<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D/A
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 5)
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)
March 20, 2000
(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 12
<PAGE> 2
SCHEDULE 13D
CUSIP NO.: 482910 10 6
1 NAME OF REPORTING PERSON
S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSON
ECT Merchant Investments 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 2,737,499
REPORTING -----------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
-----------------------------------------------
10 SHARED DISPOSITIVE POWER
2,737,499
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,737,499
- --------------------------------------------------------------------------------
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)
9.5%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
Page 2 of 12
<PAGE> 3
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 9,641,376
REPORTING ------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
------------------------------------------------
10 SHARED DISPOSITIVE POWER
9,641,376
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,641,376
- --------------------------------------------------------------------------------
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)
26.8%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- --------------------------------------------------------------------------------
Page 3 of 12
<PAGE> 4
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 13,128,875
REPORTING ------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
------------------------------------------------
10 SHARED DISPOSITIVE POWER
13,128,875
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
13,128,875
- --------------------------------------------------------------------------------
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)
35.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
Page 4 of 12
<PAGE> 5
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 13,128,875
REPORTING ---------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
---------------------------------------------
10 SHARED DISPOSITIVE POWER
13,128,875
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
13,128,875
- --------------------------------------------------------------------------------
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)
35.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
Page 5 of 12
<PAGE> 6
STATEMENT ON SCHEDULE 13D/A
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.), (iii) Enron Corp. ("Enron"), and (iv) ECT
Merchant Investments Corp. ("ECT Merchant"), 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, as amended by a Schedule 13D/As dated September 4,
1998, January 12, 1999, March 22, 1999, and January 3, 2000, is further amended
by the following:
Item 2. Identity and Background.
ECT Merchant, a Delaware corporation, is a wholly owned subsidiary of ENA that
engages in the business of holding merchant investments. The address of its
principal business and principal office is 1400 Smith Street, Houston, TX 77002.
The Schedules to this statement report current information regarding the
officers and directors of ECT Merchant, 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 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.
Page 6 of 12
<PAGE> 7
Item 3. Source and Amount of Funds or Other Consideration; Item 4. Purpose of
Transaction and Item 5. Interest in Securities of the Issuer.
A. Changes in Reported Information. This Schedule 13D amendment reports
the restructuring of a $11.25 Million Exchangeable Promissory Note, the
amendment of a warrant, the transfer of certain investments, the accrual of
dividends on the Series I Preference Shares ("Preference Shares"), and the
transfer of 1,999,999 shares of common stock, no par value per share ("Common
Stock"), from SE Thunderbird L.P. ("Thunderbird") to ECT Merchant.
(i). Restructuring of $11.25 Million Exchangeable Promissory
Note. On or about January 13, 2000, the Issuer and Sundance amended the terms of
the $11.25 Million Exchangeable Promissory Note and granted the Issuer a
purchase option with respect thereto. The amendment to the $11.25 Million
Exchangeable Promissory Note and its related Note Purchase Option Agreement are
attached as Exhibits 1 and 2 hereto.
(ii). Replacement of Warrant. As reported by the Reporting
Persons in the Schedule 13D/A filed January 3, 2000, 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.
This warrant is attached hereto as Exhibit 5.
(iii). Transfers to ENA CLO I Holding Company I L.P. ("CLO").
ENA manages the assets of CLO, an unaffiliated entity that owns instruments
issued by the Issuer (as well as other investments) pursuant to an asset
management agreement. In its role as manager of CLO's assets, ENA's authority to
vote and dispose of CLO's assets, including the instruments issued by the
Issuer, is defined by the terms of the asset management agreement which
requires, among other things, that ENA act in CLO's best interests in its
management of CLO's assets. Therefore, ENA has the ability and authority to
cause CLO to act jointly or in concert with ENA and its affiliates, provided
that such action complies
Page 7 of 12
<PAGE> 8
with ENA's obligations under the asset management agreement; any such actions,
however, would be taken by ENA solely in its capacity as asset manager on behalf
of CLO and on behalf of CLO as owner of the assets, and not on ENA's behalf or
for ENA's benefit. In a transaction which occurred on December 22, 1999, the
following instruments and the registration rights related thereto were
transferred to CLO: (i) the Deferred Payment Purchase Agreement dated as of June
1, 1997, (ii) the $12,500,000 Convertible Promissory Note (Advancing Credit
Facility) dated as of December 31, 1998, and (iii) the $7,500,000 Convertible
Promissory Note (Advancing Credit Facility) dated as of March 11, 1999.
(iv). Accrual of Dividend Rights. Pursuant to the terms of the
Preference Shares, Sundance is entitled to receive 136,517 shares of Common
Stock as dividends thereon with respect to the semiannual period beginning July
1, 1999 and ending December 31, 2000.
(v). Transfer from Thunderbird to ECT Merchant. In December,
1999, Thunderbird acquired 1,999,999 shares of Common Stock and certain
registration rights incident thereto. On March 20, 2000, Thunderbird sold these
shares and registration rights in a private transaction to ECT Merchant for
approximately $6.8125 per share.
B. Beneficial Ownership.
(i). Sundance. 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 7,911,375 shares of Common Stock: (a) 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 (inclusive of the amended
warrant attached hereto as Exhibit 5), (b) 15,000 Series I Preference Shares
("Preference Shares"), which may be converted into 3,750,000 shares of Common
Stock at any time, (c) a Convertible Promissory Note (Term Loan A) issued by the
Issuer in the original principal amount of $10 million (the "Term Loan A Note"),
which has (x) a principal balance of $10 million that may be converted into
1,250,000 shares of Common Stock at any time and
Page 8 of 12
<PAGE> 9
(y) an interest component which, including the interest accrued through December
31, 1999, may be converted upon conversion of such note into 127,500 shares of
Common Stock (or a greater number of shares, if the 30 day trade weighted
average of the sales prices of the Common Stock at the time of conversion is
less than $8.00, subject to certain adjustments), and (d) a right to accrued
dividends on the Preference Shares in the amount of 238,875 shares of Common
Stock. If Sundance converted or exercised all instruments and securities held by
it that are convertible or exercisable within sixty days, the 9,641,376 shares
it would hold would represent approximately 26.8% of the Issuer's outstanding
Common Stock.
(ii) ECT Merchant. ECT Merchant holds (a) 2,099,999 shares of
Common Stock, (b) an immediately exercisable warrant to acquire 487,500 shares
of Common Stock, and (c) an immediately exercisable warrant to acquire 150,000
shares of Common Stock. If ECT Merchant exercised its warrants, the 2,737,499
shares it would hold would represent approximately 9.5% of the Issuer's
outstanding Common Stock.
(iii) ENA. ENA holds 750,000 shares of Common Stock. When
aggregated with the shares beneficially owned by ECT Merchant and Sundance,
these 13,128,875 shares would represent approximately 35.9% of the Issuer's
outstanding Common Stock that would be outstanding upon the exercise and
conversion of the foregoing securities.
(iv) Enron. The 13,128,875 shares of Common Stock in the
aggregate that are beneficially owned by Sundance, ECT Merchant, and ENA
collectively represent approximately 35.9% of the Issuer's outstanding Common
Stock that would be outstanding upon the exercise and conversion of the
foregoing securities.
C. Disclaimer of Beneficial Ownership. Because of their control
relationships, Enron may be deemed to beneficially own the shares held by ENA,
and ENA may be deemed to beneficially own both the 9,641,376 shares beneficially
owned by Sundance and the 2,737,499 shares beneficially owned by
Page 9 of 12
<PAGE> 10
ECT Merchant. Further, ENA, Enron, Ponderosa Assets, L.P., which is Sundance's
general partner ("Ponderosa"), and Enron Ponderosa Management Holdings, Inc.
