September 15, 2000

Dear Repap shareholder:

The Board of Directors cordially invites you to attend a special meeting (the "Meeting") of shareholders of Repap Enterprises Inc. ("Repap"), scheduled to be held at 11:00 a.m. (Toronto time) on Monday, October 16, 2000 at the Le Royal Meridian King Edward Hotel, Belgravia Room, 37 King Street East, Toronto, Ontario, Canada, M5C 1E9.

At the Meeting, holders of common shares of Repap ("Repap Common Shareholders") and holders of preferred shares of Repap ("Repap Preferred Shareholders" and collectively with Repap Common Shareholders, "Repap Shareholders") will be asked to consider and approve the amalgamation (the "Amalgamation") between Repap and a wholly-owned Canadian subsidiary of UPM-Kymmene Corporation, a corporation existing under the laws of Finland ("UPM-Kymmene") to form an amalgamated company ("Amalco").

Further to the Amalgamation, Repap Common Shareholders will receive, as consideration for each common share of Repap ("Repap Common Share") held, one Amalco Special Share that will be purchased by UPM-Kymmene for CAD$0.20 per share in cash payable immediately after the completion of the Amalgamation. Repap Preferred Shareholders will receive, as consideration for each preferred share, Series C held, one Amalco Preferred Share, Series C and, as consideration for each preferred share, Series F held, one Amalco Preferred Share, Series F. Immediately after the Amalgamation has occurred, UPM-Kymmene or a wholly-owned subsidiary of UPM-Kymmene will offer to purchase each Amalco Preferred Share, Series C and each Amalco Preferred Share, Series F for CAD$25.00 per share in cash.

For the Amalgamation to proceed, it must be approved by not less than two-thirds of the votes cast at the Meeting by Repap Shareholders, voting together, and by not less than two-thirds of the votes cast at the Meeting by Repap Common Shareholders, voting as a class. The Amalgamation is also subject to various regulatory approvals.

To complete the Amalgamation, the stated capital account for the Repap Common Shares must be adjusted to reflect the value of Repap's assets. At the Meeting, Repap Common Shareholders will be asked to consider and approve the reduction of the stated capital of the Repap Common Shares (the "Reduction of Stated Capital") to an amount equal to CAD$0.20 multiplied by the number of issued and outstanding Repap Common Shares as of 5:00 p.m. on the business day before the Meeting.

For the Reduction of Stated Capital to proceed, it must also be approved by not less than two-thirds of the votes cast at the Meeting by Repap Common Shareholders.

The Board of Directors has considered the proposed amalgamation with UPM-Kymmene at length. The Board of Directors is of the view that the Amalgamation is fair to Repap Shareholders and in the best interests of Repap. The Board of Directors unanimously recommends that Repap Common Shareholders vote FOR the resolution approving the Reduction of Stated Capital, that Repap Shareholders vote for the resolution approving the Amalgamation (the "Repap Amalgamation Resolution") and that the Repap Common Shareholders vote FOR the Repap Amalgamation Resolution as a class.

As well, certain significant Repap Shareholders have entered into agreements with UPM-Kymmene pursuant to which they have agreed, in the absence of a Superior Proposal, to support the Amalgamation and vote all of the Repap Shares owned or controlled by them (collectively, representing approximately 34.5% of the outstanding Repap Common Shares and 100% of the outstanding preferred shares of Repap on the date of such agreements) in favour of the Repap Amalgamation Resolution.

Included with this letter is a Notice of Special Meeting, a Management Information Circular (the "Circular"), a form of proxy (printed on blue paper for Repap Common Shareholders and on yellow paper for Repap Preferred Shareholders) and a Letter of Transmittal (on pink paper) for Repap Shareholders. Persons holding shares of Repap ("Repap Shares") through an intermediary may receive a form requesting instructions from such intermediary rather than a form of proxy or Letter of Transmittal. The accompanying Circular provides a description of the Reduction of Stated Capital and the Amalgamation and a discussion of certain tax matters. We urge you to consider carefully all of the information in the Circular. If you require assistance, please consult your financial, legal or other professional advisors.

It is important that your Repap Shares be represented at the Meeting. Whether or not you are able to attend the Meeting in person, please complete, sign and date the applicable form of proxy and return it in the envelope provided as soon as possible. Completing and returning the applicable form of proxy will not limit your right to vote in person if you wish to attend the Meeting and vote personally.

You will not receive the consideration payable pursuant to the Amalgamation until the Amalgamation is completed and you have returned your properly completed Letter of Transmittal and other required documents and certificates, as applicable, to Montreal Trust Company, P.O. Box 1900, Station B, Montreal, Quebec, Canada H3B 3L6. Please read the instructions in the Letter of Transmittal carefully.

The completion of the Amalgamation will occur as soon as practicable after the Meeting. We currently expect that the effective date of the Amalgamation will occur on or about October 16, 2000.

On behalf of Repap, we would like to thank all Repap Shareholders for their ongoing support.

NOTICE IS HEREBY GIVEN that a special meeting (the "Meeting") of the holders of common shares (the "Repap Common Shareholders") and of the holders of preferred shares (the "Repap Preferred Shareholders" and collectively with the Repap Common Shareholders, the "Repap Shareholders") of Repap Enterprises Inc. ("Repap") will be held at the Le Royal Meridian King Edward Hotel, Belgravia Room, 37 King Street East, Toronto, Ontario, Canada, M5C 1E9, on Monday, October 16, 2000 at 11:00 a.m. (Toronto time) for the following purposes:

1. To pass, with or without variation, a special resolution (the "Repap Reduction of Stated Capital Resolution") to approve the reduction of the stated capital of the common shares of Repap (the "Reduction of Stated Capital") under section 38(1) of the Canada Business Corporations Act to an amount equal to CAD$0.20 multiplied by the number of issued and outstanding common shares of Repap immediately prior to the Amalgamation.
2. To pass, with or without variation, special resolutions (the "Repap Amalgamation Resolution") of the Repap Shareholders and the Repap Common Shareholders, as a class, to approve the amalgamation (the "Amalgamation") under section 181 of the Canada Business Corporations Act (the "CBCA").
3. To transact such further or other business, including any amendments and variations to the foregoing, as may properly come before the Meeting or any adjournment or postponement thereof.

The Reduction of Stated Capital and the Amalgamation are described in the accompanying Management Information Circular (the "Circular"). The full text of the Repap Reduction of Stated Capital Resolution and the Repap Amalgamation Resolution are set out in Appendix A and Appendix B, respectively, to the Circular.

Two forms of proxy accompany this Notice: (i) a blue proxy applicable to Repap Common Shareholders; and (ii) a yellow proxy applicable to Repap Preferred Shareholders. Only Repap Common Shareholders are entitled to vote on the Repap Reduction of Stated Capital Resolution. Repap Common Shareholders and Repap Preferred Shareholders are entitled to vote together on the Repap Amalgamation Resolution and Repap Common Shareholders shall also be entitled to vote on the Repap Amalgamation Resolution separately as a class. If you have received the wrong form of proxy, please contact Montreal Trust Company for the correct form at the address or facsimile number set out below.

The specific details of all matters proposed to be put before the Meeting are set forth in the accompanying Circular. Repap Shareholders registered at the close of business on September 14, 2000 will be entitled to receive notice of the Meeting.

Under section 190 of the CBCA, a registered Repap Shareholder may dissent in respect of the Repap Amalgamation Resolution. If the Amalgamation is completed, dissenting Repap Shareholders who comply with procedures set forth in the CBCA will be entitled to be paid the fair value of their Repap shares. This right is summarized in the Circular and section 190 of the CBCA is set forth in Appendix E to the Circular. Failure to comply with the requirements set forth in section 190 of the CBCA may result in the loss of any right to dissent.

Toronto, Ontario
Canada
September 15, 2000

GLOSSARY OF TERMS

INFORMATION CONCERNING THE MEETING

Solicitation of Proxies

Voting by Proxies

Revocability of Proxies

Dissenting Shareholder Rights

Voting Shares and Principal Holders thereof

Procedures for Payment Pursuant to Amalgamation and Transfer of Repap Shares

STATED CAPITAL REDUCTION

THE AMALGAMATION

General

Amalco Special Shares

Amalco Preferred Shares

Background

Recommendation of the Board of Directors

Opinion of Repap's Financial Advisor

Repap Shareholders Approval of the Amalgamation

Interests of Certain Persons in the Matters to be Acted Upon at the Meeting

Regulatory Matters

Notice to U.S. Repap Shareholders

Trading of Common Shares of Repap

UPM-KYMMENE

THE ACQUISITION AGREEMENT

Representations and Warranties

Covenants

Covenants Regarding Non-Solicitation

Conditions to Closing

Termination and Payment of Break Fee

OPTION AGREEMENT

SUPPORT AGREEMENTS

CANADIAN TAX CONSIDERATIONS FOR REPAP SHAREHOLDERS

Residents of Canada

Non-residents of Canada

U.S. TAX CONSIDERATIONS FOR REPAP SHAREHOLDERS

U.S. Holders

Non-U.S. Holders

Backup withholding and Information Reporting

DISSENTING SHAREHOLDER RIGHTS

CERTAIN REGULATORY AND LEGAL MATTERS

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

Compensation of Directors

Summary Compensation Table

Option grants during the most recently completed financial year

Aggregated Option Exercises and Financial Year-end Option Value

Option and SAR Repricings

Pension Benefits

Employment, Change in Control and Service Agreements

Directors' and Officers' Liability Insurance

COMPENSATION COMMITTEE

Composition of Compensation Committee

Report on Executive Compensation by the Compensation Committee

STOCK PERFORMANCE

APPROVAL OF DIRECTORS

CONSENT OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION

APPENDIX A - SPECIAL RESOLUTION REGARDING REDUCTION

  OF STATED CAPITAL

APPENDIX B - SPECIAL RESOLUTION REGARDING AMALGAMATION

APPENDIX C - OPINION OF DONALDSON, LUFKIN & JENRETTE

  SECURITIES CORPORATION

APPENDIX D - AMALGAMATION AGREEMENT

APPENDIX E - SECTION 190 OF THE CANADA BUSINESS CORPORATIONS ACT

The Amalgamation Agreement provides for the amalgamation of Repap and a wholly-owned Canadian subsidiary of UPM-Kymmene in a transaction in which each Repap Common Shareholder (other than Repap Common Shareholders who properly exercise their Dissent Rights) will receive, as consideration for each Repap Common Share held, one Amalco Special Share. Immediately after the Amalgamation has occurred, such Amalco Special Shares will be immediately purchased by UPM-Kymmene or a wholly-owned subsidiary of UPM-Kymmene and CAD$0.20 per share will be paid in cash to each former Repap Common Shareholder.

Each Repap Preferred Shareholder (other than Repap Preferred Shareholders who properly exercise their Dissent Rights) will receive, as consideration for each Repap Preferred Share, Series C held, one Amalco Preferred Share, Series C and, as consideration for each Repap Preferred Share, Series F held, one Amalco Preferred Share, Series F. Immediately after the Amalgamation has occurred, UPM-Kymmene or a wholly-owned subsidiary of UPM-Kymmene will offer to purchase each Amalco Preferred Share, Series C and each Amalco Preferred Share, Series F for CAD$25.00 per share in cash.

To complete the Amalgamation, the stated capital account for Repap Common Shares must be adjusted in order to reflect the value of Repap's assets. See "Stated Capital Reduction".

UPM-Kymmene, which is based in Helsinki, Finland, is one of the world's largest forest products companies and paper producers. UPM-Kymmene group's turnover in 1999 amounted to EUR 8.3 billion (CAD$11.1 billion) and operating profit to EUR 1.6 billion (CAD$2.1 billion). UPM-Kymmene's product range covers printing papers, converting materials and wood products.

UPM-Kymmene Printing Papers, which comprise magazine papers, newsprint and fine papers, account for over half of UPM-Kymmene group's turnover. UPM-Kymmene group is the world's second largest producer of magazine papers and is among the top ten producers of newsprint and fine papers. UPM Converting is among Europe's leading suppliers of converting materials. UPM-Kymmene group is also Europe's biggest plywood producer and one of the continent's biggest producers of sawn timber.

UPM-Kymmene operations are focused on European Union countries and the United States, where the company owns Blandin Paper Company in Minnesota producing LWC (light weight coated) magazine papers. North American sales account for 11% of UPM-Kymmene group's turnover. UPM-Kymmene group has production plants in 15 countries and 170 sales and distribution companies spanning five continents.

At the end of 1999, UPM-Kymmene had a total of 30,963 employees and 52,000 registered shareholders. UPM-Kymmene's market capitalization at the end of 1999 was EUR 10.7 billion. UPM-Kymmene's shares are quoted on the Helsinki and New York stock exchanges.

The Board of Directors has considered the proposed Amalgamation at length. The Board of Directors is of the view that the Amalgamation is fair to Repap Shareholders and in the best interests of Repap. The Board of Directors came to these determinations based on, among other things, the opinion of DLJ, Repap's financial advisor, to the effect that, as of the date of the DLJ Fairness Opinion and, based on and subject to, the assumptions, limitations and qualifications included in the DLJ Fairness Opinion, the consideration to be received by Repap Common Shareholders, other than those Repap Common Shareholders who are affiliates of Repap, pursuant to the Amalgamation was fair to such Repap Common Shareholders from a financial point of view. The Board of Directors unanimously recommends that Repap Common Shareholders vote for the Repap Reduction of Stated Capital Resolution, that Repap Shareholders vote FOR the Repap Amalgamation Resolution and that the Repap Common Shareholders vote FOR the Repap Amalgamation Resolution as a class. See "The Amalgamation - Recommendation of the Board of Directors".

DLJ has acted as financial advisor to Repap in connection with the Amalgamation. On August 28, 2000, DLJ has provided its opinion to the Board of Directors that, as of the date of the DLJ Fairness Opinion and, based on and subject to, the assumptions, limitations and qualifications included in the DLJ Fairness Opinion, the consideration to be received by Repap Common Shareholders, other than those Repap Common Shareholders who are affiliates of Repap, pursuant to the Amalgamation was fair to such Repap Common Shareholders from a financial point of view. See "The Amalgamation - Opinion of Repap's Financial Advisor" and the complete text of the DLJ Fairness Opinion set out in Appendix C to this Circular, which should be read in its entirety.

Pursuant to the Acquisition Agreement, Repap has agreed that it shall not solicit, initiate, knowingly encourage or otherwise facilitate the initiation of any inquiries or proposals regarding an Acquisition Proposal or participate in any discussions or negotiations regarding any Acquisition Proposal. Nothing in the Acquisition Agreement prevents, however, the Board of Directors from considering and participating in any discussions or negotiations regarding an unsolicited bona fide written Acquisition Proposal, in respect of which any required financing has been demonstrated to the satisfaction of the Board of Directors to be reasonably likely to be obtained or available and which the Board of Directors has determined in good faith, after consultation with its financial advisors and with outside counsel, is a Superior Proposal.

