<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No.____)*
REPAP ENTERPRISES INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, NO PAR VALUE
- --------------------------------------------------------------------------------
(Title of Class of Securities)
76026M309
----------------------------------------------
(CUSIP Number)
Julia Murray
General Counsel - Finance
Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, TX 77002
(713) 853-6161
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 15, 1998
----------------------------------------------
(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 Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box: [ ]
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) 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 ("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. 76026M309 PAGE 2 OF 14 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Enron Capital & Trade Resources Corp.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
N/A
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
128,571,429*
OWNED BY
------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
128,571,429*
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
128,571,429*
- --------------------------------------------------------------------------------
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)
14.7%**
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
* Represents shares of Common Stock issuable upon conversion of U.S.
$45,000,000 principal amount of 6% Convertible Subordinated Debentures due
2005 described herein.
** Based on information provided by the Issuer as of May 15, 1998.
<PAGE> 3
SCHEDULE 13D
CUSIP NO. 76026M309 PAGE 3 OF 14 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
Enron Corp.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
N/A
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Oregon
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
128,571,429*
OWNED BY
------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
128,571,429*
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
128,571,429*
- --------------------------------------------------------------------------------
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)
14.7%**
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
* Represents shares of Common Stock issuable upon conversion of U.S.
$45,000,000 principal amount of 6% Convertible Subordinated Debentures due
2005 described herein.
** Based on information provided by the Issuer as of May 15, 1998.
<PAGE> 4
STATEMENT ON SCHEDULE 13D
Note: All information herein with respect to Repap Enterprises Inc., a
Canadian corporation (the "Issuer"), is to the best knowledge and belief of the
Reporting Entities (as defined herein).
Item 1. Security and Issuer.
This statement relates to the shares of common stock, no par value
("Common Stock"), of Repap Enterprises Inc. The address of the principal
executive office of the Issuer is 300 Atlantic Street, Suite 200, Stamford,
Connecticut 06901.
Item 2. Identity and Background.
This statement is being filed by (i) Enron Capital & Trade Resources
Corp., a Delaware corporation ("ECT"), whose principal business is the purchase
of natural gas, gas liquids and power through a variety of contractual
arrangements and marketing these energy products to local distribution
companies, electric utilities, cogenerators and both commercial and industrial
end users, as well as the provision of risk management services and (ii) Enron
Corp., an Oregon corporation ("Enron"), which is an integrated natural gas and
electricity company that engages, primarily through subsidiaries, in the
transportation and wholesale marketing of natural gas, the exploration for and
production of natural gas and crude oil, the production, purchase,
transportation and worldwide marketing and trading of natural gas liquids,
crude oil and refined petroleum products, and the purchasing and marketing of
electricity and other energy-related commitments. ECT and Enron are referred
to herein as the "Reporting Entities." ECT is a wholly-owned subsidiary of
Enron.
The address of the principal business office of ECT and Enron is 1400
Smith Street, Houston, Texas 77002. Schedule I attached hereto sets forth
certain additional information with respect to each director and each executive
officer of ECT and Enron. The filing of this statement on Schedule 13D shall
not be construed as an admission that Enron or any person listed on Schedule I
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.
Neither of the Reporting Entities, nor to their knowledge any person
listed on Schedule I hereto, has been, during the last five years (a) convicted
of any criminal proceeding (excluding traffic violations or similar
misdemeanors) or (b) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, U.S.
federal or state securities laws or finding any violations with respect to such
laws.
Page 4 of 14
<PAGE> 5
Item 3. Source and Amount of Funds or Other Consideration.
On May 15, 1998, pursuant to a Purchase Agreement between ECT and the
Issuer (the "Purchase Agreement"), ECT purchased from the Issuer U.S.
$45,000,000 aggregate principal amount of 6% Convertible Subordinated
Debentures due 2005 (the "Debentures") at 100% of such aggregate principal
amount. The purchase price for such securities was paid in cash, and the
source of funds used for the purchase of the Debentures was working capital on
hand. See Item 4 for a more complete description of the Debentures and the
transactions contemplated by the Purchase Agreement.
Item 4. Purpose of Transaction.
The purchase of the Debentures was the result of a negotiated
transaction with the Issuer. The Debentures were acquired for investment
purposes. ECT intends to review its investment in the Issuer on a continuing
basis and, depending upon the price of, and other market conditions relating
to, the Common Stock, subsequent developments affecting the Issuer, the
Issuer's business and prospects, other investment and business opportunities
available to ECT, general stock market and economic conditions, tax
considerations and other factors deemed relevant, may decide to increase or
decrease the size of its investment in the Issuer.
The Purchase Agreement, the Registration Rights Agreement (as defined
below), the form of Debenture and the Indenture (as defined below), are each
incorporated by reference as exhibits to this statement on Schedule 13D and
incorporated herein by reference, and the following summaries of the terms of
such agreements or instruments are qualified by reference to the actual
agreements or instruments.
Purchase Agreement. On May 15, 1998, ECT acquired the Debentures
described in Item 3, pursuant to the Purchase Agreement. In addition to
providing for the transactions described in Item 3, the Purchase Agreement
provides that at any time following conversion of the Debentures held by ECT
and for so long as ECT holds, directly or indirectly through affiliates or
nominees, at least 13.5% of the Issuer's then issued and outstanding Common
Stock, calculated on a non-diluted basis other than the inclusion in such
calculation of all options granted by the Issuer on or before the date of the
Purchase Agreement, upon ECT's request, the Issuer will permit representatives
of ECT to attend all meetings of the Issuer's Board of Directors and will grant
ECT the reasonable opportunity to be heard at all such meetings of the Board of
Directors with respect to all such matters as may be reasonably considered
relevant to ECT as a holder of Common Stock of the Issuer; and at the first
meeting of shareholders of the Issuer following any such request by ECT, and
for so long as ECT holds, directly or indirectly through affiliates or
nominees, at least 13.5% of the Issuer's then issued and outstanding Common
Stock, at each meeting of shareholders thereafter, management of the Issuer
will nominate for election by the Issuer's shareholders one individual
designated by ECT for election to the Issuer's Board of Directors.
Page 5 of 14
<PAGE> 6
Registration Rights Agreement. The Issuer and ECT entered into a
Registration Rights Agreement as of May 15, 1998 (the "Registration Rights
Agreement"), pursuant to which the Issuer agreed to provide certain U.S.
registration rights and Canadian prospectus qualification rights for the shares
of Common Stock issuable upon conversion of the Debentures (the "Shares"), at
the expense of the Issuer. The record holder of any Shares or Debentures (the
"Holder") has the option to utilize U.S. registration rights and/or Canadian
prospectus qualification rights, and if at the time the Holder exercises a
demand U.S. registration right (whether singularly or in combination with
Canadian prospectus qualification rights) the Issuer is qualified to utilize
the Multijurisdictional Disclosure System implemented in Canada pursuant to
National Policy 45 ("MJDS"), the Issuer will effect such U.S. registration
using MJDS. The Registration Rights Agreement provides for certain "demand"
and "piggy-back" registration rights. The Holder can request three demand
registrations and can request to include shares of Common Stock in any
Registration Statement or Canadian Prospectus if the Issuer proposes to
register any securities of the Company entitled to vote generally in the
election of directors (or any securities convertible into or exchangeable for
or exercisable for the purchase of securities so entitled generally to vote in
the election of directors).
Debentures. The Debentures mature on June 30, 2005, and on such date,
or on such earlier date the principal amount becomes payable in accordance with
the provisions of the Indenture, the Issuer will pay ECT the sum of U.S.
$45,000,000 and, in the meantime, will pay interest thereon from May 15, 1998
or from the last interest payment date to which interest has been paid or made
available for payment on the Debentures, whichever is later, at the rate of 6%
per annum, on July 15, 1998 and thereafter half-yearly on January 15 and July
15 in each year (unless the Debenture has been previously redeemed in
accordance with the provisions of the Indenture). The Debentures are
convertible, in whole or in part, at the option of the Holder, at any time
prior to the close of business on the earlier of the business day immediately
preceding June 30, 2005 or, if this Debenture shall be called for redemption,
the business day immediately preceding the date fixed for its redemption, into
fully paid and non-assessable shares of Common Stock (without adjustment for
interest accrued thereon or for any dividends on the Common Stock issuable upon
conversion) at the price of U.S. $0.35 per share, subject to adjustment as set
forth in the Indenture. All Debentures certified and issued under the
Indenture rank pari passu. The Debentures are direct obligations of the Issuer
and are not secured by mortgage or other charge.
The Debentures were issued pursuant to a Trust Indenture between the
Issuer and Montreal Trust Company (the "Trustee") dated as of May 15, 1998 (the
"Indenture"). The Indenture sets forth the terms and conditions upon which the
Debentures are issued and held and the rights of the holders of the Debentures,
of the Issuer and of the Trustee. The Indenture also sets forth the terms and
conditions for redemption and conversion of the Debentures. The Debentures
will not be redeemed before the third anniversary of their issuance. On and
after that date and before maturity, the Debentures are subject to redemption
upon terms set forth in the Indenture, at the Issuer's option, at the principal
amount thereof, plus unpaid interest accrued to the date fixed for
Page 6 of 14
<PAGE> 7
redemption plus any additional amounts to the extent required under the terms
of the Indenture. The aggregate principal amount of Debentures which may be
issued under the Indenture is limited to U.S. $45,000,000 in lawful money of
the United States of America. The indebtedness evidenced by the Indenture and
the Debentures, including the principal thereof and interest thereon, is
subordinate and junior in right of payment to the prior payment in full of the
Senior Indebtedness (as defined in the Indenture). The Indenture contains
restrictions on the Issuer's ability to declare or pay any dividend on any of
its shares, to redeem or purchase or make any capital distribution with respect
to any of its shares and to incur additional debt after the date of the
Indenture.
Other than the transactions described herein, neither of the Reporting
Entities, nor to their knowledge any person listed on Schedule I hereto, has
any plan or proposal that would result in any of the consequences listed in
paragraphs (a) - (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) Neither of the Reporting Entities directly owns any Common Stock.
However, ECT owns Debentures which are convertible into 128,571,429 shares of
Common Stock, subject to adjustment as set forth in the Indenture. If such
Debentures were converted into Common Stock, the shares of Common Stock
issuable upon conversion of such Debentures would represent approximately 14.7%
of the outstanding Common Stock (based on the number of shares of Common Stock
outstanding as of May 15, 1998 as represented by the Issuer in the Purchase
Agreement). Enron may be deemed to beneficially own the Debentures held by
ECT. See Item 2. Enron disclaims beneficial ownership of any Debentures.
(b) ECT and Enron may be deemed to share voting and dispositive power
over the shares of Common Stock issuable upon conversion of the Debentures held
directly by ECT.
(c) Other than the transactions described herein, neither of the
Reporting Entities, nor to their knowledge any of the persons named in Schedule
I hereto, has effected any transactions in the Common Stock during the
preceding sixty days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
See the description of the Purchase Agreement, the Debentures, the
Registration Rights Agreement and the Indenture in Item 4 above.
Page 7 of 14
<PAGE> 8
Item 7. Material to be Filed as Exhibits.
Exhibit 1 Purchase Agreement dated May 15, 1998 between the
Issuer and ECT.
Exhibit 2 Registration Rights Agreement made as of May 15, 1998
by and between the Issuer and ECT.
Exhibit 3 Form of Debenture for U.S. $45,000,000 principal
amount of 6% Convertible Subordinated Debentures due
2005 of Repap Enterprises Inc.
Exhibit 4 Trust Indenture between the Issuer and Montreal Trust
Company dated as of May 15, 1998.
Exhibit 5 Joint Filing Agreement.
Page 8 of 14
<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: May 26, 1998 ENRON CAPITAL & TRADE RESOURCES CORP.
By: /s/ Peggy B. Menchaca
---------------------------------------
Name: Peggy B. Menchaca
Title: Vice President and Secretary
Date: May 26, 1998 ENRON CORP.
By: /s/ Peggy B. Menchaca
---------------------------------------
Name : Peggy B. Menchaca
Title: Vice President and Secretary
Page 9 of 14
<PAGE> 10
DIRECTORS AND EXECUTIVE OFFICERS
ENRON CAPITAL & TRADE RESOURCES CORP.
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
1400 Smith Street
Houston, TX 77002
Mark A. Frevert U.S.A. Director; President - ECT
Europe and Managing Director
Mark E. Haedicke U.S.A. Director; Managing Director - Legal
Kevin P. Hannon U.S.A. Director; President and Chief
Operating Officer
Kenneth D. Rice U.S.A. Director; Chairman of the Board, Chief
Executive Officer and Managing
Director; Chairman and Chief
Executive Officer - ECT North
America
Gene E. Humphrey U.S.A. Vice Chairman
Lou L. Pai U.S.A. Managing Director
Amanda K. Martin U.S.A. President - Energy and Finance Services
John B. Echols, Jr. U.S.A. Managing Director and Chief
Accounting Officer
Donald C. Bentley II U.S.A. Senior Vice President
Marty Sunde U.S.A. Senior Vice President
Rebecca C. Carter U.S.A. Vice President and Chief Control
Officer
Robert J. Hermann U.S.A. Vice President and General Tax
Counsel
</TABLE>
Page 10 of 14
<PAGE> 11
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
767 Fifth Avenue, 46th Fl. Chairman, President and Chief
New York, NY 10153 Executive Officer,
Belco Oil & Gas Corp.
Norman P. Blake, Jr. U.S.A. Director
USF&G Corporation Chairman, United States
6225 Smith Ave. LA0300 Fidelity and Guaranty
Baltimore, MD 21209 Company
Ronnie C. Chan U.S.A. Director
Hang Lung Development Chairman of Hang Lung
Company Limited Development Group
28/F, Standard Chartered
Bank Building
4 Des Vouex Road Central
Hong Kong
John H. Duncan U.S.A. Director
5851 San Felipe, Suite 850 Investments
Houston, TX 77057
Joe H. Foy U.S.A. Director
404 Highridge Dr. Retired Senior Partner,
Kerrville, TX 78028 Bracewell & Patterson, L.L.P.
Wendy L. Gramm U.S.A. Director
P. O. Box 39134 Former Chairman, U.S.
Washington, D.C. 20016 Commodity Futures Trading
Commission
Ken L. Harrison U.S.A. Director
121 S. W. Salmon Street Vice Chairman of Enron Corp.
Portland, OR 97204
</TABLE>
Page 11 of 14
<PAGE> 12
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
------------------------- ----------- -----------------------
<S> <C> <C>
Robert K. Jaedicke U.S.A. Director,
Graduate School of Business Professor (Emeritus), Graduate
Stanford University School of Business
Stanford, CA 94305 Stanford University
Charles A. LeMaistre U.S.A. Director
13104 Travis View Loop President (Emeritus), University of
Austin, TX 77030 Texas M. D. Anderson Cancer
Center
Jerome J. Meyer U.S.A. Director
26600 S. W. Parkway Chairman and Chief Executive
Building 63; P. O. Box 1000 Officer, Tektronix, Inc.
Wilsonville, OR 97070-1000
John A. Urquhart U.S.A. Director and Vice Chairman of
John A. Urquhart Assoc. Enron Corp.
111 Beach Road President, John A. Urquhart
Fairfield, CT 06430 Associates
John Wakeham U.K. Director
Pingleston House Former U.K. Secretary of State for
Old Alresford Energy and Leader of the
Hampshire S024 9TB Houses of Commons and Lords
United Kingdom
Charls E. Walker U.S.A. Director
Walker & Walker, LLC. Chairman, Walker & Walker, LLC
10220 River Road, Ste. 105
Potomac, Maryland 20854
Bruce G. Willison U.S.A. Director
4900 Rivergrade Road President and Chief Operating
Irwindale, CA 91706 Officer, Homes Savings of America
Herbert S. Winokur, Jr. U.S.A. Director
Winokur & Associates, Inc. President, Winokur & Associates,
30 East Elm Ct. Inc.
Greenwich, CT 06830
</TABLE>
Page 12 of 14
<PAGE> 13
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
------------------------- ----------- -----------------------
<S> <C> <C>
1400 Smith Street
Houston, TX 77002
Kenneth L. Lay U.S.A. Director, Chairman and Chief Executive
Officer
Jeffrey K. Skilling U.S.A. Director, President and Chief Operating
Officer
J. Clifford Baxter U.S.A. Senior Vice President, Corporate
Development
Richard A. Causey U.S.A. Senior Vice President and Chief
Accounting and Information Officer
James V. Derrick, Jr. U.S.A. Senior Vice President and General Counsel
Andrew S. Fastow U.S.A. Senior Vice President, Finance
Stanley C. Horton U.S.A. Chairman and Chief Executive Officer,
Enron Gas Pipeline Group
Rebecca P. Mark U.S.A. Vice Chairman; Chairman and Chief Executive
Officer,
Enron International Inc.
Thomas E. White U.S.A. Chairman, Chief Executive Officer and
President, Enron Ventures Corp.
</TABLE>
Page 13 of 14
<PAGE> 14
INDEX TO EXHIBITS
Exhibit 1 Purchase Agreement dated May 15, 1998 between the
Issuer and ECT.
Exhibit 2 Registration Rights Agreement made as of May 15, 1998
by and between the Issuer and ECT.
Exhibit 3 Form of Debenture for U.S. $45,000,000 principal
amount of 6% Convertible Subordinated Debentures due
2005 of Repap Enterprises Inc.
Exhibit 4 Trust Indenture between the Issuer and Montreal Trust
Company dated as of May 15, 1998.
Exhibit 5 Joint Filing Agreement.
<PAGE> 1
EXHIBIT 99.1
REPAP ENTERPRISES INC.
U.S. $ 45,000,000
6% CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2005
- --------------------------------------------------------------------------------
PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
Dated as of May 15, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1
AUTHORIZATION OF ISSUE OF DEBENTURES
1.1 Authorization of Issue of Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
PURCHASE AND SALE OF DEBENTURES
2.1 Purchase and Sale of Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 3
CONDITIONS PRECEDENT
3.1 Conditions of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 4
AFFIRMATIVE COVENANTS
4.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 5
NEGATIVE COVENANTS
5.1 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 6
EVENTS OF DEFAULT
6.1 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 7
REPRESENTATIONS, COVENANTS AND WARRANTIES
7.1 Representations, Covenants and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 8
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
8.1 Representations and Warranties of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.2 Purchaser's Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.3 Reliance Upon Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 9
DEFINITIONS
9.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
<PAGE> 3
- ii -
<TABLE>
<S> <C> <C>
ARTICLE 10
MISCELLANEOUS
10.2 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.6 Satisfaction Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.7 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.9 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.11 Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.12 Currency; Time; "Including"; Interest Equivalency; Currency Conversion . . . . . . . . . . . . . . . 32
10.13 Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.14 Board of Director's Visitation and Nomination Rights . . . . . . . . . . . . . . . . . . . . . . . . 33
10.15 Meetings with Corporation Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.16 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.17 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.18 Currency Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
SCHEDULES
Schedule A: Ancillary Documents
Schedule B: Form of Opinion of Corporation's Counsel
Schedule C: Form of Opinion of Corporation's U.S. Counsel
Schedule D: Subsidiaries
Schedule E: Debt
Schedule F: Assets, Plants and Facilities
Schedule G: Restrictions on Debt
Schedule H: Material Contracts
<PAGE> 4
REPAP ENTERPRISES INC.
As of May 15, 1998
To: Enron Capital & Trade Resources Corp.
Re: Issue and Sale of U.S. $45,000,000 Convertible Subordinated Debentures
Due 2005
The undersigned, Repap Enterprises Inc. (the "Corporation"), hereby
agrees with Enron Capital & Trade Resources Corp. (the "Purchaser") as follows:
ARTICLE 1
AUTHORIZATION OF ISSUE OF DEBENTURES
1.1 AUTHORIZATION OF ISSUE OF DEBENTURES
The Corporation will authorize the issue of its convertible
subordinated debentures (the "Debentures") in the aggregate principal amount of
U.S. $45,000,000 to be dated the date of issue thereof, to mature June 30,
2005, to bear interest on the unpaid balance thereof from the date thereof
until the principal thereof shall have become due and payable at the rate, at
the times and pursuant to the terms and conditions specified in the Trust
Indenture between the Corporation and Montreal Trust Company and providing for
the issuance of the Debentures (the "Indenture") and subject as well to the
terms, conditions, covenants and agreements set forth herein. CAPITALIZED
TERMS USED HEREIN HAVE THE MEANINGS SPECIFIED IN ARTICLE 9.
ARTICLE 2
PURCHASE AND SALE OF DEBENTURES
2.1 PURCHASE AND SALE OF DEBENTURES
The Corporation hereby agrees to sell to the Purchaser and, subject to
the terms and conditions set forth herein, the Purchaser agrees to purchase from
the Corporation U.S. $45,000,000 aggregate principal amount of Debentures at
100% of such aggregate principal amount. The Corporation will deliver to the
Purchaser, as directed by the Purchaser, one or more Debentures registered in
the Purchaser's (or its nominee's) name, evidencing the aggregate principal
amount of Debentures to be purchased by the Purchaser hereunder against payment
of the purchase price thereof by wire transfer of immediately available funds to
an account at The Toronto Dominion Bank designated by the Corporation, on the
date of closing, which shall be May 15 or such other date agreed upon by the
Purchaser and the Corporation (the "Closing" or the "Date of Closing").
<PAGE> 5
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ARTICLE 3
CONDITIONS PRECEDENT
3.1 CONDITIONS OF CLOSING
The Purchaser's obligation to purchase and pay for the Debentures to
be purchased by the Purchaser hereunder is subject to the satisfaction, on or
before the Date of Closing, of the following conditions:
(a) CERTAIN DOCUMENTS. The Purchaser shall have received the
following, each dated the Date of Closing:
(i) The Debentures to be purchased by such Purchaser.
(ii) A certified copy of the resolutions of the Board of
Directors of the Corporation approving this
Agreement, the issuance of the Debentures, the
Indenture and all ancillary documents set forth in
Schedule A and of all documents evidencing other
necessary corporate action and governmental
approvals, if any, with respect to this Agreement,
the Debentures, the Indenture and all ancillary
documents set forth in Schedule A.
(iii) A certificate of the Secretary or an Assistant
Secretary of the Corporation certifying the names and
true signatures of the officers of the Corporation
authorized to sign this Agreement, the Indenture, the
Debentures and the other documents to be delivered by
it hereunder.
(iv) A certified copy of the articles and by-laws of the
Corporation and of Repap New Brunswick Inc.
(v) A favourable opinion of Stikeman, Elliott, counsel to
the Corporation, substantially in the form of
Schedule B.
(vi) A favourable opinion of Sullivan & Cromwell, United
States counsel to the Corporation, substantially in
the form of Schedule C.
(vii) Certificates of status for the Corporation and Repap
New Brunswick Inc. issued by the corporate registries
for their respective jurisdictions of incorporation
and
each jurisdiction in which they own material property
or carry on a material portion of their business and,
for the purposes of this Section 3.1(a)(vii),
"material" shall mean material in relation to the
properties or businesses of the Corporation and its
Subsidiaries taken as a whole.
<PAGE> 6
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(b) OPINION OF PURCHASER'S SPECIAL COUNSEL. The Purchaser shall
have received from Blake, Cassels & Graydon, special counsel
for the Purchaser in connection with this transaction, a
favourable opinion satisfactory to the Purchaser as to such
matters incident to the matters herein contemplated as it may
reasonably request.
(c) REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The
representations and warranties contained in Article 7 shall be
true on and as of the Date of Closing; there shall exist on
the Date of Closing no Default or Event of Default as defined
herein or in Article 8 of the Indenture; and the Corporation
shall have delivered to the Purchaser an Officer's
Certificate, dated the Date of Closing, to both such effects.
(d) PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and
payment for the Debentures to be purchased by the Purchaser on
the Date of Closing on the terms and conditions herein
provided (including the use of the proceeds of such Debentures
by the Corporation) shall not violate any Applicable Law
(including section 5 of the Securities Act or Regulation U or
X of the Board of Governors of the United States Federal
Reserve System) and shall not subject the Purchaser to any
tax, penalty or liability under or pursuant to any Applicable
Law.
(e) PROCEEDINGS. All corporate and other proceedings taken or to
be taken in connection with the transactions contemplated
hereby and all documents incident thereto shall be
satisfactory in substance and form to the Purchaser, and the
Purchaser shall have received all such counterpart originals
or certified or other copies of such documents as it may
reasonably request.
(f) PRIVATE PLACEMENT NUMBERS. A private placement number issued
by Standard & Poor's CUSIP Services Bureau shall have been
obtained for the Debentures.
ARTICLE 4
AFFIRMATIVE COVENANTS
4.1 AFFIRMATIVE COVENANTS
So long as any Debenture held by the Purchaser shall remain unpaid,
the Corporation covenants that:
(a) The Corporation will deliver to the Purchaser:
<PAGE> 7
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(i) NOTICES AND FILINGS: Promptly upon filing of
transmission thereof, copies of all notices and
reports, prospectuses, registration statements
(including exhibits) and all other materials or
information which it files with any Canadian or
United States securities regulatory authorities or
stock exchanges;
(ii) QUARTERLY FINANCIAL STATEMENTS: Promptly upon
completion thereof, and in any event within 45 days
after the end of each of the first three fiscal
quarters of each fiscal year of the Corporation,
unaudited consolidated financial statements of the
Corporation;
(iii) AUDITOR'S LETTERS: Promptly upon receipt thereof, a
copy of each auditor's management letter submitted to
the Corporation or any Subsidiary by independent
auditors in connection with any annual, interim or
special audit made by them of the financial
statements, records or books of the Corporation or
any Subsidiary;
(iv) NOTICES: As soon as reasonably practicable and in
any event within 5 days after any Responsible Officer
obtaining knowledge,
(A) of any condition or event which, in the
opinion of management of the Corporation,
would or would be likely to have a Material
Adverse Effect,
(B) that any Person has given any notice to the
Corporation or any of its Subsidiaries or
taken any other action with respect to a
claimed default or event or condition that,
in the opinion of management of the
Corporation, would or would be likely to have
a Material Adverse Effect,
(C) of the institution of any litigation
involving claims against the Corporation or
any of its Subsidiaries equal to or greater
than U.S. $5,000,000 with respect to any
single cause of action or of any adverse
determination in the form of a written
decision or interim order in any court
proceeding in any litigation involving a
potential liability to the Corporation or any
of its Subsidiaries equal to or greater than
U.S. $5,000,000 with respect to any single
cause of action which makes the likelihood of
an adverse determination in such litigation
against the Corporation or such Subsidiary
substantially more probable, or
(D) of any regulatory proceeding which may have a
Material Adverse Effect,
<PAGE> 8
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a written notice specifying the nature and period of
existence of any such condition or event, or
specifying the notice given or action taken by such
Person and the nature of any such claimed default,
event or condition, or specifying the details of such
proceeding, litigation or dispute and what action the
Corporation or any of its Subsidiaries has taken, is
taking or proposes to take with respect thereto;
(v) OTHER INFORMATION: With reasonable promptness, such
other information respecting the condition,
businesses or operations (financial or otherwise),
and properties, of the Corporation or any of its
Subsidiaries as the Purchaser may reasonably request,
and any information that the Purchaser may request
that is required to be filed with the National
Association of Insurance Commissioners.
Together with each delivery of financial statements required
by Section 7.6 of the Indenture and Section 4.1(a)(ii) herein,
the Corporation will deliver to the Purchaser an Officer's
Certificate stating that there exists no Event of Default or
Default, or, if any Event of Default or Default exists,
specifying the nature and period of existence thereof and what
action the Corporation proposes to take with respect thereto.
Together with each delivery of financial statements required
by Article 7 of the Indenture, the Corporation will deliver to
the Purchaser a certificate of the Corporation's auditors
stating that they have reviewed this Agreement and stating
further whether, in making their audit, they have become aware
of any condition or event that then constitutes a Default or
an Event of Default, and, if they are aware that any such
condition or event then exists, specifying the nature and
period of the existence thereof (it being understood that such
accountants shall not be liable, directly or indirectly, for
any failure to obtain knowledge of any Default or Event of
Default unless such auditors should have obtained knowledge
thereof in making an audit in accordance with generally
accepted auditing standards, or did not make such an audit).
The Corporation will, immediately after any Responsible
Officer obtains knowledge of an Event of Default or Default,
deliver to the Purchaser of a Debenture a written notice
specifying the nature and period of existence thereof and what
action the Corporation proposes to take with respect thereto.
<PAGE> 9
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(b) INFORMATION REQUIRED BY RULE 144A: The Corporation will, upon
the request of the Purchaser, provide to the Purchaser and to
any qualified institutional buyer designated by the Purchaser,
such financial and other information as such holder may
reasonably determine to be necessary in order to permit
compliance with the information requirements of Rule 144A
under the Securities Act in connection with the resale of
Debentures, except at such times as the Corporation is subject
to the reporting requirements of section 13 or 15(d) of the
Exchange Act or exempt from such reporting requirements
pursuant to Rule 12g3-2(b) of the Exchange Act. For the
purpose of this Section 4.1(b), the term "qualified
institutional buyer" shall have the meaning specified in Rule
144A under the Securities Act.
(c) INSPECTION OF PROPERTY: The Corporation shall permit the
representatives of the Purchaser:
(i) NO DEFAULT - If no Default or Event of Default then
exists, at the expense of the Purchaser and upon
reasonable prior notice to the Corporation, to visit
during normal business hours the principal executive
office of the Corporation quarterly to discuss the
affairs, finances and accounts of the Corporation and
its Subsidiaries with the Corporation's officers and
(with the consent of the Corporation, which consent
will not be unreasonably withheld) its independent
chartered accountants, and (with the consent of the
Corporation, which consent will not be unreasonably
withheld) to visit the other offices and properties
of the Corporation and each Subsidiary, all at such
reasonable times and as often as may be reasonably
requested in writing; and
(ii) DEFAULT - If a Default or Event of Default then
exists, at the expense of the Corporation to visit
and inspect any of the offices or properties of the
Corporation or any Subsidiary, to examine all their
respective books of account, records, reports and
other papers, to make copies and extracts therefrom,
and to discuss their respective affairs, finances and
accounts with their respective officers and
independent public accountants (and by this provision
the Corporation authorizes said accountants to
discuss the affairs, finances and accounts of the
Corporation and its Subsidiaries), all at such times
and as often as may be reasonably requested.
(d) ENVIRONMENTAL MATTERS:
(i) ENVIRONMENTAL PERMITS: The Corporation will, and will
cause each Subsidiary to, obtain and maintain in full
force and effect all approvals, permits, licenses,
consents and other authorizations which are required
under Applicable Environmental Laws regarding its
property, the absence of which individually or in the
aggregate would have a Material Adverse
<PAGE> 10
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Effect, and comply in all respects with the terms and
conditions of all such approvals, permits, licenses,
consents and authorizations, and comply in all
respects with all other limitations, restrictions,
conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in
any Applicable Environmental Laws, or in any
regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, in each case
where failure to do so would individually or in the
aggregate have a Material Adverse Effect.
(ii) COPIES OF ENVIRONMENTAL REPORTS: The Corporation
will, promptly upon preparation or receipt thereof,
furnish to the Purchaser a copy of any environmental
site assessment, environmental impact assessment,
disclosure statement or audit report required to be
submitted by it or any Subsidiary to any
Governmental/Judicial Body in connection with its
property where the Corporation or Subsidiary
(individually or in the aggregate) could be liable
for costs of any clean-up or remedial action
associated therewith in excess of U.S.$ 5,000,000,
and in such event it will, or will cause such
Subsidiary to, conduct such clean-up or remedial
action within such time as may be prescribed by such
Governmental/Judicial Body.
(iii) CONTINUOUS RISK MANAGEMENT: The Corporation will,
and will cause each Subsidiary to, maintain a prudent
periodic program for proper environmental risk
management, including carrying out site inspections
and audits and developing contingency plans.
(iv) ENVIRONMENTAL AUDIT: If the Purchaser determines
that the Corporation or a Subsidiary has incurred or
may incur any environmental liabilities that could
individually or in the aggregate have a Material
Adverse Effect, then the Corporation will, or will
cause such Subsidiary to, forthwith upon the request
of the Purchaser but at the expense of the
Corporation or such Subsidiary, undertake a
documented, objective review of the Corporation's or
such Subsidiary's compliance with Applicable
Environmental Laws (an "environmental audit") in
respect of the business operations of the Corporation
or such Subsidiary affected. Such environmental
audit shall be carried out by an independent
environmental consultant or by an employee of the
Corporation or Subsidiary with appropriate
qualifications and experience, provided that such
consultant or employee shall be satisfactory to the
Purchaser, acting reasonably, and the Purchaser
reserves the right to require that the environmental
audit be performed by an independent consultant. In
the conduct of such environmental audit, the
consultant or employee shall apply an environmental
audit protocol which, in the reasonable opinion of
the Purchaser, adequately addresses the scope,
<PAGE> 11
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methodology and sophistication of the environmental
audit. A copy of the environmental audit report shall
be provided to the Purchaser immediately upon its
completion.
(e) PROCEEDS: The Corporation will as soon as practicable
following Closing use the proceeds from the issuance and sale
of the Debentures to redeem the 9% convertible subordinated
debentures of the Corporation issued pursuant to a trust
indenture dated July 14, 1988 (the "1988 Debentures"). The
Corporation will, within 10 Business Days after repayment of
the 1988 Debentures Closing, provide written confirmation of
the redemption and payment in full of the 1988 Debentures,
together with other documents verifying the foregoing as the
Purchaser may consider necessary.
(f) QUARTERLY BUDGET: As soon as reasonably practicable following
approval thereof by its Board of Directors, and in any event
within 15 days following the end of each calendar quarter, the
Corporation shall deliver to the Purchaser a copy of the
Corporation's quarterly capital expenditure and operating
budget for the then current quarter.
(g) AMALGAMATION: The Corporation shall make all reasonable
commercial efforts to obtain a Certificate of Amalgamation
dated not later than January 1, 1999 with respect to the
Amalgamation (as defined in the Indenture).
ARTICLE 5
NEGATIVE COVENANTS
5.1 NEGATIVE COVENANTS
So long as any Debenture shall remain unpaid, the Corporation
covenants that:
(a) RELATED PARTY TRANSACTIONS. The Corporation will not, and
will not permit any Subsidiary to, directly or indirectly,
purchase, acquire or lease any property from, or sell,
transfer or lease any property to, or otherwise deal with, in
the ordinary course of business or otherwise, any Related
Party, except upon terms that are no less favourable to the
Corporation or such Subsidiary, as the case may be, than those
that could be obtained in an arm's length transaction with an
unrelated third party; provided that the foregoing shall not
apply to any transaction between the Corporation and any
wholly-owned Subsidiary or between wholly-owned Subsidiaries.
(b) PENSION PLAN FUNDING DEFICIENCY. The Corporation shall not
and shall not permit:
<PAGE> 12
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(i) any Subsidiary that is incorporated under, or is
subject to the laws of, any state of the United States
of America to incur or suffer to exist any material
accumulated funding deficiency within the meaning of
ERISA or incur any material liability to the PBGC in
connection with any employee benefit plan established
or maintained by any such Subsidiary which is subject
to Title IV of ERISA if, after giving effect thereto,
the aggregate amount of all such deficiencies and
liabilities would exceed U.S. $5,000,000; and
(ii) In addition to the covenant set forth in Section
5.1(b)(i) above, each plan, fund or similar program
established or maintained outside of the United
States of America by the Corporation or any of its
Subsidiaries to which contributions are required to
be made by the Corporation or any of its Subsidiaries
for the benefit of its employees residing outside of
the United States of America which provides for a
pension, retirement income or other employee benefit
and which is not subject to ERISA:
(A) has been operated and administered in
accordance with its terms and the
requirements of all Applicable Laws,
including, without limitation, the Income Tax
Act (Canada);
(B) each of the Corporation and its Subsidiaries
has satisfied and will satisfy its funding
and contribution obligations in accordance
with the terms of the plans and all
Applicable Laws;
(C) any pension plan that contains a defined
benefit provision has been and will provide
for funding, in accordance with the
prescribed tests for solvency under the terms
of the plan and Applicable Laws, that is
adequate to pay for all benefits;
(D) there is no solvency deficiency in respect of
any defined benefit pension plan; and
(E) the present value of the aggregate benefit
liabilities under all employee plans taken
together does not exceed the aggregate
current value of the assets of such employee
plans allocable to such benefit liabilities,
determined in accordance with generally
accepted accounting principles except for any
excess
<PAGE> 13
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that is being funded in accordance with
Applicable Laws.