("EPPH"), which is Ponderosa's general partner, may be deemed to share voting
and dispositive power over the Common Stock beneficially owned by Sundance.
Similarly, ENA and Enron could be deemed to share voting and dispositive power
over the 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/A shall not be
construed as an admission that ECT Merchant, Sundance, Ponderosa, EPMH, ENA,
Enron or any person listed on the Schedules 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 13-d-3(d)(1)(i)(D) and assume that
28,043,359 shares of Common Stock are actually outstanding on the date of this
statement.
D. Other Instruments. 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 days after the filing of this statement,
except upon the occurrence of extraordinary and unpredictable events, such as a
default on indebtedness. Other than the transactions described herein and in the
Schedule 13D/A filed January 3, 2000, none of the Reporting Entities, nor, to
their knowledge, 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. Amendment to Exchangeable Promissory Note dated as of
January 13, 2000 between Kafus Cement Fibre
Industries of Texas, Inc. and Sundance.
Page 10 of 12
<PAGE> 11
Exhibit 2. Note Purchase Option Agreement dated as of January
13, 2000 between the Issuer and Sundance.
Exhibit 3. Purchase and Sale Agreement dated March 20, 2000
between Thunderbird and ECT Merchant.
Exhibit 4. Assignment and Assumption Agreement dated March 20,
2000 between Thunderbird and ECT Merchant.
Exhibit 5. Warrant dated as of August 18, 1998 issued by the
Issuer to Sundance in the amount of 250,000 warrants.
Exhibit 6. Joinder Agreement dated March 20, 2000 among ECT
Merchant, Enron, ENA, and Sundance.
Page 11 of 12
<PAGE> 12
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: April 11, 2000 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
-----------------------------------------
Name: Julia Heintz Murray
---------------------------------------
Title: Managing Director, General Counsel,
Finance and Secretary
--------------------------------------
Date: April 11, 2000 ENRON NORTH AMERICA CORP.
By: /s/ JULIA HEINTZ MURRAY
-----------------------------------------
Name: Julia Heintz Murray
--------------------------------------
Title: Managing Director, General Counsel,
Finance and Secretary
--------------------------------------
Date: April 11, 2000 ENRON CORP.
By: /s/ ANGUS H. DAVIS
-----------------------------------------
Name: Angus H. Davis
---------------------------------------
Title: Vice President and Deputy
Corporate Secretary
--------------------------------------
Date: April 11, 2000 ECT MERCHANT INVESTMENTS CORP.
By: /s/ JULIA HEINTZ MURRAY
----------------------------------------
Name: Julia Heintz Murray
---------------------------------------
Title: Managing Director, General Counsel,
Finance and Secretary
--------------------------------------
Page 12 of 12
<PAGE> 13
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
ENRON NORTH AMERICA CORP.
(FORMERLY ENRON CAPITAL & TRADE RESOURCES 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 Executive
Officer and Managing Director
Mark E. Haedicke U.S.A Director; Managing Director and General Counsel
David W. Delainey 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
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
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
Robert J. Hermann U.S.A. Managing Director
Vince J. Kaminski U.S.A. Managing Director
Julie Heintz Murray U.S.A. Managing Director, General Counsel, Finance and
Secretary
Raymond M. Bowen, Jr. U.S.A. Managing Director and Treasurer
Janet R. Dietrich U.S.A. Managing Director
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
George A. McClellan, III U.S.A. Managing Director
James B. Fallon U.S.A. Managing Director
Gary J. Hickerson U.S.A. Managing Director
Jeffrey M. Donahue U.S.A. Managing Director
</TABLE>
<PAGE> 15
SCHEDULE II
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; Chief Executive Officer and Secretary
5885 Garden River Cove General, United States Olympic Committee
Memphis, TN 38120
Ronnie C. Chan U.S.A. Director; Chairman of Hang Lung Development
Hang Lung Development Group
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
Meridional 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 Bracewell & Patterson, L.L.P.
South Tower Pennzoil Place
711 Louisiana, Ste. 2900
Houston, TX 77002
Wendy L. Gramm U.S.A. Director; Director, Regulatory Studies Program of
P. O. Box 39134 the Mercatus Center, George Mason University
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> 16
<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 Ctr.
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; Chairman and CEO, Capricorn Holdings,
Capricorn Holdings, Inc. Inc.
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
1400 Smith Street Officer
Houston, TX 77002
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
Mark E. Koenig U.S.A. Executive Vice President, Investor Relations
1400 Smith Street
Houston, TX 77002
James V. Derrick, Jr. U.S.A. Executive Vice President and General Counsel
1400 Smith Street
Houston, TX 77002
Steven J. Kean U.S.A. Executive Vice President and Chief of Staff
1400 Smith Street
Houston, TX 77002
Andrew S. Fastow U.S.A. Executive Vice President and Chief Financial
1400 Smith Street Officer
Houston, TX 77002
Mark A. Frevert U.S.A. President and Chief Executive Officer, Enron
1400 Smith Street Europe, 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 Mark-Jusbasche 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
Cindy K. Olson U.S.A. Executive Vice President, Human Resources and
1400 Smith Street Community Relations
Houston, TX 77002
Jeffrey McMahon U.S.A. Executive Vice President, Finance and Treasurer
1400 Smith Street
Houston, TX 77002
Michael S. McConnell U.S.A. Executive Vice President, Technology
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-Chief Executive Officer and President, Enron
1400 Smith Street Broadband Services, Inc.
Houston, TX 77002
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
Jeffrey K. Skilling U.S.A. Director; President and Chief Operating Officer,
1400 Smith Street Enron Corp.
Houston, TX 77002
Joseph W. Sutton U.S.A. Vice Chairman, Enron Corp.
1400 Smith Street
Houston, TX 77002
Joseph M. Hirko U.S.A. Co-Chief Executive Officer, Enron Broadband
1400 Smith Street Services, Inc.
Houston, TX 77002
</TABLE>
<PAGE> 19
SCHEDULE III
DIRECTORS AND EXECUTIVE OFFICERS
ECT MERCHANT INVESTMENTS CORP.
<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, Texas 77002
J. Clifford Baxter U.S.A. Director; Chairman, Chief Executive Officer and
Managing Director
James V. Derrick, Jr. U.S.A. Director
Mark E. Haedicke U.S.A. Director; Managing Director and General Counsel
David W. Delainey U.S.A. President and Managing Director
Raymond M. Bowen, Jr. U.S.A. Managing Director
W. Craig Childers U.S.A. Managing Director
Robert J. Hermann U.S.A. Managing Director and General Tax Counsel
Jeffrey McMahon U.S.A. Managing Director, Finance and Treasurer
Julie Heintz Murray U.S.A. Managing Director, General Counsel, Finance and
Secretary
Gregory F. Piper U.S.A. Managing Director
</TABLE>
<PAGE> 20
SCHEDULE IV
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
Mark E. Haedicke U.S.A. Director; Managing Director and General Counsel
J. Clifford Baxter U.S.A. Director and Chairman, Chief
Executive Officer and Managing Director
David W. Delainey U.S.A. President and Managing Director
Raymond M. Bowen, Jr. U.S.A. Managing Director
Richard B. Buy U.S.A. Managing Director
Andrew S. Fastow U.S.A. Managing Director
Robert J. Hermann U.S.A. Managing Director and General Tax Counsel
Michael J. Kopper U.S.A. Managing Director
Jeffrey McMahon U.S.A. Managing Director, Finance and Treasurer
Kristina M. Mordaunt U.S.A. Managing Director and General Counsel, Structured
Finance
Julie Heintz Murray U.S.A. Managing Director, General Counsel, Finance and Secretary
</TABLE>
<PAGE> 21
INDEX TO EXHIBITS
Exhibit
No. Description
------- -----------
Exhibit 1. Amendment to Exchangeable Promissory Note dated as of
January 13, 2000 between Kafus Cement Fibre
Industries of Texas, Inc. and Sundance.
