<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
REPAP ENTERPRISES INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
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[PHOTO]
NOTICE OF 1998 ANNUAL AND
SPECIAL MEETING AND
MANAGEMENT PROXY CIRCULAR
REPAP ENTERPRISES INC.
<PAGE> 3
[REPAP LOGO]
TABLE OF CONTENTS
CHAIRMAN'S WELCOME LETTER 2
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS 3
MANAGEMENT PROXY CIRCULAR 4
SOLICITATION OF PROXIES 4
BUSINESS TO BE TRANSACTED AT THE MEETING 7
NOMINEES FOR ELECTION AS DIRECTOR 8
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS 9
STOCK PERFORMANCE 14
CORPORATE GOVERNANCE 15
OTHER MATTERS 16
<PAGE> 4
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CHAIRMAN'S WELCOME LETTER
March -, 1998
DEAR SHAREHOLDER:
On behalf of the Board of Directors and Management of Repap, I wish to invite
you to our Annual and Special Meeting of Shareholders to be held on Wednesday,
May 20, 1998 at 10:30 a.m. at the Sheraton Center Toronto, Essex Ballroom, 123
Queen Street West, Toronto, Ontario, Canada, H5H 2M9.
The items of business to be considered at this meeting are detailed in the
attached Notice of Annual and Special Meeting of Shareholders and described in
greater detail in the accompanying Management Proxy Circular.
We would like you to attend the meeting but, should this not be possible, we ask
that you please complete the enclosed form of proxy and return it in the
envelope provided for that purpose.
Sincerely,
/s/William J. Anderson
William J. Anderson
Chairman
Registered Office: 1155 Rene-Levesque Blvd. West, Suite 2500, Montreal, Quebec
H3B 2K4
2
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NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual and Special Meeting of Shareholders of
REPAP ENTERPRISES INC. (the "Corporation") will be held at the Sheraton Center
Toronto, Essex Ballroom, 123 Queen Street West, Toronto, Ontario, Canada, H5H
2M9 on Wednesday, May 20, 1998 at 10:30 a.m. for the following purposes:
1. To receive the consolidated financial statements of the Corporation for
the fiscal year ended December 31, 1997 together with the auditor's report
thereon;
2. To elect directors of the Corporation for the ensuing year;
3. To consider, and if thought appropriate, to approve, with or without
variation, a special resolution approving the moving of the registered
office of the Corporation from the Montreal Urban Community to the City of
Miramichi the full text of which special resolution is set out as Schedule
A to the accompanying Management Proxy Circular;
4. To reappoint Ernst & Young as independent auditor of the Corporation for
the ensuing year; and
5. To transact such other business, if any, as may properly come before the
Annual and Special Meeting or any adjournment thereof.
The specific details of all matters proposed to be put before the Annual and
Special Meeting are set forth in the accompanying Management Proxy Circular.
Shareholders registered at the close of business on March 25, 1998 will be
entitled to receive notice of the Annual and Special Meeting.
Montreal, Quebec
Canada
- -, 1998 By order of the Board of Directors,
/s/Terry W. McBride
Terry W. McBride
Vice-President, General Counsel
and Secretary
SHAREHOLDERS WHO ARE UNABLE TO ATTEND THE ANNUAL AND SPECIAL MEETING IN
PERSON ARE ENTITLED TO BE REPRESENTED BY PROXY AND ARE REQUESTED TO KINDLY DATE
AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT TO THE CORPORATION, CARE OF
MONTREAL TRUST COMPANY AT P.O. BOX 1900, STATION B, MONTREAL, QUEBEC H3B 3L6, IN
THE ENVELOPE PROVIDED FOR THAT PURPOSE, TO BE RECEIVED BY THE CORPORATION NO
LATER THAN 48 HOURS BEFORE THE TIME OF THE HOLDING OF THE MEETING.
3
<PAGE> 6
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MANAGEMENT PROXY CIRCULAR
SOLICITATION OF PROXIES
THIS MANAGEMENT PROXY CIRCULAR (THE "CIRCULAR") IS FURNISHED IN CONNECTION
WITH THE SOLICITATION OF PROXIES BY AND ON BEHALF OF MANAGEMENT OF REPAP
ENTERPRISES INC. (THE "CORPORATION" OR "REPAP") FOR USE AT THE ANNUAL AND
SPECIAL MEETING OF THE SHAREHOLDERS OF THE CORPORATION (THE "MEETING") TO BE
HELD AT THE SHERATON CENTER TORONTO, ESSEX BALLROOM, 123 QUEEN STREET WEST,
TORONTO, ONTARIO, CANADA, ON WEDNESDAY, MAY 20, 1998 AT 10:30 A.M., AND AT ANY
ADJOURNMENT OF THE MEETING, FOR THE PURPOSES SET FORTH IN THE ATTACHED NOTICE OF
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS (THE "NOTICE OF MEETING"). This
solicitation is being made by mail. The approximate date of mailing is April 20,
1998. The Corporation may pay brokers or nominees holding Common Shares of the
Corporation in their names or in the names of their principals for their
reasonable expenses in sending solicitation material to their principals. The
cost of this solicitation will be borne by the Corporation.
In this Circular, all dollar amounts are expressed in Canadian dollars ("$",
"Cdn. $", "dollars" or "Cdn. dollars") unless otherwise specified or the context
otherwise requires.