(c) ADDITIONAL COVENANTS. Upon and following the Amalgamation,
the authorizing, declaring, payment or making of Restricted
Payments (as defined in the Indenture) by the amalgamated
corporation, and the incurrence of Debt by the amalgamated
corporation, will be governed by the applicable covenants
dealing with the same subject matter (the "Covenants")
contained in the indenture (the "New Indenture") governing the
securities (the "Securities") to be issued by Repap New
Brunswick Inc. ("Repap NB") to finance the redemption of all
or any portion of the First Priority Senior Secured Notes of
Repap NB outstanding on the date of this Agreement, as though
the Covenants and all definitions contained in the New
Indenture which relate to the Covenants were incorporated in
and formed part of this Agreement notwithstanding any
repayment, redemption, termination or cancellation, in whole
or in part, of the Securities or the New Indenture. Upon the
execution and delivery of the New Indenture and upon the
written request of the Purchaser, the Corporation and the
Purchaser shall promptly amend this Agreement to specifically
include all of the Covenants and related definitions herein.
ARTICLE 6
EVENTS OF DEFAULT
6.1 ACCELERATION
If any of the following events (an "Event of Default") shall occur and
be continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(a) INCORRECT REPRESENTATIONS. Any representation or warranty
made by (i) the Corporation herein or in the Indenture, or
(ii) the Corporation or any of its officers in any writing
furnished in connection with or pursuant to this Agreement,
the Indenture or the Debentures, shall be false in any
material respect on the date as of which made; or
(b) BREACH OF NEGATIVE COVENANT. The Corporation fails to perform
or observe any term, covenant or agreement contained in
Article 5 or the Corporation fails to give notice of a Default
or Event of Default as required by Section 4.1(a)(iv); or
<PAGE> 14
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(c) BREACH OF OTHER COVENANT. The Corporation fails to perform or
observe any other agreement, covenant, term or condition
contained herein, and such failure shall not be remedied
within 30 days after the earlier of the date that (i) a
Responsible Officer obtains actual knowledge of such default,
and (ii) the Corporation receives notice of such default from
the Purchaser; or
(d) UNENFORCEABILITY OF DOCUMENTS. This Agreement, any Debenture,
the Indenture or any part thereof, or any material provision
of any thereof shall at any time for any reason cease to be in
full force and effect, be declared to be void or voidable or
shall be repudiated, or the validity or enforceability thereof
shall at any time be contested by the Corporation, or the
Corporation shall deny that it has any or any further
liability or obligation thereunder or any action or proceeding
shall be commenced to enjoin or restrain the performance or
observance by the Corporation of any material terms thereof or
to question the validity or enforceability thereof, or at any
time it shall be unlawful or impossible for the Corporation to
perform any of its obligations thereunder if any such event,
circumstance or condition could reasonably be expected to have
a Material Adverse Effect; or
(e) CROSS DEFAULT. There occurs an Event of Default, as defined
in the Indenture.
The Purchaser may at its option, by notice in writing to the Corporation,
require the Corporation to repurchase all or any of the Debentures then held by
the Purchaser pursuant to section 4.6 of the Indenture and provided further
that the Purchaser shall be entitled to receive the percentage of principal
amount applicable to redemptions of Debentures as set forth in section 4.1 of
the Indenture for all repurchases pursuant to this section in respect of Events
of Default occurring on or after July 1, 2001 or the percentage of principal
amount specified in section 4.8 of the Indenture for all repurchases pursuant
to this section in respect of Events of Default occurring after the date hereof
and prior to July 1, 2001. Notwithstanding the foregoing, if an Event of
Default described in section 8.1(i) or section 8.1(j) of the Indenture has
occurred and is continuing, the Corporation may cure such event of default as
set forth in section 8.9 of the Indenture.
The Corporation acknowledges, and the parties hereto agree, that the Purchaser
has the right to maintain its investment in the Debentures free from repayment
by the Corporation (except as specifically provided for herein or in the
Indenture) and that the provision for payment of any amount in excess of the
principal amount of a Debenture, by the Corporation, in the event that the
Debentures are repurchased or are accelerated as a result of an Event of
Default, is intended to provide compensation for the deprivation of such right
under such circumstances.
<PAGE> 15
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ARTICLE 7
REPRESENTATIONS, COVENANTS AND WARRANTIES
7.1 REPRESENTATIONS, COVENANTS AND WARRANTIES
The Corporation represents, covenants and warrants as follows:
(a) ORGANIZATION. The Corporation is a corporation duly
incorporated and validly existing in good standing under the
Canada Business Corporations Act (Canada), having been
incorporated on January 9, 1963 and for which a restated
certificate of incorporation has been issued dated November 27,
1986. Each Subsidiary is duly incorporated or continued and
validly existing in good standing under the laws of the
jurisdiction in which it is incorporated or formed. The
Corporation is validly registered as an extra-provincial
corporation under the laws of each jurisdiction in which it
carries on a material business or owns material property. Each
Subsidiary is validly registered in each jurisdiction in which
it carries on a material business or owns material property.
The execution, delivery and performance by the Corporation of
this Agreement, the Indenture and the Debentures are within the
Corporation's corporate powers and have been duly authorized by
all necessary corporate action. This Agreement, the Indenture
and the Debentures constitute legal, valid and binding
obligations of the Corporation enforceable against it in
accordance with their respective terms, except as such
enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law). All of the Subsidiaries of the Corporation, their past
and present corporate names, the percentage direct or indirect
ownership thereof by the Corporation, their respective
jurisdictions of incorporation and the jurisdictions in which
they carry on a material portion of their business, and
confirmation of whether at the date of this Agreement a
Subsidiary is material to the business, financial position or
operations of the Corporation, by virtue of owning or holding
assets constituting more than 5% of the consolidated assets of
the Corporation, or revenues constituting more than 5% of the
consolidated revenues of the Corporation, or in respect of
which the Corporation has material obligations or liabilities
whether actual or contingent, are listed in Schedule D.
(b) FINANCIAL STATEMENTS. The Corporation has furnished the
Purchaser with the following financial statements: (i) an
audited consolidated balance sheet of the Corporation as at
December 31 in each of the years 1997 and 1996, inclusive, and
audited consolidated statements of operations, retained
earnings and changes in financial position of the Corporation
for each such year, all reported on by Ernst & Young,
Chartered Accountants; and (ii) an unaudited consolidated
balance sheet
<PAGE> 16
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of the Corporation as at March 31 in each of the
years 1998 and 1997 and unaudited consolidated statements of
operations and changes in financial position for thee three
month period ended on each such date, and for the quarter
ended on each such date, prepared by the Corporation. Such
financial statements (including any related schedules) are
true and correct in all material respects (subject, as to
interim statements, to changes resulting from audits and
year-end adjustments), have been prepared in accordance with
GAAP consistently followed throughout the periods involved and
show all liabilities, direct and contingent, of the
Corporation and its Subsidiaries required to be shown in
accordance with GAAP. The consolidated balance sheets present
fairly the financial position of the Corporation and its
Subsidiaries as at the dates thereof, and the statements of
operations and changes in financial position present fairly
the results of the operations of the Corporation and its
Subsidiaries and their changes in financial position for the
periods indicated. There has been no material adverse change
in the business, condition (financial otherwise), operations
or business prospects of the Corporation and its Subsidiaries
taken as a whole since December 31, 1997.
(c) ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending, to the knowledge of the Corporation,
threatened against the Corporation or any of its Subsidiaries,
or any properties or rights of the Corporation or any of its
Subsidiaries, by or before any Governmental/Judicial Body
which, individually or in the aggregate, could have a Material
Adverse Effect other than the New Brunswick action R. v. Paul.
There is no action, suit, investigation or proceeding pending
or, to the knowledge of the Corporation, threatened against
the Corporation or any of its Subsidiaries which purports to
affect the validity or enforceability of this Agreement, the
Indenture or any Debenture.
(d) OUTSTANDING DEBT. Neither the Corporation nor any of its
Subsidiaries has outstanding any material Debt except for Debt
included in Schedule E, together with particulars thereof.
There exists no default or event of default under the
provisions of any instrument evidencing such Debt or of any
agreement relating thereto.
(e) TITLE TO PROPERTIES. Subject to minor encumbrances which in
aggregate will not prevent the Corporation and its
Subsidiaries from having normal use and enjoyment of their
respective properties, the Corporation and each of its
Subsidiaries has good and indefeasible title to its real
property, and good and valid title to all of its other
respective properties and assets, including the properties and
assets reflected in the audited balance sheet as at December
31, 1997 referred to in Section 7.1(b) (other than properties
and assets disposed of in the ordinary course of business).
The major assets, plants and facilities owned directly by the
Corporation and its Subsidiaries are as set forth in Schedule
F. All leases necessary in any material
<PAGE> 17
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respect for the conduct of the respective businesses of the
Corporation and its Subsidiaries are valid and subsisting and
are in full force and effect.
(f) TAXES. The Corporation and each of its Subsidiaries have
filed all Canadian and U.S. federal, provincial, state and
other income tax returns which are required to be filed, and
each has paid all taxes as shown on such returns and on all
assessments received by it to the extent that such taxes have
become due, except such taxes as are being contested in good
faith by appropriate proceedings and for which adequate
reserves have been established in the reasonable opinion of
the Corporation and in accordance with GAAP.
(g) CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the
execution nor delivery of this Agreement, the Indenture or the
Debentures, nor the offering, issuance and sale of the
Debentures or the common shares of the Corporation issuable on
conversion of the Debentures, nor fulfilment of nor compliance
with the terms and provisions hereof, of the Indenture and the
Debentures will conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a default
under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of
the Corporation or any of its Subsidiaries, or trigger any
"change-of-control" provision, rights plan or similar
provision, pursuant to the articles, by-laws or any unanimous
shareholders agreement or declaration of the Corporation or
any of its Subsidiaries, any Applicable Law or any agreement
(including any agreement with shareholders), to which the
Corporation or any of its Subsidiaries is subject. The
Corporation and its Subsidiaries are in compliance with
Applicable Laws where failure to do so would individually or
in the aggregate have a Material Adverse Effect. Neither the
Corporation nor any of its Subsidiaries is a party to, or
otherwise subject to any provision contained in, its articles,
any instrument evidencing Indebtedness of the Corporation or
such Subsidiary, any agreement relating thereto or any other
contract or agreement which limits the amount of, or otherwise
imposes restrictions on the incurring of, Debt of the
Corporation of the type to be evidenced by the Debentures
except as set forth in the agreements listed in Schedule G.
(h) PRIVATE OFFERING OF DEBENTURES. Neither the Corporation nor
any agent acting on its behalf has, directly or indirectly,
offered the Debentures or any similar security of the
Corporation for sale to, or solicited any offers to buy the
Debentures or any similar security of the Corporation from, or
otherwise approached or negotiated with respect thereto with,
any Person other than not more than 150 institutional
"accredited investors" (within the meaning of Rule 501(a)(1),
(2), (3) or (7) of the Securities Act), and neither the
Corporation nor any agent acting on its behalf has taken or
will take any action which would subject the issuance or sale
of the Debentures to the provisions of Section 5 of the
Securities Act or to the registration, qualification or
similar provisions of any securities or
<PAGE> 18
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"blue sky" laws of any applicable jurisdiction or result in any
contravention of the provisions of any securities law of any
applicable jurisdiction.
(i) USE OF PROCEEDS. Neither the Corporation nor any Subsidiary has
any present intention of acquiring any "margin stock" as
defined in Regulation U (12 CFR Part 221) of the Board of
Governors of the United States Federal Reserve System ("margin
stock"). The proceeds of sale of the Debentures will be used as
set forth in Section 4.1(e). None of such proceeds will be
used, directly or indirectly, for the purpose of buying or
carrying any margin stock or for the purpose of maintaining,
reducing or retiring any Indebtedness which was originally
incurred to purchase or carry any stock that is currently a
margin stock or for any other purpose which might constitute
this transaction a "purpose credit" within the meaning of such
Regulation U or for the purpose of buying or carrying or
trading in any securities under such circumstances as to
involve the Corporation or any Subsidiary in a violation of
Regulation X of said Board (12 CFR Part 224) or to involve any
broker or dealer in a violation of Regulation T of said Board
(12 CFR Part 220). Neither the Corporation nor any agent acting
on its behalf has taken or will take any action which might
cause this Agreement or the Debentures to violate Regulation T,
Regulation U, Regulation X or any other regulation of the Board
of Governors of the United States Federal Reserve System or to
violate the Exchange Act, in each case as in effect now or as
the same may hereafter be in effect.
(j) GOVERNMENTAL CONSENT. Neither the nature of the Corporation
or of any Subsidiary, nor any of their respective businesses
or properties, nor any relationship between the Corporation or
any Subsidiary and any other Person, nor any circumstance in
connection with the offering, issuance, sale or delivery of
the Debentures or the issuance of common shares of the
Corporation on conversion of the Debentures is such as to
require any authorization, consent, approval, exemption or
other action by or notice to or filing with any
Governmental/Judicial Body (other than routine filings after
the Date of Closing with the applicable provincial securities
regulatory authorities and stock exchanges) in connection with
the execution and delivery of this Agreement, the Debentures
or the Indenture, the offering, issuance, sale or delivery of
the Debentures or the issuance of common shares of the
Corporation on conversion of the Debentures or fulfilment of
or compliance with the terms and provisions hereof, of the
Indenture or of the Debentures.
(k) ENVIRONMENTAL COMPLIANCE. Except where individually or in the
aggregate no Material Adverse Effect could reasonably be
expected to result therefrom, and except as disclosed in the
Corporation's Annual Report on Form 10-K (the "10-K") for the
fiscal year ended December 31, 1997 as filed with the SEC:
(i) ENVIRONMENTAL COMPLIANCE:
<PAGE> 19
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(A) the Corporation and each Subsidiary are in
compliance with Applicable Environmental
Laws, and the condition and use of their
property is in compliance with Applicable
Environmental Laws,
(B) the Corporation and each Subsidiary are not
subject to any environmental protection order
or enforcement order under any Applicable
Environmental Law,
(C) the Corporation and each Subsidiary are not
subject to any proceeding of any
Governmental/Judicial Body alleging the
violation of any Applicable Environmental
Law, or that may lead to a claim or order
under Applicable Environmental Law for
clean-up costs, remedial work, reclamation,
conservation, damage to natural resources or
personal injury, or that may lead to the
issuance under Applicable Environmental Law
of a stop-work order, environmental
protection order, enforcement order,
suspension order, control order, prevention
order or clean-up order,
(D) the Corporation and each Subsidiary are not
to their knowledge the subject of any
federal, provincial, state, local or foreign
review, audit or investigation which may lead
to a proceeding referred to in Section
7.1(k)(i)(a)(C),
(E) the Corporation and each Subsidiary are not
aware of any of its predecessors in title to
any of its property being the subject of any
order referred to in Section 7.1(k)(i)(a)(B),
or any federal, provincial, state, local or
foreign review, audit or investigation which
may lead to a proceeding referred to in
Section 7.1(k)(i)(a)(C),
(F) none of the Corporation's or any Subsidiary's
property is (or could reasonably be expected
to be) designated as a "contaminated site" or
has an equivalent designation under
Applicable Environmental Laws,
<PAGE> 20
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(G) the Corporation and each Subsidiary are not
subject to any action, suit, claim or
proceeding by any private Person other than a
Governmental/Judicial Body relating to
non-compliance with any Applicable
Environmental Law or to the release or
existence of Hazardous Materials on any
property or in the environment,
(H) except as disclosed in the 10-K, the
Corporation and each Subsidiary are not aware
of its property ever having been the subject
of any non-compliance with any Applicable
Environmental Law, or any order referred to
in Section 7.1(k)(i)(a)(B), or any proceeding
of the nature referred to in Section
7.1(k)(i)(a)(C), or any review, audit or
investigation of the nature referred to in
Section 7.1(k)(i)(a)(D) or 7.1(k)(i)(a)(E),
or any designation of the nature referred to
in Section 7.1(k)(i)(a)(F), or any action,
suit, claim or proceeding of the nature
referred to in Section 7.1(k)(i)(a)(G) other
than any such action, circumstance, event or
condition that:
(1) has not had or could not reasonably
be expected to have a Material
Adverse Effect, or
(2) has been fully remedied or satisfied
in compliance with Applicable Laws,
and
(I) the Corporation and each Subsidiary is not
aware of any Person to which it could have
any liability under Applicable Environmental
Laws violating any Applicable Environmental
Laws.
(ii) ENVIRONMENTAL PERMITS: Except as disclosed in the
10-K for the fiscal year ended December 31, 1997 as
filed with the SEC, the Corporation and each
Subsidiary have obtained and continue to hold all
approvals, permits, licenses, consents, certificates
of variance, certificates of qualification and other
authorizations which are necessary or advisable under
Applicable Environmental Laws.
(l) ENVIRONMENTAL DISCLOSURE. Except as would not be reasonably
expected to have a Material Adverse Effect and except as
disclosed in the Public Record, the Corporation and each
Subsidiary have no material contingent liability of which they
have knowledge or reasonably should have knowledge in
connection with any release of any Hazardous Materials into
the environment.
<PAGE> 21
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(m) ENVIRONMENTAL RISK MANAGEMENT. The Corporation and each
Subsidiary have implemented and are now maintaining a prudent
periodic program for environmental risk management.
(n) DISCLOSURE. Neither this Agreement (insofar as it makes
statements concerning the Corporation, its Subsidiaries and
their respective businesses and affairs), nor any other
document, certificate or statement furnished to any Purchaser
by the Corporation or its agents in connection herewith
contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the
statements contained herein or therein not misleading. To the
knowledge of the Corporation, there is no fact or facts
peculiar to the Corporation or any of its Subsidiaries
(excluding conditions general to the industries in which they
carry on business) which individually or in the aggregate
materially adversely affects or in the future may (so far as
the Corporation can now foresee) materially adversely affect
the business, property or assets, or financial condition of
the Corporation or any of its Subsidiaries taken as a whole
which has not been set forth in this Agreement or in the other
documents, certificates and statements furnished to each
Purchaser by or on behalf of the Corporation prior to the date
hereof in connection with the transactions contemplated
hereby. The materials comprising the Public Record contain
all required disclosure under applicable securities laws,
including under the Securities Act (Ontario), the United
States Securities Exchange Act of 1934, as amended, and the
United States
Securities Act of 1933, as amended, and such materials include
complete and accurate disclosure of the matters set forth
therein at the time such disclosure was made.
(o) PENSION ASSETS. Since December 31, 1997 there has been no
material change in the value of pension assets attributable to
the pension plans of the Corporation and its Subsidiaries as
set forth in note 21 to the audited consolidated financial
statements of the Corporation dated December 31, 1997 and each
defined benefit or defined contribution pension plan of the
Corporation or its Subsidiaries is currently in a surplus
position.
(p) FOREIGN ASSETS CONTROL REGULATIONS, ETC. The Corporation is
not a "national" of any foreign country with which the United
States of America maintains a commercial embargo, or an order
freezing assets, pursuant to legislation, Executive orders of
the President, or regulations of the Treasury Department.
Neither the sale of the Debentures by the Corporation nor the
use of the proceeds thereof by the Corporation will violate
any of such legislation, regulations or orders.
(q) INVESTMENT COMPANY ACT AND PUBLIC UTILITY HOLDING COMPANY
STATUS. The Corporation is not (i) an investment company or a
Person directly or indirectly controlled by or acting on
behalf of an investment company, within the meaning of the
United States Investment Company Act of 1940, as amended, or
(ii) a
<PAGE> 22
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"holding company" or "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", or a "public
utility", within the meaning of the United States Public
Utility Holding Company Act of 1935, as amended.
(r) MATERIAL CONTRACTS.
Except as set forth in Schedule H, the Material Contracts are
in full force and effect, and the Corporation is not in
default of, and has no knowledge of any outstanding default by
any other party under any of the Material Contracts.
(s) SHARE CAPITAL.
The authorized capital consists of an unlimited number of
common shares and an unlimited number of preferred shares
issuable in series, including 400,000 preferred shares, Series
A, 400,000 preferred shares, Series B, 280,000 preferred
shares, Series C, 316,307 preferred shares, Series D, 900,000
preferred shares, Series E, and 400,000 preferred shares,
Series F of which 743,260,637 common shares, 240,000 preferred
shares, Series C and 400,000 preferred shares, Series D are
issued and outstanding, and all such shares are fully paid and
non-assessable. No person holds any securities convertible or
exchangeable into shares of the Corporation or has any
agreement, warrant, option, right or privilege (whether
pre-emptive or contractual) being or capable of becoming an
agreement, warrant, option or right for the purchase of any
unissued securities of the Corporation, except for no more
than 69,246,000 common shares which are reserved for issuance
upon the exercise of stock options currently issued to
directors, officers and employees of the Corporation and its
Subsidiaries and for common shares issuable on conversion of
the Corporation's currently outstanding convertible
subordinated debentures issued pursuant to a trust indenture
dated July 14, 1988.
ARTICLE 8
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
8.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents, warrants and covenants to and with
the Corporation (which representations, warranties and covenants shall survive
Closing) that:
(a) the Purchaser has the legal capacity and authority to execute
and perform this agreement and to take all actions required
under this Agreement, all necessary approvals by directors and
shareholders of the Purchaser or otherwise, have been given to
authorize it to execute this Agreement and the purchase of
Debentures by
<PAGE> 23
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the Purchaser pursuant to this Agreement is within the power
and authority of the Purchaser and that when executed, this
Agreement shall be a valid and binding agreement, enforceable
against the Purchaser in accordance with its terms;
(b) the Purchaser understands that the Debentures and the common
shares of the Corporation acquired on exercise thereof have
not been and will not be registered under the Securities Act
and that the sale contemplated hereby is being made in
reliance on a private placement exemption to Accredited
Investors (as defined below) and such Debentures and common
shares are subject to resale restrictions in Canada;
(c) the Purchaser is an "Accredited Investor" as defined in Rule
501 under the Securities Act and it is acquiring Debentures
for its own account and not with a view to any resale,
distribution or other disposition of the Debentures in
violation of the United States securities laws;
(d) the Purchaser is capable of evaluating the merits and risks of
the purchase of the Debentures;
(e) None of the Corporation or any of its Subsidiaries or any
agents thereof has:
(i) exercised any discretionary authority or control with
respect to Purchaser's purchase of the Debentures
offered hereby, or
(ii) rendered individualized investment advice to
Purchaser based upon its needs regarding such matters
such as its investment policies or strategy, overall
portfolio composition or diversification.
8.2 PURCHASER'S ACKNOWLEDGEMENTS
The Purchaser, acknowledges and agrees that:
(a) it has not purchased the Debentures as a result of any general
solicitation or general advertising (as those terms are used
in Regulation D under the Securities Act), including
advertisements, articles, notices or other communications
published in any newspaper, magazine or similar media or
broadcast over radio or television, or any seminar or meeting
whose attendees have been invited by general solicitation or
general advertising;
(b) if it decides to offer, sell or otherwise transfer any of the
Securities, it will not offer, sell or otherwise transfer any
of such Securities, directly or indirectly, other than (i) in
accordance with the transfer requirements described in Article
3 of the
<PAGE> 24
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Indenture and in accordance with any legend affixed to the
Securities in accordance with the terms of the Indenture and
(ii) in a manner that does not violate any U.S. federal or
state securities laws or any of the rules and regulations
promulgated thereunder or the securities laws of any other
jurisdiction;
(c) the Purchaser will execute, deliver, file and otherwise assist
the Corporation in filing such reports, undertakings and other
documents within the applicable time periods as may be
required by applicable Canadian securities legislation and
regulations and each of the Toronto and Montreal stock
exchanges to permit the purchase of the Debentures on the
terms herein set forth and with respect to the issuance of the
Securities (including, without limitation, any undertaking
required by the Exchanges);
(d) the sale and delivery of the Debentures to the Purchaser is
conditional upon such sale being exempt from the requirements
under applicable securities legislation requiring the filing
of a prospectus in connection with the distribution of the
Debentures, or upon the issuance of such rulings, orders,
consents or approvals as may be required to permit such sale
without the requirement of filing a prospectus, and the
Purchaser acknowledges the Corporation's obligation to provide
the applicable securities regulatory authorities with a
certified list of the beneficial purchasers of the Debentures;
(e) upon the original issuance of the Securities, and until such
time as is no longer required under applicable requirements of
the Securities Act or applicable state laws, all certificates
representing the Securities, and all certificates issued in
exchange therefor or in substitution thereof, shall bear, on
the face of such certificates, the legend required by the
terms of the Indenture;
(f) the Debentures are otherwise subject to the terms, conditions
and provisions of the Trust Indenture;
(g) it is a sophisticated purchaser and has had an opportunity to
ask questions and receive answers concerning the Corporation
and its Subsidiaries and the terms and conditions of the
Debentures to be purchased hereunder and has been given
sufficient access to all information with respect to the
Corporation and its Subsidiaries requested by Purchaser and,
in entering into this Agreement, has not relied upon anything
other than the representations and warranties of the
Corporation set forth in this Agreement; and
(h) it has no knowledge, based on the actual knowledge of those
officers or agents of the Purchaser who have been involved in
the negotiation of the terms of the issuance, purchase and
sale of the Debentures, that any representation or warranty
<PAGE> 25
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of the Corporation as set forth in this Agreement is inaccurate
in any material respect.
The Purchaser consents to the Corporation making a notation on its
records or giving instructions to any transfer agent of the Securities in order
to implement the restrictions on transfer set forth and described herein.
8.3 RELIANCE UPON REPRESENTATIONS, WARRANTIES AND COVENANTS
The Purchaser acknowledges that the representations and warranties and
covenants contained in this Agreement are made with the intent that they may be
relied upon by the Corporation to, among other things, determine its
eligibility to purchase Debentures. The Purchaser further agrees that by
accepting the Debentures, the Purchaser shall be representing and warranting
that the foregoing representations and warranties are true as at the time of
Closing.
ARTICLE 9
DEFINITIONS
9.1 DEFINITIONS
(a) For the purpose of this Agreement, the terms defined in the
introductory sentence and in Articles 1 and 2 shall have the
respective meanings specified therein, and the following terms shall
have the meanings specified with respect thereto below (such meanings
to be equally applicable to both the singular and plural forms of the
terms defined):
"AFFILIATE" shall mean any Person directly or indirectly
controlling, controlled by, or under direct or indirect common
control with, the Corporation, except a Subsidiary. A Person
shall be deemed to control a corporation if such Person
possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of such
corporation, whether through the ownership of voting
securities, by contract or otherwise.
"AMALGAMATION" means the vertical short form amalgamation of
the Corporation and Repap New Brunswick Inc., a wholly-owned
subsidiary of the Corporation, in compliance with Section 184
of the Canada Business Corporations Act.
"APPLICABLE ENVIRONMENTAL LAWS" shall mean those Applicable
Laws which pertain to the environment or the release of
Hazardous Materials into the environment, and includes any
condition or requirement contained in a permit, licence,
approval, consent or other document issued pursuant to such
laws.
<PAGE> 26
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"APPLICABLE LAWS" shall mean, in relation to any Person,
transaction or event:
(i) all applicable provisions of laws, statutes, rules
and regulations from time to time in effect of any
Governmental/Judicial Body, and
(ii) all judgments, orders, awards, decrees, official
directives, writs and injunctions from time to time
in effect of any Governmental/Judicial Body in an
action, proceeding or matter in which the Person is a
party or by which it or its property is bound or
having application to the transaction or event.
"BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a day on which commercial banks in New York, New
York or Toronto, Ontario are required or authorized to be
closed.
"CAPITALIZED LEASE OBLIGATION" shall mean, with respect to any
Person, any rental obligation which, under GAAP, would be
required to be capitalized on the books of such Person, taken
at the amount thereof accounted for as indebtedness (net of
interest expense) in accordance with such principles, and may
include Sale-Leaseback obligations.
"CLOSING" shall have the meaning specified in Article 2.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"DATE OF CLOSING" shall have the meaning specified in Article
2.
"DEBT" shall mean, with respect to any Person, without
duplication:
(i) all Indebtedness for borrowed money of such Person
(including, for certainty, reimbursement obligations
in respect of letters of credit, bankers' acceptances
and Debenture purchase facilities, obligations of
such Person evidenced by a bond, Debenture, debenture
or similar instrument, and obligations of such Person
in relation to purchase money agreements, deferred
purchase price payments, production payment
transactions, conditional sales agreements, or title
retention agreements),
(ii) all Capitalized Lease Obligations of such Person, and
all Indebtedness of such Person under
Sale-Leasebacks,
(iii) all Indebtedness for borrowed money secured by a Lien
on any property or asset owned or held by such
Person, whether or not the obligations secured
thereby shall have been assumed,
<PAGE> 27
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(iv) all redemption obligations of such Person in respect
of Redeemable Preferred Shares,
(v) Swaps of such Person, and
(vi) all Guarantees of such Person with respect to
obligations of a type described in the preceding
clauses (i) to (vi) inclusive.
"ERISA" shall mean the United States Employee Retirement
Income Security Act of 1974, as amended.
"EVENT OF DEFAULT" shall mean any of the events specified in
Section 6.1, provided that there has been satisfied any
requirement in connection with such event for the giving of
notice, or the lapse of time, or the happening of any further
condition, event or act, and "DEFAULT" shall mean any of such
events, whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the United States Securities
Exchange Act of 1934, as amended.
"FOREIGN ASSETS" shall mean all assets of the Corporation and
its Subsidiaries that are located or situated (or in the case
of a receivable, is owed by a debtor who is located or
situated) outside of Canada or the United States of America,
and all assets (wherever situated or located) that are owned
or held by a Person incorporated or organized outside of
Canada or the United States of America.
"GAAP" shall mean generally accepted accounting principles in
Canada from time to time approved by the Canadian Institute of
Chartered Accountants, or any successor institute, applicable
on the date on which the applicable determination or
calculation is made or required to be made.
"GOVERNMENTAL/JUDICIAL BODY" shall mean:
(i) any government, parliament or legislature or any
regulatory or administrative authority, agency,
commission, tribunal or board of any government and
any other law, regulation or rule making entity
having jurisdiction in the relevant circumstances, or
any Person acting under the authority of any of the
foregoing, and
(ii) any judicial, administrative or arbitral court,
authority, tribunal or commission having jurisdiction
in the relevant circumstances.
<PAGE> 28
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"GUARANTEE" shall mean, with respect to any Person, any direct
or indirect liability, contingent or otherwise, of such Person
with respect to any indebtedness, letter of credit, lease,
dividend or other obligation of another, including any such
obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary
course of business) or discounted or sold with recourse by such
Person, or in respect of which such Person is otherwise
directly or indirectly liable, including any such obligation in
effect guaranteed by such Person through any agreement
(contingent or otherwise) to purchase, repurchase or otherwise
acquire such obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation (whether
in the form of loans, advances, stock purchases, capital
contributions or otherwise), in any such case if the purpose or
intent of such agreement is to provide assurance that such
obligation will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of
such obligation will be protected against loss in respect
thereof. The amount of any Guarantee shall be equal to the
outstanding principal amount of the obligation guaranteed or
such lesser amount to which the maximum exposure of the
guarantor shall have been specifically limited.
"HAZARDOUS MATERIALS" shall mean any substance that:
(i) when released to the natural environment is likely to
cause, immediately or at some future time, material
harm or degradation to the natural environment or any
risk to human health and without restricting the
generality of the foregoing, includes any pollutant,
contaminant, waste or hazardous waste, or any
"dangerous goods", "hazardous chemical", "hazardous
substance" or "hazardous waste" as may be defined by
Applicable Environmental Law for the protection of
the natural environment or human health, or
(ii) exhibits characteristics of flammability,
corrosivity, reactivity or toxicity.
"INDEBTEDNESS" shall mean, with respect to any Person, without
duplication:
(i) all items (excluding items of contingency reserves or
of reserves for deferred income taxes, investment tax
credits and non-repayable grants) which in accordance
with GAAP would be included in determining total
liabilities as shown on the liability side of a
balance sheet of such Person as of the date on which
Indebtedness is to be determined,
(ii) all indebtedness, obligations and liabilities secured
by any Lien on any property or asset owned or held by
such Person subject thereto, whether or not the
indebtedness secured thereby shall have been assumed,
and
<PAGE> 29
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(iii) all indebtedness, obligations and liabilities of
others with respect to which such Person has become
liable by way of a Guarantee.
"LIEN" shall mean any mortgage, pledge, priority, security
interest, encumbrance, lien (statutory or otherwise) or charge
of any kind, including any agreement to give any of the
foregoing, any conditional sale or other title retention
agreement, any Sale-Leaseback or Capitalized Lease Obligation.
"MATERIAL ADVERSE EFFECT" shall mean, prior to the
Amalgamation, an effect on the financial condition of the
Corporation, or its property, business, operations or
liabilities, which in each case, could reasonably be expected
to have a material adverse effect on the Corporation's ability
to perform its obligations hereunder, under the Indenture or
the Debentures, and following the Amalgamation, an effect on
the financial condition of the Corporation and its Subsidiaries
taken as a whole, or the property, business, operations or
liabilities of the Corporation and its Subsidiaries taken as a
whole, which in each case, could reasonably be expected to have
a material adverse effect on the Corporation's ability to
perform its obligations hereunder, under the Indenture or the
Debentures
"MATERIAL CONTRACTS" shall include all contracts, agreements
or indentures set forth in Schedule H to this Agreement.
"MATURITY DATE" shall mean June 30, 2005.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the
name of the Corporation by any two of its President, a Vice
President or its Secretary.
"PBGC" shall mean the United States Pension Benefit Guaranty
Corporation or any successor entity.
"PERSON" shall mean an individual, a corporation, a
partnership, a trustee or an unincorporated organization, and
pronouns have a similarly extended meaning.
"PLAN" shall mean any "employee pension benefit plan" (as such
term is defined in section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or
have been made, by the Corporation or any ERISA Affiliate.
"PUBLIC RECORD" shall mean all information filed by the
Corporation with the securities commissions or similar
regulatory authorities in each province of Canada, The Toronto
Stock Exchange, the Montreal Exchange or the SEC or any other
securities regulatory authority in the United States,
including, without limitation:
<PAGE> 30
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(i) the Annual Report on Form 10-K of the Corporation for
the fiscal year ended December 31, 1997 filed with
the SEC;
(ii) the management proxy circular of the Corporation
dated April 3, 1998; and
(iii) the consolidated financial statements of the
Corporation for the year ended December 31, 1997
together with the notes thereto and the report of the
auditor's thereon.
"REDEEMABLE PREFERRED SHARES" shall mean, in respect of any
corporation, shares of the capital stock of such corporation
that are entitled to preference or priority over any other
shares of the capital stock of such corporation in respect of
payment of dividends or distribution of assets upon
liquidation, and which are:
(i) redeemable, payable or required to be purchased or
otherwise retired or extinguished, or convertible
into Debt of such Corporation (A) at a fixed or
determinable date, whether by operation of sinking
fund or otherwise, (B) at the option of any Person
other than such Corporation, or (C) upon the
occurrence of a condition not solely within the
control of such Corporation, or
(ii) convertible into other Redeemable Preferred Shares.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration
Rights Agreement dated the date of Closing between the
Corporation and Purchaser.
"RELATED PARTY" shall mean:
(i) any Person directly or indirectly controlling,
controlled by, or under direct or indirect common
control with, the Corporation. A Person shall be
deemed to control a corporation, partnership or other
entity if such Person possesses, directly or
indirectly, the power to direct or cause the
direction of the management and policies of such
entity, whether through the ownership of voting
securities, partnership or other equity interests, or
by contract or otherwise,
(ii) any Person who beneficially owns or holds 10% or more
of any class of shares of the Corporation, or
(iii) any Person, 10% or more of any class of shares (or in
the case of a Person that is not a corporation, 10%
or more of the partnership or equity interests) of
which is beneficially owned or held by the
Corporation or a Subsidiary.
<PAGE> 31
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"RESPONSIBLE OFFICER" shall mean the chief executive officer,
chief operating officer, executive vice-president, chief
financial officer, vice-president finance or treasurer or
controller of the Corporation or any other officer of the
Corporation involved principally in its financial
administration or its controllership function.
"SALE-LEASEBACK" shall mean an arrangement under which title
to any property or an interest transferred by or on the
direction of a person ("X") to another person which leases or
otherwise grants the right to use such property, asset or
interest to X (or nominee of X), whether or not in connection
therewith X also acquires a right or is subject to an
obligation to acquire the property, asset or interest, and
regardless of the accounting treatment of such arrangement.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"SECURITIES ACT" shall mean the United States Securities Act
of 1933, as amended.