Exhibit 2. Note Purchase Option Agreement dated as of January
13, 2000 between the Issuer and Sundance.
Exhibit 3. Purchase and Sale Agreement dated March 20, 2000
between Thunderbird and ECT Merchant.
Exhibit 4. Assignment and Assumption Agreement dated March 20,
2000 between Thunderbird and ECT Merchant.
Exhibit 5. Warrant dated as of August 18, 1998 issued by the
Issuer to Sundance in the amount of 250,000 warrants.
Exhibit 6. Joinder Agreement dated March 20, 2000 among ECT
Merchant, Enron, ENA, and Sundance.
<PAGE> 1
EXHIBIT 1
[Execution Version]
AMENDMENT TO EXCHANGEABLE PROMISSORY NOTE
This Amendment to Exchangeable Promissory Note ("Agreement") dated as
of January 13, 2000, is between Kafus Cement Fibre Industries of Texas, Inc.
("Borrower") and Sundance Assets, L.P. ("Lender"). Reference is made to the
Exchangeable Promissory Note dated as of March 31, 1998 (as modified, the
Note"), between the Borrower and Enron Capital & Trade Resources Corp. ("ECT"),
an Affiliate of the Lender and predecessor in interest to the Lender thereunder,
which is attached as Exhibit A hereto and to which this Agreement relates.
Reference is made to the Letter Loan Agreement dated as of March 31, 1998 (as
modified, the "Loan Agreement"), between the Borrower and ECT, as predecessor in
interest to the Lender thereunder. Capitalized terms used herein but not defined
herein shall have the meanings specified by the Loan Agreement.
INTRODUCTION
The Borrower and the Lender have agreed to make certain modifications
to the Note and the other Loan Documents. In consideration of the foregoing, and
for other good and valuable consideration, the Borrower and the Lender hereby
agree as follows:
Section 1. Amendment of Note. The Note is amended as follows:
1.1. The third and fourth paragraphs of Section 1 of the Note, granting
certain prepayment rights to the Borrower, are deleted in their entirety and
replaced with the following:
The Borrower shall have no right to prepay any principal amount owed
under this Note.
1.2. The fifth paragraph of Section 1 of the Note, providing for
periodic payments with respect to outstanding principal of the Note, is deleted
in its entirety and replaced with the following:
On December 31, 2000 ("Maturity Date"), if the Kafus Parent (or its
permitted assignee) has not exercised the Note Purchase Option (as such
term is defined in the Note Purchase Option Agreement), including payment
of all amounts due in connection therewith, the Borrower shall repay to the
Lender, through the issuance of Common Stock as provided in Section 5 of
this Note, the entire outstanding principal balance of this Note, together
with all accrued but unpaid interest thereon as provided below.
1.3. The second paragraph of Section 2 of the Note, providing for
periodic payments of interest on the outstanding principal of the Note, is
deleted in its entirety and replaced with the following:
<PAGE> 2
On the Maturity Date, if the Kafus Parent (or its permitted assignee)
has not exercised the Note Purchase Option (as such term is defined in the
Note Purchase Option Agreement), including payment of all amounts due in
connection therewith, the Borrower shall repay to the Lender, through the
issuance of Common Stock as provided in Section 5 of this Note, all accrued
but unpaid interest on the outstanding principal balance of this Note.
1.4. The first paragraph of Section 3 of the Note, providing for
certain advances to be made by the Lender, is deleted in its entirety and
replaced with the following:
[Intentionally deleted.]
1.5. The third paragraph of Section 3 of the Note, providing the terms
applicable to payments made by the Borrower thereunder, is modified by deleting
in its entirety the first sentence thereof and replacing it with the following:
The Borrower shall make all payments required under this Note (other
than the payment of principal and interest which shall be made as provided
in Section 5 of this Note) not later than 1:00 p.m., Houston, Texas, time
on any date when due in lawful money of the United States of America to the
Lender at such location as is specified by the Lender in writing in
immediately available funds.
1.6. Subsections 5.1 and 5.2 of the Note, providing for the exchange of
certain amounts outstanding under the Note for Common Stock, are deleted in
their entirety and replaced with the following:
5.1 Exchange and Exchange Price. (a) On the Maturity Date, if the
Kafus Parent (or its permitted assignee) has not exercised the Note
Purchase Option (as such term is defined in the Note Purchase Option
Agreement), including payment of all amounts due in connection therewith,
the entire outstanding principal balance of this Note, together with all
accrued but unpaid interest hereon, shall be exchanged, as agreed under the
Limited Guaranty, into that number of fully paid and non-assessable shares
of Common Stock obtained by dividing (i) the amount of principal and
interest being so exchanged by (ii) the Exchange Price (as defined below).
In connection with such exchange, upon Lender's receipt of the Exchange
Shares issued in connection with such exchange in accordance with this
Section 5, the entire outstanding principal balance of this Note, together
with all accrued but unpaid interest hereon shall be deemed to have been
paid in full.
(b) As used herein, the following terms shall have the following
meanings:
-2-
<PAGE> 3
"Average Price" with respect to the Common Stock means, on any day,
the trade weighted average of the sales prices for such shares as reported
on Bloomberg News Services (i) on the American Stock Exchange or (ii) if
such shares are not so listed, then on the largest national securities
exchange (based on the aggregate dollar value of securities listed) on
which such shares are listed or traded or (iii) if such shares are not
listed on any national securities exchange, then the prices at which
transactions are effected through the NASDAQ National Market as reported by
NASDAQ or, (iv) if such shares shall not be listed thereon, the trade
weighted average of all transactions in the Common Stock in an
over-the-counter market.
"Exchange Price" shall mean a price per share equal to 85% of the
trade weighted average closing price of the Common Stock for the 30 trading
days immediately prior to the Maturity Date, but with a minimum price of
U.S. $4.00 per share and a maximum price of U.S. $9.00 per share, as the
same may be adjusted pursuant to Section 5.3.
5.2 Issuance of Common Stock on Exchange. On the Maturity Date, if the
Kafus Parent (or its permitted assignee) has not exercised the Note
Purchase Option (as such term is defined in the Note Purchase Option
Agreement), including payment of all amounts due in connection therewith,
the Borrower shall cause the Kafus Parent to deliver or cause to be
delivered to the Lender certificates representing the number of fully paid
and nonassessable Common Stock which the Lender is entitled to in
accordance with the provisions of this Section 5. Such exchange shall be
deemed to have been made at the close of business on the Maturity Date so
that, subject to the following provisions of this Subsection 5.2, the
Lender shall be treated for all purposes as having become the record holder
of such Common Stock at such time. If the Maturity Date shall not be a
Business Day, then such exchange shall be conducted on the next succeeding
Business Day. With respect to such exchange, upon Lender's receipt of the
Exchange Shares issued in connection with such exchange, the outstanding
amounts so exchanged shall be deemed to have been paid in full.
