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ACQUISITION AGREEMENT
DATED
August 28, 2000
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OSLER, HOSKIN & HARCOURT LLP
-
WHITE & CASE LLP
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
INTERPRETATION....................................................... 1
Section 1.1 Definitions.......................................... 1
Section 1.2 Interpretation Not Affected by Headings, etc......... 6
Section 1.3 Currency............................................. 6
Section 1.4 Number, etc...........................................6
Section 1.5 Date For Any Action...................................6
Section 1.6 Entire Agreement......................................7
Section 1.7 Schedules.............................................7
Section 1.8 Accounting Matters....................................7
Section 1.9 Knowledge.............................................7
ARTICLE 2
THE AMALGAMATION......................................................7
Section 2.1 Implementation Steps by Repap.........................7
Section 2.2 Articles of Amalgamation..............................8
Section 2.3 Repap Circular........................................8
Section 2.4 Preparation of Filings, etc...........................8
ARTICLE 3
REPRESENTATIONS AND WARRANTIES........................................9
Section 3.1 Representations and Warranties of Repap...............9
Section 3.2 Representations and Warranties of UPM................23
Section 3.3 Survival.............................................25
ARTICLE 4
COVENANTS............................................................25
Section 4.1 Retention of Goodwill................................25
Section 4.2 Covenants of Repap...................................25
Section 4.3 Covenants of UPM.....................................29
Section 4.4 Treatment of Repap Stock Options.....................30
Section 4.5 Covenants Regarding Non-Solicitation.................30
Section 4.6 Notice by Repap of Superior Proposal Determination...32
Section 4.7 Access to Information................................33
Section 4.8 Closing Matters......................................33
Section 4.9 Indemnification......................................33
ARTICLE 5
CONDITIONS...........................................................34
Section 5.1 Mutual Conditions Precedent..........................34
Section 5.2 Additional Conditions Precedent to the
Obligations of UPM...................................35
Section 5.3 Additional Conditions Precedent to the
Obligations of Repap.................................36
Section 5.4 Notice and Cure Provisions...........................36
Section 5.5 Satisfaction of Conditions...........................37
ARTICLE 6
AMENDMENT AND TERMINATION............................................37
Section 6.1 Amendment............................................37
Section 6.2 [Intentionally Deleted]..............................38
Section 6.3 Termination..........................................38
Section 6.4 Break and Other Fees; Option.........................39
Section 6.5 Remedies.............................................39
ARTICLE 7
GENERAL..............................................................40
Section 7.1 Notices..............................................40
Section 7.2 Assignment...........................................41
Section 7.3 Binding Effect.......................................42
Section 7.4 Waiver and Modification..............................42
Section 7.5 Further Assurances...................................42
Section 7.6 Expenses.............................................42
Section 7.7 Consultation.........................................42
Section 7.8 Governing Laws.......................................43
Section 7.9 Time of Essence......................................43
Section 7.10 Counterparts.........................................43
SCHEDULE A - AMALGAMATION AGREEMENT
SCHEDULE B - SPECIAL RESOLUTION OF THE REPAP SHAREHOLDERS
SCHEDULE C - REGULATORY APPROVALS
SCHEDULE D - CONFIDENTIALITY PROVISIONS
SCHEDULE E - OPTION AGREEMENT
<PAGE>
ACQUISITION AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 28th day of August, 2000
B E T W E E N :
UPM-KYMMENE CORPORATION,
a corporation existing under the laws of Finland
("UPM")
- and -
REPAP ENTERPRISES INC.,
a corporation existing under the laws of Canada
("Repap").
THIS AGREEMENT WITNESSES THAT in consideration of the respective covenants
and agreements herein contained, the parties hereto covenant and agree as
follows:
ARTICLE 1
Interpretation
Section 1.1 Definitions
In this Agreement, unless there is something in the subject matter or
context inconsistent therewith, the following terms shall have the following
meanings respectively:
"Acquireco" means 3796477 Canada Inc., a corporation existing under the
laws of Canada and a wholly-owned subsidiary of UPM;
"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" shall have the meaning ascribed thereto under the Securities
Act;
"Amalco" means the corporation continuing as a result of the Amalgamation;
"Amalco Special Shares" means the redeemable special shares of Amalco to be
issued on the Amalgamation and to be redeemed by Amalco on the Redemption
Date at the Redemption Price;
"Amalgamation" means an amalgamation of Repap and Acquireco 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;
"Amalgamation Agreement" means the amalgamation agreement providing for the
Amalgamation substantially in the form and content of Schedule A annexed
hereto and any amendments or variations thereto made in accordance with
Section 6.1;
"Amalgamation Resolution" means the special resolution of the Repap
Shareholders, to be substantially in the form and content of Schedule B
annexed hereto;
"ancillary documents" means the schedules hereto and any disclosure letters
between the parties as contemplated herein;
"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;
"Berg Litigation" means the litigation relating to Mr. S. Berg disclosed in
the documents Publicly Disclosed by Repap;
"Break Fee" shall have the meaning ascribed thereto in Section 6.4(1);
"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;
"CBCA" means the Canada Business Corporations Act as now in effect and as
it may be amended from time to time prior to the Effective Date;
"COBRA" has the meaning ascribed thereto in Section 3.1(1)(vii);
"Convertible Debenture" means the U.S. $45 million principal amount 6%
convertible subordinated debenture of Repap;
"Director" means the Director appointed pursuant to Section 260 of the
CBCA;
"Dissent Rights" means the rights of dissent in respect of the Amalgamation
under Section 190 of the CBCA;
"Dissenting Shareholder" means any Repap Shareholder which exercises its
Dissent Rights in compliance with Section 190 of the CBCA and thereby
becomes entitled to receive the fair value of the Repap Common Shares held
by that Repap Shareholder;
"Effective Date" means the date shown on the certificate of amalgamation to
be issued by the Director under the CBCA giving effect to the Amalgamation;
"Environmental Laws" means all applicable Laws, including applicable common
law, relating to the protection of the environment and public health and
safety or any hazardous or toxic substance or pollutant;
"ERISA" has the meaning ascribed thereto in Section 3.1(l)(vi);
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended 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;
"Governmental Entity" means any (a) 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, (b) self
regulatory organization or stock exchange including The Nasdaq Stock
Market, Inc. OTC Bulletin Board and The Toronto Stock Exchange, (c)
subdivision, agent, commission, board, or authority of any of the
foregoing, or (d) quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for the account of
any of the foregoing;
"holders" means, when used with reference to the Repap Common Shares and
the Repap Preferred Shares, the holders thereof shown from time to time in
the register maintained by or on behalf of Repap in respect of such
securities;
"including" means including without limitation;
"Information" has the meaning ascribed thereto in Section 4.7(2);
"Intellectual Property Rights" means all patents, trade-marks, copyright,
industrial designs, trade-names and other intellectual property rights
whether registered or not, owned by or licensed to Repap or its
subsidiaries; "Copyright" means the rights prescribed by section 3(1) of
the Copyright Act (Canada) and other copyright rights; "Industrial Designs"
means the exclusive rights conferred under the Industrial Design Act
(Canada) and other equivalent rights including design patent rights;
"Patents" means all issued patents and inventions and pending applications
therefor and patents which may be issued from current applications
(including divisions, reissues, renewals, re-examinations, continuations,
continuations-in-part and extensions) applied for or registered in any
jurisdiction; and "Trade-marks" means the trade-marks, trade-names, brands,
business names, uniform resource locators, domain names, tag lines,
designs, graphics, logos, service marks and other commercial symbols and
indicia of origin whether registered or not and any goodwill associated
therewith;
"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;
"Match Period" has the meaning ascribed thereto in Section 4.6(1);
"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
worldwide 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" when used in connection with a Person, means any
effect resulting in a Material Adverse Change with respect to it;
"material fact" shall have the meaning ascribed thereto under the
Securities Act;
"Option Agreement" means the option agreement attached as Schedule C
hereto;
"OSC" means the Ontario Securities Commission;
"Outside Date" means December 20, 2000 or such later date as may be
mutually agreed by the parties;
"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;
"Publicly Disclosed by Repap" means disclosed by Repap in a public filing
made by it with the OSC or the SEC on or before the date hereof;
"Redemption Date" means the Effective Date;
"Redemption Price" means Cdn. $0.20 per Amalco Special Share or such
greater amount established in accordance with Section 4.6;
"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, as set out in Schedule C hereto;
"Repap Circular" means the notice of the Repap Meeting and accompanying
management information circular, including all appendices thereto, to be
sent to Repap Shareholders in connection with the Repap Meeting;
"Repap Common Shares" means the common shares in the capital of Repap;
"Repap Documents" has the meaning ascribed thereto in Section 3.1(m);
"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 ten 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 Meeting" means the special meeting of Repap Shareholders, including
any adjournment or postponement thereof, to be called and held to consider
the Amalgamation;
"Repap Options" means the Repap Common Share purchase options granted under
the Repap Stock Option Plans;
"Repap Plans" has the meaning ascribed thereto in Section 3.1(l);
"Repap Preferred Shares" means collectively the Preferred Shares, Series C
and the Preferred Shares, Series F in the capital of Repap;
"Repap Shareholders" means the holders of Repap Common Shares and Repap
Preferred Shares;
"Repap Shares" means the Repap Common Shares and the Repap Preferred
Shares;
"Repap Stock Option Plans" means Repap's 1987 Directors, Officers and
Employees Stock Option Plan, and the 1991 Salaried Employees Amended Stock
Option Plan, as amended to the date hereof;
"Representatives" has the meaning ascribed thereto in Section 4.7(1);
"SEC" means the United States Securities and Exchange Commission;
"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;
"subsidiary" means, with respect to a specified body corporate, any body
corporate of which more than 50% of the outstanding shares ordinarily
entitled to elect a majority of the board of directors thereof (whether or
not shares of any other class or classes shall or might be entitled to vote
upon the happening of any event or contingency) are at the time owned
directly or indirectly by such specified body corporate, and shall include
any body corporate, partnership, joint venture or other entity over which
such specified body corporate exercises direction or control or which is in
a like relation to a subsidiary;
"Superior Proposal" means any bona fide written Acquisition Proposal that
in the good faith determination of the Board of Directors of Repap, 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 holders of Repap
Common Shares and no less favourable to the holders of Repap Preferred
Shares from a financial point of view than the transaction contemplated by
this Agreement;
"Tax" and "Taxes" have the respective meanings ascribed thereto in Section
3.1(k) (iii);
"Tax Returns" means all returns, declarations, reports, information returns
and statements required to be filed with any taxing authority relating to
Taxes;
"Technical Information" means all know-how and related technical knowledge
owned by or licensed to Repap, its subsidiaries or affiliates including,
without limitation: all trade secrets, confidential information and other
proprietary know-how; all public information and non-proprietary know-how;
any information of a scientific, technical, financial or business nature
regardless of its form; all documented research, forecasts, studies,
marketing plans, budgets, market data, developmental, demonstration or
engineering work; all information that can be or is used to define a design
or process or procure, produce, support or operate material and equipment;
all software, methods of production and procedures; all integrated circuit
topographies, mask works and similar rights in semi-conductor chip
technology; and all formulae, designs, drawings, blueprints, patterns,
plans, flow charts, parts lists, manuals and records;
"unsolicited" means unsolicited after Tuesday, August 22, 2000; and
"US Repap Plans" has the meaning ascribed thereto in Section 3.1(l)(vi).
Section 1.2 Interpretation Not Affected by Headings, etc.
The division of this Agreement into Articles, Sections and other portions
and the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation hereof. Unless otherwise
indicated, all references to an "Article" or "Section" followed by a number
and/or a letter refer to the specified Article or Section of this Agreement. The
terms "this Agreement", "hereof", "herein" and "hereunder" and similar
expressions refer to this Agreement (including the Schedules hereto) and not to
any particular Article, Section or other portion hereof and include any
agreement or instrument supplementary or ancillary hereto.
Section 1.3 Currency
Unless otherwise specifically indicated, all sums of money referred to in
this Agreement are expressed in lawful money of Canada.
Section 1.4 Number, etc.
Unless the context otherwise requires, words importing the singular shall
include the plural and vice versa and words importing any gender shall include
all genders.
Section 1.5 Date For Any Action
In the event that any date on which any action is required to be taken
hereunder by any of the parties hereto is not a Business Day, such action shall
be required to be taken on the next succeeding day which is a Business Day.
Section 1.6 Entire Agreement
This Agreement, and the agreements and other documents referred to herein,
constitute the entire agreement between the parties hereto pertaining to the
terms of the transactions contemplated hereby and supersede all other prior
agreements, understandings, negotiations and discussions, whether oral or
written, between the parties hereto with respect to the terms of the
transactions contemplated hereby.
Section 1.7 Schedules
The following Schedules are annexed to this Agreement and are hereby
incorporated by reference into this Agreement and form part hereof:
Schedule A - Amalgamation Agreement
Schedule B - Special Resolution of the Repap Shareholders
Schedule C - Regulatory Approvals
Schedule D - Confidentiality Provisions
Schedule E - Option Agreement
Section 1.8 Accounting Matters
Unless otherwise stated, all accounting terms used in this Agreement in
respect of Repap shall have the meanings attributable thereto under Canadian
generally accepted accounting principles and all determinations of an accounting
nature in respect of Repap required to be made shall be made in a manner
consistent with Canadian generally accepted accounting principles and past
practice.
Section 1.9 Knowledge
Each reference herein to the knowledge of Repap means, unless otherwise
specified, the actual knowledge of H. Stephen, S. Larson, M. Cormier or T.
McBride following due review of corporate records and inquiry of such employees
of Repap as they determine in their reasonable judgement can be made without
jeopardizing the confidentiality of the subject matter of this Agreement. Each
reference herein to the knowledge of UPM means, unless otherwise specified, the
actual knowledge of UPM's senior officers.