"SUBSIDIARY" in relation to any body corporate, shall mean any
corporation of which Voting Shares carrying more than 50% of
the voting rights attached to all outstanding Voting Shares
are owned, directly or indirectly, by or for such body
corporate and/or by or for any corporation in like relation to
such body corporate, and includes any corporation in like
relation to a Subsidiary, provided that in the case of a
"WHOLLY-OWNED SUBSIDIARY", 100% of the issued and outstanding
shares or partnership or equity interests in the capital of
such Subsidiary shall, at the time as of which any
determination is being made, be owned by the Corporation
either directly or through wholly-owned Subsidiaries.
"SWAPS" shall mean, with respect to any Person, payment
obligations with respect to interest rate swaps, currency
swaps and similar obligations obligating such Person to make
payments, whether periodically or upon the happening of a
contingency. For the purposes of this Agreement, the amount
of the obligation under any Swap shall be the amount
determined in respect thereof as of the end of the then most
recently ended fiscal quarter of such Person, based on the
assumption that such Swap had terminated at the end of such
fiscal quarter, and in making such determination, if any
agreement relating to such Swap provides for the netting of
amounts payable by and to such Person thereunder or if any
such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the
amount of such obligation shall be the net amount so
determined.
"TRANSFEREE" shall mean any direct or indirect transferee of
all or any part of any Debenture purchased by the Purchaser
under this Agreement.
<PAGE> 32
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"U.S. DOLLARS" or "U.S. $" shall mean lawful currency of the
United States of America.
"U.S. LAWS" shall mean the state and federal laws and
regulations thereof applicable from time to time in the
continental United States of America.
"VOTING SHARES" means shares of capital stock of any class of
any body corporate carrying voting rights under all
circumstances, provided, however, that shares which only carry
the right to vote conditionally on the happening of an event
shall not be considered Voting Shares nor shall any shares be
deemed to cease to be Voting Shares solely by reason of a
right to vote accruing to shares of another class by reason of
the happening of any such event.
(b) ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters
hereunder shall be made, and all financial statements and certificates
and reports as to financial matters required to be furnished hereunder
shall be prepared, in accordance with GAAP, applied on a basis
consistent with the most recent audited consolidated financial
statements of the Corporation and its Subsidiaries delivered pursuant
to Article 7 of the Indenture or, if no such statements have been so
delivered, the most recent audited financial statements referred to in
clause (i) of Section 7.1(b).
(c) REPORTING. Unless the Purchaser agree otherwise, the Corporation
shall issue its financial statements and certificates and reports as
to financial matters in Canadian Dollars.
ARTICLE 10
MISCELLANEOUS
10.1 EXPENSES
The Corporation agrees, whether or not the transactions contemplated
by this Agreement and the Indenture are consummated, to pay, and save the
Purchaser and any Transferee harmless against liability for the payment of, all
out-of-pocket expenses arising in connection with such transactions, including
(a) all document production and duplication charges and the reasonable fees and
expenses of any special counsel engaged by the Purchaser or such Transferee in
connection with this Agreement, the Indenture, the Registration Rights
Agreement, the transactions contemplated herein and therein and any subsequent
proposed modification of, or proposed consent under, this Agreement, the
Indenture and the Registration Rights Agreement (including the reasonable fees
and expenses of counsel), whether or not such proposed modification shall be
effected or proposed consent granted, (b) the fees for obtaining private
placement numbers for the Debentures from Standard & Poors CUSIP Service
Bureau, (c) all fees and expenses of environmental consultants engaged by the
Corporation or the Purchaser in connection with the
<PAGE> 33
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transactions contemplated herein and in the Indenture, and (d) the costs and
expenses, including reasonable attorneys' fees and solicitors' fees (on a
solicitor and his own client basis), incurred by the Purchaser or such
Transferee in enforcing (or determining whether or how to enforce) any rights
under this Agreement, the Indenture, the Registration Rights Agreement or in
responding to any subpoena or other legal process or informal investigative
demand of any Governmental/ Judicial Body issued in connection with this
Agreement, the Indenture, the Registration Rights Agreement or the transactions
contemplated hereby or thereby or by reason of the Purchaser or such Transferee
being the holder of any Debenture, including costs and expenses incurred in any
bankruptcy case, but excluding costs and expenses incurred which relate solely
to activities of a holder of an internal administrative nature, and do not
involve any conduct or activities of the Corporation or its Subsidiaries. The
obligations of the Corporation under this Section 10.1 shall survive the
transfer of any Debenture or portion thereof or interest therein by the
Purchaser or any Transferee and the payment of any Debenture. For greater
certainty, the costs of the Purchaser incurred in connection with the
negotiation, execution and delivery of the agreements described in items 2 and 3
of Schedule A shall be for the account of the Purchaser.
10.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties contained herein or, in the
Indenture or made in writing by or on behalf of the Corporation in connection
herewith or therewith shall survive the execution and delivery of this
Agreement, the Indenture and the Debentures, the transfer by the Purchaser of
any Debenture or portion thereof or interest therein and the payment of any
Debenture.
10.3 ENTIRE AGREEMENT
This Agreement embodies the entire agreement and understanding between
the Purchaser and the Corporation and supersede all prior agreements and
understandings relating to the subject matter hereof.
10.4 SUCCESSORS AND ASSIGNS
This Agreement and the covenants herein shall not be assignable by
either party hereto without the prior written consent of the other party not to
be unreasonably withheld except Purchaser may at any time assign this Agreement
and the covenants herein to an Affiliate of Purchaser.
<PAGE> 34
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10.5 NOTICES
All notices or other communications provided for hereunder shall be in
writing and sent by nationwide overnight delivery service (with charges
prepaid) or by facsimile and:
if to the Purchaser, addressed to it at :
Enron Capital & Trade Resources Corp.
1400 Smith Street
EB3817
Houston, Texas
77002
Attention: Donna W. Lowry
Compliance
Fax: (713) 646-4039
if the Corporation, addressed to it at:
Repap Enterprises Inc.
Suite 200, 300 Atlantic Street
Stamford, CT
06901
Attention: Terry W. McBride
Vice President and General Counsel
Fax: (203) 964-6186
10.6 SATISFACTION REQUIREMENT
If any agreement, certificate or other writing, or any action taken or
to be taken, is by the terms of this Agreement required to be satisfactory to
the Purchaser, the determination of such satisfaction shall be made by the
Purchaser, in the sole and exclusive judgment (exercised in good faith) of the
Person or Persons making such determination.
10.7 AMENDMENTS
This Agreement may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
<PAGE> 35
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10.8 SEVERABILITY
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
10.9 DESCRIPTIVE HEADINGS
The descriptive headings of the several Sections of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
10.10 COUNTERPARTS
This Agreement may be executed in any number of counterparts, and by
facsimile, all of which together shall constitute one instrument.
10.11 JUDGMENT CURRENCY
(a) If for the purposes of obtaining judgment in any court it
becomes necessary to convert any amount due hereunder in one
currency into another currency, then the conversion shall be
made at the Rate of Exchange prevailing on the last Business
Day before the day on which
the judgment is given. "Rate of Exchange" means the rate at
which the holder is able on the relevant date to purchase the
currency being converted for such other currency.
(b) In the event that there is a change in the Rate of Exchange
prevailing between the Business Day before the day on which
the judgment is given and the date of payment, the Corporation
will pay such additional amount (if any) or, as the case may
be, the holder will refund such amount (if any) as may be
necessary to ensure that the amount paid on such date is the
amount in such other currency which, when converted at the
Rate of Exchange prevailing on the date of payment, is the
amount then due under this Agreement in the currency which was
converted.
(c) Any amount due from the Corporation or any holder pursuant to
this Section will be due as a separate debt and shall not be
affected by judgment being obtained for any other sum due
under or in respect of this Agreement or any Debenture.
(d) The Corporation shall indemnify each holder against payment by
the holder of any premiums and costs of exchange incurred in
connection with the purchase of, or conversion into, the
relevant currency.
<PAGE> 36
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10.12 CURRENCY; TIME; "INCLUDING"; INTEREST EQUIVALENCY; CURRENCY CONVERSION
(a) Unless otherwise stated, references in this Agreement to
dollar amounts or $ shall be deemed to be references to
Canadian Dollars.
(b) Unless otherwise stated, references to time shall mean local
time in Toronto, Ontario.
(c) The word "including" shall not be construed to limit or
restrict the generality of the matter that precedes it.
(d) A reference in this Agreement to the equivalent of one
currency in another currency shall mean the equivalent
determined using the noon spot rate of exchange for conversion
announced by the Bank of Canada on the day for conversion.
(e) For certainty, the words "property" and "assets" are used
interchangeably herein, and include both real and personal
property.
10.13 ENVIRONMENTAL INDEMNITY
The Corporation shall indemnify and hold the Purchaser harmless against
any and all losses, costs, expenses, liabilities, actions, suits, claims or
damages of any and every kind sustained, paid or incurred by it as a result of
any environmental claims, liabilities or obligations of any and every nature
whatsoever relating to or affecting the Corporation or its Subsidiaries or the
property of any of them ("their property"), or the property of others where the
Corporation or any Subsidiary could have any liability in respect thereof under
Applicable Environmental Laws, or personal injury or death, including in respect
of:
(a) any environmental harm or damage to or impairment of their
property (or any other Person's property) caused by the
presence or release of any Hazardous Materials on their
property, or by the Corporation or any Subsidiary;
(b) any decrease or loss in value of their property (or any other
Person's property) occasioned by non-compliance by the
Corporation or any Subsidiary with Applicable Environmental
Laws;
(c) the imposition or assertion of any Lien including any expenses
collectable as taxes affecting their property under Applicable
Environmental Laws by any Governmental/Judicial Body;
(d) any claim asserted or order issued by a Governmental/Judicial
Body against a holder of a Debenture or an agent of any of
them in respect of any matter referred to in Sections
10.13(a), 10.13(b) or 10.13(c), or for any clean-up,
restoration,
<PAGE> 37
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reclamation or other securing or remedial action in respect of
their property (or any other Person's property arising out of
the activities or omissions of the Corporation or its
Subsidiaries); or
(e) any non-compliance with any provision herein relating to
environmental matters.
Without limiting the generality of the foregoing, the indemnities in
this Section shall extend to:
(a) reasonable legal fees on a solicitor and his own client basis,
including the reasonable costs of defending and/or
counterclaiming or claiming over against third parties in
respect of any action or matters; and
(b) any amounts payable arising out of a settlement of any action
entered into between the Purchaser, acting reasonably, and any
Person with the consent of the Corporation (which consent will
not be unreasonably withheld);
but shall not extend to any claim, liability or obligation to the extent the
same relates to a decrease in the value of Debentures or arises solely due to
the gross negligence or wilful misconduct of the holder claiming
indemnification.
These indemnities shall extend to the officers, directors, employees,
shareholders, agents and assignees of the Purchaser, and the Corporation will
hold the benefit of these indemnities in trust for such indemnified parties to
the extent necessary to give effect hereto. The provisions of and undertakings
and indemnification set out in this Section 10.13 shall survive the payment and
satisfaction of the Debentures including any termination of the other provisions
of this Agreement.
The Corporation acknowledges that any Person, who by sale, assignment
or other transfer from the Purchaser holds not less than U.S.$10,000,000
aggregate principal amount of Debentures, shall be entitled to all benefits,
rights and entitlements under the indemnity granted by the Corporation in this
Section 10.13 as if such Person was a party to this Agreement.
10.14 BOARD OF DIRECTOR'S VISITATION AND NOMINATION RIGHTS
At any time following conversion of the Debentures held by the
Purchaser and for so long as the Purchaser holds, directly or indirectly
through affiliates or nominees, at least 13.5% of the Corporation's then issued
and outstanding common shares, calculated on a non-diluted basis other than the
inclusion in such calculation of all options granted by the Corporation on or
before the date of this Agreement, upon the Purchaser's request:
(a) the Corporation will permit representatives of the Purchaser
to attend all meetings of the Corporation's Board of Directors
whether convened by telephone or otherwise, and will provide
advance notice of all such meetings to the Purchaser,
<PAGE> 38
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concurrent with such notice being given to the Board of
Directors, and will grant the Purchaser the reasonable
opportunity to be heard at all such meetings of the Board of
Directors with respect to all such matters as may be reasonably
considered relevant to the Purchaser as a holder of common
shares of the Corporation; and
(b) at the first meeting of shareholders of the Corporation
following any such request by the Purchaser, and at each
meeting of shareholders thereafter, management of the
Corporation will nominate for election by the Corporation's
shareholders one individual designated by the Purchaser for
election to the Corporation's Board of Directors.
10.15 MEETINGS WITH CORPORATION OFFICERS
Within fifteen days after the delivery of the unaudited quarterly
financial statements as required by Section 4.1 or the annual audited financial
statements as required by Article 7 of the Indenture, at least 15 days notice
shall be given by the Purchaser to the Corporation setting forth the time and
place of a proposed meeting or, at the Purchaser's discretion, the time of a
proposed telephone meeting, between the Purchaser and officers of the
Corporation. The Corporation shall be required to make available, at any such
meeting the Chairman, Chief Financial Officer, Chief Operating Officer, General
Counsel and the senior operations officer for each of the Corporation's
material operating Subsidiaries, or officers holding similar positions, and
such other officers of the Corporation or any of its material operating
Subsidiaries as required by the Purchaser for the purpose of discussing the
business and affairs of the Corporation and its Subsidiaries with the
Purchaser.
10.16 ADJUSTMENTS TO CONVERSION PRICE
(a) The provisions of section 5.5(2) of the Indenture and the
other provisions of article 5 of the Indenture applicable
thereto, shall also apply to all options to subscribe for
common shares of the Corporation and to all rights to
subscribe for securities exchangeable for or convertible into
common shares of the Corporation, granted to employees,
officers and directors of the Corporation pursuant to any
benefit or compensation plan of the Corporation in effect from
time to time but not including common shares of the
Corporation currently reserved for issuance on exercise of any
options under any such plans in effect on the date hereof, and
in each such case the Conversion Price (as defined and applied
in the Indenture), applicable only to the Debentures held by
the Purchaser, shall be deemed to be adjusted as set forth in
section 5.5(2)(a) and (b) of the Indenture. After any such
deemed adjustment, and upon any conversion of Debentures by
the Purchaser the Corporation shall, in addition to and
concurrently with receipt of the common shares of the
Corporation which it is entitled to receive pursuant to the
provisions of the Indenture, receive such additional common
shares of the Corporation as are required to give effect to
the deemed adjustment to the
<PAGE> 39
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Conversion Price set forth above. Further, any adjustments to
the Conversion Price pursuant to section 5.5 of the Indenture
shall apply to the Conversion Price as adjusted herein from
time to time.
(b) In addition to the right in Section 10.16(a), the Purchaser
shall be entitled to participate pro rata in:
(i) any issuances of common shares from treasury by way
of private placement or otherwise, and
(ii) any issuances of rights, warrants or other securities
convertible into common shares,
to other than all or substantially all existing shareholders
of the Corporation.
The pro rata participation by the Purchaser shall be effected
by way of sales by the Corporation to the Purchaser as part of
a public distribution or private placement of the relevant
securities (in accordance with available exemptions from
prospectus filing requirements, if applicable) to the
Purchaser of a sufficient number of common shares so as to
effect such pro rata participation as determined in paragraph
(c) below, at either the public distribution offering price or
the private placement offering price for such securities, as
applicable.
(c) In calculating the number of common shares required to be
issued by the Corporation to the Purchaser to satisfy the pro
rata participation right described in (b) above, such number
shall be determined by reference to the percentage of common
shares of the Corporation then owned by the Purchaser as a
result of, or acquirable by the Purchaser upon, a conversion
of Debentures, relative to all common shares of the
Corporation then outstanding determined immediately prior to
any of the events triggering such participation rights as
described above.
10.17 FURTHER ASSURANCES
Each party shall promptly cure any defect by it in the execution and
delivery of this Agreement. The Corporation, at its expense, shall promptly
execute and deliver to the Purchaser, upon the reasonable request by the
Purchaser in writing, all such other and further documents, agreements,
opinions, certificates and instruments in order to give effect to the covenants
and agreements of the Corporation in this Agreement, the Indenture or the
Debentures, and shall make any recording, file any notice or obtain any consent
in connection therewith, all as may be reasonably necessary or appropriate in
connection therewith.
<PAGE> 40
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10.18 ARBITRATION
(a) MEDIATION. If a dispute arises out of or is related to this
Agreement or the breach thereof (a "Demand"), the parties
agree to first attempt, in good faith, to settle the Demand by
mediation under the Commercial Mediation Rules of the American
Arbitration Association ("AAA") before resorting to binding
arbitration as set forth in this Section 10.18. If the parties
are unable to resolve the matter within one calendar month of
one party giving notice to the other party hereto requesting
mediation in accordance with this Section 10.18, then any
remaining unresolved controversy, claim or dispute arising out
of or relating to this Agreement or the breach thereof, shall
be settled by binding arbitration in accordance with this
Section 10.18.
(b) APPLICABLE LAW. All questions concerning the validity,
interpretation, performance or breach of this Agreement shall
be governed and decided by the laws in force from time to time
in the State of New York.
(c) ARBITRATION. Subject to Section 10.18(a), all Demands shall
be referred to arbitration in New York, New York under the
Commercial Arbitration Rules for International Commercial
Arbitrations of the American Arbitration Association in effect
on the date of this Agreement (the "Rules"). In the event of
any conflict between the Rules and this Section 10.18, the
provisions of this Section 10.18 shall govern.
(d) ARBITRATORS. Each party shall appoint one arbitrator within 30
days after receipt by the respondent of the Demand, and the two
arbitrators appointed by the parties shall, within 30 days
after their appointment, appoint a third presiding arbitrator.
If either party fails to nominate an arbitrator, or the two
arbitrators appointed by the parties are unable to appoint a
presiding arbitrator within the stated periods, the second or
presiding arbitrator, as the case may be, shall be appointed
according to the procedures of Rule 13 of the Rules. All
arbitrators shall be fluent in English, and all hearings shall
be conducted in the English language.
(e) AWARD. The arbitrators shall, by majority vote, render a
written decision stating reasons therefor within 60 days after
the respondent receives the Demand. Any cash award shall be
payable in lawful currency of the United States of America
through a branch of a bank located in New York, New York net
of fees, taxes and other charges. Each party shall bear its
own costs of the arbitration unless awarded otherwise by the
arbitrators.
(f) ENFORCEMENT. The award shall be final and enforceable and may
be confirmed by the judgment of a court of competent
jurisdiction.
<PAGE> 41
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(g) ATTORNMENT. For purposes of this Section 10.18, each party
hereby attorns to the non-exclusive jurisdiction of the Courts
having jurisdiction in the State of New York.
10.19 CURRENCY CONVERSION
Where an amount in this Agreement is denominated in U.S. dollars or
Cdn. dollars as the case may be, (the "First Currency") and for purposes of
determining compliance with the provisions of this Agreement it is necessary to
convert U.S. dollars into Cdn. dollars or vice versa (the "Other Currency"),
then the equivalent amount of the First Currency shall be that amount of the
First Currency which would be required to purchase such amount of the Other
Currency at the Bank of Canada noon (Montreal local time) rate for such
currencies on such date of determination (as quoted or published from time to
time by the Bank of Canada) or, if such date of determination is not a Business
Day, on the Business Day immediately preceding such date of determination, or
of such other rate as may be agreed upon by the Corporation and the Purchaser
each acting reasonably.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterparts of this letter and return the same to
the Corporation, whereupon this letter shall become a binding agreement among
the Corporation and the Purchaser.
Very truly yours,
REPAP ENTERPRISES INC.
By: /s/ STEPHEN C. LARSON
-----------------------------------
Name: Stephen C. Larson
Title: President and Chief Executive
Officer
By: /s/ TERRY W. MCBRIDE
-----------------------------------
Name: Terry W. McBride
Title: Secretary
The foregoing Agreement is
hereby accepted as of the
dated first above written.
ENRON CAPITAL & TRADE RESOURCES CORP.
By: /s/ MARK K. LAY
-----------------------------
Name: Mark K. Lay
Title: Vice President
By:
-----------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 99.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of May 15 , 1998, by and between Repap Enterprises Inc., a
Canadian corporation (the "Company"), and Enron Capital & Trade Resources Corp.
("Shareholder").
This Agreement is made pursuant to a Purchase Agreement between the
Company and Shareholder dated as at May 15, 1998 (the "Purchase Agreement").
Pursuant to the Purchase Agreement, Shareholder will become the owner of U.S.
$45,000,000 principal amount of 6% Convertible Subordinated Debentures due 2005
(the "Debentures") which are convertible into 128,571,429 shares, subject to
adjustment as set forth in the Indenture (the "Shares"), of the common shares,
no par value, of Company (the "Common Shares").
To induce Shareholder to enter into the Purchase Agreement, the Company
has agreed to provide the U.S. registration, Canadian prospectus qualification,
and other rights set forth in this Agreement. The Company acknowledges that in
order to provide Shareholder with necessary marketing flexibility for
dispositions of Shares: i) Shareholder will have the option to utilize the U.S.
registration rights and/or the Canadian prospectus qualification rights on the
terms set forth herein, and ii) if at the time Shareholder exercises a demand
U.S. registration right (whether singularly or in combination with Canadian
prospectus qualification rights) the Company is qualified to utilize the
Multijurisdictional Disclosure System implemented in Canada pursuant to National
Policy 45 ("MJDS"), the Company shall effect such U.S. registration using MJDS.
The execution and delivery of this Agreement is a condition to the
Closing (as defined in the Purchase Agreement) under the Purchase Agreement.
The parties agree as follows:
ARTICLE I
1.1 Definitions. The terms set forth below are used herein as so defined:
"HOLDER" means the record holder of any Registrable Securities or Debentures
representing Registrable Securities, as the case may be.
"INDENTURE" means the Trust Indenture dated May 15, 1998 between the Company and
Montreal Trust Company, as trustee.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, business trust,
trust or unincorporated entity.
<PAGE> 2
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"REGISTRABLE SECURITIES" means the Shares (including Shares acquired upon
conversion of Debentures) until such time as such securities cease to be
Registrable Securities pursuant to Section 1.2 hereof.
"SELLING HOLDER" means a Holder who is selling Registrable Securities pursuant
to a Registration Statement (as defined herein).
1.2 Registrable Securities
Any Registrable Security will cease to be a Registrable Security when
(i) a Registration Statement (as defined in Section 2.1(b)) covering such
Registrable Security has been declared effective by the United States Securities
and Exchange Commission (the "Commission") and such Registrable Security has
been issued, sold or disposed of pursuant to such effective Registration
Statement, (ii) such Registrable Security is disposed of pursuant to Rule 144
(or any similar provision then in force) under the Securities Act of 1933, as
amended (the "Securities Act"), (iii) such Registrable Security is eligible to
be, and at the time of determination can be, disposed of pursuant to paragraph
(k) of Rule 144 (or any similar provision then in force) under the Securities
Act, provided the Holder can, in its reasonable opinion, dispose of Shares
pursuant to such exemption on equivalent terms and within a comparable timeframe
to that achievable through a sale of Shares otherwise completed using a
registration right as provided herein, or (iv) such Registrable Security is held
by the Company or one of its subsidiaries.
ARTICLE II
2.1 Demand Registration
(a) Any time after the date of this Agreement any Holder or
Holders may request (a "Request Notice") the Company to:
(i) register under the Securities Act, provided either
(i) at that time the Common Shares are registered
with the Commission under Section 12 of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act") or the Company is otherwise subject
to reporting requirements under the Exchange Act; or
(ii) the Company is otherwise required to register
under the Securities Act in order for the Company to
effect a distribution in Canada;
(ii) file and obtain a receipt for a preliminary
prospectus in all provinces in Canada in respect of;
or
<PAGE> 3
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(iii) register as described in (i) above and file a
prospectus as described in (ii) above, in respect of;
all or any portion (provided that such portion represents at
least 22% of all of the Registrable Securities at the date
hereof) of the Registrable Securities that are held by such
Holder or Holders (collectively, the "Requesting Holder") for
sale in the manner specified in the Request Notice.
(b) Following receipt of a Request Notice, the Company shall
promptly notify each Holder (except the Requesting Holder) of
the receipt of a Request Notice and shall use its best efforts
to
(i) file a registration statement under the Securities
Act (each such registration statement is hereinafter
referred to as a "Registration Statement") effecting
the registration under the Securities Act;
(ii) file a preliminary short form prospectus in all
provinces of Canada (each such preliminary short form
prospectus is hereinafter referred to as a "Canadian
Prospectus") qualifying the relevant Registrable
Securities; or
(iii) file both a Registration Statement and a Canadian
Prospectus as described in (i) and (ii) above;
for public sale in accordance with the method of disposition
specified in such Request Notice, the Registrable Securities
specified in the Request Notice (and in any notices received
from other Holders no later than the 15th day after receipt of
the notice sent by the Company) (such other Holders and the
Requesting Holder are hereinafter referred to as the
"Requesting Holders"). If such method of disposition shall be
an underwritten public offering, the Company may designate the
managing underwriter of such offering, subject to the approval
of the Requesting Holders holding a majority of the
Registrable Securities to be registered, which approval shall
not be withheld unreasonably.
(c) The Company shall be obligated to register (pursuant to
Section 2.1(b)(i)), file a qualifying prospectus in respect of
Registrable Securities (pursuant to Section 2.1(b)(ii)), or
register and file a qualifying prospectus (pursuant to Section
2.1(b)(iii)), on three occasions only.
A request pursuant to Section 2.1(a)(i), (ii) or (iii) shall
be counted as one of the three required registrations,
prospectus filings or combined registration and prospectus
filings only when (i) all the Registrable Securities requested
to be included in any such registration or prospectus filing
<PAGE> 4
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have been so included, (ii) the corresponding Registration
Statement has become effective under the Securities Act,
and/or a receipt for a final prospectus has been issued by the
Ontario Securities Commission, as applicable, and (iii) the
public offering has been consummated and the Registrable
Securities have been sold on the terms and conditions
specified therein unless the offering is not consummated or
any Registrable Securities have not been sold as a result of a
default by a Requesting Holder or any underwriter or the
Company shall have no further obligation pursuant to Section
2.3(g).
(d) The Company shall be entitled to include in any Registration
Statement or Canadian Prospectus filed pursuant to this
Section 2.1, for sale in accordance with the method of
disposition specified by the Requesting Holder, securities of
the Company entitled to vote generally in the election of
directors (or any securities convertible into or exchangeable
for or exercisable for the purchase of securities so entitled
generally to vote in the election of directors) (collectively,
"Voting Securities") to be sold by the Company for its own
account, except as and to the extent that, in the opinion of
the managing underwriter (if such method of disposition shall
be an underwritten public offering), such inclusion would
materially jeopardize the successful marketing of the
Registrable Securities to be sold. Any Person other than a
Holder entitled to piggy-back registration rights with respect
to a Registration Statement or Canadian Prospectus filed
pursuant to this Section 2.1 may include Voting Securities of
the Company with respect to which such rights apply in such
Registration Statement or Canadian Prospectus for sale in
accordance with the method of disposition specified by the
Requesting Holder, except and to the extent that, in the
opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering) such
inclusion would materially jeopardize the successful marketing
of the Registrable Securities to be sold. Except as provided
in this subsection (d), the Company will not effect any other
registration, or file a preliminary prospectus in respect of,
its Voting Securities (except with respect to Registration
Statements on Form S-4 or S-8, or the equivalent form for
foreign private issuers, for purposes permissible under such
forms as of the date hereof), whether for its own account or
that of any other security holder, from the date of receipt of
a Request Notice requesting the registration of or prospectus
filing in respect of a firm commitment underwritten public
offering until the completion of the distribution by the
underwriters of all securities thereunder.
(e) Until no Registrable Securities remain outstanding, the
Company shall not issue any demand registration rights or
Canadian prospectus qualification rights to any person or
entity without the prior written consent of Shareholder, which
consent
<PAGE> 5
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shall not be unreasonably withheld, provided always that
notwithstanding any such issue Shareholder shall remain
entitled to exercise the registration rights as set forth in
Section 2.2 in respect of a demand registration or prospectus
qualification by any such person or entity and demand
registration rights as set forth in Section 2.1.
2.2 Piggy-Back Registration.
If the Company proposes to register any Voting Securities under the
Securities Act for sale to the public for cash or to file with one or more
Canadian provincial securities commissions a preliminary prospectus relating to
an offering of Voting Securities for sale to the public for cash, whether for
its own account or for the account of other security holders or both (except
with respect to Registration Statements on Forms S-4 or S-8 for purposes
permissible under such forms as of the date hereof), each such time it will give
written notice to all Holders of its intention to do so no less than 20 days
prior to the anticipated filing date. Upon the written request of any Holder,
received by the Company no later than the 10th day after receipt by such Holder
of the notice sent by the Company, to register or include in the securities
offered by the preliminary prospectus, on the same terms and conditions as the
securities otherwise being sold pursuant to such registration or preliminary
prospectus, any of its Registrable Securities (which request shall state the
intended method of disposition thereof), the Company will use its best efforts
to cause the Registrable Securities as to which such request relates to be
included in the securities to be covered by the Registration Statement or
preliminary prospectus proposed to be filed by the Company, on the same terms
and conditions as any similar securities included therein, all to the extent
requisite to permit the sale or other disposition by each Holder (in accordance
with its written request) of such Registrable Securities; provided, however,
that the Company may at any time prior to the effectiveness of any such
Registration Statement or the filing of a final prospectus, in its sole
discretion and without the consent of any Holder, abandon the proposed offering
in which any Holder had requested to participate. The number of Registrable
Securities to be included in such a registration statement or preliminary
prospectus may be reduced or eliminated if and to the extent that, in the case
of an underwritten offering, in the opinion of the managing underwriter such
inclusion would materially jeopardize the successful marketing of the securities
(including the Registrable Securities) proposed to be sold therein; provided,
however, that such number of Registrable Securities shall not be reduced if any
securities included in such registration are included other than for the account
of the Company. From and after the date of this Agreement and until no
Registrable Securities remain outstanding, the Company shall not grant any
piggy-back registration rights to any Person unless such rights are expressly
made subject to the prior right of Holders to include any or all of their
Registrable Securities before such other Person includes any shares in any
registration statement or preliminary prospectus relating to an underwritten
public offering with respect to which, in the opinion of the managing
underwriter, the inclusion in the offering of all shares requested to be
registered or included in the preliminary prospectus by all Persons holding
registration rights would materially jeopardize the
<PAGE> 6
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successful marketing of the securities (including the Registrable Securities) to
be sold. In the event that the number of Registrable Securities to be included
in a registration statement or preliminary prospectus is to be reduced as
provided above, within 10 days after receipt by each Holder proposing to sell
Registrable Securities pursuant to the offering of the opinion of such managing
underwriter, all such Selling Holders may allocate among themselves the number
of shares of such Registrable Securities which such opinion states may be
distributed without adversely affecting the distribution of the securities
covered by the Registration Statement or the preliminary prospectus, and if such
Holders are unable to agree among themselves with respect to such allocation,
such allocation shall be made in proportion to the respective numbers of shares
specified in their respective written requests.
2.3 Registration and Prospectus Filing Procedures.
If and whenever the Company is required pursuant to this Agreement to
effect the registration of any of the Registrable Securities, the Company will,
as expeditiously as possible:
(a) following each receipt of a Request Notice pursuant to section
2.1(a):
(i) prepare, file with and obtain a receipt from the
securities commissions in all provinces of Canada:
(I) a preliminary short form prospectus relating
to such securities (which filing shall be
made within 45 days after the receipt by the
Company of a Request Notice) and use its
best efforts to cause such preliminary
prospectus to be cleared for filing of a
final prospectus; and
(II) a final short form prospectus relating to
such securities; or
(ii) prepare and file with
(I) the Commission a Registration Statement, on
a form available to the Company, with
respect to such securities (which filing
shall be made within 45 days after the
receipt by the Company of a Request Notice)
and use its best efforts to cause such
Registration Statement to become and remain
effective for the period of the distribution
contemplated thereby (determined pursuant to
subparagraph 2.3(g) below); and
<PAGE> 7
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(II) file with the Commission such amendments and
supplements to such Registration Statement
and the prospectus used in connection
therewith as may be necessary to keep such
Registration Statement effective for the
period specified in subsection (g) below
and as may be necessary to comply with the
provisions of the Securities Act with
respect to the disposition of all
securities covered by such Registration
Statement in accordance with the sellers'
intended method of disposition set forth in
such Registration Statement for such
period; or
(iii) prepare and file the prospectuses and registration
statement (including amendments and supplements) as
described in subsections (a) and (b) above;
in accordance with the instructions set forth in the Request
Notice.
Provided, however, that, if the Company is in possession of
material information that has not been disclosed to the public
and the Company reasonably deems it to be advisable not to
disclose such information in a registration statement or a
Canadian Prospectus, then the period after the receipt by the
Company of a Request Notice in which it must comply with this
Section 2.3(a) shall be extended for such time (but in no case
longer than 90 days commencing on the date of receipt by the
Company of a Request Notice) during which such information
remains non-public;
(b) furnish to each Selling Holder and to each underwriter such
number of copies of the Canadian preliminary and final
prospectuses and/or the Registration Statement and the
prospectus included therein (including each preliminary
prospectus and each document incorporated by reference therein
to the extent then required by the rules and regulations of
the Commission) as such Persons may reasonably request in
order to facilitate the public sale or other disposition of
the Registrable Securities covered by such Canadian prospectus
or Registration Statement;
(c) use its best efforts to register or qualify the Registrable
Securities covered by such Registration Statement under the
securities or blue sky laws of such jurisdictions as the
Selling Holders or, in the case of an underwritten public
offering, the managing underwriter, shall reasonably request,
provided, however, that the Company shall not be required for
any such purpose to (A) qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not
otherwise be required to qualify but for the requirements of
this Section 2.3(c), (B) consent
<PAGE> 8
- 8 -
to general service of process in any such jurisdiction, or
(C) subject itself to taxation in any jurisdiction wherein
it would not otherwise be subject to taxation but for the
requirements of this Section 2.3(c);
(d) notify each Selling Holder and each underwriter, at any time
when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a
result of which the Canadian final prospectus or the
prospectus contained in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading
and as promptly as practicable amend the Canadian final
prospectus or the Registration Statement or supplement the
prospectus or take other appropriate action so that the
Canadian and U.S. prospectuses do not include an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading;
(e) in the case of an underwritten public offering, furnish, (i)
on the date that Registrable Securities are delivered to the
underwriters for sale pursuant to such Registration Statement,
an opinion of counsel for the Company dated as of such date
and addressed to the underwriters and to the Selling Holders,
stating that such Registration Statement has become effective
under the Securities Act and that (A) the Registration
Statement, the related prospectus, and each amendment or
supplement thereof, appear on their face to be appropriately
responsive in all material respects to the requirements of the
Securities Act and the applicable rules and regulations
thereunder of the Commission (except that such counsel need
express no opinion as to the financial statements or any
engineering report contained or incorporated therein) and (B)
to such other effects as may reasonably be requested by
counsel for the underwriters, and (ii) on the effective date
of the Registration Statement and the date of the Canadian
final prospectus and on the date that Registrable Securities
are delivered to the underwriters for sale pursuant to such
Registration Statement or Canadian final prospectus, a letter
dated such dates from the independent accountants retained by
the Company, addressed to the underwriters and to the Selling
Holders, stating that they are independent public accountants
within the meaning of the Securities Act and that, in the
opinion of such accountants, the financial statements of the
Company and the schedules thereto that are included or
incorporated by reference in the Registration Statement or the
Canadian Prospectus, or any amendment or supplement thereof,
comply as to form in all material respects with the applicable
requirements of the Securities
<PAGE> 9
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Act and the published rules and regulations thereunder and
all applicable Canadian requirements, and such letter shall
additionally address such other financial matters (including
information as to the period ending no more than five
Business Days prior to the date of such letter) included in
the Registration Statement in respect of which such letter is
being given as the underwriters may reasonably request;
(f) make available for inspection by one representative of the
Selling Holders designated by a majority thereof, any
underwriter participating in any distribution pursuant to such
Registration Statement, and any attorney, accountant or other
agent retained by such representative of the Selling Holders
or underwriter (the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by
any such Inspector in connection with such Registration
Statement or Canadian final prospectus. For purposes of
subsections (a) and (b) above and of Section 2.1(c) of this
Agreement, the period of distribution of Registrable
Securities in a firm commitment underwritten public offering
shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the
period of distribution of Registrable Securities in any other
registration shall be deemed to extend until the earlier of
the sale of all Registrable Securities covered thereby or 90
days;
(g) use its best efforts to keep effective and maintain for the
period specified in subparagraph (g) a registration,
qualification, approval or listing obtained to cover the
Registrable Securities or a Canadian final prospectus as may
be necessary for the Selling Holders to dispose thereof and
shall from time to time amend or supplement any prospectus
used in connection therewith to the extent necessary in order
to comply with applicable law;
(h) use its best efforts to cause the Registrable Securities to be
registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the Selling
Holders to consummate the disposition of such Registrable
Securities; and
(i) enter into customary agreements (including, if requested, an
underwriting agreement in customary form) and take such other
actions as are reasonably requested by the Selling Holders or
the underwriters, if any, in order to expedite or facilitate
the disposition of such Registrable Securities.