No fractional share of Common Stock shall be issued upon the exchange
of this Note. Instead of any fractional share of Common Stock which would
otherwise be issuable upon exchange of this Note, the Borrower shall cause
the Kafus Parent to pay a cash adjustment in respect of such fraction in an
amount equal to such fraction of a share multiplied by the applicable
Exchange Price.
Section 2. Representations and Warranties. The Borrower represents and warrants
to the Lender that:
2.1. Upon the effectiveness of this Agreement and the amendment of the
Note as provided for herein, all representations and warranties set forth in the
Loan Documents shall be true and correct in all material respects and the
Borrower shall be in compliance with all covenants in the Loan Documents.
-3-
<PAGE> 4
2.2. Upon the effectiveness of this Agreement and the amendment of the
Note as provided for herein, no default or event of default, however
denominated, shall exist under the Loan Documents, and there shall have occurred
no event which with notice or lapse of time would become a default or event of
default under the Loan Documents.
Section 3. Effect on Loan Documents.
3.1. Except as amended herein, the Note and the other Loan Documents
remain in full force and effect. The Borrower further agrees that nothing herein
shall act as a waiver of any of the Lender's rights under the Loan Documents as
amended, including any waiver of any default or event of default, however
denominated. The Borrower must continue to comply with the terms of the Loan
Documents, as amended.
3.2. This Agreement is a Loan Document for the purposes of the
provisions of the other Loan Documents. Without limiting the generality of the
foregoing, any breach of representations, warranties, and covenants under this
Agreement shall be a default and event of default for the purposes of all other
Loan Documents.
Section 4. Effectiveness. This Agreement shall become effective and the Note
shall be amended as provided herein effective as of the date first set forth
above when the Borrower and the Lender shall have duly and validly executed
originals of this Agreement, and the Borrower shall have delivered the same to
the Lender.
Section 5. Miscellaneous.
5.1. Expenses. The Borrower shall pay directly or reimburse the Lender
for all reasonable expenses of the Lender, including charges and disbursements
of legal counsel for the Lender, in connection with the preparation, execution,
delivery, or interpretation of this Agreement and the other Loan Documents, and
the preservation or enforcement of any rights of the Lender hereunder or
thereunder, including the expenses of the Lender prior to the execution of this
Agreement. The provisions of this paragraph shall survive any purported
termination of this Agreement or the other Loan Documents that does not
expressly reference this paragraph.
5.2. Incorporation of Terms. The miscellaneous provisions of the Note
apply to this Agreement. This Agreement may be signed in any number of
counterparts, each of which shall be an original, and may be executed and
delivered by telecopier.
-4-
<PAGE> 5
THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signatures begin on the following page.]
-5-
<PAGE> 6
EXECUTED as of the date first above written.
KAFUS CEMENT FIBRE INDUSTRIES OF TEXAS, INC.
By:
--------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
[Signature page to Amendment to Note]
<PAGE> 7
SUNDANCE ASSETS, L.P.
By: Ponderosa Assets, L.P., its general partner
By: Enron Ponderosa Management Holdings, Inc.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
[Signature page to Amendment to Note]
<PAGE> 1
EXHIBIT 2
NOTE PURCHASE OPTION AGREEMENT
This Note Purchase Option Agreement ("Agreement") dated as of
[effective date], is between Kafus Industries Ltd. ("Kafus") and Sundance
Assets, L.P. ("Lender").
INTRODUCTION
Reference is made to the Exchangeable Promissory Note dated as of March
31, 1998 (as modified, the Note"), between Kafus Cement Fibre Industries of
Texas, Inc. ("Borrower"), a Subsidiary of Kafus, and Enron Capital & Trade
Resources Corp. ("ECT"), an Affiliate of the Lender and predecessor in interest
to the Lender thereunder, which is attached as Exhibit A hereto and to which
this Agreement relates. Reference is further made to the Letter Loan Agreement
dated as of March 31, 1998 (as modified, the "Loan Agreement"), between the
Borrower and ECT, as predecessor in interest to the Lender thereunder. In
connection with certain amendments to the Note, the Loan Agreement, and the
other Loan Documents (as defined in the Loan Agreement), Kafus has requested and
the Lender has agreed to grant Kafus the option provided herein. In connection
with the foregoing, and for other good and valuable consideration, Kafus and the
Lender hereby agree as follows:
Section 1. Definitions. Capitalized terms used herein but not defined
herein shall have the meanings set forth or referred to in the
Loan Agreement. As used herein, the following terms shall have
the following meanings:
"Maturity Date" means September 30, 2000.
"Note Purchase Option" has the meaning set forth in Section 2(a) of
this Agreement.
"Note Rights and Obligations" means means all of the Lender's rights
and obligations under the Note and the other Loan Documents (other than the
Income Participation Certificate) and related documents, including the rights to
the payment of principal, interest, fees, reimbursements, and indemnifications,
and all security and support for such rights and obligations
"Note Purchase Option Price" means an amount equal to the sum of (a)
the entire outstanding principal balance of the Note, together with all accrued
but unpaid interest thereon and any other amounts owing from the Borrower to the
Lender thereunder or in connection therewith, and (b) U.S. $3,000,000.
Section 2. Note Purchase Option.
(a) Upon at least 10 days' prior written notice to
the Lender, Kafus may purchase all, but not less
than all, of the
<PAGE> 2
Note Rights and Obligations from the Lender on
the Maturity Date at a price equal to the Note
Purchase Option Price (such right being the
"Note Purchase Option"). Any written certificate
provided by the Lender to Kafus showing the
calculation of the Note Purchase Option Price
shall be conclusive and binding for all
purposes, absent manifest error. Kafus shall
make payment of the Note Purchase Option Price
to the Lender within ten days after delivery of
the foregoing notice, and upon receipt of such
payment, Lender shall deliver to Kafus the Note
and the other documents evidencing the Note
Rights and Obligations, accompanied with such
transfer endorsements or instruments as are
necessary to transfer the same to Kafus, all
without recourse to the Lender and without
representations or warranties of any kind,
express or implied.
(b) Kafus shall make the foregoing payment to
the Lender by means of a wire transfer of U.S.
Dollars in immediately available funds to the
Lender at such payment location as directed by
the Lender.
Section 3. Effectiveness. This Agreement shall become effective as of the
date first set forth above when Kafus, the Borrower, and the
Lender shall have duly and validly executed originals of this
Agreement, and the Kafus shall have delivered the same to the
Lender.
Section 4. Miscellaneous.
(a) Kafus shall pay to the Lender on demand all
costs and expenses of the Lender in connection
with the preservation or enforcement of the
Lender's rights under this Agreement, whether
through negotiations, legal proceedings, or
otherwise, including fees and expenses of
counsel for the Lender. The provisions of this
paragraph shall survive any purported
termination of this Agreement that does not
expressly reference this paragraph.
(b) Kafus shall at all times protect and hold the
Lender and its respective shareholders,
affiliates, directors, officers, employees,
agents, and servants and the persons under their
respective control or supervision (collectively,
the
-2-
<PAGE> 3
"Indemnified Parties") harmless of, from, and
against any and all claims (whether in tort,
contract, or otherwise), demands, damages,
losses, liabilities, costs, or expenses of any
kind or nature whatsoever (each referred to
herein as a "Loss") which an Indemnified Party
may incur or which may be claimed against an
Indemnified Party by any Person, in each case by
reason of, or arising out of this Agreement and
the Note Rights and Obligations or any other
document or instrument delivered in connection
herewith or therewith or the enforcement of any
of the terms or provisions hereof or thereof or
the transactions contemplated hereby or thereby;
provided, however, that the indemnity set forth
in this Section shall not extend to any Loss
arising, in the case of any Indemnified Party,
as a result of the gross negligence or willful
misconduct of such Indemnified Party. Kafus
further covenants and agrees, to the extent
permitted by law, to pay or to reimburse the
Indemnified Parties for any and all costs,
reasonable attorneys' fees, liabilities, or
expenses incurred in connection with
investigating, defending against, or otherwise
in connection with any such losses, claims,
damages, liabilities, expenses, or actions,
except to the extent that the same arise out of
the gross negligence or willful misconduct of
the Indemnified Party claiming such payment or
reimbursement.