ARTICLE 2
THE AMALGAMATION
Section 2.1 Implementation Steps by Repap
Repap covenants in favour of UPM that Repap shall:
(a) convene and hold the Repap Meeting, within 30 days of causing the
Repap Circular and other documentation required in connection with the
Repap Meeting to be sent to each Repap Shareholder pursuant to Section
2.3, for the purpose of considering the Amalgamation Resolution;
(b) subject to Section 4.6(1) and Section 5.4(2), not postpone or cancel
(or propose for adjournment, postponement or cancellation) the Repap
Meeting without UPM's prior written consent except as required for
quorum purposes, by Law or by the Repap Shareholders;
(c) at the request of UPM, use commercially reasonable efforts to solicit
from the Repap Shareholders proxies in favour of the approval of the
Amalgamation Resolution and to take all other action that is necessary
or desirable to secure the approval of the Amalgamation Resolution by
the Repap Shareholders, except to the extent that the Board of
Directors has changed its recommendation in accordance with the terms
of this Agreement (and subject in all cases to Section 6.4); and
(d) subject to the satisfaction or waiver of the other conditions herein
contained in favour of each party and on written direction from UPM,
send to the Director, for endorsement and filing by the Director, the
Articles of Amalgamation and such other documents as may be required
in connection therewith under the CBCA to give effect to the
Amalgamation.
Section 2.2 Articles of Amalgamation
The Articles of Amalgamation shall implement the Amalgamation, as a result
of which, among other things, each holder of Repap Common Shares will be
entitled to receive one Amalco Special Share for each Repap Common Share.
Section 2.3 Repap Circular
Repap shall commence preparation of the Repap Circular no later than on
August 29, 2000. As promptly as reasonably practicable after the execution and
delivery of this Agreement, Repap shall complete the Repap Circular together
with any other documents required by the Securities Act or other applicable Laws
in connection with the Amalgamation required to be prepared by Repap, and as
promptly as practicable after the execution and delivery of this Agreement, and
in any event on or prior to September 15, 2000 Repap shall, unless otherwise
agreed by the parties, cause the Repap Circular and other documentation required
in connection with the Repap Meeting to be sent to each Repap Shareholder and
filed as required by applicable Laws.
Section 2.4 Preparation of Filings, etc.
(1) UPM and Repap shall use all reasonable efforts to cooperate in the
preparation, seeking and obtaining of all circulars, filings, consents,
Regulatory Approvals and other approvals and other matters in
connection with this Agreement and the Amalgamation.
(2) Each of UPM and Repap shall furnish to the other all such information
concerning it and its shareholders as may be required (and, in the case
of its shareholders, available to it) for the effectuation of the
actions described in Sections 2.3 and the foregoing provisions of this
Section 2.4, and each covenants that no information furnished by it (to
its knowledge in the case of information concerning its shareholders)
in connection with such actions or otherwise in connection with the
consummation of the Amalgamation and the other transactions
contemplated by this Agreement will contain any untrue statement of a
material fact or omit to state a material fact required to be stated in
any such document or necessary in order to make any information so
furnished for use in any such document not misleading in the light of
the circumstances in which it is furnished.
(3) Repap shall promptly notify UPM if at any time before the Effective
Date it becomes aware that the Repap Circular contains any untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements contained
therein not misleading in light of the circumstances in which they are
made, or that otherwise requires an amendment or supplement to the
Repap Circular or such other document. In any such event, UPM and Repap
shall cooperate in the preparation of a supplement or amendment to the
Repap Circular or such application or other document, as required and
as the case may be, and, if required, shall cause the same to be sent
to Repap Shareholders and filed as required by applicable Laws.
(4) Repap shall ensure that the Repap Circular complies in all material
respects with all applicable Laws. Without limiting the generality of
the foregoing, Repap shall ensure that the Repap Circular provides
holders of Repap Shares with information in sufficient detail to permit
them to form a reasoned judgement concerning the matters to be placed
before them at the Repap Meeting.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of Repap
Repap represents and warrants to and in favour of UPM as follows and
acknowledges that UPM is relying upon such representations and warranties in
connection with the transactions contemplated by this Agreement:
(a) Organization. Each of Repap and the Repap Material Subsidiaries has
been duly incorporated or formed under all applicable Laws, is validly
subsisting and has full corporate or legal power and authority to own
its properties and conduct its businesses as currently owned and
conducted. All of the outstanding shares and other ownership interests
of the Repap Material Subsidiaries which are held directly or
indirectly by Repap are validly issued, fully paid and non-assessable
and all such shares and other ownership interests are owned directly
or indirectly by Repap, free and clear of all material liens, claims
or encumbrances, except for restrictions on transfers contained in
articles or similar documents, and there are no outstanding options,
rights, entitlements, understandings or commitments (contingent or
otherwise) regarding the right to acquire any such shares or other
ownership interests in any of the Repap Material Subsidiaries. Repap
has disclosed in writing to UPM in a form acceptable to UPM the names
and jurisdictions of incorporation of each of the Repap Material
Subsidiaries.
(b) Capitalization. Except as has been disclosed in writing by Repap to
UPM in a form acceptable to UPM, the authorized capital of Repap
consists of an unlimited number of Repap Common Shares and an
unlimited number of Preferred Shares, issuable in series. As of the
date hereof, there are 743,960,637 Repap Common Shares (and no more)
and 240,000 Preferred Shares, Series C (and no more) and 400,000
Preferred Shares, Series F (and no more) and no Preferred Shares of
any other series, issued and outstanding. In addition, as at the date
hereof, options to acquire an aggregate of not more than 60,895,000
Repap Common Shares are granted and outstanding under the Repap Stock
Option Plans and the right to acquire an aggregate of not more than
128,571,429 Repap Common Shares is outstanding under the Convertible
Debenture at a conversion price as at the date hereof of U.S.$0.35 per
Repap Common Share. Except as described in the preceding sentences of
this Section 3.1(b), there are no options, warrants, conversion
privileges or other rights, agreements, arrangements or commitments
(pre-emptive, contingent or otherwise) obligating Repap or any Repap
subsidiary to issue or sell any shares of Repap or of any of the Repap
subsidiaries or securities or obligations of any kind convertible into
or exchangeable for any shares of Repap or of any Repap subsidiary.
All outstanding Repap Common Shares and Repap Preferred Shares have
been duly authorized and are validly issued and outstanding as fully
paid and non-assessable shares, free of pre-emptive rights. Except as
has been disclosed in this Section, there are no outstanding
contractual obligations of Repap or any of the Repap subsidiaries to
repurchase, redeem or otherwise acquire any of its outstanding
securities or with respect to the voting or disposition of any
outstanding securities of Repap or any of the Repap subsidiaries.
(c) Authority and No Violation.
(i) Repap has the requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement and the Option Agreement
by Repap and the consummation by Repap of the transactions
contemplated by this Agreement and the Option Agreement have been
duly authorized by its Board of Directors and no other corporate
proceedings on its part are necessary to authorize this Agreement
or the transactions contemplated hereby, other than:
(A) with respect to the Repap Meeting, the Repap Circular and
other matters relating solely thereto, the approval of the
Board of Directors of Repap; and
(B) with respect to the completion of the Amalgamation, the
requisite approval of the Repap Shareholders.
(ii) This Agreement and the Option Agreement have been duly executed
and delivered by Repap and constitute legal, valid and binding
obligations, enforceable against Repap in accordance with their
terms, subject to bankruptcy, insolvency and other applicable
Laws affecting creditors' rights generally, and to general
principles of equity.
(iii)The Board of Directors of Repap has (A) unanimously determined as
of the date hereof that the Amalgamation is fair to the Repap
Shareholders and is in the best interests of Repap, (B) received
an opinion from Donaldson, Lufkin & Jenrette Securities
Corporation to the effect that, as of the date of this Agreement,
the consideration offered to Repap Shareholders pursuant to the
Amalgamation is fair from a financial point of view to the Repap
Shareholders, and (C) determined as of the date hereof
unanimously to recommend that the Repap Shareholders vote in
favour of the Amalgamation. Repap's directors have advised Repap
that, except in the event of a Superior Proposal, they intend to
vote all Repap Shares held by them in favour of the Amalgamation
and will so represent in the Repap Circular.
(iv) The approval of this Agreement and the Option Agreement, the
execution and delivery by Repap of this Agreement and the Option
Agreement and the performance by it of its obligations under
those agreements and the completion of the Amalgamation and the
transactions contemplated thereby, will not:
(A) result (with or without notice or the passage of time) in a
violation or breach of, require any consent to be obtained
under or give rise to any termination, accelerated payment
right, purchase or sale rights or payment obligation under
any provision of:
(I) its or any Repap Material Subsidiary's certificate of
incorporation, articles, by-laws or other charter
documents;
(II) any Laws, judgement or decree (subject to obtaining the
Regulatory Approvals relating to Repap and UPM), except
to the extent that the violation or breach of, or
failure to obtain any consent under, any Laws,
judgement or decree would not, individually or in the
aggregate, have a Material Adverse Effect on Repap and
would not prevent, materially hinder or materially
delay the completion of the transactions contemplated
hereby; or
(III)except as has been disclosed in writing by Repap to UPM
in a form acceptable to UPM, any contract, agreement,
licence, franchise, permit, loan, government grant or
guarantee to which Repap or any Repap subsidiary is
party or by which it is bound or subject or is the
beneficiary, except as would not, individually or in
the aggregate, have a Material Adverse Effect on Repap;
(B) except as has been disclosed in writing by Repap to UPM in a
form acceptable to UPM, give rise to any right of
termination or acceleration of indebtedness of Repap or any
Repap subsidiary, or cause any such indebtedness to come due
before its stated maturity, or cause any available credit of
Repap or any Repap subsidiary to cease to be available,
other than as would not, individually or in the aggregate,
have a Material Adverse Effect on Repap; or
(C) result in the imposition of any encumbrance, charge or lien
upon any of its assets or the assets of any Repap
subsidiary, except as would not, individually or in the
aggregate, have a Material Adverse Effect on Repap.
No consent, approval, order or authorization of, or declaration
or filing with, any Governmental Entity is required to be
obtained by Repap or any of its subsidiaries in connection with
the execution and delivery of this Agreement or the Option
Agreement or the consummation by Repap of the transactions
contemplated hereby other than (A) filings with the Director
under the CBCA, (B) the Regulatory Approvals relating to Repap
and (C) any other consents, approvals, orders, authorizations,
declarations or filings of or with a Governmental Entity which
have been disclosed in writing by Repap to UPM in a form
acceptable to UPM or which, if not obtained, would not,
individually or in the aggregate, have a Material Adverse Effect
on Repap and would not prevent, materially hinder or materially
delay the completion of the transactions contemplated hereby.
(d) No Defaults. Subject to obtaining the Regulatory Approvals relating to
Repap, neither Repap nor any of its subsidiaries is in default under,
and there exists no event, condition or occurrence which, after notice
or lapse of time or both, would constitute such a default under, any
contract, agreement, licence or franchise to which it is a party which
would have a Material Adverse Effect on Repap.
(e) Absence of Certain Changes or Events. Except as has been disclosed in
writing by Repap to UPM in a form acceptable to UPM or Publicly
Disclosed by Repap, since December 31, 1999 each of Repap and the
Repap Material Subsidiaries has conducted its business only in the
ordinary and regular course of business consistent with past practice
and there has not occurred:
(i) a Material Adverse Change with respect to Repap;
(ii) any damage, destruction or loss not fully covered by insurance,
subject to customary deductions, retentions and exclusions, that
would have a Material Adverse Effect on Repap;
(iii)any redemption, repurchase or other acquisition of Repap Common
Shares by Repap or Repap Preferred Shares or any declaration,
setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to Repap Common
Shares or Repap Preferred Shares;
(iv) any material increase in or modification of the compensation
payable or to become payable by it to any of its directors or
officers, the entering into of any change of control, "golden
parachute" or similar agreement or arrangement with any of its
directors or officers, or any grant to any such director or
officer of any increase in severance or termination pay;
(v) any material increase in or modification of any bonus, pension,
insurance or benefit arrangement (including the granting of stock
options, restricted stock awards or stock appreciation rights)
made to, for or with any of its directors or officers;
(vi) any acquisition or sale of its property or assets aggregating 10%
or more of Repap's total consolidated property and assets as at
December 31, 1999 other than in the ordinary and regular course
of business consistent with past practice;
(vii) any entering into, amendment of, relinquishment, termination or
non-renewal by it of any material contract, agreement, licence,
franchise, lease transaction, commitment or other right or
obligation that would have a Material Adverse Effect on Repap;
(viii) any resolution to approve a split, consolidation or
reclassification of any of its outstanding shares;
(ix) any material change in its accounting methods, policies or
practices;
(x) any guarantee of the payment of material indebtedness or any
incurrence of material indebtedness for money borrowed or any
issue or sale of any debt securities except in the ordinary and
regular course of business consistent with past practice;
(xi) except in the usual, ordinary and regular course of business and
consistent with past practice: (A) any satisfaction or settlement
of any claims or liabilities prior to the same being due, which
were, individually or in the aggregate, material; or (B) any
grant of any waiver, exercise of any option or relinquishment of
any contractual rights which were, individually or in the
aggregate, material; or
(xii)any giving of a consent by Repap to the assignment of the
purchase agreement dated as of May 15, 1998 relating to the
original issuance of the Convertible Debenture.
(f) Employment Matters.
(i) Except as has been disclosed in writing by Repap to UPM in a form
acceptable to UPM, neither Repap nor any Repap Material
Subsidiary is a party to any agreement, obligation or
understanding providing for severance or termination payments to,
or any employment, change of control, "golden parachute" or
similar agreement with, any director or officer, other than any
common law obligations of reasonable notice of termination or pay
in lieu thereof and any statutory obligations.
(ii) Except as has been disclosed in writing by Repap to UPM in a form
acceptable to UPM, Repap and its subsidiaries are not subject to
any collective bargaining agreements, and there are no current,
pending or, to the knowledge of Repap, threatened strikes or
lockouts at Repap or any Repap Material Subsidiary that would,
individually or in the aggregate, have a Material Adverse Effect
on Repap.