<PAGE> 10
- 10 -
Upon the occurrence of any event contemplated by Section 2.3(d), the
Company shall, as soon as reasonably practicable, prepare and furnish
to each Selling Holder and underwriter, if any, a reasonable number of
copies of a prospectus supplemented or amended so that, as thereafter
delivered to the purchasers of the Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each Selling
Holder of Registrable Securities agrees that upon receipt of any
notice from the Company of the happening of any event of the kind
described in Section 2.3(d), such Selling Holder shall forthwith
discontinue the disposition of Registrable Securities pursuant to the
registration statement or Canadian Prospectus applicable to such
Registrable Securities until such Selling Holder receives copies of
such amended or supplemented registration statement or prospectus, and
if so directed by the Company, such Selling Holder shall deliver to
the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Selling Holders' possession of the
prospectus covering such Registrable Securities at the time of
receipt of such notice.
The Company may require each Selling Holder as to which any
registration statement or Canadian Prospectus is being effected to
furnish to the Company such information regarding such holder and the
distribution of such Registrable Securities as the Company may from
time to time reasonably request in writing, but only to the extent that
such information is required in order to comply with the Securities Act
or any relevant Canadian or state securities or blue sky law or
obligation. Each Selling Holder as to which any registration statement
or Canadian Prospectus is being effected agrees to notify the Company
as promptly as practicable of any inaccuracy or change in information
previously furnished by such Selling Holder to the Company or of the
happening of any event in either case as a result of which any
prospectus relating to such registration contains an untrue statement
of a material fact regarding such Selling Holder or the distribution of
such Registrable Securities or omits to state any material fact
regarding such Selling Holder or the distribution of such Registrable
Securities required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and to furnish promptly to the Company any
additional information required to correct and update any previously
furnished information or required so that such prospectus shall not
contain, with respect to such Selling Holder or the distribution of
such Registrable Securities, an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
In connection with each registration or filing of a Canadian prospectus
hereunder with respect to an underwritten public offering, the Company
and each Selling Holder shall use
<PAGE> 11
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their commercially reasonable efforts to enter into a written
agreement with the managing underwriter or underwriters selected in
the manner herein provided in such form and containing such provisions
as are customary in the securities business for such an arrangement
between underwriters and companies of the Company's size and
investment stature, provided that such agreement shall not contain any
such provision applicable to the Company or the Selling Holders that
is inconsistent with the provisions hereof; and further provided, that
the time and place of the closing under such agreement shall be as
mutually agreed upon among the Company, the Selling Holders and such
managing underwriter.
2.4 MJDS
At any time the Company is a "foreign private issuer" within the
meaning of Rule 405 under the Securities Act and is qualified to utilize the
MJDS, the Company agrees to utilize MJDS following receipt of a Request Notice
for a demand registration as described in section 2.1(a)(i) or (iii).
2.5 Expenses
(a) All expenses incident to the Company's performance under or
compliance with this Agreement, including without limitation,
all registration and filing fees, blue sky fees and expenses,
printing expenses, listing fees, fees and disbursements of
counsel and independent public accountants for the Company,
fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars and
reasonable out-of-pocket expenses (including, without
limitation, reasonable legal fees of one counsel for all
Selling Holders) of the Selling Holders, but excluding any
Selling Expenses (as defined below), are herein called
"Registration Expenses." All underwriting fees, discounts and
selling commissions allocable to the sale of the Registrable
Securities are herein called "Selling Expenses."
(b) Except as provided below, the Company will pay all
Registration Expenses in connection with each Registration
Statement or Canadian preliminary or final prospectus filed
pursuant to this Agreement, whether or not the Registration
Statement becomes effective, and the Selling Holders shall pay
Selling Expenses in connection with any Registrable Securities
registered pursuant to this Agreement. Notwithstanding the
foregoing, on the third occasion of the exercise of demand
registration rights pursuant to Section 2.1 hereof, each of
the Selling Holders (as a group) and the Company shall pay
one-half of all Registration Expenses except for any
Registration Expenses attributable to the inclusion in such
<PAGE> 12
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registration or prospectus of any Voting Securities by the
Company or any other Person that is not a Holder.
2.6 Indemnification
(a) In the event of a registration pursuant to this Agreement of
any Registrable Securities under the Securities Act or the
filing pursuant to this Agreement of a Canadian prospectus
offering any Registrable Securities, the Company will
indemnify and hold harmless each Selling Holder thereunder and
each underwriter of Registrable Securities thereunder and each
Person, if any, who controls such Selling Holder or
underwriter within the meaning of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages or liabilities
(including reasonable attorneys' fees) ("Losses"), joint or
several, to which such Selling Holder or underwriter or
controlling Person may become subject under the Securities
Act, the Exchange Act, any applicable Canadian federal or
provincial securities legislation or otherwise, insofar as
such Losses, (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Registration
Statement under which such Registrable Securities were
registered under the Securities Act pursuant to this
Agreement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or
in any Canadian prospectus offering such securities, or arise
out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,
and will reimburse each such Selling Holder, each such
underwriter and each such controlling Person for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any such Loss or actions;
provided, however, that the Company will not be liable in any
such case if and to the extent that any such Loss arises out
of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in
conformity with information furnished by such Selling Holder,
such underwriter or such controlling Person in writing
specifically for use in such Registration Statement or
prospectus.
(b) Each Selling Holder agrees to indemnify and hold harmless the
Company, its directors, officers, employees and agents and
each Person, if any, who controls the Company within the
meaning of the Securities Act or of the Exchange Act to the
same extent as the foregoing indemnity from the Company to
such Selling Holder, but only with respect to information
regarding such Selling Holder furnished in writing by or on
behalf of such Selling Holder expressly for inclusion in any
<PAGE> 13
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Registration Statement or prospectus relating to the
Registrable Securities, or any amendment or supplement
thereto;
(c) Each Selling Holder agrees to indemnify and hold harmless each
other Selling Holder, their directors, officers, employees and
agents and each Person, if any, who controls a Selling Holder
within the meaning of the Securities Act or of the Exchange
Act to the same extent as the foregoing indemnity from the
Company to the Selling Holders, but only with respect to
information regarding such Selling Holder furnished in writing
by or on behalf of such Selling Holder expressly for inclusion
in any Registration Statement or prospectus relating to the
Registrable Securities, or any amendment or supplement
thereto; provided, however, that the liability of each Selling
Holder pursuant to all indemnities given by such Selling
Holder pursuant to this Section 2.6 shall not be greater in
aggregate amount than the dollar amount of the proceeds (net
of any Selling Expenses) received by such Selling Holder from
the sale of the Registrable Securities giving rise to all such
indemnifications.
(d) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made
against the indemnifying party hereunder, notify the
indemnifying party in writing thereof, but the omission so to
notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party other
than under this Section 2.6. In case any such action shall be
brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to
the extent it shall wish, to assume and undertake the defense
thereof with counsel reasonably satisfactory to such
indemnified party and, after notice from the indemnifying
party to such indemnified party of its election so to assume
and undertake the defense thereof, the indemnifying party
shall not be liable to such indemnified party under this
Section 2.6 any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other
than reasonable costs of investigation and of liaison with
counsel so selected; provided, however, that:
(i) if the indemnifying party has failed to assume the
defense and employ counsel or
(ii) if the defendants in any such action include both the
indemnified party and the indemnifying party and
counsel to the indemnified party shall have concluded
that there may be reasonable defenses available to
the
<PAGE> 14
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indemnified party that are different from or
additional to those available to the indemnifying
party or if the interests of the indemnified party
reasonably may be deemed to conflict with the
interests of the indemnifying party, then the
indemnified party shall have the right to select a
separate counsel and to assume such legal defense and
otherwise to participate in the defense of such
action, with the reasonable expenses and fees of such
separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying
party as incurred.
(e) If the indemnification provided for in this Section 2.6 is
unavailable to the Company or the Selling Holders or is
insufficient to hold them harmless in respect of any losses,
claims, damages, liabilities or expenses referred to herein,
then each such indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such
losses, claims, damages, liabilities and expenses as between
the Company on the one hand and each Selling Holder on the
other, in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and of each
Selling Holder on the other in connection with the statements
or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one
hand and each Selling Holder on the other shall be determined
by reference to, among other things, whether the untrue or
alleged untrue statements of a material fact or the omission
or alleged omission to state a material fact has been made
by, or relates to, information supplied by such party, and
the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such
statement or omission.
(f) No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who is not guilty of
such fraudulent misrepresentation.
2.7 Covenant.
Until no Registrable Securities remain outstanding the Company shall
use its best efforts to maintain the listing of the Common Shares on each of The
Toronto Stock Exchange and the Montreal Exchange.
<PAGE> 15
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2.8 Certain Events.
The provisions of this Agreement shall apply, to the full extent set
forth herein with respect to the Registrable Securities, to any and all shares
of equity capital of the Company or any successor or assign of the Company
(whether by merger, consolidation, sale of assets or otherwise) which may by
issued in respect of, in exchange for, or in substitution of the Registrable
Securities, in each case as the amounts of such securities outstanding are
appropriately adjusted for any equity dividends, splits, reverse splits,
combinations, recapitalizations and the like occurring after the date of this
Agreement.
ARTICLE III
3.1 Communications.
All notices and other communications provided for or permitted
hereunder shall be made in writing by telecopy, courier service or personal
delivery:
(a) if to a Holder of Registrable Securities, at the most current
address given by such Holder of the Company in accordance with
the provisions of this Section 3.1, which address initially
is, with respect to the Shareholder, the address set forth in
the Purchase Agreement, and
(b) if to the Company, initially at its address set forth in the
Purchase Agreement and thereafter at such other address,
notice of which is given in accordance with the provisions of
this Section 3.1.
All such notices and communications shall be deemed to have been
received at the time delivered by hand, if personally delivered; when
receipt is acknowledged, if telecopied; and on the next business day if
timely delivered to an air courier guaranteeing overnight delivery.
3.2 Successor and Assigns.
The rights of any Holder under this Agreement may be assigned to any
Person who acquires any Registrable Securities. Any assignment of registration
rights pursuant to this Section 3.2 shall be effective only upon receipt by the
Company of written notice from such assigning Holder stating the name and
address of any assignee. All the terms and provisions of this Agreement shall be
binding upon, shall inure to the benefit of and shall be enforceable by the
respective successors of the parties hereto and the respective successors and
permitted assigns (as described therein) of the parties to the Purchase
Agreement under which such Registrable
<PAGE> 16
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Securities are to be or have been purchased. If any transferee of any holder of
Registrable Securities shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such person shall be entitled to receive the
benefits of and be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of this Agreement.
3.3 Counterparts.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which counterparts,
when so executed and delivered, shall be deemed to be an original and all of
which counterparts, taken together, shall constitute but one and the same
Agreement.
3.4 Headings.
The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
3.5 Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
3.6 Severability of Provisions.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting or impairing the validity or enforceability of
such provision in any other jurisdiction.
3.7 Entire Agreement.
This Agreement is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with respect to
the registration rights granted by the Company with respect to the securities
sold pursuant to the Purchase Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
<PAGE> 17
- 17 -
3.8 Attorneys' Fees.
In any action or proceeding brought to enforce any provision of this
Agreement, the successful party shall be entitled to recover reasonable
attorneys' fees in addition to its costs and expenses and any other available
remedy.
3.9 Amendment.
This Agreement may be amended only by means of a written amendment
signed by the Company and by the Holders of a majority of the Registrable
Securities at the time of amendment.
<PAGE> 18
- 18 -
3.10 Registrable Securities Held by the Company or Its Affiliates.
In determining whether the Holders of the required amount of
Registrable Securities have concurred in any direction, amendment, supplement,
waiver or consent, Registrable Securities owned by the Company or one of its
Affiliates shall be disregarded.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
REPAP ENTERPRISES INC.
By: /s/ STEPHEN C. LARSON
-------------------------------------
Name: Stephen C. Larson
Title: President and Chief
Executive Officer
By: /s/ TERRY W. MCBRIDE
-------------------------------------
Name: Terry W. McBride
Title: Secretary
ENRON CAPITAL & TRADE RESOURCES CORP.
By: /s/ MARK K. LAY
-------------------------------------
Name: Mark K. Lay
Title: Vice President
By:
-------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 99.3
THE SECURITIES REPRESENTED BY THIS DEBENTURE AND ANY COMMON SHARES
ISSUED ON CONVERSION THEREOF MAY NOT BE RESOLD IN CANADA OR TO
PURCHASERS RESIDENT IN CANADA UNTIL 90 DAYS AFTER THE DATE OF ISSUE.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF
THE CORPORATION THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES
IN ACCORDANCE WITH RULE 903 OR 904, AS THE CASE MAY BE, OF REGULATION S
UNDER THE 1933 ACT, AS APPLICABLE TO CATEGORY 3 SECURITIES AND RULE 905
OF REGULATION S, (C) TO A QUALIFIED INSTITUTIONAL BUYER PURSUANT TO THE
EXEMPTION FROM THE 1933 ACT PROVIDED BY RULE 144A THEREUNDER, (D)
PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED
BY RULE 144 THEREUNDER, IF AVAILABLE, OR (E) PURSUANT TO A TRANSACTION
THAT DID NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR ANY APPLICABLE
UNITED STATES LAWS AND REGULATIONS GOVERNING THE OFFER AND SALE OF
SECURITIES (IN WHICH CASE THE OWNER OF SUCH DEBENTURE SHALL PROVIDE AN
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION AND THE TRUSTEE
ADDRESSED TO THE CORPORATION AND THE TRUSTEE TO THE EFFECT THAT SUCH
RESALE, PLEDGE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE 1933
ACT). THE HOLDER HEREOF FURTHER AGREES THAT HEDGING TRANSACTIONS
INVOLVING SUCH SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE
WITH THE 1933 ACT. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE
"GOOD DELIVERY" IN SETTLEMENT ON STOCK EXCHANGES IN CANADA. A NEW
CERTIFICATE, BEARING NO LEGEND, MAY BE OBTAINED FROM MONTREAL TRUST
COMPANY UPON DELIVERY OF THIS CERTIFICATE AND AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION AND THE TRUSTEE ADDRESSED TO THE
CORPORATION AND THE TRUSTEE TO THE EFFECT THAT SUCH SECURITIES MAY BE
FREELY RESOLD WITHOUT RESTRICTION UNDER THE 1933 ACT.
<PAGE> 2
No: 1 USD$45,000,000
REPAP ENTERPRISES INC.
(INCORPORATED UNDER THE LAWS OF CANADA)
6% CONVERTIBLE SUBORDINATED DEBENTURE
DUE JUNE 30, 2005
Repap Enterprises Inc. (hereinafter called the "Corporation")
for value received hereby acknowledges itself indebted and promises to pay to
ENRON CAPITAL & TRADE RESOURCES CORP., the registered holder hereof on June 30,
2005, or on such earlier date as the principal hereof becomes payable in
accordance with the provisions of the Indenture hereinafter mentioned, the sum
of FORTY FIVE MILLION DOLLARS in lawful money of the United States of America on
presentment and surrender of this Debenture at the principal office in Montreal
of the Trustee (as hereinafter defined) and, in the meantime, to pay interest
thereon from the date hereof or from the last interest payment date to which
interest has been paid or made available for payment on the Debentures,
whichever is later, at the rate of six per cent (6%) per annum in like money, at
the same places on July 15, 1998 and thereafter half-yearly on January 15 and
July 15 in each year (unless this Debenture shall have been previously redeemed
in accordance with the provisions of the Indenture); and should the Corporation
at any time make default in the payment of any principal or interest, to pay
interest on the amount in default at the same rate, in like money, at the same
places and half-yearly on the same dates. As interest becomes due on this
Debenture (except at maturity or on redemption when interest may, at the option
of the Corporation, be paid upon surrender of this Debenture), the Corporation,
either directly or through the Trustee, shall send by prepaid ordinary mail a
cheque for such interest (less any tax required to be withheld therefrom)
payable to the then registered holder of this Debenture and addressed to such
holder at his last address appearing on the central register or, in the case of
joint registered holders, payable to all such joint holders and addressed to all
of them at the last address appearing upon the central register of that one of
such joint holders whose name stands first on the central register as one of
such joint holders, unless otherwise directed in writing by such holder or by
all of such joint holders. Without prejudice to any other amounts due and
payable under the Indenture, the forwarding of such cheque shall satisfy and
discharge the liability for interest on this Debenture to the extent of the sum
represented thereby, plus the amount of any tax withheld as aforesaid and
remitted to the appropriate tax authorities, unless such cheque be not paid at
par on presentation at any of the places of payment above-mentioned.
This Debenture is one of the Debentures designated 6%
Convertible Subordinated Debentures (herein called the "Debentures") issued or
to be issued under a Trust Indenture (herein called the "Indenture") made
between the Corporation and Montreal Trust Company, as Trustee, (herein called
the "Trustee") and dated as of May 15, 1998 which Indenture and all instruments
supplemental thereto are referred to for a description of the terms and
conditions upon which the Debentures are issued and held and the rights of the
holders of the Debentures and of the Corporation and of the Trustee, all to the
same effect as if the provisions of the Indenture and all instruments
supplemental thereto were herein set forth, to all of which the holder, by
acceptance hereof, assents. The aggregate principal amount of Debentures which
may be issued under the
<PAGE> 3
-2-
Indenture is limited to USD$45,000,000 in lawful money of the United States of
America and Debentures to the said aggregate principal amount have been
authorized for immediate issue. This Debenture and all other Debentures
certified and issued under the Indenture rank pari passu. The Debentures are
direct obligations of the Corporation and are not secured by mortgage or other
charge.
This Debenture is convertible, in whole or in part, at the
option of the holder, at any time prior to the close of business on the earlier
of the Business Day immediately preceding June 30, 2005 or, if this Debenture
shall be called for redemption, the Business Day immediately preceding the date
fixed for its redemption, into fully paid and non-assessable Common Shares of
the Corporation (without adjustment for interest accrued hereon or for any
dividends on the Common Shares issuable upon conversion) at the price of
USD$0.35 per share, subject to and upon the terms provided in the Indenture,
which contains provisions for adjustment of the conversion privilege in the
events and in the manner therein specified.
The indebtedness evidenced by the Debentures is subordinate
and junior in right of payment, to the extent and in the manner provided in the
Indenture, to the prior payment of all Senior Indebtedness (as defined in the
Indenture) of the Corporation whether outstanding at the date hereof or
hereafter created, assumed, incurred or guaranteed.
The Debentures will not be redeemed before the third
anniversary of the issuance thereof. On and after that date and before maturity,
the Debentures are subject to redemption upon the terms set forth in the
Indenture, at the option of the Corporation, at the principal amount thereof,
plus unpaid interest accrued to the date fixed for redemption plus any
additional amounts to the extent required under the terms of the Indenture.
This Debenture, if for a principal amount in excess of
USD$1,000, is subject to redemption in part (being USD$1,000 or a multiple
thereof) all as more fully provided in the Indenture.
In case an Event of Default, as defined in the Indenture, has
occurred and is continuing the principal of all Debentures then outstanding
under the Indenture may be declared due and payable upon the conditions and in
the manner and with the effects provided in the Indenture.
The Indenture contains provisions for the holding of meetings
of Debentureholders and for binding all Debentureholders by resolutions passed
at such meetings by the holders of not less than a specified percentage of the
principal amount of the Debentures represented and voted or by instruments in
writing signed by the holders of not less than a specified percentage of the
principal amount of the Debentures.
Upon presentation at the principal office of the Trustee in
Montreal, Quebec, subject to the provisions of the Indenture and upon compliance
with the reasonable requirements
<PAGE> 4
-3-
of the Trustee: (a) Debentures of any denomination may be exchanged for
denominations of the same aggregate principal amount and (b) Debentures may be
transferred by the registered holder thereof or his executors, administrators
or other legal representatives or his or their attorney duly appointed in
writing but no such transfer of a Debenture shall be valid as against the
Corporation unless it has been duly noted on one of the registers maintained
for that purpose.
The Debentures represented hereby and the Common Shares
issuable upon conversion of such Debentures have not been registered under the
1933 Act or the securities laws of any state of the United States. As a result,
in addition to other restrictions on transfer hereunder or applicable law or
under the Indenture, the Debentures and the Common Shares may not be sold,
transferred, or delivered unless such securities are registered under the 1933
Act and the securities laws of any state in which the transferee holder is
resident or unless an exemption from such registration requirement is available
and the additional requirements for such transfer set forth in the Indenture and
this Debenture are satisfied.
The Common Shares issuable upon the conversion of a Debenture
(and all Common Shares issued in exchange therefor or in substitution or
transfer thereof) shall bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH
SECURITIES, AGREES FOR THE BENEFIT OF THE CORPORATION THAT
SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 903 OR 904, AS THE CASE MAY BE, OF
REGULATION S UNDER THE 1933 ACT AS APPLICABLE TO CATEGORY 3
SECURITIES AND RULE 905 OF REGULATION S, (C) TO A QUALIFIED
INSTITUTIONAL BUYER PURSUANT TO THE EXEMPTION FROM THE 1933
ACT PROVIDED BY RULE 144A THEREUNDER, (D) PURSUANT TO THE
EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY
RULE 144 THEREUNDER, IF AVAILABLE, OR (E) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT. THE
HOLDER HEREOF FURTHER AGREES THAT HEDGING TRANSACTIONS
INVOLVING SUCH SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE 1933 ACT. DELIVERY OF THIS CERTIFICATE
MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW CERTIFICATE,
BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE "GOOD
DELIVERY" MAY BE OBTAINED FROM MONTREAL TRUST COMPANY, AS
REGISTRAR AND TRANSFER AGENT FOR THE CORPORATION, UPON
DELIVERY OF THIS CERTIFICATE AND
<PAGE> 5
-4-
AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION AND THE TRANSFER
AGENT ADDRESSED TO THE CORPORATION AND THE TRANSFER AGENT TO THE EFFECT
THAT SUCH SECURITIES MAY BE FREELY RESOLD WITHOUT RESTRICTION UNDER
THE 1933 ACT."
and all certificates representing Common Shares issued in exchange therefor or
in substitution thereof will bear the same legend; provided, that the legend may
be removed upon delivery to the transfer agent of an opinion of counsel
satisfactory to the Corporation and the transfer agent to the effect that such
Common Shares may be freely resold without restriction under the 1933 Act.
<PAGE> 6
-5-
This Debenture shall not become obligatory for any purpose
until it shall have been certified by or on behalf of the Trustee for the time
being under the Indenture.
IN WITNESS WHEREOF Repap Enterprises Inc. has caused this
Debenture to be signed by its duly authorized officers as of May 15, 1998.
REPAP ENTERPRISES INC.
By: /s/ STEPHEN C. LARSON
---------------------------------
By: /s/ TERRY W. MCBRIDE
---------------------------------
(FORM OF TRUSTEE'S CERTIFICATE)
TRUSTEE'S CERTIFICATE
This Debenture is one of the 6% Convertible Subordinated
Debentures referred to in the Indenture within mentioned.
MONTREAL TRUST COMPANY, as Trustee
By: /s/ GUY L'ESPERANCE
----------------------------------
Authorized Officer
<PAGE> 7
-6-
REGISTRATION PANEL
(FOR USE OF TRUSTEE OR REGISTRAR)
<TABLE>
<CAPTION>
===============================================================================================
Place of Registry and
Date of Registry Name of Registered Owner Signature of Registrar
===============================================================================================
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
===============================================================================================
</TABLE>
Note to Debentureholders: In order to transfer this Debenture it must be
delivered to Montreal Trust Company. Certain transfers may also be subject to
additional restrictions as set forth in the Debenture, the Indenture or under
applicable law.
<PAGE> 8
-7-
(FORM OF NOTICE OF ELECTION)
NOTICE OF ELECTION TO CONVERT
Principal amount to be converted
(in multiples of USD$1,000) ........USD$
-------------
The undersigned holder of the within Debenture elects to
convert the above noted principal amount of such Debenture into Common Shares of
Repap Enterprises Inc. in accordance with the provisions of the within mentioned
Indenture and hereby directs that the certificate for such shares be registered
as follows:
================================================================================
Number of
Name in Full Address Shares
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
The undersigned hereby represents and warrants to the
Corporation as follows (check one):
[] (i) the undersigned is not a U.S. person and the Debenture is not being
converted within the United States or on behalf of or for the account
or benefit of a U.S. person;
[] (ii) the undersigned is a U.S. person or the Debenture is being converted
within the United States or on behalf of or for the account or benefit
of a U.S. person and the undersigned (a) is the original holder of the
Debenture and executed a letter regarding non-distribution of the
Debentures in the United States in connection with the initial
subscription thereof, a copy of which letter is being delivered
concurrently herewith or (b) is a valid transferee and has previously
delivered to the Corporation and to the Trustee, or is delivering
concurrently herewith, a purchaser's letter containing
representations, warranties and agreements substantially similar to
those contained in the original U.S. subscription agreement; or
[] (iii) the undersigned is providing a written opinion of counsel or other
evidence satisfactory to the Corporation and the Trustee that the
acquisition of Common Shares by such person is in compliance with
applicable United States federal and state securities laws.
<PAGE> 9
-8-
"United States" and "U.S. person" are as defined by Regulation
S under the United States Securities Act of 1933, as amended.
Dated:
-----------------
Guarantee of Signature:
----------------------------------
(Print name of Debentureholder)
- -------------------------------- ----------------------------------
(Signature of Debentureholder)
If shares are to be issued in the name of a person other than the
Debentureholder, the signature of the Debentureholder must be guaranteed by a
Canadian chartered bank or trust company or a brokerage firm which is a member
of a recognized stock exchange in Canada.
<PAGE> 1
EXHIBIT 99.4
REPAP ENTERPRISES INC.
- and -
MONTREAL TRUST COMPANY
- --------------------------------------------------------------------------------
TRUST INDENTURE
6% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2005
- --------------------------------------------------------------------------------
Dated as of May 15, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
INTERPRETATION
<S> <C> <C>
1.1 Definitions.....................................................................................2
1.2 Meaning of "outstanding" for Certain Purposes ................................................11
1.3 Interpretation not Affected by Headings, etc. ................................................12
1.4 Business Day .................................................................................12
1.5 Applicable Law ...............................................................................12
ARTICLE 2
THE DEBENTURES
2.1 Terms and Forms of Debentures..................................................................13
2.2 Issuance of Debentures .......................................................................13
2.3 Debentures to Rank Pari Passu ................................................................14
2.4 Signing of Debentures ........................................................................14
2.5 Certification by Trustee.......................................................................14
2.6 Temporary Debentures...........................................................................14
2.7 Replacement of Debentures......................................................................15
2.8 Computation of Interest........................................................................15
2.9 Repayment Net of Withholding Imposts...........................................................16
ARTICLE 3
REGISTRATION, TRANSFER, EXCHANGE AND OWNERSHIP
3.1 Registers ....................................................................................17
3.2 Transfers of Debentures ......................................................................18
3.3 Exchange of Debentures.........................................................................19
3.4 Charges for Transfer and Exchange ............................................................19
3.5 Inspection of Registers and Lists of Holders...................................................19
3.6 Closing of Registers .........................................................................20
3.7 Ownership of Debentures........................................................................20
3.8 Legend.........................................................................................21
ARTICLE 4
REDEMPTION AND PURCHASE
4.1 Optional Redemption............................................................................21
4.2 Conditions of Redemption.......................................................................22
4.3 Places of Payment ............................................................................22
4.4 Partial Redemption.............................................................................22
4.5 Notice of Redemption .........................................................................22
</TABLE>
<PAGE> 3
ii
<TABLE>
<S> <C> <C>
4.6 Payment of Redemption Price ..................................................................23
4.7 Purchase of Debentures .......................................................................23
4.8 Cancellation of Retired Debentures ...........................................................24
4.9 Special Prepayment for Adverse Prepayment Event................................................24
ARTICLE 5
CONVERSION
5.1 Conversion Privilege and Conversion Price......................................................25
5.2 Conversion Procedure...........................................................................25
5.3 No Fractional Shares .........................................................................27
5.4 Legend on Common Shares........................................................................27
5.5 Adjustment of Conversion Privilege.............................................................28
5.6 Adjustment Rules .............................................................................31
5.7 Certificate as to Adjustment .................................................................32
5.8 Notice to Debentureholders ...................................................................32
5.9 Termination and Revival of Right to Convert....................................................33
5.10 Cancellation of Debentures ...................................................................33
5.11 Reservation of Shares ........................................................................33
5.12 Governmental Requirements ....................................................................34
ARTICLE 6
SUBORDINATION
6.1 Agreement to Subordinate .....................................................................34
6.2 Distribution on Dissolution, Winding-Up, Liquidation or Reorganization.........................34
6.3 Subrogation of Debentures ....................................................................36
6.4 Rights of Debentureholders Reserved ...........................................................36
6.5 Authorization to Effect Subordination .........................................................37
ARTICLE 7
COVENANTS OF THE CORPORATION
7.1 General Covenants ............................................................................37
7.2 Trustee's Remuneration, Expenses and Indemnity ...............................................39
7.3 Not to Accumulate Interest ...................................................................39
7.4 Restrictive Covenant .........................................................................40
7.5 Reporting Issuer Status and Stock Exchange Listing.............................................40
7.6 Financial Statements...........................................................................40
7.7 Compliance Certificate.........................................................................40
7.8 Performance of Covenants by Trustee............................................................41
7.9 Indemnity of Corporation.......................................................................41
7.10 Insurance......................................................................................42
7.11 Shareholder Materials..........................................................................42
</TABLE>
<PAGE> 4
iii
<TABLE>
<S> <C> <C>
7.12 Other Information..............................................................................42
7.13 Restricted Payments ..........................................................................43
7.14 Restrictions on Additional Debt................................................................43
7.15 Management Agreement...........................................................................43
ARTICLE 8
DEFAULT AND ENFORCEMENT
8.1 Events of Default ............................................................................43
8.2 Acceleration on Default ......................................................................46
8.3 Notice of Events of Default ..................................................................46
8.4 Waiver of Default ............................................................................46
8.5 Proceedings by Trustee.........................................................................47
8.6 Suits by Debentureholders ....................................................................48
8.7 Application of Moneys Received by Trustee ....................................................48
8.8 Distribution of Proceeds .....................................................................49
8.9 Curing Certain Events of Default...............................................................50
8.10 Currency Conversion............................................................................50
ARTICLE 9
SATISFACTION AND DISCHARGE
9.1 Cancellation and Destruction .................................................................50
9.2 Non-Presentment of Debentures ................................................................51
9.3 Repayment of Unclaimed Moneys to Corporation .................................................51
9.4 Release from Covenants .......................................................................51
ARTICLE 10
SUCCESSOR CORPORATIONS
10.1 Certain Requirements in Respect of Merger, etc. ..............................................52
10.2 Vesting of Powers in Successor ...............................................................53
ARTICLE 11
MEETINGS OF DEBENTUREHOLDERS
11.1 Right to Convene Meeting .....................................................................53
11.2 Notice .......................................................................................53
11.3 Chairman .....................................................................................54
11.4 Quorum ......................................................................................54
11.5 Power to Adjourn ............................................................................54
11.6 Show of Hands ...............................................................................55
11.7 Poll ........................................................................................55
11.8 Voting ......................................................................................55
11.9 Regulations ..................................................................................55
</TABLE>
<PAGE> 5
iv
<TABLE>
<S> <C> <C>
11.10 Corporation and Trustee may be Represented ...................................................56
11.11 Powers Exercisable by Extraordinary Resolution ...............................................56
11.12 Meaning of "Extraordinary Resolution"..........................................................58
11.13 Powers Cumulative ............................................................................59
11.14 Minutes ......................................................................................59
11.15 Instruments in Writing .......................................................................59
11.16 Binding Effect of Resolutions ................................................................59
ARTICLE 12
SUPPLEMENTAL INDENTURES
12.1 Execution of Supplemental Indentures ..........................................................60
ARTICLE 13
CONCERNING THE TRUSTEE
13.1 Trust Indenture Legislation....................................................................61
13.2 Rights and Duties of Trustee...................................................................61
13.3 Evidence, Experts and Advisers.................................................................62
13.4 Documents, Moneys, etc., Held by Trustee.......................................................63
13.5 Action by Trustee to Protect Interests .......................................................64
13.6 Trustee not Required to Give Security .......................................................64
13.7 Protection of Trustee ........................................................................64
13.8 Replacement of Trustee .......................................................................65
13.9 Conflict of Interest...........................................................................66
13.10 Acceptance of Trust ..........................................................................66
ARTICLE 14
NOTICES
14.1 Notice to Debentureholders ...................................................................66
14.2 Notice to Trustee..............................................................................67
14.3 Notice to Corporation ........................................................................67
14.4 Mail Service Interruption ....................................................................67
</TABLE>
<PAGE> 6
v
<TABLE>
<CAPTION>
ARTICLE 15
FORM OF DEBENTURES
<S> <C> <C>
15.1 Text of Debentures ...........................................................................68
ARTICLE 16
EXECUTION
16.1 Counterparts and Formal Date .................................................................77
</TABLE>
<PAGE> 7
THIS TRUST INDENTURE made as of May 15, 1998.
B E T W E E N:
REPAP ENTERPRISES INC., incorporated under the laws of Canada,
(herein called the "Corporation")
- and -
MONTREAL TRUST COMPANY, a trust company incorporated under the
laws of Canada, having an office in the City of Montreal in the
Province of Quebec (herein called the "Trustee")
PREAMBLE:
1. The Corporation deems it necessary for its corporate purposes to
create and issue Debentures to be constituted and issued in the manner
hereinafter appearing;
2. The Corporation under the laws relating thereto is duly
authorized to create and issue the Debentures to be issued as herein provided;
3. All things necessary have been done and performed to make the
Debentures, when certified by the Trustee and issued as in this Trust Indenture
provided, valid, binding and legal obligations of the Corporation with the
benefits and subject to the terms of this Trust Indenture; and
4. The foregoing recitals and any statements of fact in this Trust
Indenture or in the Debentures (except the representation contained in Section
13.9(1) and in the certificate of the Trustee on the Debentures) are and shall
be deemed to be made only by the Corporation;
AGREEMENT:
It is hereby agreed and declared as follows:
<PAGE> 8
-2-
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Trust Indenture, unless there is something in the
subject-matter or context inconsistent therewith:
"ACCREDITED INVESTOR" has the meaning set forth in Regulation D under the 1933
Act;
"ADMINISTRATIVE BODY" means any domestic or foreign, national, federal,
provincial, state, municipal or other local government or regulatory body and
any division, agency, ministry, commission, board or authority or any
quasi-governmental or private body exercising any statutory, regulatory,
expropriation or taxing authority under the authority of any of the foregoing,
and any domestic, foreign or international judicial, quasi-judicial, arbitration
or administrative court, tribunal, commission, board or panel acting under the
authority of any of the foregoing;
"AFFILIATE" means any Person which, directly or indirectly, controls or is
controlled by or under common control with the Corporation and, for purposes of
this definition, "control" means the beneficial ownership, directly or
indirectly, of more than 50% of the Voting Shares of the subject corporation and
"controlling" and controlled" have corresponding meanings;
"AMALGAMATION" means the vertical short form amalgamation of the Corporation and
Repap New Brunswick Inc., a wholly-owned subsidiary of the Corporation, in
compliance with Section 184 of the Canada Business Corporations Act;
"APPLICABLE ENVIRONMENTAL LAWS" means shall mean those Applicable Laws which
pertain to the environment or the release of Hazardous Materials into the
environment, and includes any condition or requirement contained in a permit,
licence, approval, consent or other document issued pursuant to such laws.