Repap has agreed not to accept an unsolicited Superior Proposal unless: (a) it has provided UPM-Kymmene with a copy of the Superior Proposal document; and (b) five calendar days shall have elapsed.

During such five-calendar day period, UPM-Kymmene may offer to amend the terms of the Acquisition Agreement. See "The Acquisition Agreement - Covenants Regarding Non-Solicitation".

The Acquisition Agreement may be terminated if the Effective Date does not occur on or prior to December 20, 2000. Either UPM-Kymmene or Repap may also terminate the Acquisition Agreement if, among other reasons, the Repap Shareholders' approval shall not have been obtained at the Meeting. Furthermore, the Acquisition Agreement may be terminated by UPM-Kymmene if the Board of Directors has approved or recommended any Acquisition Proposal.

The Acquisition Agreement provides that a "Break" fee of CAD$18 million is payable to UPM-Kymmene in certain circumstances of termination of the Acquisition Agreement. See "The Acquisition Agreement - Termination and Payment of Break Fee".

Repap has granted to UPM-Kymmene an option to purchase up to 19.9% of the Repap Common Shares at a price of CAD$0.20 per Repap Common Share that may be exercised if an Acquisition Proposal is made. The sum of the proceeds realizable by UPM-Kymmene on the exercise of the Option and the Break Fee is limited to CAD$18 million. See "Option Agreement".

On August 28, 2000, the Principal Shareholders entered into the Support Agreements with UPM-Kymmene pursuant to which the Principal Shareholders agreed that they will, in the absence of a Superior Proposal, support and vote all of the Repap Common Shares owned or controlled by them (collectively, representing approximately 30.8% of the outstanding Repap Common Shares on the date of the Support Agreements) in favour of the Repap Amalgamation Resolution.

On September 13, 2000, Mr. George S. Petty, indirectly through two corporations he controls, entered into a support agreement with UPM-Kymmene on the same terms as those contained in the Support Agreements with the Principal Shareholders. Mr. Petty indirectly beneficially owns approximately 3.7% of the outstanding Repap Common Shares and 100% of the outstanding Repap Preferred Shares. See "Support Agreements".

The Meeting will be held at the Le Royal Meridian King Edward Hotel, Belgravia Room, 37 King Street East, Toronto, Ontario, Canada, M5C 1E9 on Monday, October 16, 2000 at 11:00 a.m. (Toronto time). At the Meeting, the Repap Shareholders will be asked to approve the Repap Reduction of Stated Capital Resolution and the Repap Amalgamation Resolution.

The Repap Reduction of Stated Capital Resolution must be approved by not less than two-thirds of the votes cast at the Meeting by Repap Common Shareholders, present or voting at the Meeting at which a quorum is present. See "Stated Capital Reduction".

The Repap Amalgamation Resolution must be approved by not less than two-thirds of the votes cast by Repap Shareholders voting together and by not less than two-thirds of the votes cast at the Meeting by Repap Common Shareholders, voting separately as a class, present or voting by proxy at the Meeting at which a quorum is present. See "The Amalgamation - Repap Shareholders Approval of the Amalgamation".

The completion of the Amalgamation is subject to obtaining certain governmental consents and approvals (including the Regulatory Approvals). While there can be no assurance that the necessary governmental consents and approvals will be obtained prior to the Meeting or at all. UPM-Kymmene and Repap currently expect that all such consents and approvals that are conditions to completion of the Amalgamation will have been obtained or otherwise resolved by the date of the Meeting. See "The Amalgamation - Regulatory Matters".

The obligations of UPM-Kymmene and Repap to complete the Amalgamation are subject to the satisfaction or waiver, where permissible, of certain other conditions set forth in the Acquisition Agreement, including obtaining the approval of the Amalgamation from Repap Shareholders. See "The Acquisition Agreement - Conditions to Closing".

The Amalgamation will be completed and the Amalco Special Shares and the Amalco Preferred Shares acquired or redeemed, as the case may be, as soon as practicable after receipt of the requisite approvals from Repap Shareholders and after all other conditions to the Amalgamation have been satisfied or waived. It is currently expected that the Effective Date will occur on or about October 16, 2000. See "The Amalgamation - Effective Date of the Amalgamation".

If the requisite Regulatory Approvals and approvals from Repap Shareholders are obtained and the Amalgamation is completed, each Repap Common Shareholder (other than Repap Common Shareholders who properly exercise their Dissent Rights) will receive, as consideration for each Repap Common Share held, one Amalco Special Share. Immediately after the Amalgamation has occurred, all such Amalco Special Shares will be purchased by UPM-Kymmene, or a wholly-owned subsidiary of UPM-Kymmene, and CAD$0.20 per share will be paid in cash to the former Repap Common Shareholder.

Repap Preferred Shareholders (other than Repap Preferred Shareholders who properly exercise their Dissent Rights) will receive, as consideration for each Repap Preferred Share, Series C held, one Amalco Preferred Share, Series C and for each Repap Preferred Share, Series F held, one Amalco Preferred Share, Series F Immediately after the Amalgamation has occurred, UPM-Kymmene or a wholly-owned subsidiary of UPM-Kymmene will offer to purchase each Amalco Preferred Share, Series C and each Amalco Preferred Share, Series F for CAD$25.00 per share in cash. In order to obtain such consideration, a Repap Shareholder must submit to the Exchange Agent a validly completed Letter of Transmittal together with its Repap Share certificates and the other documents required thereby. See "Information Concerning the Meeting - Procedures for Payment Pursuant to Amalgamation".

Repap Shareholders who properly exercise their Dissent Rights will be entitled to be paid the fair value of their Repap Shares. The Dissent Procedures require that a Repap Shareholder who wishes to dissent must be a registered shareholder and must provide to Repap a Dissent Notice at or prior to the Meeting. The execution or exercise of a proxy does not constitute a Dissent Notice. See "Dissenting Shareholder Rights".

The Reduction of Stated Capital will not result in any negative Canadian tax consequences. No gain or loss will be realized by a Repap Shareholder when the Repap Shares are converted on the Amalgamation into Amalco Shares.

A Repap Shareholder who, at all relevant times, for the purposes of the Canadian Tax Act, holds Repap Common Shares and will hold Amalco Special Shares as capital property, deals with Repap, Amalco and UPM-Kymmene at arm's length, and is resident or deemed to be resident in Canada, will realize a capital gain (or capital loss) on the disposition of the Amalco Special Shares to UPM-Kymmene pursuant to the terms of such shares, to the extent that the Repap Shareholder's proceeds of disposition of the Amalco Special Shares, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base to the Repap Shareholder of such Amalco Special Shares, which will be equal to the Repap Shareholder's adjusted cost base of his or her Repap Common Shares. A Repap Shareholder's proceeds of disposition will be equal to the amount of cash received by the Repap Shareholder for the Amalco Special Shares.

A Repap Shareholder who, at all relevant times, for the purposes of the Canadian Tax Act and any relevant income tax convention, holds Repap Common Shares and will hold Amalco Special Shares as capital property, deals with Repap, Amalco and UPM-Kymmene at arm's length, has not been and will not be resident or deemed to be resident in Canada, does not use or hold, and is not deemed to use or hold, the Repap Common Shares or Amalco Special Shares in connection with carrying on a business in Canada, and to whom such shares do not otherwise constitute "taxable Canadian property", will not be subject to tax under the Canadian Tax Act on the Acquisition. See "Canadian Tax Considerations for Repap Shareholders".

For U.S. federal income tax purposes, the receipt of Amalco Special Shares in exchange for Repap Common Shares will be disregarded, and a Repap Shareholder who holds Repap Common Shares will be treated as receiving cash in exchange for the Repap Common Shares equal to the amount of cash received for the Amalco Special Shares. In general, if you are a U.S. holder (as defined below under "U.S. Tax Considerations for Repap Shareholders"), you will recognize capital gain or loss on the receipt of cash in exchange for your Repap Common Shares (not including any interest awarded pursuant to the exercise of Dissent Rights); the amount of capital gain or loss will be equal to the difference between the U.S. dollar value of the Canadian dollars received and your tax basis, also determined in U.S. dollars, in your Repap Common Shares. Any interest awarded to you pursuant to Dissent Rights generally will be included in your income as ordinary income at the time you receive the interest or when it accrues, depending on your method of accounting for tax purposes. If you are a not a United States person for United States federal income tax purposes, you will generally not be subject to United States federal income tax on the receipt of cash in exchange for your Repap Common Shares. See "U.S. Tax Considerations for Repap Shareholders".

This Circular has been prepared in accordance with the disclosure requirements of Canada. Repap Shareholders resident in the United States should be aware that such requirements are different from those of the United States and none of the Amalco Shares have been registered with the United States Securities and Exchange Commission pursuant to the registration requirements of the United States Securities Act of 1933.

Repap Shareholders resident in the United States should be aware that the implementation of the Amalgamation as described in this Circular may have tax consequences both in Canada and the United States. Such consequences to Repap Shareholders who are resident in, or citizens of, the United States may not be fully described in this Circular. Each such Repap Shareholder should consult its own tax advisor concerning the Amalgamation described in this Circular.

The enforcement by United States resident Repap Shareholders of civil liabilities under the United States federal securities laws may be affected adversely by the fact that Repap, UPM-Kymmene, and Amalco are organized under the laws of a jurisdiction other than the United States, that some or all of their respective officers and directors are residents of countries other than the Unites States, that some or all of the experts named in the Circular may be residents of countries other than the United States, and that all or a substantial portion of the assets of Repap, UPM-Kymmene, and Amalco are, and all or a substantial portion of the assets of such persons may be, located outside the United States.

See "The Amalgamation - Notice to U.S. Repap Shareholders".

Unless the context otherwise requires, the following terms shall have the meanings set forth below when used in this Circular.

"Aquireco" means 3796477 Canada Inc., a corporation existing under the laws of Canada and a wholly-owned subsidiary of UPM-Kymmene.

"Acquisition" means the transfer of the Amalco Special Shares to UPM-Kymmene pursuant to the terms of such shares.

"Acquisition Agreement" means the Acquisition Agreement between UPM-Kymmene and Repap dated as of August 28, 2000, as amended as of September 11, 2000. The Acquisition Agreement was attached to a material change report dated August 31, 2000.

"Acquisition Proposal" means any proposal or offer with respect to any merger, amalgamation, arrangement, business combination, liquidation, dissolution, recapitalization, take-over bid, tender offer, purchase of all or any material assets of, or any purchase of more than 20% of the equity (or rights thereto) of, or similar transactions involving Repap or any Repap Material Subsidiary, excluding the Amalgamation.

"Affiliate" has the meaning ascribed thereto under the Securities Act.

"Amalco" means the corporation continuing as a result of the Amalgamation.

"Amalco Preferred Shares, Series C" means the preferred shares, series C in the capital of Amalco.

"Amalco Preferred Shares, Series F" means the preferred shares, series F in the capital of Amalco.

"Amalco Common Shares" means the common shares in the capital of Amalco.

"Amalco Preferred Shares" means, collectively, the Amalco Preferred Shares, Series C and the Amalco Preferred Shares, Series F.

"Amalco Shares" means, collectively, the Amalco Preferred Shares and the Amalco Special Shares.

"Amalco Special Shares" means the special shares in the capital of Amalco to be issued on the Amalgamation which, pursuant to their terms, shall be transferred or deemed to be transferred to UPM-Kymmene or a wholly-owned subsidiary of UPM-Kymmene at CAD$0.20 per share.

"Amalgamation" means the amalgamation under section 181 of the CBCA, on the terms and subject to the conditions set out in the Amalgamation Agreement, subject to any amendments or variations thereto made in accordance with Section 6.1 of the Acquisition Agreement.

"Amalgamation Agreement" means the Amalgamation Agreement to be entered into by Repap and Aquireco in the form annexed as Appendix D hereto, as it may be amended and/or restated from time to time.

"Articles of Amalgamation" means the articles of amalgamation of Repap and Acquireco in respect of the Amalgamation that are required by the CBCA to be filed with the Director.

"Board of Directors" means the board of directors of Repap.

"Break Fee" means a cash fee of CAD$18 million payable by Repap to UPM-Kymmene under the circumstances described under the heading "The Acquisition Agreement - Termination and Payment of Break Fee", as may be adjusted in certain circumstances. See "Option Agreement".

"Business Day" means any day on which commercial banks are generally open for business in Toronto, Ontario and Helsinki, Finland other than a Saturday, a Sunday or a day observed as a holiday in Toronto, Ontario or in Helsinki, Finland under applicable Laws.

"Canadian Tax Act" means the Income Tax Act (Canada), as amended.

"Canadian Tax Regulations" means the regulations under the Canadian Tax Act.

"CBCA" means the Canada Business Corporations Act, as amended from time to time prior to the Effective Date.

"CCRA" means Canada Customs and Revenue Agency (formerly Revenue Canada).

"CDS" means the Canadian Depositary for Securities Limited.

"Change in Control" shall mean the occurrence of any of the following events after the date hereof:

1. the purchase of at least 25% of the outstanding Repap Common Shares or of common shares of Repap New Brunswick Inc. by a buyer who is a forest products industry participant; or
2. the purchase of at least 33% of the outstanding Repap Common Shares or of common shares of Repap New Brunswick Inc. by a buyer other than a buyer who is described in (a) above; or
3. the sale of substantially all of the assets of Repap New Brunswick Inc.; or
4. the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving Repap or Repap New Brunswick Inc. (a "Business Combination"), unless immediately following such Business Combination: more than 66% of the total voting power of (x) Repap resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation, is represented by the Repap Common Shares or common shares of Repap New Brunswick, Inc., as prior to such Business Combination (or, if applicable, is represented by share into which such common shares were converted pursuant to such Business Combination).

"Circular" means this management information circular of Repap.

"Convertible Debenture" means the US$45 million principal amount 6% convertible subordinated debenture of Repap.

"Demand for Payment" means a written notice to Repap or Amalco by a Dissenting Shareholder demanding payment of the fair value of his or her Repap Shares.

"Director" means the Director appointed from time to time under section 260, or any successor section, of the CBCA.

"Dissent Notice" means a written objection to the Repap Amalgamation Resolution made by a Repap Shareholder in accordance with the Dissent Procedures.

"Dissent Procedures" means the dissent procedures described under the heading "Dissenting Shareholder Rights".

"Dissent Rights" means the rights of a registered Repap Shareholder to dissent from the Repap Amalgamation Resolution. See "Dissenting Shareholder Rights".

"Dissenting Shareholder" means a registered Repap Shareholder who dissents in respect of the Repap Amalgamation Resolution in strict compliance with the Dissent Procedures.

"DLJ" means Donaldson, Lufkin & Jenrette Securities Corporation, financial advisor to Repap in connection with the Amalgamation.

"DLJ Fairness Opinion" means the written opinion dated August 28, 2000 from DLJ delivered to the Board of Directors in connection with the Amalgamation, a copy of which is attached as Appendix C to this Circular.

"Effective Date" means the date shown on the certificate of amalgamation issued by the Director under the CBCA giving effect to the Amalgamation.

