<PAGE>   1
 
                                  EXHIBIT 10.5
 
MEMORANDUM OF AGREEMENT entered into as of October 1, 1997
 
<TABLE>
<CAPTION>
 
<S>               <C>
BY AND BETWEEN:   REPAP ENTERPRISES INC., a company duly incorporated under
                  the laws of Canada, having its principal place of business
                  at 1250 Rene-Levesque Boulevard West, Suite 3800, in the
                  City and District of Montreal, Quebec
                  (hereinafter "Repap")
AND               Michelle A. Cormier, having his address for the purposes of
                  the present Agreement at Montreal, Quebec,
                  (hereinafter the "Executive")
</TABLE>
 
THE PARTIES DECLARE AS FOLLOWS:
 
      WHEREAS Repap considers the continuous maintenance of a sound and vital
management team to be essential to protecting and enhancing the best interests
of Repap and its shareholders during this process; and
 
      WHEREAS Repap and the Executive have previously entered into a Memorandum
of Agreement dated as of June 17, 1996 (the "Prior Agreement") certain
provisions of which the parties intend to be replaced by this Agreement; and
 
      WHEREAS a Change in Control (as defined in the Prior Agreement) has
occured and the Executive has Good Reason (as defined in the Prior Agreement) to
terminate his employment with Repap;
 
      WHEREAS Repap recognizes that the possibility of a further Change in
Control or other circumstances may still exist and that such possibility, and
the uncertainty and questions which it may raise among Repap's management team,
may result in the departure or distraction of members thereof to the detriment
of Repap and its shareholders; and
 
      WHEREAS Repap has therefore determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of Repap's management team to their assigned duties.
 
      NOW, THEREFORE, THIS AGREEMENT WITNESSETH THAT, in consideration of the
mutual promises contained herein, and other good and valuable consideration the
adequacy and sufficiency of which is hereby acknowledged by the parties hereto,
it is hereby agreed by and between the parties hereto as follows:
 
                                   ARTICLE 1
 
                                 INTERPRETATION
 
1.1    DEFINITIONS.  For the purpose of this Agreement, or for the purposes of
any notice or communication required hereunder, the following words and
expressions shall have the following respective meanings, except where the
context dictates otherwise.
 
      "Agreement" shall mean this agreement and all instruments supplemental
      hereto or in amendment or confirmation hereof; "herein", "hereof",
      "hereto", "hereunder" and similar expressions mean and refer to this
      Agreement and not to any particular Article, Section, Subsection or other
      subdivision; "Article", "Section", "Subsection" or other subdivision of
      this Agreement means and refers to the specified Article, Section,
      Subsection or other subdivision of this Agreement;
 
      "Cause" shall mean any event or circumstance which, pursuant to applicable
      law, constitutes cause for dismissal without either notice or payment in
      lieu of notice:
 
      "Change in Control"shall mean the occurrence of any of the following
      events after the date hereof:
 
      (a)   the purchase of at least twenty-five percent of the outstanding
           common shares of Repap or of Repap New Brunswick Inc. by a buyer who
           is a forest products industry participant; or
 
      (b)   the purchase of at least thirty-three percent of the outstanding
           common shares of Repap or of Repap New Brunswick Inc. by a buyer
           other than a buyer who is described in sub-paragraph (a) of this
           definition; or
 
                                       55
<PAGE>   2
 
      (c)   during any period of two consecutive years, individuals who at the
           beginning of such period constituted the board of directors of the
           Corporation (together with any new directors whose election by such
           board of directors or whose nomination for election by the
           shareholders of the Corporation was approved by a vote of two-thirds
           of the directors of the Corporation then still in office who were
           either directors at the beginning of such period or whose election or
           nomination for election was previously so approved) cease for any
           reason to constitute a majority of the board of directors of the
           Corporation then in office; or
 
      (d)   a reduction in the aggregate common share ownership of Silverton
           International Fund Limited and River Road (Canada) L.C.C. to ten
           percent or less through a sale to a third party other than a sale
           qualified through a public secondary offering of the common shares of
           Repap by Silverton International Fund Limited or Paloma Partners
           L.C.C. or through a treasury offering of the common shares of Repap;
 
      "Good Reason" shall mean, without the Executive's express consent, written
      or otherwise, any of the following:
 
      (a)   assignment to the Executive of any duties inconsistent with, or a
           substantial alteration in the nature or status of, his
           responsibilities from those in effect as of the date hereof; or
 