"ASSETS OF THE CORPORATION" means any assets of the Corporation of any kind or
character, whether in cash, property, securities or otherwise;
"BUSINESS DAY" means a day which is not a Saturday, Sunday or statutory or civic
holiday at the principal office of the Trustee in Montreal, Quebec;
"CAPITAL REORGANIZATION" has the meaning attributed thereto in Section 5.5;
"CAPITALIZED LEASE OBLIGATION" shall mean, with respect to any Person, any
rental obligation which, under GAAP, would be required to be capitalized on the
books of such Person, taken at the amount thereof accounted for as indebtedness
(net of interest expense) in accordance with such principles, and may include
Sale-Leaseback obligations;
<PAGE> 9
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"CASH DIVIDENDS IN THE ORDINARY COURSE", with respect to shares of any class,
means cash dividends declared on the shares of such class in any financial year
of the Corporation to the extent that such cash dividends, in the aggregate, do
not exceed 100% of the net income (or, if the Corporation then has any
Subsidiary, the Consolidated Net Income), before extraordinary items, of the
Corporation for its immediately preceding financial year;
"CERTIFICATE OF THE CORPORATION", "ORDER OF THE CORPORATION" and "REQUEST OF THE
CORPORATION" means, respectively, a written certificate, order and request
signed in the name of the Corporation by its Chief Executive Officer, President
or a Vice-President or a Director and, in addition, by its secretary or
assistant secretary or controller or another Director, and may consist of one or
more instruments so executed;
"CERTIFIED RESOLUTION" means a copy of a resolution certified by the secretary
or assistant secretary of the Corporation to have been duly passed by the
Directors and to be in full force and effect on the date of such certification;
"CHANGE OF CONTROL" means if any Person acquires, directly or indirectly, alone
or in concert with other Persons, over a period of time or at any one time,
shares in the capital of the Corporation aggregating in excess of 35% of all of
the then issued and outstanding Voting Shares of the Corporation;
"CLOSE OF BUSINESS" means the normal closing time of the principal office in
Montreal, Quebec of the Trustee;
"COMMON SHARES" means Common Shares in the capital of the Corporation as such
shares exist at the Close of Business on the date of execution and delivery of
this Trust Indenture or, upon any subdivision or consolidation of the Common
Shares, the shares resulting therefrom or, upon the occurrence of a Capital
Reorganization, the shares and/or other securities and/or property substituted
for the Common Shares or into which Common Shares are reclassified or changed;
"COMPLIANCE CERTIFICATE" means the certificate of the Corporation substantially
in the form of Schedule B to the Indenture;
"CONTAMINANTS" means those substances, pollutants, wastes and special wastes
which are defined as contaminants, hazardous, toxic, or a threat to public
health or to the Environment under any applicable Environmental Laws, including,
without limitation, any radioactive materials, urea formaldehyde foam
insulation, asbestos or polychlorinated biphenyls (PCB's);
"CONSOLIDATED NET INCOME" means, for any period, the net income or deficit of
the Corporation and its Subsidiaries for such period determined in accordance
with Canadian generally accepted accounting principles on a consolidated basis;
"CONVERSION DATE" has the meaning attributed thereto in Section 5.2;
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"CONVERSION PRICE" means the price per Common Share at which the Debentures
shall from time to time be convertible into Common Shares in accordance with the
provisions of Article Five;
"CONVERSION PRIVILEGE" means the right to convert any Debenture into Common
Shares as provided in Article Five;
"CORPORATION" means Repap Enterprises Inc. and also every Successor Corporation
which shall have complied with the provisions of Article Ten;
"CORPORATION'S AUDITORS" or "AUDITORS OF THE CORPORATION" means an independent
firm of chartered accountants duly appointed as auditors of the Corporation;
"COUNSEL" means a barrister or solicitor or firm of barristers and solicitors
retained by the Trustee or retained by the Corporation and acceptable to the
Trustee;
"CREDIT RATING" means the credit rating announced by a Rating Agency of the long
term senior secured indebtedness of Repap New Brunswick Inc. prior to the
Amalgamation and of the Corporation following the Amalgamation;
"CURRENT MARKET PRICE" of the Common Shares on any date means a price per share
equal to the Weighted Average Price at which the Common Shares have traded on
The Toronto Stock Exchange or, if the Common Shares are not then listed on The
Toronto Stock Exchange, on such other stock exchange on which such shares are
listed as may be selected for such purpose by the Directors, during the period
of 10 consecutive Trading Days commencing 13 Trading Days before such date;
"DEBENTUREHOLDERS" or "HOLDERS" means the several Persons for the time being
entered in the registers hereinafter mentioned as holders of Debentures;
"DEBENTURES" means the Debentures of the Corporation issued and certified
hereunder and outstanding from time to time;
"DEBENTUREHOLDERS REQUEST" means an instrument signed in one or more
counterparts by the holders of not less than 25% in principal amount of the
Debentures then outstanding, requesting the Trustee to take some action or
proceeding specified therein;
"DEBT" shall mean, with respect to any Person, without duplication:
(i) all Indebtedness for borrowed money of such Person (including, for
certainty, reimbursement obligations in respect of letters of
credit and bankers' acceptances, obligations of such Person
evidenced by a bond, debenture or similar instrument, and
obligations of such Person in relation to purchase money
agreements, deferred purchase price payments, production payment
transactions, conditional sales agreements, or title retention
agreements),
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(ii) all Capitalized Lease Obligations of such Person, and all
Indebtedness of such Person under Sale-Leasebacks,
(iii) all Indebtedness for borrowed money secured by a Lien on any
property or asset owned or held by such Person, whether or not the
obligations secured thereby shall have been assumed,
(iv) all redemption obligations of such Person in respect of Redeemable
Preferred Shares,
(v) Swaps of such Person, and
(vi) all Guarantees of such Person with respect to obligations of a
type described in the preceding clauses (i) to (v) inclusive;
"DIRECTOR" means a director of the Corporation for the time being, and reference
without more to action by the Directors means action by the directors of the
Corporation as a board or, whenever duly empowered, action by an executive
committee of the board;
"DISTRIBUTION" means any distribution, division or application, partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
any part of the Assets of the Corporation upon or in connection with any
dissolution, winding-up, liquidation, arrangement or reorganization of the
Corporation or its property, whether in bankruptcy, insolvency or receivership
proceedings or at execution sale or upon an assignment for the benefit of
creditors or any other marshalling of the assets and liabilities of the
Corporation or otherwise, other than a dissolution, winding-up, liquidation,
arrangement or reorganization of the Corporation with a view towards its
consolidation or merger with another corporation or the sale, transfer or lease
of its property as an entirety or substantially as an entirety, to another
corporation upon the terms and conditions provided in Article Ten, if such other
corporation shall, as part of such consolidation, merger, transfer, sale or
lease, comply with the provisions of Article Ten;
"$" and "USD$" means United States dollars, unless otherwise specified;
"ENVIRONMENT" means all components of the earth, including, without limitation,
all layers of the atmosphere, air, land (including, without limitation, all
underground spaces and cavities and all lands submerged under water), soil,
water (including, without limitation, surface and underground water), organic
and inorganic matter and living organisms, and the interacting natural systems
that include the components referred to in this definition;
"ENVIRONMENTAL LAWS" means any Law relating, in whole or in part, to the
protection or enhancement of the Environment, including, without limitation,
occupational safety, product liability, public health, public safety and
transportation or handling of dangerous goods;
"EVENT OF DEFAULT" has the meaning attributed thereto in Section 8.1;
<PAGE> 12
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"EXTRAORDINARY RESOLUTION" has the meaning attributed thereto in Article 11;
"GAAP" shall mean generally accepted accounting principles in Canada from time
to time approved by the Canadian Institute of Chartered Accountants, or any
successor institute, applicable on the date on which the applicable
determination or calculation is made or required to be made;
"GOVERNMENTAL/JUDICIAL BODY" means:
(a) any government, parliament or legislature or any regulatory or
administrative authority, agency, commission, tribunal or board of any
government and any other law, regulation or rule making entity having
jurisdiction in the relevant circumstances, or any Person acting under the
authority of any of the foregoing, and
(b) any judicial, administrative or arbitral court, authority, tribunal or
commission having jurisdiction in the relevant circumstances.
"GUARANTEE" shall mean, with respect to any Person, any direct or indirect
liability, contingent or otherwise, of such Person with respect to any
indebtedness, letter of credit, lease, dividend or other obligation of another,
including any such obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise directly or indirectly liable, including any such obligation
in effect guaranteed by such Person through any agreement (contingent or
otherwise) to purchase, repurchase or otherwise acquire such obligation or any
security therefor, or to provide funds for the payment or discharge of such
obligation (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), in any such case if the purpose or intent of such
agreement is to provide assurance that such obligation will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such obligation will be protected against loss in respect
thereof. The amount of any Guarantee shall be equal to the outstanding principal
amount of the obligation guaranteed or such lesser amount to which the maximum
exposure of the guarantor shall have been specifically limited;
"HAZARDOUS MATERIALS" means shall mean any substance that:
(a) when released to the natural environment is likely to cause, immediately or
at some future time, material harm or degradation to the natural
environment or any risk to human health and without restricting the
generality of the foregoing, includes any pollutant, contaminant, waste or
hazardous waste, or any "dangerous goods", "hazardous chemical", "hazardous
substance" or "hazardous waste" as may be defined by Applicable
Environmental Law for the protection of the natural environment or human
health, or
(b) exhibits characteristics of flammability, corrosivity, reactivity or
toxicity.
<PAGE> 13
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"HOLDERS OF SENIOR INDEBTEDNESS" means the holders of Senior Indebtedness or
their representatives or, in circumstances where the instruments evidencing any
Senior Indebtedness were issued under a trust deed or trust indenture, the
trustee under such trust deed or trust indenture;
"INDEBTEDNESS" shall mean, with respect to any Person, without duplication:
(i) all items (excluding items of contingency reserves or of reserves
for deferred income taxes, investment tax credits and
non-repayable grants) which in accordance with GAAP would be
included in determining total liabilities as shown on the
liability side of a balance sheet of such Person as of the date on
which Indebtedness is to be determined,
(ii) all indebtedness, obligations and liabilities secured by any Lien
on any property or asset owned or held by such Person subject
thereto, whether or not the indebtedness secured thereby shall
have been assumed, and
(iii) all indebtedness, obligations and liabilities of others with
respect to which such Person has become liable by way of a
Guarantee;
"INVESTMENT GRADE RATING" means a rating of BBB- or higher by S&P and Baa3 or
higher by Moody's or the equivalent of such ratings by S&P or Moody's or by any
other Rating Agency selected as provided in the definition of Rating Agency.
"LIEN" shall mean any mortgage, pledge, priority, security interest,
encumbrance, lien (statutory or otherwise) or charge of any kind, including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any Sale-Leaseback or capitalized lease;
"INDENTURE LEGISLATION" has the meaning attributed thereto in Section 13.1;
"LAWS" or "LAW" includes all constitutions, treaties, laws, statutes, codes,
ordinances, orders, decrees, rules, regulations and municipal by-laws, whether
domestic, foreign or international, any judgments, orders, writs, injunctions,
decisions, rulings, decrees and awards of any Administrative Body, and any
policies, voluntary restraints, practices or guidelines of any Administrative
Body, and including, without limitation, any principles of common law and
equity;
"MANAGEMENT AGREEMENT" means the Management Services and Cost Allocation
Agreement between the Corporation and Repap New Brunswick Inc., dated April 15,
1995, including all amendments and restatements thereof;
"MATERIAL ADVERSE EFFECT" means, prior to the Amalgamation, an effect on the
financial condition of the Corporation, or its property, business, operations or
liabilities, which in each case, could reasonably be expected to have a material
adverse effect on the Corporation's ability to perform
<PAGE> 14
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its obligations under the Indenture or the Debentures, and following the
Amalgamation, an effect on the financial condition of the Corporation and its
Subsidiaries taken as a whole, or the property, business, operations or
liabilities of the Corporation and its Subsidiaries taken as a whole, which in
each case, could reasonably be expected to have a material adverse effect on the
Corporation's ability to perform its obligations under the Indenture or the
Debentures;
"PERSON" means an individual, a corporation, a partnership, a trustee or an
unincorporated organization, and pronouns have a similarly extended meaning;
"PREPAYMENT EVENT" means with respect to the Corporation, the Indenture or the
Debentures, the occurrence, after the date of this Indenture, of any amendments
to, or change in the laws, regulations or published tax bulletins, circulars or
rulings of Canada or any political subdivision or taxing authority thereof,
including any change in the administrative practices of any relevant taxing
authority, affecting taxation;
"RATING AGENCY" means Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("Moody's") or if S&P or Moody's or both shall not issue
a Credit Rating, a nationally recognized statistical rating agency or agencies,
as the case may be, selected by the Corporation and the holders, each acting
reasonably, which shall be substituted for S&P or Moody's or both, as the case
may be;
"RECOGNIZED STOCK EXCHANGE" includes the Toronto Stock Exchange, Montreal
Exchange, New York Stock Exchange, American Stock Exchange and The Nasdaq Stock
Market;
"REDEEMABLE PREFERRED SHARES" shall mean, in respect of any corporation, shares
of the capital stock of such corporation that are entitled to preference or
priority over any other shares of the capital stock of such corporation in
respect of payment of dividends or distribution of assets upon liquidation, and
which are:
(i) redeemable, payable or required to be purchased or otherwise
retired or extinguished, or convertible into Debt of such
Corporation (A) at a fixed or determinable date, whether by
operation of sinking fund or otherwise, (B) at the option of any
Person other than such Corporation, or (C) upon the occurrence of
a condition not solely within the control of such Corporation, or
(ii) convertible into other Redeemable Preferred Shares;
"REDEMPTION DATE", with respect to any Debentures, means the date specified in a
notice of redemption as the date on which such Debentures will be redeemed by
the Corporation;
"REGULATION S" means Regulation S under the 1933 Act;
"REDEMPTION PRICE" has the meaning attributed thereto in Section 4.1;
<PAGE> 15
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"RELEASE" includes releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing or dumping;
"RESTRICTED PAYMENT", with respect to the Corporation, means that the
Corporation has declared or paid any dividend or returned any capital to its
stockholders or partners or authorized or made any other payment or distribution
of property or cash to its shareholders or equity holders as such, or redeemed,
retired, purchased, or otherwise acquired, directly or indirectly, for
consideration, any shares of any class of its capital stock or any of its other
equity interests (or any options, warrants or rights issued by the Corporation
with respect to its capital stock or other equity interests), or set aside any
funds for any of the foregoing purposes, or shall have permitted any of its
Subsidiaries to purchase or otherwise acquire for a consideration any shares of
any class of the capital stock or any other equity interest of the Corporation
(or any options, warrants or rights issued by the Corporation with respect to
its capital stock or other equity interests);
"RIGHTS OFFERING" has the meaning attributed thereto in Section 5.5;
"SALE-LEASEBACK" shall mean an arrangement under which title to any property or
an interest transferred by or on the direction of a person ("X") to another
person which leases or otherwise grants the right to use such property, asset or
interest to X (or nominee of X), whether or not in connection therewith X also
acquires a right or is subject to an obligation to acquire the property, asset
or interest, and regardless of the accounting treatment of such arrangement;
"SENIOR INDEBTEDNESS" means the principal of and redemption premium (if any) and
interest on:
(i) indebtedness of the Corporation (other than indebtedness evidenced
by the Debentures), whether outstanding on the date of this
Indenture or thereafter created, incurred, assumed or guaranteed
by the Corporation, which is for money borrowed by the Corporation
or for money borrowed by others for payment of which the Corporation
is responsible or liable;
(ii) indebtedness of the Corporation, whether outstanding on the date
of this Indenture or thereafter created, incurred, assumed or
guaranteed by the Corporation, in connection with the acquisition
by the Corporation or by others of any business property or other
assets; and
(iii) renewals, extensions or refundings of any indebtedness referred to
in clauses (i) or (ii) of this definition;
unless, in any case, it is provided by the terms of the instrument creating or
evidencing such indebtedness or pursuant to which such indebtedness is
outstanding that such indebtedness is not prior in right of payment to the
Debentures but ranks pari passu with or is subordinated in right of payment to
the Debentures;
"SHARE REORGANIZATION" has the meaning attributed thereto in Section 5.5;
<PAGE> 16
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"SPECIAL DISTRIBUTION" has the meaning attributed thereto in Section 5.5;
"SUBORDINATED INDEBTEDNESS" has the meaning attributed thereto in Section 6.1;
"SUBSIDIARY", in relation to any body corporate, means any corporation of which
Voting Shares carrying more than 50% of the voting rights attached to all
outstanding Voting Shares are owned, directly or indirectly, by or for such body
corporate and/or by or for any corporation in like relation to such body
corporate, and includes any corporation in like relation to a Subsidiary;
"SUCCESSOR CORPORATION" has the meaning attributed thereto in Section 10.1;
"SWAPS" shall mean, with respect to any Person, payment obligations with respect
to interest rate swaps, currency swaps and similar obligations obligating such
Person to make payments, whether periodically or upon the happening of a
contingency. For the purposes of this Indenture, the amount of the obligation
under any Swap shall be the amount determined in respect thereof as of the end
of the then most recently ended fiscal quarter of such Person, based on the
assumption that such Swap had terminated at the end of such fiscal quarter, and
in making such determination, if any agreement relating to such Swap provides
for the netting of amounts payable by and to such Person thereunder or if any
such agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligation shall be the net
amount so determined;
"TRADING DAY", with respect to any stock exchange, means a day on which such
stock exchange is open for business;
"TRUST INDENTURE", "INDENTURE", "HEREIN", "HEREOF" and similar expressions means
or refer to this Indenture and any indenture, deed or instrument supplemental or
ancillary hereto, and the expressions "Article", "Section" and "clause" followed
by a number mean and refer to the specified Article, Section or clause of this
Indenture;
"TRUSTEE" means Montreal Trust Company and its successors for the time being in
the trusts hereby created;
"U.S. PERSON" AND "UNITED STATES" have the meanings ascribed thereto in
Regulation S;
"VOTING SHARES" means shares of capital stock of any class of any body corporate
carrying voting rights under all circumstances, provided, however, that shares
which only carry the right to vote conditionally on the happening of an event
shall not be considered Voting Shares nor shall any shares be deemed to cease to
be Voting Shares solely by reason of a right to vote accruing to shares of
another class by reason of the happening of any such event;
"WEIGHTED AVERAGE PRICE", with respect to any specified shares, means the number
resulting from the division of the aggregate sale price of all such shares sold
or traded on a specified stock exchange during a specified period by the total
number of such shares sold or traded during such
<PAGE> 17
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period; provided however, that if, at any time after the first day of such
period, such shares commence trading on such stock exchange on a basis which
gives effect to a subdivision or consolidation of such shares, the computation
of Weighted Average Price shall give effect to such subdivision or consolidation
throughout the whole such period; and
"1933 ACT" means the United States Securities Act of 1933, as amended.
Words importing the singular number include the plural and vice versa and
words importing gender include the neuter, feminine and masculine genders; and
Any reference in this Indenture to any Act or Section thereof shall be
deemed to be a reference to such Act or Section as amended or re-enacted from
time to time.
1.2 MEANING OF "OUTSTANDING" FOR CERTAIN PURPOSES
Every Debenture certified and delivered by the Trustee hereunder shall be
deemed to be outstanding until it shall be cancelled or delivered to the Trustee
for cancellation or moneys for the payment thereof shall be set aside pursuant
to Article Nine, provided, however, that:
(1) Debentures which have been partially redeemed shall be deemed to be
outstanding to the extent of the unredeemed part of the principal
amount thereof;
(2) if a new Debenture has been issued in substitution for a Debenture
which has been mutilated, lost, stolen or destroyed, only one of them
shall be counted for the purpose of determining the aggregate
principal amount of the Debentures outstanding; and
(3) for the purpose of any provision of this Indenture entitling holders
of Debentures to vote, sign consents, requests or other instruments or
take any other action under this Indenture, Debentures owned legally
or equitably by the Corporation or any Affiliate shall be disregarded
except that:
(a) for the purpose of determining whether the Trustee shall be
protected in relying on any such vote, consent, request or other
instrument or other action, only the Debentures which the Trustee
knows are so owned shall be so disregarded; and
(b) Debentures so owned which have been pledged in good faith other
than to the Corporation or any Affiliate shall not be so
disregarded if the pledgee shall establish to the satisfaction of
the Trustee the pledgee's right to vote such Debentures in his
discretion free from the control of the Corporation or such
Affiliate.
<PAGE> 18
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1.3 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this Indenture into Articles and Sections, the provision of
a table of contents and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation hereof.
1.4 BUSINESS DAY
Whenever any provision of this Indenture requires payment or performance to
be made on a day which is not a Business Day, such payment or performance shall
be made on the next succeeding day which is a Business Day.
1.5 APPLICABLE LAW
This Indenture and the Debentures shall be governed by and construed in
accordance with the laws of the Province of Ontario and the federal laws of
Canada applicable therein and shall be treated in all respects as an Ontario
contract.
ARTICLE 2
THE DEBENTURES
2.1 TERMS AND FORMS OF DEBENTURES
(1) The aggregate principal amount of Debentures which may be issued
hereunder is limited to USD$45,000,000.
(2) The Debentures shall be designated "6% Convertible Subordinated
Debentures Due 2005"; shall be dated as of their respective dates of
issue; shall bear interest from such dates (subject to Section 2.8) at
the rate of 6% per annum payable (after as well as before maturity and
after as well as before default with interest on overdue interest at
the same rate) half-yearly on January 15 and July 15 in each year,
commencing July 15, 1998; and shall mature on June 30, 2005.
(3) The principal of the Debentures will be made payable in lawful money
of the United States of America against surrender thereof by the
registered holder of the Debenture at the principal office in
Montreal, Quebec of the Trustee.
(4) Debentures shall be issuable as fully registered Debentures in
denominations of USD$1,000 and integral multiples thereof; shall be
substantially in the form set out in Article 15; and shall bear such
distinguishing letters and numbers as the Trustee may approve.
<PAGE> 19
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2.2 ISSUANCE OF DEBENTURES
Debentures in the aggregate principal amount specified in an Order of the
Corporation referred to below may forthwith and from time to time be executed by
the Corporation and certified by or on behalf of the Trustee and delivered by it
upon receipt of the following:
(1) an Order of the Corporation for the certification and delivery of such
Debentures, specifying the principal amount of the Debentures so to be
certified;
(2) an opinion of Counsel to the effect that all legal requirements in
connection with the issue of such Debentures have been complied with;
and
(3) such certificate as the Corporation, pursuant to Section 13.1 is
required to furnish to the Trustee in connection with the issue,
certification and delivery of the Debentures.
2.3 DEBENTURES TO RANK PARI PASSU
All Debentures shall rank pari passu without discrimination, preference or
priority.
2.4 SIGNING OF DEBENTURES
The Debentures shall be signed by the President or the Chief Financial
Officer or any Vice President of the Corporation. The signatures of any such
officers may be mechanically reproduced in facsimile and Debentures bearing such
facsimile signatures shall be binding upon the Corporation as if they had been
manually signed by such officers. Notwithstanding that any of the individuals
whose manual or facsimile signature appears on any Debentures as one of such
officers may no longer hold office at the date of this Indenture or at the date
of such Debenture or at the date of certification and delivery thereof, any
Debenture signed as aforesaid shall be valid and binding upon the Corporation
and entitled to the benefit of this Indenture.
2.5 CERTIFICATION BY TRUSTEE
(1) No Debenture shall be issued or, if issued, shall be obligatory or
entitle the holder to the benefit hereof until it has been certified
by or on behalf of the Trustee substantially in the form of the
certificate set out in Article 15 or in some other form approved by
the Trustee. Such certification by the Trustee upon any Debenture
shall be conclusive evidence as against the Corporation that the
<PAGE> 20
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Debenture so certified has been duly issued hereunder and is a valid
obligation of the Corporation and that the holder is entitled to the
benefit hereof.
(2) The certificate of the Trustee on Debentures shall not be construed as
a representation or warranty by the Trustee as to the validity of this
Indenture or of the Debentures (except the due certification thereof)
and the Trustee shall in no respect be liable or answerable for the
use made of the Debentures or any of them or of the proceeds thereof.
2.6 TEMPORARY DEBENTURES
(1) Pending the preparation of definitive Debentures, the Corporation may
execute, and upon an Order of the Corporation the Trustee shall
deliver, temporary Debentures which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any denomination,
substantially of the tenor of the definitive Debentures in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers of the Corporation
executing such Debentures may determine, as evidenced by their
execution of such Debentures.
(2) If temporary Debentures are issued, the Corporation will cause
definitive Debentures to be prepared without unreasonable delay. After
the preparation of definitive Debentures, the temporary Debentures
shall be exchangeable for definitive Debentures upon surrender of the
temporary Debentures at the principal office of the Trustee in
Montreal, Quebec, without charge to the holder. Upon surrender for
cancellation of any one or more temporary Debentures, the Corporation
shall execute and the Trustee shall certify and deliver in exchange
therefor a like principal amount of definitive Debentures of
authorized denominations. Until so exchanged the temporary Debentures
shall in all respects be entitled to the same benefits under this
Indenture as definitive Debentures.
2.7 REPLACEMENT OF DEBENTURES
(1) In case any Debenture shall become mutilated or be lost, destroyed or
stolen and in the absence of notice that such Debenture has been
acquired by a good faith purchaser the Corporation shall issue, and
thereupon the Trustee shall certify and deliver, a new Debenture of
like tenor as the one mutilated, lost, destroyed or stolen in exchange
for and upon surrender and cancellation of such mutilated Debenture or
in lieu of and in substitution for such lost, destroyed or stolen
Debenture, and the new Debenture shall be entitled to the benefit
hereof and rank equally in accordance with its terms with all other
Debentures.
<PAGE> 21
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(2) The applicant for the issue of a new Debenture pursuant to this
Section 2.7 shall bear the cost of the issue thereof and in case of
loss, destruction or theft shall, as a condition precedent to the
issue thereof, furnish to the Corporation and to the Trustee such
evidence of ownership and of the loss, destruction or theft of the
Debenture so lost, destroyed or stolen as shall be satisfactory to the
Corporation in its discretion and such applicant shall also furnish
indemnity in amount and form satisfactory to the Corporation in its
discretion, and shall pay the reasonable charges of the Corporation
and the Trustee or other registrar in connection therewith.
2.8 COMPUTATION OF INTEREST
(1) Debentures, whether issued originally or upon exchange or in
substitution for previously issued Debentures, shall bear interest
from their respective dates of issue or from the last interest payment
date to which interest on the Debentures shall have been paid or made
available for payment, whichever shall be the later.
(2) Interest for any period of less than six months shall be computed on
the basis of a year of 365 days.
2.9 REPAYMENT NET OF WITHHOLDING IMPOSTS
(1) All payments by the Corporation under this Indenture or any Debenture,
whether in respect of principal, interest, interest on overdue
interest, fees or any other payment obligations, shall be made in full
without any deduction or withholding on account of taxes or duties of
whatsoever nature imposed or levied by or on behalf of Canada or any
Administrative Body in Canada having power to tax unless the
Corporation is prohibited by Law from doing so, in which event the
Corporation shall:
(a) forthwith pay to the holder of each Debenture such additional
amount so that the net amount received by the holder will equal
the full amount which would have been received by it had no such
deduction or withholding been made;
(b) pay to the relevant taxation or other authorities within the
period for payment permitted by Law the full amount of the
deduction or withholding (including the full amount of any
deduction or withholding from any additional amount paid pursuant
to this Section); and
(c) furnish to the holder of each Debenture promptly, as soon as
available, an official receipt of the relevant taxation or other
authorities involved for all amounts deducted or withheld as
aforesaid.
<PAGE> 22
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(2) If as a result of any payment by the Corporation under this Indenture
or any Debenture, whether in respect of principal, interest, interest
on overdue interest, fees or other payment obligations, any holder of
a Debenture is required to pay tax under Part XIII of the Income Tax
Act (Canada) or any successor provisions in addition to and aside from
the amounts referred to in Section 2.9(1)(b) above which have been
paid by the Corporation, then the Corporation will, upon demand by the
holder of any Debenture, and whether or not such taxes are correctly
or legally asserted, indemnify the holder of each Debenture for the
payment of any such taxes, together with any interest, penalties and
expenses in connection therewith.
(3) If, following any payment made by the Corporation to any holder of
Debentures under Section 2.9(1)(a) above or any indemnity payment made
by the Corporation to any holder of Debentures under Section 2.9(2)
above, such holder shall receive or be granted a refund, credit,
allowance or remission in respect of the taxes or duties resulting in
the payment thereof and such holder is able to readily identify such
refund, credit, allowance or remission as being attributable to such
taxes or duties, such holder shall, to the extent that it can do so
without prejudice to the retention of the amount of such refund,
credit, allowance or remission and without prejudice to the right of
such holder to obtain any other relief or allowance which may be
available to it, reimburse the Corporation with such amount as such
holder, acting reasonably, determines to be the amount of money
attributable to such refund, credit, allowance or remission that may
be paid by such holder to leave it (after such reimbursement) in no
worse position than it would have been in had there been no such
deduction or withholding or payment of tax which resulted in the
payment under Section 2.9(1)(a) or 2.9(2) above.
(4) Notwithstanding Sections 2.9(1)(a) and 2.9(2) above, the Corporation
shall not be required to make any payments to a holder of a Debenture
thereunder on account of any taxes if (i) such holder is liable for
such taxes in respect of such Debentures by reason only of it having
some connection with Canada other than the mere holding of such
Debentures, or (ii) such holder would not be liable for such taxes if
it satisfied any routine procedural statutory requirements or if it
made a routine procedural declaration of eligibility for treaty
benefit or other similar claim for exemption to the relevant tax
authority (in each case which does not adversely affect its other
affairs), but fails to do so after having been informed in writing of
the need to do so by the Corporation (together with complete details
setting forth all requirements and the reasons therefor) within 3
months of such notice, all of which shall be at the expense of the
Corporation. Furthermore, the Corporation shall not be required to
make payments to a holder of Debentures pursuant to Section 2.9(1) or
2.9(2) which are in excess of the amount of the payments which would
be required to be made by it to such holder if such holder were a
resident of the United States of America for the purposes of the
Canada-United States Income Tax Convention.
<PAGE> 23
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ARTICLE 3
REGISTRATION, TRANSFER, EXCHANGE AND OWNERSHIP
3.1 REGISTERS
The Corporation shall cause to be kept, by and at the principal office of
the Trustee in Montreal, Quebec, a central register, in which shall be entered
all particulars required by law, including the names and latest known addresses
of the holders of Debentures and particulars of the Debentures held by them
respectively, and shall cause to be kept, by and at the principal office of the
Trustee and at such other place or places, if any, and by such other registrar
or registrars, if any, as the Corporation, with the approval of the Trustee, may
designate, a register of exchanges and transfers recording all exchanges and
transfers of Debentures. The registration of any Debenture shall be noted on
such Debenture by the Trustee or other registrar.
3.2 TRANSFERS OF DEBENTURES
(1) No transfer of a Debenture shall be valid unless made on a register of
transfers herein provided for by the registered holder or such
holder's executors, administrators or other legal representatives or
his or their attorney duly appointed by an instrument in writing in
form and execution satisfactory to the Trustee or other registrar upon
compliance with such reasonable requirements as the Trustee or other
registrar may prescribe, nor unless the name of the transferee shall
have been noted on the Debenture by the Trustee or other registrar.
(2) Notwithstanding anything contained in this Indenture, in the
Debentures or in any subscription agreements under which Debentures
were issued and sold, neither the Trustee, relying solely on the
transfer form or such other reasonable requirements as the Corporation
and Trustee may prescribe pursuant to Section 3.2(1) or this Section,
nor the Corporation shall register any transfer of a Debenture unless
the Debenture is transferred (i) in a transaction that occurs outside
the United States in accordance with Rule 903 or 904, as the case may
be, of Regulation S as applicable to Category 3 securities and Rule
905 of Regulation S and all applicable local laws and regulations;
(ii) to a qualified institutional buyer pursuant to the exception from
the 1933 Act provided by Rule 144A thereunder; (iii) pursuant to an
exemption from the 1933 Act provided by Rule 144 thereunder, if
available; (iv) pursuant to a transaction that did not require
registration under the 1933 Act or any applicable United States laws
and regulations governing the offer and sale of securities (in which
case the owner of such Debenture shall provide an opinion of counsel
satisfactory to the Corporation and the Trustee addressed to the
Corporation and the Trustee to the effect that such resale, pledge or
transfer is
<PAGE> 24
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exempt from registration under the 1933 Act); or (v) to the
Corporation; however, upon receipt of such duly executed certificates,
the Trustee will proceed with such registration, subject to such terms
and conditions, including legending the Debentures, as may be required
by law or by the Corporation on advice of Counsel.
(3) Each of the Corporation and the Trustee shall be entitled to rely, and
the transferring holder of the Debentures shall be deemed to have
represented and warranted to each of the Corporation and the Trustee,
upon any transfer being made, that this transfer restriction is being
complied with and that such transfer is in accordance with the 1933
Act or an exemption therefrom and with applicable state securities
laws.
3.3 EXCHANGE OF DEBENTURES
(1) Subject to Section 3.6, Debentures of any denomination may be
exchanged upon reasonable notice for Debentures of the same aggregate
principal amount in any other authorized denomination or
denominations.
(2) Debentures may be exchanged at the principal office of the Trustee in
Montreal, Quebec or at any of the places at which a register is kept
for the Debentures pursuant to the provisions of this Article. Any
Debenture tendered for exchange shall be surrendered to the Trustee.
The Corporation shall execute and the Trustee shall certify all
Debentures necessary to carry out exchanges as aforesaid. All
Debentures surrendered for exchange shall be cancelled.
3.4 CHARGES FOR TRANSFER AND EXCHANGE
Except as provided in Sections 2.6(2) and 4.4, for each Debenture exchanged
or transferred the Trustee may and shall, if required by the Corporation and
subject to any limitation prescribed by law, make a reasonable charge for its
services and for each new Debenture issued, if any, and payment of such charges
and reimbursement of the Trustee or the Corporation for any transfer taxes or
governmental or other charges required to be paid shall be made by the party
requesting such exchange, registration or transfer as a condition precedent
thereto.
3.5 INSPECTION OF REGISTERS AND LISTS OF HOLDERS
(1) The registers provided for in Section 3.1 shall at all reasonable
times be open for inspection by the Corporation, the Trustee (if not
the registrar) or any Debentureholder.
(2) Every registrar, including the Trustee, from time to time, shall:
<PAGE> 25
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(a) at the request of the Corporation or the Trustee, furnish the
Corporation or the Trustee with a list of the names and addresses
of the holders of Debentures entered on the register kept by such
registrar, showing the principal amount of the Debentures held by
each such holder and the aggregate principal amount of the
Debentures; and
(b) at the request of any Debentureholder, furnish such a list to
such holder within 10 days of such request upon receiving from
such holder a reasonable fee therefor and upon fulfilment by such
holder of the conditions prescribed by Indenture Legislation in
that respect.
3.6 CLOSING OF REGISTERS
Neither the Corporation nor the Trustee nor any other registrar shall be
required:
(1) to make transfers or exchanges of any Debentures on any interest
payment day for the Debentures or during the 10 preceding Business
Days; or
(2) to make transfers or exchanges of any Debenture;
(a) on the day of any selection by the Trustee of Debentures to be
redeemed or during the 10 preceding Business Days; or
(b) which has been selected or called for redemption in whole or in
part unless, upon due presentment thereof for redemption, such
Debenture shall not be redeemed.
3.7 OWNERSHIP OF DEBENTURES
(1) Unless otherwise required by law, the Person in whose name any
Debenture is registered shall for all purposes of this Indenture be
and be deemed to be the owner thereof and payment of or on account of
the principal of such Debenture and interest thereon shall be made
only to or upon the order in writing of such registered holder.
(2) Neither the Corporation nor the Trustee or other registrar shall be
bound to take notice of or see to the performance or observance of any
duty to a third Person, whether under a trust, express, implied or
constructive in respect of any Debenture or otherwise, by the
registered holder or any Person whom the Corporation or the Trustee
treats, as permitted or required by law, as the owner or the
registered holder of such Debenture, but shall transfer the same on
the direction of the Person
<PAGE> 26
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so treated or registered as the holder thereof, whether named as
trustee or otherwise, as though that Person were the beneficial owner
thereof.