(iii) Except as has been disclosed in writing by Repap to UPM in a form
acceptable to UPM, neither Repap nor any Repap Material
Subsidiary is subject to any litigation, actual or, to the
knowledge of Repap, threatened, relating to employment or
termination of employment of employees or independent
contractors, other than those claims or such litigation as would,
individually or in the aggregate, not have a Material Adverse
Effect on Repap.
(iv) Except as has been disclosed in writing by Repap to UPM in a form
acceptable to UPM, Repap and all Repap Material Subsidiaries
have, during the past 12 months, operated in accordance with all
applicable Laws with respect to employment and labour, including,
but not limited to, employment and labour standards, occupational
health and safety, employment equity, pay equity, workers'
compensation, human rights and labour relations and there are no
current, pending or, to the knowledge of Repap, threatened
proceedings before any board or tribunal with respect to any of
the above areas, other than as has been disclosed in writing by
Repap to UPM in a form acceptable to UPM or where the failure to
so operate or such proceedings would, individually or in the
aggregate, not have a Material Adverse Effect on Repap.
(v) Except as has been disclosed in writing by Repap to UPM in a form
acceptable to UPM, there are no outstanding stock appreciation
rights, phantom equity or similar rights, agreements,
arrangements or commitments based upon the book revenue, value,
income or any other attribute of Repap or any Repap subsidiary.
(g) Financial Statements; Contingent Liabilities. The audited consolidated
financial statements for Repap as at and for each of the 12-month
periods ended on or about December 31, 1999, 1998 and 1997 have been
prepared in accordance with Canadian generally accepted accounting
principles and such financial statements present fairly, in all
material respects, the consolidated financial position and results of
operations of Repap as of the respective dates thereof and for the
respective periods covered thereby. Except as set forth in the Repap
Documents filed prior to the date hereof, and except for liabilities
and obligations incurred in the ordinary course of business since the
date of the most recent consolidated balance sheet included in the
Repap Documents, neither Repap nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) except for those that would not, individually
or in the aggregate, have a Material Adverse Effect on Repap.
The quarterly financial statements for Repap for the fiscal quarters
ended March 31, 2000 and June 30, 2000 have been prepared in
accordance with Canadian generally accepted accounting principles on a
basis consistent with the consolidated audited financial statements
for the year ended December 31, 1999 and such financial statements
fairly present, in all material respects, the consolidated financial
position and results of operations of Repap as of the respective dates
thereof and for the respective periods covered thereby.
(h) Books and Records. The financial books, records and accounts of Repap
and its subsidiaries, in all material respects, (i) have been and are
being maintained in accordance with accounting principles generally
accepted in the country of domicile of each such entity on a basis
consistent with prior years, (ii) are stated in reasonable detail and
accurately and fairly reflect the acquisitions and dispositions of the
assets of Repap and its subsidiaries and (iii) accurately and fairly
reflect the basis for the Repap consolidated financial statements.
Repap's and the Repap Material Subsidiaries' corporate minute books
contain minutes of all meetings and resolutions of the directors and
shareholders held, and full access thereto has been provided to UPM
with the exception of certain recent minutes of the board of directors
relating solely to the strategic initiatives of Repap.
(i) Litigation, Etc. Except as has been disclosed in writing by Repap to
UPM in a form acceptable to UPM or Publicly Disclosed by Repap, there
is no claim, action, proceeding or investigation pending or, to the
knowledge of Repap, threatened against Repap or any of its
subsidiaries before any court or Governmental Entity that if
determined adversely to Repap or such subsidiary would reasonably be
expected to have a Material Adverse Effect on Repap or to prevent,
materially hinder or materially delay consummation of the transactions
contemplated by this Agreement. Neither Repap nor any Repap
subsidiary, nor any of their respective assets and properties, is
subject to any outstanding judgement, order, writ, injunction or
decree that has had or would reasonably be expected to have a Material
Adverse Effect on Repap or that would prevent, materially hinder or
materially delay consummation of the transactions contemplated by this
Agreement. Except as has been disclosed in writing by Repap to UPM in
a form acceptable to UPM, to Repap's knowledge, Repap and the Repap
subsidiaries are not subject to any warranty, negligence, performance
or other claims or disputes or potential claims or disputes in respect
of products or services currently being delivered or previously
delivered, and to Repap's knowledge there are no events or
circumstances which would reasonably be expected to give rise to any
such claims or disputes or potential claims or disputes, in each case
which has had or would reasonably be expected to have a Material
Adverse Effect on Repap.
(j) Environmental. Except for any matters that, individually or in the
aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect on Repap or except as has been disclosed in
writing by Repap to UPM in a form acceptable to UPM:
(i) all operations of Repap and its subsidiaries have been conducted,
and are now, in compliance with all Environmental Laws; and
(ii) neither Repap nor any Repap subsidiary is subject to:
(A) any Environmental Law which requires or may require any
material work, repairs, construction, change in business
practices or operations, or expenditures; or
(B) any written demand or written notice with respect to a
breach of or liability under any Environmental Laws
applicable to Repap or any Repap subsidiary;
(iii) there are no claims, proceedings or actions by any Governmental
Entity or other person or entity pending or, to the knowledge of
Repap threatened, against Repap or any of its subsidiaries under
any Environmental Law; and
(iv) there are no facts, to the knowledge of Repap, relating to the
business or operations of Repap or any of its subsidiaries, or to
any real property at any time owned, leased or operated by Repap
or any of its subsidiaries, that would give rise to any claim,
proceeding or action, or to any liability, under any
Environmental Law.
(k) Tax Matters. Except as has been disclosed in writing by Repap to UPM
in a form acceptable to UPM:
(i) Repap and each of the Repap Material Subsidiaries have filed, or
caused to be filed, all material Tax Returns required to be filed
by or with respect to them in the form and within the time
prescribed under applicable Laws for so doing (all of which
returns were correct and complete in all material respects), and
have paid, or caused to be paid, all material amounts of Taxes
shown to be due and payable thereon, and Repap's most recently
published financial statements contain an adequate provision in
accordance with Canadian generally accepted accounting principles
for all material amounts of Taxes payable in respect of each
period covered by such financial statements and all prior periods
to the extent such Taxes have not been paid, whether or not due
and whether or not shown as being due on any Tax Returns. Repap
and each of its subsidiaries have made adequate provision in
accordance with accounting principles generally accepted in the
domicile of each such entity in their books and records for any
material amounts of Taxes accruing in respect of any accounting
period which has ended subsequent to the period covered by such
financial statements. Repap has duly and timely withheld from any
amount paid or credited by it to or for the account or benefit of
any person, including any employees, officers or directors and
any non-resident person, the amount of all Taxes and other
deductions required by any Laws, rule or regulation to be
withheld from any such amount and has duly and timely remitted
the same to the appropriate Governmental Entity.
(ii) Except as disclosed in writing by Repap to UPM in a manner
acceptable to UPM, neither Repap nor any of its subsidiaries has
received any written notification that any issues involving a
material amount of Taxes have been raised (and are currently
pending) by the Canada Customs and Revenue Agency, the United
States Internal Revenue Service or any other taxing authority,
including any sales tax authority, in connection with any of the
Tax Returns filed or required to be filed, and no waivers of
statutes of limitations, or objections to any assessments or
reassessments, have been given or requested or made with respect
to Repap or any Repap Material Subsidiary. Except as disclosed by
Repap to UPM in a form acceptable to UPM, all liability of Repap
and its subsidiaries for income taxes has been assessed for up to
the fiscal years disclosed in writing by Repap to UPM in a manner
acceptable to UPM. Neither Repap nor any Repap Material
Subsidiary has received any written notice from any taxing
authority to the effect that any Tax Return is being examined. To
the best of the knowledge of Repap, there are no written
proposals to assess additional Taxes involving a material amount
of Taxes and none has been asserted in writing. No Tax liens have
been filed for material amounts of Taxes other than for Taxes not
yet due and payable. Neither Repap nor any of the Repap Material
Subsidiaries is a party to any Tax sharing, allocation,
indemnification or other similar agreement or arrangement of any
nature with any other Person (other than Repap or any of its
subsidiaries) pursuant to which Repap or any of the Repap
Material Subsidiaries has or could have any liabilities in
respect of a material amount of Taxes. Neither Repap nor any
Repap Material Subsidiary has received a refund of any Taxes to
which it was not entitled.
(iii) "Tax" and "Taxes" means, with respect to any entity, all income
taxes (including any tax on or based upon net income, gross
income, income as specially defined, earnings, profits or
selected items of income, earnings or profits) and all capital
taxes, gross receipts taxes, environmental taxes, sales taxes,
use taxes, ad valorem taxes, value added taxes, transfer taxes,
franchise taxes, licence taxes, withholding taxes or other
withholding obligations, payroll taxes, employment taxes, Canada
or Quebec Pension Plan premiums, excise, severance, social
insurance or social security premiums, workers' compensation
premiums, employment insurance or compensation premiums, stamp
taxes, occupation taxes, premium taxes, property taxes, windfall
profits taxes, alternative or add-on minimum taxes, goods and
services tax, customs duties or other taxes of any kind
whatsoever (whether payable directly or by withholding or not
requiring the filing of a Tax Return), all estimated taxes and
deficiency assessments, together with any interest and any
penalties or additional amounts imposed by any taxing authority
(domestic or foreign) on such entity or for which such entity is
responsible, and any interest, penalties, additional taxes,
additions to tax or other amounts imposed with respect to the
foregoing.
(iv) For purposes of this Section 3.1(k), the term "material amount of
Taxes" shall mean an amount of Taxes that is material to Repap
and its subsidiaries taken as a whole.
(l) Pension and Employee Benefits.
(i) Repap has made available to UPM a list of all current employee
benefit, health, welfare, supplemental unemployment benefit,
bonus, pension, profit sharing, deferred compensation, stock
option, stock compensation, stock purchase, retirement,
hospitalization insurance, medical, dental, legal, disability and
similar plans or arrangements or practices, whether written or
oral, which are maintained by Repap and each of its subsidiaries
(collectively referred to as the "Repap Plans").
(ii) To Repap's knowledge, no step has been taken, no event has
occurred and no condition or circumstance exists that has
resulted in or would reasonably be expected to result in any
Repap Plan being ordered or required to be terminated or wound up
in whole or in part or having its registration under applicable
Laws refused or revoked, or being placed under the administration
of any trustee or receiver or regulatory authority or being
required to pay any material Taxes, penalties or levies under
applicable Laws. To Repap's knowledge, there are no actions,
suits, claims (other than routine claims for payment of benefits
in the ordinary course), trials, demands, investigations,
arbitrations or other proceedings which are pending or threatened
in respect of any of the Repap Plans or their assets which
individually or in the aggregate would have a Material Adverse
Effect on Repap.
(iii) Repap has made available to UPM true, correct and complete copies
of all of the material Repap Plans requested by UPM (or, in the
case of any material unwritten Repap Plan, a description thereof)
together with funding agreements, actuarial reports, funding and
financial information returns and statements with respect to each
Repap Plan, and current plan summaries, booklets and personnel
manuals. Repap has made available to UPM a true and complete copy
of the most recent report filed with applicable Governmental
Entities with respect to each Repap Plan in respect of which such
a report was required.
(iv) Other than as has been disclosed in writing by Repap to UPM in a
form acceptable to UPM, all of the Repap Plans are in compliance
in all material respects with all applicable Laws and their
terms, and all of the Repap Plans are fully insured or fully
funded.
(v) Except as has been disclosed in writing by Repap to UPM in a form
acceptable to UPM, the entry into or performance by Repap of this
Agreement and the completion of the Amalgamation and the
transactions contemplated thereby will not result in any payment
(including severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any director,
officer or employee of Repap or any Repap Material Subsidiary, or
increase any benefits otherwise payable under any Material Repap
Plan or result in the acceleration of time of payment or vesting
of any such benefits.
(vi) Repap has disclosed in writing to UPM in a form acceptable to UPM
an accurate and complete list of each employee benefit plan,
within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and
regulations thereunder ("ERISA") and each stock option, stock
appreciation right, restricted stock, stock purchase, stock unit,
performance share, incentive, bonus, profit-sharing, savings,
deferred compensation, health, medical, dental, life insurance,
disability, accident, supplemental unemployment or retirement,
employment, severance or salary or benefits continuation or
fringe benefit plan, program, arrangement or agreement, in each
case, subject to ERISA or for the benefit of active, retired or
former employees or directors residing within the United States
of America (or with respect to which any such employee or
director is a participant or party), that have been established
or maintained by Repap or any subsidiary thereof (collectively,
the "US Repap Plans").