(i) An Indemnified Party shall promptly
notify Kafus in writing of any claim or
action brought against such Indemnified
Party in which indemnity may be sought
against Kafus pursuant to this Section; and
such notice shall be given in sufficient
time to allow Kafus to defend such claim or
action. However, the failure to give such
notice in sufficient time shall not
constitute a defense hereunder nor in any
way impair the obligations of Kafus under
this Section, if (i) the Indemnified Party
shall not have had knowledge or notice of
such claim or action, (ii) neither Kafus nor
any Affiliate thereof shall have had
knowledge or notice of such claim or action,
or (iii) Kafus's ability to defend such
claim or action shall not thereby be
materially impaired. In the event,
-3-
<PAGE> 4
however, that (i) the Indemnified Party
shall not have timely notified Kafus of any
such claim or action, (ii) neither Kafus nor
any Affiliate thereof shall have had
knowledge or notice of such claim or action,
and (iii) Kafus's ability to defend or
participate in such claim or action is
materially impaired by reason of not having
received timely notice thereof from the
Indemnified Party, then Kafus's obligation
to so defend and indemnify shall be
qualified to the extent (and only to the
extent) of such material impairment.
(ii) The obligations of Kafus under this
Section shall survive the termination of
this Agreement and remain in full force and
effect, with respect to each Loss of each
Indemnified Party, until the later of (i)
the expiration of the period stated in the
applicable statute of limitations during
which a claim or cause of action may be
brought, and (ii) payment in full or the
satisfaction of such claim or cause of
action and of all expenses and charges
incurred by such Indemnified Party relating
to the enforcement of the provisions herein
specified.
(c) This Agreement shall be governed by the
internal laws of the State of Texas (without
reference to principles of conflicts of laws
that would select another law). Unless otherwise
specified, all monetary amounts expressed
hereunder and all payments required to be made
hereunder are in U.S. Dollars. Any and all
payments by Kafus under this Agreement shall be
made free and clear of and without deduction for
any and all present or future taxes, levies,
imposts, deductions, charges, or withholdings,
and all liabilities with respect thereto, other
than taxes imposed on the income of and
franchise taxes imposed on the Lender by any
jurisdiction in which the Lender is a permanent
citizen or resident or any political subdivision
of such jurisdiction (all such non-excluded
taxes, levies, imposts, deductions, charges,
withholdings, and liabilities being hereinafter
referred to as "Taxes"). If Kafus shall be
required by law to deduct any Taxes from any sum
payable to the Lender (i) the sum payable
-4-
<PAGE> 5
shall be increased as may be necessary so that,
after making all required deductions (including
deductions applicable to additional sums payable
under this paragraph), the Lender receives an
amount equal to the sum it would have received
had no such deductions been made, (ii) Kafus
shall make such deductions, and (iii) Kafus
shall pay the full amount deducted to the
relevant taxation authority or other authority
in accordance with applicable law. Kafus agrees
to pay any present or future stamp or
documentary taxes or any other excise or
property taxes, charges, or similar levies which
arise from any payment made with respect to, or
from the execution, delivery, filing, or
registration of, this Agreement. Further, If any
sum due from Kafus under this Agreement or any
order or judgment given in relation hereto has
to be converted from the currency in which the
same is payable hereunder or under such order or
judgment (the "first currency") into another
currency (the "second currency") for the purpose
of (i) making or filing a claim or proof against
Kafus with any governmental authority or in any
court, tribunal, or arbitration panel or (ii)
enforcing any order or judgment given in
relation hereto, Kafus shall indemnify the
Lender against any loss incurred as a result of
any discrepancy between (A) the rate of exchange
used when restating the amount in question from
the first currency into the second currency and
(B) the rate or rates of exchange at which the
Lender purchased the first currency with the
second currency after receipt of a sum paid to
it in the second currency in satisfaction, in
whole or in part, of any such sum due or order
or judgment. The foregoing indemnity shall
constitute a separate obligation of Kafus
distinct from any other obligations and shall
survive the giving or making of any judgment or
order in relation to all or any of such other
obligations.
(d) If any provision in this Agreement is held to
be unenforceable, such provision shall be
severed and the remaining provisions shall
remain in full force and effect. All
representations, warranties, and covenants of
Kafus in this Agreement shall survive the
execution of this Agreement and any other
contract or agreement. If a due date for an
amount
-5-
<PAGE> 6
payable is not specified in this Agreement, the
due date shall be the date on which the Lender
demands payment therefor. The Lender's remedies
under this Agreement and other documents and
agreements shall be cumulative, and no delay in
enforcing this Agreement shall act as a waiver
of the Lender's rights thereunder. The
provisions of this Agreement may be waived or
amended only in a writing signed by the party
against whom enforcement is sought. This
Agreement shall bind and inure to the benefit of
Kafus and the Lender and their respective
successors and assigns. Kafus may not assign its
rights or delegate its duties under this
Agreement without the prior written consent of
the Lender, which consent shall not be
unreasonably withheld; provided that Kafus may
assign its rights or delegate its duties under
this Agreement to The Samarac Corporation Ltd.
without the consent of the Lender. The Lender
may assign its rights and delegate its duties
under this Agreement. This Agreement may be
executed and delivered by telecopier, and may be
executed in multiple counterparts each of which
shall constitute one and the same agreement.
(e) Except as otherwise provided herein, any
notice, demand, direction, certificate, request,
instrument, or other communication authorized or
required by this Agreement to be given to or
filed with the Lender or Kafus shall be deemed
to have been sufficiently given or filed for all
purposes of this Agreement if and when delivered
by messenger or by a recognized courier service
or sent by registered or certified mail, return
receipt requested, postage prepaid or sent by
confirmed telecopy, as follows:
To the Lender, to:
Sundance Assets, L.P.
1400 Smith Street
Houston, Texas 77002
Attention: J. Kevin McConville
Telephone: 713-853-7691
Telecopier: 713-646-5727
-6-
<PAGE> 7
With a copy to:
Enron North America Corp.
Attn: Donna Lowry
1400 Smith Street
Houston, Texas 77002
telephone: 713-853-1939
telecopier: 713-646-4039
And a copy to:
Enron Capital Management
Attn: Ben Glisan
1400 Smith Street
Houston, Texas 77002
telephone: 713-853-6103
telecopier: 713-646-4990
To Kafus, to:
Kafus Industries Ltd.
270 Bridge Street
Dedham, MA 02026
Attn: Mr. Michael A. McCabe
telephone: 781-326-5001
telecopier: 781-326-5105
With copies to:
Kafus Industries Ltd.
440-755 Burrad Street
Vancouver, British Columbia
Canada V6X1X6
Attn: Mr. Ken Swaisland
telephone: 604-602-1981
telecopier: 604-685-2426
The Lender and Kafus may, by like notice, designate any
further or different addresses or telecopy numbers to which subsequent notices,
demands, directions, certificates, requests,
-7-
<PAGE> 8
instruments, or other communications hereunder shall be sent. Any notice,
demand, direction, certificate, request, instrument, or other communication
hereunder shall, except as may expressly be provided herein, be deemed to have
been delivered or given as of the date it shall have been delivered by messenger
or courier service or sent by confirmed telecopy or upon receipt if mailed.
THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signatures begin on the following page.]
-8-
<PAGE> 9
EXECUTED as of the date first above written.
KAFUS INDUSTRIES LTD.
By:
--------------------------------
Name:
-------------------------------
Title:
------------------------------
[Signature page to Note Purchase Option Agreement]
-9-
<PAGE> 10
SUNDANCE ASSETS, L.P.
By: Ponderosa Assets, L.P., its general partner
By: Enron Ponderosa Management Holdings, Inc.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
[Signature page to Note Purchase Option Agreement]
-10-
<PAGE> 11
Consented and Agreed:
KAFUS CEMENT FIBRE INDUSTRIES OF TEXAS, INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
[Signature page to Note Purchase Option Agreement]
-11-
<PAGE> 1
EXHIBIT 3
PURCHASE AND SALE AGREEMENT
DATED AS OF MARCH 20, 2000
BETWEEN
ECT MERCHANT INVESTMENTS CORP.
AS PURCHASER
AND
SE THUNDERBIRD L.P.
AS SELLER
<PAGE> 2
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into as
of March 20, 2000 and is by and among ECT MERCHANT INVESTMENTS CORP., a Delaware
corporation (the "Purchaser"), and SE THUNDERBIRD L.P., a Delaware limited
partnership (the "Seller").
R E C I T A L S:
A. The Seller owns the Kafus Shares, 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.
<PAGE> 3
"Closing Date" is defined in Section 2.1(a).
"Purchase Price" means $13,624,993.
"Purchased Assets" means the Kafus Shares and all rights to be
transferred to the Purchaser pursuant to the Ancillary Agreements.
"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
in consideration of such Purchased Assets. In connection therewith, the Seller
shall deliver to the Purchaser: (i) the stock certificates representing the
Kafus Shares, (ii) a duly executed Transfer of Shares in form and substance
satisfactory to the parties, (iii) a duly executed Assignment and Assumption
Agreement related to rights applicable to the Kafus Shares under the
Registration Rights Agreement described therein in form and substance
satisfactory to the parties, and (iv) a duly executed letter from Seller to
Kafus providing notice of the transfer to Purchaser in form and substance
satisfactory to the parties.
(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: SE Thunderbird
L.P. 1400 Smith Street, Houston, Texas 77002, Citibank, New York, NY, Account
number: 3042-4197, ABA number: 021-000-089.
Section 2.2 Closing. The closing for the sale of the Purchased Assets
shall occur at the offices of Enron North America Corp. at 1400 Smith 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
-2-
<PAGE> 4
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 applicable
bankruptcy, reorganization, insolvency, moratorium, or similar laws affecting
creditors' rights generally and by general principles of equity.
(e) 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 Kafus, other than those disclosed to the public and those
disclosed to the Purchaser in writing prior to the date hereof.
(f) To the knowledge of Seller, no action, suit, or proceeding has been
commenced against Kafus 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
-3-
<PAGE> 5
have a material and adverse effect on the business, operations, properties,
assets, or condition (financial or otherwise) of Kafus.
(g) 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.
(h) 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.
(i) 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.
(j) 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 Kafus, its assets, financial performance,
financial condition, and prospects, or any other matter affecting it.
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 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
Kafus. The Purchaser has had an adequate opportunity to ask questions and
receive answers from the officers of Kafus 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.
-4-
<PAGE> 6
(c) The Purchaser is aware that the Kafus Shares 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.
(d) 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.
(e) 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.
(f) 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.
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.
-5-
<PAGE> 7
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.
(b) 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.
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:
-6-
<PAGE> 8
If to the Seller:
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: Rose Engeldorf
If to the Purchaser:
ECT Merchant Investments Corp.
1400 Smith Street
Houston, Texas 77002
Attn: Donna Lowry
with a copy to:
ECT Merchant Investments Corp.
1400 Smith Street
Houston, Texas 77002
Attn: Julia Heintz Murray
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.
-7-
<PAGE> 9
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 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
-8-
<PAGE> 10
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]
-9-
<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. ECT MERCHANT INVESTMENTS
By: Blue Heron I LLC, its general partner CORP.
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:
-------------------
-10-
<PAGE> 1
EXHIBIT 4
ASSIGNMENT AND ASSUMPTION AGREEMENT
(KAFUS INDUSTRIES LTD.)
This Assignment and Assumption Agreement (this "Agreement"), dated as
of March 20, 2000 (the "Effective Date"), is between SE Thunderbird L.P., a
Delaware limited partnership (the "Assignor"), and ECT Merchant Investments
Corp., a Delaware corporation (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 Agreements" means the Registration Rights
Agreement dated March 11, 1999, between Kafus Industries Ltd. ("Kafus")
and Assignee and the Registration Rights Agreement dated as of July 16,
1997, between Kafus and Enron Capital & Trade Resources Corp., now
known as Enron North America Corp., as each of them 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 Agreements, 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 other debt, equity or other
instruments of Kafus held by Assignor 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, duties and obligations of the Assignor that arise under the
Registration
<PAGE> 2
Rights Agreements. Assignee agrees to be bound by all of the terms of the
Registration Rights Agreements.
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.
3.3 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.
3.4 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.
(signature pages follow)
-2-
<PAGE> 3
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.
<TABLE>
<S> <C>
SE THUNDERBIRD L.P. ECT MERCHANT INVESTMENTS 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:
By: Egret I LLC, its managing member -------------------------
Name:
-----------------------
By: Title:
------------------------- ----------------------
Name:
-----------------------
Title:
----------------------
</TABLE>
-3-
<PAGE> 1
EXHIBIT 5
WARRANT
- --------------------------------------------------------------------------------
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND
MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR IN RELIANCE ON AN AVAILABLE
EXEMPTION FROM THE ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 2.
- --------------------------------------------------------------------------------
KAFUS INDUSTRIES LTD.
Common Stock Purchase Warrant
Representing Right To Purchase Shares of
Common Stock
of
Kafus Industries Ltd.
<PAGE> 2
FOR VALUE RECEIVED, KAFUS INDUSTRIES LTD., a British Columbia
corporation (the "Company"), hereby certifies that Sundance Assets, L.P., a
Delaware limited partnership, (the "Holder"), is entitled to purchase from the
Company at any time or from time to time during the period (the "Exercise
Period") commencing on the date hereof, and ending on 5:00 p.m. (Toronto,
Ontario time) on July 31, 2008 (the "Expiration Date"), 250,000 shares of Common
Stock of the Company (the Common Stock of the Company being referred to herein
as the "Common Stock" and such number of shares of Common Stock as adjusted
pursuant to the terms hereof, being the "Warrant Shares"), at a price per share
equal to the weighted average closing price of Common Stock for the 15 trading
days immediately prior to commencement of the Exercise Period, but with a
minimum price of U.S. $3.50 and a maximum price of U.S. $4.00 (as such price may
be adjusted pursuant to the terms hereof, the "Exercise Price"). This Warrant
was issued to the Holder (together with such other warrants as may be issued in
exchange, transfer, or replacement of this Warrant, the "Warrants") in
connection with the U.S. $12,500,000 Promissory Note dated as of August 18, 1998
(the "Note"), made by the Company and payable to the order of the Holder, and
entitles the Holder to purchase the Warrant Shares and to exercise the other
rights, powers, and privileges hereinafter provided.
