EXHIBIT 1
August 28, 2000
TO: UPM-KYMMENE CORPORATION
ETELAESPLANADI 2
FIN - 00101
HELSINKI, FINLAND
Ladies and Gentlemen:
RE: ACQUISITION OF REPAP ENTERPRISES INC.
IN CONSIDERATION OF UPM-KYMMENE CORPORATION ("UPM-KYMMENE") entering into an
acquisition agreement dated the date hereof with, and agreeing to cause its
wholly-owned subsidiary to participate in an AMALGAMATION WITH, REPAP
ENTERPRISES INC. ("REPAP") (the "TRANSACTION"), THIS LETTER AGREEMENT (THE
"AGREEMENT") sets out the terms on which The Third Avenue Trust, for the Third
Avenue Value Fund Series and the Third Avenue Small Cap Value Fund Series (the
"SHAREHOLDER") undertakes to take certain actions and do certain things in
respect of the Transaction.
The terms of the Transaction are summarized in the acquisition agreement dated
the date hereof between UPM-Kymmene and Repap (the "ACQUISITION AGREEMENT"), and
terms used herein and not otherwise defined shall have the meanings set forth in
the Acquisition Agreement. A copy of the Acquisition Agreement is attached
hereto AS SCHEDULE 1.
1. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER AND UPM-KYMMENE
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1.1 The Shareholder hereby represents and warrants to you (and acknowledges
that you are relying upon such representations and warranties):
(a) that the common shares in the capital of Repap set forth on SCHEDULE 2
TO THIS AGREEMENT (THE "SHARES") include all common shares held of
record, beneficially owned by, or for which voting or dispositive power
is granted to the Shareholder or to any trust or associate thereof for
the benefit of the Shareholder. The Shareholder has sole voting power,
and, unless otherwise stated, has exclusive right of disposition and
sole power to agree to all of the matters set forth in this Agreement.
The Shareholder or other owners of such Shares has good and marketable
title to its Shares, free and clear of any and all liens, pledges,
mortgages, charges, restrictions, security interests, adverse claims
and demands or rights of others OF ANY NATURE OR KIND WHATSOEVER
("ENCUMBRANCES"), except AS OTHERWISE NOTED ON SCHEDULE 2 (which
Encumbrances will be fully and completely discharged as of the
Effective Date). Other than the Shares, no common shares or securities
of Repap convertible into common shares are beneficially owned or
controlled, directly or indirectly, by the Shareholder;
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(b) the Shareholder has the legal capacity to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Shareholder, and,
assuming the due authorization, execution and delivery by UPM-Kymmene,
this Agreement constitutes the legal, valid and binding obligation of
the Shareholder, enforceable against it in ACCORDANCE WITH ITS TERMS,
subject to laws of general application and bankruptcy, insolvency and
other similar laws affecting creditors' rights generally and general
principles of equity;
(c) neither the execution and delivery of this Agreement by the
Shareholder, the consummation by the Shareholder of the transactions
contemplated hereby nor the compliance by the Shareholder with any of
the provisions hereof shall: (i) result in any breach of, or constitute
a default (or an event which with notice or lapse of time or both would
become a default) (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under
any of the terms, conditions or provisions of any note, loan agreement,
bond, mortgage, indenture, contract, license, agreement, lease, permit
or other instrument or obligation to which the Shareholder is a party
or by which the Shareholder or any of its properties or assets
(including its Shares) may be bound, (ii) require on the part of the
Shareholder any filing with (other than pursuant to the requirements of
applicable securities legislation (which filings the Shareholder will
undertake)) or permit, authorization, consent or approval of, any
Governmental Entity, or (iii) subject to compliance with any orders or
laws contemplated by the Acquisition Agreement, violate any order,
writ, injunction, decree, judgment, or Laws applicable to the
Shareholder or any of its properties or assets, excluding from the
foregoing such violations, breaches, defaults or failures to make any
filing or to obtain any permit, authorization, consent or approval
which would not, individually or in the aggregate, impair the ability
of the Shareholder to consummate the transactions contemplated hereby;
(d) that there is no private or governmental action, suit, proceeding,
claim, arbitration or investigation pending before any Governmental
Entity, or, to the knowledge of the Shareholder, threatened against the
Shareholder or any of its properties that, individually or in the
aggregate, could reasonably be expected to have a material adverse
effect on the Shareholder's ability to consummate the transactions
contemplated by this Agreement. There is no judgment, decree or order
against the Shareholder that could prevent, enjoin, alter or materially
delay any of the transactions contemplated by this Agreement, or that
could reasonably be expected to have a material adverse effect on the
Shareholder's ability to consummate the transactions contemplated by
this Agreement; and
(e) the Shareholder has not previously granted or agreed to grant any proxy
or other right to vote in respect of its Shares or entered into any
voting trust, nor pooling or other agreement with respect to the right
to vote, to call meetings of shareholders or to give consents or
approvals of any kind as to its Shares except those which are no longer
of any force or effect.