(vii) Except as has been disclosed in writing by Repap to UPM in a form
acceptable to UPM: (A) each US Repap Plan is in substantial
compliance with all applicable laws (including, without
limitation, ERISA and the Code) and has been administered and
operated in all material respects in accordance with its terms;
(B) each US Repap Plan which is intended to be "qualified" within
the meaning of Section 401(a) of the Code has received a
favourable determination letter or opinion letter from the
Internal Revenue Service and, to the knowledge of Repap, no event
has occurred and no condition exists which would reasonably be
expected to result in the revocation of any such determination;
(C) no US Repap Plan is covered by Title IV of ERISA or subject
to Section 412 of the Code or Section 302 of ERISA; (D) full
payment has been timely made of all amounts which Repap and/or
its subsidiaries are required under applicable law or under any
US Repap Plan or related agreement to have paid as of the last
day of the most recent fiscal year of each US Repap Plan ended
prior to the date hereof, or such non-payment has been reflected
in their financial statements, and, to the knowledge of Repap, no
event has occurred or condition exists that would reasonably be
expected to result in a material increase in the level of such
amounts paid or accrued for the most recently ended fiscal year;
(E) neither Repap nor any of its subsidiaries has incurred or
expects to incur any material liability (including, without
limitation, additional contributions, fines, taxes or penalties)
as a result of a failure to administer or operate any US Repap
Plan that is a "group health plan" (as such terms is defined in
Section 607(l) of ERISA or Section 5000(b)(l) of the Code) in
compliance with the applicable requirements of Part 6 of Subtitle
B of Title I of ERISA or Section 4980B of the Code ("COBRA"); (F)
no US Repap Plan provides for post-employment or retiree health,
life insurance or other welfare benefits (G) neither Repap nor
any of its subsidiaries has engaged in any transaction, act or
omission to act in connection with any US Repap Plan that would
reasonably be expected to result in the imposition of a material
penalty or fine pursuant to Section 502 of ERISA, or a tax
pursuant to Section 4975 of the Code; (I) the execution of this
Agreement and the consummation of the transactions contemplated
hereby do not constitute a triggering event under any US Repap
Plan, policy, arrangement or agreement, which (either alone or
upon the occurrence of any additional or subsequent event) will
or may result in any payment, "parachute payment" (as such term
is defined in Section 280G of the Code), severance, bonus,
retirement or job security or similar-type benefit, or increase
any benefits or accelerate the payment or vesting of any benefits
to any employee or former employee or director or Repap or any of
its affiliates; (J) no US Repap Plan provides for the payment of
severance, termination, change in control or similar-type
payments or benefits; (K) no material liability, claim, action,
litigation, audit, examination, investigation or administrative
proceeding has been made, commenced or, to the best knowledge or
Repap, threatened with respect to any US Repap Plan (other than
routine claims for benefits payable in the ordinary course) which
could result in a material liability of Repap or any affiliate
thereof; and (L) except as required to maintain the tax-qualified
status of any US Repap Plan intended to qualify under Section
401(a) of the Code, no condition or circumstance exists that
would prevent the amendment or termination of any US Repap Plan.
(viii) Repap has delivered or caused to be delivered to UPM or its
counsel true and complete copies of each US Repap Plan, together
with all amendments thereto, and, to the extent applicable, (A)
all current summary plan descriptions; (B) the annual report on
Internal Revenue Service Form 5500-series, including any
attachments thereto, for each of the last three plan years; (C)
the most recent actuarial valuation report; and (D) the most
recent determination letter.
(m) Reports. Except as has been disclosed in writing by Repap to UPM in a
form acceptable to UPM, Repap has filed with the OSC and the SEC and
Repap New Brunswick Inc. has filed with the SEC, true and complete
copies of all forms, reports, schedules, statements and other
documents required to be filed by them since January 1, 1998 (such
forms, reports, schedules, statements and other documents, including
any financial statements or other documents, including any schedules
included therein, are collectively referred to as the "Repap
Documents"). The Repap Documents at the time filed (i) did not contain
any misrepresentation of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, and (ii) complied in all material respects with the
requirements of applicable securities Laws. Neither Repap nor Repap
New Brunswick Inc. has filed any confidential material change report
with the OSC, the SEC or any other securities authority or regulator
or any stock exchange or other self-regulatory authority which at the
date hereof remains confidential.
(n) Compliance with Laws. Except as has been disclosed in writing by Repap
to UPM in a form acceptable to UPM or Publicly Disclosed by Repap,
Repap and the Repap Material Subsidiaries have complied with and are
not in violation of any applicable Laws, orders, judgements and
decrees other than non-compliance or violations which would not,
individually or in the aggregate, have or be reasonably expected to
have a Material Adverse Effect on Repap. Without limiting the
generality of the foregoing, all securities of Repap (including all
options, rights or other convertible or exchangeable securities) have
been issued in compliance with all applicable securities Laws and,
subject to Regulatory Approvals, all securities to be issued on or
before the Effective Date upon exercise of any such options, rights
and other convertible or exchangeable securities will be issued in
compliance with all applicable securities Laws.
(o) Restrictions on Business Activities. There is no agreement, judgement,
injunction, order or decree binding upon Repap or any subsidiary or
affiliate that has or would reasonably be expected to have the effect
of prohibiting, materially restricting or materially impairing any
business practice of Repap or any subsidiary or affiliate, any
acquisition of property by Repap or any subsidiary or affiliate or the
conduct of business by Repap or any subsidiary or affiliate as
currently conducted (including following the Amalgamation) other than
such agreements, judgements, injunctions, orders or decrees which
would not, individually or in the aggregate, have or be reasonably
expected to have a Material Adverse Effect on Repap.
(p) Property. Except as has been disclosed in writing by Repap to UPM in a
form acceptable to UPM or Publicly Disclosed by Repap, Repap and each
Repap Material Subsidiary have good and sufficient title to the real
property interests, including fee simple estate of and in real
property, leases, easements, rights of way, permits or licences from
land owners or authorities permitting the use of land by Repap or such
Repap Material Subsidiary, necessary to permit the operation of their
businesses as presently owned and conducted except for such failure of
title that would, individually or in the aggregate, not have a
Material Adverse Effect on Repap. Repap and its subsidiaries are not a
party to, or under any agreement to become a party to, any lease with
respect to real property which if terminated would reasonably be
expected to have a Material Adverse Effect on Repap.
(q) Licences, Etc. Except as has been disclosed in writing by Repap to UPM
in a form acceptable to UPM, Repap and each Repap Material Subsidiary
owns, possesses, or has obtained and is in compliance with, all
licences, permits, certificates, orders, grants and other
authorizations of or from any Governmental Entity necessary to conduct
its businesses as now conducted except for such failure that would
not, individually or in the aggregate, have or be reasonably expected
to have a Material Adverse Effect on Repap.
(r) Authorizations etc. Repap and each Repap Material Subsidiary owns,
possesses, or has obtained and is in compliance with any
authorizations, certificates, approvals or licences of or from any
Person necessary to conduct its business as now conducted except for
such failures that would not, individually or in the aggregate, have
or be reasonably expected to have a Material Adverse Effect on Repap.
(s) Registration Rights. Except as has been disclosed in writing by Repap
to UPM in a form acceptable to UPM, no holder of securities issued by
Repap has any right to compel Repap to register or otherwise qualify
such securities for public sale in Canada or the United States or
elsewhere.
(t) Intellectual Property. Repap has set forth in writing in a form
acceptable to UPM a complete and accurate list of all (i)
registrations and applications relating to Intellectual Property which
is owned by Repap or its subsidiaries; and (ii) Intellectual Property
Rights and Technical Information that is licensed by Repap which is
material to Repap's business and any applicable licensing agreements.
Except as disclosed in writing by Repap to UPM in a form acceptable to
UPM:
(A) Repap, or one of its subsidiaries is the exclusive beneficial
owner of all right, title and interest in and to the Intellectual
Property Rights and Technical Information (with no breaks in the
chain of title thereof) free and clear of any claim, security
interest, lien, pledge, option, charge or encumbrance of any kind
whatsoever. Neither Repap nor any of its subsidiaries has
transferred nor will it transfer such rights, licenses or
privileges, to any other Person;
(B) Repap and its subsidiaries have and shall maintain all right,
title and interest in and to the Intellectual Property Rights and
Technical Information, including the right to use all licensed
Intellectual Property Rights and Technical Information, to the
extent necessary to continue to conduct its business as it has
been conducted to the date hereof;
(C) the Intellectual Property Rights are in full force and effect and
have not been used or enforced or failed to be used or enforced
in a manner that would result in their abandonment, cancellation
or unenforceability;
(D) there are no claims of adverse ownership or invalidity or other
opposition to or conflicts with any of the Intellectual Property
Rights and Technical Information nor any claim against Repap or
any of its affiliates relating to the Intellectual Property
Rights and Technical Information;
(E) to Repap's knowledge, the use by it and its subsidiaries of the
Intellectual Property Rights and Technical Information does not
breach, violate, infringe or interfere with any rights of any
Person; and
(F) there are no claims, oppositions, conflicts, suits, proceedings,
demands, actions, investigations, breaches, violations,
infringements and interferences of the Intellectual Property
Rights and Technical Information, and to the best of Repap's
knowledge, there are no facts upon which a challenge could be
made;
except to the extent that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Repap;
provided that, notwithstanding the foregoing, Repap makes no
representation or warranty in this Section 3.1(t) with respect to the
technology for making pulp known as the ALCELL(R) technology.
(u) Non-Arm's Length Transactions. Except as has been disclosed in writing
by Repap to UPM in a form acceptable to UPM, there are no material
contracts, commitments, agreements, arrangements or other transactions
between Repap or any of its subsidiaries, on the one hand, and any (i)
officer or director of Repap or any of its subsidiaries, (ii) any
holder of record or beneficial owner of five percent or more of the
securities of Repap or of the Convertible Debenture, or (iii) any
affiliate or associate of any such officer, director or beneficial
owner, on the other hand.
(v) Insurance. Repap and its subsidiaries maintain insurance coverage with
reputable insurers in such amounts and covering such risks, subject to
customary deductions, retentions and exclusions, as are in accordance
with normal industry practice for companies engaged in businesses
similar to that of Repap and its subsidiaries.
(w) Customers and Suppliers. Since January 1, 2000, there has been no
termination or cancellation of, and no material adverse modification
or change in, the business relationship with any customer or group of
customers which individually or in the aggregate provided more than
10% of the consolidated gross revenues of Repap and its subsidiaries
for the fiscal year ended on December 31, 1999.
(x) Foreign Private Issuer. Repap is a "foreign private issuer" as such
term is defined in Rule 3b-4(c) of the Exchange Act.
(y) Broker's or Finder's Fee. Except for Donaldson, Lufkin & Jenrette
Securities Corporation (whose fees and expenses will be paid by Repap
in accordance with their agreement with such firm, a true and correct
copy of which has been previously delivered to UPM), no agent, broker,
Person or firm acting on behalf of Repap is, or will be, entitled to
any fee, commission or broker's or finder's fees from Repap, or from
any Person controlling, controlled by, or under common control with
Repap, in connection with this Agreement or any of the transactions
contemplated hereby.
(z) Cumulative Breach. The breaches, if any, of the representations made
by Repap in this Agreement that would occur if all references in such
representations to phrases concerning materiality, including
references to the qualification "Material Adverse Effect" or "Material
Adverse Change", were deleted, in the aggregate do not have and would
not reasonably be expected to have a Material Adverse Effect on, or do
not or would not reasonably be expected to amount to a Material
Adverse Change in respect of, Repap.
Section 3.2 Representations and Warranties of UPM
UPM represents and warrants to and in favour of Repap as follows and
acknowledges that Repap is relying upon such representations and warranties in
connection with the matters contemplated by this Agreement:
(a) Organization. Each of UPM and Acquireco has been duly incorporated or
formed under applicable Laws, is validly subsisting and has full
corporate or legal power and authority to own its properties and
conduct its businesses as currently owned and conducted.
(b) Capitalization. The issued capital of Acquireco consists of one common
share.
(c) Authority and No Violation.
(i) UPM has the requisite corporate power and authority to enter into
this Agreement and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement by UPM
and the performance by UPM of the transactions contemplated by
this Agreement have been duly authorized by its Board of
Directors and no other proceedings on its part are necessary to
authorize this Agreement or the transactions contemplated hereby
or thereby.
(ii) This Agreement has been duly executed and delivered by UPM and
constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy,
insolvency and other applicable Laws affecting creditors' rights
generally, and to general principles of equity. The Amalgamation
Agreement will be duly executed and delivered by Acquireco and,
when so executed and delivered, will constitute its legal, valid
and binding obligation, enforceable against it in accordance with
its terms, subject to bankruptcy, insolvency and other applicable
Laws affecting creditors' rights generally, and to general
principles of equity.
(iii) The approval of this Agreement and the Option Agreement, the
execution and delivery by UPM of this Agreement and the Option
Agreement and by Acquireco of the Amalgamation Agreement and the
performance by each of them of their respective obligations
hereunder and thereunder and the completion of the Amalgamation
and the transactions contemplated thereby, will not result (with
or without notice or the passage of time) in a violation or
breach of, require any consent to be obtained under or give rise
to any termination, purchase or sale rights or payment obligation
under any provision of:
(A) its certificate of incorporation, articles, by-laws or other
charter documents; or;
(B) any Laws, judgement or decree (subject to obtaining the
Regulatory Approvals relating to UPM and Repap), except to
the extent that the violation or breach of, or failure to
obtain any consent under, any Laws, judgement or decree
would not, individually or in the aggregate, prevent,
materially hinder or materially delay the completion of the
transactions contemplated hereby.
(iv) No consent, approval, order or authorization of, or declaration
or filing with, any Governmental Entity is required to be
obtained by UPM in connection with the execution and delivery of
this Agreement or the Option Agreement or the consummation by UPM
of the transactions contemplated hereby other than (A) the
Regulatory Approvals relating to UPM, and (B) any other consents,
approvals, orders, authorizations, declarations or filings of or
with a Governmental Entity which have been set forth in writing
by UPM to Repap in a form acceptable to Repap or which, if not
obtained, would not, individually or in the aggregate have a
Material Adverse Effect on UPM.
(d) Necessary Funds. UPM has or has access to the funds necessary to
redeem the Amalco Special Shares and the Repap Preferred Shares after
they have become Amalco Preferred Shares as contemplated in this
Agreement.
Section 3.3 Survival
The representations and warranties of Repap and UPM contained herein
shall survive the execution and delivery of this Agreement and shall terminate
on the earlier of the termination of this Agreement in accordance with its terms
and the Effective Date. Any investigation by a party hereto or its advisors
shall not mitigate, diminish or affect the representations and warranties of
another party to this Agreement.
ARTICLE 4
COVENANTS
Section 4.1 Retention of Goodwill
Until the Effective Date, Repap will continue to carry on the business of
Repap and its subsidiaries in a manner consistent with prior practice,
working to preserve the attendant goodwill of such entities and to contribute to
retention of that goodwill to and after the Effective Date, but subject to the
following provisions of this Article 4. The provisions of Section 4.2 are
intended to be in furtherance of this general commitment.