"Exchange Agent" means Montreal Trust Company.

"FTC" means the Federal Trade Commission.

"Governmental Entity" means any (i) multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau or agency, domestic or foreign; (ii) self-regulatory organization or stock exchange including The NASDAQ Stock Market, Inc., OTC Bulletin Board and The Toronto Stock Exchange; (iii) subdivision, agent, commission, board or authority of any of the foregoing; or (iv) quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing.

"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976 as amended.

"Laws" means all statutes, regulations, statutory rules, orders and terms and conditions of any grant of approval, permission, authority or license of any Governmental Entity and the term "applicable" with respect to such Laws and in the context that refers to one or more Persons, means that such Laws apply to such Person or Persons or its or their business, undertaking, property or securities and emanate from a Governmental Entity having jurisdiction over the Person or Persons or its or their business, undertaking, property or securities.

"Letter of Transmittal" means the letter of transmittal delivered to Repap Shareholders (on pink paper) with this Circular.

"Material Adverse Change" when used in connection with a Person, means any change, effect, event or occurrence with respect to the financial condition, properties, assets, liabilities, obligations (whether absolute, accrued, conditional or otherwise), businesses, operations or results of operations of such Person or any of its subsidiaries that is, or would be material and adverse to such Person and its subsidiaries taken as a whole, other than any change, effect, event or occurrence (i) relating to, or arising out of, the Canadian, United States or European economies, political conditions or securities markets in general, or (ii) affecting the world-wide pulp and paper industry in general or the North American coated paper industry in general which does not have a materially disproportionate impact on such Person and its subsidiaries.

"Material Adverse Effect" means, when used in connection with UPM-Kymmene or Repap, any effect of a Material Adverse Change relating to such party.

"Meeting" means the Repap special meeting of Repap Shareholders to be held on Monday, October 16, 2000 and all adjournments and postponements thereof.

"New Stated Capital Amount" means an amount equal to CAD$0.20 multiplied by the number of issued and outstanding Repap Common Shares immediately prior to the Amalgamation. That amount shall be determined by the chairman of the Meeting and that determination shall be final and binding.

"Non-Registered Holder" means a Person who is a beneficial owner, and not a registered holder of Repap Shares.

"Non-Resident Shareholder" means a Repap Shareholder who for purposes of the Canadian Tax Act and any relevant tax treaty or convention, at all relevant times, has not been and will not be resident or deemed to be resident in Canada, does not use or hold, and is not deemed to use or hold, the Repap Common Shares or Amalco Special Shares in connection with carrying on a business in Canada, and to whom such shares do not otherwise constitute "taxable Canadian property''

"Offer to Pay" means a written offer by Amalco to pay a Dissenting Shareholder the fair value of the Dissenting Shareholder's Repap Shares.

"Option" means the option granted to UPM-Kymmene pursuant to the Option Agreement to purchase from the treasury of Repap up to 19.9% of the issued and outstanding Repap Common Shares in circumstances described under the heading "Option Agreement".

"Option Agreement" means the Option Agreement between UPM-Kymmene and Repap dated as of August 28, 2000, as it may be amended and/or restated from time to time.

"Person" includes any individual, firm, partnership, limited partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body corporate, corporation, unincorporated association or organization, Governmental Entity, syndicate or other entity, whether or not having legal status.

"Principal Shareholders" means the Third Avenue Trust and TD Asset Management Inc.

"Reduction of Stated Capital" means the reduction of the stated capital account in respect of the Repap Common Shares to the New Stated Capital Amount or such other amount as the Board of Directors may determine.

"Regulatory Approvals" means those sanctions, rulings, consents, orders, exemptions, permits and other approvals (including the lapse, without objection, of a prescribed time under a statute or regulation that states that a transaction may be implemented if a prescribed time lapses following the giving of notice without an objection being made) of Governmental Entities set out in Schedule C to the Acquisition Agreement. See "The Amalgamation - Regulatory Matters".

"Repap" means Repap Enterprises Inc., a corporation existing under the laws of Canada.

"Repap Amalgamation Resolution" means the special resolution of the Repap Shareholders concerning the Amalgamation, in the form set out in Appendix B to this Circular.

"Repap Articles" means the Repap articles of incorporation, as amended and currently in force.

"Repap By-Laws" means the Repap by-laws, as amended and currently in force.

"Repap Common Shareholder" means a holder of Repap Common Shares.

"Repap Common Shares" means the common shares in the capital of Repap.

"Repap Material Subsidiary" means Repap New Brunswick Inc. and each other subsidiary of Repap (i) the total assets of which constituted more than ten percent of the consolidated assets of Repap or (ii) the total revenues of which constituted more than 10 percent of the consolidated revenues of Repap, in each case as set out in the financial statements of Repap for the year ended December 31, 1999 and each affiliate of Repap that directly or indirectly holds an equity interest in any such subsidiary.

"Repap Preferred Shareholder" means a holder of Repap Preferred Shares.

"Repap Preferred Shares" means collectively the Repap Preferred Shares, Series C and the Repap Preferred Shares, Series F.

"Repap Preferred Shares, Series C" means the preferred shares, series C in the capital of Repap.

"Repap Preferred Shares, Series F" means the preferred shares, series F in the capital of Repap.

"Repap Record Date" means the Business Day prior to the mailing of this Circular, which is anticipated to be September 14, 2000.

"Repap Reduction of Stated Capital Resolution" means the special resolution of the Repap Common Shareholders concerning the Reduction of Stated Capital, in the form set out in Appendix A to this Circular.

"Repap Shareholders" means, collectively, the Repap Common Shareholders and the Repap Preferred Shareholders.

"Repap Shares" means collectively the Repap Preferred Shares and the Repap Common Shares.

"RESP" means a registered education savings plan (as such term is defined under the Canadian Tax Act).

"RRIF" means a registered retirement income fund (as such term is defined under the Canadian Tax Act).

"RRSP" means a registered retirement savings plan (as such term is defined under the Canadian Tax Act).

"Securities Act" means the Securities Act (Ontario) and the rules, regulations and policies made thereunder, as now in effect and as they may be amended from time to time prior to the Effective Date.

"Superior Proposal" means any bona fide written Acquisition Proposal that in the good faith determination of the Board of Directors, after consultation with its financial advisors and with outside counsel (a) is reasonably capable of being completed, taking into account all legal, financial, regulatory and other aspects of such proposal and the party making such proposal; and (b) would, if consummated in accordance with its terms, result in a transaction more favourable to the Repap Common Shareholders and no less favourable to the Repap Preferred Shareholders from a financial point of view than the Amalgamation.

"Support Agreements" means the agreements dated August 28, 2000 entered into by the Principal Shareholders with UPM-Kymmene, pursuant to which the Principal Shareholders have agreed to support the Amalgamation and vote all of the Repap Common Shares owned or controlled by them in favour of the Repap Amalgamation Resolution.

"Tax Proposals" means specific proposals to amend the Canadian Tax Act and the Canadian Tax Regulations publicly announced by, or on behalf of, the Minister of Finance (Canada) prior to the date hereof.

"TSE" means The Toronto Stock Exchange Inc.

"United States" means the United States of America, its territories and possessions, any State of the United States, and the District of Columbia.

"UPM-Kymmene" means UPM-Kymmene Corporation, a corporation existing under the laws of Finland.

The Meeting will be held at 11:00 a.m. (Toronto time) on Monday, October 16, 2000 at the Le Royal Meridian King Edward Hotel, Belgravia Room, 37 King Street East, Toronto, Ontario, Canada, M5C 1E9 as set forth in the Notice of Special Meeting.

This Circular is furnished in connection with the solicitation of proxies by and on behalf of the management of Repap for use at the Meeting. This solicitation is being made by mail. The approximate date of mailing is September 15, 2000. Repap may pay brokers or nominees holding Repap Shares in their names or in the names of their principals for their reasonable expenses in sending solicitation material to their principals. The cost of this solicitation will be borne by Repap. Georgeson Shareholder Communications Canada (the "Soliciting Agent") has also been retained by the Board of Directors to solicit proxies on behalf of the Board of Directors. The Soliciting Agent will be paid CAD$30,000 plus CAD$6.00 per phone call to a registered Repap Shareholder. The Soliciting Agent can be reached at 1-800-890-1037.

There are two forms of proxy, a blue proxy applicable to Repap Common Shareholders and a yellow proxy applicable to Repap Preferred Shareholders. If you have received the wrong form of proxy please contact the Exchange Agent for the correct form at the address or facsimile number or telephone number set out in the form of proxy.

The persons appointed as proxy in the accompanying form of proxy are directors or officers of Repap. A Repap Shareholder may appoint a person (who need not be a Repap Shareholder) other than the persons designated in the accompanying form of proxy to attend and vote for that Repap Shareholder at the Meeting and may do so either by striking out the names of the persons designated in the form of proxy and inserting the other person's name in the blank space provided for that purpose in the form of proxy or by completing another acceptable form of proxy and, in either case, delivering the completed proxy to the Secretary of Repap, care of Montreal Trust Company, at P.O. Box 1900, Station B, Montreal, Quebec, Canada H3B 3L6. Execution of the proxy will not affect a Repap Shareholder's right to attend the Meeting and vote in person.

A properly completed and signed proxy confers discretionary authority upon the named proxy nominee with respect to any amendments or variations to the matters identified in the Notice of Special Meeting and any other matter which may properly come before the Meeting or any adjournment or postponement thereof. As at the date of this Circular, management is not aware of any such amendments or variations, or other matters to be presented for action at the Meeting.

The management representatives designated in the enclosed proxy will vote or withhold from voting in accordance with the instructions given by the Repap Shareholder in the form of proxy. If no instructions are marked, the securities represented by a proxy given to management will be voted: (i) in the case of Repap Common Shares, FOR the Repap Reduction of Stated Capital Resolution; (ii) FOR the Repap Amalgamation Resolution; (iii) in the case of Repap Common Shares, voting as a class, FOR the Repap Amalgamation Resolution; and (iv) in accordance with management's recommendation with respect to amendments or variations of the matters set out in the Notice of Special Meeting or any other matters which may properly come before the Meeting.

Generally, only registered Repap Shareholders, as applicable to the particular vote, or the persons they appoint as their proxies are permitted to attend and vote at the Meeting. However, Repap Shares may be beneficially owned by a person and registered either: (i) in the name of an intermediary such as, among others, banks, trust companies, securities dealers or brokers and trustees or administrators of self-administered RRSPs, RRIFs, RESPs and similar plans; or (ii) in the name of a clearing agency (such as CDS) of which the intermediary is a participant.

Under the Repap By-Laws, at any meeting of Repap Shareholders, two persons personally present, each being a Repap Shareholder entitled to vote at the Meeting either personally or as an authorized representative and together representing in person or by proxy at least 25% of the outstanding voting shares, constitute a quorum. Repap Shares represented in person or by proxy at the Meeting will be counted for quorum purposes regardless of whether the Repap Shareholder or proxy fails to vote on a particular proposal (an "abstention") or whether a broker with a discretionary authority fails to exercise that authority with respect to a particular proposal (a "broker nonvote"). For purposes of determining whether a proposal has been approved, an abstention or broker nonvote with regard to that proposal will be counted neither for nor against the proposal. Voting on any proposal will be by show of hands except where a ballot is demanded by a Repap Shareholder or proxyholder entitled to vote at the meeting.

A registered Repap Shareholder who executes and returns the accompanying form of proxy has the right to revoke it at any time before it is acted upon by an instrument in writing executed by the Repap Shareholder or by the Repap Shareholder's attorney duly authorized in writing or, if the Repap Shareholder is a corporation, under its corporate seal or by an officer or attorney thereof duly authorized and deposited at the registered office of Repap (300 Atlantic Street, Suite 200, Stamford, CT, U.S.A. 06901) at any time up to and including the last Business Day preceding the date of the Meeting or with the chairman of the Meeting on the day of the Meeting or an adjournment thereof, or in any other manner permitted by Law.

A Non-Registered Holder may revoke a voting instruction form or a waiver of the right to vote given to an intermediary at any time by written notice to the intermediary. However, an intermediary is not required to act on any such revocation that is not received by the intermediary at least seven days prior to the Meeting.

Repap Shareholders who properly exercise their Dissent Rights will be entitled to be paid the fair value of their Repap Shares in accordance with section 190 of the CBCA. The Dissent Procedures require that a Repap Shareholder who wishes to dissent must be a registered Repap Shareholder prior to the Meeting. The execution or exercise of a proxy does not constitute a Dissent Notice. See "Dissenting Shareholder Rights".

As at September 11, 2000, there were outstanding: (i) 743,960,637 Repap Common Shares; (ii) 240,000 Repap Preferred Shares, Series C; and (iii) 400,000 Repap Preferred Shares, Series F. Repap Shareholders are entitled to vote at the Meeting on the basis of one vote for each Repap Share registered in the Repap Shareholder's name.

Repap Shareholders whose names are entered on the register of Repap Shareholders at the close of business on September 14, 2000, will be entitled to attend in person or appoint a proxy nominee to attend the Meeting and such person will be entitled to vote for each Repap Share held on such date. If a holder has transferred any Repap Shares after September 14, 2000 and the transferee of such Repap Shares establishes ownership of them and demands in writing, not later than the close of business on October 6, 2000, to be included in the list of Repap Shareholders entitled to vote at the Meeting, the transferee will be entitled to vote such Repap Shares at the Meeting.

The following table and the notes thereto set forth, as of September 11, 2000, certain information regarding the beneficial ownership of the Repap Shares with respect to (i) each person known by Repap to own beneficially more than 5% of the outstanding Repap Shares, (ii) the executive officers of Repap named in the Summary Compensation Table that appears under "Compensation of Directors and Executive Officers", (iii) each of Repap's directors, and (iv) all directors and executive officers of Repap as a group. Unless otherwise indicated, each shareholder has sole voting and investment power with respect to the Repap Shares beneficially owned by that shareholder.

Enclosed with this Circular is a Letter of Transmittal (on pink paper) which is being delivered to Repap Shareholders. The Letter of Transmittal, when properly completed and duly executed and returned together with a certificate or certificates for Repap Shares and all other required documents, will enable, if the Amalgamation is completed, each Repap Common Shareholder to obtain, as consideration for each Repap Common Share held, one Amalco Special Share. All such Amalco Special Shares will be immediately purchased by UPM-Kymmene or a wholly-owned subsidiary and CAD$0.20 per share will be paid in cash to the former Repap Common Shareholder. Repap Preferred Shareholders will receive, as consideration for each Repap Preferred Share, Series C held, one Amalco Preferred Share, Series C which shall provide for the right to receive CAD$25.00 per share in cash and, as consideration for each Repap Preferred Share, Series F held, one Amalco Preferred Share, Series F which shall provide for the right to receive CAD$25.00 per share in cash.

Any use of the mail to transmit a certificate for Repap Shares and a related Letter of Transmittal and other required documents is at the risk of the Repap Shareholder. If these documents are mailed, it is recommended that registered mail, with return receipt requested, properly insured, be used.

