All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to each party and its counsel. No
action or proceeding before a court or any other governmental agency or body
shall have been instituted or threatened to restrain or prohibit the
transactions contemplated herein and no governmental agency or body shall have
taken any other action or made any request of the Seller or the Purchaser as a
result of which either party deems it inadvisable to proceed with the
transactions hereunder.
Section 4.2 Conditions to the Obligations of Purchaser. The
obligation of the Purchaser to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following further conditions:
(a) The Seller shall have performed in all material respects
all of its obligations under this Agreement required to be performed by it on or
prior to the Closing Date.
(b) The representations and warranties of the Seller contained
in this Agreement shall be true in all material respects at and as of the
Closing Date.
Section 4.3 Conditions to the Obligations of the Seller. The
obligation of the Seller to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following further conditions:
(a) The Purchaser shall have performed in all material
respects all of its obligations under this Agreement required to be performed by
it on or prior to the Closing Date.
(c) The representations and warranties of the Purchaser
contained in this Agreement shall be true in all material respects at and as of
the Closing Date, as if made at and as of such date.
ARTICLE 5.
AGREEMENTS
Section 5.1 Conflict of Interests. The parties acknowledge and
understand that (a) the Seller and its Affiliates have and may continue to
maintain certain investments in the Companies that are different in character
from the Purchased Assets and (b) that they have certain rights to appoint
directors, participate in the management of the Companies, vote their securities
and take other actions
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<PAGE> 8
with respect to such debt and equity investments. The parties further understand
that, as result of such investments and rights, the interest of the Seller and
its Affiliates on the one hand and of the Purchaser on the other hand may
conflict. The parties therefore hereby agree that, except as expressly set forth
herein: (i) that the Seller and its Affiliates shall have no duties whatsoever
to the Purchaser with respect to their management and control of the Companies
(fiduciary or otherwise), (ii) that none of such rights need be exercised on
behalf of or for the benefit of the Purchaser, (iii) that the Seller and its
Affiliates shall have no duty to disclose information concerning their
intentions with respect to their investments or with respect to the Companies
and (iv) that the Purchaser hereby waives all conflicts of interest arising from
any action or omission by the Seller or any of its Affiliates with respect to
such investments and rights.
Section 5.2 Retention of Certain Rights. Except as expressly
provided to the contrary in any Ancillary Agreement, the Seller's and its
Affiliates' preemptive rights to acquire additional securities of the Companies
and to nominate and maintain directors are retained by their holder and shall
not be assigned or conveyed to the Purchaser, either pursuant to this Agreement
or pursuant to any Ancillary Agreement.
Section 5.3 Limitation of Liability. It is expressly understood and
agreed by the parties hereto that, notwithstanding any other term of this
Agreement, (i) the Purchaser shall not be permitted to recover punitive,
consequential, economic or indirect damages from the Seller, whether by way of
indemnification or under any other legal document, causes of action, or theory
of recovery, and (ii) the Seller's maximum liability with respect to this
Agreement and the Ancillary Agreements shall not exceed the Purchase Price.
ARTICLE 6.
MISCELLANEOUS
Section 6.1 Notices. All notices, demands and requests that may be
given or that are required to be given hereunder shall be sent by United States
certified mail, postage prepaid, return receipt requested, to the parties at
their respective addresses as follows:
If to the Seller:
Enron North America Corp.
1400 Smith Street
Houston, Texas 77002
Attn: Donna Lowry
with a copy to:
Enron North America Corp.
1400 Smith Street
Houston, Texas 77002
Attn: Julia Heintz Murray
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<PAGE> 9
If to the Purchaser:
SE Thunderbird L.P.
c/o The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, New Castle County
Delaware 19801
with a copy to:
SE Thunderbird L.P.
c/o Enron Corp.
1400 Smith Street
Houston, Texas 77002
Attn: Cynthia Harkness
Section 6.2 Counterparts. For the purpose of facilitating the
execution and proving of this Agreement, as herein provided and for other
purposes, this Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.
Section 6.3 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Texas.
Section 6.4 Specific Performance. Any party hereto may enforce
specific performance of this Agreement.
Section 6.5 Further Assurances. The parties hereto agree to execute
and deliver such other instruments and take such other actions as may be
necessary to effectuate the purposes and to carry out the terms of this
Agreement.
Section 6.6 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to its subject matter and supersedes all
oral communications and prior writing with respect thereto.
Section 6.7 Arbitration.
(a) Any and all claims, counterclaims, demands, causes of action,
disputes, controversies, and other matters in question arising under this
Agreement or the alleged breach of any provision hereof (all of which are
referred to herein as "Disputed Claims"), whether such Disputed Claims arise at
law or in equity, under state or federal law, for damages or any other relief,
shall be resolved by binding arbitration in the manner set forth herein.