APPOINTMENT OF PROXIES
The persons appointed as proxy in the accompanying form of proxy are
directors and officers of the Corporation. A SHAREHOLDER MAY APPOINT A PERSON
(WHO NEED NOT BE A SHAREHOLDER) OTHER THAN THE PERSONS DESIGNATED IN THE
ACCOMPANYING FORM OF PROXY TO ATTEND AND VOTE FOR THAT SHAREHOLDER AT THE
MEETING AND MAY DO SO EITHER BY STRIKING OUT THE NAMES OF THE PERSONS DESIGNATED
IN THE FORM OF PROXY AND INSERTING THE OTHER PERSON'S NAME IN THE BLANK SPACE
PROVIDED FOR THAT PURPOSE IN THE FORM OF PROXY OR BY COMPLETING ANOTHER
ACCEPTABLE FORM OF PROXY and, in either case, delivering the completed proxy to
the Secretary of the Corporation, care of Montreal Trust Company, at P.O. Box
1900, Station B, Montreal, Quebec H3B 3L6. Execution of the proxy will not
affect a shareholder's right to attend the Meeting and vote in person.
REVOCATION OF PROXIES
A shareholder who executes and returns the accompanying form of proxy has the
right to revoke it at any time before it is acted upon by an instrument in
writing executed by the shareholder or by the shareholder's attorney duly
authorized in writing or, if the shareholder is a corporation, under its
corporate seal or by an officer or attorney thereof duly authorized and
deposited at the registered office of the Corporation (1155 Rene-Levesque Blvd.
West, Suite 2500, Montreal, Quebec, Canada H3B 2K4) at any time up to and
including the last business day preceding the date of the Meeting or any
adjournment thereof at which the proxy is to be used, or with the Chairman of
the Meeting on the day of the Meeting or an adjournment thereof, or in any other
manner permitted by law.
ACTION TO BE TAKEN UNDER PROXIES
SHARES REPRESENTED BY PROPERLY EXECUTED PROXIES IN FAVOUR OF PERSONS
DESIGNATED IN THE PRINTED PORTION OF THE ACCOMPANYING FORM OF PROXY OR ANY OTHER
VALIDLY EXECUTED PROXIES WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS
INDICATED THEREON. IF NO CONTRARY INSTRUCTION IS INDICATED, SHARES REPRESENTED
BY PROPERLY EXECUTED PROXIES WILL BE VOTED BY THE PERSONS DESIGNATED IN THE
PRINTED PORTION THEREOF: (a) FOR THE ELECTION OF THE NOMINEES NAMED HEREAFTER TO
SERVE AS DIRECTORS OF THE CORPORATION UNTIL THE NEXT ANNUAL MEETING; (b) FOR THE
AMENDMENT OF THE ARTICLES OF THE CORPORATION TO CHANGE THE PLACE OF THE
REGISTERED OFFICE OF THE CORPORATION WITHIN CANADA FROM MONTREAL, QUEBEC TO
MIRAMICHI, NEW BRUNSWICK; (c) FOR THE REAPPOINTMENT OF ERNST & YOUNG AS
INDEPENDENT AUDITOR OF THE CORPORATION FOR THE ENSUING YEAR; AND (d) AT THE
DISCRETION OF THE PROXYHOLDER WITH RESPECT TO AMENDMENTS TO MATTERS IDENTIFIED
IN THE NOTICE OF MEETING OR WITH RESPECT TO OTHER BUSINESS, IF ANY, WHICH MAY
PROPERLY COME BEFORE THE MEETING.
4
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The enclosed form of proxy confers discretionary authority upon the persons
named therein with respect to amendments to matters identified in the Notice of
Meeting and to other matters, if any, that may properly come before the Meeting.
As of the date hereof, Management and the Board of Directors of the Corporation
know of no such amendment, variation or other matter expected to come before the
Meeting.
Of the matters to be submitted to the Corporation's shareholders at the
Meeting, the election of directors and the reappointment of the independent
auditor must be passed by a simple majority of the votes cast by the
shareholders at the Meeting. The special resolution approving the change of
place within Canada of the Corporation's registered office must be passed by
two-thirds of the votes cast by the common shareholders who voted in respect of
the special resolution. Under the Corporation's General By-law, at any meeting
of shareholders, two persons personally present, each being a shareholder
entitled to vote at the Meeting either personally or as an authorized
representative and together representing in person or by proxy at least 25% of
the outstanding voting shares, constitute a quorum. Shares represented in person
or by proxy at the Meeting will be counted for quorum purposes regardless of
whether the shareholder or proxy fails to vote on a particular proposal (an
"abstention") or whether a broker with a discretionary authority fails to
exercise that authority with respect to a particular proposal (a "broker
nonvote"). For purposes of determining whether a proposal has been approved, an
abstention or broker nonvote with regard to that proposal will be counted
neither for or against the proposal. Voting on any proposal will be by show of
hands except where a ballot is demanded by a shareholder or proxyholder entitled
to vote at the meeting.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
At -, 1998, 742,460,637 Common Shares were issued and outstanding. Each
holder of Common Shares shall be entitled to attend the Meeting and to vote
thereat on the basis of one vote for each Common Share registered in that
holder's name on the list of shareholders. The list of shareholders is available
for inspection during normal business hours at Montreal Trust Company and at the
Meeting. Only shareholders of record as at the close of business on March 25,
1998 shall be entitled to receive notice of and to attend and vote at the
Meeting. A transferee of shares acquired after that date shall be entitled to
attend and to vote at the Meeting if that transferee produces properly endorsed
certificates for those shares or otherwise establishes ownership of those shares
and has demanded not later than 10 days before the Meeting that the name of the
transferee be included in the list of shareholders entitled to vote at the
Meeting. As well, certain non-registered holders of Common Shares of the
Corporation are entitled to receive proxy-related materials in respect of the
Meeting.
(a) Security ownership of certain beneficial owners.
The following persons are known to the Corporation to be the beneficial owner
of more than five per cent of Repap's issued and outstanding common shares.