Cheques representing the consideration payable to a former holder of Repap Shares who has complied with the procedures set out above will, as soon as practicable after the Effective Date, (a) be forwarded to the Repap Shareholder at the address specified in the Letter of Transmittal by first class mail; or (b) be made available for pick-up by the Repap Shareholder at the office of Montreal Trust Company where the Letter of Transmittal has been filed if requested by the Repap Shareholder, in the Letter of Transmittal.

Where a certificate for Repap Shares has been destroyed, lost or stolen, the registered Repap Shareholder of that certificate should immediately complete the Letter of Transmittal as fully as possible and return it together with a letter describing the destruction, loss or theft, to the Exchange Agent in accordance with the instructions in the Letter of Transmittal. The Exchange Agent will respond with replacement requirements.

To complete the Amalgamation, the stated capital account for Repap Common Shares must be adjusted in order to reflect the value of Repap's assets. At the Meeting, the Repap Common Shareholders will be asked to approve the Repap Reduction of Stated Capital Resolution, a copy of which is annexed as Appendix A to this Circular.

In order to be effective, the Repap Reduction of Stated Capital Resolution must be approved by not less than two-thirds of the votes cast at the Meeting by Repap Common Shareholders.

The Repap Reduction of Stated Capital Resolution will have the effect of reducing the stated capital attributable to the Repap Common Shares to the New Stated Capital Amount. The Repap Reduction of Stated Capital Resolution does not authorize any repayment of capital.

The blue form of proxy delivered with this Circular provides a means for a Repap Common Shareholder to vote for or against the Repap Reduction of Stated Capital Resolution. The blue form of proxy further provides that if a Repap Common Shareholder using the proxy does not specify whether such shares are to be voted for or against the Repap Reduction of Stated Capital Resolution, the proxy holder will vote FOR the Repap Reduction of Stated Capital Resolution.

The Amalgamation Agreement provides for the amalgamation of Acquireco and Repap as of the Effective Date to continue as one corporation, Amalco, in a transaction in which:

1. each issued and outstanding Repap Common Share (other than those held by Dissenting Shareholders and other than those held by Acquireco, if any) will be converted into one Amalco Special Share;
2. each issued and outstanding Repap Common Share held by Acquireco will be cancelled;
3. each issued and outstanding Acquireco Common Share will be converted into one Amalco Common Share;
4. each issued and outstanding Repap Preferred Share, Series C (other than those held by Dissenting Shareholders) will be converted into one Amalco Preferred Share, Series C;
5. each issued and outstanding Repap Preferred Share, Series F (other than those held by Dissenting Shareholders) will be converted into one Amalco Preferred Share, Series F; and
6. Dissenting Shareholders will be entitled to be paid the fair value of their Repap Shares

The share provisions attaching to the Amalco Special Shares will provide that, on the Effective Date (the "Effective Time"), UPM-Kymmene or its wholly-owned subsidiary following the giving of a transfer notice by Amalco to UPM-Kymmene or its wholly-owned subsidiary, will have a right to purchase and will purchase from each holder of Amalco Special Shares all of such person's right, title and interest in and to its Amalco Special Shares and UPM-Kymmene or its wholly-owned subsidiary shall acquire, and shall be deemed to have acquired, from each holder of Amalco Special Shares all, but not less than all, of the Amalco Special Shares held by such holder for a consideration of CAD$0.20 per share in cash. UPM-Kymmene or its wholly-owned subsidiary shall acquire, and shall be deemed to have acquired, from each holder of Amalco Special Shares all, but not less than all, of the Amalco Special Shares held by such holder. UPM-Kymmene or its wholly-owned subsidiary shall, on the Effective Date, deposit with, or otherwise cause to be deposited with, the Exchange Agent sufficient funds to pay the aggregate consideration payable to the holders of the Amalco Special Shares. On and after the Effective Time, any such money deposited with the Exchange Agent shall be held by the Exchange Agent as agent for the holders of the Amalco Special Shares and receipt of payment by the Exchange Agent shall be deemed to constitute receipt of payment of the consideration payable to the holders of the Amalco Special Shares for all of the Amalco Special Shares transferred to UPM-Kymmene or its wholly-owned subsidiary.

The holders of the Amalco Special Shares transferred to UPM-Kymmene or its wholly-owned subsidiary will receive CAD$0.20 per share in cash, without interest, for each Amalco Special Share so transferred (subject to the following paragraph) and on presentation of a fully completed and duly executed Letter of Transmittal.

No share certificates representing Amalco Special Shares will be issued to holders of Amalco Special Shares. Share certificates representing a certain number of Repap Common Shares shall be deemed to represent share certificates for the same number of Amalco Special Shares.

The Amalco Preferred Shares shall be redeemable for CAD$25.00 per share in cash. Further, pursuant to the Acquisition Agreement, UPM-Kymmene has undertaken to make an offer or to cause one of its subsidiaries to make an offer to purchase forthwith after the Effective Date all of the Preferred Shares for CAD$25.00 per share in cash.

The Amalgamation will be completed and the Amalco Special Shares and the Amalco Preferred Shares acquired as soon as practicable after receipt of the requisite approvals from Repap Shareholders and after all other conditions to the Amalgamation have been satisfied or waived. It is currently expected that the Effective Date will occur on or about October 16, 2000.

The provisions of the Acquisition Agreement are the result of arm's length negotiations conducted among representatives of Repap and UPM-Kymmene and their respective legal and financial advisors. The following is a brief summary of the material events that preceded the execution of the Acquisition Agreement.

On Friday, August 18, 2000, Mr. Stephen Larson, President and Chief Executive Officer of Repap, received a letter from Mr. Juha Niemelä, President and Chief Executive Officer of UPM-Kymmene. On the same date Mr. Niemelä reached by telephone Mr. Hap Stephen, the Chairman of Repap, to inform him that the said letter had been forwarded to Mr. Larson. Mr. Niemelä suggested to Mr. Stephen that representatives of the two companies meet to discuss the transaction proposed in the letter as early as possible. Mr. Stephen informed Mr. Niemelä that the Board of Directors would meet to consider the request.

The letter received from Mr. Niemelä constituted a non-binding acquisition proposal from UPM-Kymmene. The proposal contemplated acquiring all of the issued and outstanding common and preferred shares in the capital of Repap for cash, payment of a "break" fee in certain circumstances and the grant to UPM-Kymmene of an option to purchase, in circumstances where a "break fee" would be payable, up to approximately 19.9% of the outstanding shares of Repap. The proposal was conditional upon limited due diligence satisfactory to UPM-Kymmene and the receipt of the support of the Principal Shareholders of the transaction and contemplated a period of time during which UPM-Kymmene would be entitled to negotiate definitive documentation with Repap on an exclusive basis.

A meeting of the Board of Directors was held by means of telephone conference during the evening of Friday, August 18, 2000, at which the letter received from UPM-Kymmene and the telephone conversation between Mr. Stephen and Mr. Niemelä were discussed. The Board of Directors considered the merits of the proposal and received advice from its legal counsel as to appropriate process in the circumstances. The Board of Directors concluded that it was interested in pursuing further the opportunity presented by the UPM-Kymmene letter and decided to retain financial advisors. On Saturday, August 19, 2000, Mr. Stephen and Mr. Larson contacted DLJ to seek their assistance in this matter. On Saturday and Sunday, August 19 and 20, 2000, UPM-Kymmene's request to sign a confidentiality agreement containing exclusivity arrangements between Repap and UPM-Kymmene was, along with other aspects of the proposal, reviewed by representatives of Repap.

On Monday, August 21, 2000, the Board of Directors again met by telephone conference to review with DLJ UPM-Kymmene's proposal and discussed other strategic alternatives that Repap had under consideration to enhance shareholder value. The Board of Directors mandated Mr. Hap Stephen, to be assisted by Repap's senior management, to meet with UPM-Kymmene's representatives.

During the afternoon and evening of Tuesday, August 22, 2000, senior officers of UPM-Kymmene and their advisors met with senior officers of Repap and their advisors and discussed due diligence and various other issues. In the evening of August 22, 2000, Repap informed UPM-Kymmene that it was not prepared to enter into the suggested exclusivity agreement but that it was ready to negotiate with UPM-Kymmene on an exclusive basis until Monday August 28, 2000.

During the period from August 23, 2000 to August 28, 2000, the price, "break fee", non-solicitation provisions and other terms of the Acquisition Agreement and of the Option Agreement were negotiated.

In the late afternoon of Monday, August 28, 2000, the Board of Directors met to consider the Acquisition Agreement and Option Agreement as negotiated and to receive advice from its legal and financial advisors. At this meeting, DLJ gave a presentation as to the terms and structure of the UPM-Kymmene proposal as contained in the negotiated Acquisition Agreement and Option Agreement. Furthermore, DLJ gave a presentation as to the analysis and methodology used in connection with assessing the fairness of the consideration being offered to Repap Common Shareholders, from a financial point of view. DLJ orally delivered its opinion as to the fairness, from a financial point of view, to Repap Common Shareholders (other than those Repap Common Shareholders who are affiliates of Repap), of the consideration to be received by such Repap Common Shareholders in the Amalgamation.

Following consideration of a number of factors, including those factors specified under "The Amalgamation - Recommendation of the Board of Directors" and on the basis of the advice received from its financial and legal advisors, including the DLJ Fairness Opinion, the Board of Directors unanimously concluded that the acquisition was fair to Repap Shareholders and in the best interests of Repap and unanimously approved the entering into of the Acquisition Agreement and the Option Agreement.

The Acquisition Agreement and the Option Agreement were entered into later that evening. Contemporaneously, the Principal Shareholders entered into the Support Agreements with UPM-Kymmene pursuant to which they have agreed, subject to the receipt of a Superior Proposal, to support the Amalgamation and vote all of the Repap Common Shares owned or controlled by them in favour of the Repap Amalgamation Resolution. A press release to that effect was issued by Repap and UPM-Kymmene prior to the commencement of trading on the TSE on Tuesday, August 29, 2000.

On September 11, 2000, the Board of Directors met to consider certain non-material amendments to the Acquisition Agreement. At such meeting, the Board of Directors unanimously approved the entering into of an agreement amending the Acquisition Agreement.

The Board of Directors is of the view that the terms of the Amalgamation are fair to Repap Shareholders and in the best interests of Repap. The Board of Directors unanimously recommends that Repap Common Shareholders vote FOR the Repap Reduction of Stated Capital Resolution, that Repap Shareholders vote FOR the Repap Amalgamation Resolution and that Repap Common Shareholders vote FOR the Repap Amalgamation Resolution as a class.

Each of the directors of Repap has advised Repap that he currently intends to vote the Repap Common Shares held or controlled by him, directly or indirectly, in favour of the Repap Reduction of Stated Capital Resolution and in favour of the Repap Amalgamation Resolution.

In reaching its determination and making these recommendations, the Board of Directors considered a number of factors, including the following:

1. the consideration of CAD$0.20 per Common Share offered to Repap Common Shareholders in connection with the Amalgamation, is payable entirely in cash and represented a premium of 100% over the closing price on August 25, 2000 on the TSE for a Repap Common Share and a premium of approximately 108% to the average closing price on the TSE for the 20 trading days preceding the date the Acquisition Agreement was entered into;
2. the opinion dated August 28, 2000 of DLJ as to the fairness from a financial point of view to the Repap Common Shareholders (other than those Repap Common Shareholders who are affiliates of Repap) of the consideration to be received by such holders;
3. holders of approximately 30.8% of the Repap Common Shares agreed, subject to the receipt of a Superior Proposal, to vote their Repap Shares in favour of the Repap Amalgamation Resolution;
4. the Board of Directors retained the right to participate in any unsolicited discussions or negotiations with, and provide information (subject to entering into a confidentiality agreement) to, an interested third party if the Board of Directors determines in good faith, after consultation with financial advisors and outside counsel, that the third party's proposal is a Superior Proposal. See "The Acquisition Agreement - Covenants Regarding Non-Solicitation";
5. considering that other interested parties would not be precluded from subsequently proposing a Superior Proposal, the Acquisition Agreement was the best alternative among the opportunities available to Repap at the time of the Board of Directors' consideration of the terms of the Acquisition Agreement;
6. the terms and conditions of the Acquisition Agreement, including the amount of the Break Fee and the circumstances in which it is payable, the terms of the Option Agreement and the circumstances in which it becomes exercisable and the circumstances in which the Acquisition Agreement may be terminated;
7. the requirement that the Amalgamation must be approved by a special resolution passed by not less than two-thirds of the votes cast at the Meeting by Repap Shareholders voting together and by not less than two-thirds of the votes cast at the Meeting by Repap Common Shareholders voting as a class; and
8. under the Amalgamation, registered Repap Shareholders have Dissent Rights.

In reaching its determination, the Board of Directors also considered and evaluated, among other things: (a) information concerning the business, operations, property, assets, financial condition, operating results and prospects of Repap; (b)  current industry, economic and market conditions and trends and its informed expectations as to prospects; (c) historical market prices and trading information with respect to Repap Common Shares; and (d) the expected likelihood of receiving regulatory clearance for the Amalgamation.

The foregoing discussion of the information and factors considered by the Board of Directors is not intended to be exhaustive but is believed to include all material factors considered by the Board of Directors. In addition, in reaching the determination to approve and recommend the Reduction of Stated Capital and the Amalgamation, the Board of Directors did not assign any relative or specific weights to the foregoing factors which were considered, and individual directors may have given different weights to different factors. The Board of Directors is, however, unanimous in its recommendation to the Repap Shareholders that the Repap Reduction of Stated Capital Resolution and the Repap Amalgamation Resolution be approved at the Meeting.

Repap asked DLJ, in its role as financial advisor to Repap, to render an opinion to the Board of Directors as to the fairness, from a financial point of view, to the Repap Common Shareholders (other than those Repap Common Shareholders who are affiliates of Repap) of the consideration to be received by such holders in the Amalgamation. On August 28, 2000, DLJ delivered to the Board of Directors its written opinion to the effect that, as of that date, based on and subject to the assumptions, limitations and qualifications set forth in its written opinion, the consideration to be received by the Repap Common Shareholders (other than those Repap Common Shareholders who are affiliates of Repap) in the Amalgamation was fair to such holders from a financial point of view. The full text of DLJ's opinion is attached as Appendix C to this Circular.

DLJ expressed no opinion as to the price at which Repap Common Shares would actually trade at any time. DLJ's opinion did not address the relative merits of the Amalgamation and the other business strategies considered by the Board of Directors nor did it address the Board of Directors' decision to proceed with the Amalgamation. DLJ's opinion did not constitute a recommendation to any Repap Shareholder as to how such holder should vote on the Amalgamation.

Repap selected DLJ as its financial advisor because DLJ is an internationally recognized investment banking firm that has substantial experience providing strategic advisory services. DLJ was not retained as an advisor or agent to the Repap Shareholders or any other person. As part of its investment banking business, DLJ is regularly engaged in the valuation of businesses and securities in connection with mergers, acquisitions, underwritings, sales and distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. DLJ was not requested to solicit, nor did DLJ solicit, the interest of any other party in acquiring Repap.

