<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
KAFUS INDUSTRIES LTD.
---------------------
(Name of Issuer)
COMMON STOCK, WITHOUT PAR VALUE
-------------------------------
(Title of Class of Securities)
482910 10 6
-----------
(CUSIP Number)
Cynthia L. Harkness
Senior Counsel
Enron Global Finance
1400 Smith Street
Houston, Texas 77002
(713) 345-7370
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
December 21, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box: [ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See section 240.13d-7(b) for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 (the "Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE> 2
SCHEDULE 13D
CUSIP NO.: 482910 10 6
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSON
SE Thunderbird L.P.
- --------------------------------------------------------------------------------
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
0
------------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 1,999,999
OWNED BY -------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0
WITH -------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,999,999
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,999,999
- --------------------------------------------------------------------------------
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)
7.1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- --------------------------------------------------------------------------------
Page 2 of 13
<PAGE> 3
STATEMENT ON SCHEDULE 13D
NOTE: This Schedule 13D is being filed by SE Thunderbird L.P., which is referred
to as the "Reporting Entity." 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 Entity.
ITEM 1. SECURITY AND ISSUER.
This statement relates to the common stock, no par value per share, of
the Issuer (the "Common Stock"). The Issuer's principal executive offices are
located at 755 Burrard Street, Suite 440, Vancouver, British Columbia V6Z 1X6.
ITEM 2. IDENTITY AND BACKGROUND.
SE Thunderbird L.P. ("Thunderbird") is a Delaware limited partnership
formed primarily to acquire and own certain securities, including the
Purchased Shares (as defined below) and to take certain actions with respect
thereto. Blue Heron I LLC, a Delaware corporation ("Blue Heron"), is the general
partner of Thunderbird; Whitewing Associates L.P., a Delaware limited
partnership ("Whitewing Associates"), is the sole member of Blue Heron;
Whitewing Management LLC, a Delaware limited liability company ("Whitewing
Management"), is the general partner of Whitewing Associates; Egret I LLC, a
Delaware limited liability company ("Egret"), is the managing member of, and
Osprey Trust, a Delaware business trust ("Osprey"), is a member of, Whitewing
Management; and Enron Corp., an Oregon corporation ("Enron") is the managing
member of Egret. Pursuant to the limited liability company agreement of
Whitewing Management (the "Whitewing Management LLC Agreement"), Egret is
currently the managing member; however, Osprey has the right at any time to
cause the management responsibilities with respect to Whitewing Management
granted to Egret by the Whitewing Management LLC Agreement to be assumed by a
board of directors which shall be composed of an equal number of representatives
of Egret and Osprey. On the date of this statement, Osprey has not exercised
such rights. Osprey is owned by several financial institutions, none of which
control Osprey. The address of the principal business and the principal office
of each of the foregoing persons is 1400 Smith, Houston, Texas 77002. Schedules
I and II attached hereto set forth certain additional information with respect
to the managing members, executive officers and directors of Enron and
Thunderbird. The filing of this statement on Schedule 13D shall not be construed
as an admission that the Reporting Entity, Enron, or any person listed on any
Schedule hereto is, for the purposes of Section 13(d) or 13(g) of the Securities
Exchange Act of 1934, the
Page 3 of 13
<PAGE> 4
beneficial owner of any securities covered by this statement.
Neither the Reporting Entity nor, to its 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.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On December 21, 1999, Enron North America Corp. ("ENA"), a wholly owned
subsidiary of Enron, transferred to Thunderbird in a private transaction
1,999,999 shares of Common Stock (the "Purchased Stock") and certain
registration rights associated therewith. ENA had acquired these shares and
rights immediately prior to such transfer from Sundance Assets, L.P., a Delaware
limited partnership that is indirectly controlled by Enron and ENA. Thunderbird
funded the $7.50 per share purchase price for this investment from its working
capital.
ITEM 4. PURPOSE OF TRANSACTION.
Thunderbird acquired the Purchased Stock for investment purposes.
Thunderbird will review Thunderbird's investment in the Issuer on a continuing
basis, and, depending upon the price of the Common Stock, other market
conditions relating to it, subsequent developments affecting the Issuer, the
Issuer's business and prospects, other investment and business opportunities
available to Thunderbird, general stock market and economic conditions, tax
considerations and other factors deemed relevant, Thunderbird may increase or
decrease the size of its investment in the Issuer.
Page 4 of 13
<PAGE> 5
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
a. Interests. Certain Enron affiliates and Thunderbird have the
following interests in Common Stock of the Issuer:
1. Thunderbird. Thunderbird holds 1,999,999 shares of Common Stock.
These shares represent approximately 7.1% of the Issuer's outstanding Common
Stock.
2. 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 7,774,858 shares of Common Stock: (i) five warrants to purchase
1,000,000, 500,000, 750,000, 45,000, and 250,000 shares of Common Stock,
respectively, which are immediately exercisable, (ii) 10,000 Series I Preference
Shares ("Preference Shares"), which may be converted into 2,500,000 shares of
Common Stock at any time, (iii) 5,000 Preference Shares, which may be converted
into 2,500,000 shares on or after February 18, 1999, (iv) 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 (a) a
principal balance of $10 million that may be converted into 1,250,000 shares of
Common Stock at any time and (b) an interest component which, based on the
interest accrued through December 31, 1999, may be converted upon conversion of
such note into 127,500 shares (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 (v) a right
to accrued dividends on the Preference Shares in the amount of 102,358 shares of
Common Stock. If Sundance converted or exercised all instruments and securities
held by it that are convertible or exercisable within sixty days into Common
Stock, the 9,504,859 shares of Common Stock it would hold would represent
approximately 26.5% of the Issuer's outstanding Common Stock.
3. ECT Merchant. ECT Merchant Investments Corp., a Delaware corporation
indirectly controlled by Enron and ENA ("ECT Merchant"), holds (i) 100,000
shares of Common Stock, (ii) an
Page 5 of 13
<PAGE> 6
immediately exercisable warrant to acquire Common Stock in the amount of 487,500
shares, and (iii) an immediately exercisable warrant to acquire Common Stock in
the amount of 150,000 shares. If ECT Merchant exercised its warrants, the
737,500 shares of Common Stock it would hold would represent approximately 2.6%
of the Issuer's outstanding Common Stock.