1.2 UPM-Kymmene hereby represents and warrants to the Shareholder (and
acknowledges that the Shareholder is relying upon such representations and
warranties):
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(a) that UPM-Kymmene is a company duly incorporated and validly
existing under the laws of Finland; and
(b) that UPM-Kymmene has the requisite power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby,
and that this Agreement constitutes the valid and binding obligation of
UPM-Kymmene. This Agreement has been duly executed and delivered by
UPM-Kymmene and, assuming the due execution and delivery by the
Shareholder, is enforceable against it in accordance with its terms,
subject to laws of general application and bankruptcy, insolvency and
other similar laws affecting creditors' rights generally and general
principles of equity.
2. VOTING RIGHTS
2.1 The Shareholder hereby represents and warrants to you and covenants with
you that, between the date of this Agreement and the earlier of: (a) the
date of termination of the Acquisition Agreement in accordance with its
terms, (b) the date of termination of this Agreement in accordance with its
terms; and (c) the Effective Date of the Transaction (such earlier date
BEING THE "EXPIRY DATE"), the Shareholder shall not: (i) sell, transfer,
gift, assign, pledge, hypothecate, encumber or otherwise dispose of any of
its Shares or enter into any agreement, arrangement or understanding in
connection therewith, without having first obtained the prior written
consent of UPM-Kymmene, or (ii) except as contemplated herein, grant any
proxies or powers of attorney, deposit its Shares into a voting trust or
enter into a voting agreement, understanding or arrangement with respect to
such Shares, without having first obtained the prior written consent of
UPM-Kymmene.
2.2 The Shareholder agrees that, until the Expiry Date, it shall not, directly
or indirectly, negotiate with, solicit, initiate or encourage submission of
proposals or offers from, or provide information to, any other person,
entity or group relating to an Acquisition Proposal or any Shares.
2.3 The Shareholder hereby irrevocably undertakes, until the Expiry
Date:
(a) to vote (or cause to be voted) all the Shares at any meeting of the
shareholders of Repap, and in any action by written consent of the
shareholders of Repap: (i) in favour of the approval, consent,
ratification and adoption of the Transaction (and any actions required
in furtherance thereof); and (ii) against any action that would impede,
interfere or discourage the Transaction (including for greater
certainty in favour of any Superior Proposal) and against any action
that would result in any breach of any representation, warranty or
covenant of Repap in the Acquisition Agreement. Upon the written
request or direction of UPM-Kymmene, the Shareholder shall execute a
form of proxy (effective only until the Expiry Date) in respect of any
such resolution appointing such person or persons as UPM-Kymmene may
request or direct as proxy for such Shareholder, with full power of
substitution, to attend, vote and otherwise act for and on behalf of
the Shareholder in respect of all Shares and in respect of all such
matters which may come before a meeting of the shareholders of Repap
relating to the Transaction (other than any change in the terms of the
Transaction which would decrease the value of the consideration to be
received by the Shareholder) including any action that would impede,
interfere or discourage the Transaction and the Shareholder shall not
be responsible for the voting under such proxy; and
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(b) not to, without the prior written consent of UPM-Kymmene, requisition
or join in the requisition of any meeting of the shareholders of Repap
for the purpose of considering any resolution with respect to any of
the matters referred to in subsection 2.3(a).
3. SUPERIOR PROPOSAL
3.1 In the event that a Superior Proposal is made, announced or otherwise
disclosed to Repap's shareholders on or prior to the Expiry Date, and
either:
(a) the Match Period (as defined in Section 4.6(1) of the Acquisition
Agreement) has expired without UPM-Kymmene having offered to amend the
terms of the Acquisition Agreement as contemplated by Section 4.6(2) of
the Acquisition Agreement; or
(b) the Match Period has expired, and the Board of Directors of Repap has
rejected an offer to amend the terms of the Acquisition Agreement made
by UPM-Kymmene in accordance with the provisions of Section 4.6(2) of
the Acquisition Agreement;
the Shareholder shall have the right to terminate this Agreement
upon notice to UPM-Kymmene.
4. COVENANTS
4.1 The Shareholder agrees:
(a) to details of this Agreement being set out in any information circular
produced by, or any filing to be made with the OSC or the SEC by, Repap
and/or UPM-Kymmene in connection with the Transaction;
(b) to this Agreement being filed as an exhibit to any document filed with
the OSC or the SEC or otherwise being available for inspection to the
extent required by Law; and
(c) that an award of monetary damages would not be an adequate remedy for
any loss incurred by reason of any breach of this Agreement and that,
in the event of any breach or threatened breach of this Agreement by
the Shareholder, UPM-Kymmene will be entitled to equitable relief,
including injunctive relief and specific performance. Such remedies
will not be the exclusive remedies for any breach or threatened breach
of this Agreement by the Shareholder but will be in addition to all
other remedies available at law or in equity to UPM-Kymmene.
4.2 UPM-Kymmene agrees not to amend the definition of the term "Outside Date",
section 2.4, subsection 6.3(1), subsection 6.3(2), clause 6.3(3)(d) or
subsection 6.3(4) of the Acquisition Agreement without the prior written
consent of the Shareholder, which consent shall not be unreasonably
withheld.