(b) The validity, construction, and interpretation of this
agreement to arbitrate and all procedural aspects of the arbitration conducted
pursuant to this agreement to arbitrate and the rules governing the conduct of
arbitration (including the time for filing an answer, the time for the filing
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<PAGE> 10
of counter Disputed Claims, the times for amending the pleadings, the
specificity of the pleadings, the extent and scope of discovery, the issuance of
subpoenas, the time for the designation of experts, whether the arbitration is
to be stayed pending resolution of related litigation involving third parties
not bound by this Agreement, the receipt of evidence, and the like) shall be
decided by the arbitrators. In deciding the substance of the parties' Disputed
Claims, the arbitrators shall refer to the substantive laws of the State of
Texas for guidance (excluding Texas choice-of-law principles that might call for
the application of some other state's law); provided, however, that IT IS
EXPRESSLY AGREED THAT NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT TO
THE CONTRARY, THE ARBITRATORS SHALL HAVE ABSOLUTELY NO AUTHORITY TO AWARD
CONSEQUENTIAL DAMAGES (SUCH AS LOSS OF PROFIT), INCIDENTAL, TREBLE, EXEMPLARY OR
PUNITIVE DAMAGES OF ANY TYPE UNDER ANY CIRCUMSTANCES REGARDLESS OF WHETHER SUCH
DAMAGES MAY BE AVAILABLE UNDER TEXAS LAW, THE LAW OF ANY OTHER STATE, OR FEDERAL
LAW, OR UNDER THE UNITED STATES ARBITRATION ACT OR UNDER ANY OTHER RULES OF
ARBITRATION. The arbitrators shall have the authority to assess the costs and
expenses of the arbitration proceeding (including the arbitrators' fees and
expenses) against either or both parties. However, each party shall bear its own
attorneys fees and the arbitrators shall have no authority to award attorneys
fees.
(c) The arbitration proceedings shall be conducted in Houston, Texas by
three arbitrators in accordance with the American Arbitration Association
Commercial Arbitration Rules. Within 30 days of the notice of initiation of the
arbitration procedure, the parties shall select three arbitrators. Each party
shall select one person to act as arbitrator and the two arbitrators so selected
shall select a third arbitrator within 10 days of their appointment. If the
arbitrators selected by the parties are unable or fail to agree upon the
identity of the third, within the time set forth herein, the third arbitrator
shall be selected by the American Arbitration Association. The arbitration shall
be governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16, as
such Act is modified by this Agreement and judgment upon the award rendered by
the arbitrators may be entered by an court having jurisdiction thereof.
(d) All fees of the arbitrators and other administrative charges
related to the arbitration shall be borne equally by the parties.
(e) The parties hereby agree that the arbitration proceeding and the
arbitrators' award are to remain confidential and none of the parties or their
counsel will divulge or discuss, directly or indirectly, in the newspaper,
electronic media, or other public or private forum, or with any third parties,
the arbitration proceedings and/or the arbitrators' award except: (i) to the
extent required by a court of law or any federal, state, or local government,
agency or regulatory body or to the extent required to comply with applicable
securities laws or stock exchange requirements; (2) to the extent further agreed
by the parties hereto; or (3) to the extent necessary under subsection (f)
below.
(f) The award of the arbitrators shall be final and binding on the
parties, and judgment thereon may be entered in a court of competent
jurisdiction.
[signature pages follow]
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed hereto by their respective officers thereunto duly authorized, all as of
the day and year first above written.
SE THUNDERBIRD L.P. ENRON NORTH AMERICA CORP.
By: Blue Heron I LLC, its general partner
By: Whitewing Associates L.P., its sole
member
By: Whitewing Management LLC, its general
partner
By: Egret I LLC, its managing member By:
-------------------------
Name:
-----------------------
Title:
----------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
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<PAGE> 1
EXHIBIT 2
[Execution Version]
PARTIAL ASSIGNMENT AND ASSUMPTION AGREEMENT
(KAFUS INDUSTRIES, LTD.)
This Partial Assignment and Assumption Agreement (this "Agreement"),
dated as of December 21, 1999 (the "Effective Date"), is between Enron North
America Corp., a Delaware corporation (the "Assignor"), and SE Thunderbird L.P.,
a Delaware limited partnership (the "Assignee") and is delivered pursuant to
that certain Purchase and Sale Agreement of even date herewith between Assignor
and Assignee (the "Purchase and Sale Agreement").
In the event of a conflict between the terms of this Agreement and the
Purchase and Sale Agreement, the Purchase and Sale Agreement shall control.
Terms capitalized for other than grammatical purposes in this Agreement and not
defined herein have the meanings set forth in the Purchase and Sale Agreement,
and the following term shall have the following definition:
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of July 16, 1997 between Kafus and Assignor, as the same may
have been amended, modified and supplemented from time to time.