4. ENA. ENA holds 750,000 shares of Common Stock. These shares
represent approximately 2.7% of the Issuer's outstanding Common Stock considered
individually and, when aggregated with the Common Stock beneficially owned by
ECT Merchant and Sundance, represent approximately 30.2% of the Issuer's
outstanding Common Stock.
5. Collective Ownership. The 12,992,358 shares of Common Stock
in the aggregate that are beneficially owned by Thunderbird, Sundance, ECT
Merchant, and ENA collectively represent approximately 35.6% of the Issuer's
outstanding Common Stock.
b. Beneficial Ownership; Voting and Dispositive Power. Because of their
relationships, Enron may be deemed to beneficially own the shares held by ENA
and Thunderbird, and ENA may be deemed to beneficially own not only the shares
that are beneficially owned by Sundance but also the shares that are
beneficially owned by ECT Merchant. Enron, ENA and Sundance in their filings on
Schedule 13D have each disclaimed beneficial ownership of the Common Stock
referenced in this statement, and Thunderbird hereby disclaims beneficial
ownership of the shares of Common Stock beneficially owned by ENA, ECT Merchant,
and Sundance referenced in their filings on Schedule 13D.
In addition, ENA, Enron, Ponderosa Assets, L.P. (which is Sundance's
general partner ("Ponderosa")) and Enron Ponderosa Management Holdings, Inc.
(which is Ponderosa's general partner ("EPMH")) may be deemed to share voting
and dispositive power over the Common Stock beneficially owned by Sundance.
Likewise, Blue Heron, Whitewing Associates, Whitewing Management, Osprey and
Egret I LLC may be deemed to share voting and dispositive power over the Common
Stock beneficially owned by Thunderbird. Similarly, ENA and Enron could be
deemed to share voting and dispositive power over the shares of Common Stock
beneficially owned by ECT Merchant. The filing of this statement on Schedule 13D
shall not be construed as an admission that Thunderbird, Blue Heron, Whitewing
Associates, Whitewing Management, Egret, Osprey, Sundance, Ponderosa, EPMH, ECT
Merchant, 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 or any other filings on Schedule 13D
referenced herein. All percentage ownership calculations utilized herein are
calculated in accordance
Page 6 of 13
<PAGE> 7
with Rule 13d-3(d)(1)(i)(D) and assume that 28,043,359 shares of Common Stock
are actually outstanding on the date of this statement.
In addition to the shares of Common Stock reported herein, ECT, ECT
Merchant and Sundance hold convertible promissory notes and other instruments
that entitle or require them 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. These
arrangements are described in greater detail in the Deferred Payment Purchase
Agreement and the Income Participation Certificate Purchase Agreement filed as
exhibits to the joint Schedule 13D of Enron and ENA dated July 27, 1997 and in
the $11.25 million Exchangeable Promissory Note, the Subordinated Loan
Conversion Agreement, the Income Participation Certificate Purchase Agreement,
and the $12.5 million Convertible Promissory Note (Advancing Credit Facility)
filed as exhibits to the joint Schedule 13D/A dated March 22, 1999 filed by
Enron, ENA, and Sundance. Other than the transactions described herein, none of
Enron, ENA, Sundance, ECT Merchant or Thunderbird, nor, to their knowledge, Blue
Heron, Whitewing Associates, Whitewing Management, Egret, Osprey, Ponderosa,
EPMH or any of the persons named in the Schedules hereto, has effected any
transaction in the Common Stock during the preceding sixty days.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
On December 23, 1999, Thunderbird, Enron, ENA, and Sundance Assets,
L.P. entered into an Amendment to Registration Rights Agreements which (i)
waives certain rights to liquidated damages against the Issuer, (ii) sets new
deadlines with respect to the registration statements to be filed pursuant to
certain of such parties' existing registration rights agreements, and (iii)
confirms the scope of the
Page 7 of 13
<PAGE> 8
Registration Rights Agreement dated July 16, 1997 between ENA and the Issuer
(the "July 16th Registration Rights Agreement"). The shares of Common Stock
owned by Thunderbird are entitled to the benefit of certain registration rights
contained in the July 16th Registration Rights Agreement.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1. Purchase and Sale Agreement dated
December 21, 1999 between Sundance and
Thunderbird
Exhibit 2. Partial Assignment and Assumption
Agreement dated December 21, 1999 between
Sundance and Thunderbird
Exhibit 3. Amendment to Registration Rights
Agreements dated December 23, 1999 among
ENA, EMIC, Sundance and Thunderbird
Exhibit 4. Registration Rights Agreement dated July
16, 1997 between ENA and the Issuer (filed
as Exhibit 3 to the Schedule 13D filed
July 27, 1997 by Enron and ENA; SEC File
No. 055-51321)
Page 8 of 13
<PAGE> 9
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: January 3, 2000 SE THUNDERBIRD L.P.
By: Blue Heron I LLC, its general partner
By: Whitewing Associates L.P., its sole member
By: Whitewing Management LLC, its general partner
By: Egret I LLC, its managing member
By: /s/ CHERYL LIPSHUTZ
----------------------------
Name: CHERYL LIPSHUTZ
----------------------------
Title: Vice President
----------------------------
Page 9 of 13
<PAGE> 10
SCHEDULE I
MANAGING MEMBER AND EXECUTIVE OFFICERS
EGRET I LLC
<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
Enron Corp n/a Managing Member
Richard A. Causey USA Manager
Andrew S. Fastow USA Manager
Ben F. Glisan, Jr. USA Manager
Michael J. Kopper USA Manager
Jeffrey McMahon USA Manager
Cheryl Lipshutz USA Manager
</TABLE>
Page 10 of 13
<PAGE> 11
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 & Gas Corp. Officer, Belco Oil & Gas Corp.