In arriving at the DLJ Fairness Opinion, DLJ:

1. reviewed a draft dated August 24, 2000 of the Acquisition Agreement and the schedules thereto and assumed the final form of the Acquisition Agreement would not vary in any respect material to DLJ's analysis;
2. reviewed financial and other information that was publicly available or furnished to DLJ by Repap, including information provided during discussions with its management. Included in the information provided during discussions with Repap's management were certain financial projections of Repap for the period beginning January 1, 2000 and ending December 31, 2001 prepared by the management of Repap;
3. compared certain financial and securities data of Repap with various other companies whose securities are traded in public markets;
4. reviewed the historical stock prices and trading volumes of Repap Common Shares;
5. reviewed prices and premiums paid in certain other business combinations; and
6. conducted other financial studies, analyses and investigations as DLJ deemed appropriate for purposes of rendering the DLJ Fairness Opinion.

In rendering the DLJ Fairness Opinion, DLJ relied upon and assumed the accuracy and completeness of all of the financial and other information that was available to it from public sources, that was provided to it by Repap or its representatives, or that DLJ otherwise reviewed. With respect to the financial projections supplied to DLJ, DLJ relied on representations that the projections were reasonably prepared on the basis reflecting the best currently available estimates and judgements of the management of Repap as to the future operating and financial performance of Repap. DLJ expressed no opinion with respect to these projections or the assumptions upon which they were based. DLJ did not assume responsibility for making any independent evaluation of the assets or liabilities, or for making any independent verification of the information DLJ reviewed. DLJ relied as to certain legal matters on advice of counsel to Repap.

DLJ necessarily based the DLJ Fairness Opinion on economic, market, financial and other conditions as they existed on, and on the information made available to DLJ as of, the date of the DLJ Fairness Opinion. In the DLJ Fairness Opinion, DLJ stated that, although subsequent developments may affect the conclusions reached in the DLJ Fairness Opinion, DLJ does not have any obligation to update, revise or reaffirm the DLJ Fairness Opinion.

The following is a summary of the financial analyses DLJ presented to the Board of Directors on August 28, 2000 in connection with the preparation of the DLJ Fairness Opinion. No company or transaction used in the analyses described below is directly comparable to Repap or the contemplated transaction. In addition, mathematical analysis such as determining the average or median is not in itself a meaningful method of using selected company or transaction data. The analyses DLJ performed are not necessarily indicative of actual values or future results, which may be significantly more or less favourable than suggested by these analyses. The implied equity values per Repap Common Share outlined below were based on: (i) 743,960,637 Repap Common Shares outstanding, (ii) 60,500,000 Repap Common Shares issuable upon the exercise of options, (iii) net debt of CAD$1,160,450,000 (including CAD$6,430,000 cash proceeds from the exercise of options) and (iv) Repap Preferred Shares of CAD$16,000,000. The information summarized in the tables which follow should be read in conjunction with the accompanying text.

Trading History.  DLJ examined the historical closing prices of Repap Common Shares from August 23, 1999 to August 23, 2000. During this time period, Repap Common Shares reached a high of CAD$0.16 per share and a low of CAD$0.07 per share.

Comparable Publicly Traded Company Analysis.  DLJ analyzed the market values and trading multiples of selected publicly traded printing paper companies that DLJ believed were reasonably comparable to Repap. These comparable companies consisted of:

1. five American printing paper companies (the "American Comparables"):
1. Bowater Incorporated;
2. International Paper Company;
3. The Mead Corporation;
4. Potlatch Corporation; and
5. Westvaco Corporation.
2. four European printing paper companies (the "European Comparables"):
1. Metsä Serla Corporation;
2. Sappi Limited;
3. Stora Enso Oyi; and
4. UPM-Kymmene.

In examining these comparable companies, DLJ calculated the enterprise value of each company as a multiple of EBITDA for each of calendar years 1995 and 1999, LTM EBITDA and projected calendar year 2000 and 2001 EBITDA. The enterprise value of a company is equal to the value of its fully-diluted common equity plus debt and the liquidation value of outstanding preferred shares, if any, minus cash and the value of certain other assets, including minority interests in other entities. LTM means the last twelve-month period for which financial data for the company at issue has been reported. EBITDA means earnings before interest expense, taxes, depreciation and amortization. All historical data was derived from publicly available sources and all projected data was obtained from Wall Street research reports where available. DLJ's analysis of the comparable companies yielded the following multiple ranges:

Based on an analysis of this data and Repap's projected results for comparable periods, DLJ derived a reference range of multiples of 5.0x to 8.0x and, based on this reference range, DLJ estimated a negative value per Repap Common Share compared to the proposed price of CAD$0.20 per Repap Common Share to be received in the Amalgamation.

Precedent Merger and Acquisition Transaction Analysis.  DLJ reviewed seven selected transactions involving companies in the printing paper industry that DLJ believed are reasonably comparable to the Amalgamation. These transactions consisted of:

1. International Paper Company's acquisition of Champion International;
2. Stora-Enso Oyi's acquisition of Consolidated Papers;
3. International Paper Company's acquisition of Union Camp Corporation;
4. UPM-Kymmene's acquisition of Blandin Paper Company;
5. Consolidated Papers, Inc.'s acquisition of Repap Wisconsin, Inc.;
6. Sappi's acquisition of DLJMB's equity interest in S.D. Warren; and
7. Sappi and DLJMB's acquisition of S.D. Warren.

In examining these acquisitions, DLJ calculated the enterprise value of the acquired company implied by each of these transactions as a multiple of EBITDA for each of calendar year 1995 and 1999 and as a multiple of daily production capacity measured in short tons. DLJ's analysis of these comparable acquisitions yielded the following multiple ranges:

Based on an analysis of this data and Repap's historical and projected operating results, DLJ derived a reference range of multiples of 5.0x to 11.0x and, based on this reference range, DLJ estimated a value per share of Repap common stock ranging from CAD$0.00 to CAD$0.22, compared to the proposed price of CAD$0.20 per Repap Common Share to be received in the Amalgamation.

Premiums Paid Analysis.  DLJ determined the premium over the common stock trading prices for one day, one week and four weeks prior to the announcement date in selected merger and acquisition transactions that DLJ believed are reasonably comparable to the Amalgamation. These transactions consisted of:

1. International Paper Company's acquisition of Champion International;
2. Stora-Enso Oyi's acquisition of Consolidated Papers;
3. Abitibi-Consolidated Inc.'s acquisition of Donohue Inc.;
4. Weyerhaeuser Company's acquisition of MacMillan Bloedel Limited;
5. International Paper Company's acquisition of Union Camp Corporation;
6. Jefferson Smurfit Corporation's merger with Stone Container Corporation; and
7. Bowater Incorporated's merger with Avenor Inc.

The median premiums for the selected transactions over the common stock trading prices for one day, one week and four weeks prior to the announcement date were 31.5%, 35.4% and 52.3%, respectively. Applying the above premiums to the closing price of Repap Common Shares on comparable days, DLJ estimated a value per Repap Common Share ranging from CAD$0.12 to CAD$0.14, compared to the proposed price of CAD$0.20 per Repap Common Share to be paid in the Amalgamation.

The summary set forth above does not purport to be a complete description of the analyses performed by DLJ but describes, in summary form, the material elements of the presentation that DLJ made to the Board of Directors on August 28, 2000 in connection with the preparation of the DLJ Fairness Opinion. The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances and, therefore, such an opinion is not readily susceptible to summary description. DLJ conducted each of the analyses in order to provide a different perspective on the transaction and to add to the total mix of information available. DLJ did not form a conclusion as to whether any individual analysis, considered in isolation, supported or failed to support an opinion as to fairness from a financial point of view. Rather, in reaching its conclusion, DLJ considered the results of the analyses in light of each other and ultimately reached its opinion based on the results of all analyses taken as a whole. DLJ did not place any particular reliance or weight on any individual analysis, but instead concluded that its analyses, taken as a whole, supported its determination. Accordingly, notwithstanding the separate factors summarized above, DLJ has indicated to Repap that it believes that its analyses must be considered as a whole and that selecting portions of its analyses and the factors considered by it, without considering all analyses and factors, could create an incomplete view of the evaluation process underlying the DLJ Fairness Opinion. The analyses DLJ performed are not necessarily indicative of actual values or future results, which may be significantly more or less favourable than suggested by these analyses.

Pursuant to the terms of an engagement agreement dated December 21, 1999, Repap has agreed to pay a fee that is customary in transactions of this nature a substantial portion of which is contingent upon the consummation of the Amalgamation. In addition, Repap agreed to reimburse DLJ, upon DLJ's request from time to time, for all out-of-pocket expenses (including the reasonable fees and expenses of counsel) DLJ incurred in connection with its engagement thereunder and to indemnify DLJ and certain related persons against certain liabilities in connection with its engagement, including liabilities under Canadian and U.S. federal securities laws. DLJ and Repap negotiated the terms of the fee arrangement.

In the ordinary course of business, DLJ and its affiliates may own or actively trade the securities of Repap and UPM-Kymmene for their own accounts and for the accounts of their customers and, accordingly, may at any time hold a long or short position in securities of Repap or UPM-Kymmene. DLJ has performed investment banking and other services for Repap in the past, including acting as sole underwriter in a US$100 million high-yield bond offering in May 1999, and has been compensated for such services.

The Meeting will be held at 11:00 a.m. on Monday, October 16, 2000 at the Le Royal Meridian King Edward Hotel, Belgravia Room, 37 King Street East, Toronto, Ontario, Canada, M5C 1E9. At the Meeting, the Repap Shareholders and the Repap Common Shareholders, as a class, will be asked to approve the Repap Amalgamation Resolution.

For the Amalgamation to proceed, it must be approved by not less than two-thirds of the votes cast at the Meeting by Repap Shareholders, voting together and by not less than two-thirds of the votes cast at the Meeting by holders of Repap Common Shares, voting as a class. The Amalgamation is also subject to a number of other conditions and various Regulatory Approvals.

Certain Repap Shareholders have entered into support agreements with UPM-Kymmene pursuant to which they have agreed to support, subject to the receipt of a Superior Proposal, the Amalgamation and vote all of the Repap Shares owned or controlled by them (collectively, representing approximately 34.5% of the outstanding Repap Common Shares and 100% of the outstanding Repap Preferred Shares) in favour of the Repap Amalgamation Resolution. See "Support Agreements".

Repap Shareholders should review this Circular in its entirety for further information regarding the Meeting.

The Acquisition Agreement provides that all rights to indemnification now existing in favour of the current and former officers and directors of Repap or any subsidiary as provided in the Repap Articles, Repap By-Laws or by contract or otherwise will survive the Amalgamation for a period of not less than six years from the Effective Date. The Acquisition Agreement also provides that, for not less than six years from the Effective Date, there shall be maintained in effect coverage substantially equivalent to that in effect under current policies of the directors' and officers' liability insurance maintained by Repap or any of its subsidiaries which is no less advantageous, and with no gaps or lapses in coverage, with respect to matters occurring prior to the Effective Date. Alternatively, at UPM-Kymmene's option, it may cause Repap to purchase "run-off" directors' and officers' liability insurance providing coverage substantially as favourable to such directors and officers as that in effect under such current policies to cover prior events during such six year period or the balance thereof.

The Principal Shareholders and Mr. Petty, indirectly through two corporations he controls, have entered into support agreements with UPM-Kymmene pursuant to which they have agreed to support, subject to the receipt of a Superior Proposal, the Amalgamation and vote all of the Repap Shares owned or controlled by them in favour of the Repap Amalgamation Resolution. See "Support Agreements".

The Employment Agreements of the senior officers of Repap provide each of them with certain severance payments and benefits in the event such individuals' employment with Repap is terminated either without cause or within a certain period after a change in control of Repap. See "Compensation of Directors and Executive Officers - Employment, Change-in-Control and Service Agreements".

Repap has agreed to pay to DLJ a fee that is customary in transactions of this nature, a substantial portion of which is contingent upon the consummation of the Amalgamation. See "The Amalgamation - Opinion of Repap's Financial Advisor".

Neither UPM-Kymmene nor Repap is aware of any material licences or regulatory permits that it holds which might be adversely affected by the Amalgamation or of any material approval or other action by any Governmental Entity that would be required to be obtained prior to the Effective Date, except as described below. While there can be no assurance that the necessary governmental consents and approvals will be obtained prior to the Meeting or at all, UPM-Kymmene and Repap currently expect that all such consents and approvals that are conditions to completion of the Amalgamation will have been obtained or otherwise resolved by the date of the Meeting.

Under the Competition Act (Canada), certain transactions that involve the acquisition of voting shares of a corporation that carries on an operating business in Canada with respect to which certain financial and shareholding thresholds are passed require prior notification (a "Notifiable Transaction") to the Commissioner of Competition. If a transaction is a Notifiable Transaction, notification must be made either on the basis of a short-form filing (in respect of which there is a 14-day statutory waiting period) or a long-form filing (in respect of which there is a 42-day statutory waiting period). The decision as to whether to make a short-form or long-form filing is at the discretion of the parties. If a short-form filing is made, the Commissioner of Competition may, within the 14-day waiting period, require that the parties make a long-form filing, thereby extending the waiting period for a further 42 days following receipt of the long-form filing.

A Notifiable Transaction may not be completed until the applicable statutory waiting period has expired. However, the Commissioner of Competition's review of a Notifiable Transaction may take longer than the statutory waiting period. Upon completion of the Commissioner of Competition's review of a Notifiable Transaction, the Commissioner of Competition may decide to:

1. challenge the Notifiable Transaction, if the Commissioner of Competition concludes that it will or is likely to substantially lessen or prevent competition and seek an order of the Competition Tribunal: (i) prohibiting the completion of the Notifiable Transaction on an interim or permanent basis if the parties insist on proceeding with it without addressing the Commissioner of Competition's concerns; (ii) requiring the divestiture of shares or assets or the dissolution of the Notifiable Transaction, if it has been completed; or (iii) with the consent of the person against whom the order is directed, requiring that person to take any other action;
2. issue a letter (a "No Action Letter") stating or otherwise advising the parties that the Commissioner of Competition does not intend to challenge the Notifiable Transaction at that time but retains the statutory authority to do so for three years after completion of the Notifiable Transaction; or
3. issue an advance ruling certificate (an "ARC"). Where an ARC is issued and the Notifiable Transaction to which the ARC relates is substantially completed within one year after the ARC is issued, the Commissioner of Competition cannot seek an order of the Competition Tribunal in respect of the Notifiable Transaction solely on the basis of information that is the same or substantially the same as the information on the basis of which the ARC was issued.

