September 12, 2000
TO: UPM-KYMMENE CORPORATION
ETELAESPLANADI 2
FIN - 00101
HELSINKI, FINLAND
Dear Sirs:
RE: ACQUISITION OF REPAP ENTERPRISES INC.
In consideration of UPM-Kymmene Corporation ("UPM-KYMMENE") agreeing in an
acquisition agreement dated as of August 28, 2000, as amended (the "Acquisition
Agreement"): (i) to cause its wholly-owned subsidiary, Acquireco, to participate
in an amalgamation with Repap Enterprises Inc. ("REPAP") (the "Transaction"),
and (ii) thereafter, on the Effective Date of the Transaction, to acquire,
directly or through a wholly-owned subsidiary, the Amalco Special Shares and the
Amalco Preferred Shares, George S. Petty Management Ltd. and 1211423 Ontario
Inc. (collectively, the "SHAREHOLDER") undertakes to take certain actions and do
certain things in respect of the Transaction on the terms set forth in this
letter agreement (the "Agreement").
The terms of the Transaction are summarized in the Acquisition Agreement and
terms used herein and not otherwise defined shall have the meanings set forth in
the Acquisition Agreement. A copy of the Acquisition Agreement is attached
hereto as Schedule 1.
1. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER AND UPM-KYMMENE
1.1 The Shareholder hereby represents and warrants to you (and acknowledges
that you are relying upon such representations and warranties):
(a) that the common shares and the preferred shares in the capital of
Repap set forth on Schedule 2 to this Agreement (the "SHARES") include
all common shares and preferred shares held of record, beneficially
owned by, or for which voting or dispositive power is granted to the
Shareholder or to any trust or associate thereof for the benefit of
the Shareholder. The Shareholder has sole voting power, and, unless
otherwise stated, has exclusive right of disposition and sole power to
agree to all of the matters set forth in this Agreement. The
Shareholder or other owners of such Shares has good and marketable
title to its Shares, free and clear of any and all liens, hypothecs,
pledges, mortgages, charges, restrictions, security interests, adverse
claims and demands or rights of others of any nature or kind
whatsoever ("ENCUMBRANCES"), except as otherwise noted on Schedule 2
(which Encumbrances will be fully and completely discharged as of the
Effective Date). Other than the Shares, no common shares or preferred
shares or securities of Repap convertible into common shares or
preferred shares are beneficially owned or controlled, directly or
indirectly, by the Shareholder;
(b) the Shareholder has the legal capacity to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Shareholder,
and, assuming the due authorization, execution and delivery by
UPM-Kymmene, this Agreement constitutes the legal, valid and binding
obligation of the Shareholder, enforceable against it in accordance
with its terms, subject to laws of general application and bankruptcy,
insolvency and other similar laws affecting creditors' rights
generally and general principles of equity;
(c) neither the execution and delivery of this Agreement by the
Shareholder, the consummation by the Shareholder of the transactions
contemplated hereby nor the compliance by the Shareholder with any of
the provisions hereof shall: (i) result in any breach of, or
constitute a default (or an event which with notice or lapse of time
or both would become a default) (or give rise to any third party right
of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, loan
agreement, bond, mortgage, indenture, contract, license, agreement,
lease, permit or other instrument or obligation to which the
Shareholder is a party or by which the Shareholder or any of its
properties or assets (including its Shares) may be bound, (ii) require
on the part of the Shareholder any filing with (other than pursuant to
the requirements of applicable securities legislation (which filings
the Shareholder will undertake)) or permit, authorization, consent or
approval of, any Governmental Entity, or (iii) subject to compliance
with any orders or laws contemplated by the Acquisition Agreement,
violate any order, writ, injunction, decree, judgment, or Laws
applicable to the Shareholder or any of its properties or assets,
excluding from the foregoing such violations, breaches, defaults or
failures to make any filing or to obtain any permit, authorization,
consent or approval which would not, individually or in the aggregate,
impair the ability of the Shareholder to consummate the transactions
contemplated hereby;
(d) that there is no private or governmental action, suit, proceeding,
claim, arbitration or investigation pending before any Governmental
Entity, or, to the knowledge of the Shareholder, threatened against
the Shareholder or any of its properties that, individually or in the
aggregate, could reasonably be expected to have a material adverse
effect on the Shareholder's ability to consummate the transactions
contemplated by this Agreement. There is no judgment, decree or order
against the Shareholder that could prevent, enjoin, alter or
materially delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a material
adverse effect on the Shareholder's ability to consummate the
transactions contemplated by this Agreement; and
(e) the Shareholder has not previously granted or agreed to grant any
proxy or other right to vote in respect of its Shares or entered into
any voting trust, nor pooling or other agreement with respect to the
right to vote, to call meetings of shareholders or to give consents or
approvals of any kind as to its Shares except those which are no
longer of any force or effect.