PART I
GRANTING CLAUSES
For ten dollars ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which Assignor hereby acknowledges, Assignor has
transferred, bargained, conveyed and assigned, and does hereby transfer,
bargain, convey and assign to Assignee, effective for all purposes as of the
Effective Date, the Registration Rights Agreement, including, without
limitation, all rights, privileges and obligations related thereto, but only to
the extent that the foregoing relate to the Kafus Shares; provided, however,
that Assignor's rights and duties with respect to (a) liquidated damages under
Section 2(b) of the Registration Rights Agreement accrued prior to the date
hereof and accruing through December 31, 1999, and (b) other debt, equity or
other instruments of Kafus held by Assignor, in each case shall not be assigned
or delegated pursuant to this Agreement (the "Assigned Rights").
TO HAVE AND TO HOLD, subject to the terms, exceptions and other
provisions herein stated, the Assigned Rights unto Assignee, its successors and
assigns, forever.
PART II
ASSUMPTION OF OBLIGATIONS BY ASSIGNEE
Assignee has and by these presents does hereby fully assume and agrees
to perform and timely discharge from and after the Effective Date all
liabilities, duties and obligations of the Assignor that are attributable to the
ownership of the Assigned Rights, including, without limitation, all
liabilities,
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<PAGE> 2
duties and obligations of the Assignor that arise under the Registration Right
Agreement. Assignee agrees to be bound by all of the terms of the Registration
Rights Agreement.
PART III
MISCELLANEOUS
3.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of Assignor and Assignee and their respective successors and assigns.
3.2 GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Texas, except to the extent that it
is mandatory that the law of some other jurisdiction shall apply.
3.4 CAPTIONS. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
3.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed hereto by their respective officers thereunto duly authorized, all as of
the day and year first above written.
SE THUNDERBIRD L.P. ENRON NORTH AMERICA CORP.
By: Blue Heron I LLC, its general partner
By: Whitewing Associates L.P., its sole member
By: Whitewing Management LLC, its general partner
By: Egret I LLC, its managing member By:
-----------------------
Name:
---------------------
Title:
--------------------
By:
-----------------------
Name:
---------------------
Title:
--------------------
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<PAGE> 1
EXHIBIT 3
Agreement to Amend Registration Rights Agreements
December 23, 1999
Enron North America
ECT Merchant Investments Corp.
Sundance Assets, L.P.
SE Thunderbird, L.P.
1400 Smith Street
Houston, Texas 77002
Re: Kafus Industries, Ltd.
Amendment of Registration Rights Agreements
Ladies and Gentlemen:
Reference is made to the Registration Rights Agreement dated as of
December 31, 1998 (the "December 31st Registration Rights Agreement"), made by
Kafus Industries, Ltd. (formerly Kafus Environmental Industries, Ltd.), a
British Columbia corporation (the "Company"), and Enron North America Corp.
(formerly "Enron Capital & Trade Resources Corp."), a Delaware corporation
("Enron"), the Amended and Restated Registration Rights Agreement dated as of
March 11,1999 between Sundance Assets, L.P. ("Sundance") and the Company (the
"Sundance Registration Rights Agreement"), and the Registration Rights Agreement
dated as of March 11,1999 between the Company and ECT Merchant Investments
Corp., a Delaware corporation and an Affiliate of Enron ("ECTMI") (the "ECTMI
Registration Rights Agreement"). The December 31st Registration Rights
Agreement, the Sundance Registration Rights Agreement and the ECTMI Registration
Rights Agreement are collectively referred to as the "Registration Rights
Agreements").
This Agreement To Amend Registration Rights Agreements (the
"Agreement") is intended to amend certain terms under the Registration Rights
Agreements pursuant to which the Company had agreed to seek effectiveness of a
registration statement, on or before the "Effectiveness Deadline," covering the
sale of certain securities in the Company. Unless otherwise indicated, all of
the capitalized terms used herein shall have the meanings ascribed to them in
the relevant Registration Rights Agreement.
Enron, ECTMI, and Sundance have now agreed to waive any of their rights
and remedies arising from or related to the Company's inability to have the
registration statements required by the Registration Rights Agreements declared
effective by the Effectiveness Deadline. The parties have further agreed to
amend the Registration Rights Agreements to change the Filing Deadlines to June
30, 2000 with respect to those shares that were to be registered pursuant to the
ECTMI Registration Rights Agreement and to December 31, 2000 with respect to
those shares that were to be registered pursuant to the Sundance Registration
Rights Agreement. The parties have further agreed to correspondingly amend the
dates by which the subject registration statements were to be declared effective
and certain penalty provisions were to be invoked.