767 Fifth Avenue, 46th Fl.
New York, NY 10153
Norman P. Blake, Jr. U.S.A. Director; Chairman, President & CEO of Promus Hotel
Promus Hotel Corp. Corporation
705 Crossover Lane
Memphis, TN 38117-4900
Ronnie C. Chan U.S.A. Director; Chairman of Hang Lung Development Group
Hang Lung Development
Company Limited
28/F, Standard Chartered
Bank Building
4 Des Vouex Road Central
Hong Kong
John H. Duncan U.S.A. Director; Investments
5851 San Felipe, Suite 850
Houston, TX 77057
Paulo V. Ferraz Perairo Brazil Director; President and Chief Executive Officer
Meridonal Financial Group of Meridional Financial Group
Av. Rio Branco, 138-15th andar
20057-900 Rio de Janerio - RJ
Brazil
Joe H. Foy U.S.A. Director; Retired Senior Partner,
Bracewell & Patterson Bracewell & Patterson, L.L.P.
2900 South Tower Pennzoil Place
711 Louisiana
Houston, TX 77002
Wendy L. Gramm U.S.A. Director; Former Chairman, U.S. Commodity Futures
P. O. Box 39134 Trading Commission
Washington, D.C. 20016
Ken L. Harrison U.S.A. Director; Chairman and Chief Executive Officer,
121 S. W. Salmon Street Portland General Electric Company
Portland, OR 97204
Robert K. Jaedicke U.S.A. Director; Professor (Emeritus), Graduate School of
Graduate School of Business Business Stanford University
Stanford University
Stanford, CA 94305
</TABLE>
Page 11 of 13
<PAGE> 12
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
Charles A. LeMaistre U.S.A. Director; President (Emeritus), University of Texas
P.O. Box 15247 M.D. Anderson Cancer Center
San Antonio, TX 78212
John Mendelsohn U.S.A. Director; President, University of Texas
University of Texas M.D. Anderson Cancer Center
M.D. Anderson Cancer Center
1515 Holcombe
Houston, TX 77030
Jerome J. Meyer U.S.A. Director; Chairman and Chief Executive Officer,
26600 S.W. Parkway Tektronix, Inc.
Building 63; P. O. Box 1000
Wilsonville, OR 97070-1000
Frank Savage U.S.A Director; Chairman, Alliance Capital Management
1345 Avenue of the Americas International
39th Floor
New York, New York 10105
John A. Urquhart U.S.A. Director; Senior Advisor to the Chairman of Enron
John A. Urquhart Assoc. Corp.; President, John A. Urquhart Associates
111 Beach Road
Fairfield, CT 06430
John Wakeham U.K. Director; Former U.K. Secretary of State for Energy
1 Salisbury Square and Leader of the Houses of Commons and Lords
London EC4Y 8JB
United Kingdom
Herbert S. Winokur, Jr. U.S.A. Director; President, Winokur & Associates, Inc.
Capricorn Management, G.P.
30 East Elm Ct.
Greenwich, CT 06830
Kenneth L. Lay U.S.A. Director; Chairman and Chief Executive Officer
1400 Smith Street
Houston, TX 77002
J. Clifford Baxter U.S.A. Chairman of the Board, Chief Executive Officer
1400 Smith Street and 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 12 of 13
<PAGE> 13
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
James V. Derrick, Jr. U.S.A. Executive Vice President and General Counsel
1400 Smith Street
Houston, TX 77002
Andrew S. Fastow U.S.A. Executive Vice President and Chief Financial Officer
1400 Smith Street
Houston, TX 77002
Mark A. Frevert U.S.A. President and Chief Executive Officer, Enron Europe,
1400 Smith Street Ltd.
Houston, TX 77002
Stanley C. Horton U.S.A. Chairman and Chief Executive Officer, Enron Gas
1400 Smith Street Pipeline Group
Houston, TX 77002
Rebecca P. Mark U.S.A. Director; Chairman, and Chief Executive Officer, Azurix Corp.
1400 Smith Street
Houston, TX 77002
J. Mark Metts U.S.A. Executive Vice President, Corporate Development
1400 Smith Street
Houston, TX 77002
Lou L. Pai U.S.A. Chairman, President and Chief Executive Officer,
1400 Smith Street Enron Energy Services, Inc.
Houston, TX 77002
Kenneth D. Rice U.S.A. Co-Chairman and Co-Chief Executive Officer and President,
1400 Smith Street Enron Communications Inc.
Houston, TX 77002
Jeffrey K. Skilling U.S.A. Director; President and Chief Operating Officer, Enron
1400 Smith Street Corp.
Houston, TX 77002
Joseph W. Sutton U.S.A. Vice Chairman, Enron Corp.
1400 Smith Street
Houston, TX 77002
</TABLE>
Page 13 of 13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<S> <C>
Exhibit 1. Purchase and Sale Agreement dated
December 21, 1999 between Sundance and
Thunderbird
Exhibit 2. Partial Assignment and Assumption
Agreement dated December 21, 1999 between
Sundance and Thunderbird
Exhibit 3. Amendment to Registration Rights
Agreements dated December 23, 1999 among
ENA, EMIC, Sundance and Thunderbird
Exhibit 4. Registration Rights Agreement dated July
16, 1997 between ENA and the Issuer (filed
as Exhibit 3 to the Schedule 13D filed
July 27, 1997 by Enron and ENA; SEC File
No. 055-51321)
</TABLE>
<PAGE> 1
EXHIBIT 1
[Execution Version]
PURCHASE AND SALE AGREEMENT
DATED AS OF DECEMBER 21, 1999
BETWEEN
SE THUNDERBIRD L.P.
AS PURCHASER
AND
ENRON NORTH AMERICA CORP.
AS SELLER
<PAGE> 2
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into as
of December 21, 1999 and is by and among SE THUNDERBIRD L.P., a Delaware limited
partnership (the "Purchaser"), and ENRON NORTH AMERICA CORP., a Delaware
corporation (the "Seller").