1.2 UPM-Kymmene hereby represents and warrants to the Shareholder (and
acknowledges that the Shareholder is relying upon such representations and
warranties):
(a) that UPM-Kymmene is a company duly incorporated and validly existing
under the laws of Finland; and
(b) that UPM-Kymmene has the requisite power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby,
and that this Agreement constitutes the valid and binding obligation
of UPM-Kymmene. This Agreement has been duly executed and delivered by
UPM-Kymmene and, assuming the due execution and delivery by the
Shareholder, is enforceable against it in accordance with its terms,
subject to laws of general application and bankruptcy, insolvency and
other similar laws affecting creditors' rights generally and general
principles of equity.
2. VOTING RIGHTS
2.1 The Shareholder hereby represents and warrants to you and covenants with
you that, between the date of this Agreement and the earlier of: (a) the
date of termination of the Acquisition Agreement in accordance with its
terms, (b) the date of termination of this Agreement in accordance with its
terms; and (c) the Effective Date of the Transaction (such earlier date
being the "EXPIRY DATE"), the Shareholder shall not: (i) sell, transfer,
gift, assign, pledge, hypothecate, encumber or otherwise dispose of any of
its Shares or enter into any agreement, arrangement or understanding in
connection therewith, without having first obtained the prior written
consent of UPM-Kymmene, or (ii) except as contemplated herein, grant any
proxies or powers of attorney, deposit its Shares into a voting trust or
enter into a voting agreement, understanding or arrangement with respect to
such Shares, without having first obtained the prior written consent of
UPM-Kymmene.
2.2 The Shareholder agrees that, until the Expiry Date, it shall not, directly
or indirectly, negotiate with, solicit, initiate or encourage submission of
proposals or offers from, or provide information to, any other person,
entity or group relating to an Acquisition Proposal or any Shares.
2.3 The Shareholder hereby irrevocably undertakes, until the Expiry Date:
(a) to vote (or cause to be voted) all the Shares at any meeting of the
shareholders of Repap, and in any action by written consent of the
shareholders of Repap: (i) in favour of the approval, consent,
ratification and adoption of the Transaction (and any actions required
in furtherance thereof); and (ii) against any action that would
impede, interfere or discourage the Transaction (including for greater
certainty in favour of any Superior Proposal) and against any action
that would result in any breach of any representation, warranty or
covenant of Repap in the Acquisition Agreement. Upon the written
request or direction of UPM-Kymmene, the Shareholder shall execute a
form of proxy (effective only until the Expiry Date) in respect of any
such resolution appointing such person or persons as UPM-Kymmene may
request or direct as proxy for such Shareholder, with full power of
substitution, to attend, vote and otherwise act for and on behalf of
the Shareholder in respect of all Shares and in respect of all such
matters which may come before a meeting of the shareholders of Repap
relating to the Transaction (other than any change in the terms of the
Transaction which would decrease the value of the consideration to be
received by the Shareholder) including any action that would impede,
interfere or discourage the Transaction and the Shareholder shall not
be responsible for the voting under such proxy; and
(b) not to, without the prior written consent of UPM-Kymmene, requisition
or join in the requisition of any meeting of the shareholders of Repap
for the purpose of considering any resolution with respect to any of
the matters referred to in subsection 2.3(a).