<TABLE>
<CAPTION>
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Percent
of Common Shares Ownership of Class
- ----------------------------------------------------------------------------------------
<S> <C> <C>
SILVERTON INTERNATIONAL FUND LIMITED,
2 AMERICAN LANE, GREENWICH, CT 158,593,728 Common Shares 21.4%
PALOMA PARTNERS L.L.C.,
2 AMERICAN LANE, GREENWICH, CT. 53,191,273 Common Shares 7.2%
CIBC OPPENHEIMER CORP. 49,070,800 Common Shares 6.6%
</TABLE>
5
F
<PAGE> 8
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(b) Security Ownership of Directors and Officers
The following table sets forth the beneficial ownership of Repap's common
shares by the directors and executive officers.
<TABLE>
<CAPTION>
Amount and nature
Name of beneficial owner of beneficial Percent
of Common Shares ownership of class
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
WILLIAM J. ANDERSON 0 - shares
2,000,000 - options Less than 1%
ROBERT E. BELLAMY 2,000 - shares
2,045,000 - options Less than 1%
GUY G. DUFRESNE 0 - shares
2,045,000 - options Less than 1%
STEPHEN C. LARSON 0 - shares
18,500,000 - options 2.29%
DAVID McAUSLAND 0 - shares
2,000,000 - options Less than 1%
ROBERT B. POILE 0
JOHN R. PURCELL 0 - shares
2,045,000 - options Less than 1%
MICHELLE A. CORMIER 1,384 - shares
5,069,616 - options Less than 1%
NEIL M. FALCO 14,154 - shares
4,080,569 - options Less than 1%
TERRY W. McBRIDE 4,000 - shares
5,233,000 - options Less than 1%
GEORGE S. PETTY (1) 26,523,255 3.57%
ALL DIRECTORS AND 21,538 - shares Less than 1%
EXECUTIVE OFFICERS AS A GROUP 43,018,185 - options 5.33%
</TABLE>
(1) Mr. Petty resigned as Chairman and Chief Executive Officer on August 13,
1997.
6
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BUSINESS TO BE TRANSACTED AT THE MEETING
PRESENTATION OF FINANCIAL STATEMENTS
The consolidated financial statements for the year ended December 31, 1997
and the report of the shareholders' auditor thereon will be placed before the
Meeting. The consolidated financial statements are included in the Corporation's
1997 Annual Report which is being mailed to shareholders with this Notice of
Meeting and Circular.
ELECTION OF DIRECTORS
The Articles of the Corporation stipulate that there shall be not more than
15 nor fewer than three directors. The Board of Directors, in accordance with
the by-laws of the Corporation, has fixed the number of directors at seven.
At the Meeting, seven directors are to be elected, each to hold office until
the next annual meeting of the shareholders or until his or her successor is
elected or appointed. The persons nominated in the printed portion of the
accompanying form of proxy will, unless otherwise specified by the shareholders,
vote for the election of the nominees whose names appear hereafter. If any of
these nominees are for any reason unavailable to serve as a director, proxies in
favour of Management will be voted for the remaining nominees and for substitute
nominees at their discretion unless the shareholder has specified in the proxy
that his shares are to be withheld from voting on the election of directors. The
Board of Directors unanimously recommends a vote in favour of each of the
nominees.
CHANGING THE PLACE OF THE REGISTERED OFFICE
During 1997, the Corporation sold or otherwise transferred its interest in
three of its four operating subsidiaries. Its sole remaining operating
subsidiary is Repap New Brunswick Inc. with operations in Miramichi, New
Brunswick. In the circumstances the Board of Directors is of the view that the
registered office should be in the same place as its main operations. A special
resolution approving the moving of the registered office of the Corporation from
the Montreal Urban Community in the province of Quebec to the City of Miramichi
in the province of New Brunswick is attached to this Management Proxy Circular
as Schedule A. The Board of Directors unanimously recommends that shareholders
vote for the approval of this special resolution.
APPOINTMENT AND REMUNERATION OF AUDITOR
The Shareholders are required to appoint a firm of auditors to serve as
auditor of the Corporation until the close of the next annual meeting. Unless
such authority is withheld, the persons named in the accompanying form of proxy
intend to vote for the reappointment of Ernst & Young as auditor of the
Corporation to hold office until the next annual meeting of shareholders at such
remuneration as may be fixed by the Board of Directors. Representatives of Ernst
& Young will be present at the Annual Meeting and will be given an opportunity
to make a statement if they desire to do so and will be available to respond to
appropriate questions from shareholders.
OTHER BUSINESS
The Chairman will report on recent events of significance to the Corporation
and on other matters of interest to the shareholders and will invite questions
and comments from the floor.
7
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NOMINEES FOR ELECTION AS DIRECTOR
The table below sets forth the nominees, their ages, current principal
occupation, office or offices with the Corporation or its significant affiliates
(if any) and the date of first election as a director of the Corporation.
<TABLE>
<S> <C> <C> <C>
Name Age Principal occupation and First elected
major positions and offices or appointed
with the Corporation or as Director
its significant affiliates
William J. Anderson(1)(2) 49 President, Silverton Management August 13, 1997
Company Limited (private investment
management company)
Robert E. Bellamy(1)(3) 64 Managing Director, Verulam Capital Corp. September 23, 1986
(investment holding company)
Guy G. Dufresne(2)(3) 56 President and Chief Executive Officer of September 20, 1993
Quebec Cartier Mining Company
Stephen C. Larson 49 President and Chief Executive Officer May 30, 1996
of the Corporation
David McAusland 44 Partner, Byers Casgrain August 13, 1997
(Barristers and Solicitors)
Robert B. Poile(1) 38 Paloma Partners Management Co. August 13, 1997
(private investment management company)
John R. Purcell(2)(3) 66 Chairman and Chief Executive Officer, June 1, 1995
Grenadier Associates, Ltd.
</TABLE>
1 Member of the Audit Committee. The audit committee meets with senior financial
management and the auditor to review the financial statements and recommend
their approval by the Board and to monitor the effectiveness of internal audit
and control procedures.