R E C I T A L S:
A. The Seller owns the Kafus Shares and the Quanta Convertible Note,
both as defined below, and certain rights associated therewith.
B. Subject to the terms and conditions of this Agreement and in
exchange for the consideration set forth herein, the Seller hereby agrees to
sell to the Purchaser, and the Purchaser hereby agrees to purchase from the
Seller, such assets.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements set forth herein, and for good and valuable consideration, the
receipt and sufficiency of which is acknowledged by all parties, the parties
hereto agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1 Definitions. Unless the context otherwise requires, the
following capitalized terms used in this Agreement shall have the following
meanings:
"Affiliate" means any other Person that directly or indirectly, through
one or more intermediaries, controls, or is controlled by, or is under
common control with, a Person.
"Ancillary Agreements" means the agreements and instruments to be
delivered pursuant to Section 2.1(a) of this Agreement.
"Disputed Claims" is defined in Section 6.7(a).
"Kafus" means Kafus Industries, Ltd., a British Columbia corporation.
"Kafus Shares" means 1,999,999 shares of common stock, without par
value, of Kafus.
"Person" means an individual, a corporation, a partnership, an
association, a limited liability company, a joint stock company, a
trust or other unincorporated organization.
"Closing Date" is defined in Section 2.1(a)
"Companies" means Kafus and Quanta.
<PAGE> 3
"Purchase Price" means the aggregate of the purchase prices set forth
in Sections 2.1(a)(1) and (2).
"Purchased Assets" means the Kafus Shares and the Quanta Convertible
Note, and all rights to be transferred to the Purchaser pursuant to the
Ancillary Agreements.
"Purchase Price" means the sum of the amounts payable pursuant to
Sections 2.1(a).
"Quanta" means Quanta Services, Inc., a Delaware corporation.
"Quanta Convertible Note" means the Convertible Promissory Note due
2010 dated October 5, 1998 issued by Quanta Services, Inc. to Enron
Capital & Trade Resources Corp. in the original principal amount of
Twelve Million Three Hundred Thirty-Seven Thousand Five Hundred Dollars
($12,337,500).
"Securities Act" means the Securities Act of 1933, as amended, and all
the rules and regulations promulgated thereunder.
ARTICLE 2.
CONVEYANCE OF THE PURCHASED ASSETS
Section 2.1 Conveyance of Purchased Assets. On the date first set forth
above (the "Closing Date"):
(a) The Seller shall sell, transfer, assign, set over and otherwise
convey to the Purchaser, and the Purchaser shall purchase from the Seller, all
of the right, title and interest of the Seller in and to the Purchased Assets in
exchange for payment, in immediately available funds, of the Purchase Price, as
follows.
(1) The Purchaser shall pay to the Seller $14,999,992.50 in
consideration of the Purchased Assets that relate to Kafus, and the Seller shall
deliver to the Purchaser (i) the stock certificates representing the Kafus
Shares, (ii) a duly executed Partial Assignment and Assumption Agreement in form
and substance satisfactory to the parties and (iii) a duly executed Transfer of
Shares in form and substance satisfactory to the parties.
(2) The Purchaser shall pay to the Seller $25,136,826.59 in
consideration of the Purchased Assets that relate to the Quanta Convertible
Note, and the Seller shall deliver to the Purchaser (i) the Quanta Convertible
Note, indorsed over to the Purchaser by the Seller, but without recourse to the
Seller and without transfer warranties to the Purchaser (other than those set
forth in Section 3.1 hereof), (ii) a duly executed Partial Assignment and
Assumption Agreement in form and substance satisfactory to the parties and (iii)
a duly executed Allonge to Convertible Promissory Note in form and substance
satisfactory to the parties.
-2-
<PAGE> 4
(b) The parties expressly intend that this is an absolute sale of the
Purchased Assets and both parties agree to account for the transactions
contemplated hereunder in this manner.
(c) Payments for the Purchased Assets shall be made by wire transfer of
immediately available federal funds to the following account: ECT- Finance 1400
Smith Street, Houston, Texas 77002-7361, CitiBank NY, NY, Account: 4075-9492,
ABA#: 021000089, Tax ID#: 76-0318139.
Section 2.2 Closing. The closing for the sale of the Purchased Assets
shall occur at the offices of Bracewell & Patterson, L.L.P. at Pennzoil Place,
South Tower, 711 Louisiana Street, Houston, Texas 77002 on the Closing Date or
at such other time or place as the Purchaser and the Seller may agree.
Section 2.3 Costs and Expenses. All costs and expenses (including legal
fees, professional fees, and other transaction costs) incurred by either party
hereto in connection with the transfer and delivery of the Purchased Assets in
the manner contemplated herein shall be borne by the party that incurred such
costs and/or expenses.
Section 2.4 Payments to Purchaser. The Seller hereby agrees that from
and after the Closing Date it shall pay over to the Purchaser, as assignee of
the Purchased Assets, all amounts received by the Seller with respect to the
Purchased Assets. Any amounts received by the Seller contrary to the preceding
sentence shall be received by the Seller in trust for the benefit of the
Purchaser and shall be immediately paid by the Seller to and as directed by the
Purchaser.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Seller. The
Seller hereby represents and warrants to the Purchaser that as of the Closing
Date:
(a) The Seller has taken all steps necessary to transfer all
of the Seller's right, title and interest in and to the Purchased Assets to the
Purchaser.
(b) Immediately prior to the transfers contemplated by this
Agreement, the Seller was the sole owner and holder of the Purchased Assets,
free and clear of any and all liens, pledges, charges or security interests of
any nature.
(c) The Seller (i) is duly organized, validly existing and in
good standing under the laws of Delaware, (ii) has the full right, power and
authority to enter into and perform its obligations under this Agreement and the
Ancillary Agreements and to consummate the transactions contemplated hereby and
(iii) has obtained all requisite company or similar authorizations, consents or
approvals applicable to do so.