Section 4.2 Covenants of Repap
(a) Repap covenants and agrees that, until the Effective Date or the
earlier termination of this Agreement in accordance with Article 6,
except (i) with the consent of UPM to any deviation therefrom; (ii) as
has been disclosed in writing by Repap to UPM in a form acceptable to
UPM prior to the date hereof; or (iii) with respect to any matter
expressly contemplated by this Agreement, including the transactions
involving the businesses of Repap contemplated hereby, Repap will, and
will cause the Repap Material Subsidiaries to:
(i) carry on its business in, and only in, the ordinary and regular
course in substantially the same manner as heretofore conducted
and, to the extent consistent with such business, 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;
(ii) not split, consolidate or reclassify any of the outstanding
shares of Repap nor declare, set aside or pay any dividends on or
make any other distributions on or in respect of the outstanding
shares of Repap;
(iii) not amend the articles or by-laws of Repap or materially amend
the articles or by-laws of any subsidiary;
(iv) not sell, pledge, encumber, allot, reserve, set aside or issue,
authorize or propose the sale, pledge, encumbrance, allotment,
reservation, setting aside or issuance of, or purchase or redeem
or propose the purchase or redemption of, any shares in its
capital stock or of any Repap Material Subsidiary or any class of
securities convertible or exchangeable into, or rights, warrants
or options to acquire, any such shares or other convertible or
exchangeable securities, except for (A) transactions between two
or more wholly-owned Repap subsidiaries or between a wholly-owned
subsidiary of Repap and Repap, and (B) the issuance of Repap
Common Shares pursuant to fully vested and duly exercised Repap
Options granted prior to the date hereof;
(v) except to vest any currently issued and unvested options under
the Repap Stock Option Plans (unless specifically agreed to the
contrary), not amend, vary or modify the Repap Stock Option
Plans, or other benefits granted thereunder;
(vi) not reorganize, amalgamate or merge Repap or any of the Repap
Material Subsidiaries with any other Person, nor acquire or agree
to acquire by amalgamating, merging or consolidating with,
purchasing substantially all of the assets or shares of or
otherwise, any business of any corporation, partnership,
association or other business organization or division thereof,
which acquisition would be material to its business or financial
condition on a consolidated basis;
(vii) except with respect to the sale of inventory of Repap or any
subsidiary in the ordinary and regular course of business
consistent with past practice, not sell, lease, encumber or
otherwise dispose of any material assets (other than relating to
transactions between two or more wholly-owned Repap subsidiaries
or between a wholly-owned subsidiary of Repap and Repap);
(viii) use its reasonable efforts to comply promptly with all
requirements which applicable Laws may impose on Repap or its
subsidiaries with respect to the transactions contemplated
hereby;
(ix) not:
(A) other than pursuant to existing employment, pension,
supplemental pension, termination, compensation arrangements
or policies, enter into or modify any employment, severance,
change of control, "golden parachute" or similar agreements,
policies or arrangements with, or grant any bonuses, salary
increases, pension or supplemental pension benefits, profit
sharing, retirement allowances, deferred compensation,
incentive compensation, severance or termination pay to or
any other form of compensation or with respect to any
increase of benefits payable to, or make any loan to, any
officers or directors of Repap or any Repap subsidiary; or
(B) other than in the usual, ordinary and regular course of
business and consistent with past practice or pursuant to
existing employment, pension, supplemental pension,
termination, compensation arrangements or policies, in the
case of employees who are not officers or directors of Repap
or any Repap subsidiary, take any action with respect to the
entering into or modification of any material employment,
severance, collective bargaining or similar agreements,
policies or arrangements or grant any material bonuses,
salary increases, pension or supplemental pension benefits,
profit sharing, retirement allowances, deferred
compensation, incentive compensation, severance or
termination pay or any other form of compensation or with
respect to any material increase of benefits payable, or
make any material loans to employees;
(x) not settle or compromise any claim brought by any present, former
or purported holder of any of its securities in connection with
the transactions contemplated by this Agreement or the prior to
the Effective Date;
(xi) not guarantee the payment of material indebtedness or incur
material indebtedness for money borrowed or issue or sell any
debt securities except in the ordinary and regular course of
business consistent with past practice, other than as has been
disclosed in writing by Repap to UPM in a form acceptable to UPM;
(xii) not, except in the usual, ordinary and regular course of business
and consistent with past practice: (A) satisfy or settle any
claims or liabilities prior to the same being due, except such as
have been reserved against in the financial statements of Repap
and its subsidiaries or as has been disclosed in writing to UPM
by Repap in a form acceptable to UPM, which are, individually or
in the aggregate, material; (B) grant any waiver, exercise any
option or relinquish any contractual rights which are,
individually or in the aggregate, material; or (C) enter into any
interest rate, currency or commodity swaps, hedges or other
similar financial instruments;
(xiii) use its reasonable commercial efforts to cause its current
insurance (or re-insurance) policies not to be cancelled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse,
replacement policies underwritten by insurance and re-insurance
companies of nationally recognized standing providing coverage,
subject to customary deductions, retentions and exclusions, equal
to or greater than the coverage under the cancelled, terminated
or lapsed policies for substantially similar premiums are in full
force and effect;
(xiv) incur or commit to capital expenditures prior to the Effective
Date only in the ordinary course consistent with past practice
and Repap's approved capital expenditure budget for 2000;
(xv) continue to defend the Berg Litigation and not enter into any
settlement in respect of the Berg Litigation without the prior
written consent of UPM;
(xvi) not make any changes to existing accounting practices relating to
Repap or any Repap subsidiary, except as required by Canadian or
U.S. Law or required by Canadian generally accepted accounting
principles, or make any material tax election inconsistent with
past practice; and
(xvii) promptly advise UPM orally and, if then requested, in writing:
(A) of any event known to it occurring subsequent to the date of
this Agreement that would render any representation or
warranty of Repap contained in this Agreement (except any
such representation or warranty which speaks solely as of a
date prior to the occurrence of such event), if made on or
as of the date of such event or the Effective Date, untrue
or inaccurate in any material respect;
(B) of any Material Adverse Change known to it in respect of
Repap; and
(C) of any material breach by Repap known to it of any covenant
or agreement contained in this Agreement;
(b) Repap shall and shall cause its subsidiaries to perform all
obligations required or desirable to be performed by Repap or any of
its subsidiaries under this Agreement, co-operate with UPM in
connection therewith, and 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 this
Agreement and, without limiting the generality of the foregoing, Repap
shall and where appropriate shall cause its subsidiaries to:
(i) use all reasonable efforts to obtain the requisite approvals of
the Repap Shareholders to the Amalgamation;
(ii) apply for and use all reasonable efforts to obtain all Regulatory
Approvals relating to Repap or any of its subsidiaries,
including, without limitation, any approvals with respect to
timber licences held by Repap or any of its subsidiaries required
as a result of the Amalgamation and, in doing so, to keep UPM
informed as to the status of the proceedings related to obtaining
the Regulatory Approvals, including, but not limited to,
providing UPM with copies of all related applications and
notifications, in draft form, in order for UPM to provide its
reasonable comments and providing UPM with copies of all material
correspondence;
(iii) defend all lawsuits or other legal, regulatory or other
proceedings to which it is a party challenging or affecting this
Agreement or the consummation of the transactions contemplated
hereby and not enter into any settlement of any lawsuits or such
other proceedings without the prior written consent of UPM;
(iv) use its reasonable efforts to have lifted or rescinded any
injunction or restraining order relating to Repap or other order
which may adversely affect the ability of the parties to
consummate the transactions contemplated hereby;
(v) use its reasonable efforts to effect all necessary registrations,
filings and submissions of information required by Governmental
Entities from Repap or any of its subsidiaries relating to the
Amalgamation;
(vi) use its reasonable efforts to obtain all necessary waivers,
consents and approvals required to be obtained by Repap or a
subsidiary in connection with the Amalgamation from other parties
to any material loan agreements, leases or other material
contracts; and
(c) use its reasonable efforts to comply promptly with all requirements
which applicable Laws may impose on Repap or its subsidiaries with
respect to the transactions contemplated hereby.
Section 4.3 Covenants of UPM
UPM hereby covenants and agrees to and, if applicable, will cause Acquireco
to, perform all obligations required or desirable to be performed by it under
this 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 this Agreement and, without limiting the generality
of the foregoing, to:
(a) apply for and use all reasonable efforts to obtain all Regulatory
Approvals relating to UPM and, in doing so, to keep Repap informed as
to the status of the proceedings related to obtaining the Regulatory
Approvals, including, but not limited to, providing Repap with copies
of all related applications and notifications, in draft form, in order
for Repap to provide its reasonable comments and providing Repap with
copies of all material correspondence;
(b) effect all necessary registrations, filings and submissions of
information required by Governmental Entities from UPM or its
subsidiaries relating to the Amalgamation;
(c) defend all lawsuits or other legal, regulatory or other proceedings to
which it is a party challenging or affecting this Agreement or the
consummation of the transactions contemplated hereby;
(d) use commercially reasonable efforts to have lifted or rescinded any
injunction or restraining order or other order relating to UPM which
may adversely affect the ability of the parties to consummate the
transactions contemplated hereby;
(e) effect all necessary registrations, filings and submissions of
information required by Governmental Entities from UPM or its
subsidiaries relating to the Amalgamation;
(f) promptly advise Repap orally and, if then requested, in writing:
(i) of any event known to it occurring subsequent to the date of this
Agreement that would render any representation or warranty of UPM
contained in this Agreement (except any such representation or
warranty which speaks solely as of a date prior to the occurrence
of such event), if made on or as of the date of such event or the
Effective Date, untrue or inaccurate in any material respect; and
(ii) of any material breach by UPM known to it of any covenant or
agreement contained in this Agreement;
(g) UPM acknowledges the employment contracts (as amended) disclosed in
writing by Repap to UPM in a manner acceptable to UPM, and agrees to
cause Repap to comply with such contracts, as may be amended from time
to time with UPM's consent; and
(h) cause Amalco to redeem the Amalco Special Shares and the Repap
Preferred Shares on the Effective Date following the completion of the
Amalgamation.
Section 4.4 Treatment of Repap Stock Options
UPM understands that Repap will provide interim financial assistance to
holders of Repap Options in connection with the exercise of such Repap Options.
Such financial assistance shall consist of interest free loans in an amount
necessary to enable such holders of Repap Options to exercise such options. Each
loan shall be secured by an assignment of the proceeds and direction of payment
thereof to Repap of any disposition of the shares under option up to the amount
of the loans. Furthermore, Repap shall provide lists to UPM of optionholders who
will receive financial assistance, the number of options held by those holders
and the exercise price(s) of their options.
Section 4.5 Covenants Regarding Non-Solicitation
(1) Subject to Section 4.6, Repap 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, (i) 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,
(ii) initiate or participate in any discussions or negotiations regarding
any Acquisition Proposal, (iii) approve or recommend, or propose to
recommend, any Acquisition Proposal or (iv) accept or enter into any
agreement, arrangement or understanding related to any Acquisition
Proposal. Notwithstanding the preceding part of this Section 4.5(1) and any
other provision of this Agreement, nothing shall prevent the Board of
Directors of Repap from complying with Repap's disclosure obligations under
applicable Laws with regard to an Acquisition Proposal or from considering,
participating in any discussions or negotiations, or entering into a
confidentiality agreement and providing information pursuant to Section
4.5(3) (but, subject to Section 4.6, shall not approve, recommend, accept
or enter into any agreement, arrangement or understanding), regarding an
unsolicited bona fide written Acquisition Proposal (a) in respect of which
any required financing has been demonstrated to the satisfaction of the
Board of Directors of Repap, acting in good faith, to be reasonably likely
to be obtained or available, (b) that did not otherwise result from a
breach of this Section 4.5 and (c) which the Board of Directors of Repap
has determined in good faith, after consultation with financial advisors
and 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. Repap shall, and shall cause its subsidiaries and the officers,
directors, employees, representatives and agents of itself and its
subsidiaries to, cease immediately all current discussions and negotiations
regarding any proposal that constitutes, or may reasonably be expected to
lead to, an Acquisition Proposal, and request the return or destruction of
all confidential information provided in connection therewith.
(2) Repap shall forthwith notify UPM, at first orally and then in writing, of
any Acquisition Proposal and any inquiry that could lead to an Acquisition
Proposal, or any amendments to the foregoing, or any request for non-public
information (including requests for shareholder or noteholder lists)
relating to Repap or any Repap Material Subsidiary in connection with an
Acquisition Proposal or for access to the properties, books or records of
Repap or any Repap Material Subsidiary by any Person. Such notice shall
include a description of the material terms and conditions of any proposal,
the identity of the Person making such proposal, inquiry or contact and
provide such other details of the proposal, inquiry or contact as UPM may
reasonably request. Repap shall keep UPM informed of the status including
any change to the material terms of any such Acquisition Proposal or
inquiry.
(3) If Repap receives a request for material non-public information from a
Person who has made an unsolicited bona fide written Acquisition Proposal
and Repap is permitted, subject to and as contemplated under the second
sentence of Section 4.5(1), to negotiate the terms of such Acquisition
Proposal, then, and only in such case, the Board of Directors of Repap may,
subject to the execution by such Person of a confidentiality agreement
containing employee non-solicitation provisions, provide such Person with
access to information regarding Repap; provided, however, that Repap sends
a copy of any such confidentiality agreement to UPM promptly upon its
execution and UPM is provided with a list of or copies of the information
provided to such Person and promptly provided with access to similar
information to which such Person was provided.
(4) Repap shall ensure that its officers, directors and employees and its
subsidiaries and their officers, directors and employees and any financial
advisors or other advisors or representatives retained by it or its
subsidiaries are aware of the provisions of this Section 4.5, and Repap
shall be responsible for any breach of this Section 4.5 by its and its
subsidiaries' officers, directors, employees, representatives or agents.