The Amalgamation is a Notifiable Transaction. In the Acquisition Agreements, UPM-Kymmene agreed to make all regulatory filings which includes those under the Competition Act. The respective obligations of UPM-Kymmene and Repap to complete the Amalgamation are conditional, among other things, on the expiration or earlier termination of the applicable statutory waiting period following notification under the Competition Act and receipt of an ARC or in the alternative to an ARC, a No Action Letter from the Commissioner of Competition on terms and conditions satisfactory to UPM-Kymmene acting reasonably.

The Amalgamation is reviewable under the Investment Canada Act (Canada), a Canadian statute governing the acquisition of control of Canadian businesses by non-Canadians. A reviewable investment is one for which the acquiror must submit an application for review with prescribed information to Industry Canada.

Before a reviewable investment may be completed, the Minister of the federal Cabinet responsible for Industry Canada must determine that the investment is likely to be of "net benefit to Canada". The Minister has an initial 45-day period within which to make his determination. The Minister may extend that period for a further 30 days by giving notice to the prospective acquiror. If the Minister is not satisfied that the investment is likely to be of net benefit to Canada, he must send a notice to that effect to the prospective acquiror, and the acquiror has 30 days to make representations and submit undertakings to the Minister in an attempt to change his decision.

An application for review under the Investment Canada Act was filed by UPM-Kymmene on September 1, 2000.

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules promulgated thereunder by the FTC, certain transactions, including the Amalgamation, may not be consummated unless notification has been given and certain information has been furnished to the FTC and the Antitrust Division and certain waiting period requirements have been satisfied. Pursuant to the HSR Act, on or about September 15, 2000, UPM-Kymmene and Repap will each file a Notification and Report Form with the FTC and the Antitrust Division for review in connection with the Amalgamation. The respective obligations of UPM-Kymmene and Repap to complete the Amalgamation are conditional, among other things, on the expiration or earlier termination of the applicable statutory waiting period following notification under the HSR Act.

This Circular has been prepared in accordance with the disclosure requirements of Canada. Repap Shareholders resident in the United States should be aware that such requirements are different from those of the United States and none of the Amalco Shares have been registered with the United States Securities and Exchange Commission pursuant to the registration requirements of the United States Securities Act of 1933.

Repap Shareholders resident in the United States should be aware that the implementation of the Amalgamation as described in this Circular may have tax consequences both in Canada and the United States. Such consequences to Repap Shareholders who are resident in, or citizens of, the United States may not be fully described in this Circular. Each such Repap Shareholder should consult its own tax advisor concerning the Amalgamation described in this Circular.

The enforcement by United States resident Repap Shareholders of civil liabilities under the United States federal securities laws may be affected adversely by the fact that Repap, UPM-Kymmene, and Amalco are organized under the laws of a jurisdiction other than the United States, that some or all of their respective officers and directors are residents of countries other than the Unites States, that some or all of the experts named in the Circular may be residents of countries other than the United States, and that all or a substantial portion of the assets of Repap, UPM-Kymmene, and Amalco are, and all or a substantial portion of the assets of such persons may be, located outside the United States.

Repap Common Shares are traded on the TSE under the symbol "RPP". The following table sets forth, for the calendar periods indicated, the high and low closing sale prices and trading volumes for Repap Common Shares as reported on the TSE, expressed in dollars per share:

On August 25, 2000, the last full trading day prior to the public announcement of the Amalgamation, the closing price per Repap Common Share as reported on the TSE was CAD$0.10. On September 11, 2000, the closing price per Repap Common Share as reported on the TSE was CAD$0.205. Historic market prices are not indicative of future market prices.

UPM-Kymmene, which is based in Helsinki, Finland, is one of the world's largest forest products companies and paper producers. UPM-Kymmene group's turnover in 1999 amounted to EUR 8.3 billion (CAD$11.1 billion) and operating profit to EUR 1.6 billion (CAD$2.1 billion). UPM-Kymmene's product range covers printing papers, converting materials and wood products.

UPM-Kymmene Printing Papers, which comprise magazine papers, newsprint and fine papers, account for over half of UPM-Kymmene group's turnover. UPM-Kymmene group is the world's second largest producer of magazine papers and is among the top ten producers of newsprint and fine papers. UPM Converting is among Europe's leading suppliers of converting materials. UPM-Kymmene group is also Europe's biggest plywood producer and one of the continent's biggest producers of sawn timber.

UPM-Kymmene operations are focused on European Union countries and the United States, where the company owns Blandin Paper Company in Minnesota producing LWC magazine papers. North American sales account for 11% of UPM-Kymmene group's turnover. UPM-Kymmene group has production plants in 15 countries and 170 sales and distribution companies spanning five continents.

At the end of 1999, UPM-Kymmene had a total of 30,963 employees and 52,000 registered shareholders. UPM-Kymmene's market capitalization at the end of 1999 was EUR 10.7 billion. UPM-Kymmene's shares are quoted on the Helsinki and New York stock exchanges.

The following is a summary of the material terms of the Acquisition Agreement and is subject to, and qualified in its entirety by the full text of the Acquisition Agreement.

The Acquisition Agreement contains various representations and warranties of Repap relating to, among other things, (i) the corporate existence and organization of Repap and each Repap Material Subsidiary; (ii) the capitalization of Repap; (iii) authorization, execution, delivery and enforceability of the Acquisition Agreement and the Option Agreement; (iv) the determination of the Board of Directors (a) that the Amalgamation is fair to the Repap Shareholders and is in the best interests of Repap, and (b) to unanimously recommend that the Repap Shareholders vote in favour on the Repap Amalgamation Resolution; (v) the receipt by the Board of Directors of the DLJ Fairness Opinion; (vi) the absence of a default under any contract, agreement, licence or franchise which would, if terminated due to such a default, cause a Material Adverse Effect on Repap; (vii) the absence of certain events and any Material Adverse Change with respect to Repap since December 31, 1999 other than those which have been publicly disclosed by Repap; (viii) employment matters; (ix) financial statements; (x) books and records; (xi) the absence of undisclosed liabilities, (xii) the absence of undisclosed litigation that, if adversely determined, could reasonably be expected to have a Material Adverse Effect on Repap; (xiii) environmental matters; (xiv) the filing of tax returns and payment of taxes; (xv) pension and employee benefit matters; (xvi) compliance with Laws; (xvii) the absence of restrictions on the business activities of Repap or any subsidiary or affiliate; (xviii) the existence of necessary licences, authorizations and permits; (xix) the intellectual property of Repap; (xx) certain insurance matters; (xxi) property interests of Repap and each Repap Material Subsidiary; (xxii) non-arm's length transactions; and (xxiii) customers and suppliers.

The Acquisition Agreement also contains various representations and warranties of UPM-Kymmene relating to, among other things, (i) the corporate existence and organization of UPM-Kymmene and Acquireco; (ii) the capitalization of Acquireco; (iii) authorization, execution, delivery and enforceability of the Acquisition Agreement and the Option Agreement; and (iv) access to the funds necessary to acquire the Amalco Special Shares and the Amalco Preferred Shares.

Pursuant to the Acquisition Agreement, Repap has agreed that, among other things, until the earlier of the termination of the Acquisition Agreement and the Effective Date, except as expressly contemplated by the Acquisition Agreement, or with the prior written consent of UPM-Kymmene, it will and will cause each of the Repap Material Subsidiaries to carry on its business, in and only in, the ordinary and regular course in substantially the same manner as conducted prior to the date of the Acquisition Agreement and use all reasonable efforts to preserve intact its present business organization and keep available the services of its present officers and employees and others having business dealings with it to the end that its goodwill and business shall be maintained to and after the Effective Date.

Repap has also agreed to other customary negative and positive covenants including the performance of all obligations required or desirable to be performed by it under the Acquisition Agreement, to co-operate with UPM-Kymmene in connection therewith, and to do all such other acts and things as may be necessary or desirable in order to consummate and make effective, as soon as reasonably practicable, the transactions contemplated by the Acquisition Agreement.

UPM-Kymmene has covenanted in the Acquisition Agreement, in addition to other customary covenants, to:

1. perform, and cause Acquireco to perform, all obligations required or desirable to be performed by it under the Acquisition Agreement, to co-operate with Repap in connection therewith, and to do all such other acts and things as may be necessary or desirable in order to consummate and make effective, as soon as reasonably practicable, the transactions contemplated by the Acquisition Agreement;
2. use all reasonable efforts to: (i) apply for and use all reasonable efforts to obtain all Regulatory Approvals relating to UPM-Kymmene; (ii) effect all necessary registrations, filings and submissions of information required by Governmental Entities from UPM-Kymmene or its subsidiaries relating to the Amalgamation; and (iii) defend all lawsuits or other legal, regulatory or other proceedings to which it is a party challenging or affecting the Acquisition Agreement or the consummation of the transactions contemplated hereby; and
3. acquire or cause its subsidiary to acquire the Amalco Special Shares and offer to purchase the Amalco Preferred Shares on the Effective Date following the completion of the Amalgamation.

In the Acquisition Agreement, Repap has agreed that it shall not, directly or indirectly, through any officer, director, employee, representative (including for greater certainty any investment banker, lawyer or accountant) or agent of Repap or any of its subsidiaries: (a) solicit, initiate, knowingly encourage or otherwise facilitate (including by way of furnishing information or entering into any form of agreement, arrangement or understanding) the initiation of any inquiries or proposals regarding an Acquisition Proposal; (b) initiate or participate in any discussions or negotiations regarding any Acquisition Proposal; (c) approve or recommend or propose to recommend any Acquisition Proposal; or (d) accept or enter into any agreement, arrangement or understanding related to any Acquisition Proposal. Notwithstanding the foregoing, nothing in the Acquisition Agreement prevents the Board of Directors from considering, participating in any discussions or negotiations, or entering into a confidentiality agreement and providing information regarding an unsolicited bona fide written Acquisition Proposal, in respect of which any required financing has been demonstrated to the satisfaction of the Board of Directors, acting in good faith, to be reasonably likely to be obtained or available, which does not otherwise breach the non-solicitation provisions of the Acquisition Agreement and which the Board of Directors has determined in good faith after consultation with its financial advisors and with outside counsel is a Superior Proposal and that it is required to take such actions in order to comply with its fiduciary duties under applicable Laws; unless UPM-Kymmene has terminated the Acquisition Agreement, Repap must notify UPM-Kymmene of any Acquisition Proposal or any inquiry which could lead to an Acquisition Proposal.

Repap has agreed not to accept, approve, recommend or enter into any agreement, understanding or arrangement in respect of an unsolicited Superior Proposal (other than a confidentiality agreement) unless: (a) it has provided UPM-Kymmene with a copy of the Superior Proposal document; and (b) five calendar days shall have elapsed from the later of (i) the date UPM-Kymmene receives a copy of the Superior Proposal, and (ii) the date UPM-Kymmene receives written notice that the Board of Directors has resolved to accept, approve, recommend or enter into an agreement, understanding or arrangement in respect of such Superior Proposal.

During such five-calendar day period, UPM-Kymmene may, but is not obligated to, offer to amend the terms of the Acquisition Agreement. The Board of Directors is obligated to review any offer by UPM-Kymmene to amend the terms of the Acquisition Agreement in good faith in order to determine, in its discretion in the exercise of its fiduciary duties, whether UPM-Kymmene's offer upon acceptance by Repap would result in the Superior Proposal ceasing to be a Superior Proposal. If the Board of Directors so determines, it must enter into an amended agreement with UPM-Kymmene reflecting the amended proposal. If the Board of Directors continues to believe, in good faith and after consultation with its financial advisors and outside counsel, that such Superior Proposal remains a Superior Proposal and therefore rejects UPM-Kymmene's amended proposal, then Repap may approve, recommend, accept or enter into an agreement, understanding or arrangement with respect to the Superior Proposal, provided that such acceptance or agreement does not obligate Repap or any other Person to seek to interfere with the timing or the holding of the Meeting to consider whether to approve the Amalgamation or to provide for any "break", "hello" or other fees or options or rights to acquire assets or securities or any other obligations of Repap or any subsidiary that would be payable or apply if the Amalgamation occurs.

The Acquisition Agreement provides that the respective obligations of each party to complete the Amalgamation are subject to the satisfaction or waiver, where permissible, of a number of conditions before the Effective Date, including the following:

1. the Amalgamation shall have been approved at the Meeting by not less than two-thirds of the votes cast by the Repap Shareholders voting together and by not less than two-thirds of the votes cast by the Repap Common Shareholders;
2. there shall not be in force any final and non-appealable injunction, order or decree restraining or enjoining the consummation of the Amalgamation and there shall be no proceedings of a judicial or administrative nature or otherwise, brought by a Governmental Entity in progress or threatened that relates to or results from the Amalgamation that would, if successful, result in an order or ruling that would preclude completion of the Amalgamation in accordance with the terms of the Acquisition Agreement;
3. the Acquisition Agreement shall not have been terminated in accordance with its terms;
4. the Regulatory Approvals shall have been obtained or satisfied on terms and conditions satisfactory to UPM-Kymmene, acting reasonably;
5. other than the Regulatory Approvals, all consents, waivers, permits, orders and approvals of any Governmental Entity, and the expiry of any waiting periods, in connection with, or required to permit, the consummation of the Amalgamation, the failure of which to obtain or the non-expiry of which would constitute a violation of applicable Laws, or would have a Material Adverse Effect on UPM-Kymmene or Repap, as the case may be, shall have been obtained or received on terms that will not have a Material Adverse Effect on UPM-Kymmene and/or Repap;
6. there shall not be pending or threatened any suit, action or proceeding by any Governmental Entity: (i) seeking to prohibit or restrict the acquisition by UPM-Kymmene or any of its subsidiaries of any Repap Common Shares, seeking to restrain or prohibit the consummation of the Amalgamation or seeking to obtain from Repap or UPM-Kymmene any damages directly or indirectly in connection with the Amalgamation; (ii) seeking to prohibit or materially limit the ownership or operation by UPM-Kymmene or any of its subsidiaries of any portion of the business or assets of Repap or any of its subsidiaries or to compel UPM-Kymmene or any of its subsidiaries to dispose of or hold separate any material portion of the business or assets of Repap or any of its subsidiaries; (iii) seeking to impose limitations on the ability of UPM-Kymmene or any of its subsidiaries to acquire or hold, or exercise full rights of ownership of, any Repap Common Shares, including the right to vote the Repap Common Shares purchased by them on all matters properly presented to the Repap Shareholders; (iv) seeking to prohibit UPM-Kymmene or any of its subsidiaries from effectively controlling in any material respect the business or operations of Repap or any of its subsidiaries; or (v) which otherwise is reasonably likely to have a Material Adverse Effect on Repap or UPM-Kymmene.