<PAGE> 2
In consideration for the mutual covenants and agreements of the
parties, the Company, Enron, ECTMI, Sundance, and SE Thunderbird L.P.
("Thunderbird") now agree as follows:
1. Waiver. Enron, ECTMI, and Sundance hereby permanently waive and
voluntarily relinquish any and all rights and remedies arising from or related
to the Company's failure to file the above-referenced registration statements by
June 30, 1999 and/or have such registration statements declared effective on or
prior to the 150th day following such Filing Deadlines.
2. New Filing Deadlines. Section 2(a) of the December 31st Registration
Rights Agreement, as amended by the ECTMI Registration Rights Agreement, is
hereby amended to provide for a Filing Deadline of June 30, 2000. Section 2(a)
of the Sundance Registration Rights Agreement is hereby amended to provide for a
Filing Deadline of December 31, 2000. All other applicable dates and deadlines
are correspondingly adjusted and amended. The Company shall indemnify Enron,
Sundance, and ECTMI and hold them harmless from and against any and all taxes,
damages, liabilities, losses, claims, penalties, expenses, and costs, including
reasonable attorneys' fees and court costs, arising from the foregoing waivers,
adjustments, and amendments.
3. Demand Registration Right. At any time, ECTMI or Sundance (or their
respective transferees) may serve written notice on the Company (the "Amended
Filing Deadline Notice") requiring the Company to file within thirty (30) days
of receipt of such Amended Filing Deadline Notice a registration statement
covering any or all of the securities identified in the Amended Filing Deadline
Notice (whether or not such securities were previously covered by any of the
Registration Rights Agreements). Delivery of the Amended Filing Deadline Notice
to the Company shall constitute an immediate and effective amendment of the
Filing Deadlines set forth above. ECTMI and Sundance (or their respective
transferees) shall be limited to delivering no more than two (2) Amended Filing
Deadline Notices.
4. Amendment of July 16th Registration Rights Agreement. Except as
described below, nothing in this Agreement shall serve to amend the terms and
conditions of that certain Registration Rights Agreement dated as of July 16,
1997 between the Company and Enron. The Company shall promptly proceed to file a
registration statement covering those 9,000,000 shares formerly registered by
the Company (which registration statement has now lapsed) pursuant to such
agreement and 730,000 shares issued in payment of dividends owing on the Series
I Preference Shares ("Dividend Shares") held by Sundance. The Company shall
promptly amend such registration statement as necessary to cover any Dividend
Shares that may be issued in the future from time to time (including the 102,358
Dividend Shares owing with respect to the semiannual period ended June 30,
1999), as well as any other shares that may be Registrable Securities within the
meaning of such Registration Rights Agreement. The parties hereby confirm that
the terms of such Registration Rights Agreement apply in all respects to (i) the
Shares, as defined in the Subscription Agreement dated July 16, 1997 between the
Company and Enron (inclusive of the 1,999,999 share portion thereof assigned by
Enron to Thunderbird on December 21, 1999), (ii) the 750,000 shares transferred
to Enron pursuant to the Fee Agreement dated July 16, 1997 between Enron and The
CanFibre Group Ltd., (iii) all Dividend Shares that may be issued from time to
time, and (iv) any shares Enron might receive in payment for its Series I
Preference Shares pursuant to the Waiver And Amendment Agreement dated August
18,
2
<PAGE> 3
1998 between Enron and The Samarac Corporation, Ltd. Enron hereby permanently
waives and voluntarily relinquishes any and all rights and remedies arising from
or related to the Company's failure to keep such registration statement
effective prior to the date hereof.
5. Counterparts. This Agreement may be executed in counterparts which
together shall constitute one and the same instrument.
6. Choice of Law; Integration. This letter agreement shall be governed
and construed in accordance with the laws of the State of Texas, notwithstanding
any conflicts of law principles that would direct the application of the laws of
another jurisdiction. This letter agreement contains the entire agreement among
the parties with respect to the subject matter hereof.
EXECUTED as of the date first written above.
Very truly yours,
KAFUS INDUSTRIES, LTD., fka KAFUS
ENVIRONMENTAL INDUSTRIES, LTD.
By:
-----------------------------------
Mike McCabe, President
AGREED TO AND ACCEPTED
as of the date first above written.
ENRON NORTH AMERICA CORP., fka
ENRON CAPITAL & TRADE RESOURCES CORP.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
ECT MERCHANT INVESTMENTS CORP.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
3
<PAGE> 4
SUNDANCE ASSETS, L.P.
By: Ponderosa L.P., its general partner
By: Enron Ponderosa Management Holdings, Inc.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
SE THUNDERBIRD L.P.
By: Blue Heron I LLC, its general partner
By: Whitewing Associates L.P., its sole member
By: Whitewing Management LLC, its general partner
By: Egret I LLC, its managing member
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
4