(3) The registered holder for the time being of any Debenture shall be
entitled to the principal and interest evidenced by such Debenture,
free from all equities or rights of set-off or counterclaim between
the Corporation and the original or any intermediate holder thereof
save in respect of equities of which the Corporation is required to
take notice by statute or by order of a court of competent
jurisdiction, and all Persons may act accordingly and the receipt of
any such holder for any such principal or interest shall be a good
discharge to the Corporation and the Trustee for the same and neither
the Corporation nor the Trustee shall be bound to inquire into the
title of any such holder save as aforesaid.
(4) The Corporation and the Trustee may treat the registered holder of any
Debenture as the owner thereof without actual production of such
Debenture for the purpose of any Debentureholders' Request,
requisition, direction, consent, instrument or other document.
3.8 LEGEND
Except as provided in this Section 3.8, each Debenture (and all Debentures
issued in exchange therefor or in substitution or transfer thereof) shall bear
the legends set forth in the form of the Debenture set out in Article Fifteen,
together with such additional legends as may be required by the Corporation on
advice of Counsel. A new Debenture bearing no U.S. securities law legend may be
obtained from the Trustee upon delivery to the Trustee of the Debenture and an
opinion of counsel satisfactory to the Corporation and the Trustee addressed to
the Corporation and the Trustee to the effect that such Debenture may be freely
resold without restriction under the 1933 Act.
ARTICLE 4
REDEMPTION AND PURCHASE
4.1 OPTIONAL REDEMPTION
The Debentures shall not be redeemable by the Corporation before the third
anniversary of issuance thereof. Subject to Section 4.2, the Corporation shall
have the right at its option, in the manner hereinafter in this Article Four
provided, to redeem on and after the third anniversary of issuance thereof and
prior to the maturity of the Debentures at any time the whole or from time to
time any part of the principal amount of the Debentures upon payment in lawful
money of the United States of the following percentages of the principal amount
thereof:
<PAGE> 27
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<PAGE> 28
-22-
<TABLE>
<CAPTION>
If redeemed in
the 12 month Percentage
period beginning of principal
July 1, amount
------------------ ----------------
<S> <C>
2001 106.00
2002 104.00
2003 102.00
2004 100.00
2005 100.00
</TABLE>
in each case, together with unpaid interest accrued thereon to the Redemption
Date, the applicable one of such prices together with such accrued and unpaid
interest constituting the "Redemption Price".
4.2 CONDITIONS OF REDEMPTION
If the Corporation wishes to redeem all or part of the Debentures on a
Redemption Date that is not a date on which interest is payable on the
Debentures as provided for in Section 2.1(2), then in every such case, the
Corporation shall only be entitled to so redeem the Debentures if the Weighted
Average Price of the Common Shares for 20 consecutive days during a period of 45
days prior to the proposed Redemption Date, is equal to or exceeds the
Conversion Price.
4.3 PLACES OF PAYMENT
The Redemption Price of Debentures called for redemption under any
provision hereof shall be payable upon presentment and surrender thereof at any
of the places where the principal of such Debentures is expressed to be payable
and at such other places, if any, as may be specified in the notice of
redemption given under Section 4.5.
4.4 PARTIAL REDEMPTION
(1) If less than all of the Debentures are to be redeemed at any one time,
the Debentures to be redeemed shall be selected by lot by the Trustee
or may be selected on a pro rata basis (to the nearest multiple of
USD$1,000) in accordance with the principal amount of Debentures
registered in the name of each holder or in such other manner as the
Trustee shall deem equitable. Any part, being USD$1,000 or an integral
multiple thereof, of a Debenture of a denomination in excess of
USD$1,000 may be selected and called for redemption as hereinafter
provided and all references in this Indenture to redemption of
Debentures shall be deemed to include redemption of such parts.
<PAGE> 29
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(2) The holder of any Debenture of which part only is redeemed shall, upon
presentment of such Debenture and receipt of the moneys payable to him
by reason of such redemption, surrender such Debenture to the paying
bank for transmission to the Trustee and the Trustee shall cancel the
same and, without charge, shall forthwith certify and deliver to such
holder a new Debenture or Debentures of aggregate principal amount
equal to the unredeemed part of the principal amount of the Debenture
so surrendered.
4.5 NOTICE OF REDEMPTION
Notice of redemption of any Debentures shall be given to the Trustee and
the holders of the Debentures which are to be redeemed, not more than 60 nor
less than 30 days prior to the date fixed for redemption, in the manner provided
in Article 14. Every such notice shall specify the aggregate principal amount of
Debentures called for redemption, the date fixed for redemption, the Redemption
Price and the places of payment and shall state that interest upon the principal
amount of Debentures called for redemption shall cease to be payable from and
after the Redemption Date and that the right to convert the principal of the
Debentures so to be redeemed will terminate and expire at the Close of Business
on the Business Day immediately preceding the Redemption Date. In addition,
unless all the outstanding Debentures are to be redeemed, the notice of
redemption shall also specify:
(a) in the case of a notice mailed to a Debenture holder, the
distinguishing letters and numbers of the Debentures which are to
be redeemed (or of such thereof as are registered in the name of
such Debentureholders);
(b) in the case of a published notice, the distinguishing letters and
numbers of the Debentures which are to be redeemed; and
(c) in all cases, the principal amounts of such Debentures or, if any
such Debenture is to be redeemed in part only, the principal
amount of such part.
4.6 PAYMENT OF REDEMPTION PRICE
Upon notice being given in accordance with Section 4.5, the principal
amount of the Debentures so called for redemption and the principal amount to be
redeemed of the Debentures so called for redemption in part shall be and become
due and payable on the Redemption Date at the Redemption Price, and with the
same effect as if it were the date of maturity specified in such Debentures,
anything therein or herein to the contrary notwithstanding and, from and after
such Redemption Date, interest upon the principal amounts so becoming due and
payable shall cease unless payment of the Redemption Price shall not be made on
presentment for surrender of such Debenture at any of the places specified in
Section 4.2, 4.3 on or after the Redemption Date and prior to the setting aside
of the Redemption Price pursuant to Article Nine.
<PAGE> 30
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4.7 PURCHASE OF DEBENTURES
The Corporation shall have the right at any time and from time to time when
not in default hereunder to purchase Debentures in the market or by tender, or
by private contract at any price not exceeding the principal amount thereof at
the date of purchase, together with unpaid interest accrued thereon to the date
of purchase and costs of purchase. With respect to any purchase by the
Corporation of Debentures pursuant to this Section 4.7, unless otherwise agreed
in writing by all Debentureholders, the principal amount of Debentures so
purchased shall be allocated to all Debentures at the time outstanding in
proportion to the respective outstanding principal amounts of Debentures then
held by each Debentureholder.
4.8 CANCELLATION OF RETIRED DEBENTURES
Subject to the provisions of Section 4.4 as to Debentures redeemed in part,
all Debentures purchased or redeemed in whole or in part under the provisions of
this Article Four shall be forthwith delivered to and cancelled by the Trustee
and no Debentures shall be issued in substitution therefor.
4.9 SPECIAL PREPAYMENT FOR ADVERSE PREPAYMENT EVENT
If, in connection with any payment of interest on the Debentures, the
Corporation shall, as a result of the occurrence of any Prepayment Event, be
required to pay any Additional Amounts pursuant to Section 2.9 (said Section 2.9
being herein called a "TAX PAYMENT PROVISION") in excess of 10% of the aggregate
amount of such interest payment (other than as a result of the making of any
payment by the Corporation, from or through any jurisdiction other than the
United States or Canada), then the Corporation may, at its option, prepay, on a
date which is not less than 30 days and not more than 90 days after the date on
which the Corporation delivers to the holders written notice of the occurrence
of such Prepayment Event in accordance with the notice requirements of Section
14.1 (which notice shall specify that the holders have the right to waive such
prepayment pursuant to this Section 4.9), all, but not less than all, of the
Debentures with respect to which such amounts are required to be paid at 100% of
the principal amount thereof, together with all interest accrued on such
Debentures to the date fixed for prepayment, provided that (i) no prepayment
pursuant to this Section 4.9 shall in any way relieve the Corporation of any
obligation under any Tax Payment Provision with respect to payments under this
Indenture or the Debentures payable prior to or upon the making of such
prepayment and (ii) no Debentures shall be prepaid pursuant to this Section 4.9
if the holder thereof shall, not less than fifteen days prior to the date
specified for prepayment of the Debenture in the notice given by the Corporation
in accordance with the notice requirements of Section 14.1, deliver a notice to
the Corporation (which notice shall be binding on any transferee of such
Debenture), stating that such holder waives any right to payment under such Tax
Payment Provision in respect of the specific event or condition (including with
respect to the continuing or future effects of such specific event or condition
on subsequent payments) that shall have given rise to the Corporation's
prepayment
<PAGE> 31
-25-
right under this Section 4.9 (it being agreed that no such waiver shall
constitute a waiver of any other right to receive a payment under such Tax
Payment Provision in respect of any event or condition other than the specific
event or condition in respect of which such waiver shall have been given) and
that the Corporation shall have all of its rights under this Section 4.9 with
respect to such other event or condition.
ARTICLE 5
CONVERSION
5.1 CONVERSION PRIVILEGE AND CONVERSION PRICE
(1) Subject to and upon compliance with the provisions of this Article
Five, the holder of any Debenture shall have the right, at such
holder's option, at any time prior to the Close of Business on the
Business Day immediately preceding
(a) maturity, or,
(b) if such Debenture shall be called for redemption, the Redemption
Date of such Debenture,
whichever is earlier, to convert such Debenture or any portion (which is an
integral multiple of USD$1,000) of the principal amount thereof into fully paid
non-assessable Common Shares at the Conversion Price.
(2) The Conversion Price at which Debentures shall be convertible into
Common Shares shall be USD$0.35 per share.
5.2 CONVERSION PROCEDURE
(1) In order to exercise the conversion privilege, the holder of any
Debenture to be converted shall, within the time specified in Section
5.1, surrender such Debenture to the Trustee at its principal office
in Montreal, Quebec, accompanied by a written notice (which shall be
irrevocable) in the form of the "Notice of Election to Convert" set
out in Article Fifteen, duly signed by such holder or his executors,
administrators or other legal representative or his or their attorney
duly appointed by an instrument in writing in form and execution
satisfactory to the Trustee, stating:
(a) that such holder elects to convert such Debenture or a specified
portion (which is an integral multiple of USD$1,000) of the
principal amount thereof, and
<PAGE> 32
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(b) the names (with addresses) in which the certificates representing
the Common Shares issuable upon such conversion are to be
registered and, if there is more than one name, the number of
shares to be registered in each of such names.
If any of the Common Shares into which such Debenture is to be converted are to
be issued to a Person or Persons other than the holder of such Debenture, such
notice shall be accompanied by payment to the Trustee of any transfer tax which
may be payable by reason thereof and the signature of the transferor must be
guaranteed. The surrender of such Debenture accompanied by such written notice
shall be deemed to constitute a contract between the holder of such Debenture
and the Corporation whereby:
(i) the holder of such Debenture subscribes for the number of Common
Shares which such holder shall be entitled to receive on such
conversion;
(ii) the holder of such Debenture releases the Corporation from all
liability with respect to such Debenture or the portion of the
principal amount thereof to be converted, as the case may be; and
(iii) the Corporation agrees that the surrender of such Debenture for
conversion constitutes full payment of the subscription price for
the Common Shares issuable upon such conversion.
The date of receipt by the Trustee of such Debenture and such notice is herein
referred to as the "Conversion Date" of such Debenture.
(2) As promptly as practicable after the Conversion Date of a Debenture,
the Corporation shall issue or cause to be issued and deliver or cause
to be delivered to the holder of such Debenture, or on the written
order of such holder, a certificate or certificates in the name or
names of the Person or Persons specified in such notice for the number
of Common Shares deliverable upon the conversion of such Debenture (or
specified portion thereof) and provision shall be made in respect of
any fraction of a share as provided in Section 5.3. Such conversion
shall be deemed to have been effected immediately prior to the Close
of Business on the Conversion Date and, at that time, the rights of
the holder of such Debenture as such holder shall cease and the Person
or Persons in whose name or names any certificate or certificates for
Common Shares shall be delivered upon such conversion shall be deemed
to have become the holder or holders of record of the Common Shares
represented thereby; provided, however, that the surrender of a
Debenture for conversion on any date on which the share transfer
registers for Common Shares shall be closed shall not be effective to
constitute the Person or Persons entitled to receive the Common Shares
upon such conversion as the holder or holders of record of such Common
Shares, but such surrender shall be effective
<PAGE> 33
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to constitute the person or persons entitled to receive such Common
Shares as the holder or holders of record thereof for all purposes at
the Close of Business on the next succeeding day on which such share
transfer registers are open. No payment or adjustment shall be made
upon any conversion on account of any dividends declared and paid on
the Common Shares prior to the date of conversion.
(3) Upon surrender to the Trustee of any Debenture which is to be
converted in part only, the holder thereof shall be entitled to
receive, without expense to such holder, one or more new Debentures
for the unconverted portion of the principal amount of the Debenture
so surrendered.
5.3 NO FRACTIONAL SHARES
Notwithstanding anything herein contained, the Corporation shall in no case
be required to issue fractional Common Shares upon the conversion of any
Debenture. If any fractional interest in a Common Share would, except for the
provisions of this Section 5.3, be deliverable upon the conversion of any
Debenture, the Corporation shall adjust such fractional interest by payment by
cheque to the holder of such surrendered Debenture of an amount equal (to the
nearest cent) to the product of such fractional interest and the Conversion
Price in effect on the Conversion Date of such Debenture.
5.4 LEGEND ON COMMON SHARES
The certificates representing Common Shares issuable upon the conversion of
a Debenture shall bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE
CORPORATION THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 903 OR 904, AS THE CASE MAY BE, OF REGULATION S UNDER
THE 1933 ACT AS APPLICABLE TO CATEGORY 3 SECURITIES AND RULE 905 OF
REGULATION S, (C) TO A QUALIFIED INSTITUTIONAL BUYER PURSUANT TO THE
EXEMPTION FROM THE 1933 ACT PROVIDED BY RULE 144A THEREUNDER, (D) PURSUANT
TO THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY RULE 144
THEREUNDER, IF AVAILABLE, OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT. THE HOLDER HEREOF FURTHER AGREES THAT HEDGING
TRANSACTIONS
<PAGE> 34
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INVOLVING SUCH SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
THE 1933 ACT. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD
DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW
CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE "GOOD
DELIVERY" MAY BE OBTAINED FROM MONTREAL TRUST COMPANY, AS REGISTRAR AND
TRANSFER AGENT FOR THE CORPORATION, UPON DELIVERY OF THIS CERTIFICATE AND
AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION AND THE TRANSFER
AGENT ADDRESSED TO THE CORPORATION AND THE TRANSFER AGENT TO THE EFFECT
THAT SUCH SECURITIES MAY BE FREELY RESOLD WITHOUT RESTRICTION UNDER THE
1933 ACT."
and all certificates representing Common Shares issued in exchange
therefor or in substitution thereof will bear the same legend;
provided, that the legend may be removed upon delivery to the Transfer
Agent of an opinion of counsel satisfactory to the Corporation and the
transfer agent to the effect that such Common Shares may be freely
resold without restriction under the 1933 Act.
5.5 ADJUSTMENT OF CONVERSION PRIVILEGE
(1) If and whenever the Corporation shall:
(a) subdivide the outstanding Common Shares into a greater number of
shares;
(b) consolidate the outstanding Common Shares into a smaller number
of shares;
(c) issue Common Shares or securities convertible into or
exchangeable for Common Shares as a stock dividend to all or
substantially all the holders of Common Shares; or
(d) make a distribution on the outstanding Common Shares to all or
substantially all the holders of Common Shares payable in Common
Shares or securities convertible into or exchangeable for Common
Shares;
any of such events being herein called a "Share Reorganization", then in each
such case the Conversion Price shall be adjusted, effective immediately after
the record date at which the holders of Common Shares are determined for the
purposes of the Share Reorganization or, if no record date is fixed, the
effective date of the Share Reorganization, by multiplying the Conversion Price
in effect on such record or effective date, as the case may be, by a fraction of
which:
(i) the numerator shall be the number of Common Shares
outstanding on such record or effective date; and
<PAGE> 35
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(ii) the denominator shall be the number of Common Shares
outstanding after giving effect to such Share
Reorganization, including, in the case of a distribution of
securities convertible into or exchangeable for Common
Shares, the number of Common Shares that would have been
outstanding if such securities had been converted into or
exchanged for Common Shares on such record or effective
date.
(2) If and whenever the Corporation shall issue to all or substantially
all the holders of Common Shares, rights, options or warrants under
which such holders are entitled, during a period expiring not more
than 45 days after the record date of such issue, to subscribe for or
purchase Common Shares (or securities convertible into or exchangeable
for Common Shares) at a price per share (or, in the case of securities
convertible into or exchangeable for Common Shares, at an exchange or
conversion price per share at the date of issue of such securities) of
less than 95% of the Current Market Price of the Common Shares on such
record date (any such event being herein called a "Rights Offering"),
then in each such case the Conversion Price shall be adjusted,
effective immediately after the record date at which holders of Common
Shares are determined for the purposes of the Rights Offering, by
multiplying the Conversion Price in effect on such record date by a
fraction of which:
(a) the numerator shall be the sum of:
(i) the number of Common Shares outstanding on such record date;
and
(ii) a number obtained by dividing:
(i) either,
(I) the product of the total number of Common Shares
so offered for subscription or purchase and the
price at which such shares are so offered, or
(II) the product of the maximum number of Common Shares
into or for which the convertible or exchangeable
securities so offered for subscription or purchase
may be converted or exchanged and the conversion
or exchange price of such securities,
as the case may be, by
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(B) the Current Market Price of the Common Shares on such
record date; and
(b) the denominator shall be the sum of:
(i) the number of Common Shares outstanding on such record date;
and
(ii) the number of Common Shares so offered for subscription or
purchase (or, in the case of securities convertible into or
exchangeable for Common Shares, the maximum number of Common
Shares for or into which the securities so offered for
subscription or purchase may be converted or exchanged).
To the extent that such rights, options or warrants are not exercised prior to
the expiry time thereof, the Conversion Price shall be readjusted effective
immediately after such expiry time to the Conversion Price which would then have
been in effect based upon the number of Common Shares (or securities
exchangeable into Common Shares) actually delivered upon the exercise of such
rights, options or warrants.
(3) If and whenever the Corporation shall issue or distribute to all or
substantially all the holders of Common Shares:
(a) shares of the Corporation of any class, other than Common Shares;
(b) rights, options or warrants;
(c) any other assets (excluding cash dividends and equivalent
dividends in shares paid in lieu of Cash Dividends in the
Ordinary Course);
and if such issuance or distribution does not constitute a Share Reorganization
or a Rights Offering (any such event being herein called a "Special
Distribution"), then in each such case the Conversion Price shall be adjusted,
effective immediately after the record date at which the holders of Common
Shares are determined for purposes of the Special Distribution, by multiplying
the Conversion Price in effect on such record date by a fraction of which:
(i) the numerator shall be the difference between:
(i) the product of the number of Common Shares outstanding on
such record date and the Current Market Price of the Common
Shares on such date; and
(ii) the fair market value, as determined by the Directors (whose
determination shall be conclusive), to the holders of Common
Shares
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of the shares, rights, options, warrants, evidences of
indebtedness or other assets issued or distributed in the Special
Distribution (net of any consideration paid therefor by the
holders of Common Shares), and
(ii) the denominator shall be the product of the number of Common
Shares outstanding on such record date and the Current Market
Price of the Common Shares on such date.
(4) If and whenever there shall occur:
1. a reclassification or redesignation of the Common
Shares or any change of the Common Shares into other
shares, otherwise than in a Share Reorganization;
2. a consolidation, merger or amalgamation of the
Corporation with or into another body corporate; or
3. the transfer of all or substantially all of the assets
of the Corporation to another body corporate;
(any such event being herein called a "Capital Reorganization"), then in each
such case the holder of any Debenture who exercises the Conversion Privilege
after the effective date of such Capital Reorganization shall be entitled to
receive and shall accept, upon the exercise of such right, in lieu of the number
of Common Shares to which such holder was theretofore entitled upon exercise of
the Conversion Privilege, the aggregate number of shares or other securities or
property of the Corporation or of the body corporate resulting from such Capital
Reorganization that such holder would have been entitled to receive as a result
of such Capital Reorganization if, on the effective date thereof, such holder
had been the holder of the number of Common Shares to which such holder was
theretofore entitled upon conversion; provided, however, that no such Capital
Reorganization shall be carried into effect unless all necessary steps shall
have been taken so that the holders of Debentures shall thereafter be entitled
to receive such number of shares or other securities of the Corporation or of
the body corporate resulting from such Capital Reorganization, subject to
adjustment thereafter in accordance with provisions the same, as nearly as may
be possible, as those contained in this Section 5.5 and in Section 5.6.
5.6 ADJUSTMENT RULES
The following rules and procedures shall be applicable to adjustments of
the Conversion Privilege made pursuant to Section 5.5:
(a) no adjustment in the Conversion Price shall be required unless
such adjustment would result in a change of at least 1% in the
Conversion Price then in effect, provided, however, that any
adjustments which, but for the
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provisions of this clause 5.6(a), would otherwise have been
required to be made, shall be carried forward and taken into
account in any subsequent adjustment;
(b) no adjustment in the Conversion Price shall be made in respect of
any event described in Section 5.5 (other than an event described
in clauses 5.5(1)(a) or 5.5(1)(b) and in clause 5.5(4)(c)), if
the holders of the Debentures are entitled to participate in such
event on the same terms mutatis mutandis as if they had converted
their Debentures prior to the effective date or record date of
such event. The terms of any such participation shall be subject
to the prior approval of The Toronto Stock Exchange and the
Montreal Exchange; and
(c) no adjustment in the Conversion Price shall be made pursuant to
Section 5.5 in respect of the issue from time to time of Common
Shares to holders of Common Shares who receive substantially
equivalent dividends in Common Shares in lieu of receiving Cash
Dividends in the Ordinary Course.
5.7 CERTIFICATE AS TO ADJUSTMENT
The Corporation shall from time to time immediately after the occurrence of
any event which requires an adjustment in the Conversion Privilege lodge with
the Trustee a Certificate of the Corporation specifying the nature of the event
requiring the adjustment, the amount of the adjustment necessitated thereby, the
Conversion Price after giving effect to such adjustment and setting forth, in
reasonable detail, the method of calculation and the facts upon which such
calculation is based. The Corporation shall forthwith give to the
Debentureholders notice, in the manner provided in Article Fourteen, of such
adjustment, specifying the event requiring such adjustment and the Conversion
Price after giving effect to such adjustment.
5.8 NOTICE TO DEBENTUREHOLDERS
If the Corporation shall fix a record date for:
(a) any Share Reorganization (other than the subdivision of
outstanding Common Shares into a greater number of shares or the
consolidation of outstanding Common Shares into a smaller number
of shares),
(b) any Rights Offering,
(c) any Special Distribution,
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(d) any Capital Reorganization (other than a reclassification or
redesignation of the Common Shares into other shares), or
(e) any cash dividend other than a Cash Dividend in the Ordinary
Course,
the Corporation shall, not less than 14 days prior to such record date or, if no
record date is fixed, prior to the effective date of such event, give to the
Debentureholders, in the manner provided in Article Fourteen, notice of the
particulars of the proposed event to the extent that such particulars have been
determined at the time of giving the notice.
5.9 TERMINATION AND REVIVAL OF RIGHT TO CONVERT
(1) The right to convert any Debenture which is called for redemption
shall terminate and expire at the Close of Business on the Business
Day immediately preceding the Redemption Date of such Debenture,
unless the Corporation shall make default in the payment of the
Redemption Price of such Debenture.
(2) If payment of the Redemption Price of any Debenture called for
redemption is not duly made, the right to convert such Debenture shall
revive and continue until the earlier of payment of such Redemption
Price and the maturity date.
5.10 CANCELLATION OF DEBENTURES
All Debentures surrendered for conversion shall be cancelled by the Trustee
and no Debentures shall be issued in substitution therefor.
5.11 RESERVATION OF SHARES
The Corporation shall at all times while any of the Debentures remain
outstanding reserve and keep available out of its authorized but unissued Common
Shares, for the purpose of effecting the conversion of the Debentures, such
number of Common Shares as shall from time to time be sufficient to effect the
conversion of all Debentures. As a condition precedent to the taking of any
action which would require an adjustment to the Conversion Price, the
Corporation shall take any corporate action which may, in the opinion of
Counsel, be necessary in order that the Corporation shall have unissued and
reserved in its authorized capital, and may validly and legally issue, the
shares to which the Debentureholders are entitled on the full exercise of their
conversion rights in accordance with the provisions hereof.
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5.12 GOVERNMENTAL REQUIREMENTS
If any Common Shares of the Corporation, reserved or to be reserved for the
purpose of conversion of the Debentures hereunder, require qualification with or
approval of any governmental authority under any federal, provincial or state
law before such shares may be validly issued upon conversion, the Corporation
shall take such action as may be necessary to secure such qualification or
approval, as the case may be.
ARTICLE 6
SUBORDINATION
6.1 AGREEMENT TO SUBORDINATE
The indebtedness evidenced by this Indenture and the Debentures, including
the principal thereof and interest thereon (such indebtedness being hereinafter
referred to as "Subordinated Indebtedness") shall be subordinate and junior in
right of payment, in the manner set forth in this Article Six, to the prior
payment in full of the Senior Indebtedness. Each holder of a Debenture, by
acceptance thereof, agrees to and shall be bound by the provisions of this
Article Six.
6.2 DISTRIBUTION ON DISSOLUTION, WINDING-UP, LIQUIDATION OR REORGANIZATION
(1) Upon any Distribution of Assets of the Corporation:
(a) All Senior Indebtedness shall first be paid in full, or such
payment provided for, before any payment is made on account of
the Subordinated Indebtedness and in any such proceedings, any
payment or Distribution of any kind or character, whether in cash
or property or securities, which may be payable or deliverable in
respect of the Subordinated Indebtedness shall be paid or
delivered directly to the holders of Senior Indebtedness for
application and payment thereof, unless and until the Senior
Indebtedness shall have been paid and satisfied in full, or such
payment and satisfaction shall have been provided for; provided,
however, that:
1. if payment or delivery of such cash, property or
securities to holders of Subordinated Indebtedness is
authorized by an order or decree made by a court of
competent jurisdiction in any proceedings under the
Companies Creditors Arrangement Act (Canada) or any
statute in replacement or substitution thereof and
giving effect, and stating in such order or decree that
effect is given, to the subordination of such
Subordinated Indebtedness to the Senior Indebtedness,
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no payment or delivery of such cash, property or
securities payable or deliverable with respect to the
Subordinated Indebtedness need be made to the holders
of the Senior Indebtedness; and
2. no such delivery need be made of securities which are
issued pursuant to voluntary reorganization,
dissolution or liquidation proceedings, or upon any
merger, consolidation, sale, lease, transfer or other
disposal (not prohibited by any indenture, agreement or
other instrument to which the Corporation or any of its
successors then is a party) by the Corporation or any
such successor, and which securities are effectively
made subordinate and junior in right of payment to the
Senior Indebtedness by provisions substantially to the
effect set out in this Article Six.
(b) The Trustee and the holders of Debentures assign to the holders
of Senior Indebtedness, for the purposes and to the extent set
forth in this clause 6.2(1)(b), all their right, title and
interest in and to any payment or Distribution (other than a
payment or Distribution referred to in subclauses (i) and (ii) of
clause 6.2(1)(a)) of Assets of the Corporation of any kind or
character, whether in cash, property or securities, to which they
would be entitled in respect of the Subordinated Indebtedness
except for the provisions of Sections 6.2 and 6.3, and agree to
take such steps as may be necessary or appropriate to entitle the
holders of Senior Indebtedness to receive such payment or
Distribution, ratably according to the aggregate amount remaining
unpaid on the Senior Indebtedness held by each, all to the extent
necessary to provide for the payment or satisfaction of all
Senior Indebtedness in full, after giving effect to any
concurrent payment or Distribution, or provision therefor, to the
holders of Senior Indebtedness, prior to any payment or
Distribution upon the Subordinated Indebtedness; and
(c) If, notwithstanding the provisions of clauses 6.2(1)(a) and (b),
any payment or Distribution (other than a payment or Distribution
referred to in subclauses (i) and (ii) of clause 6.2(1)(a)) of
Assets of the Corporation of any kind or character, whether in
cash, property or securities, shall be received by the Trustee,
by the holders of Debentures or by the Corporation in respect of
the Subordinated Indebtedness before all Senior Indebtedness
shall have been paid in full, such payment or Distribution shall
be held by such party in trust (which such parties hereby declare
and acknowledge) for the benefit of, and shall be paid over or
delivered to, the holders of Senior Indebtedness for application
to the payment of all Senior
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Indebtedness remaining unpaid to the extent necessary to pay all
such Senior Indebtedness after giving effect to any concurrent
payment or Distribution, or provision therefor, to the holders of
Senior Indebtedness.
(2) Upon any Distribution of Assets of the Corporation referred to in this
Article Six, the Trustee and the holders of the Debentures shall be
entitled to rely upon a Certificate of the Corporation, and/or a
certificate of the trustee in bankruptcy, receiver, assignee for the
benefit of creditors or other liquidating agent making such payment or
Distribution, delivered to the Trustee or to the holders of the
Debentures, for the purpose of ascertaining the Persons entitled to
participate in such Distribution, the holders of Senior Indebtedness
and other indebtedness of the Corporation, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and
all other facts pertinent thereto.
6.3 SUBROGATION OF DEBENTURES
Subject to and upon payment in full of the Senior Indebtedness, the holders
of the Debentures shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of Assets of the Corporation
applicable to the Senior Indebtedness to the extent of the prior application
thereof of cash, property or securities of the Corporation which would have been
payable or distributable to the holders of the Debentures but for the provisions
of this Article Six, until the principal of the Debentures and interest thereon
shall be paid in full, and no such payments or distributions of Assets of the
Corporation to the holders of Senior Indebtedness which would have been payable
or distributable to the holders of the Debentures but for the provisions of this
Article Six shall, for the purposes of such subrogation, as between the
Corporation, its creditors other than the holders of Senior Indebtedness, and
the holders of the Debentures be deemed to be a payment or distribution of
Assets of the Corporation to or for the account of the holders of Senior
Indebtedness, it being understood that the provisions of this Article Six are,
and are intended, solely for the purposes of defining the relative rights of the
holders of the Debentures, on the one hand, and of the holders of Senior
Indebtedness, on the other hand.
6.4 RIGHTS OF DEBENTUREHOLDERS RESERVED
Nothing contained herein or in the Debentures is intended to or shall
impair, as between the Corporation, its creditors other than the holders of
Senior Indebtedness, and the holders of the Debentures, the obligation of the
Corporation, which is absolute and unconditional, to pay to the holders of the
Debentures the indebtedness represented thereby, including the principal thereof
and interest thereon, as and when the same shall become due and payable in
accordance with their terms, or affect the relative rights of the holders of the
Debentures and creditors of the Corporation other than the holders of Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or the
holders of any Debenture from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under
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this Article Six of the holders of Senior Indebtedness in respect of Assets of
the Corporation received upon the exercise of such remedy.
6.5 AUTHORIZATION TO EFFECT SUBORDINATION
Each holder of a Debenture, by his acceptance thereof, authorizes and
directs the Trustee on behalf of such holder to take such action as may be
necessary or appropriate to effectuate the subordination provided for in this
Article Six and appoints the Trustee attorney-in-fact of such holder for any and
all such purposes. Upon the Request of the Corporation, and upon being furnished
with a Certificate of the Corporation stating that one or more named persons are
holders of Senior Indebtedness and specifying the amount and nature of such
Senior Indebtedness, the Trustee, from time to time, for and on behalf of the
holders of the Debentures, shall execute and deliver deeds of subordination in
favour of the Person or Persons named in such Certificate of the Corporation
providing that such Person or Persons are entitled to all the rights and
benefits of this Article Six as the holder or holders of Senior Indebtedness.
Such deeds shall be conclusive evidence that the indebtedness specified therein
is Senior Indebtedness. An executed counterpart of each such deed shall be
delivered by the Trustee to the Corporation and another such counterpart shall
be retained by the Trustee. Nothing contained in this Section 6.5 shall impair
the rights of any holders of Senior Indebtedness in whose favour such a deed of
subordination has not been executed and delivered.
ARTICLE 7
COVENANTS OF THE CORPORATION
7.1 GENERAL COVENANTS
The Corporation covenants with the Trustee that so long as any Debentures
remain outstanding:
(a) It will well, duly and punctually pay or cause to be paid to
every holder of every Debenture the principal thereof and the
interest accrued thereon (including, in case of default, interest
on the amount in default) at the dates and places, in the
currency and in the manner mentioned herein and in the
Debentures. As interest becomes due on each Debenture (except at
maturity or on redemption when interest may, at the option of the
Corporation, be paid upon surrender of such Debenture), the
Corporation, either directly or through the Trustee, shall send
no later than five Business Days prior to each date upon which
such interest is due by prepaid ordinary mail a cheque for such
interest (less any tax required to be withheld therefrom, if any)
payable to the order of the registered holder of such Debenture
and addressed to him at his last address appearing on the
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register, unless such holder otherwise directs. In the case of
joint holders, the cheque shall, unless such joint holders
otherwise direct, be made payable to the order of all of such
joint holders and, if more than one address appears on the
register in respect of such joint holding, the cheque shall be
mailed to the first address so appearing, unless otherwise
directed in writing by such holder or by all of such joint
holders. The mailing of such cheque shall, to the extent of the
sum represented thereby plus the amount, if any, of any tax
withheld as aforesaid and remitted to the appropriate tax
authorities, satisfy and discharge the liability for interest on
such Debenture, unless such cheque be not paid at par on
presentment at one of the places where such interest is by the
terms of such Debenture, made payable. In the event of
non-receipt of any cheque for interest by the person to whom it
is so sent, the Corporation will issue to such Person a
replacement cheque for a like amount upon being furnished with
such evidence of non-receipt as it shall reasonably require and
upon being indemnified to its satisfaction. Notwithstanding the
foregoing, if the Corporation is prevented by circumstances
beyond its control (including, without limitation, any
interruption in mail service) from making payment of any interest
due on each Debenture in the manner provided above, the
Corporation may make payment of such interest or make such
interest available for payment in any other manner acceptable to
the Trustee with the same effect as though payment had been made
in the manner provided above;
(b) Except as herein otherwise provided, it will at all times
maintain its corporate existence; it will carry on and conduct
its business and will cause the business of any Subsidiaries it
may have to be carried on and conducted in a proper, efficient
and businesslike manner and in accordance with good business
practice; it will keep and cause any such Subsidiaries to keep
proper books of account; and it will file with the Trustee and
cause the Trustee to forward to the Debentureholders in a timely
manner copies of all documents and other material of the
Corporation furnished to its shareholders after the date hereof;
notwithstanding the foregoing, nothing herein shall restrict the
Corporation from amalgamating or otherwise merging with its
Subsidiary corporation Repap New Brunswick, Inc. provided that no
Event of Default has occurred and is then subsisting and no Event
of Default shall occur as a result of such amalgamation or
merger;
(c) It will comply in all material respects with all laws and
regulations applicable to it and all policies and guidelines of
any regulatory body having jurisdiction over it with respect to
the Corporation generally, its business, the Assets of the
Corporation and the performance of its obligations hereunder,
including, without limitation, the payment of all taxes,
assessments and governmental charges;
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7.2 TRUSTEE'S REMUNERATION, EXPENSES AND INDEMNITY
The Corporation covenants that it will pay to the Trustee from time to time
reasonable remuneration for its services hereunder and will pay or reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in the administration or execution of the trusts
created hereby (including the reasonable compensation and the disbursements of
its counsel and all other advisers and assistants not regularly in its employ),
both before any default hereunder and thereafter until all duties of the Trustee
under such trusts shall be finally and fully performed, except any such expense,
disbursement or advance as may arise from its gross negligence or bad faith.