The Acquisition Agreement provides that the obligation of UPM-Kymmene to complete the Amalgamation is also subject to the fulfilment of a number of additional conditions, each of which may be waived by UPM-Kymmene, including the following:

1. all covenants of Repap under the Acquisition Agreement to be performed on or before the Effective Date shall have been duly performed by Repap in all material respects;
2. the representations and warranties of Repap under the Acquisition Agreement shall have been true and correct in all material respects on the date hereof;
3. the representations and warranties of Repap under the Acquisition Agreement shall be true and correct in all material respects as of the Effective Date as if made on and as of such date and UPM-Kymmene shall have received a certificate of Repap addressed to UPM-Kymmene and dated the Effective Date confirming the same as at the Effective Date;
4. the Board of Directors shall have adopted all necessary resolutions, and all other necessary corporate action shall have been taken by Repap and the subsidiaries to permit the consummation of the Amalgamation;
5. between the date of the Acquisition Agreement and the Effective Date, there shall not have occurred a Material Adverse Change to Repap;
6. the holders of Repap Common Shares representing in excess of 15% of the outstanding Repap Common Shares shall not have exercised Dissent Rights or similar rights in connection with the Amalgamation; and
7. all outstanding options or other rights or entitlements of any type whatsoever to purchase or otherwise acquire authorized and unissued Repap Common Shares, other than pursuant to the Convertible Debenture, shall have been exercised in full or irrevocably released, surrendered and waived by the holders thereof.

The Acquisition Agreement provides that the obligation of Repap to complete the Amalgamation is also subject to the fulfilment of a number of additional conditions, each of which may be waived by Repap, including the following:

1. all covenants of UPM-Kymmene under the Acquisition Agreement to be performed on or before the Effective Date shall have been duly performed by UPM-Kymmene in all material respects;
2. all representations and warranties of UPM-Kymmene under the Acquisition Agreement shall have been true and correct in all material respects on the date hereof;
3. the representations and warranties of UPM-Kymmene under the Acquisition Agreement shall be true and correct in all material respects as of the Effective Date as if made on and as of such date and Repap shall have received a certificate of UPM-Kymmene addressed to Repap and dated the Effective Date confirming the same as at the Effective Date; and
4. the Board of Directors of UPM-Kymmene shall have adopted all necessary resolutions and all other necessary corporate action shall have been taken by Acquireco to permit the consummation of the Amalgamation.

The Acquisition Agreement may be terminated by mutual agreement of Repap and UPM-Kymmene at any time prior to the Effective Date. In addition, if the Effective Date does not occur on or prior to December 20, 2000, the Acquisition Agreement shall terminate, unless otherwise agreed in writing by the parties.

Either UPM-Kymmene or Repap may terminate the Acquisition Agreement prior to the Effective Date if: (a) there shall be passed any Law that makes consummation of the Amalgamation illegal or otherwise prohibited; and (b) the Repap Shareholders approval shall not have been obtained by reason of the failure to obtain the required vote at the Meeting.

The Acquisition Agreement may be terminated by UPM-Kymmene prior to the Effective Date if: (a) the Board of Directors has failed to recommend or has withdrawn, modified or changed in a manner adverse to UPM-Kymmene its approval or recommendation of the Acquisition Agreement, the Amalgamation or the Repap Amalgamation Resolution (unless the Repap Shareholders shall have approved the Repap Amalgamation Resolution prior to such termination), or (b) the Board of Directors has approved or recommended any Acquisition Proposal.

If: (a) UPM-Kymmene terminates the Acquisition Agreement because the Board of Directors fails to recommend or withdraws, modifies, or changes in a manner adverse to UPM-Kymmene its approval or recommendation of the Acquisition Agreement, the Amalgamation or the Repap Amalgamation Resolution (unless the Repap Shareholders have approved the Repap Amalgamation Resolution prior to such termination) or the Board of Directors has approved or recommended any Acquisition Proposal; or (b) either Repap or UPM-Kymmene terminates the Acquisition Agreement as a result of the failure to have the Amalgamation approved by not less than two-thirds of the votes cast by the Repap Shareholders voting together and by not less than two-thirds of the votes cast by the Repap Common Shareholders or by a Governmental Entity; and (x) an Acquisition Proposal has been made, publicly announced or otherwise publicly disclosed by any person other than UPM-Kymmene prior to the Meeting or (y) the prospect of there being an Acquisition Proposal has been disclosed to holders of more than 20 percent of the Repap Shares prior to or during the Meeting, Repap Shareholder approval of the Amalgamation is not obtained at the Meeting and an Acquisition Proposal is made, publicly announced or otherwise publicly disclosed, prior to the expiration of six months following termination of the Acquisition Agreement; and such Acquisition Proposal is consummated, then in any such case Repap shall pay to UPM-Kymmene the Break Fee. Such payment shall be due concurrently with the consummation of an Acquisition Proposal. Repap shall not be obligated to pay more than one Break Fee.

In addition to the Break Fee, concurrently with the execution of the Acquisition Agreement, Repap granted to UPM-Kymmene an option to purchase from the treasury of Repap up to the greater of (i) 148,048,167 Repap Common Shares, and (ii)  19.9% of the issued and outstanding Repap Common Shares on the date of exercise of the Option (in each case, the "Option Shares") (provided, however, that in no event shall the number of Option Shares exceed 19.9% of the issued and outstanding Repap Common Shares prior to giving effect to the Option), at a price of CAD$0.20 per Repap Common Share, payable in cash, and on the terms and conditions set forth in the Option Agreement.

The Option may be exercised upon the occurrence of an Acquisition Proposal or in certain other specified circumstances. The Repap Common Shares issuable pursuant to the Option may be voted with respect to any such Acquisition Proposal, but may not be voted in connection with the Amalgamation. The Option Agreement further provides that in no event shall the amount of any net proceeds (price of disposition or deemed disposition less purchase price) received by UPM-Kymmene on the sale of Repap Common Shares received upon the exercise of the Option together with the Break Fee which may be payable to UPM-Kymmene exceed CAD$18 million.

UPM-Kymmene has agreed that it will not exercise any voting rights attached to the Option Shares to vote in favour of the Amalgamation. It would, however, be entitled to exercise any such voting rights to vote against a Superior Proposal.

On September 6, 2000, UPM-Kymmene announced that since August 28, 2000 it had purchased 7,545,000 Repap Common Shares in the open market over the TSE.

On August 28, 2000, the Principal Shareholders entered into the Support Agreements with UPM-Kymmene pursuant to which the Principal Shareholders agreed that they will support the Amalgamation and the transactions contemplated thereby. The Principal Shareholders own or control approximately 30.8% of the outstanding Repap Common Shares on the date of the Support Agreements.

Pursuant to the Support Agreements, each of the Principal Shareholders agreed until the earlier of: (a) the date of termination of the Acquisition Agreement; (b) the date of termination of the Support Agreement; and (c) the Effective Date (such earlier date being the "Expiry Date") not to: (i) sell, transfer, gift, assign, pledge, hypothecate, encumber or otherwise dispose of any of its Repap Common Shares or enter into any agreement, arrangement or understanding in connection therewith, without having first obtained the prior written consent of UPM-Kymmene, (ii) grant any proxies or powers of attorney, deposit its Repap Common Shares into a voting trust or enter into a voting agreement, understanding or arrangement with respect to such Repap Voting Shares, without having first obtained the prior written consent of UPM-Kymmene, (iii) 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 Repap Common Shares, or (iv) not to exercise any Rights of Dissent.

In addition, each of the Principal Shareholders undertook, until the Expiry Date: (a) to vote (or cause to be voted) all the Repap Common Shares at any meeting of the Repap Shareholders and in any action by written consent of the Repap Shareholders: (i) in favour of the approval, consent, ratification and adoption of the Amalgamation, and (ii) against any action that would impede, interfere with or discourage the Amalgamation (including 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, each Principal 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 Principal Shareholder, with full power of substitution, to attend, vote and otherwise act for and on behalf of the Principal Shareholder in respect of all Repap Common Shares and in respect of all such matters which may come before a meeting of the Repap Shareholders relating to the Amalgamation (other than any change in the terms of the Amalgamation which would decrease the value of the consideration to be received by the Principal Shareholder) including any action that would impede, interfere with or discourage the Amalgamation and the Principal Shareholder shall not be responsible for the voting under such proxy; and (b) not to, without the prior written consent of UPM-Kymmene, requisition or join in the requisition of any meeting of the Repap Shareholders for the purpose of considering any resolution with respect to any of the matters referred to in (a) above.

Each of the Principal Shareholders has the right to terminate the Support Agreement upon notice to UPM-Kymmene in the event that a Superior Proposal is made, announced or otherwise disclosed to Repap Shareholders on or prior to the Expiry Date, and either: (a) the five day period has expired without UPM-Kymmene having offered to amend the terms of the Acquisition Agreement; or (b) the five day period has expired, and the Board of Directors has rejected an offer to amend the terms of the Acquisition Agreement made by UPM-Kymmene.

On September 13, 2000, Mr. George S. Petty, indirectly through two corporations he controls, entered into a support agreement with UPM-Kymmene on the same terms as those contained in the Support Agreements with the Principal Shareholders. Mr. Petty indirectly beneficially owns approximately 3.7% of the outstanding Repap Common Shares and 100% of the outstanding Repap Preferred Shares.

In the opinion of Stikeman Elliott, counsel to Repap, the following summary fairly describes the principal Canadian federal income tax considerations generally applicable to Repap Shareholders who at all relevant times, for the purposes of the Canadian Tax Act, hold Repap Shares and will hold Amalco Special Shares or Amalco Preferred Shares, as applicable, as capital property and deals with Repap, Amalco and UPM-Kymmene at arm's length.

Repap Shares will generally be considered to be capital property to Repap Shareholders unless any such shares are held in the course of carrying on a business of buying and selling shares or such shares are acquired in a transaction considered to be an adventure in the nature of trade. Repap Shareholders, other than Non-Resident Shareholders, whose Repap Shares and Amalco Shares might not otherwise qualify as capital property, may be entitled to obtain such qualification by making the irrevocable election provided by subsection 39(4) of the Canadian Tax Act. Repap Shareholders who do not hold Repap Shares and Amalco Shares as capital property should consult their own tax advisors regarding their particular circumstances. The Canadian Tax Act contains certain provisions relating to securities held by certain financial institutions (the "mark-to-market rules"). This summary does not address mark-to-market rules, and Repap Shareholders that are "financial institutions'' should consult their own tax advisors with respect to the tax consequences to them of the application of the mark-to-market rules.

This summary is based on the current provisions of the Canadian Tax Act, the Canadian Tax Regulations in force as of the date of the Circular, and counsel's understanding of the current published administrative and assessing practices of the CCRA in effect as of the date of the Circular. This summary takes into account Tax Proposals publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date of the Circular. There is no certainty that the Tax Proposals will be enacted in the form proposed, if at all. This summary is not exhaustive of all possible Canadian federal income tax considerations and, except for the Tax Proposals, does not otherwise take into account or anticipate any changes in law or administrative practice whether by legislative, governmental, or judicial action or decision, nor does it take into account provincial or foreign tax considerations which may differ significantly from the Canadian federal income tax considerations described in the Circular. No advance income tax ruling has been sought or obtained by Repap from the CCRA to confirm the tax consequences to a Repap Shareholder of any of the transactions described in the Circular.

A Repap Shareholder who acquired or was deemed to have acquired Repap Shares prior to 1972, or acquired or is deemed to have acquired such shares in one or more non-arm's length transactions from a person who held such shares at any time prior to 1972, should consult the holder's tax advisors as to the impact of certain transitional rules on the following description of the Canadian federal income tax consequences to Repap Shareholders. The transitional rules are not considered below.

The following portion of the summary is generally applicable to a Repap Shareholder who, for purposes of the Canadian Tax Act and any relevant tax treaty or convention, is resident or deemed to be resident in Canada at all relevant times.

No dividend will be deemed to be paid on the Reduction of Stated Capital provided that no amount is paid by Repap on such reduction. To the same extent, no reduction of the adjusted cost base of the Repap Common Shares will be realized.

No gain or loss will be realized by a Repap Shareholder when the Repap Shares are converted on the Amalgamation into Amalco Shares. The aggregate adjusted cost base to a Repap Shareholder of the Repap Shares will, following the Amalgamation, continue as the aggregate adjusted cost base of the Amalco Shares to that Repap Shareholder.

On the transfer of Amalco Shares to UPM-Kymmene or a wholly-owned subsidiary which includes the transfer of the Amalco Special Shares to UPM-Kymmene pursuant to the terms of such shares (the "Acquisition"), a Repap Shareholder will realize a capital gain (or capital loss) to the extent that the Repap Shareholder's proceeds of disposition of the Amalco Shares, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base to the Repap Shareholder of such Amalco Shares. A Repap Shareholder's proceeds of disposition will be equal to the amount of cash received by the Repap Shareholder for the Amalco Shares by UPM-Kymmene.

Two-thirds of any capital gain (the "taxable capital gain") realized by a Repap Shareholder will be included in the Repap Shareholder's income for the year of disposition. Two-thirds of any capital loss so realized (the "allowable capital loss ") may be deducted by the holder against taxable capital gains for the year of disposition. Any excess of allowable capital losses over taxable capital gains of the Repap Shareholder for the year of disposition may be carried back up to three taxation years or forward indefinitely and deducted against net taxable capital gains in those other years to the extent and in the circumstances prescribed in the Canadian Tax Act and the Tax Proposals.

Capital gains realized by an individual or trust, other than certain trusts, may give rise to alternative minimum tax under the Canadian Tax Act. A Repap Shareholder that is a Canadian-controlled private corporation (as defined in the Canadian Tax Act) may be liable to pay an additional refundable tax of 6 2/3% on taxable capital gains.

In the case of a corporation, the amount of any capital loss arising on a disposition or deemed disposition of Repap Shares may be reduced by the amount of dividends received or deemed to have been received by it on such Repap Shares to the extent and under circumstances prescribed by the Canadian Tax Act. Similar rules may apply where a corporation is a member of a partnership or a beneficiary of a trust that owns Repap Shares, or where a trust or partnership of which a corporation is a beneficiary or a member is a member of a partnership or a beneficiary of a trust that owns Repap Shares.

If a Repap Shareholder exercises Dissent Rights and receives the fair value of the Repap Shares, the Repap Shareholder will be considered to have disposed of its shares for proceeds of disposition equal to the amount received by the Repap Shareholder less the amount of any interest awarded by the court. Any interest awarded to the Repap Shareholder by the Court will be included in the Repap Shareholder's income for the purpose of the Canadian Tax Act. Repap Shareholders who exercise Dissent Rights are urged to consult their tax advisors with respect to the tax considerations relevant to them.

The following portion of the summary is generally applicable to a Repap Shareholder who, for purposes of the Canadian Tax Act and any relevant tax treaty or convention, at all relevant times, has not been and will not be resident or deemed to be resident in Canada, does not use or hold, and is not deemed to use or hold, the Repap Common Shares or Amalco Special Shares in connection with carrying on a business in Canada, and to whom such shares do not otherwise constitute "taxable Canadian property". This summary does not apply to a non-resident that is an insurer carrying on business in Canada and elsewhere.