(d) This Agreement and the Ancillary Agreements have been duly
executed and delivered by the Seller and constitute the legal, valid and binding
obligations of the Seller enforceable against it in accordance with their terms,
except as the enforceability thereof may be limited by any
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<PAGE> 5
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and by general principles of equity.
(e) The outstanding principal balance of the Quanta
Convertible Note is $12,337,500, all interest payments due thereunder have been
paid when due and no principal or interest thereunder has been prepaid, forgiven
or postponed, and to the knowledge of Seller there exists no material default or
event of default thereunder.
(f) Since September 30, 1999, to the knowledge of the Seller
there has not occurred any material adverse change or any threatened material
adverse change in the business, operations, properties, assets or condition
(financial or otherwise) of the Companies, other than those disclosed to the
public and those disclosed to the Purchaser in writing prior to the date hereof.
(g) To the knowledge of Seller, no action, suit or proceeding
has been commenced against any of the Companies before any court or arbitrator
or any governmental body, agency or official except for such action, suit or
proceeding that could not reasonably be expected to have a material and adverse
effect on the business, operations, properties, assets or condition (financial
or otherwise) of such Company.
(h) All material information given by the Seller to the
Purchaser in connection with the transactions contemplated by this Agreement was
true and correct in all material respects on the date such information was given
and on the date hereof.
(i) Any approvals, filings and consents relating to the
transfer of the Purchased Assets from the Seller to the Purchaser required to be
obtained from or made with any governmental or quasi-governmental agency,
entity, or body from whom approval is required under applicable law have been
made or obtained.
(j) Assuming that the Purchaser's representations set forth in
this Agreement are true and correct, the sale of the Purchased Assets in the
manner contemplated by this Agreement by the Seller will be exempt from the
registration requirements of the Securities Act by reason of Section 4(2)
thereof.
(k) No agent, broker or other Person acting pursuant to
authority of the Seller is entitled to any commission or finder's fee in
connection with the transactions contemplated by this Agreement.
Except as set forth in this Section 3.1, the Seller makes no
representation or warranty whatsoever to the Purchaser concerning the Purchased
Assets. Without limiting the generality of the foregoing, the Seller makes no
representation or warranty concerning the Companies, their respective assets,
financial performance, financial condition, and prospects, or any other matter
affecting them.
Section 3.2 Representations and Warranties of the Purchaser.
The Purchaser hereby makes the following representations and warranties to the
Seller:
(a) The Purchaser is an "accredited investor" within the
meaning of Rule 501
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<PAGE> 6
under the Securities Act and is acquiring the Purchased Assets for its own
account and not with a view toward their distribution.
(b) The Purchaser is able to bear the economic risk of an
investment in the Purchased Assets and can afford to sustain a total loss of
such investment and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the proposed
investment in the Companies. The Purchaser has had an adequate opportunity to
ask questions and receive answers from the officers of the Companies and the
Seller concerning all matters relating to the transactions described herein. The
Purchaser has asked all questions in the nature described in the preceding
sentence, and such questions have been answered to their satisfaction.
(c) The Purchaser is aware of all facts, risks and other
matters disclosed in the periodic financial and other reports filed by Quanta
with U.S. Securities and Exchange Commission and by Kafus and its subsidiaries
with its Canadian equivalent. The Purchaser acknowledges that copies of the same
have been made available to it, either directly or through the www.sedar.com and
www.sec.com website.
(d) The Purchaser is aware that the Kafus Shares and the
shares issuable pursuant to the Quanta Convertible Note are restricted
securities within the meaning of Rule 144 under the Securities Act and therefore
may not be sold, transferred or otherwise disposed of unless they are registered
and/or qualified under the Securities Act and applicable state securities laws,
or unless an exemption from the registration or qualification requirements is
otherwise available.
(e) The Purchaser (i) is duly organized, validly existing and
in good standing under the laws of the State of Delaware, (ii) has the full
right, power and authority to enter into and perform its obligations under this
Agreement and the Ancillary Agreements and to consummate the transactions
contemplated hereby, and (iii) has obtained all requisite company and similar
authorizations, consents or approvals applicable to do so.
(f) This Agreement and the Ancillary Agreements have been duly
executed and delivered by the Purchaser and constitute the legal, valid and
binding obligations of the Purchaser enforceable against the Purchaser in
accordance with their terms, except as the enforceability thereof may be limited
by any applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and by general principles of equity.
(g) No agent, broker or other Person acting pursuant to
authority of the Purchaser is entitled to any commission or finder's fee in
connection with the transactions contemplated by this Agreement.
(h) The Purchaser is not a Prohibited Person within the
meaning of the Stockholders and Warrantholders Agreement.
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<PAGE> 7
ARTICLE 4.
CONDITIONS TO CLOSING
Section 4.1 Condition to the Obligations of Each Party. The
obligations of the Purchaser and the Seller to consummate the transactions
contemplated by this Agreement are subject to the satisfaction of the following
conditions:
(a) As of the Closing Date, all approvals, filings, waivers
and consents relating to the transfer of the Purchased Assets from the Seller to
the Purchaser required to be made or obtained pursuant to any applicable
documents or agreements shall have been made or obtained.
(b) All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to each party and its counsel. No
action or proceeding before a court or any other governmental agency or body
shall have been instituted or threatened to restrain or prohibit the
transactions contemplated herein and no governmental agency or body shall have
taken any other action or made any request of the Seller or the Purchaser as a
result of which either party deems it inadvisable to proceed with the
transactions hereunder.
Section 4.2 Conditions to the Obligations of Purchaser. The
obligation of the Purchaser to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following further conditions:
(a) The Seller shall have performed in all material respects
all of its obligations under this Agreement required to be performed by it on or
prior to the Closing Date.
(b) The representations and warranties of the Seller contained
in this Agreement shall be true in all material respects at and as of the
Closing Date.
Section 4.3 Conditions to the Obligations of the Seller. The
obligation of the Seller to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following further conditions:
(a) The Purchaser shall have performed in all material
respects all of its obligations under this Agreement required to be performed by
it on or prior to the Closing Date.