2 Member of the Compensation Committee. The compensation committee establishes
policy for the remuneration (salary, bonuses and non-cash) for senior management
and sets the remuneration of the President and Chief Executive Officer.
3 Along with Mr. William I. Turner, Jr., a former director, member of an
independent committee established to oversee the strategic alternatives process
begun by the Corporation in 1996. The duties of this committee concluded with
the sale of the shares of Repap USA Inc. in September 1997.
During the past five years, the above individuals have held those positions
with the companies indicated opposite their names, except as follows: Mr.
William J. Anderson was a managing director of Paloma Partners Management
Company (investment management company) from 1993 to 1996 when Mr. Anderson
became President of Silverton Management Company Limited; Mr. Stephen C. Larson
served as President and Chief Operating Officer of Repap from February 1996 to
August 1997. Prior to that Mr. Larson served as President and Chief Operating
Officer of Domtar Inc. between October 1994 and March 1, 1996. From August 1991
to October 1994 Mr. Larson was President - Pulp and Paper Group of Domtar Inc.
Mr. William J. Anderson is a director of Rigel Energy Corporation.
The Corporation maintains Directors' and Officers' Liability Insurance of
$50,000,000 with a deductible of $250,000. During 1997, the Corporation paid the
entire premium of approximately $400,000 with respect to this insurance.
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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Repap does not pay its directors cash compensation. Instead, each director,
except for Mr. Poile who has declined the grant and Mr. Larson who has received
options in his capacity as President and Chief Executive Officer, has been
granted options to acquire 2,000,000 common shares in the capital of the
Corporation pursuant to the Corporation's 1987 Directors, Officers and Employees
Stock Option Plan.
COMPENSATION TABLE
The following table (presented in accordance with applicable law) sets forth
the annual and long-term compensation for the financial years ended December 31,
1997, 1996 and 1995 for the chief executive officers who served as such during
1997 and the three other executive officers of Repap at December 31, 1997. Those
listed in the table are hereinafter referred to as the "Named Executive
Officers".
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ ------------------------------------------
Awards Payouts
------------------------------------------
Securities
Under
Options/SARs
Granted (#)
-----------------
Restricted
Other Shares or Long-term
Name & Annual Restricted Incentive All Other
Principal Compen- Share Plan Compensation
Position Year Salary $ Bonus $(1) sation $(2) Options SARs Units $ Payouts $ $(3)
- -------- ---- -------- ---------- ----------- ------------- ---- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
George S. Petty 1997 371,667 - - - - 5,532,536(8)
Chairman and 1996 600,000 435,349(4) - - - 408,000
Chief Executive Officer(6) 1995 643,107 800,000 1,000,000 - - - 204,000
Stephen C. Larson 1997 585,141 18,000,000 - - - 7,000
President and Chief 1996 461,869 500,000(5) - - - 255,000
Operating Officer(7) 1995 - - - - - -
Neil M. Falco 1997 325,200(10) - 1,231,020(9)(10) 4,000,000 -
President, 1996 315,980(10) 11,590(10) - -
Repap Marketing Inc. 1995 315,980(10) 93,560(10) - -
Terry W. McBride 1997 286,667 186,800 5,000,000
Vice President, General 1996 260,000 -
Counsel and Secretary 1995 260,000 71,200 48,000
Michelle A. Cormier 1997 220,000 128,800 5,000,000
Vice President, 1996 191,667 -
Finance 1995 150,000 165,371 34,615
</TABLE>
(1) Amounts in this column include amounts for bonuses earned in 1995 pursuant
to Repap's long-term incentive plan.
(2) Perquisites and other personal benefits do not exceed the lesser of $50,000
and 10% of the total of the annual salary and bonus of the Named Executive
Officers.
(3) Amounts in this column represent directors' fees except (a) the amount for
George S. Petty for 1997 which is itemized in note 8; (b) the amounts of
$200,000 and $401,000 which were paid to George S. Petty Management Ltd. in 1995
and 1996, respectively, for services rendered to Repap including the use of
George S. Petty Management Ltd.'s properties for company functions; and (c) the
amount of $250,000 paid to Mr. Larson upon his acceptance of employment with
Repap.
(4) As part of Repap's long-term incentive plan 1995 bonus, 435,349 options were
granted to Mr. Petty at an exercise price of $5.375.
(5) 500,000 options granted to Mr. Larson upon his acceptance of employment with
Repap in 1996.
(6) Mr. Petty resigned as Chairman and Chief Executive Officer on August 13,
1997.
(7) Mr. Larson was appointed President and Chief Executive Officer on August 13,
1997. Prior to that time, he was President and Chief Operating Officer of the
Corporation.
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(8) This amount in this column represents $3,215,535 paid to Mr. Petty pursuant
to a change in control contract; $2,000,000 to George S. Petty Management Ltd.
to terminate a services agreement; $144,652 paid to George S. Petty Management
Ltd. for services rendered to Repap including the use of George S. Petty
Management Ltd.'s properties for company functions; $57,692 vacation pay; $7,000
reimbursement of legal fees and $107,657 Pension.
(9) This amount represents a payment to the executive indicated pursuant to a
change in control contract that became effective upon the sale of Repap USA Inc.
in order to retain the executive and ensure the ability of the Corporation to
continue to operate and pursue its business and strategic objectives.
(10) Amounts originally paid in United States dollars have been converted to
Canadian dollars using an exchange rate of Cdn.$1.4363 per U.S.$1.00.
OPTION GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
The following table sets forth individual grants of stock options during the
financial year ended December 31, 1997 to each of the Named Executive Officers.