Generally, the Repap Common Shares and Amalco Special Shares will not constitute taxable Canadian property to a Non- Resident Shareholder provided such shares are listed on a prescribed stock exchange (which currently includes the TSE) unless, at any time during the five-year period immediately preceding the disposition of Repap Common Shares or Amalco Special Shares, as applicable, by the Non-Resident Shareholder, not less than 25% of the issued shares of any class or series of the capital stock of Repap or Amalco, as the case may be, were owned by (or under option to) the Non-Resident Shareholder, persons with whom the Non-Resident Shareholder did not deal at arm's length, or any combination thereof. The TSE has confirmed that from the time the Amalgamation becomes effective, the Amalco Special Shares will be listed on the TSE.

No dividend will be deemed to be paid on the reduction of the stated capital in respect of Repap Common Shares provided that no amount is paid by Repap on such reduction. To the same extent, no reduction of the adjusted cost base of the Repap Common Shares will be realized.

A Non-Resident Shareholder will not be subject to tax under the Canadian Tax Act on the Amalgamation or the Acquisition.

A Non-Resident Shareholder who exercises Dissent Rights will be subject to the same income tax considerations as those above with respect to dissenting Repap Shareholders resident in Canada, except that the Non-Resident Shareholder will not be subject to tax under the Canadian Tax Act in respect of capital gains realized on the disposition of its shares. If a Non-Resident Shareholder receives interest consequent upon the exercise of Dissent Rights (see "Residents of Canada - Dissenting Repap Shareholders"), such amount will be subject to Canadian withholding tax at the rate of 25%. Such rate of withholding may be reduced under the provisions of an applicable tax treaty or convention. Non-Resident Shareholders who exercise Dissent Rights are urged to consult their tax advisors with respect to the tax considerations relevant to them.

This section describes the material United States federal income tax consequences of the Amalgamation to Repap Common Shareholders who exchange Repap Common Shares for Amalco Special Shares and immediately thereafter receive cash in exchange for their Amalco Special Shares pursuant to the Acquisition Agreement. This section does not apply to you if you are a member of a special class of holders subject to special rules, including:

1. a dealer in securities,
2. a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings,
3. a tax-exempt organization,
4. a life insurance company,
5. a person liable for alternative minimum tax,
6. a person that actually or constructively owns 10% or more of the voting stock of Repap,
7. a person that holds Repap Common Shares as part of a straddle or a hedging or conversion transaction, or
8. a person whose functional currency is not the U.S. dollar.

This discussion applies to you only if you hold Repap Common Shares as capital assets for tax purposes.

This section is based on the Internal Revenue Code of 1986, as amended (the "Code"), its legislative history, existing and proposed regulations and published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis.

You are a U.S. holder if you are a beneficial owner of Repap Common Shares and you are:

1. a citizen or resident of the United States,
2. a domestic corporation,
3. an estate whose income is subject to United States federal income tax regardless of its source, or
4. a trust if a United States court can exercise primary supervision over the trust's administration and one or more United States persons are authorized to control all substantial decisions of the trust.

You are a non-U.S. holder if you are a beneficial owner of Repap Common Shares who is not a United States person for United States federal income tax purposes.

This discussion addresses only United States federal income taxation.

For U.S. federal income tax purposes, the receipt of Amalco Special Shares in exchange for Repap Common Shares will be disregarded, and you will be treated as receiving cash in exchange for your Repap Common Shares equal to the amount of cash you receive for your Amalco Special Shares. If you are a U.S. holder, for United States federal income tax purposes, you will recognize capital gain or loss on the receipt of cash in exchange for your Repap Common Shares (not including any interest awarded pursuant to the exercise of Dissent Rights). The amount of capital gain or loss will be equal to the difference between the U.S. dollar value of the Canadian dollars received and your tax basis, also determined in U.S. dollars, in your Repap Common Shares. Capital gain of an individual U.S. holder is generally taxed at a maximum rate of 20% where the property is held more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

If you are a U.S. holder, any interest awarded to you pursuant to Dissent Rights will be included in your income as ordinary income at the time you receive the interest or when it accrues, depending on your method of accounting for tax purposes. You must include any tax withheld from the interest awarded even though you do not in fact receive it. You may be entitled to deduct or credit this tax, subject to applicable limits. The rules governing foreign tax credits are complex and you should consult your tax advisor regarding the availability of the foreign tax credit in your situation. Interest paid pursuant to Dissent Rights is income from sources outside the United States, but, with certain exceptions, will be "passive" or "financial services" income, which is treated separately from other types of income for purposes of computing the foreign tax credit allowable to a U.S. holder.

If you are a non-U.S. holder, you will not be subject to United States federal income tax on the receipt of cash in exchange for your Repap Common Shares unless:

1. the amount of cash received, determined in U.S. dollars, exceeds your tax basis, also determined in U.S. dollars, in your Repap Common Shares, such gain is "effectively connected" with your conduct of a trade or business in the United States, and the gain is attributable to a permanent establishment that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to United States taxation on a net income basis, or
2. you are an individual, you are present in the United States for 183 or more days in the taxable year of the sale and certain other conditions exist.

If you are a corporate non-U.S. holder, "effectively connected" gain that you recognize on the exchange of your Repap Common Shares for cash may also, under certain circumstances, be subject to an additional "branch profits tax" at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.

If you receive cash in exchange for your Repap Common Shares through a United States office of a broker, the cash payment will be subject to both United States backup withholding at the rate of 31% and information reporting unless you certify that you are a non-U.S. person, under penalties of perjury, or you otherwise establish an exemption. If you exchange your Repap Common Shares outside the United States through a non-U.S. office of a non-U.S. broker, and the proceeds are paid to you outside the United States, then United States backup withholding and information reporting requirements generally will not apply to the payment. However, United States information reporting, but not backup withholding, will apply to payment of the proceeds even if the payment is made outside the United States, if you exchange your Repap Common Shares through a non-U.S. office of a broker that:

1. is a United States person,
2. derives 50% or more of its gross income for a specified three-year period from the conduct of a trade or business in the United States,
3. is a "controlled foreign corporation" as to the United States, or
4. with respect to a payment made after December 31, 2000, is a foreign partnership, if at any time during its tax year:

1. one or more of its partners are U.S. persons, as defined in U.S. Treasury regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership, or
2. at any time during its tax year the foreign partnership is engaged in a United States trade or business,

unless the broker has documentary evidence in its records that you are a non-United States person and does not have actual knowledge that you are a U.S. person or you otherwise establish an exemption.

You generally may obtain a refund of any amount withheld under the backup withholding rules that exceeds your income tax liability by filing a refund claim with the United States Internal Revenue Service.

Section 190 of the CBCA provides shareholders with the right to dissent from certain resolutions of a corporation which effect extraordinary corporate transactions or fundamental corporate changes. Any registered Repap Shareholder who dissents from the Repap Amalgamation Resolution in compliance with section 190 of the CBCA will be entitled, in the event the Amalgamation becomes effective, to be paid the fair value of the Repap Shares held by such Dissenting Shareholder determined as of the close of business on the day before the Repap Amalgamation Resolution is adopted.

Section 190 provides that a shareholder may only make a claim under that section with respect to all the shares of a class held by the shareholder on behalf of any one beneficial owner and registered in the shareholder's name. One consequence of this provision is that a Repap Shareholder may only exercise the right to dissent under section 190 in respect of Repap Shares which are registered in that holder's name. In many cases, shares beneficially owned by a person are registered either: (i) in the name of an intermediary that the Non-Registered Holder deals with in respect of the shares (such as banks, trust companies, securities dealers and brokers, trustees or administrators of self-administered registered retirement savings plans, registered retirement income funds, registered educational savings plans and similar plans, and their nominees); or (ii) in the name of a clearing agency (such as CDS) of which the intermediary is a participant. Accordingly, a Non-Registered Holder will not be entitled to exercise the right to dissent under section 190 directly (unless the Repap Shares are re-registered in the Non-Registered Holder's name). A Non-Registered Holder who wishes to exercise the right to dissent should immediately contact the intermediary with whom the Non-Registered Holder deals in respect of his or her Repap Shares and either: (a) instruct the intermediary to exercise the right to dissent on the Non-Registered Holder's behalf (which, if the Repap Shares are registered in the name of CDS or other clearing agency, would require that the Repap Shares first be re-registered in the name of the intermediary); or (b) instruct the intermediary to re-register the Repap Shares in the name of the Non-Registered Holder, in which case the Non-Registered Holder would have to exercise the right to dissent directly.

A Repap Shareholder who wishes to dissent must provide a Dissent Notice to Repap c/o Montreal Trust Company, P.O. Box 1900, Station B, Montreal, Quebec, Canada H3B 3L6 prior to the Meeting or to the chairman of the Meeting at the Meeting. The filing of a Dissent Notice does not deprive a registered Repap Shareholder of the right to vote at the Meeting; however, the CBCA provides, in effect, that a registered Repap Shareholder who has submitted a Dissent Notice and who votes in favour of the Repap Amalgamation Resolution will no longer be considered a Dissenting Shareholder with respect to that class of share voted in favour of the Repap Amalgamation Resolution. The CBCA does not provide, and Repap will not assume, that a vote against the Repap Amalgamation Resolution or an abstention constitutes a Dissent Notice but a registered Repap Shareholder need not vote his or her Repap Shares against the Repap Amalgamation Resolution in order to dissent. Similarly, the revocation of a proxy conferring authority on the proxy holder to vote in favour of the Repap Amalgamation Resolution does not constitute a Dissent Notice; however, any proxy granted by a registered Repap Shareholder who intends to dissent, other than a proxy that instructs the proxy holder to vote against the Repap Amalgamation Resolution should be validly revoked (see "Information regarding the Meeting - Revocability of Proxies") in order to prevent the proxy holder from voting such Repap Shares in favour of the Repap Amalgamation Resolution and thereby causing the registered Repap Shareholder to forfeit his or her right to dissent.

Repap is required, within 10 days after the Repap Shareholders adopt the Repap Amalgamation Resolution, to notify each Dissenting Shareholder that the Repap Amalgamation Resolution has been adopted. Such notice is not required to be sent to any Repap Shareholder who has voted in favour of the Repap Amalgamation Resolution or who has withdrawn his or her Dissent Notice.

A Dissenting Shareholder who has not withdrawn his or her Dissent Notice must then, within 20 days after receipt of notice that the Repap Amalgamation Resolution has been adopted or, if the Dissenting Shareholder does not receive such notice, within 20 days after he or she learns that the Repap Amalgamation Resolution has been adopted, send to Repap a Demand for Payment, containing his or her name and address, the number and class of Repap Shares in respect of which he or she dissents, and a Demand for Payment of the fair value of such Repap Shares. Within 30 days after sending a Demand for Payment, the Dissenting Shareholder must send to Repap or the Exchange Agent the certificates representing the Repap Shares in respect of which he or she dissents. A Dissenting Shareholder who fails to send certificates representing the Repap Shares in respect of which he or she dissents forfeits his or her right to dissent. Repap or the Exchange Agent will endorse on any share certificate received from a Dissenting Shareholder a notice that the holder is a Dissenting Shareholder and will forthwith return the share certificates to the Dissenting Shareholder.

After sending a Demand for Payment, a Dissenting Shareholder ceases to have any rights as a holder of the Repap Shares in respect of which the shareholder has dissented other than the right to be paid the fair value of such shares as determined under section 190, unless: (i) the Dissenting Shareholder withdraws the Demand for Payment before Repap makes an Offer to Pay; (ii) Repap fails to make a timely Offer to Pay to the Dissenting Shareholder and the Dissenting Shareholder withdraws his or her Demand for Payment; or (iii) the Board of Directors revokes the Repap Amalgamation Resolution, in all of which cases the Dissenting Shareholder's rights as a shareholder are reinstated.

Repap is required, not later than seven days after the later of the Effective Date and the date on which Repap receives a Demand for Payment from a Dissenting Shareholder, to send such Dissenting Shareholder an Offer to Pay for his or her Repap Shares in an amount considered by the Board of Directors to be the fair value thereof, accompanied by a statement showing the manner in which such fair value was determined. Every Offer to Pay must be on the same terms. Repap must pay for the Repap Shares of a Dissenting Shareholder within 10 days after an Offer to Pay has been accepted by such Dissenting Shareholder, but any such offer lapses if Repap does not receive an acceptance thereof within 30 days after the Offer to Pay has been made.

If Repap fails to make an Offer to Pay for a Dissenting Shareholder's Repap Shares or if a Dissenting Shareholder fails to accept an offer which has been made, Repap may, within 50 days after the Effective Date or within such further period as the Court may allow, apply to the Court to fix a fair value for the Repap Shares of Dissenting Shareholders. If Repap fails to apply to the Court, a Dissenting Shareholder may apply to the Court for the same purpose within a further period of 20 days or within such further period as the Court may allow. A Dissenting Shareholder is not required to give security for costs in such an application.

Upon an application to the Court, all Dissenting Shareholders whose Repap Shares have not been purchased by Repap will be joined as parties and bound by the decision of the Court and Repap will be required to notify each affected Dissenting Shareholder of the date, place and consequences of the application and of his or her right to appear and be heard in person or by counsel. Upon any such application to the Court, the Court may determine whether any person is a Dissenting Shareholder who should be joined as a party and the Court will then fix a fair value for the Repap Shares of all Dissenting Shareholders. The final order of the Court will be rendered against Repap in favour of each Dissenting Shareholder and for the amount of the fair value of his or her Repap Shares as fixed by the Court. The Court may, in its discretion, allow a reasonable rate of interest on the amount payable to each Dissenting Shareholder from the Effective Date until the date of payment.

Certain legal matters in connection with the Amalgamation will be passed upon by Stikeman Elliott and Sullivan & Cromwell on behalf of Repap. Certain legal matters in connection with the Amalgamation will be passed upon by Osler, Hoskin & Harcourt LLP and White & Case LLP on behalf of UPM-Kymmene. As at September 12, 2000, partners and associates of Stikeman Elliott owned beneficially, directly or indirectly, less than 1% of the outstanding Repap Shares.

Since January 1, 2000, Repap pays its directors (other than the Chairman and the President) an annual retainer of CAD$20,000 together with attendance fees of CAD$1,500 per day for each directors' meeting attended in person or by telephone. Chairmen of board committees are paid CAD$2,500 as an annual retainer together with attendance fees of CAD$1,500 per day for each committee meeting attended in person or by telephone. Other committee members are paid attendance fees of CAD$1,000 for each committee meeting attended in person or by telephone. Commencing January 1, 2000, Repap pays Stephen Capital Inc. US$110,000 per year for services rendered to Repap by Harold (Hap) S. Stephen as Chairman.

The following table sets forth the annual and long-term compensation for the financial years ended December 31, 1999, 1998 and 1997 for the chief executive officer and the three other most highly compensated executive officers of Repap at December 31, 1999. Also included in this table is the amount paid to F. Steven Berg whose compensation would have been disclosed had he been employed by Repap on December 31, 1999. Those listed in the table are hereinafter referred to as the "Named Executive Officers".

The following table discloses all the benefits that executive officers are entitled to from pension plans maintained by Repap or its subsidiaries.