(c) The representations and warranties of the Purchaser
contained in this Agreement shall be true in all material respects at and as of
the Closing Date, as if made at and as of such date.
ARTICLE 5.
AGREEMENTS
Section 5.1 Conflict of Interests. The parties acknowledge and
understand that (a) the Seller and its Affiliates have and may continue to
maintain certain investments in the Companies that are different in character
from the Purchased Assets and (b) that they have certain rights to appoint
directors, participate in the management of the Companies, vote their securities
and take other actions
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<PAGE> 8
with respect to such debt and equity investments. The parties further understand
that, as result of such investments and rights, the interest of the Seller and
its Affiliates on the one hand and of the Purchaser on the other hand may
conflict. The parties therefore hereby agree that, except as expressly set forth
herein: (i) that the Seller and its Affiliates shall have no duties whatsoever
to the Purchaser with respect to their management and control of the Companies
(fiduciary or otherwise), (ii) that none of such rights need be exercised on
behalf of or for the benefit of the Purchaser, (iii) that the Seller and its
Affiliates shall have no duty to disclose information concerning their
intentions with respect to their investments or with respect to the Companies
and (iv) that the Purchaser hereby waives all conflicts of interest arising from
any action or omission by the Seller or any of its Affiliates with respect to
such investments and rights.
Section 5.2 Retention of Certain Rights. Except as expressly
provided to the contrary in any Ancillary Agreement, the Seller's and its
Affiliates' preemptive rights to acquire additional securities of the Companies
and to nominate and maintain directors are retained by their holder and shall
not be assigned or conveyed to the Purchaser, either pursuant to this Agreement
or pursuant to any Ancillary Agreement.
Section 5.3 Limitation of Liability. It is expressly understood and
agreed by the parties hereto that, notwithstanding any other term of this
Agreement, (i) the Purchaser shall not be permitted to recover punitive,
consequential, economic or indirect damages from the Seller, whether by way of
indemnification or under any other legal document, causes of action, or theory
of recovery, and (ii) the Seller's maximum liability with respect to this
Agreement and the Ancillary Agreements shall not exceed the Purchase Price.
ARTICLE 6.
MISCELLANEOUS
Section 6.1 Notices. All notices, demands and requests that may be
given or that are required to be given hereunder shall be sent by United States
certified mail, postage prepaid, return receipt requested, to the parties at
their respective addresses as follows:
If to the Seller:
Enron North America Corp.
1400 Smith Street
Houston, Texas 77002
Attn: Donna Lowry
with a copy to:
Enron North America Corp.
1400 Smith Street
Houston, Texas 77002
Attn: Julia Heintz Murray
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<PAGE> 9
If to the Purchaser:
SE Thunderbird L.P.
c/o The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, New Castle County
Delaware 19801
with a copy to:
SE Thunderbird L.P.
c/o Enron Corp.
1400 Smith Street
Houston, Texas 77002
Attn: Cynthia Harkness
Section 6.2 Counterparts. For the purpose of facilitating the
execution and proving of this Agreement, as herein provided and for other
purposes, this Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.
Section 6.3 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Texas.
Section 6.4 Specific Performance. Any party hereto may enforce
specific performance of this Agreement.
Section 6.5 Further Assurances. The parties hereto agree to execute
and deliver such other instruments and take such other actions as may be
necessary to effectuate the purposes and to carry out the terms of this
Agreement.
Section 6.6 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to its subject matter and supersedes all
oral communications and prior writing with respect thereto.
Section 6.7 Arbitration.
(a) Any and all claims, counterclaims, demands, causes of action,
disputes, controversies, and other matters in question arising under this
Agreement or the alleged breach of any provision hereof (all of which are
referred to herein as "Disputed Claims"), whether such Disputed Claims arise at
law or in equity, under state or federal law, for damages or any other relief,
shall be resolved by binding arbitration in the manner set forth herein.
(b) The validity, construction, and interpretation of this
agreement to arbitrate and all procedural aspects of the arbitration conducted
pursuant to this agreement to arbitrate and the rules governing the conduct of
arbitration (including the time for filing an answer, the time for the filing
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<PAGE> 10
of counter Disputed Claims, the times for amending the pleadings, the
specificity of the pleadings, the extent and scope of discovery, the issuance of
subpoenas, the time for the designation of experts, whether the arbitration is
to be stayed pending resolution of related litigation involving third parties
not bound by this Agreement, the receipt of evidence, and the like) shall be
decided by the arbitrators. In deciding the substance of the parties' Disputed
Claims, the arbitrators shall refer to the substantive laws of the State of
Texas for guidance (excluding Texas choice-of-law principles that might call for
the application of some other state's law); provided, however, that IT IS
EXPRESSLY AGREED THAT NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT TO
THE CONTRARY, THE ARBITRATORS SHALL HAVE ABSOLUTELY NO AUTHORITY TO AWARD
CONSEQUENTIAL DAMAGES (SUCH AS LOSS OF PROFIT), INCIDENTAL, TREBLE, EXEMPLARY OR
PUNITIVE DAMAGES OF ANY TYPE UNDER ANY CIRCUMSTANCES REGARDLESS OF WHETHER SUCH
DAMAGES MAY BE AVAILABLE UNDER TEXAS LAW, THE LAW OF ANY OTHER STATE, OR FEDERAL
LAW, OR UNDER THE UNITED STATES ARBITRATION ACT OR UNDER ANY OTHER RULES OF
ARBITRATION. The arbitrators shall have the authority to assess the costs and
expenses of the arbitration proceeding (including the arbitrators' fees and
expenses) against either or both parties. However, each party shall bear its own
attorneys fees and the arbitrators shall have no authority to award attorneys
fees.
(c) The arbitration proceedings shall be conducted in Houston, Texas by
three arbitrators in accordance with the American Arbitration Association
Commercial Arbitration Rules. Within 30 days of the notice of initiation of the
arbitration procedure, the parties shall select three arbitrators. Each party
shall select one person to act as arbitrator and the two arbitrators so selected
shall select a third arbitrator within 10 days of their appointment. If the
arbitrators selected by the parties are unable or fail to agree upon the
identity of the third, within the time set forth herein, the third arbitrator
shall be selected by the American Arbitration Association. The arbitration shall
be governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16, as
such Act is modified by this Agreement and judgment upon the award rendered by
the arbitrators may be entered by an court having jurisdiction thereof.