Section 4.6 Notice by Repap of Superior Proposal Determination
(1) Notwithstanding Sections 4.5(1), (2) and (3), but subject to UPM's rights
under Sections 6.3(3)(c) and 6.4, Repap may accept, approve, recommend or
enter into any agreement, understanding or arrangement in respect of an
unsolicited Superior Proposal if, and only if: (i) it has provided UPM with
a copy of the Superior Proposal document; and (ii) five calendar days (the
"Match Period") shall have elapsed from the later of the date UPM received
written notice advising UPM that Repap's Board of Directors has resolved,
subject only to compliance with this Section 4.6, to accept, approve,
recommend or enter into an agreement, understanding or arrangement in
respect of such Superior Proposal and the date UPM received a copy of such
Superior Proposal. In the event that Repap provides UPM with the notice
contemplated in this Section on a date that is less than seven calendar
days prior to the Repap Meeting, Repap shall adjourn the Repap Meeting to a
date that is not less than seven calendar days and not more than 10
calendar days after the date of such notice. Any information provided by
Repap to UPM pursuant to this Section 4.6 or pursuant to Section 4.5 shall
constitute "Information" under Section 4.7(2).
(2) During the Match Period, Repap agrees that UPM shall have the right, but
not the obligation, to offer to amend the terms of this Agreement. The
Board of Directors of Repap will review any offer by UPM to amend the terms
of this Agreement in good faith in order to determine, in its discretion in
the exercise of its fiduciary duties, whether UPM's offer upon acceptance
by Repap would result in such Superior Proposal ceasing to be a Superior
Proposal. If the Board of Directors of Repap so determines, it will enter
into an amended agreement with UPM reflecting UPM's amended proposal. If
the Board of Directors of Repap continues to believe, in good faith, after
consultation with its financial advisors and outside counsel, that such
Superior Proposal remains a Superior Proposal and therefore rejects UPM's
amended proposal, 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 Repap 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. In addition, in such circumstances, Repap may proceed
with such approvals, consents, filings of or required by Governmental
Entities and such other Persons as Repap shall consider appropriate in
order to consummate such Superior Proposal, provided that such activity
does not interfere with the timing or the holding of the Repap Meeting to
consider whether to approve the Amalgamation. If as a result of the
application of this Section there is another Acquisition Proposal to be
considered at the Repap Meeting, Repap will act fairly in connection with
the order of presentation, signage, proxy forms and other matters related
thereto.
(3) Subject to Section 4.6(l), nothing contained in this Section 4.6 shall
limit in any way the obligation of Repap to convene and hold the Repap
Meeting in accordance with Section 2.1 of this Agreement.
(4) Repap acknowledges and agrees that each successive material amendment to
any Acquisition Proposal shall constitute a new Acquisition Proposal for
purposes of the requirement under clause (ii) of Section 4.6(1) to initiate
an additional Match Period.
Section 4.7 Access to Information
(1) Subject to Section 4.7(2) and applicable Laws, upon reasonable notice,
Repap shall (and shall cause each of its subsidiaries to) afford UPM's
officers, employees, counsel, accountants and other authorized
representatives and advisors ("Representatives") access, during normal
business hours from the date hereof and until the earlier of the
Effective Date or the termination of this Agreement, to its and its
subsidiaries' properties, books, contracts and records as well as to
its management personnel, and, during such period, Repap shall (and
shall cause each of its subsidiaries to) furnish promptly to UPM all
information concerning Repap's and its subsidiaries' businesses,
properties and personnel as UPM may reasonably request; provided,
however, that neither Repap nor any of its subsidiaries shall be
required to disclose trade secrets, breach confidentiality obligations
or waive solicitor-client privilege.
(2) UPM acknowledges that certain information provided to it under Section
4.7(1) above will be non-public and/or proprietary in nature (the
"Information") and will be subject to the terms for confidentiality set
forth in Schedule D hereto. For greater certainty, the provisions of
Schedule D shall survive the termination of this Agreement for the
periods set forth in Schedule D, provided that Schedule D and Section
4.7(1) shall terminate at the Effective Date notwithstanding anything
to the contrary contained therein.
Section 4.8 Closing Matters
Each of UPM and Repap shall deliver, at the closing of the transactions
contemplated hereby, such customary certificates, resolutions and other closing
documents as may be required by the other party hereto, acting reasonably.
Section 4.9 Indemnification
(1) UPM agrees that all rights to indemnification or exculpation now existing
in favour of the current and former directors or officers of Repap or any
subsidiary as provided in its articles or by-laws or by contract or
otherwise shall survive the Amalgamation and shall continue in full force
and effect for a period of not less than six years from the Effective Date.
UPM hereby irrevocably and unconditionally guarantees the obligations of
Repap in favour of such directors or officers, whether or not they remain
in office, and Repap shall hold the benefit of such obligations in favour
of such persons.
(2) There shall be maintained in effect, for not less than six years from the
Effective Date, coverage substantially equivalent to that in effect under
the current policies of the directors' and officers' liability insurance
maintained by Repap or any of its subsidiaries, as the case may be, which
is no less advantageous, and with no gaps or lapses in coverages with
respect to matters occurring prior to the Effective Date. Alternatively, at
UPM's option, it may cause Repap to purchase "run-off" directors' and
officers' liability insurance providing coverage 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.
ARTICLE 5
CONDITIONS
Section 5.1 Mutual Conditions Precedent.
The respective obligations of the parties hereto to complete the
transactions contemplated by this Agreement shall be subject to the
satisfaction, on or before the Effective Date, of the following conditions
precedent, each of which may only be waived by the mutual consent of UPM and
Repap:
(a) the Amalgamation shall have been approved at the Repap 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 holders of Repap Common Shares;
(b) there shall not be in force any final and non-appealable injunction,
order or decree restraining or enjoining the consummation of the
transactions contemplated by this Agreement and there shall be no
proceeding, of a judicial or administrative nature or otherwise,
brought by a Governmental Entity in progress or threatened that
relates to or results from the transactions contemplated by this
Agreement that would, if successful, result in an order or ruling that
would preclude completion of the transactions contemplated by this
Agreement in accordance with the terms hereof;
(c) this Agreement shall not have been terminated pursuant to Article 6;
(d) 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 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 and/or Repap; 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 or any of its subsidiaries of any Repap Common
Shares or Repap Options, seeking to restrain or prohibit the
consummation of the Amalgamation or seeking to obtain from Repap or
UPM any damages directly or indirectly in connection with the
Amalgamation, (ii) seeking to prohibit or materially limit the
ownership or operation by UPM or any of its subsidiaries of any
material portion of the business or assets of Repap or any of its
subsidiaries or to compel UPM or any of its subsidiaries to dispose of
or hold separate any portion of the business or assets of Repap or any
of its subsidiaries, (iii) seeking to impose limitations on the
ability of UPM 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 shareholders of Repap, (iv)
seeking to prohibit UPM 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; and
(e) the Regulatory Approvals shall have been obtained or satisfied on
terms and conditions satisfactory to UPM, acting reasonably.
Section 5.2 Additional Conditions Precedent to the Obligations of UPM
(1) The obligations of UPM to complete the transactions contemplated by this
Agreement shall also be subject to the fulfilment of each of the following
conditions precedent (each of which is for UPM's exclusive benefit and may
be waived by UPM):
(a) all covenants of Repap under this Agreement to be performed on or
before the Effective Date shall have been duly performed by Repap in
all material respects;
(b) the representations and warranties of Repap under this Agreement shall
have been true and correct in all material respects on the date
hereof;
(c) the representations and warranties of Repap under this Agreement shall
be true and correct in all material respects as of the Effective Date
as if made on and as of such date (except to the extent such
representations and warranties speak solely as of an earlier date, in
which event such representations and warranties shall be true and
correct to such extent as of such earlier date, or except as affected
by transactions contemplated or permitted by this Agreement), and UPM
shall have received a certificate of Repap addressed to UPM and dated
the Effective Date, signed on behalf of Repap by two senior executive
officers of Repap (on Repap's behalf and without personal liability),
confirming the same as at the Effective Date;
(d) the Board of Directors of Repap 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;
(e) between the date hereof and the Effective Date, there shall not have
occurred a Material Adverse Change to Repap;
(f) 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
(g) 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.
(2) UPM may not rely on the failure to satisfy any of the above conditions
precedent if the condition precedent would have been satisfied but for a
material default by UPM in complying with its obligations hereunder.
Section 5.3 Additional Conditions Precedent to the Obligations of Repap
(1) The obligations of Repap to complete the transactions contemplated by this
Agreement shall also be subject to the following conditions precedent (each
of which is for the exclusive benefit of Repap and may be waived by Repap):
(a) all covenants of UPM under this Agreement to be performed on or before
the Effective Date shall have been duly performed by UPM in all
material respects;
(b) all representations and warranties of UPM under this Agreement shall
have been true and correct in all material respects on the date
hereof;
(c) the representations and warranties of UPM under this Agreement shall
be true and correct in all material respects as of the Effective Date
as if made on and as of such date (except to the extent such
representations and warranties speak solely as of an earlier date, in
which event such representations and warranties shall be true and
correct to such extent as of such earlier date, or except as affected
by transactions contemplated or permitted by this Agreement), and
Repap shall have received a certificate of UPM addressed to Repap and
dated the Effective Date, signed on behalf of UPM by two senior
executive officers of UPM (on UPM's behalf and without personal
liability), confirming the same as at the Effective Date; and
(d) the Board of Directors of UPM 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.
(2) Repap may not rely on the failure to satisfy any of the above conditions
precedent if the condition precedent would have been satisfied but for a
material default by Repap in complying with its obligations hereunder.
Section 5.4 Notice and Cure Provisions
(1) UPM and Repap will give prompt notice to the other of the occurrence, or
failure to occur, at any time from the date hereof until the Effective
Date, of any event or state of facts which occurrence or failure would, or
would be likely to:
(a) cause any of its representations or warranties contained herein to be
untrue or inaccurate on the date hereof or on the Effective Date; or
(b) result in the failure in any material respect to comply with or
satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder prior to the Effective Date.
(2) Neither UPM nor Repap may seek to rely upon any conditions precedent
contained in Sections 5.1, 5.2 or 5.3, or exercise any termination right
arising therefrom, unless forthwith and in any event prior to the filing of
the Articles of Amalgamation for acceptance by the Director, UPM or Repap,
as the case may be, has delivered a written notice to the other specifying
in reasonable detail all breaches of covenants, representations and
warranties or other matters which UPM or Repap, as the case may be, are
asserting as the basis for the non-fulfilment of the applicable condition
precedent or the exercise of the termination right, as the case may be. If
any such notice is delivered, provided that Repap or UPM, as the case may
be, is proceeding diligently to cure such matter, if such matter is
susceptible to being cured (for greater certainty, except by way of
disclosure in the case of representations and warranties), the other may
not terminate this Agreement as a result thereof until the later of the 30
days prior to the Outside Date and the expiration of a period of 30 days
following such notice. If such notice has been delivered prior to the date
of the Repap Meeting, such meetings shall, unless the parties agree
otherwise, be postponed or adjourned until the expiry of such period. If
such notice has been delivered prior to the filing of the Articles of
Amalgamation with the Director, such filing shall be postponed until two
Business Days after the expiry of such period. For greater certainty, in
the event that such matter is cured within the time period referred to
herein without a Material Adverse Effect on the curing party, this
Agreement may not be terminated solely as a result of the cured breach.
Section 5.5 Satisfaction of Conditions.
The conditions precedent set out in Sections 5.1, 5.2 and 5.3 shall be
conclusively deemed to have been satisfied, waived or released when, with the
agreement of UPM and Repap, a Certificate of Amalgamation in respect of the
Amalgamation is issued by the Director.
ARTICLE 6
AMENDMENT AND TERMINATION
Section 6.1 Amendment
This Agreement and the Amalgamation Agreement may, at any time and from
time to time before or after the holding of the Repap Meeting but not later than
the Effective Date, be amended by mutual written agreement of the parties
hereto, and any such amendment may, subject to applicable Laws, without
limitation:
(a) change the time for performance of any of the obligations or acts of
the parties;
(b) waive any inaccuracies or modify any representation or warranty
contained herein or in any document delivered pursuant hereto;
(c) waive compliance with or modify any of the covenants herein contained
and waive or modify performance of any of the obligations of the
parties; and/or
(d) waive compliance with or modify any conditions precedent herein
contained.
Section 6.2 [Intentionally Deleted]
Section 6.3 Termination
(1) If any condition contained in Sections 5.1 or 5.2 is not satisfied at or
before the Effective Date, then UPM may, subject to Section 5.4 and to
Section 5.2(2) in the case of Section 5.2, by notice to Repap terminate
this Agreement and the obligations of the parties hereunder (except as
otherwise herein provided, including under Section 6.4), but without
detracting from the rights of UPM arising from any breach by Repap but for
which the condition would have been satisfied.
(2) If any condition contained in Sections 5.1 or 5.3 is not satisfied at or
before the Effective Date, then Repap may, subject to Section 5.4 and to
Section 5.3(2) in the case of Section 5.3, by notice to UPM terminate this
Agreement and the obligations of the parties hereunder (except as otherwise
herein provided, including under Section 6.4), but without detracting from
the rights of Repap arising from any breach by UPM but for which the
condition would have been satisfied.
(3) This Agreement may:
(a) be terminated by the mutual agreement of Repap and UPM (for greater
certainty, without further action on the part of the Repap
Shareholders if terminated after the holding of the Repap Meeting);
(b) be terminated by either Repap or UPM if there shall be passed any Law
that makes consummation of the transactions contemplated by this
Agreement illegal or otherwise prohibited;
(c) be terminated by UPM if (i) the Board of Directors of Repap shall have
failed to recommend or shall have withdrawn, modified or changed in a
manner adverse to UPM its approval or recommendation of this
Agreement, the Amalgamation or the Amalgamation Resolution (unless the
Repap Shareholders shall have approved the Amalgamation Resolution
prior to such termination, or (ii) the Board of Directors of Repap
shall have approved or recommended any Acquisition Proposal; or
(d) be terminated by either UPM or Repap if the Repap Shareholder approval
shall not have been obtained by reason of the failure to obtain the
required vote at the Repap Meeting;
in each case, prior to the Effective Date.
(4) If the Effective Date does not occur on or prior to the Outside Date, then,
unless otherwise agreed in writing by the parties, this Agreement shall
terminate.