<TABLE>
<CAPTION>
% of Total Market Value
Securities Options Granted of Underlying
Under Options(1)/ to Employees Exercise Price Options on the Date
Name SARs Granted in Financial Year ($/Security) of Grant(2) ($/Security) Expiration Date
- ---- ----------------- ----------------- -------------- ------------------------ ---------------
<S> <C> <C> <C> <C> <C>
Stephen C. Larson 18,000,000 29.51% $0.235 $0.235 August, 2007
Terry W. McBride 5,000,000 8.20% $0.235 $0.235 August, 2007
Michelle A. Cormier 5,000,000 8.20% $0.235 $0.235 August, 2007
Neil M. Falco 4,000,000 6.56% $0.235 $0.235 August, 2007
George S. Petty 0 - - - -
</TABLE>
(1) Options granted during 1977 under the 1987 Directors, Officers and Employees
Stock Option Plan are exercisable as follows:
- - 20% immediately;
- - a further 20% upon the earlier of (a) the first anniversary of the grant of
the option (that is, August 29, 1998) or (b), if the shares of the Corporation
have a closing price on The Toronto Stock Exchange in excess of $0.29375 (being
125% of the exercise price) on ten consecutive trading days occurring after the
six month's anniversary from the grant of the option (that is, March 1, 1998),
then on or after the first trading day after that ten consecutive day period;
- - a further 20% upon the earlier of (a) the second anniversary of the grant of
the option (that is, August 29, 1999) or (b), if the shares of the Corporation
have a closing price on The Toronto Stock Exchange in excess of $0.3525 (being
150% of the exercise price) on ten consecutive trading days occurring after the
first anniversary from the grant of the option, then on or after the first
trading day after that ten consecutive day period; and
- - the balance upon the earlier of (a) the third anniversary of the grant of the
option (that is, August 29, 2000) or (b), if the shares of the Corporation have
a closing price on The Toronto Stock Exchange in excess of $0.47 (being 200% of
the exercise price) on ten consecutive trading days occurring after the second
anniversary from the grant of the option, then on or after the first trading day
after that ten consecutive day period;
provided that all options shall become exercisable upon a change in control of
the Corporation or Repap New Brunswick Inc.
(2) The exercise price of $0.235 was the closing price of the common shares on
the Toronto Stock Exchange on August 28, 1997, the day before the options were
granted.
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AGGREGATED OPTION EXERCISES DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
AND FINANCIAL YEAR-END OPTION VALUE
The following table sets forth details of all exercises of stock options by
each of the Named Executive Officers of Repap during the financial year ended
December 31, 1997 and the financial year-end value of unexercised options on an
aggregated basis.
<TABLE>
<CAPTION>
Market value of
Unexercised Options Exercisable/unexercisable in-the-Money
at FY-End (#) Options at FY-End($)(1)
Securities Aggregate -------------------------------------------------------------------
Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable
- ---- --------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen C. Larson - - 500,000(1) - - -
3,600,000(2) 14,400,000(2) - -
Terry W. McBride - - 223,000(1) - - -
1,000,000(2) 4,000,000(2) - -
Michelle A. Cormier - - 69,615(1) - - -
1,000,000(2) 4,000,000(2) - -
Neil M. Falco - - 80,569(1) - - -
800,000(2) 3,200,000(2) - -
George S. Petty - - - - - -
</TABLE>
(1) These options were granted prior to 1997. All options granted prior to 1997
became exercisable upon the entering into of the pre-merger agreement dated
December 17, 1996 among the Corporation, Avenor Inc. and others.
(2) See footnote (1) to the table "Options Granted During the most recently
completed financial year" for details on the terms of exercise of these options.
(3) Based on the closing price on the TSE of Common Shares of the Corporation
($0. - ) on December 31, 1997.
PENSION BENEFITS
Prior to 1996, Repap did not have a pension plan for its head office
executives and employees except for a former executive. Effective January 1,
1996, a pension program was established which was comprised of a registered
pension plan and two supplementary plans. Pursuant to these plans head office
employees, including executives, will be entitled, commencing, at the employee's
option, between ages 60 and 65, to receive a pension based on years of service
(with past service recognised) of up to 60% of their average best three years'
base salary, excluding bonuses. The pension will be partially funded up to the
maximum tax-deductible limit allowable by Revenue Canada. Any excess will be
provided by an unfunded supplementary plan.
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<PAGE> 14
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The following table discloses all the benefits that executive officers are
entitled to from pension plans maintained by Repap or its subsidiaries.
<TABLE>
<CAPTION>
Years of Service
- -----------------------------------------------------------------------------------------------------------------------
Remuneration ($)(1) 5 ($) 10 ($) 15 ($) 20 ($) 25 ($)
- ------------------- ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
125,000 17,408 34,816 45,974 57,132 68,290
200,000 28,657 57,315 75,973 94,630 113,288
300,000 43,658 87,315 115,973 144,630 173,288
400,000 58,658 117,315 155,973 194,630 233,288
500,000 73,658 147,315 195,973 244,631 293,289
600,000 88,658 177,315 235,973 294,631 353,289
700,000 103,658 207,315 275,973 344,631 413,289
</TABLE>
(1) Average of best three years' base salary, excluding bonuses.
The estimated credited years for each of the Named Executive Officers are:
Stephen C. Larson, 9.25 years; Neil Falco, 6.75 years; Terry McBride, 10.9
years; Michelle Cormier, 10.3 years.