(d) All fees of the arbitrators and other administrative charges
related to the arbitration shall be borne equally by the parties.
(e) The parties hereby agree that the arbitration proceeding and the
arbitrators' award are to remain confidential and none of the parties or their
counsel will divulge or discuss, directly or indirectly, in the newspaper,
electronic media, or other public or private forum, or with any third parties,
the arbitration proceedings and/or the arbitrators' award except: (i) to the
extent required by a court of law or any federal, state, or local government,
agency or regulatory body or to the extent required to comply with applicable
securities laws or stock exchange requirements; (2) to the extent further agreed
by the parties hereto; or (3) to the extent necessary under subsection (f)
below.
(f) The award of the arbitrators shall be final and binding on the
parties, and judgment thereon may be entered in a court of competent
jurisdiction.
[signature pages follow]
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed hereto by their respective officers thereunto duly authorized, all as of
the day and year first above written.
SE THUNDERBIRD L.P. ENRON NORTH AMERICA CORP.
By: Blue Heron I LLC, its general partner
By: Whitewing Associates L.P., its sole
member
By: Whitewing Management LLC, its general
partner
By: Egret I LLC, its managing member By:
-------------------------
Name:
-----------------------
Title:
----------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
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<PAGE> 1
EXHIBIT 2
[Execution Version]
PARTIAL ASSIGNMENT AND ASSUMPTION AGREEMENT
(KAFUS INDUSTRIES, LTD.)
This Partial Assignment and Assumption Agreement (this "Agreement"),
dated as of December 21, 1999 (the "Effective Date"), is between Enron North
America Corp., a Delaware corporation (the "Assignor"), and SE Thunderbird L.P.,
a Delaware limited partnership (the "Assignee") and is delivered pursuant to
that certain Purchase and Sale Agreement of even date herewith between Assignor
and Assignee (the "Purchase and Sale Agreement").
In the event of a conflict between the terms of this Agreement and the
Purchase and Sale Agreement, the Purchase and Sale Agreement shall control.
Terms capitalized for other than grammatical purposes in this Agreement and not
defined herein have the meanings set forth in the Purchase and Sale Agreement,
and the following term shall have the following definition:
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of July 16, 1997 between Kafus and Assignor, as the same may
have been amended, modified and supplemented from time to time.
PART I
GRANTING CLAUSES
For ten dollars ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which Assignor hereby acknowledges, Assignor has
transferred, bargained, conveyed and assigned, and does hereby transfer,
bargain, convey and assign to Assignee, effective for all purposes as of the
Effective Date, the Registration Rights Agreement, including, without
limitation, all rights, privileges and obligations related thereto, but only to
the extent that the foregoing relate to the Kafus Shares; provided, however,
that Assignor's rights and duties with respect to (a) liquidated damages under
Section 2(b) of the Registration Rights Agreement accrued prior to the date
hereof and accruing through December 31, 1999, and (b) other debt, equity or
other instruments of Kafus held by Assignor, in each case shall not be assigned
or delegated pursuant to this Agreement (the "Assigned Rights").
TO HAVE AND TO HOLD, subject to the terms, exceptions and other
provisions herein stated, the Assigned Rights unto Assignee, its successors and
assigns, forever.
PART II
ASSUMPTION OF OBLIGATIONS BY ASSIGNEE
Assignee has and by these presents does hereby fully assume and agrees
to perform and timely discharge from and after the Effective Date all
liabilities, duties and obligations of the Assignor that are attributable to the
ownership of the Assigned Rights, including, without limitation, all
liabilities,
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<PAGE> 2
duties and obligations of the Assignor that arise under the Registration Right
Agreement. Assignee agrees to be bound by all of the terms of the Registration
Rights Agreement.
PART III
MISCELLANEOUS
3.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of Assignor and Assignee and their respective successors and assigns.
3.2 GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Texas, except to the extent that it
is mandatory that the law of some other jurisdiction shall apply.
3.4 CAPTIONS. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
3.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed hereto by their respective officers thereunto duly authorized, all as of
the day and year first above written.
SE THUNDERBIRD L.P. ENRON NORTH AMERICA CORP.
By: Blue Heron I LLC, its general partner
By: Whitewing Associates L.P., its sole member
By: Whitewing Management LLC, its general partner
By: Egret I LLC, its managing member By:
-----------------------
Name:
---------------------
Title:
--------------------
By:
-----------------------
Name:
---------------------
Title:
--------------------
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<PAGE> 1
EXHIBIT 3
Agreement to Amend Registration Rights Agreements
December 23, 1999
Enron North America
ECT Merchant Investments Corp.
Sundance Assets, L.P.
SE Thunderbird, L.P.
1400 Smith Street
Houston, Texas 77002
Re: Kafus Industries, Ltd.
Amendment of Registration Rights Agreements
Ladies and Gentlemen:
Reference is made to the Registration Rights Agreement dated as of
December 31, 1998 (the "December 31st Registration Rights Agreement"), made by
Kafus Industries, Ltd. (formerly Kafus Environmental Industries, Ltd.), a
British Columbia corporation (the "Company"), and Enron North America Corp.
(formerly "Enron Capital & Trade Resources Corp."), a Delaware corporation
("Enron"), the Amended and Restated Registration Rights Agreement dated as of
March 11,1999 between Sundance Assets, L.P. ("Sundance") and the Company (the
"Sundance Registration Rights Agreement"), and the Registration Rights Agreement
dated as of March 11,1999 between the Company and ECT Merchant Investments
Corp., a Delaware corporation and an Affiliate of Enron ("ECTMI") (the "ECTMI
Registration Rights Agreement"). The December 31st Registration Rights
Agreement, the Sundance Registration Rights Agreement and the ECTMI Registration
Rights Agreement are collectively referred to as the "Registration Rights
Agreements").
