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EXHIBIT 2
NOTE PURCHASE OPTION AGREEMENT
This Note Purchase Option Agreement ("Agreement") dated as of
[effective date], is between Kafus Industries Ltd. ("Kafus") and Sundance
Assets, L.P. ("Lender").
INTRODUCTION
Reference is made to the Exchangeable Promissory Note dated as of March
31, 1998 (as modified, the Note"), between Kafus Cement Fibre Industries of
Texas, Inc. ("Borrower"), a Subsidiary of Kafus, and Enron Capital & Trade
Resources Corp. ("ECT"), an Affiliate of the Lender and predecessor in interest
to the Lender thereunder, which is attached as Exhibit A hereto and to which
this Agreement relates. Reference is further made to the Letter Loan Agreement
dated as of March 31, 1998 (as modified, the "Loan Agreement"), between the
Borrower and ECT, as predecessor in interest to the Lender thereunder. In
connection with certain amendments to the Note, the Loan Agreement, and the
other Loan Documents (as defined in the Loan Agreement), Kafus has requested and
the Lender has agreed to xxxxx Xxxxx the option provided herein. In connection
with the foregoing, and for other good and valuable consideration, Kafus and the
Lender hereby agree as follows:
Section 1. Definitions. Capitalized terms used herein but not defined
herein shall have the meanings set forth or referred to in the
Loan Agreement. As used herein, the following terms shall have
the following meanings:
"Maturity Date" means September 30, 2000.
"Note Purchase Option" has the meaning set forth in Section 2(a) of
this Agreement.
"Note Rights and Obligations" means means all of the Lender's rights
and obligations under the Note and the other Loan Documents (other than the
Income Participation Certificate) and related documents, including the rights to
the payment of principal, interest, fees, reimbursements, and indemnifications,
and all security and support for such rights and obligations
"Note Purchase Option Price" means an amount equal to the sum of (a)
the entire outstanding principal balance of the Note, together with all accrued
but unpaid interest thereon and any other amounts owing from the Borrower to the
Lender thereunder or in connection therewith, and (b) U.S. $3,000,000.
Section 2. Note Purchase Option.
(a) Upon at least 10 days' prior written notice to
the Lender, Kafus may purchase all, but not less
than all, of the
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Note Rights and Obligations from the Lender on
the Maturity Date at a price equal to the Note
Purchase Option Price (such right being the
"Note Purchase Option"). Any written certificate
provided by the Lender to Kafus showing the
calculation of the Note Purchase Option Price
shall be conclusive and binding for all
purposes, absent manifest error. Kafus shall
make payment of the Note Purchase Option Price
to the Lender within ten days after delivery of
the foregoing notice, and upon receipt of such
payment, Lender shall deliver to Kafus the Note
and the other documents evidencing the Note
Rights and Obligations, accompanied with such
transfer endorsements or instruments as are
necessary to transfer the same to Kafus, all
without recourse to the Lender and without
representations or warranties of any kind,
express or implied.
(b) Kafus shall make the foregoing payment to
the Lender by means of a wire transfer of U.S.
Dollars in immediately available funds to the
Lender at such payment location as directed by
the Lender.
Section 3. Effectiveness. This Agreement shall become effective as of the
date first set forth above when Kafus, the Borrower, and the
Lender shall have duly and validly executed originals of this
Agreement, and the Kafus shall have delivered the same to the
Lender.
Section 4. Miscellaneous.
(a) Kafus shall pay to the Lender on demand all
costs and expenses of the Lender in connection
with the preservation or enforcement of the
Lender's rights under this Agreement, whether
through negotiations, legal proceedings, or
otherwise, including fees and expenses of
counsel for the Lender. The provisions of this
paragraph shall survive any purported
termination of this Agreement that does not
expressly reference this paragraph.