EMPLOYMENT, CHANGE-IN-CONTROL AND SERVICE AGREEMENTS
Upon commencing employment with Repap, Mr. Stephen C. Larson entered into an
employment agreement dated February 2, 1996. Mr. Larson's employment contract
was revised at the time the US$130 million 8.5% convertible debentures were
exchanged for common shares of the Corporation. Repap has also amended, as of
October 1, 1997, change-in-control agreements previously entered into with Terry
W. McBride, Vice-President, General Counsel and Secretary and Michelle Cormier,
Vice-President, Finance. Change in control for the purposes of these agreements
is defined to include the purchase of at least 25% of the common shares of Repap
or Repap New Brunswick Inc. by a forest products industry participant, the
purchase of at least 33% of the common shares of Repap or Repap New Brunswick
Inc. by any other purchaser, the replacement of a majority of the Board of
Directors or the reduction in the common share position of Silverton
International Limited and Paloma Partners L.L.P. to 10% or less. These
agreements now provide that in the event of a voluntary or involuntary
termination of employment, the named executives will be entitled to receive
compensation (the "Termination Payment") equal to four and one-half times, in
the case of Mr. Larson, and three times in the case of Michelle A. Cormier and
Terry W. McBride, the annual salary of the executive. For the purposes of
determining such payments, in the case of Mr. Larson, his annual salary shall be
his annual base salary at the time of such termination. In the case of Michelle
Cormier and Terry McBride, the annual salary shall be the highest of his or her
annual salary in the three years preceding the date of the change in control of
Repap. In addition, in the event of a change in control following which Mr.
Larson's employment is either voluntarily or involuntarily terminated, Mr.
Larson will be entitled to receive a bonus of US$500,000 plus, if the share
price of the common shares of the Corporation at the time of the change in
control is greater than $0.235, an additional amount of US$250,000. Each of Mr.
Larson, Mr. McBride and Ms. Cormier, upon termination of his or her employment,
is entitled to health and insurance coverage benefits continuation together
with, in the case of Mr. Larson, 4.5 years and, in the case of Mr. McBride and
Ms. Cormier, two years past service credit under Repap's pension plans. In
December 1997, the Corporation purchased Mr. Larson's Montreal residence for
$400,000 and the mortgage against that property in favour of the Corporation was
repaid (see "Table of Indebtedness of Directors and Executive Officers"). In
December 1997, in conjunction with the move of the Corporation's executive
offices to Stamford, Connecticut, the Corporation purchased Mr. McBride's home
for $485,000. Also in conjunction with the move of the Corporation's executive
offices to Stamford, Connecticut, the Corporation has agreed to pay Mr. Larson,
Mr. McBride and Ms. Cormier in United States dollars.
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<PAGE> 15
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TABLE OF INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Largest Amount Amount
Involvement of Purpose Outstanding Outstanding as of
Name Issuer or Subsidiary of loan During 1997 December 31, 1997
- ---- -------------------- ------- ----------- -----------------
<S> <C> <C> <C> <C>
Stephen C. Larson Repap Home acquisition Loan $250,000 Nil
Neil M. Falco Repap Sales Corporation Home acquisition Loan U.S.$ 45,000 Nil
Michelle A. Cormier Repap Home Acquisition Loan $ 40,839 Nil
</TABLE>
COMPOSITION OF THE COMPENSATION COMMITTEE
The Board of Directors of Repap has appointed a Compensation Committee
composed of William J. Anderson (Chairman), Guy G. Dufresne and John R. Purcell.
No member of the Compensation Committee is employed by Repap or its affiliates,
and no member is a former officer or employee of Repap or its affiliates.
REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION COMMITTEE
Executive Compensation Policy and Strategy
Prior to 1997, Repap's executive compensation policy was designed to attract
and retain entrepreneurial executives capable of profitably developing and
consolidating a paper company who were willing to share the risks and rewards of
a growing company in a cyclical industry. As a result of the divestiture of
three of the four Repap operations, the resignation of the Chairman and Chief
Executive Officer and the Chief Financial Officer and the substantial
restructuring of the Board of Directors, the Corporation's complement of
executive officers has been reduced to four. Repap made certain arrangements
with the new President and Chief Executive Officer and the other named
executives to ensure the ability of the Corporation to continue to operate and
pursue its business and strategic objectives (see "Summary Compensation Table"
and "Employment, Change-in-Control and Service Agreements"). The policy on which
the current compensation of the Corporation's executive officers is based is
designed to be competitive with other comparable forest products companies as
well as to recognize the uncertainties that have accompanied the changes
experienced by the Corporation over the past fiscal year.
Following the changes to its Board of Directors and senior executives, Repap
developed and adopted a Key Management 1998 Bonus Plan (the "Plan") which is
designed to reflect the realities of the transition of the Corporation, be
results driven, be measurable, include key decision-makers and provide stretch
objectives, within management's control, that realistically can be achieved.
The Plan is applicable to the 1998 fiscal year only, reflecting the
Corporation's current position and near term objectives for performance
improvement. A new plan will be established each fall for the following year.
The Plan establishes goals for three organizational areas (operations, sales,
corporate) with certain common links to encourage teamwork yet with specific
objectives within each managers' control. Each goal is quantified and measurable
so progress can clearly be monitored throughout the year. Operational goals can
be incorporated in and applied to lower level bonus plans and departmental
objectives. The number of goals is limited to five for each organizational area
to help develop focus, priorities and effective management. Bonuses are meant to
reward effort beyond strictly doing one's job or merely achieving "given"
expectations such as environmental compliance. The theme of continuous
improvement is incorporated in each goal. Minimum standards, beyond prior years'
results, must be met before bonuses are earned.
In addition to the three organizational areas of operations, sales and
corporate, the Plan recognizes two tiers of management participation reflective
of leadership and decision-making responsibility within the company. The first
tier in which the named executive officers are placed is comprised of seven
employees and establishes a bonus range of 0-60% of
13
<PAGE> 16
[REPAP LOGO]
salary. The second tier is comprised of 17 employees and establishes a bonus
range of 0-40% of salary. Five goals are established for each organizational
area and are given a performance weighting. Each goal has three quantified
measurement standards. The first establishes a minimum threshold required to
begin earning a bonus. The second goal establishes a "target". Achievement of
this level of improvement, often reflective of the budgeted objective, results
in earning 50% of the bonus range. That is, tier 1 would be entitled to a bonus
equal to 30% of salary, tier 2 to 20% of salary. Achievement of the maximum
performance goal or beyond will require considerable stretch and will result in
the full bonus being earned.