Subject to Section 13.2(1), the Corporation shall be liable for and shall
indemnify and hold harmless the Trustee, its officers, directors, employees,
beneficiaries and shareholders from and against any and all liabilities, losses,
costs, claims, actions, expenses or demands (collectively, the "Liabilities")
which may be brought against or incurred by the Trustee, its officers,
directors, employees, beneficiaries and shareholders arising, directly or
indirectly, from any act or omission by the Trustee in the performance of its
duties and obligations hereunder except for the Liabilities which result from
the gross negligence, wilful misconduct or bad faith of the Trustee. After
default all amounts so payable and the interest thereon shall be payable out of
any funds coming into the possession of the Trustee in priority to the principal
of and interest on the Debentures. It is understood and agreed that this
indemnification shall survive the termination or discharge of this Trust
Indenture or the resignation of the Trustee.
7.3 NOT TO ACCUMULATE INTEREST
In order to prevent any accumulation after maturity of interest, the
Corporation covenants with the Trustee that it will not, except with the
approval of the Debentureholders expressed by Extraordinary Resolution, directly
or indirectly extend or assent to the extension of time for payment of any
interest payable hereunder or be a party to or approve any such arrangement by
purchasing or funding any interest or in any other manner. In case the time for
payment of any such interest shall be so extended, whether for a definite period
or otherwise, such interest shall not be entitled in case of default hereunder
to the benefit of these presents except subject to the prior payment in full of
the principal of all Debentures and of all interest on Debentures, the payment
of which has not been so extended, and of all other moneys payable hereunder.
7.4 RESTRICTIVE COVENANT
Subject to Section 7.13, the Corporation shall not:
(a) declare or pay any dividend (other than a dividend payable in
shares of the Corporation) on any share of the Corporation; or
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(b) redeem or purchase or make any capital distribution with respect
to any share of the Corporation;
at any time when the Corporation is in arrears in the payment of any principal
of or interest on any of the Debentures.
7.5 REPORTING ISSUER STATUS AND STOCK EXCHANGE LISTING
The Corporation covenants to use all reasonable efforts for so long as any
Debentures remain issued and outstanding to maintain the listing of the Common
Shares into which the Debentures are convertible on The Toronto Stock Exchange
and the Montreal Exchange and to maintain its status as a reporting issuer not
in default of any requirements of the securities legislation of the provinces of
Canada in which the Corporation is a reporting issuer at the date of this
Indenture, and the Corporation covenants and agrees to provide not less than
thirty (30) days prior written notice to the Trustee and to the registered
holders of the Debentures in the manner provided in Article Fourteen of any
decision taken by the Corporation to de-list its Common Shares from the
aforementioned exchanges or change its status as a reporting issuer not in
default under the aforementioned legislation.
7.6 FINANCIAL STATEMENTS
The Corporation will deliver to the Trustee (who will upon receipt
forthwith deliver to each Debentureholder) within 120 days after the end of each
fiscal year of the Corporation, audited consolidated financial statements of the
Corporation for such fiscal year.
7.7 COMPLIANCE CERTIFICATE
The Corporation will deliver to the Trustee (who will upon receipt
forthwith deliver to each Debentureholder) together with the financial
statements referred to in Section 7.6 and at any time the Trustee may reasonably
request, a Compliance Certificate of the Corporation.
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7.8 PERFORMANCE OF COVENANTS BY TRUSTEE
If the Corporation shall fail to perform any of its covenants contained in
this Indenture, the Trustee may itself perform any of such covenants capable of
being performed by it, but shall be under no obligation to do so. All sums
expended or advanced by the Trustee for such purpose shall be repayable as
provided in Section 7.2. No such performance or advance by the Trustee shall be
deemed to relieve the Corporation of any default hereunder.
7.9 INDEMNITY OF CORPORATION
The Corporation shall indemnify and hold the Trustee harmless against any
and all losses, costs, expenses, liabilities, actions, suits, claims or damages
of any and every kind sustained, paid or incurred by it as a result of any
environmental claims, liabilities or obligations of any and every nature
whatsoever relating to or affecting the Corporation or its Subsidiaries or the
property of any of them ("their property"), or the property of others where the
Corporation or any Subsidiary could have any liability in respect thereof under
Applicable Environmental Laws, or personal injury or death, including in respect
of:
(1) any environmental harm or damage to or impairment of their property
(or any other Person's property) caused by the presence or release of
any Hazardous Materials on their property, or by the Corporation or
any Subsidiary;
(2) any decrease or loss in value of their property (or any other Person's
property) occasioned by non-compliance with Applicable Environmental
Laws;
(3) the imposition or assertion of any Lien including any expenses
collectable as taxes affecting their property under Applicable
Environmental Laws by any Governmental/Judicial Body;
(4) any claim asserted or order issued by a Governmental/Judicial Body
against a holder of a Debenture or an agent of any of them in respect
of any matter referred to in Sections 7.9(1), 7.9(2) or 7.9(3), or for
any clean-up, restoration, reclamation or other securing or remedial
action in respect of their property (or any other Person's property);
or
(5) any non-compliance with any provision herein relating to environmental
matters.
Without limiting the generality of the foregoing, the indemnities in this
Section 7.9 shall extend to:
(a) reasonable legal fees on a solicitor and his own client basis,
including the reasonable costs of defending and/or counterclaiming or
claiming over against third parties in respect of any action or
matters; and
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(b) any amounts payable arising out of a settlement of any action entered
into between the Trustee, acting reasonably, and any Person with the
consent of the Corporation (which consent will not be unreasonably
withheld);
but shall not extend to any claim, liability or obligation to the extent that
the same relates to a decrease in the value of Debentures or the same arises
solely due to the gross negligence or wilful misconduct of the holder claiming
indemnification.
These indemnities shall extend to the officers, directors, employees,
shareholders, agents and assignees of the Trustee, and the Corporation will hold
the benefit of these indemnities in trust for such indemnified parties to the
extent necessary to give effect hereto. The provisions of and undertakings and
indemnification set out in this Section 7.9 shall survive the payment and
satisfaction of the Debentures including any termination of the other provisions
of this Agreement.
7.10 INSURANCE
The Corporation shall maintain or cause to be maintained adequate insurance
in respect of its property and the property of its subsidiaries in accordance
with prudent industry standards, and shall provide the Trustee with copies of
all insurance policies relating thereto if so requested.
7.11 SHAREHOLDER MATERIALS
The Corporation shall provide to the Trustee and Debentureholders on a
timely basis all reports, notices, proxies and other materials sent by the
Corporation to shareholders of the Corporation.
7.12 OTHER INFORMATION
The Corporation shall provide to the Trustee and the Debentureholders such
other documentation and information concerning the Corporation and its
Subsidiaries as the Trustee may request acting reasonably.
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7.13 RESTRICTED PAYMENTS
Prior to the Amalgamation, the Corporation will not authorize, declare, pay
or make, or permit any of its Subsidiaries to authorize, declare, pay or make,
any Restricted Payments (other than Restricted Payments made by a Subsidiary to
the Corporation or a wholly-owned Subsidiary of the Corporation).
7.14 RESTRICTIONS ON ADDITIONAL DEBT
Except for the issuance of Debentures pursuant to this Indenture, the
Corporation shall not, prior to the Amalgamation, incur any Debt after the date
of this Indenture, provided that:
(i) in the event the Amalgamation occurs, any Debt of Repap New
Brunswick, Inc., immediately prior to the Amalgamation shall not
be considered additional Debt of the Corporation for the purposes
of this Section 7.14, 7.15; and
(ii) the extension, renewal or refinancing of any Debt of either the
Corporation on the date hereof or of Repap New Brunswick, Inc.
immediately prior to the Amalgamation shall not be considered
additional Debt of the Corporation for purposes of this Section
7.14, 7.15 provided that the principal amount of any such Debt
does not increase from its original amount less any amount which
has been repaid at the time of such extension, renewal or
refinancing.
7.15 MANAGEMENT AGREEMENT
Other than solely as a result of the Amalgamation, the Corporation shall
not amend or terminate the Management Agreement or waive any of its rights and
remedies thereunder including the forgiveness of any payment obligation to the
Corporation thereunder without the prior written consent of the
Debentureholders, such consent not to be unreasonably withheld.
ARTICLE 8
DEFAULT AND ENFORCEMENT
8.1 EVENTS OF DEFAULT
Each of the following events is herein sometimes called an "Event of
Default":
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(a) if the Corporation shall make default in payment of the principal
of any Debenture when the same becomes due under any provision
hereof or of such Debenture;
(b) if the Corporation shall make default in payment of any interest
due on any Debenture and such default continues for a period of 5
days;
(c) if the Corporation shall make default in the observance of the
covenant in Section 7.4;
(d) if the Corporation shall neglect to carry out or observe any
other covenant herein contained on its part to be observed or
performed and, after notice in writing has been given by the
Trustee to the Corporation specifying such default and requiring
the Corporation to put an end to the same, the Corporation shall
fail to make good such default within a period of 30 days, unless
the Trustee (having regard to the subject matter of the neglect
or non-observance) shall have agreed to a longer period, and in
such event, within the period agreed to by the Trustee;
(e) if the Corporation shall make default under any term or provision
of any agreement evidencing indebtedness for borrowed money
(other than the Debentures) and as a result of such default the
lender of such indebtedness shall have accelerated the repayment
of indebtedness which exceeds in the aggregate USD $5,000,000, or
if the Corporation shall fail to honour its guarantee of the
indebtedness of any other Person, of if the Corporation shall
fail to repay on demand any of its indebtedness for borrowed
money which exceeds in the aggregate USD $5,000,000 that is
repayable on demand;
(f) if an order shall be made or an effective resolution passed for
the winding-up, liquidation or dissolution of the Corporation,
except in the course of carrying out or pursuant to a transaction
which is permitted by Section 10.1;
(g) if the Corporation shall make a general assignment for the
benefit of its creditors or a proposal under the Bankruptcy and
Insolvency Act (Canada), or shall be declared bankrupt, or if a
custodian or a sequestrator or a receiver and manager or any
other Person with similar powers shall be appointed in respect of
the Corporation or of the property of the Corporation or any part
thereof which, in the opinion of the Trustee, is a substantial
part thereof;
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(h) if an encumbrancer shall take possession of the property of the
Corporation or any part thereof which has an aggregate value in
excess of USD $5,000,000, or if a distress or execution or any
similar process shall be levied or enforced thereagainst and
remain unsatisfied for such period as would permit such property
or such part thereof to be sold thereunder; or
(i) if a Change of Control occurs, provided that a Change of Control
shall be deemed not to occur unless and until the Credit Rating
shall, on or within 90 days after the date of the occurrence of
such Change of Control (which period shall be extended so long as
the Credit Rating is under publicly announced consideration for
possible downgrade by either Rating Agency), be less than the
Credit Rating on the date (the "Rating Date") which is 90 days
before the date of the occurrence of such Change of Control;
provided further, however, that, if on the Rating Date the Credit
Rating is an Investment Grade Rating given by both Rating
Agencies, a Change of Control shall be deemed not to occur unless
and until the Credit Rating shall, on or within 90 days after the
date of the occurrence of such Change of Control (which period
shall be extended so long as the Credit Rating is under publicly
announced consideration for possible downgrade by either Rating
Agency), be less than an Investment Grade Rating; or
(j) if the Corporation fails to maintain the listing of the Common
Shares into which the Debentures are convertible on The Toronto
Stock Exchange and the Montreal Exchange and to maintain its
status as a reporting issuer not in default of any requirements
of the securities legislation of the provinces of Canada in which
the Corporation is a reporting issuer at the date of this
Indenture (a "Delisting") provided that a Delisting shall be
deemed not to occur unless and until the Credit Rating shall, on
or within 90 days after the date of the occurrence of such
Delisting (which period shall be extended so long as the Credit
Rating is under publicly announced consideration for possible
downgrade by either Rating Agency) be less than the Credit Rating
on the date (the "Rating Date") which is 90 days before the date
of the occurrence of such Delisting; provided further, however,
that, if on the Rating Date, the Credit Rating is an Investment
Grade Rating given by both Rating Agencies, a Delisting shall be
deemed not to occur unless and until the Credit Rating shall, on
or within 90 days after the date of the occurrence of such
Delisting (which period shall be extended so long as the Credit
Rating is under publicly announced consideration for possible
downgrade by either Rating Agency) be less than an Investment
Grade Rating.
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8.2 ACCELERATION ON DEFAULT
In case any Event of Default has occurred and is continuing, the Trustee
may in its discretion and shall, upon receipt of a Debentureholders' Request,
subject to the provisions of Section 8.4, declare the principal of and interest
on the Debentures and all other moneys payable hereunder to be due and payable
and the same shall forthwith become immediately due and payable to the Trustee
on demand, anything therein or herein to the contrary notwithstanding, and the
Corporation shall on such demand forthwith pay to the Trustee for the benefit of
the Debentureholders the principal of and unpaid interest accrued on and
interest on amounts in default under the Debentures and all other moneys payable
hereunder together with subsequent interest thereon at the rate borne by the
Debentures from the date of such declaration until payment is received by the
Trustee, such subsequent interest to be payable at the times and places and in
the moneys mentioned in and according to the tenor of the Debentures. Such
payment when made shall be deemed to have been made in discharge of the
Corporation's obligations hereunder and any moneys so received by the Trustee
shall be applied as herein provided.
8.3 NOTICE OF EVENTS OF DEFAULT
The Corporation will promptly notify the Trustee in writing upon becoming
aware of the occurrence of any Event of Default hereunder and will in such
notice distinctly specify the Event of Default that has occurred. If an Event of
Default shall occur and be continuing the Trustee shall within 30 days after it
becomes aware of the occurrence of such Event of Default, give notice of such
Event of Default to the Debentureholders in the manner provided in Section 13.1,
provided that, notwithstanding the foregoing, the Trustee shall not be required
to give such notice if the Trustee in good faith shall have decided that the
withholding of such notice is in the best interests of the Debentureholders and
shall have so advised the Corporation in writing.
8.4 WAIVER OF DEFAULT
In case any Event of Default has occurred otherwise than by default in
payment of any principal moneys at maturity:
(a) the holders of more than 50% of the principal amount of the
Debentures shall have power (in addition to and subject to the
powers exercisable by Extraordinary Resolution) by requisition in
writing to instruct the Trustee to waive the default and/or to
annul any declaration made by the Trustee pursuant to Section 8.2
and the Trustee shall thereupon waive the default and/or annul
such declaration upon such terms and conditions as such
Debentureholders shall prescribe; and
(b) the Trustee, so long as it has not become bound to institute any
proceedings hereunder, shall have power to waive the default if,
in the Trustee's
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opinion, the same shall have been cured or adequate satisfaction
made therefor, and in such event to annul any such declaration
theretofore made by the Trustee in the exercise of its
discretion, upon such terms and conditions as the Trustee may
deem advisable;
provided, however, that no act or omission either of the Trustee or of the
Debentureholders in the premises shall extend to or be taken in any manner
whatsoever to affect any subsequent default or the rights resulting therefrom.
8.5 PROCEEDINGS BY TRUSTEE
(1) Whenever any Event of Default has occurred, but subject to the
provisions of Section 8.4 and to the provisions of any Extraordinary
Resolution:
(a) the Trustee, in the exercise of its discretion, may proceed to
enforce the rights of the Trustee and the Debentureholders by any
action, suit, remedy or proceeding authorized or permitted by law
or by equity and may file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have
the claims of the Trustee and of the Debentureholders lodged in
any bankruptcy, winding-up or other judicial proceedings relative
to the Corporation; and
(b) upon receipt of a Debentureholders' Request and upon receiving
sufficient funds and being indemnified to its satisfaction as
provided in Section 13.2, the Trustee shall exercise or take such
one or more of the said remedies as the Debentureholders' Request
may direct or, if such Debentureholders' Request contains no
direction, as the Trustee may deem expedient.
(2) No such remedy for the enforcement of the rights of the Trustee or of
the Debentureholders shall be exclusive of or dependent on any other
such remedy but any one or more of such remedies may from time to time
be exercised independently or in combination.
(3) Upon the exercising or taking by the Trustee of any of such remedies,
whether or not a declaration and demand have been made pursuant to
Section 8.2, the principal of and interest on the Debentures and all
other moneys payable under Section 8.2 shall forthwith become due and
payable to the Trustee as though such a declaration and a demand
therefor had actually been made.
(4) All rights of action hereunder may be enforced by the Trustee without
the possession of any of the Debentures or the production thereof on
the trial or other proceedings relative thereto.
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(5) No delay or omission of the Trustee or of the Debentureholders to
exercise any remedy referred to in Section 8.5(1) shall impair any
such remedy or shall be construed to be a waiver of any default
hereunder or acquiescence therein.
8.6 SUITS BY DEBENTUREHOLDERS
No holder of any Debenture shall have the right to institute any action or
proceeding or to exercise any other remedy authorized by this Indenture for the
purpose of enforcing any right on behalf of the Debentureholders or for the
execution of any trust or power hereunder or for the appointment of a liquidator
or receiver or for a receiving order under the Bankruptcy Act or to have the
Corporation wound up or to file or prove a claim in any liquidation or
bankruptcy proceedings, unless the Debentureholders' Request, funds and
indemnity referred to in Section 8.5 have been tendered to the Trustee and the
Trustee shall have failed to act within a reasonable time thereafter; in such
case, but not otherwise, any Debentureholder acting on behalf of himself and all
other Debentureholders shall be entitled to take proceedings in any court of
competent jurisdiction such as the Trustee might have taken under Section 8.5;
it being understood and intended that no one or more holders of Debentures shall
have any right in any manner whatsoever to affect, disturb or prejudice the
rights hereby created by his or their action or to enforce any right hereunder
or under any Debenture, except subject to the conditions and in the manner
herein provided, and that all powers and trusts hereunder shall be exercised and
all proceedings at law shall be instituted, had and maintained by the Trustee,
except only as herein provided, and in any event for the equal benefit of all
holders of Debentures.
8.7 APPLICATION OF MONEYS RECEIVED BY TRUSTEE
Except as herein otherwise provided, the moneys arising from any
enforcement hereof shall be held by the Trustee and by it applied, together with
any other moneys then or thereafter in the hands of the Trustee available for
the purpose, as follows:
(a) firstly, in payment or reimbursement to the Trustee of the
remuneration, expenses, disbursements and advances of the Trustee
earned, incurred or made in the administration or execution of
the trusts hereunder or otherwise in relation to this Indenture,
with interest thereon as herein provided;
(b) secondly, but subject to Section 7.3, in payment of the principal
of and unpaid interest accrued on the Debentures (less any tax
required to be withheld therefrom), in that order of priority
unless otherwise directed by Extraordinary Resolution and, in
that case, in such order of priority as between principal and
interest as may be directed by such Extraordinary Resolution; and
(c) the surplus, if any, of such moneys shall be paid to the
Corporation or its assigns unless otherwise required by law;
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provided, however, that no payment shall be made pursuant to the foregoing
clause (b) in respect of the principal of or interest on any Debenture held,
directly or indirectly by or for the benefit of the Corporation or any of its
Subsidiaries or Affiliates (other than any Debenture pledged for value and in
good faith to a Person other than the Corporation or any of its Subsidiaries or
Affiliates, but only to the extent of such Person's interest therein) except
subject to the prior payment in full of the principal of and interest on the
Debentures which are not so held.
8.8 DISTRIBUTION OF PROCEEDS
Payments to holders of Debentures pursuant to clause 8.7(b) shall be made
as follows:
(a) at least 15 days' notice of every such payment shall be given in
the manner provided in Article Fourteen specifying the time when
and the place or places where the Debentures are to be presented
and the amount of the payment and the application thereof as
between principal and interest;
(b) payment of any Debenture shall be made upon presentment thereof
at any one of the places specified in such notice and any such
Debenture thereby paid in full shall be surrendered, otherwise a
memorandum of such payment shall be endorsed thereon; but the
Trustee may in its discretion dispense with presentment and
surrender or endorsement in any special case upon such indemnity
being given as it shall deem sufficient;
(c) from and after the date of payment specified in the notice,
interest shall accrue only on the amount owing on each Debenture
after giving credit for the amount of the payment specified in
such notice unless such Debenture be duly presented on or after
the date so specified and payment of such amount be not made;
(d) the Trustee shall not be required to make any interim payment to
Debentureholders unless the moneys in its hands, after reserving
therefrom such amount as the Trustee may think necessary to
provide for the payments mentioned in clause 8.7(a), exceed 5% of
the principal amount of the Debentures.
8.9 CURING CERTAIN EVENTS OF DEFAULT
If an Event of Default described in Section 8.1(i) or in Section 8.1(j) has
occurred and is continuing, the Corporation may cure such Event of Default by
offering to redeem, on a date which is not less than 30 days and not more than
90 days after the date on which the Corporation delivers to the holders written
notice (a "Default Event Notice") of the occurrence of such Event of Default in
accordance with Section 14.1, the Debentures at a price equal to 101.00% of the
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entire principal amount of the Debentures then outstanding, together with
interest accrued on such principal amount to the date fixed for prepayment.
8.10 CURRENCY CONVERSION
Where an amount in the Indenture is denominated in U.S. dollars or Cdn.
dollars as the case may be, (the "First Currency") and for purposes of
determining compliance with the provisions of the Indenture it is necessary to
convert U.S. dollars into Cdn. dollars or vice versa (the "Other Currency"),
then the equivalent amount of the First Currency shall be that amount of the
First Currency which would be required to purchase such amount of the Other
Currency at the Bank of Canada noon (Montreal local time) rate for such
currencies on such date of determination (as quoted or published from time to
time by the Bank of Canada) or, if such date of determination is not a Business
Day, on the Business Day immediately preceding such date of determination, or of
such other rate as may be agreed upon by the Corporation and the
Debentureholders each acting reasonably.
ARTICLE 9
SATISFACTION AND DISCHARGE
9.1 CANCELLATION AND DESTRUCTION
All matured Debentures shall, forthwith after payment, be cancelled and
delivered to the Trustee. All Debentures cancelled or required to be cancelled
under this or any other provision of this Indenture may, subject to applicable
law, be destroyed by or under the direction of the Trustee by cremation or
otherwise (in the presence of a representative of the Corporation, if the
Corporation shall so require) and the Trustee shall prepare and retain a
certificate of such destruction and deliver a duplicate thereof to the
Corporation.
9.2 NON-PRESENTMENT OF DEBENTURES
In case the holder of any Debenture shall fail to present the same for
payment on the date on which the principal thereof and/or the interest thereon
becomes payable either at maturity, on redemption or otherwise, the Corporation
shall be entitled:
(a) to pay to the Trustee and direct it to set aside, or
(b) in respect of moneys in the hands of the Trustee which may or
should be applied to the payment or redemption of the Debentures,
to direct the Trustee to set aside,
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the principal moneys and/or the interest, as the case may be, in trust to be
paid to the holder of such Debenture upon due presentment and surrender thereof
in accordance with the provisions of this Indenture; and thereupon the principal
moneys and/or the interest payable on or represented by each Debenture in
respect whereof such moneys have been set aside shall be deemed to have been
paid and the holder thereof shall thereafter have no right in respect thereof
except that of receiving payment of the moneys so set aside by the Trustee
(without interest on such moneys) upon due presentment and surrender thereof,
subject always to the provisions of Section 9.3.
9.3 REPAYMENT OF UNCLAIMED MONEYS TO CORPORATION
Any moneys set aside under Section 9.2 in respect of any Debenture and not
claimed by and paid to the holders of such Debenture, as provided in Section
9.2, within six years after the date of such setting aside shall be repaid to
the Corporation by the Trustee on demand, and thereupon the Trustee shall be
released from all further liability with respect to such moneys, and thereafter
such holder shall have no rights in respect of such Debenture except to obtain
payment of such moneys (without interest thereon) from the Corporation, subject
to any applicable period of prescription provided by law.
9.4 RELEASE FROM COVENANTS
Upon proof being given to the reasonable satisfaction of the Trustee that
the principal of all Debentures and interest (including interest on amounts in
default) thereon and other moneys payable hereunder have been paid or satisfied
or that, all the Debentures having matured or having been duly called for
redemption, or the Trustee having been given irrevocable instructions by the
Corporation to publish within 90 days notice of redemption of all the
Debentures, such payment and/or redemption has been duly and effectually
provided for by payment to the Trustee or otherwise, and upon payment of all
costs, charges and expenses properly incurred by the Trustee in relation to
these presents and all interest thereon and the remuneration of the Trustee, or
upon provision satisfactory to the Trustee being made therefor, the Trustee
shall, at the request and at the expense of the Corporation, execute and deliver
to the Corporation such deeds or other instruments as shall be requisite to
release the Corporation from its covenants herein contained except those
relating to the indemnification of the Trustee.
ARTICLE 10
SUCCESSOR CORPORATIONS
10.1 CERTAIN REQUIREMENTS IN RESPECT OF MERGER, ETC.
The Corporation shall not enter into any transaction (whether by way of
reorganization, reconstruction, consolidation, amalgamation, merger, transfer,
sale, lease or otherwise) whereby
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all or substantially all of its undertaking, property and assets would become
the property of any other Person or, in the case of amalgamation, of the
continuing corporation resulting therefrom unless:
(a) such other Person is a body corporate (herein called a "Successor
Corporation") incorporated under the laws of Canada or any
province thereof;
(b) the Successor Corporation shall execute, prior to or
contemporaneously with the consummation of such transaction, such
instruments as are satisfactory to the Trustee and, in the
opinion of Counsel, are necessary or advisable to evidence the
assumption by the Successor Corporation of liability for the due
and punctual payment of the Debentures and the interest thereon
and all other moneys payable hereunder and the covenant of the
Successor Corporation to pay the same and its agreement to
observe and perform all the covenants and obligations of the
Corporation under this Indenture;
(c) such transaction shall, to the satisfaction of the Trustee and in
the opinion of Counsel, be upon such terms as substantially to
preserve and not to impair any of the rights and powers of the
Trustee or of the Debentureholders hereunder; and
(d) no condition or event shall exist in respect of the Successor
Corporation at the time of such transaction and after giving full
effect thereto which would constitute an Event of Default.
10.2 VESTING OF POWERS IN SUCCESSOR
Whenever the conditions of Section 10.1 have been duly observed and
performed, the Successor Corporation shall succeed to and be substituted for the
Corporation with the same effect as if the Successor Corporation had been named
herein as the party of the first part, and the Successor Corporation shall
possess and from time to time may exercise each and every right and power of the
Corporation under this Indenture in the name of the Corporation or otherwise and
any act or proceeding required by any provision of this Indenture to be done or
performed by any directors or officers of the Corporation may be done and
performed with like force and effect by the like directors or officers of the
Successor Corporation.
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ARTICLE 11
MEETINGS OF DEBENTUREHOLDERS
11.1 RIGHT TO CONVENE MEETING
The Trustee may at any time and from time to time and shall, on receipt of
a Request of the Corporation or a Debentureholder's Request and upon receiving
sufficient funds and being indemnified to its reasonable satisfaction by the
Corporation or by the Debentureholders signing such Debentureholders' Request,
as the case may be, against the costs which may be incurred in connection with
the calling and holding of such meeting, convene a meeting of the
Debentureholders. In the event of the Trustee failing within 30 days after
receipt of such request, funds and indemnity to give notice convening such
meeting, the Corporation or such Debentureholders, as the case may be, may
convene such meeting. Every such meeting shall be held in the city of Toronto or
at such other place as may be approved or determined by the Trustee.
11.2 NOTICE
At least 21 days' notice of any meeting shall be given to the
Debentureholders in the manner provided in Article 14 and a copy thereof shall
be sent by mail, subject to Section 14.4, to the Trustee unless the meeting has
been called by it and to the Corporation unless the meeting has been called by
it. Such notice shall state the time when and the place where the meeting is to
be held and shall state briefly the general nature of the business to be
transacted thereat and it shall not be necessary for any such notice to set out
the terms of any resolution to be proposed or any of the provisions of this
Article Eleven.
11.3 CHAIRMAN
Some individual, who need not be a Debentureholder, nominated in writing by
the Trustee shall be chairman of the meeting and if no individual is so
nominated, or if the individual so nominated is not present within 15 minutes
from the time fixed for the holding of the meeting, the Debentureholders present
in person or by proxy shall choose some individual present to be chairman.
11.4 QUORUM
Subject to the provisions of Section 11.1:
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(a) at any meeting of Debentureholders, a quorum shall consist of
Debentureholders present in person or by proxy and representing
at least 25% in principal amount of the Debentures;
(b) if a quorum of the Debentureholders shall not be present within
30 minutes from the time fixed for holding the meeting, such
meeting, if convened by the Debentureholders or on a
Debentureholders' Request, shall be dissolved; but if otherwise
convened, the meeting shall stand adjourned without notice to the
same day in the next week (unless such day is not a Business Day
in which case it shall stand adjourned to the next following
Business Day thereafter) at the same time and place, unless the
chairman shall appoint some other place, day and/or time of which
not less than seven days' notice shall be given in the manner
provided in Article 14; and
(c) at the adjourned meeting, the Debentureholders present in person
or by proxy shall constitute a quorum and may transact the
business for which the meeting was originally convened
notwithstanding that they may not represent 25% in principal
amount of the Debentures.
11.5 POWER TO ADJOURN
The chairman of any meeting at which a quorum of the Debentureholders is
present may, with the consent of holders of a majority in principal amount of
the Debentures represented thereat, adjourn any such meeting and no notice of
such adjournment need be given except such notice, if any, as the meeting may
prescribe.
11.6 SHOW OF HANDS
Every question submitted to a meeting shall be decided in the first place
by a majority of the votes given on a show of hands except that votes on
Extraordinary Resolutions shall be given in the manner hereinafter provided. At
any such meeting, unless a poll is duly demanded as herein provided, a
declaration by the chairman that a resolution has been carried or carried
unanimously or by a particular majority or lost or not carried by a particular
majority shall be conclusive evidence of the fact.
11.7 POLL
On every Extraordinary Resolution, and on any other question submitted to a
meeting when demanded after a vote by show of hands by the Chairman or by any
Debentureholders acting in person or by proxy, a poll shall be taken in such
manner as the chairman shall direct. Questions other than Extraordinary
Resolutions shall, if a poll be taken, be decided by the votes
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of the holders of a majority in principal amount of the Debentures represented
at the meeting and voted on the poll.
11.8 VOTING
On a show of hands, every person who is present and entitled to vote,
whether as a Debentureholder or as proxy for one or more absent Debentureholders
or both, shall have one vote. On a poll, each Debentureholder present in person
or represented by a proxy duly appointed by instrument in writing shall be
entitled to one vote in respect of each USD$1,000 principal amount of Debentures
of which he shall then be the holder. A proxy need not be a Debentureholder.
Joint registered holders of a Debenture shall vote together in respect of
Debentures of which they are joint registered holders and may be represented in
person or by proxy by any one of them.
11.9 REGULATIONS
The Trustee, or the Corporation with the approval of the Trustee, may from
time to time make and from time to time vary such regulations as it shall from
time to time think fit:
(a) for the deposit of instruments appointing proxies at such place
as the Trustee, the Corporation or the Debentureholders convening
the meeting, as the case may be, may in the notice convening the
meeting direct; and
(b) for the deposit of instruments appointing proxies at some
approved place or places other than the place at which the
meeting is to be held and enabling particulars of such
instruments appointing proxies to be mailed, cabled or sent by
any other means of recorded communication before the meeting to
the Corporation or to the Trustee at the place where the same is
to be held and for the voting of proxies so deposited as though
the instruments themselves were produced at the meeting.
Any regulations so made shall be binding and effective and the votes given in
accordance therewith shall be valid and shall be counted. Save as such
regulations may provide, the only persons who shall be recognized at any meeting
as the holders of any Debentures, or as entitled to vote or be present at the
meeting in respect thereof, shall be the registered holders of Debentures and
persons whom registered holders of Debentures have by instrument in writing duly
appointed as their proxies.
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11.10 CORPORATION AND TRUSTEE MAY BE REPRESENTED
The Corporation and the Trustee, by their respective officers and
directors, and the legal advisers of the Corporation, the Trustee and
Debentureholders may attend any meeting of the Debentureholders, but shall have
no vote as such.
11.11 POWERS EXERCISABLE BY EXTRAORDINARY RESOLUTION
In addition to all other powers conferred upon them by Section 13.8 or any
other provisions of this Indenture or by law, a meeting of the Debentureholders
shall have the following powers, any one or combination of which may be
exercised from time to time by Extraordinary Resolution:
(a) power to agree to any modification, abrogation, alteration,
compromise or arrangement of the rights of the Debentureholders
and/or the Trustee against the Corporation or against its
undertaking, property and assets or any part thereof, whether
such rights arise under this Indenture or the Debentures or
otherwise;
(b) power to direct or authorize the Trustee to exercise any power,
right, remedy or authority given to it by this Indenture or the
Debentures in any manner specified in such Extraordinary
Resolution or to refrain from exercising any such power, right,
remedy or authority;
(c) power to waive and direct the Trustee to waive any default on the
part of the Corporation in complying with any provision of this
Indenture or the Debentures and/or to annul and to direct the
Trustee to annul any declaration made by the Trustee pursuant to
Section 8.2, either unconditionally or upon any conditions
specified in such Extraordinary Resolution;
(d) power to restrain any Debentureholders from taking, instituting
or maintaining any suit, action or proceeding for the payment of
principal or interest or for the execution of any trust or power
hereunder or for the appointment of a liquidator or a receiver or
a receiver and manager or a trustee in bankruptcy or to have the
Corporation wound up or for any other remedy thereunder;
(e) power to direct any holder of a Debenture who, as such, has
instituted any such suit, action or proceeding to stay or
otherwise discontinue or otherwise deal with the same upon
payment, if the taking of such suit, action or proceeding shall
have been permitted by Section 8.6, of the costs, charges and
expenses reasonably and properly incurred by such holder in
connection therewith;
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(f) power to sanction the exchange of Debentures for or the
conversion of Debentures into shares, bonds, debentures, notes or
any other securities or obligations of the Corporation or any
other body corporate;
(g) power to assent to any modification of or change in or omission
from the provisions contained herein which shall be agreed to by
the Corporation and to authorize the Trustee to concur in and
execute any deed or instrument supplemental hereto embodying such
modification, change or omission;
(h) power to repeal, modify or amend any Extraordinary Resolution
previously passed by the Debentureholders; and
(i) power to appoint and remove a committee to consult with the
Trustee and to delegate to such committee (subject to such
limitations, if any, as may be prescribed in the Extraordinary
Resolution) all or any of the powers which the Debentureholders
could exercise by Extraordinary Resolution under the foregoing
clauses (b), (c) and (d). The Extraordinary Resolution making
such appointment may provide for payment of the expenses and
disbursements of and compensation to such committee. Such
committee shall consist of such number of persons as shall be
prescribed in the Extraordinary Resolution appointing it, and the
members need not themselves be Debentureholders. Subject to the
Extraordinary resolution appointing it, every such committee may
elect its chairman and may make regulations respecting its
quorum, the calling of its meetings, the filling of vacancies
occurring in its number, the manner in which it may act and its
procedure generally and such regulations may provide that the
committee may act at a meeting at which a quorum is present or
may act by resolutions signed by a majority of the members
thereof or the number of members thereof necessary to constitute
a quorum, whichever is the greater. All acts of any such
committee within the authority delegated to it shall be binding
upon all Debentureholders.
11.12 MEANING OF "EXTRAORDINARY RESOLUTION"
(1) The expression "Extraordinary Resolution" means, subject as
hereinafter in this Section 11.12 and in Section 11.15 provided, a
resolution at a meeting of Debentureholders duly convened for the
purpose and held in accordance with the provisions of this Article
Eleven at which the holders of more than 50% in principal amount of
the Debentures are present in person or by proxy and passed by the
favourable votes of the holders of not less than 66 2/3% of the
principal amount of Debentures represented at the meeting and voted
on a poll upon such resolution.
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(2) If at any such meeting the holders of more than 50% in principal
amount of the Debentures are not present in person or by proxy within
30 minutes after the time appointed for the meeting, then the
meeting, if convened by Debentureholders or on a Debentureholders'
Request, shall be dissolved; but if otherwise convened, the meeting
shall stand adjourned to such date, being not less than 14 nor more
than 60 days later, and to such place and time as may be appointed by
the chairman. Not less than seven days notice shall be given of the
time and place of such adjourned meeting in the manner provided in
Article 14. Such notice shall state that at the adjourned meeting the
Debentureholders present in person or by proxy shall constitute a
quorum but it shall not be necessary to set forth the purposes for
which the meeting was originally called or any such particulars. At
the adjourned meeting the Debentureholders present in person or by
proxy shall constitute a quorum and may transact the business for
which the meeting was originally convened and a resolution proposed
at such adjourned meeting and passed by the requisite vote as
provided in Section 11.12(1) shall be an Extraordinary Resolution
within the meaning of this Indenture, notwithstanding that the
holders of more than 50% in principal amount of the Debentures are
not present in person or by proxy at such adjourned meeting.