This Agreement To Amend Registration Rights Agreements (the
"Agreement") is intended to amend certain terms under the Registration Rights
Agreements pursuant to which the Company had agreed to seek effectiveness of a
registration statement, on or before the "Effectiveness Deadline," covering the
sale of certain securities in the Company. Unless otherwise indicated, all of
the capitalized terms used herein shall have the meanings ascribed to them in
the relevant Registration Rights Agreement.
Enron, ECTMI, and Sundance have now agreed to waive any of their rights
and remedies arising from or related to the Company's inability to have the
registration statements required by the Registration Rights Agreements declared
effective by the Effectiveness Deadline. The parties have further agreed to
amend the Registration Rights Agreements to change the Filing Deadlines to June
30, 2000 with respect to those shares that were to be registered pursuant to the
ECTMI Registration Rights Agreement and to December 31, 2000 with respect to
those shares that were to be registered pursuant to the Sundance Registration
Rights Agreement. The parties have further agreed to correspondingly amend the
dates by which the subject registration statements were to be declared effective
and certain penalty provisions were to be invoked.
<PAGE> 2
In consideration for the mutual covenants and agreements of the
parties, the Company, Enron, ECTMI, Sundance, and SE Thunderbird L.P.
("Thunderbird") now agree as follows:
1. Waiver. Enron, ECTMI, and Sundance hereby permanently waive and
voluntarily relinquish any and all rights and remedies arising from or related
to the Company's failure to file the above-referenced registration statements by
June 30, 1999 and/or have such registration statements declared effective on or
prior to the 150th day following such Filing Deadlines.
2. New Filing Deadlines. Section 2(a) of the December 31st Registration
Rights Agreement, as amended by the ECTMI Registration Rights Agreement, is
hereby amended to provide for a Filing Deadline of June 30, 2000. Section 2(a)
of the Sundance Registration Rights Agreement is hereby amended to provide for a
Filing Deadline of December 31, 2000. All other applicable dates and deadlines
are correspondingly adjusted and amended. The Company shall indemnify Enron,
Sundance, and ECTMI and hold them harmless from and against any and all taxes,
damages, liabilities, losses, claims, penalties, expenses, and costs, including
reasonable attorneys' fees and court costs, arising from the foregoing waivers,
adjustments, and amendments.
3. Demand Registration Right. At any time, ECTMI or Sundance (or their
respective transferees) may serve written notice on the Company (the "Amended
Filing Deadline Notice") requiring the Company to file within thirty (30) days
of receipt of such Amended Filing Deadline Notice a registration statement
covering any or all of the securities identified in the Amended Filing Deadline
Notice (whether or not such securities were previously covered by any of the
Registration Rights Agreements). Delivery of the Amended Filing Deadline Notice
to the Company shall constitute an immediate and effective amendment of the
Filing Deadlines set forth above. ECTMI and Sundance (or their respective
transferees) shall be limited to delivering no more than two (2) Amended Filing
Deadline Notices.
4. Amendment of July 16th Registration Rights Agreement. Except as
described below, nothing in this Agreement shall serve to amend the terms and
conditions of that certain Registration Rights Agreement dated as of July 16,
1997 between the Company and Enron. The Company shall promptly proceed to file a
registration statement covering those 9,000,000 shares formerly registered by
the Company (which registration statement has now lapsed) pursuant to such
agreement and 730,000 shares issued in payment of dividends owing on the Series
I Preference Shares ("Dividend Shares") held by Sundance. The Company shall
promptly amend such registration statement as necessary to cover any Dividend
Shares that may be issued in the future from time to time (including the 102,358
Dividend Shares owing with respect to the semiannual period ended June 30,
1999), as well as any other shares that may be Registrable Securities within the
meaning of such Registration Rights Agreement. The parties hereby confirm that
the terms of such Registration Rights Agreement apply in all respects to (i) the
Shares, as defined in the Subscription Agreement dated July 16, 1997 between the
Company and Enron (inclusive of the 1,999,999 share portion thereof assigned by
Enron to Thunderbird on December 21, 1999), (ii) the 750,000 shares transferred
to Enron pursuant to the Fee Agreement dated July 16, 1997 between Enron and The
CanFibre Group Ltd., (iii) all Dividend Shares that may be issued from time to
time, and (iv) any shares Enron might receive in payment for its Series I
Preference Shares pursuant to the Waiver And Amendment Agreement dated August
18,
2
<PAGE> 3
1998 between Enron and The Samarac Corporation, Ltd. Enron hereby permanently
waives and voluntarily relinquishes any and all rights and remedies arising from
or related to the Company's failure to keep such registration statement
effective prior to the date hereof.
5. Counterparts. This Agreement may be executed in counterparts which
together shall constitute one and the same instrument.
6. Choice of Law; Integration. This letter agreement shall be governed
and construed in accordance with the laws of the State of Texas, notwithstanding
any conflicts of law principles that would direct the application of the laws of
another jurisdiction. This letter agreement contains the entire agreement among
the parties with respect to the subject matter hereof.
EXECUTED as of the date first written above.
Very truly yours,
KAFUS INDUSTRIES, LTD., fka KAFUS
ENVIRONMENTAL INDUSTRIES, LTD.
By:
-----------------------------------
Mike McCabe, President
AGREED TO AND ACCEPTED
as of the date first above written.
ENRON NORTH AMERICA CORP., fka
ENRON CAPITAL & TRADE RESOURCES CORP.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
ECT MERCHANT INVESTMENTS CORP.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
3
<PAGE> 4
SUNDANCE ASSETS, L.P.
By: Ponderosa L.P., its general partner
By: Enron Ponderosa Management Holdings, Inc.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
SE THUNDERBIRD L.P.
By: Blue Heron I LLC, its general partner
By: Whitewing Associates L.P., its sole member
By: Whitewing Management LLC, its general partner
By: Egret I LLC, its managing member
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
4