(b) Kafus shall at all times protect and hold the
Lender and its respective shareholders,
affiliates, directors, officers, employees,
agents, and servants and the persons under their
respective control or supervision (collectively,
the
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"Indemnified Parties") harmless of, from, and
against any and all claims (whether in tort,
contract, or otherwise), demands, damages,
losses, liabilities, costs, or expenses of any
kind or nature whatsoever (each referred to
herein as a "Loss") which an Indemnified Party
may incur or which may be claimed against an
Indemnified Party by any Person, in each case by
reason of, or arising out of this Agreement and
the Note Rights and Obligations or any other
document or instrument delivered in connection
herewith or therewith or the enforcement of any
of the terms or provisions hereof or thereof or
the transactions contemplated hereby or thereby;
provided, however, that the indemnity set forth
in this Section shall not extend to any Loss
arising, in the case of any Indemnified Party,
as a result of the gross negligence or willful
misconduct of such Indemnified Party. Kafus
further covenants and agrees, to the extent
permitted by law, to pay or to reimburse the
Indemnified Parties for any and all costs,
reasonable attorneys' fees, liabilities, or
expenses incurred in connection with
investigating, defending against, or otherwise
in connection with any such losses, claims,
damages, liabilities, expenses, or actions,
except to the extent that the same arise out of
the gross negligence or willful misconduct of
the Indemnified Party claiming such payment or
reimbursement.
(i) An Indemnified Party shall promptly
notify Kafus in writing of any claim or
action brought against such Indemnified
Party in which indemnity may be sought
against Kafus pursuant to this Section; and
such notice shall be given in sufficient
time to allow Kafus to defend such claim or
action. However, the failure to give such
notice in sufficient time shall not
constitute a defense hereunder nor in any
way impair the obligations of Kafus under
this Section, if (i) the Indemnified Party
shall not have had knowledge or notice of
such claim or action, (ii) neither Kafus nor
any Affiliate thereof shall have had
knowledge or notice of such claim or action,
or (iii) Kafus's ability to defend such
claim or action shall not thereby be
materially impaired. In the event,
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however, that (i) the Indemnified Party
shall not have timely notified Kafus of any
such claim or action, (ii) neither Kafus nor
any Affiliate thereof shall have had
knowledge or notice of such claim or action,
and (iii) Kafus's ability to defend or
participate in such claim or action is
materially impaired by reason of not having
received timely notice thereof from the
Indemnified Party, then Kafus's obligation
to so defend and indemnify shall be
qualified to the extent (and only to the
extent) of such material impairment.
(ii) The obligations of Kafus under this
Section shall survive the termination of
this Agreement and remain in full force and
effect, with respect to each Loss of each
Indemnified Party, until the later of (i)
the expiration of the period stated in the
applicable statute of limitations during
which a claim or cause of action may be
brought, and (ii) payment in full or the
satisfaction of such claim or cause of
action and of all expenses and charges
incurred by such Indemnified Party relating
to the enforcement of the provisions herein
specified.
(c) This Agreement shall be governed by the
internal laws of the State of Texas (without
reference to principles of conflicts of laws
that would select another law). Unless otherwise
specified, all monetary amounts expressed
hereunder and all payments required to be made
hereunder are in U.S. Dollars. Any and all
payments by Kafus under this Agreement shall be
made free and clear of and without deduction for
any and all present or future taxes, levies,
imposts, deductions, charges, or withholdings,
and all liabilities with respect thereto, other
than taxes imposed on the income of and
franchise taxes imposed on the Lender by any
jurisdiction in which the Lender is a permanent
citizen or resident or any political subdivision
of such jurisdiction (all such non-excluded
taxes, levies, imposts, deductions, charges,
withholdings, and liabilities being hereinafter
referred to as "Taxes"). If Kafus shall be
required by law to deduct any Taxes from any sum
payable to the Lender (i) the sum payable
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shall be increased as may be necessary so that,
after making all required deductions (including
deductions applicable to additional sums payable
under this paragraph), the Lender receives an
amount equal to the sum it would have received
had no such deductions been made, (ii) Kafus
shall make such deductions, and (iii) Kafus
shall pay the full amount deducted to the
relevant taxation authority or other authority
in accordance with applicable law. Kafus agrees
to pay any present or future stamp or
documentary taxes or any other excise or
property taxes, charges, or similar levies which
arise from any payment made with respect to, or
from the execution, delivery, filing, or
registration of, this Agreement. Further, If any
sum due from Kafus under this Agreement or any
order or judgment given in relation hereto has
to be converted from the currency in which the
same is payable hereunder or under such order or
judgment (the "first currency") into another
currency (the "second currency") for the purpose
of (i) making or filing a claim or proof against
Kafus with any governmental authority or in any
court, tribunal, or arbitration panel or (ii)
enforcing any order or judgment given in
relation hereto, Kafus shall indemnify the
Lender against any loss incurred as a result of
any discrepancy between (A) the rate of exchange
used when restating the amount in question from
the first currency into the second currency and
(B) the rate or rates of exchange at which the
Lender purchased the first currency with the
second currency after receipt of a sum paid to
it in the second currency in satisfaction, in
whole or in part, of any such sum due or order
or judgment. The foregoing indemnity shall
constitute a separate obligation of Kafus
distinct from any other obligations and shall
survive the giving or making of any judgment or
order in relation to all or any of such other
obligations.