Section 1. Exercise of Warrant; Cancellations of Warrant. This Warrant
may be exercised in whole or in part, at any time or from time to time, during
the Exercise Period, by presentation to the Company at its principal office at
the address set forth in Section 9 of (a) this Warrant, with the Purchase Form
annexed hereto as Exhibit A duly executed and (b) a certified bank check equal
to the Exercise Price for the Warrant Shares for which this Warrant is being
exercised (the date of such delivery referred to herein as the "Exercise Date").
Within five business days after payment of the Exercise Price, the Company shall
execute and deliver to the Holder a certificate or certificates for the total
number of Warrant Shares for which this Warrant is being exercised, in such
names and denominations as requested in writing by the Holder. The Company shall
pay any and all documentary stamp or similar issue taxes payable in respect of
the issue of the Warrant Shares. If this Warrant is exercised in part only, the
Company shall, upon surrender of this Warrant, execute and deliver a new Warrant
evidencing the rights of the Holder thereof to purchase the balance of the
Warrant Shares issuable hereunder.
Section 2. Exchange, Transfer, Assignment, or Loss of Warrant. Upon
surrender of this Warrant to the Company, with the Assignment Form annexed
hereto as Exhibit B duly executed and funds sufficient to pay any transfer tax,
the Company shall, without charge, execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees named in such Assignment Form and, if
the Holder's entire interest is not being assigned, in the name of the Holder,
and this Warrant shall promptly be canceled. This Warrant may be divided or
combined with other Warrants that carry the same rights upon presentation
-2-
<PAGE> 3
hereof at the office of the Company, together with a written notice specifying
the names and denominations in which new Warrants are to be issued and signed by
the Holder hereof. Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction, or mutilation of this Warrant, and (in the case of
loss, theft, or destruction) of reasonably satisfactory indemnification
(including, if required in the reasonable judgment of the Company, a statement
of net worth of such Holder that is at a level reasonably satisfactory to the
Company), and upon surrender and cancellation of this Warrant, if mutilated, the
Company shall execute and deliver a new Warrant of like tenor and date.
Section 3. Antidilutive Adjustments. The shares of Common Stock
purchasable on exercise of this Warrant are shares of Common Stock of the
Company as constituted as of the date of issuance hereof. The number and kind of
securities purchasable on the exercise of this Warrant shall be subject to
adjustment from time to time upon the happening of certain events, as follows:
(a) Mergers, Consolidations, and Reclassifications. In case of
any reclassification or change of outstanding securities issuable upon exercise
of this Warrant at any time (other than a change in par value, or from par value
to no par value, or from no par value to par value or as a result of a
subdivision or combination to which subsection 3(b) applies), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is the surviving
corporation and which does not result in any reclassification or change (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination to which
subsection 3(b) applies) of outstanding securities issuable upon exercise of
this Warrant), the Holder shall have, and the Company, or such successor
corporation or other entity, shall covenant in the constituent documents
effecting any of the foregoing transactions that such holder does have, the
right to obtain upon the exercise hereof, in lieu of the shares of Common Stock,
other securities, money, or other property theretofore issuable upon exercise of
this Warrant, the kind and amount of shares of stock, other securities, money,
or other property receivable upon such reclassification, change, consolidation,
or merger by a holder of the shares of Common Stock, other securities, money, or
other property issuable upon exercise hereof had this Warrant been exercised
immediately prior to such reclassification, change, consolidation, or merger.
The constituent documents effecting any such reclassification, change,
consolidation, or merger shall provide for any adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided in this
subsection 3(a). The provisions of this subsection 3(a) shall similarly apply to
successive reclassifications, changes, consolidations, or mergers.
-3-
<PAGE> 4
(b) Subdivisions and Combinations. If the Company at any time
during the Exercise Period shall subdivide its shares of Common Stock into a
greater number of shares, the number of shares of Common Stock purchasable upon
exercise of this Warrant shall be proportionately increased and the Exercise
Price shall be proportionately decreased, as at the effective date of such
subdivision, or if the Company shall take a record of holders of its Common
Stock for the purpose of so subdividing, as at such record date, whichever is
earlier. If the Company, at any time during the Exercise Period, shall combine
its shares of Common Stock into a smaller number of shares, the number of shares
of Common Stock purchasable upon exercise hereof shall be proportionately
reduced and the Exercise Price shall be proportionately increased, as at the
effective date of such combination, or if the Company shall take a record of
holders of its Common Stock for purposes of such combination, as at such record
date, whichever is earlier.
(c) Dividends and Distributions. If the Company at any time
shall declare a dividend on its Common Stock payable in stock or other
securities of the Company or of any other corporation or other entity, or in
property or otherwise than in cash, to the holders of its Common Stock, the
Holder shall, without additional cost, be entitled to receive upon any exercise
hereof, in addition to the Common Stock to which the Holder would otherwise be
entitled upon such exercise, the number of shares of stock or other securities
or property which the Holder would have been entitled to receive if the Holder
had been a holder immediately prior to the record date for such dividend (or, if
no record date shall have been established, the payment date for such dividend)
of the number of shares of Common Stock purchasable on exercise of this Warrant
immediately prior to such record date or payment date, as the case may be.
(d) Upon any increase or decrease in the number of Warrant
Shares purchasable upon the exercise of this Warrant, the Company shall, within
30 days thereafter, deliver written notice thereof to the Holder, which notice
shall state the increased or decreased number of Warrant Shares purchasable upon
the exercise of this Warrant and the revised Exercise Price thereof, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculations are based.
Section 4. Notification by the Company. In case at any time while this
Warrant remains outstanding:
(a) the Company shall declare any dividend or make any
distribution upon its Common Stock or any other class of its capital stock; or
-4-
<PAGE> 5
(b) the Company shall offer for subscription pro rata to the
holders of its Common Stock or any other class of its capital stock any
additional shares of stock of any class or any other securities convertible into
or exchangeable for shares of stock or any rights or options to subscribe
thereto; or
(c) the Board of Directors of the Company shall authorize any
capital reorganization, reclassification, or similar transaction involving the
capital stock of the Company, or a sale or conveyance of all or a substantial
part of the assets of the Company, or a consolidation, merger, or business
combination of the Company; or
(d) actions or proceedings shall be authorized or commenced
for a voluntary or involuntary dissolution, liquidation, or winding-up of the
Company;
then, in any one or more of such cases, the Company shall give written notice to
the Holder, at the earliest time legally practicable (and not less than 20 days
before any record date or other date set for definitive action) of the date on
which (i) the books of the Company shall close or a record shall be taken for
such dividend, distribution, or subscription rights or options or (ii) such
reorganization, reclassification, sale, conveyance, consolidation, merger,
dissolution, liquidation, or winding-up shall take place or be voted on by
shareholders of the Company, as the case may be. Such notice shall also specify
the date as of which the holders of the Common Stock of record shall participate
in said dividend, distribution, subscription rights, or options or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, sale, conveyance,
consolidation, merger, dissolution, liquidation, or winding-up, as the case may
be. If the action in question or the record date is subject to the effectiveness
of a registration statement under the Securities Act or to a favorable vote of
shareholders, the notice required by this Section 4 shall so state.
Section 5. No Voting Rights: Limitations of Liability. Prior to
exercise, this Warrant will not entitle the Holder to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the absence of
affirmative action by the Holder to exercise this Warrant, and no enumeration
herein of the rights or privileges of the Holder, shall give rise to any
liability of the Holder for the purchase price of the Warrant Shares pursuant to
the exercise hereof.
Section 6. Amendment and Waiver.