3. SUPERIOR PROPOSAL
3.1 In the event that a Superior Proposal is made, announced or otherwise
disclosed to Repap's shareholders on or prior to the Expiry Date, and
either:
(a) the Match Period (as defined in Section 4.6(1) of the Acquisition
Agreement) has expired without UPM-Kymmene having offered to amend the
terms of the Acquisition Agreement as contemplated by Section 4.6(2)
of the Acquisition Agreement; or
(b) the Match Period has expired, and the Board of Directors of Repap has
rejected an offer to amend the terms of the Acquisition Agreement made
by UPM-Kymmene in accordance with the provisions of Section 4.6(2) of
the Acquisition Agreement;
the Shareholder shall have the right to terminate this Agreement upon
notice to UPM-Kymmene.
4. COVENANTS
4.1 The Shareholder agrees:
(a) to details of this Agreement being set out in any information circular
produced by, or any filing to be made with the OSC or the SEC by,
Repap and/or UPM-Kymmene in connection with the Transaction;
(b) to this Agreement being filed as an exhibit to any document filed with
the OSC or the SEC or otherwise being available for inspection to the
extent required by Law; and
(c) that an award of monetary damages would not be an adequate remedy for
any loss incurred by reason of any breach of this Agreement and that,
in the event of any breach or threatened breach of this Agreement by
the Shareholder, UPM-Kymmene will be entitled to equitable relief,
including injunctive relief and specific performance. Such remedies
will not be the exclusive remedies for any breach or threatened breach
of this Agreement by the Shareholder but will be in addition to all
other remedies available at law or in equity to UPM-Kymmene.
4.2 UPM-Kymmene agrees not to amend the definition of the term "Outside Date",
section 2.4, subsection 6.3(1), subsection 6.3(2), clause 6.3(3)(d) or
subsection 6.3(4) of the Acquisition Agreement without the prior written
consent of the Shareholder, which consent shall not be unreasonably
withheld.
4.3 The Shareholder agrees, until the Expiry Date, not to exercise any rights
of dissent.
5. SALE OF PREFERRED SHARES
5.1 If the Transaction is consummated, UPM-Kymmene or a wholly-owned subsidiary
of UPM-Kymmene will offer to purchase and the Shareholder agrees to sell
the Amalco Preferred Shares which it will receive on the amalgamation of
Acquireco and Repap to UPM-Kymmene, or a wholly-owned subsidiary thereof,
at a price of Cdn. $25.00 per share, as provided in paragraph 4.3(h) of the
Acquisition Agreement.
6. MISCELLANEOUS
6.1 The headings in this Agreement are for reference only and shall not affect
the meaning or interpretation of this Agreement.
6.2 This Agreement (including the Schedules attached hereto) constitutes the
entire agreement and supersedes all prior agreements and understandings,
both oral and written, among the parties with respect to the subject matter
hereof.
6.3 Any provision in this Agreement may be amended or waived if, and only if,
such amendment or waiver is in writing and signed, in the case of an
amendment, by the Shareholder and UPM-Kymmene or in the case of a waiver,
by the party against whom the waiver is to be effective. No failure or
delay by any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise.
6.4 Any date, time or period referred to in this Agreement shall be of the
essence except to the extent to which UPM-Kymmene and the Shareholder agree
in writing to vary any date, time or period, in which event the varied
date, time or period shall be of the essence.
6.5 Each of UPM-Kymmene and the Shareholder shall bear its own expenses
incurred in connection with this Agreement and the transactions
contemplated hereby.
6.6 All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be given (and shall be deemed to have been
duly given upon receipt) by delivery in person, by telecopy, or facsimile,
or by a nationally recognized courier service to the respective parties at
their addresses as specified in Schedule 3 hereto.
6.7 If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of this
Agreement is not affected in any manner materially adverse to any party.
Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate
in good faith to modify this Agreement so as to effect the original intent
of the parties as closely as possible in a mutually acceptable manner in
order that the terms of this Agreement remain as originally contemplated to
the fullest extent possible.