(d) If any provision in this Agreement is held to
be unenforceable, such provision shall be
severed and the remaining provisions shall
remain in full force and effect. All
representations, warranties, and covenants of
Kafus in this Agreement shall survive the
execution of this Agreement and any other
contract or agreement. If a due date for an
amount
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payable is not specified in this Agreement, the
due date shall be the date on which the Lender
demands payment therefor. The Lender's remedies
under this Agreement and other documents and
agreements shall be cumulative, and no delay in
enforcing this Agreement shall act as a waiver
of the Lender's rights thereunder. The
provisions of this Agreement may be waived or
amended only in a writing signed by the party
against whom enforcement is sought. This
Agreement shall bind and inure to the benefit of
Kafus and the Lender and their respective
successors and assigns. Kafus may not assign its
rights or delegate its duties under this
Agreement without the prior written consent of
the Lender, which consent shall not be
unreasonably withheld; provided that Kafus may
assign its rights or delegate its duties under
this Agreement to The Samarac Corporation Ltd.
without the consent of the Lender. The Lender
may assign its rights and delegate its duties
under this Agreement. This Agreement may be
executed and delivered by telecopier, and may be
executed in multiple counterparts each of which
shall constitute one and the same agreement.
(e) Except as otherwise provided herein, any
notice, demand, direction, certificate, request,
instrument, or other communication authorized or
required by this Agreement to be given to or
filed with the Lender or Kafus shall be deemed
to have been sufficiently given or filed for all
purposes of this Agreement if and when delivered
by messenger or by a recognized courier service
or sent by registered or certified mail, return
receipt requested, postage prepaid or sent by
confirmed telecopy, as follows:
To the Lender, to:
Sundance Assets, L.P.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: J. Xxxxx XxXxxxxxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000
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With a copy to:
Enron North America Corp.
Attn: Xxxxx Xxxxx
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
telephone: 000-000-0000
telecopier: 000-000-0000
And a copy to:
Enron Capital Management
Attn: Xxx Xxxxxx
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
telephone: 000-000-0000
telecopier: 000-000-0000
To Kafus, to:
Kafus Industries Ltd.
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xx. Xxxxxxx X. XxXxxx
telephone: 000-000-0000
telecopier: 000-000-0000
With copies to:
Kafus Industries Ltd.
000-000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X0X0
Attn: Xx. Xxx Xxxxxxxxx
telephone: 000-000-0000
telecopier: 604-685-2426
The Lender and Kafus may, by like notice, designate any
further or different addresses or telecopy numbers to which subsequent notices,
demands, directions, certificates, requests,
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instruments, or other communications hereunder shall be sent. Any notice,
demand, direction, certificate, request, instrument, or other communication
hereunder shall, except as may expressly be provided herein, be deemed to have
been delivered or given as of the date it shall have been delivered by messenger
or courier service or sent by confirmed telecopy or upon receipt if mailed.
THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signatures begin on the following page.]
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EXECUTED as of the date first above written.
KAFUS INDUSTRIES LTD.
By:
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Name:
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Title:
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[Signature page to Note Purchase Option Agreement]
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SUNDANCE ASSETS, L.P.
By: Ponderosa Assets, L.P., its general partner
By: Enron Ponderosa Management Holdings, Inc.
By:
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Name:
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Title:
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[Signature page to Note Purchase Option Agreement]
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Consented and Agreed:
KAFUS CEMENT FIBRE INDUSTRIES OF TEXAS, INC.
By:
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Name:
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Title:
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[Signature page to Note Purchase Option Agreement]
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