(5) If this Agreement is terminated in accordance with the foregoing provisions
of this Section 6.3, no party shall have any further liability to perform
its obligations hereunder except as provided in Section 6.4, Schedule D and
as otherwise expressly contemplated hereby, and provided that neither the
termination of this Agreement nor anything contained in this Section 6.3(5)
shall relieve any party from any liability for any breach by it of this
Agreement or Schedule D, including from any inaccuracy in its
representations and warranties and any non-performance by it of its
covenants made herein.
Section 6.4 Break and Other Fees; Option
(1) If:
(a) (i) UPM shall terminate this Agreement pursuant to Section 6.3(3)
(c); or
(ii) either Repap or UPM shall terminate this Agreement pursuant to
Section 6.3(1) or (2) as a result of the failure to satisfy the
conditions specified in either Section 5.1(a) or Section 5.1(b)
in circumstances where the requisite Repap Shareholder approval
has not been obtained at the Repap Meeting or if either Repap or
UPM shall terminate this Agreement pursuant to Section 6.3(3)(d);
and
(b) (i) an Acquisition Proposal has been made, publicly announced or
otherwise publicly disclosed by any Person other than UPM prior
to the Repap Meeting; or
(ii) 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 Repap Meeting, Repap Shareholder approval
of the Amalgamation is not obtained at the Repap Meeting and an
Acquisition Proposal is made, publicly announced or otherwise
publicly disclosed, prior to the expiration of six months
following termination of this Agreement; and
(c) such Acquisition Proposal is consummated;
then in any such case Repap shall pay to UPM $18 million (the "Break Fee")
in immediately available funds to an account designated by UPM. Such
payment shall be due concurrently with the consummation of an Acquisition
Proposal. Repap shall not be obligated to make more than one payment
pursuant to this Section 6.4(1).
(2) On the date hereof, Repap granted to UPM the option to purchase Repap
Common Shares upon the terms and subject to the conditions contained in the
Option Agreement, a copy of which is attached as Schedule E.
Section 6.5 Remedies
(1) Subject to Section 6.5(2), the parties hereto acknowledge and agree that an
award of money damages would be inadequate for any breach of this Agreement
by any party or its representatives and either such breach would cause the
non-breaching party irreparable harm. Accordingly, the parties hereto agree
that, in the event of any breach or threatened breach of this Agreement by
one of the parties, the non-breaching party will also be entitled, without
the requirement of posting a bond or other security, to equitable relief,
including injunctive relief and specific performance. Such remedies will
not be the exclusive remedies for any breach of this Agreement but will be
in addition to all other remedies available at law or equity to each of the
parties.
(2) The parties agree that if Repap pays to UPM amounts required by Section
6.4(1) as a result of the occurrence of any of the events referenced in
Section 6.4(1), UPM shall have no other remedy for any breach of this
Agreement by Repap.
ARTICLE 7
GENERAL
Section 7.1 Notices
All notices and other communications which may or are required to be given
pursuant to any provision of this Agreement shall be given or made in writing
and shall be deemed to be validly given if served personally or by facsimile, in
each case addressed to the particular party at:
(a) If to UPM, at:
UPM Kymmene Group
Etelaesplanadi 2
P.O. Box 380
FIN-00101
Helsinki, Finland
Attention: Reko Aalto-Setala
Facsimile No.: (358) 204 15 0304
with a copy to:
Osler, Hoskin & Harcourt LLP
P.O. Box 50
1 First Canadian Place
Toronto, Ontario
M5X 1B8
Attention: Dale Ponder
Facsimile No.: (416) 862-6666
and with a copy to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: Timothy B. Goodell
Facsimile No.: (212) 354-8113
(b) If to Repap at:
Repap Enterprises Inc.
300 Atlantic Street
Suite 200
Stamford, Connecticut 07901
Attention: Stephen Larson
Facsimile No.: (203) 964-6183
with a copy to:
Stikeman Elliott
1155 Rene-Levesque Blvd. W.
40th Floor
Montreal, Quebec
H3B 3V2
Attention: Pierre Raymond
Facsimile No.: (514) 397-3222
and with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Andrew Soussloff
Facsimile No.: (212) 558-3588
or at such other address of which any party may, from time to time, advise the
other party by notice in writing given in accordance with the foregoing. The
date of receipt of any such notice shall be deemed to be the date of delivery or
facsimile transmission thereof if prior to 5:00 p.m. local time on a Business
Day in place of delivery or receipt, and if not received on a Business Day or
after 5:00 p.m. on a Business Day then the date of receipt shall be deemed to be
the next Business Day. Notice to the persons to be copied hereunder is not
proper notice to the primary recipients.
Section 7.2 Assignment
No party hereto may assign its rights or obligations under this Agreement
or the Amalgamation Agreement, except that UPM may assign all or part of its
rights or obligations to a wholly-owned subsidiary thereof, provided that UPM
remains jointly and severally liable hereunder with such wholly-owned
subsidiary.
Section 7.3 Binding Effect
This Agreement shall be binding upon and shall enure to the benefit of the
parties hereto and their respective successors and permitted assigns and no
third party shall have any rights hereunder.
Section 7.4 Waiver and Modification
Each of Repap and UPM may waive or consent to the modification of, in
whole or in part, any inaccuracy of any representation or warranty made to it
hereunder or in any document to be delivered pursuant hereto and may waive or
consent to the modification of any of the covenants herein contained for its
respective benefit or waive or consent to the modification of any of the
obligations of the other party hereto. Any waiver or consent to the modification
of any of the provisions of this Agreement, to be effective, must be in writing
executed by the party granting such waiver or consent.
Section 7.5 Further Assurances
Each party hereto shall, from time to time, and at all times hereafter,
at the request of the other parties hereto, but without further consideration,
do all such further acts and execute and deliver all such further documents and
instruments as shall be reasonably required in order to fully perform and carry
out the terms and intent hereof.
Section 7.6 Expenses
(1) Subject to Section 6.4, the parties agree that all out-of-pocket expenses
of the parties relating to the Amalgamation and the transactions
contemplated hereby, including legal fees, accounting fees, financial
advisory fees, regulatory filing fees, stock exchange fees, all
disbursements of advisors and printing and mailing costs, shall be paid by
the party incurring such expenses.
(2) Repap represents and warrants to UPM that, except for any amounts owing to
those financial advisers referred to in Section 3.1(c)(iii) by Repap
pursuant to and in accordance with the terms of written and executed
agreements existing as at the date hereof and disclosed to UPM prior to the
date hereof, no broker, finder or investment banker is or will be entitled
to any brokerage, finder's or other fee or commission from Repap or any
subsidiary of Repap in connection with the transactions contemplated
hereby.
Section 7.7 Consultation
UPM and Repap agree to consult with each other as to the general nature of
any news releases or public statements with respect to this Agreement or the
transactions contemplated hereby, and to use their respective reasonable efforts
not to issue any news releases or public statements inconsistent with the
results of such consultations. Subject to applicable Laws, each party shall use
its reasonable efforts to enable the other parties to review and comment on all
such news releases prior to the release thereof. The parties agree to issue
jointly the news release in the agreed form with respect to the Amalgamation as
soon as practicable following the execution of this Agreement. UPM and Repap
also agree to consult with each other in preparing and making any filings and
communications in connection with any Regulatory Approvals or other regulatory
approvals and in seeking any third party consents under leases, or other
agreements.
Section 7.8 Governing Laws
This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein and
shall be treated in all respects as a Ontario contract. Each party hereby
irrevocably attorns to the jurisdiction of the courts of the Province of Ontario
in respect of all matters arising under or in relation to this Agreement.
Section 7.9 Time of Essence
Time shall be of the essence in this Agreement.
Section 7.10 Counterparts
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same instrument.
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Acquisition
Agreement as of the date first written above.
UPM-KYMMENE CORPORATION
By: /s/ Juha Niemela
------------------------------------------
Authorized Signing Officer
By: /s/ Reko Aalto-Setala
------------------------------------------
Authorized Signing Officer
REPAP ENTERPRISES INC.
By: /s/ Hap Stephen
------------------------------------------
Authorized Signing Officer
<PAGE>
SCHEDULE A
AMALGAMATION AGREEMENT
THIS AMALGAMATION AGREEMENT is made as of ________, 2000
BETWEEN:
REPAP ENTREPRISES INC.,
a corporation existing under the Canada Business Corporations Act
("Repap")
- and -
3796477 CANADA INC.,
a corporation incorporated under the Canada Business Corporations Act
("Acquireco").
RECITALS:
A. Repap and Acquireco have agreed to amalgamate pursuant to the Canada
Business Corporations Act and upon the terms and conditions set forth in
this Agreement;
B. The authorized capital of Repap consists of an unlimited number of Repap
Common Shares and an unlimited number of Preferred Shares of which, as of
the date hereof, there are 743,960,637 Repap Common Shares (and no more)
and 240,000 Preferred Shares, Series C and 400,000 Preferred Shares, Series
F (and no more) and no Preferred Shares of any other series, issued and
outstanding;
C. The authorized capital of Acquireco consists of an unlimited number of
common shares; and
D. It is desirable that this amalgamation be effected.
NOW THEREFORE in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged) the parties agree as follows:
1. Interpretation
In this Agreement:
"Acquireco Common Shares" means the common shares in the capital of
Acquireco;
"Act" means the Canada Business Corporations Act;
"Affiliate" means an affiliated body corporate within the meaning of
section 1(2) of the Act;
"Agreement" means this amalgamation agreement, and the expressions
"hereof", "herein", "hereto", "hereunder", "hereby" and similar expressions
refer to this agreement;
"Amalco" means the corporation continuing as a result of the Amalgamation;
"Amalco Class A Redeemable Preferred Shares" means the Class A redeemable
preferred shares in the capital of Amalco having the rights, privileges,
restrictions and conditions set forth in Schedule 1.
"Amalco Class B Preferred Shares" means the Class B preferred shares in the
capital of Amalco, issuable in series, having the rights, privileges,
restrictions and conditions set forth in Schedule 1;
"Amalco Class B Preferred Shares, Series C" means the Class B preferred
shares, series C in the capital of Amalco having the rights, privileges,
restrictions and conditions set forth in Schedule 1;
"Amalco Class B Preferred Shares, Series F" means the Class B preferred
shares, Series F in the capital of Amalco having the rights, privileges,
restrictions and conditions set forth in Schedule 1;
"Amalco Common Shares" means the common shares in the capital of Amalco
having the rights, privileges, restrictions and conditions set forth in
Schedule 1;
"Amalgamating Corporations" means Repap and Acquireco;
"Amalgamation" means the amalgamation of the Amalgamating Corporations as
contemplated in this 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;
"Dissenting Shareholder" means a registered holder of Repap Shares who, in
connection with the special resolution of the shareholders which approves
and adopts this Agreement, has exercised the right to dissent under section
190 of the Act in compliance with the provisions thereof and thereby
becomes entitled to receive the fair value of his or her Repap Shares;
"Effective Date" means the date shown on the certificate of amalgamation to
be issued by the Director under the Act giving effect to the Amalgamation;
"Record Date" means the record date for the Meeting;
"Redemption Consideration" means Cdn. $.20 per Amalco Class A Redeemable
Preferred Share; and
"Redemption Date" means the Effective Date;
"Repap Common Shares" means the common shares in the capital of Repap;
"Repap Meeting" means the special meeting of Repap shareholders to be held
to consider the approval of the special resolution which approves and
adopts this Agreement;
"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 Shares" means the Repap Common Shares, Repap Preferred Shares,
Series C and Repap Preferred Shares, Series F.
Words and phrases used but not defined in this Agreement and defined in the
Act shall have the same meaning in this Agreement as in the Act unless the
context or subject matter otherwise requires.
2. Agreement to Amalgamate
The Amalgamating Corporations hereby agree to amalgamate as of the
Effective Date and to continue as one corporation on the terms and conditions
set out in this Agreement.
3. Name
The name of Amalco shall be 3796477 Canada Inc.
4. Registered Office
The registered office of Amalco shall be c/o Osler, Hoskin & Harcourt LLP,
P.O. Box 50, 1 First Canadian Place, Toronto, Ontario, M5X 1B8.
5. Authorized Capital
Amalco shall be authorized to issue an unlimited number of Amalco Common
Shares, an unlimited number of Amalco Class A Redeemable Preferred Shares and an
unlimited number of Amalco Class B Preferred Shares, issuable in series. The
rights, privileges, restrictions and conditions attaching to each class of
shares of Amalco shall be as described in Schedule 1 to this Agreement.
6. Private Company Restrictions
Effective immediately upon UPM-Kymmene Corporation becoming the sole holder
of shares of Amalco:
(a) the right to transfer shares of Amalco shall be restricted in that no
share shall be transferred except with the consent of the board of
directors of Amalco, to be expressed either by a resolution passed at
a meeting of the board of directors or by an instrument or instruments
in writing signed by a majority of the directors; and
(b) the number of shareholders of Amalco, exclusive of persons who are in
its employment or the employment of an affiliate and exclusive of
persons who, having been formerly in the employment of Amalco were,
while in that employment, and have continued after the termination of
that employment to be, shareholders of Amalco, shall be limited to not
more than fifty. Two or more persons who are the joint registered
owners of one of more shares shall be counted as one shareholder.
Any invitation to the public to subscribe for securities of Amalco is
prohibited. For the purposes hereof, the issuance of Amalco Class A Redeemable
Preferred Shares, Amalco Class B Preferred Shares and Amalco Common Shares upon
the Amalgamation shall not constitute an invitation to the public to subscribe
for securities of Amalco.
7. Restrictions on Business
There shall be no restrictions on the business which Amalco is authorized
to carry on.
8. Number of Directors
The board of directors of Amalco shall, until otherwise changed in
accordance with the Act, consist of a minimum number of one and a maximum number
of [5] directors. The number of directors of Amalco shall initially be [3] and
the directors of Amalco shall be empowered to determine from time to time the
number of directors of Amalco within the said minimum and maximum numbers
provided for in the Articles of Amalco, as the same may be amended from time to
time.