6.8 The provisions of this Agreement shall be binding upon and enure to the
benefit of the parties hereto and their respective successors and permitted
assigns, provided that no party may assign, delegate or otherwise transfer
any of its rights, interests or obligations under this Agreement without
the prior written consent of the other party hereto, except that
UPM-Kymmene may assign, delegate or otherwise transfer any of its rights,
interests or obligations under this Agreement to a wholly-owned subsidiary,
without reducing its own obligations hereunder, without the consent of the
Shareholder.
6.9 This Agreement is governed by the laws of the Province of Ontario and the
federal laws of Canada applicable therein. The Shareholder hereby
irrevocably attorns to the jurisdiction of the Courts of the Province of
Ontario and irrevocably agrees that the Courts of the Province of Ontario
are to have jurisdiction to settle any disputes which may arise out of or
in connection with this Agreement and that, accordingly, any suit, action
or proceeding ("PROCEEDINGS") arising out of or in connection with this
Agreement may be brought in such Courts. The Shareholder hereby waives any
objection which it may have now or hereafter to the venue of any
Proceedings in the Courts of the Province of Ontario and any claim that any
Proceedings have been brought in an inconvenient forum and further
irrevocably agrees that a judgment in any Proceedings brought in the Courts
of the Province of Ontario shall be conclusive and binding upon the
Shareholder and may be enforced in the courts of any other jurisdiction.
6.10 This Agreement may be executed by facsimile and in one or more
counterparts, all of which shall be considered one and the same agreement.
This Agreement has been agreed and accepted this 12th day of September, 2000.
GEORGE S. PETTY MANAGEMENT LTD.
By: /s/ George S. Petty
--------------------------------------
Name: George S. Petty
Title: President
1211423 ONTARIO INC.
By: /s/ George S. Petty
--------------------------------------
Name: George S. Petty
Title: Authorized Signing Officer
UPM-KYMMENE CORPORATION
By: /s/ Jaakko Palsanen
--------------------------------------
Name: Jaakko Palsanen
Title: V.P. Business Development
By: /s/ Sakari Lahdelma
--------------------------------------
Name: Sakari Lahdelma
Title: Authorized Signing Officer
<PAGE>
SCHEDULE 1
ACQUISITION AGREEMENT
Please see the attached.
<PAGE>
SCHEDULE 2
SHAREHOLDER NUMBER AND TYPE OF SHARES
----------- -------------------------
George S. Petty Management Ltd. 18,412,255 Common Shares
240,000 Preferred Shares, Series C
400,000 Preferred Shares, Series F
1211423 Ontario Inc. 9,000,000 Common Shares
TOTAL 27,412,255 Common Shares
240,000 Preferred Shares, Series C
400,000 Preferred Shares, Series F
ENCUMBRANCES
The 18,412,255 Common Shares, the 240,000 Preferred Shares, Series C, and the
400,000 Preferred Shares, Series F, are subject to moveable hypothecs in favour
of the Royal Bank of Canada and the Canadian Imperial Bank of Commerce as a
result of the hypothecation of securities agreements bearing the formal date of
June 12, 1998.
<PAGE>
SCHEDULE 3
ADDRESS
UPM-Kymmene Corporation
Etelaesplanadi 2
FIN - 00101
Helsinki, Finland
Attention: Reko Aalto-Setala
Telecopier No.: (358) 204 15 0304
with a copy to:
Osler, Hoskin & Harcourt LLP
100 King Street West, Suite 6100
First Canadian Place
Toronto, Ontario M5X 1B8
Attention: Dale R. Ponder
Telecopier No.: (416) 862-6666
White & Case LLP
1155 Avenue of the Americas
New York, New York
10036-2787
Attention: Timothy B. Goodell
Telecopier No.: (212) 354-8113
George S. Petty Management Ltd. and
1211423 Ontario Inc.
3442 Redpath
Montreal, Quebec H3G 2G3
Attention: George S. Petty
Telecopier No.: (514) 934-2214
with a copy to:
Hart, Saint-Pierre
1 Place Ville-Marie
Suite 2125
Montreal, Quebec H3B 2C6
Attention: Michel St-Pierre
Telecopier No.: (514) 866-8323