(a) No failure or delay of the Holder in exercising any power
or right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of such right or
-5-
<PAGE> 6
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Holder are cumulative and
not exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified, or waived with (and only
with) the written consent of the Company and the Holder.
(b) No notice or demand on the Company in any case shall
entitle the Company to any other or further notice or demand in similar or other
circumstances.
Section 7. No Fractional Warrant Shares. The Company shall not be
required to issue stock certificates representing fractions of Warrant Shares,
but shall in respect of any fraction of a Warrant Share make a payment in cash
based on the Value of the Common Stock after giving effect to the full exercise
or conversion of the Warrants.
Section 8. Validity of Warrant Shares. The Company shall reserve and
keep available at all times, free from preemptive rights, a sufficient number of
Warrant Shares to satisfy the requirements of this Warrant. The Warrant Shares:
(i) will be upon issuance, free and clear of any liens, claims, or other
encumbrances ("Liens") created by the Company or, to the Company's knowledge,
any other Person; (ii) have been duly and validly authorized and when issued and
paid for in accordance with the terms of the Warrants will be duly and validly
issued, fully paid, and non-assessable; (iii) will not have been issued or sold
in violation of any preemptive or similar rights; and (iv) will not subject the
holder thereof to personal liability by reason of being such holders.
Section 9. Notices. Unless otherwise specified, all notices and other
communications provided for between the Company and the Holder in this Warrant
shall be in writing, including telecopy, and delivered or transmitted to the
addresses set forth below, or to such other address as shall be designated by
the Company or the Holder in written notice to the other party. Notice sent by
telecopy shall be deemed to be given and received when receipt of such
transmission is acknowledged, and delivered notice shall be deemed to be given
and received when receipted for by, or actually received by, an authorized
officer of the Company or the Holder, as the case may be.
-6-
<PAGE> 7
If to the Company:
Kafus Industries Ltd.
270 Bridge Street
Dedham MA 02026
Attn: Mr. Michael A. McCabe
telephone: 781-326-5001
telecopier: 781-326-5105
With copies to:
Kafus Industries Ltd.
440-755 Burrad Street
Vancouver, British Columbia
Canada V6X1X6
Attn: Mr. Ken Swaisland
telephone: 604-602-1981
telecopier: 604-685-2426
If to the Holder:
Enron North America Corp.
Attn: Kevin McConville
1400 Smith Street
Houston, Texas 77002
telephone: 713-853-7691
telecopier: 713-646-2654
With copies to:
Enron North America Corp.
Attn: Donna Lowry
1400 Smith Street
Houston, Texas 77002
telephone: 713-853-6161
telecopier: 713-646-4039
and
Enron Capital Management
Attn: Ben Glisan
1400 Smith Street
Houston, Texas 77002
telephone: 713-853-6161
telecopier: 713-646-4990
-7-
<PAGE> 8
Section 10. Section and Other Headings. The headings contained in this
Warrant are for reference purposes only and will not affect in any way the
meaning or interpretation of this Warrant.
Section 11. Governing Law. THIS WARRANT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF BRITISH COLUMBIA AND THE APPLICABLE
LAWS OF CANADA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW WHICH WOULD
SELECT ANOTHER LAW.
Section 12. Binding Effect. The terms and provisions of this Warrant
shall inure to the benefit of the Holder and its successors and assigns and
shall be binding upon the Company and its successors and assigns, including,
without limitation, any successor to the Company by merger, consolidation, or
acquisition of all or substantially all of the Company's assets.
Section 13. Arbitration. Disputes arising under this Warrant shall be
settled by one arbitrator pursuant to the rules of the American Arbitration
Association (the "AAA") for Commercial Arbitration (the "Rules"). Such
arbitration shall be held in New York, New York, or at such other location as
mutually agreed to by the parties to the dispute. Subject to any applicable
limitations contained in this Warrant, arbitration may be commenced at any time
by any party giving notice to the other party that a dispute has been referred
to arbitration under this Section. The arbitrator shall be selected by the joint
agreement of the parties hereto, but if they do not so agree within twenty (20)
days after the date of the notice referred to above, the selection shall be made
pursuant to the Rules from the panel of arbitrators maintained by the AAA. Any
award of the arbitrator shall be accompanied by a written opinion giving the
reasons for the award. The expense of the arbitration shall be borne by the
parties in the manner determined in writing by the arbitrator. This arbitration
provision shall be specifically enforceable by the parties. The determination of
the arbitrator pursuant to this Section shall be final and binding on the
parties and may be entered for enforcement before any court of competent
jurisdiction.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the seal of the Company and the signature of its
duly authorized officer have been affixed hereto as of August 18, 1998.
[SEAL] KAFUS INDUSTRIES LTD.
Attest: By:
------------------- ----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
-9-
<PAGE> 10
EXHIBIT A
TO
WARRANT
PURCHASE FORM
To Be Executed by the Holder
Desiring to Exercise a Warrant of
Kafus Environmental Industries Ltd.
The undersigned holder hereby exercises the right to purchase _______
shares of Common Stock covered by the within Warrant, according to the
conditions thereof, and herewith undertakes to make payment in full of the
Exercise Price of such shares or to withdraw this notice of exercise, in
accordance with the terms of the Warrant.
Name of Holder:
------------------------------------------
Signature:
--------------------------------
Title:
------------------------------------
Address:
----------------------------------
------------------------------------------
------------------------------------------
Dated: , .
------------------- -------
-10-
<PAGE> 11
EXHIBIT B
TO
WARRANT
ASSIGNMENT FORM
To Be Executed by the Holder
Desiring to Transfer a Warrant of
Kafus Environmental Industries Ltd.
FOR VALUE RECEIVED, the undersigned holder hereby sells, assigns, and
transfers unto __________ the right to purchase __________ shares of Common
Stock covered by the within Warrant, and does hereby irrevocably constitute and
appoint _________________ Attorney to transfer the said Warrant on the books of
the Company (as defined in such Warrant), with full power of substitution.
Name of Holder:
------------------------------------------
Signature:
--------------------------------
Title:
------------------------------------
Address:
----------------------------------
------------------------------------------
------------------------------------------
Dated: , .
------------------- -------
In the presence of
- ------------------------------------
NOTICE:
The signature to the foregoing Assignment Form must correspond to the name as
written upon the face of the within Warrant in every detail, without alteration
or enlargement or any change whatsoever.
-11-
<PAGE> 1
EXHIBIT 6
JOINT FILING AGREEMENT
The undersigned each agree that (i) the Statement on Schedule 13D/A
relating to the Common Stock, no par value, of Kafus Industries, Ltd. is adopted
and filed on behalf on each of them, (ii) all future amendments to such
Statement on Schedule 13D/A will, unless written notice to the contrary is
delivered as described below, be jointly filed on behalf of each of them, and
(iii) the provisions of Rule 13d-1(k) under the Securities Exchange Act of 1934
apply to each of them. This agreement may be terminated with respect to the
obligation to jointly file future amendments to such Statement on Schedule 13D
as to any of the undersigned upon such person giving written notice thereof to
each of the other persons signatory hereto, at the principal office thereof.
IN WITNESS WHEREOF, the undersigned hereby execute this Joint Filing
Agreement as of the date set forth below.
Date: April __, 2000 ECT MERCHANT INVESTMENTS CORP.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Date: April __, 2000 SUNDANCE ASSETS, L.P.
By: Ponderosa Assets, L.P., its
general partner
By: Enron Ponderosa Management
Holdings, Inc. its general
partner
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Dated: April __, 2000 ENRON NORTH AMERICA CORP.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Dated: April __, 2000 ENRON CORP.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