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4.3 The Shareholder agrees, until the Expiry Date, not to exercise any rights
of dissent.
5. MISCELLANEOUS
5.1 The headings in this Agreement are for reference only and shall not affect
the meaning or interpretation of this Agreement.
5.2 This Agreement (including the Schedules attached hereto) constitutes the
entire agreement and supersedes all prior agreements and understandings,
both oral and written, among the parties with respect to the subject matter
hereof.
5.3 Any provision in this Agreement may be amended or waived if, and only if,
such amendment or waiver is in writing and signed, in the case of an
amendment, by the Shareholder and UPM-Kymmene or in the case of a waiver,
by the party against whom the waiver is to be effective. No failure or
delay by any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise.
5.4 Any date, time or period referred to in this Agreement shall be of the
essence except to the extent to which UPM-Kymmene and the Shareholder agree
in writing to vary any date, time or period, in which event the varied
date, time or period shall be of the essence.
5.5 Each of UPM-Kymmene and the Shareholder shall bear its own expenses
incurred in connection with this Agreement and the transactions
contemplated hereby.
5.6 All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be given (and shall be deemed to have been
duly given upon receipt) by delivery in person, by telecopy, or facsimile,
or by a nationally recognized courier service to the respective parties at
their ADDRESSES AS SPECIFIED IN SCHEDULE 3 hereto.
5.7 If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of this
Agreement is not affected in any manner materially adverse to any party.
Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate
in good faith to modify this Agreement so as to effect the original intent
of the parties as closely as possible in a mutually acceptable manner in
order that the terms of this Agreement remain as originally contemplated to
the fullest extent possible.
5.8 The provisions of this Agreement shall be binding upon and enure to the
benefit of the parties hereto and their respective successors and permitted
assigns, provided that no party may assign, delegate or otherwise transfer
any of its rights, interests or obligations under this Agreement without
the prior written consent of the other party hereto, except that
UPM-Kymmene may assign, delegate or otherwise transfer any of its rights,
interests or obligations under this Agreement to a wholly-owned subsidiary,
without reducing its own obligations hereunder, without the consent of the
Shareholder.
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5.9 This Agreement is governed by the laws of the Province of Ontario and the
federal laws of Canada applicable therein. The Shareholder hereby
irrevocably attorns to the jurisdiction of the Courts of the Province of
Ontario and irrevocably agrees that the Courts of the Province of Ontario
are to have jurisdiction to settle any disputes which may arise out of or
in connection with this Agreement and that, accordingly, any SUIT, ACTION
OR PROCEEDING ("PROCEEDINGS") arising out of or in connection with this
Agreement may be brought in such Courts. The Shareholder hereby waives any
objection which it may have now or hereafter to the venue of any
Proceedings in the Courts of the Province of Ontario and any claim that any
Proceedings have been brought in an inconvenient forum and further
irrevocably agrees that a judgment in any Proceedings brought in the Courts
of the Province of Ontario shall be conclusive and binding upon the
Shareholder and may be enforced in the courts of any other jurisdiction.
5.10 This Agreement may be executed by facsimile and in one or more
counterparts, all of which shall be considered one and the same agreement.
THIS AGREEMENT HAS BEEN AGREED AND ACCEPTED THIS 28TH day of August, 2000.
THE THIRD AVENUE TRUST, FOR
THE THIRD AVENUE VALUE FUND
SERIES AND THE THIRD AVENUE
SMALL CAP VALUE FUND SERIES
By: /s/ Martin J. Whitman
--------------------------
Name: Martin J. Whitman
Title: Chairman
UPM-KYMMENE CORPORATION
By: /s/
--------------------------
Name:
Title: Chief Executive Officer
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SCHEDULE 1
ACQUISITION AGREEMENT
Omitted.
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SCHEDULE 2
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SHAREHOLDER NUMBER OF SHARES
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The Third Avenue 110,174,479
Value Fund Series
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The Third Avenue 12,253,700
Small Cap Value
Fund Series
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TOTAL 122,428,179
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.
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SCHEDULE 3
ADDRESS
UPM-Kymmene Corporation
Etelaesplanadi 2
FIN - 00101
Helsinki, Finland
Attention: Reko Aalto-Setala
Telecopier No.: (358) 204 15 0304
with a copy to:
Osler, Hoskin & Harcourt LLP
100 King Street West, Suite 6100
First Canadian Place
Toronto, Ontario M5X 1B8
Attention: Dale R. Ponder
Telecopier No.: (416) 862-6666
White & Case LLP
1155 Avenue of the Americas
New York, New York
10036-2787
Attention: Timothy B. Goodell
Telecopier No.: (212) 354-8113
The Third Avenue Trust, for the
Third Avenue Value Fund Series and the
Third Avenue Small Cap Value Fund Series
767 Third Avenue
New York, NY 10017
Attention: Marty Whitman
Telecopier No.: (212) 888-6704
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