Compensation of the Chief Executive Officer
The salary and bonus of the Chief Executive Officer are determined by the
Compensation Committee. The compensation of Mr. George S. Petty, who resigned
during the last fiscal year, was set in prior years to be competitive with other
comparable forest products companies and to recognize Mr. Petty's unique
personal contributions and leadership. Payments to Mr. Petty in 1997 (other than
salary) were contractual based upon a change in control contract that was
triggered with Mr. Petty's resignation following the repayment of the
Corporation's 8.5% convertible debentures by the issuance of common shares on
August 1, 1997. The compensation of Mr. Larson was set to ensure that his
experience and knowledge would be available to the Corporation as it attempted
to cope with the changes that were experienced during 1997 and the challenges
facing the Corporation as a result of those changes.
Submitted by the Compensation Committee: William J. Anderson, John R. Purcell,
and Guy G. Dufresne.
STOCK PERFORMANCE
The following graph compares the total cumulative yield of a $100 investment
in the shares of the Corporation made on December 31, 1992 and the cumulative
performance of the TSE 300 and TSE Paper and Forest Products Indices on the
Toronto Stock Exchange for the last five fiscal years.
Five Year Cumulative Total Return
[GRAPH]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
REPAP 100 152 345 286 184 9
TSE 300 Index 100 133 132 152 194 224
TSE Paper and Forest 100 144 148 143 157 139
Products Index
</TABLE>
14
<PAGE> 17
[REPAP LOGO]
CORPORATE GOVERNANCE
The Toronto Stock Exchange has adopted a requirement that disclosure be made
by each listed company of its governance system by making reference to The
Toronto Stock Exchange Guidelines for Corporate Governance (the "Guidelines")
and by explaining where the listed Company's system of governance differs from
the Guidelines. The Montreal Exchange has adopted similar disclosure
requirements. The Board has assumed responsibility for developing the
Corporation's approach to governance and for the Corporation's response to the
disclosure requirements of The Toronto Stock Exchange and the Montreal Exchange.
The following disclosure has been approved by the Board of Directors of the
Corporation.
The Board of Directors
The Board, in keeping with its duties and responsibilities, oversees the
management of the business and affairs of the Corporation. In doing so, it
approves the business plans of the Corporation and the broad lines of strategic
initiatives to be taken. The Board meets four times a year to receive the
reports of management on the operations of the Corporation and to provide advice
and direction on matters of current or strategic concern to the Corporation. In
addition, the Board meets as required between regular quarterly meetings to
consider particular issues in a timely manner and to ensure that its overall
mandate is being carried out. The Board met 17 times during 1997.
The Board is chaired by a director who is independent from the Corporation.
All major decisions concerning, among other things, the Corporation's corporate
status, capital, debt financing, securities, distribution, investments,
acquisitions, divestitures and strategic alliances, are subject to approval by
the Board.
The Board is composed of seven directors, six of which are unrelated.
The Board has not adopted a formal policy for the recruitment of new
directors or the evaluation of the effectiveness of the Board, its committees or
individual directors. Proposed new directors are discussed with the Board before
being nominated at the Annual Meeting of Shareholders. New directors meet
informally with senior management. Presentations at regularly scheduled Board
meetings supplement the Board members' knowledge of the Corporation.
The Board, with the approval of the Chairman, permits individual directors to
engage outside advisers in appropriate circumstances.
Committees of the Board
The Board has two committees, the Audit Committee and the Compensation
Committee.
In 1997 the Audit Committee was composed of three unrelated directors. The
Audit Committee reviews the financial statements of the Corporation with
management and the Corporation's auditor; reports on those financial statements
to the Board; reviews and advises on audit fees; assesses the Corporation's
internal control systems with the external auditors; and from time to time
advises upon accounting and reporting policies relative to subsidiaries and
associated companies. The Audit Committee met four times during 1997.
The Compensation Committee, composed of three unrelated directors, is
responsible for establishing the basis for compensation of senior management of
the Corporation, for setting the compensation of the Chief Executive Officer,
and for reviewing compensation for Board and Board Committee members. The
Compensation Committee met twice during 1997.
The Independent Committee, composed of four unrelated directors, was
established in 1996 to assume responsibility for ensuring that the strategic
alternatives process begun by the Corporation in 1996 was conducted in the
interest of all shareholders independent of the management of the Corporation.
During 1996 and 1997, the Independent Committee met both formally and informally
before Board of Directors Meetings and independently approximately 15 times
during 1997. The duties of this committee concluded with the sale of the Shares
of Repap USA Inc. and Repap Wisconsin, Inc. in September 1997.
15
<PAGE> 18
[REPAP LOGO]
OTHER MATTERS
THE MANAGEMENT OF THE CORPORATION KNOWS OF NO AMENDMENT OF THE MATTERS
REFERRED TO IN THE NOTICE OF MEETING NOR OF OTHER BUSINESS TO BE BROUGHT BEFORE
THE MEETING; HOWEVER, IF ANY AMENDMENT OR OTHER BUSINESS SHOULD PROPERLY BE
BROUGHT BEFORE THE MEETING, THE ACCOMPANYING FORM OF PROXY CONFERS DISCRETIONARY
AUTHORITY UPON THE PERSONS NAMED THEREIN TO VOTE UPON ANY AMENDMENT OF THE
MATTERS REFERRED TO IN THE NOTICE OF MEETING OR ON OTHER BUSINESS PROPERLY
BROUGHT BEFORE THE MEETING IN ACCORDANCE WITH THEIR BEST JUDGEMENT.