(3) Votes on an Extraordinary Resolution shall always be taken by a poll
and no demand for a poll on an Extraordinary Resolution shall be
necessary.
11.13 POWERS CUMULATIVE
It is hereby declared and agreed that any one or more of the powers and/or
combination of the powers in this Indenture stated to be exercisable by the
Debentureholders by Extraordinary Resolution or otherwise may be exercised from
time to time and the exercise of any one or more of such powers or any
combination of powers from time to time shall not be deemed to exhaust the right
of the Debentureholders to exercise such powers or powers or combination of
powers thereafter from time to time.
11.14 MINUTES
Minutes of all resolutions and proceedings at every meeting of the
Debentureholders shall be made and duly entered in books to be from time to time
provided for that purpose by the Trustee at the expense of the Corporation, and
any such minutes, if signed by the chairman of the meeting at which such
resolutions were passed or proceedings had, or by the chairman of the next
succeeding meeting of the Debentureholders, shall be prima facie evidence of the
matters therein stated and, until the contrary is proved, every such meeting in
respect of the proceedings of which minutes shall have been made, shall be
deemed to have been duly held and convened, and all resolutions passed thereat
or proceedings had, to have been duly passed and had.
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11.15 INSTRUMENTS IN WRITING
All action which may be taken and all powers which may be exercised by the
Debentureholders at a meeting held as hereinbefore in this Article 11 provided
may also be taken and exercised by the holders of 66 2/3% of the principal
amount of all the Debentures by an instrument in writing signed in one or more
counterparts and the expression 'Extraordinary Resolution' when used in this
Indenture shall include an instrument so signed.
11.16 BINDING EFFECT OF RESOLUTIONS
Every resolution and every Extraordinary Resolution passed in accordance
with the provisions of this Article Eleven at a meeting of Debentureholders
shall be binding upon all the Debentureholders, whether present at or absent
from such meeting, and every instrument in writing signed by Debentureholders in
accordance with Section 11.15 shall be binding upon the Debentureholders,
whether signatories thereto or not, and each and every Debentureholder and the
Trustee (subject to the provisions for its indemnity herein contained) shall be
bound to give effect accordingly to every such resolution, Extraordinary
Resolution and instrument in writing.
ARTICLE 12
SUPPLEMENTAL INDENTURES
12.1 EXECUTION OF SUPPLEMENTAL INDENTURES
From time to time the Corporation (when authorized by a resolution of its
Directors and with the prior approval of The Toronto Stock Exchange and The
Montreal Exchange) and the Trustee may, subject to the provisions of these
presents, and they shall, when so directed by these presents, execute and
deliver by their proper officers, indentures or other instruments supplemental
hereto, which thereafter shall form part hereof, for any one or more of the
following purposes:
(a) evidencing the succession of Successor Corporations to the
Corporation and the covenants of and obligations assumed by such
successor Corporations in accordance with the provisions of
Article 10;
(b) giving effect to any Extraordinary Resolution;
(c) adding to or altering the provisions hereof in respect of the
registration and transfer of Debentures, making provision for the
issue of Debentures in forms or denominations other than those
herein provided for and for the exchange of Debentures of
different forms and denominations or making
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any modification in the forms of the Debentures which does not
affect the substance thereof;
(d) making any additions to, deletions from or alterations of the
provisions of this Indenture or the Debentures which, in the
opinion of Counsel, are necessary or advisable in order to
incorporate, reflect or comply with applicable law;
(e) the correction or rectification of any ambiguity, defective
provision, error or omission herein, provided that, in the
opinion of the Trustee, the rights of the Trustee or of the
Debentureholders are not prejudiced thereby; and
(f) any other purposes not inconsistent with the provisions of this
Indenture, provided that, in the opinion of the Trustee, the
rights of the Trustee and of the Debentureholders are not
prejudiced thereby.
ARTICLE 13
CONCERNING THE TRUSTEE
13.1 TRUST INDENTURE LEGISLATION
(1) In this Article 13, the term "Indenture Legislation" means the
provisions, if any, of the Canada Business Corporations Act and, to
the extent that such provisions are at the time in force and
applicable to this Indenture, any other statute of Canada or a
province thereof, and the respective regulations thereunder relating
to trust indentures and/or to the rights, duties and obligations of
trustees under trust indentures and of corporations issuing debt
obligations under trust indentures.
(2) If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with a mandatory requirement of Indenture
Legislation, such mandatory requirement shall prevail.
(3) The Corporation and the Trustee agree that each will at all times in
relation to this Indenture and any action to be taken hereunder
observe and comply with and be entitled to the benefits of Indenture
Legislation, including the requirement that the Corporation deliver a
statutory declaration or certificate pursuant to Section 87 of the
Canadian Business Corporations Act.
13.2 RIGHTS AND DUTIES OF TRUSTEE
(1) In exercising the powers and discharging the duties conferred by the
terms of this Indenture, the Trustee shall act honestly and in good
faith with a view to the best
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interests of the Debentureholders and exercise the care, diligence and
skill of a reasonably prudent trustee.
(2) The Trustee shall not be required to take notice or be deemed to have
notice or actual knowledge of any matter hereunder, including an Event
of Default, unless the Trustee shall have received from the
Corporation or a Debentureholder written notice distinctly stating the
matter in respect of which the Trustee should have notice or actual
knowledge and in the absence of such notice, the Trustee may for all
purposes of this Trust Indenture, conclusively assume that the
Corporation is not in default hereunder and that no Event of Default
has occurred.
(3) The obligation of the Trustee to commence or continue any act, action
or proceeding for the purpose of enforcing any rights of the Trustee
or the Debentureholders hereunder shall be conditional upon the
Debentureholders furnishing, when required by notice in writing by the
Trustee, sufficient funds to commence or continue such act, action or
proceeding and indemnity reasonably satisfactory to the Trustee to
protect and hold harmless the Trustee against the expenses and
liabilities to be incurred thereby and any loss and damage it may
suffer by reason thereof except such as may arise from its negligence
or bad faith. None of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers unless indemnified as
aforesaid.
(4) The Trustee may, before commencing or at any time during the
continuance of any act, action or proceeding referred to in Section
13.2(3), require the Debentureholders at whose instance it is acting
to deposit with the Trustee the Debentures held by them, for which
Debentures the Trustee shall issue receipts.
(5) Every provision of this Indenture that by its terms relieves the
Trustee of liability or entitles it to rely upon any evidence
submitted to it, is subject to the provisions of Indenture
Legislation, of this Section 13.2 and of Section 13.3.
13.3 EVIDENCE, EXPERTS AND ADVISERS
(1) In addition to the reports, certificates, opinions and other evidence
required by this Indenture, the Corporation shall furnish to the
Trustee such additional evidence of compliance with any provision
hereof, and in such form, as may be prescribed by Indenture
Legislation or as the Trustee may reasonably require by written notice
to the Corporation.
(2) In the exercise of its rights and duties, the Trustee may, if it is
acting in good faith, rely as to the truth of the statements and the
accuracy of the opinions expressed
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therein, upon statutory declarations, opinions, reports, certificates
or other evidence furnished to the Trustee pursuant to any provision
hereof or of Indenture Legislation or pursuant to a request of the
Trustee, provided that such evidence complies with Indenture
Legislation and that the Trustee examines the same and determines that
such evidence complies with the applicable requirements of this
Indenture.
(3) Whenever Indenture Legislation requires that evidence referred to in
Section 13.3(1) be in the form of a statutory declaration, the Trustee
may accept such statutory declaration in lieu of a Certificate of the
Corporation required by any provision hereof. Any such statutory
declaration may be made by one or more of the president,
vice-presidents, secretary, controller or treasurer of the
Corporation.
(4) Proof of the execution of an instrument in writing, including a
Debentureholders' Request, by any Debentureholder may be made by the
certificate of a notary public, or other officer with similar powers,
that the person signing such instrument acknowledged to such notary
the execution thereof, or by an affidavit of a witness to such
execution or in any other manner which the Trustee may consider
adequate.
(5) The Trustee may employ or retain such counsel, accountants, engineers,
appraisers or other experts or advisers as it may reasonably require
for the purpose of discharging its duties hereunder and may pay
reasonable remuneration for all services so performed by any of them
for which it shall be reimbursed by the Corporation under Section 7.2,
without taxation of costs of any counsel, and shall not be responsible
for any misconduct on the part of any of them. The Trustee may act and
shall be protected in acting in good faith on the opinion or advice of
or information obtained from any counsel, accountant, appraiser or
other expert or adviser, whether retained or employed by the
Corporation or by the Trustee, in relation to any matter arising in
the administration of the trusts hereof.
(6) Any opinion of Counsel may be based, insofar as it relates to factual
matters, upon information with respect to such matters which is in the
possession of the Corporation, upon the certificate or opinion or
representation or any officer of the Corporation unless such Counsel
knows that the certificate or opinion or representation with respect
to the matters upon which Counsel's opinion may be based are erroneous
or, in the exercise of reasonable care, should have known that the
same were erroneous.
13.4 DOCUMENTS, MONEYS, ETC., HELD BY TRUSTEE
(1) Any securities, documents of title or other instruments that may at
any time be held by the Trustee subject to the trusts hereof may be
placed in the deposit vaults of the
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Trustee or of any Canadian chartered bank (including an Affiliate of
the Trustee) or deposited for safekeeping with any such bank.
(2) Unless herein otherwise expressly provided, any moneys held by the
Trustee hereunder, pending the application or withdrawal thereof under
any provision of this Indenture, may and shall at the written
direction of the Corporation be deposited in the name of the Trustee,
at the rate of interest (if any) then current on similar deposits, in
any Canadian chartered bank or trust company (including the Trustee or
an Affiliate of the Trustee) having a shareholders' equity according
to its most recently published audited annual statement of assets and
liabilities of at least CDN$250,000,000 (a "Qualified Institution")
or, upon the written direction of the Corporation, may be (i)
deposited in the deposit department of the Trustee or any other loan
or trust company authorized to accept deposits under the laws of
Canada or any province thereof, or (ii) invested in securities issued
or guaranteed by the Government of Canada or any province thereof or
in obligations, maturing not more than one year from the date of
investment of any Qualified Institution. The Trustee shall not be
subject to any liability whatsoever in respect of any loss or
diminution in value incurred as a result of complying with the
Corporation's written direction to invest in securities pursuant to
this Section 13.4(2)(ii).
(3) Unless an Event of Default shall have occurred and be continuing, all
interests or other income received by the Trustee in respect of
deposits and investments made pursuant to this Section 13.4 shall
belong to the Corporation.
(4) The Trustee, for the purpose of immediately applying the proceeds of
any investment made pursuant to this Section 13.4 to the redemption or
purchase of Debentures, may and shall at the written direction of the
Corporation sell the same at the best prices obtainable in the opinion
of the Trustee. The Corporation shall reimburse the Trustee for any
loss realized on any such sale. Unless an Event of Default shall have
occurred and be continuing, any profit realized by the Trustee upon
any such sale shall belong to the Corporation.
13.5 ACTION BY TRUSTEE TO PROTECT INTERESTS
The Trustee shall have power to institute and to maintain such actions and
proceedings as it may consider necessary or expedient to preserve, protect or
enforce its interest and the interests of the holders of Debentures.
13.6 TRUSTEE NOT REQUIRED TO GIVE SECURITY
The Trustee shall not be required to give any bond or security in respect
of the execution of the trusts and powers of this Indenture or otherwise in
respect of the premises.
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13.7 PROTECTION OF TRUSTEE
By way of supplement to the provisions of any law for the time being
relating to trustees, it is expressly declared and agreed as follows:
(a) the Trustee shall not be liable for or by reason of any
statements of fact or recitals in this Indenture or in the
Debentures (except the representation contained in Section 13.9
or in the certificate of the Trustee on the Debentures) or
required to verify the same, but all such statements or recitals
are and shall be deemed to be made by the Corporation.
(b) nothing herein contained shall impose any obligation on the
Trustee to see to or to require evidence of the registration or
filing (or renewal thereof) of this Indenture or any instrument
ancillary or supplemental hereto;
(c) the Trustee shall not be bound to give notice to any Person of
the execution hereof;
(d) the Trustee shall not incur any liability or responsibility
whatever or be in any way responsible for the consequence of any
breach on the part of the Corporation of any of the covenants
herein contained or of any acts of the agents or servants of the
Corporation; and
(e) the Trustee, in its personal capacity or any other capacity, and
any Affiliate of the Trustee, may buy, sell, lend upon, become a
pledgee of and deal in the Debentures and generally contract and
enter into financial transactions with the Corporation without
being liable to account for any profits made thereby.
13.8 REPLACEMENT OF TRUSTEE
The Trustee may resign its trust and be discharged from all further duties
and liabilities hereunder by giving to the Corporation not less than 60 days'
notice in writing or such shorter notice as the Corporation may accept as
sufficient. The Debentureholders by Extraordinary Resolution shall have power at
any time to remove the Trustee and to appoint a new Trustee. In the event of the
Trustee resigning or being removed as aforesaid or being dissolved, becoming
bankrupt, going into liquidation or otherwise becoming incapable of acting
hereunder, the Corporation shall forthwith appoint a new Trustee unless a new
Trustee has already been appointed by the Debentureholders; failing such
appointment by the Corporation, the retiring Trustee or any Debentureholder may
apply to the Court of Queen's Bench of Ontario, on such notice as such Court may
direct, for the appointment of a new Trustee; but any new Trustee so appointed
by the Corporation or by the Court shall be subject to removal as aforesaid by
the
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Debentureholders. Any new Trustee appointed under any provision of this Section
13.8 shall be a corporation authorized to carry on the business of a trust
corporation in the Province of Ontario and, if required by the Indenture
Legislation of any other province, in such other province. On any such
appointment, the new Trustee shall be vested with the same powers, rights,
duties and responsibilities as if it had been originally named herein as Trustee
without any further assurance, conveyance, act or deed, but there shall be
immediately executed, at the expense of the Corporation, all such conveyances or
other instruments as, in the opinion of Counsel, may be necessary or advisable
for the purpose of assuring the same to the new Trustee. At the request of the
Corporation or the new Trustee, the retiring Trustee, upon payment of the
amounts, if any, due to it pursuant to Section 7.2, shall duly assign, transfer
and deliver to the new Trustee all property and money held and all records kept
by the retiring Trustee hereunder or in connection herewith.
13.9 CONFLICT OF INTEREST
(1) The Trustee represents to the Corporation that at the time of the
execution and delivery hereof no material conflict of interest exists
in the Trustee's role as a fiduciary hereunder and any other role of
the Trustee and agrees that in the event of a material conflict of
interest arising hereafter it will, within 60 days after ascertaining
that it has such material conflict of interest, either eliminate the
same or resign its trust hereunder.
(2) Subject to Section 13.1, the Trustee, in its personal or any other
capacity, may buy, lend upon and deal in securities of the Corporation
and generally may contract and enter into financing transactions with
the Corporation or any Subsidiary it may have from time to time
without being liable to account for any profit made thereby.
13.10 ACCEPTANCE OF TRUST
The Party of the Second Part hereby accepts the trusts in this Indenture
declared and provided for and agrees to perform the same upon the terms and
conditions herein set forth.
ARTICLE 14
NOTICES
14.1 NOTICE TO DEBENTUREHOLDERS
Unless herein otherwise expressly provided, any notice to be given
hereunder to Debentureholders shall be deemed to be validly given to the holders
of Debentures if such notice
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is sent by ordinary surface or air mail, postage prepaid, addressed to such
holders at their respective addresses appearing on the central register
mentioned in Article Three; and, if in the case of joint holders of any
Debenture more than one address appear in the central register in respect of
such joint holding, such notice shall be addressed only to the first address so
appearing, provided, however, that if any notice so given would be unlikely to
reach the Debentureholders to whom it is addressed in the ordinary course of
post by reason of an interruption in mail service, whether at the place of
dispatch or receipt or both, the Corporation shall give such notice by
publication once (twice in the case of a notice of a meeting of
Debentureholders) in the City of Toronto and New York City; each such
publication to be made in a daily newspaper of general national circulation in
the English language and approved by the Trustee. Any notice so given by mail
shall be deemed to have been given on the day of mailing. Any notice so given by
publication shall be deemed to have been given on the day on which publication
shall have been effected at least once in the newspaper in which publication was
required. In determining under any provision hereof the date when notice of any
meeting, redemption or other event must be given, the date of giving the notice
shall be included and the date of the meeting, redemption or other event shall
be excluded. Accidental error or omission in giving notice or accidental failure
to mail notice to any one or more Debentureholders shall not invalidate any
action or proceeding founded thereon.
14.2 NOTICE TO TRUSTEE
Any notice to the Trustee under any provision of this Indenture shall be
valid and effective if delivered on a Business Day to the Manager, Client
Servicing of the Trustee at its principal office in Montreal, Quebec 1800,
McGill College, Montreal, Quebec, H3A 3K9, or if sent by registered mail,
postage prepaid, addressed to the Trustee at its office at Montreal, Quebec,
Attention: Manager, Client Servicing, or if sent by fax to (514) 982-7677.
Notice by mail shall be deemed to have been effectively given seven days after
it was sent and notice by fax shall be deemed to have been effectively given on
the Business Day next following the day it was sent.
14.3 NOTICE TO CORPORATION
Any notice to the Corporation under any provision of this Indenture shall
be valid and effective if delivered to an officer of the Corporation or is sent
by registered mail, postage prepaid, addressed to the Corporation at 300
Atlantic Street, Suite 200 Stamford, CT, 06901, Attention: President, or if sent
by fax to (203) 964-6186. Notice by mail shall be deemed to have been
effectively given seven days after it was sent and notice by fax shall be deemed
to have been effectively given on the Business Day next following the day it was
sent. The Corporation may from time to time notify the Trustee of a change in
address of the Corporation for all purposes of this Indenture.
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14.4 MAIL SERVICE INTERRUPTION
If by reason of any interruption of mail service, actual or threatened, any
notice to be given to the Trustee or to the Corporation would reasonably be
unlikely to reach its destination by the time notice by mail would have been
deemed to have been given pursuant to Section 14.2 or 14.3, such notice shall be
valid and effective only if delivered on a Business Day to an officer of the
party to which it is addressed or if sent to such party, at the appropriate
address in accordance with Section 14.2 or 14.3, as the case may be, by fax.
ARTICLE 15
FORM OF DEBENTURES
15.1 TEXT OF DEBENTURES
The text of the Debentures, including the legend pursuant to Section 3.8,
the Trustee's certificate, the registration panel and the notice of election
shall be substantially as follows:
THE SECURITIES REPRESENTED BY THIS DEBENTURE AND ANY COMMON SHARES ISSUED
ON CONVERSION THEREOF MAY NOT BE RESOLD IN CANADA OR TO PURCHASERS RESIDENT
IN CANADA UNTIL 90 DAYS AFTER THE DATE OF ISSUE.
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE
CORPORATION THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 903 OR 904, AS THE CASE MAY BE, OF REGULATION S UNDER
THE 1933 ACT, AS APPLICABLE TO CATEGORY 3 SECURITIES AND RULE 905 OF
REGULATION S, (C) TO A QUALIFIED INSTITUTIONAL BUYER PURSUANT TO THE
EXEMPTION FROM THE 1933 ACT PROVIDED BY RULE 144A THEREUNDER, (D) PURSUANT
TO THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY RULE 144
THEREUNDER, IF AVAILABLE, OR (E) PURSUANT TO A TRANSACTION THAT DID NOT
REQUIRE REGISTRATION UNDER THE 1933 ACT OR ANY APPLICABLE UNITED STATES
LAWS AND REGULATIONS GOVERNING THE OFFER AND SALE OF SECURITIES (IN WHICH
CASE THE OWNER OF SUCH DEBENTURE SHALL PROVIDE AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION AND THE TRUSTEE ADDRESSED TO THE
CORPORATION AND THE TRUSTEE TO THE EFFECT THAT SUCH RESALE, PLEDGE OR
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE 1933 ACT). THE HOLDER HEREOF
FURTHER AGREES THAT HEDGING TRANSACTIONS INVOLVING SUCH
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SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT.
DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN
SETTLEMENT ON STOCK EXCHANGES IN CANADA. A NEW CERTIFICATE, BEARING NO
LEGEND, MAY BE OBTAINED FROM MONTREAL TRUST COMPANY UPON DELIVERY OF THIS
CERTIFICATE AND AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION AND
THE TRUSTEE ADDRESSED TO THE CORPORATION AND THE TRUSTEE TO THE EFFECT THAT
SUCH SECURITIES MAY BE FREELY RESOLD WITHOUT RESTRICTION UNDER THE 1933
ACT."
No: USD$
REPAP ENTERPRISES INC.
(INCORPORATED UNDER THE LAWS OF CANADA)
6% CONVERTIBLE SUBORDINATED DEBENTURE
DUE JUNE 30, 2005
Repap Enterprises Inc. (hereinafter called the "Corporation") for
value received hereby acknowledges itself indebted and promises to pay to the
registered holder hereof on June 30, 2005, or on such earlier date as the
principal hereof becomes payable in accordance with the provisions of the
Indenture hereinafter mentioned, the sum of __ DOLLARS in lawful money of the
United States of America on presentment and surrender of this Debenture at the
principal office in Montreal of the Trustee (as hereinafter defined) and, in the
meantime, to pay interest thereon from the date hereof or from the last interest
payment date to which interest has been paid or made available for payment on
the Debentures, whichever is later, at the rate of six per cent (6%) per annum
in like money, at the same places on July 15, 1998 and thereafter half-yearly on
January 15 and July 15 in each year (unless this Debenture shall have been
previously redeemed in accordance with the provisions of the Indenture); and
should the Corporation at any time make default in the payment of any principal
or interest, to pay interest on the amount in default at the same rate, in like
money, at the same places and half-yearly on the same dates. As interest becomes
due on this Debenture (except at maturity or on redemption when interest may, at
the option of the Corporation, be paid upon surrender of this Debenture), the
Corporation, either directly or through the Trustee, shall send by prepaid
ordinary mail a cheque for such interest (less any tax required to be withheld
therefrom) payable to the then registered holder of this Debenture and addressed
to such holder at his last address appearing on the central register or, in the
case of joint registered holders, payable to all such joint holders and
addressed to all of them at the last address appearing upon the central register
of that one of such joint holders whose name stands first on the central
register as one of such joint holders, unless otherwise directed in writing by
such holder or by all of such joint holders. Without prejudice to any other
amounts due and payable under the Indenture, the forwarding of such cheque shall
satisfy and discharge the liability for interest on this Debenture to the extent
of the sum represented thereby, plus the amount of any
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tax withheld as aforesaid and remitted to the appropriate tax authorities,
unless such cheque be not paid at par on presentation at any of the places of
payment above-mentioned.
This Debenture is one of the Debentures designated 6% Convertible
Subordinated Debentures (herein called the "Debentures") issued or to be issued
under a Trust Indenture (herein called the "Indenture") made between the
Corporation and Montreal Trust Company, as Trustee, (herein called the
"Trustee") and dated as of May 15, 1998 which Indenture and all instruments
supplemental thereto are referred to for a description of the terms and
conditions upon which the Debentures are issued and held and the rights of the
holders of the Debentures and of the Corporation and of the Trustee, all to the
same effect as if the provisions of the Indenture and all instruments
supplemental thereto were herein set forth, to all of which the holder, by
acceptance hereof, assents. The aggregate principal amount of Debentures which
may be issued under the Indenture is limited to USD$45,000,000 in lawful money
of the United States of America and Debentures to the said aggregate principal
amount have been authorized for immediate issue. This Debenture and all other
Debentures certified and issued under the Indenture rank pari passu. The
Debentures are direct obligations of the Corporation and are not secured by
mortgage or other charge.
This Debenture is convertible, in whole or in part, at the option of
the holder, at any time prior to the close of business on the earlier of the
Business Day immediately preceding June 30, 2005 or, if this Debenture shall be
called for redemption, the Business Day immediately preceding the date fixed for
its redemption, into fully paid and non-assessable Common Shares of the
Corporation (without adjustment for interest accrued hereon or for any dividends
on the Common Shares issuable upon conversion) at the price of USD$0.35 per
share, subject to and upon the terms provided in the Indenture, which contains
provisions for adjustment of the conversion privilege in the events and in the
manner therein specified.
The indebtedness evidenced by the Debentures is subordinate and junior
in right of payment, to the extent and in the manner provided in the Indenture,
to the prior payment of all Senior Indebtedness (as defined in the Indenture) of
the Corporation whether outstanding at the date hereof or hereafter created,
assumed, incurred or guaranteed.
The Debentures will not be redeemed before the third anniversary of
the issuance thereof. On and after that date and before maturity, the Debentures
are subject to redemption upon the terms set forth in the Indenture, at the
option of the Corporation, at the principal amount thereof, plus unpaid interest
accrued to the date fixed for redemption plus any additional amounts to the
extent required under the terms of the Indenture.
This Debenture, if for a principal amount in excess of USD$1,000, is
subject to redemption in part (being USD$1,000 or a multiple thereof) all as
more fully provided in the Indenture.
In case an Event of Default, as defined in the Indenture, has occurred
and is continuing the principal of all Debentures then outstanding under the
Indenture may be declared
<PAGE> 76
-70-
due and payable upon the conditions and in the manner and with the effects
provided in the Indenture.
The Indenture contains provisions for the holding of meetings of
Debentureholders and for binding all Debentureholders by resolutions passed at
such meetings by the holders of not less than a specified percentage of the
principal amount of the Debentures represented and voted or by instruments in
writing signed by the holders of not less than a specified percentage of the
principal amount of the Debentures.
Upon presentation at the principal office of the Trustee in Montreal,
Quebec, subject to the provisions of the Indenture and upon compliance with the
reasonable requirements of the Trustee: (a) Debentures of any denomination may
be exchanged for denominations of the same aggregate principal amount and (b)
Debentures may be transferred by the registered holder thereof or his executors,
administrators or other legal representatives or his or their attorney duly
appointed in writing but no such transfer of a Debenture shall be valid as
against the Corporation unless it has been duly noted on one of the registers
maintained for that purpose.
The Debentures represented hereby and the Common Shares issuable upon
conversion of such Debentures have not been registered under the 1933 Act or the
securities laws of any state of the United States. As a result, in addition to
other restrictions on transfer hereunder or applicable law or under the
Indenture, the Debentures and the Common Shares may not be sold, transferred, or
delivered unless such securities are registered under the 1933 Act and the
securities laws of any state in which the transferee holder is resident or
unless an exemption from such registration requirement is available and the
additional requirements for such transfer set forth in the Indenture and this
Debenture are satisfied.
The Common Shares issuable upon the conversion of a Debenture (and all
Common Shares issued in exchange therefor or in substitution or transfer
thereof) shall bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE
CORPORATION THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 903 OR 904, AS THE CASE MAY BE, OF REGULATION S UNDER
THE 1933 ACT AS APPLICABLE TO CATEGORY 3 SECURITIES AND RULE 905 OF
REGULATION S, (C) TO A QUALIFIED INSTITUTIONAL BUYER PURSUANT TO THE
EXEMPTION FROM THE 1933 ACT PROVIDED BY RULE 144A THEREUNDER, (D) PURSUANT
TO THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY RULE 144
THEREUNDER, IF AVAILABLE, OR (E) PURSUANT TO AN EFFECTIVE
<PAGE> 77
-71-
REGISTRATION STATEMENT UNDER THE 1933 ACT. THE HOLDER HEREOF FURTHER AGREES
THAT HEDGING TRANSACTIONS INVOLVING SUCH SECURITIES MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE 1933 ACT. DELIVERY OF THIS CERTIFICATE MAY
NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK
EXCHANGES IN CANADA. A NEW CERTIFICATE, BEARING NO LEGEND, DELIVERY OF
WHICH WILL CONSTITUTE "GOOD DELIVERY" MAY BE OBTAINED FROM MONTREAL TRUST
COMPANY, AS REGISTRAR AND TRANSFER AGENT FOR THE CORPORATION, UPON DELIVERY
OF THIS CERTIFICATE AND AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION AND THE TRANSFER AGENT ADDRESSED TO THE CORPORATION AND THE
TRANSFER AGENT TO THE EFFECT THAT SUCH SECURITIES MAY BE FREELY RESOLD
WITHOUT RESTRICTION UNDER THE 1933 ACT."
and all certificates representing Common Shares issued in exchange therefor or
in substitution thereof will bear the same legend; provided, that the legend may
be removed upon delivery to the transfer agent of an opinion of counsel
satisfactory to the Corporation and the transfer agent to the effect that such
Common Shares may be freely resold without restriction under the 1933 Act.
This Debenture shall not become obligatory for any purpose until it
shall have been certified by or on behalf of the Trustee for the time being
under the Indenture.
IN WITNESS WHEREOF Repap Enterprises Inc. has caused this Debenture to
be signed by its duly authorized officers as of May 15, 1998.
REPAP ENTERPRISES INC.
By:
--------------------------------
By:
--------------------------------
(FORM OF TRUSTEE'S CERTIFICATE)
TRUSTEE'S CERTIFICATE
This Debenture is one of the 6% Convertible Subordinated Debentures
referred to in the Indenture within mentioned.
MONTREAL TRUST COMPANY, as Trustee
By:
--------------------------------
Authorized Officer
<PAGE> 78
-72-
REGISTRATION PANEL
(FOR USE OF TRUSTEE OR REGISTRAR)
<TABLE>
<CAPTION>
========================================== ==================================== ====================================
Place of Registry and
Date of Registry Name of Registered Owner Signature of Registrar
========================================== ==================================== ====================================
<S> <C> <C>
- ------------------------------------------ ------------------------------------ ------------------------------------
- ------------------------------------------ ------------------------------------ ------------------------------------
- ------------------------------------------ ------------------------------------ ------------------------------------
- ------------------------------------------ ------------------------------------ ------------------------------------
- ------------------------------------------ ------------------------------------ ------------------------------------
- ------------------------------------------ ------------------------------------ ------------------------------------
- ------------------------------------------ ------------------------------------ ------------------------------------
- ------------------------------------------ ------------------------------------ ------------------------------------
========================================== ==================================== ====================================
</TABLE>
Note to Debentureholders: In order to transfer this Debenture it must be
delivered to Montreal Trust Company. Certain transfers may also be subject to
additional restrictions as set forth in the Debenture, the Indenture or under
applicable law.
<PAGE> 79
-73-
(FORM OF NOTICE OF ELECTION)
NOTICE OF ELECTION TO CONVERT
Principal amount to be converted
(in multiples of USD$1,000) ........USD$
The undersigned holder of the within Debenture elects to convert the
above noted principal amount of such Debenture into Common Shares of Repap
Enterprises Inc. in accordance with the provisions of the within mentioned
Indenture and hereby directs that the certificate for such shares be registered
as follows:
<TABLE>
<CAPTION>
======================================= ================================================= =========================
Number of
Name in Full Address Shares
======================================= ================================================= =========================
<S> <C> <C>
- --------------------------------------- ------------------------------------------------- -------------------------
- --------------------------------------- ------------------------------------------------- -------------------------
- --------------------------------------- ------------------------------------------------- -------------------------
- --------------------------------------- ------------------------------------------------- -------------------------
- --------------------------------------- ------------------------------------------------- -------------------------
======================================= ================================================= =========================
</TABLE>
The undersigned hereby represents and warrants to the Corporation as
follows (check one):
[ ] (i) the undersigned is not a U.S. person and the Debenture is being
converted outside the United States in accordance with Rule 903 or
904, as the case may be, of Regulation S under the 1933 Act, as
applicable to Category 3 Securities and Rule 905 of Regulation S;
[ ] (ii) the undersigned is a U.S. person or the Debenture is being
converted within the United States or on behalf of or for the
account or benefit of a U.S. person and the undersigned (a) is the
original holder of the Debenture and executed a letter regarding
non-distribution of the Debentures in the United States in
connection with the initial subscription thereof, a copy of which
letter is being delivered concurrently herewith or (b) is a valid
transferee and has previously delivered to the Corporation and to
the Trustee, or is delivering concurrently herewith, a purchaser's
letter containing representations, warranties and agreements
substantially similar to those contained in the original U.S.
subscription agreement; or
[ ] (iii) the undersigned is providing a written opinion of counsel or other
evidence satisfactory to the Corporation and the Trustee that the
acquisition of Common Shares by such person is in compliance with
applicable United States federal and state securities laws.
<PAGE> 80
-74-
"United States" and "U.S. person" are as defined by Regulation S under
the United States Securities Act of 1933, as amended.
Dated:
--------------
Guarantee of Signature:
-----------------------------------
(Print name of Debentureholder)
- ----------------------------- -----------------------------------
(Signature of Debentureholder)
If shares are to be issued in the name of a person other than the
Debentureholder, the signature of the Debentureholder must be guaranteed by a
Canadian chartered bank or trust company or a brokerage firm which is a member
of a recognized stock exchange in Canada.
<PAGE> 81
-75-
ARTICLE 16
EXECUTION
16.1 COUNTERPARTS AND FORMAL DATE
This Indenture may be executed in several counterparts, each of which so
executed shall be deemed to be an original, and such counterparts together and
by facsimile shall constitute one and the same instrument and notwithstanding
their date of execution shall be deemed to bear date as of May 15, 1998.
IN WITNESS WHEREOF the parties hereto have executed these presents
under their respective corporate seals and the hands of their proper officers in
that behalf.
REPAP ENTERPRISES INC.
By: /s/ STEPHEN C. LARSON
--------------------------------
Name: Stephen C. Larson
Title: President and Chief
Executive Officer
By: /s/ TERRY W. MCBRIDE
--------------------------------
Name: Terry W. McBride
Title: Secretary
MONTREAL TRUST COMPANY
By: /s/ GUY L'ESPERANCE
--------------------------------
Name: Guy L'Esperance
Title: Manager, Client Servicing
By: /s/ CAROLE GHANIME
--------------------------------
Name: Carole Ghanime
Title: Trust Officer
<PAGE> 82
SCHEDULE A
REPAP ENTERPRISES INC.
FORM OF COMPLIANCE CERTIFICATE
TO: MONTREAL TRUST COMPANY, as Trustee
Re: Trust Indenture made effective __, 1998 between Repap Enterprises Inc. and
Montreal Trust Company, (the "Indenture").
This Certificate is delivered to the Trustee pursuant to Section __ of the
Indenture. Unless otherwise indicated, capitalized terms defined in the
Indenture have the same meanings when used herein.
I am the duly appointed [INSERT NAME OF OFFICE] of the Corporation and
hereby certify in such capacity for and on behalf of the Corporation, and not in
my personal capacity without assuming any personal liability whatsoever that
except as otherwise set forth in the attached exhibit:
1. There has not occurred any Material Adverse Effect.
2. All terms, covenants and conditions of the Indenture and the ancillary
documents thereto are being complied with.
3. No Event of Default has occurred other than those that have been expressly
disclosed, in writing, to and waived by the Trustee.
The undersigned officer acknowledges that the Trustee and the
Debentureholders are relying on this Certificate.
Dated at __, __ this ________________ day of __________, 199__.
Per:
-------------------------------
Name:
Title:
<PAGE> 1
Exhibit 5
JOINT FILING AGREEMENT
The undersigned each agree that (i) the Statement on Schedule 13D
relating to the Common Stock, no par value, of Repap Enterprises Inc. is
adopted and filed on behalf on each of them, (ii) all future amendments to such
Statement on Schedule 13D will, unless written notice to the contrary is
delivered as described below, be jointly filed on behalf of each of them, and
(iii) the provisions of Rule 13d-1(f)(1) under the Securities Exchange Act of
1934, as amended, apply to each of them. This agreement may be terminated with
respect to the obligation to jointly file future amendments to such Statement
on Schedule 13D as to any of the undersigned upon such person giving written
notice thereof to each of the other persons signatory hereto, at the principal
office thereof.
EXECUTED as of May 26, 1998.
ENRON CAPITAL & TRADE RESOURCES CORP.
By: /s/ Peggy B. Menchaca
-------------------------------------
Name: Peggy B. Menchaca
Title: Vice President and Secretary
ENRON CORP.
By: /s/ Peggy B. Menchaca
-------------------------------------
Name: Peggy B. Menchaca
Title: Vice President and Secretary