9. Initial Directors
The first directors of Amalco shall be the persons whose names and
residential addresses appear below;
Name Municipality of Residence Resident Canadian
o o [yes/no]
Such directors shall hold office until the next annual meeting of
shareholders of Amalco or until their successors are elected or appointed.
10. By-Laws
The by-laws of Amalco, until repealed, amended or altered, shall be the
by-laws of Repap.
11. Amalgamation
On the Effective Date:
(a) 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 Class A Redeemable Preferred
Share;
(b) each issued and outstanding Repap Common Share held by Acquireco will
be cancelled;
(c) each issued and outstanding Acquireco Common Share will be converted
into one Amalco Common Share;
(d) each issued and outstanding Repap Preferred Share, Series C will be
converted into one Amalco Class B Preferred Share, Series C;
(e) each issued and outstanding Repap Preferred Share, Series F will be
converted into one Amalco Class B Preferred Share, Series F; and
(f) Dissenting Shareholders will be entitled to be paid the fair value of
their Common Shares.
12. Stated Capital Accounts
There shall be added to the stated capital account in the accounting
records of Amalco maintained for:
(a) the Amalco Class A Redeemable Preferred Shares, an amount equal to the
number of Amalco Class A Redeemable Preferred Shares issued on the
Amalgamation multiplied by Cdn. $.20;
(b) the Amalco Class B Preferred Shares, Series C, an amount equal to the
aggregate stated capital of each Repap Preferred Share, Series C
changed into an Amalco Class B Preferred Share, Series C on the
Amalgamation;
(c) the Amalco Class B Preferred Shares, Series F, an amount equal to the
aggregate stated capital of each Repap Preferred Share, Series F
changed into an Amalco Class B Preferred Share, Series F on the
Amalgamation; and
(d) the Amalco Common Shares, an amount equal to the amount by which the
aggregate stated capital attributable to the Repap Common Shares
(other than those held by Acquireco, if any) and the Acquireco Common
Shares exceeds the amount added to the stated capital account
maintained for the Amalco Class A Redeemable Preferred Shares in
accordance with this section.
The amount of stated capital attributable to the Amalco Common Shares shall
be adjusted to reflect payments that may be made to Dissenting Shareholders.
13. Share Certificates
No certificates shall be issued in respect of the Amalco Class A Redeemable
Preferred Shares and such shares shall be evidenced by the certificates
representing Repap Common Shares. No certificates shall be issued in respect of
the Amalco Class B Preferred Shares, Series C or the Amalco Class B Preferred
Shares, Series F and such shares shall be evidenced by certificates representing
Repap Preferred Shares, Series C and Repap Preferred Shares, Series F
respectively.
14. Contribution of Assets
Each of Repap and Acquireco shall contribute to Amalco all its assets,
subject to its liabilities, as such exist immediately before the Effective Date.
15. Property of Amalco
Amalco shall posses all the property, rights, privileges and franchises and
shall be subject to all the liabilities, contracts, disabilities and debts of
each of the Amalgamating Corporations as such exist immediately before the
Effective Date.
16. Rights of Creditors
All rights of creditors against property, rights and assets of each of the
Amalgamating Corporations and all liens upon their property, rights and assets
shall be unimpaired by the Amalgamation and all debts, contracts, liabilities
and duties of each of the Amalgamating Corporations shall thenceforth attach to
Amalco and may be enforced against it.
17. General Conditions Precedent
The respective obligations of the parties hereto to consummate the
transactions contemplated hereby, and in particular the Amalgamation, are
subject to the satisfaction, on or before the Effective Date, of the following
conditions any of which may be waived by the mutual consent of such parties
without prejudice to their rights to rely on any other or others of such
conditions:
(a) this Agreement and the transactions contemplated hereby, including in
particular the Amalgamation, shall have been approved by:
(i) the common shareholder of Acquireco; and
(ii) not less than two-thirds of the votes cast by the holders of
Repap Shares who, being entitled to do so, vote in person or by
proxy at the Repap Meeting in accordance with the provisions of
the Act and in accordance with other applicable regulatory
requirements; and
(b) there shall not be in force any order or decree restraining or
enjoining the consummation of the transactions contemplated by this
Agreement, including, without limitation, the Amalgamation.
18. Termination
This Agreement may, prior to the issuance of a certificate of Amalgamation,
be terminated by the board of directors of Repap or Acquireco notwithstanding
the approval thereof by the shareholders of Repap and Acquireco.
19. Dissenting Shareholders
Repap Shares which are held by a Dissenting Shareholder shall not be
converted into Amalco Class A Redeemable Preferred Shares. However, in the event
that a holder of Repap Shares fails to perfect or effectively withdraws such
shareholder's claim under section 190 of the Act or forfeits such shareholder's
rights to make a claim under section 190 of the Act or his rights as a
shareholder of Repap are otherwise reinstated, (i) such shareholder's Repap
Common Shares shall thereupon be deemed to have been converted as of the
Effective Date into Amalco Class A Redeemable Preferred Shares, (ii) such
shareholder's Repap Preferred Shares, Series C shall thereupon be deemed to have
been converted as of the Effective Date into Amalco Class B Preferred Shares,
Series C and (iii) such shareholder's Repap Preferred Shares, Series F shall
thereupon be deemed to have been converted as of the Effective Date into Amalco
Class B Preferred Shares, Series F, in each case, on the basis set forth in
paragraph 11 hereof.
20. Filing Documents
Upon the shareholders of each of the Amalgamating Corporations approving
this Agreement by special resolution in accordance with the Act and subject to
the other provisions of this Agreement, the Amalgamating Corporations shall
jointly file with the Director under the Act articles of amalgamation and such
other documents as may be required.
21. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein.
22. Counterparts
This Agreement may be signed in counterparts and each such counterpart
shall constitute an original document and such counterparts, taken together,
shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties have executed this Agreement.
REPAP ENTERPRISES INC.
By:
-----------------------------
Authorized Signing Officer
3796477 CANADA INC.
By:
-----------------------------
Authorized Signing Officer
<PAGE>
SCHEDULE B
SPECIAL RESOLUTION OF THE REPAP SHAREHOLDERS
RESOLVED AS A SPECIAL RESOLUTION THAT:
1. The amalgamation (the "Amalgamation") of Repap (the "Corporation") and
3796477 Canada Inc. ("Acquireco") under section 181 of the Canada Business
Corporations Act, as more particularly described and set forth in the Management
Information Circular (the "Circular") of Repap accompanying the notice of this
meeting is hereby authorized and approved upon the terms and conditions set
forth in the acquisition agreement (the "Acquisition Agreement") dated as of
August 28, 2000 between the Corporation and UPM-Kymmene Corporation, the full
text of which is set forth in Schedule _____ to the Circular;
2. The amalgamation agreement between the Corporation and Acquireco dated
_____, 2000, in the form set forth in Schedule A to the Acquisition Agreement,
is hereby approved;
3. The board of directors of the Corporation is hereby authorized to revoke
this resolution at any time prior to the Amalgamation becoming effective without
further approval of the shareholders of the Corporation and to determine not to
proceed with the Amalgamation; and
4. The directors and proper officers of the Corporation are hereby
authorized to take all such steps as they deem necessary or desirable in
connection with the Amalgamation of the Corporation and Acquireco.
<PAGE>
SCHEDULE C
REGULATORY APPROVALS
Canada
- expiration or earlier termination of the waiting period under Part IX of
the Competition Act (Canada) and receipt of an advance ruling certificate
("ARC") pursuant to the Competition Act (Canada) or, in the alternative to
an ARC, a no-action letter from the Commissioner of Competition
- determination by the Minister responsible for Investment Canada under the
Investment Canada Act (Canada) that the Amalgamation is of "net benefit to
Canada" for purposes of such Act on terms and conditions satisfactory to
UPM, acting reasonably
- any required government consents with respect to Crown timber licenses and
agreements to which Repap or any of its affiliates is a party
- approval for the listing of the Repap Common Shares issuable upon the
exercise of the Option by The Toronto Stock Exchange
United States
- expiration or earlier termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976
<PAGE>
SCHEDULE D
CONFIDENTIALITY PROVISIONS
In connection with UPM's interest in the acquisition of Repap (the
"Transaction"), Repap and Repap's affiliates are furnishing UPM or UPM's
representatives with certain information which is either non-public,
confidential or proprietary in nature. This information furnished to UPM or
UPM's representatives, together with analyses, compilations, forecasts, studies
or other documents prepared by UPM, its agents, representatives (including
lawyers, accountants and financial advisors) or employees which contain or
otherwise reflect such information is, subject to section 3 of this Schedule,
hereinafter referred to as the "Information". In consideration of Repap
furnishing UPM with the Information, UPM agrees that:
1. The Information shall be kept confidential and shall not, without Repap's
prior written consent, be disclosed by UPM, or by UPM's agents,
representatives or employees, in any manner whatsoever, in whole or in
part, and shall not be used by UPM, UPM's agents, representatives or
employees, other than, in each case, in connection with the Transaction.
Moreover, UPM agrees to reveal the Information only to UPM's agents,
representatives and employees who need to know the Information for the
purposes of evaluating the Transaction, who are informed by UPM of the
confidential nature of the Information and who shall agree to act in
accordance with the terms and conditions of this Schedule.
2. Upon the termination of the Acquisition Agreement to which these provisions
constitute Schedule D, all copies of the Information, except for that
portion of the Information which consists of analyses, compilations,
forecasts, studies or other documents prepared by UPM, UPM's agents,
representatives or employees, will be, at UPM's option, returned to Repap
or destroyed. That portion of the Information which consists of analyses,
compilations, forecasts, studies or other documents prepared by UPM, UPM's
agents, representatives or employees will be destroyed upon Repap's request
and any oral Information will continue to be subject to the terms of this
Schedule. Upon Repap's request, UPM shall provide Repap with a certificate
certifying as to the complete return and destruction of all Information in
accordance with the terms of this paragraph. Notwithstanding the foregoing,
one copy of each document or other item constituting Information may be
retained by counsel to UPM, permanently subject to the terms of this
Schedule, for use only in connection with any dispute or litigation which
has arisen at that time and for which such Information is necessary or
desirable.
3. The term "Information" shall not include such portions of the Information
which (i) are or become generally available to the public other than as a
result of a disclosure by UPM, UPM's agents, representatives or employees
in contravention of this Schedule, (ii) are received from an independent
third party who had obtained the Information lawfully and was under no
obligation of secrecy to Repap, (iii) UPM can show were in UPM's possession
before UPM received such Information from Repap or (iv) UPM can show were
independently developed by UPM or on UPM's behalf by persons having no
access to the Information at the time of independent development.
4. UPM acknowledges that neither Repap nor any of Repap's affiliates makes any
express or implied representation or warranty as to the accuracy or
completeness of the Information, and each of Repap and Repap's affiliates
expressly disclaims any and all liability that may be based on the
Information, errors therein or omissions therefrom. UPM agrees that UPM is
not entitled to rely on the accuracy or completeness of the Information and
that UPM shall be entitled to rely solely on the representations and
warranties made to UPM in the Acquisition Agreement.
5. If UPM or anyone to whom UPM transmits the Information becomes compelled by
applicable legal or regulatory requirements (including, without limitation,
the requirements of any applicable stock exchange) to disclose any of the
Information, UPM will provide Repap with prompt notice so that Repap may
seek a protective order or other appropriate remedy and/or waive compliance
with the provisions of this Schedule. If such protective order or other
remedy is not obtained or Repap waives compliance with the provisions of
this Schedule, UPM will furnish only that portion of the Information which
UPM is advised, by written opinion of counsel, is required by such
applicable legal or regulatory requirements and will exercise its
commercially reasonable efforts to obtain assurance that confidential
treatment will be accorded to the Information if such confidential
treatment is available.
6. Without the prior written consent of Repap, for a period of two years from
the date of this Agreement, neither UPM nor any of UPM's affiliates will
solicit for employment, employ or otherwise contract for the services of
any person who is now employed (either as an employee or full-time
consultant) by Repap or any of its operating divisions or affiliates and
with whom UPM or UPM's agents, representatives or employees communicate in
connection with the Transaction, other than persons (i) whose employment by
Repap or any of its operating divisions or affiliates, or any of their
successors, shall have been terminated, (ii) who shall have voluntarily
left the employ of Repap or its affiliate prior to the date of such
solicitation, employment or other contractual arrangements, (iii) who shall
have responded to general solicitation through advertising or (iv) who
shall have responded to general solicitation by a recruiting or search firm
(provided that such search firm has not been directed by UPM or any of
UPM's affiliates to contact such persons).
7. Any provision in this Schedule which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Schedule or affecting the validity or enforceability of
such provisions in any other jurisdiction.
8. UPM acknowledges that disclosure of the Information in contravention of
this Schedule may cause significant damage and harm to Repap and its
affiliates and that remedies at law may be inadequate to protect against
breach of this Agreement, and UPM hereby in advance agrees to the granting
of injunctive relief in Repap's favour without proof of actual damages, in
addition to any other remedy to which Repap may be entitled.
9. The obligations described in this Schedule shall terminate two years from
the date of this Schedule; provided, however, that sections 3, 8 and 10 of
this Schedule shall survive indefinitely.
10. It is acknowledged and agreed that UPM is requesting access to the
Information to permit it and its agents, representatives and employees to
perform the above-described evaluation of Repap and/or any of its
affiliates. It is understood that affiliated companies of UPM may be given
access to the Information and that those affiliated companies of UPM which
are given access to the Information will be informed of the confidential
nature of the Information and UPM will make commercially reasonable efforts
to cause the directors, officers, employees, agents and representatives of
those affiliated companies to treat the Information on a confidential
basis. The affiliated companies of UPM which are not given such access
shall have no obligations under this Schedule. References in this Schedule
to "UPM" shall be deemed to be references to UPM and/or such affiliated
companies as may eventually be given access to the Information.
11. This Schedule constitutes the entire agreement between Repap and UPM with
respect to the subject matter hereof.
<PAGE>
SCHEDULE E
OPTION AGREEMENT