ANNUAL REPORT ON FORM 10-K
THE CORPORATION WILL PROVIDE WITHOUT CHARGE TO EACH SHAREHOLDER SOLICITED, ON
THE WRITTEN REQUEST OF THAT PERSON, A COPY OF THE CORPORATION'S ANNUAL REPORT ON
FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND THE FINANCIAL SCHEDULES.
WRITTEN REQUESTS SHOULD BE FORWARDED TO REPAP ENTERPRISES INC. 300 ATLANTIC
STREET, SUITE 200, STAMFORD, CT., 06901, ATTENTION: THE SECRETARY.
SHAREHOLDER PROPOSALS
Proposals by shareholders intended to be presented at the Annual Meeting to
be held in 1999 must be received by the Secretary of the Corporation at the
executive offices of the Corporation (1155 Rene-Levesque Blvd. West, Suite 2500,
Montreal, Quebec H3B 2K4) no later than February 19, 1999 to be considered for
inclusion in the proxy statement for that meeting. It is suggested that
proponents submit any proposals by registered mail.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Except as otherwise disclosed in this Management Proxy Circular, the
Management of the Corporation is unaware of any material interest of any
director or officer of the Corporation, of any management nominee for election
as a director of the Corporation or of any person who beneficially owns or
exercises control or direction over shares carrying more than 10% of the voting
rights attached to the common shares of the Corporation, or any associate or
affiliate of the foregoing persons in any transaction since the beginning of the
last completed financial year of the Corporation or any proposed transaction
which has materially affected or will materially affect the Corporation or any
of its subsidiaries.
DIRECTORS' APPROVAL
The information contained in this Management Proxy Circular is given as of
March -, 1998, except as otherwise specified therein. The Board of Directors of
the Corporation has approved the contents and the sending of this Management
Proxy Circular.
For the Board of Directors,
/s/ Terry W. McBride
Terry W. McBride
Vice President, General Counsel and Secretary
Montreal, Quebec
Canada
March -, 1998
16
<PAGE> 19
[REPAP LOGO]
SCHEDULE A
SPECIAL RESOLUTION OF THE SHAREHOLDERS OF REPAP ENTERPRISES INC.
CHANGING THE PLACE OF THE REGISTERED OFFICE
RESOLVED as a special resolution that the articles of the Corporation are hereby
amended to change the place in Canada where the registered office is to be
situated from the Montreal Urban Community in the province of Quebec to the City
of Miramichi in the province of New Brunswick.
<PAGE> 20
REPAP ENTERPRISES INC.
PROXY SOLICITED BY THE MANAGEMENT OF THE CORPORATION FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON WEDNESDAY, MAY 20, 1998
COMMON SHARES
The undersigned holder of Common Shares of REPAP ENTERPRISES INC. hereby
appoints Mr. William J. Anderson, Chairman, or failing him, Mr. Terry W.
McBride, Secretary or instead of either of them the undersigned appoints
NAME(S):
-----------------------------------------------------------------------
the attorney and proxy of the undersigned for and in the name and on behalf of
the undersigned to attend, vote and act in respect of all matters that may come
before the ANNUAL MEETING OF SHAREHOLDERS of the Corporation to be held on
Wednesday, May 20, 1998, at 10:30 a.m. at the Marriott Chateau Champlain, Salle
de Bal, 1 Place du Canada, Montreal, Quebec, and at any and all adjournments
thereof. Unless otherwise specified by marks in the referent boxes, the shares
of the undersigned will be voted for all matters listed below.
The shares represented by this proxy will be voted as directed by the
undersigned on the following:
- -------------------------------------------------------------------------------
1. / / For the election of all nominees for director listed below (except as
marked to the contrary)
/ / Withhold authority to vote in respect of all nominees for director
Nominees for director William J. Andersen, Robert E. Bellamy, Guy G.
Dufresne, Stephen C. Larson, David McAusland, Robert B. Poile, John H. Purcell
YOU MAY WITHHOLD YOUR VOTE FROM ANY NOMINEE FOR
DIRECTOR BY STRIKING OUT THE NAME OF THAT NOMINEE
2. / / For the Special Resolution approving the moving of the registered
office of the Corporation from the Montreal Urban Community in the
Province of Quebec to the City of Miramichi in the Province of
New Brunswick.
/ / Against the Special Resolution approving the moving of the registered
office of the Corporation from the Montreal Urban Community in the
Province of Quebec to the City of Miramichi in the Province of
New Brunswick.
3. / / For the reappointment of Ernst & Young as auditor
/ / Withhold authority to vote the reappointment of Ernst & Young as auditor
- -------------------------------------------------------------------------------
PLEASE TURN OVER
<PAGE> 21
Note 1. A shareholder has the right to appoint a person (who need not be a
shareholder) other than the persons desiginated on the face of this proxy to
represent them at the Meeting. A shareholder wishing to endorse this right
should strike the name or names of the persons designated and insert the name or
names of his nominee(s) in the blank space provided for that purpose on the
face of this proxy.
Note 2. Please sign exactly as the shares are registered. When signing as
executor, administrator, trustee or the like, please give your title as such.
A corporation executing this form of proxy is requested to affix his corporate
seal under the hand(s) of its authorized officer(s).
Note 3. An undated proxy is deemed to be as the date on which it is executed
by the person making the solicitations. For additional information see the
Management Proxy Circular accompanying the Notice of Meeting.
Note 4. This proxy confers discretionary authority upon the persons named
therin with respect to amendments to identified in the Notice of Meeting and to
other matters, if any, that may properly come before the Meeting.
/ / Please check here if you plan to attend the Annual Meeting.
- -------------------------------------------------------------------------------
Date Signature of Shareholder