      (b)   reduction by Repap in the Executive's annual salary as in effect on
           the date hereof or as same may be increased from time to time; or
 
      (c)   taking of any action by Repap which reduces or would materially
           reduce or fails to renew any of the benefits enjoyed by the Executive
           under any of Repap's life insurance, medical, health and accident or
           disability plans (collectively the "Insurance Plans"), or Repap's
           pension, deferred compensation or savings plans (collectively the
           "Benefit Plans") in which the Executive was participating at the time
           or of any other benefits herein mentioned; or
 
      (d)   a requirement that the Executive perform his duties in a
           municipality other than the municipality in which the Executive
           resides at the date of this Agreement or other than Stamford,
           Connecticut;
 
      "Person" shall mean any individual or other entity possessed of juridical
      personality, including, without limitation, a corporation, company,
      cooperative, partnership, trust, unincorporated association, or
      governmental body; and pronouns when they refer to a Person shall have a
      similarly extended meaning;
 
      "Repap" means Repap Enterprises Inc., one of the parties to this Agreement
      and includes any successor to Repap that may result from a Change in
      Control.
 
1.2    GENDER.  Any reference in this Agreement to any gender shall include all
      genders and words used herein importing the singular number only shall
      include the plural and vice versa.
 
1.3    HEADINGS.  The insertion of headings is for convenience of reference only
      and shall not affect or be utilized in the construction or interpretation
      hereof.
 
1.4    SEVERABILITY.  Any article, section, subsection or other subdivision of
      this Agreement or any other provision of this Agreement which is deemed to
      be or becomes, illegal, invalid or unenforceable shall be severed herefrom
      and shall be ineffective to the extent of such illegality, invalidity or
      unenforceability and shall not affect or impair the remaining provisions
      hereof which shall remain in full force and effect.
 
1.5    ENTIRE AGREEMENT.  This Agreement together with any instruments to be
      delivered pursuant hereto constitute the entire agreement between the
      parties hereto pertaining to the subject matter hereof and supersede all
      prior agreements (including the Prior Agreement), understandings,
      negotiations, and discussions, whether oral or written, by or among the
      said parties in respect of such subject matter.
 
1.6    AMENDMENT.  No amendment hereto shall be binding unless expressly
      provided for in an instrument duly executed by the parties hereto.
 
1.7    WAIVER.  No waiver by any party hereto, whether by conduct or otherwise,
      of any of the provisions of this Agreement shall be deemed to constitute a
      waiver by such party of any other provisions (whether or not similar) nor
      shall such waiver constitute a continuing waiver hereof, unless otherwise
      expressly provided in an instrument duly executed by the party or parties
      hereto to be bound thereby.
 
1.8    GOVERNING LAW.  This Agreement shall be governed by and interpreted and
      construed in accordance with the laws of Quebec.
 
                                       56
<PAGE>   3
 
                                   ARTICLE 2
 
                                  TERMINATION
 
2.1    TERMINATION OF EMPLOYMENT.  In the event that during the term of the
      Executive's employment with Repap the Executive, on 30 days prior written
      notice, terminates her employment or a Change in Control occurs, and the
      Executive's employment is thereafter terminated:
 
      (a)   by Repap without Cause within a period of twenty-four (24) months
           after the Change in Control and other than for death, disability or
           voluntary retirement at normal retirement age; or
 
      (b)   by the Executive, for Good Reason, within a period of twenty-four
           (24) months after the Change in Control,
 
      the Executive shall be entitled to the benefits provided below:
 
      (c)   Base Salary -- Repap shall pay in cash as soon as practical, but no
           later than thirty (30) days following the date of termination, his
           full gross salary until the date of termination at the rate in effect
           at the time of termination plus the amounts, if any, owed to the
           Executive for bonuses declared but not paid;
 
      (d)   Indemnity -- in consideration of the Executive agreeing to continue
           to be employed by Repap and in lieu of any further compensation
           payments to the Executive for periods subsequent to the date of
           termination, Repap shall pay to the Executive a lump sum indemnity
           (the "Indemnity") equal to three times the highest of the Executive's
           annual salary in the three years preceding the Change in Control, or
           if there has not been a Change of Control within twenty-four months
           from the date of termination then in the three years preceding the
           date of termination. The Indemnity shall be paid to the Executive in
           cash as soon as practical, but no later than thirty (30) days
           following the date of termination;
 
      (e)   Other Termination Benefits -- the Executive shall be entitled to
           receive the following payments and benefits:
 
           (i)   a lump sum payment equal to the present value, as of the date
               of termination, of Repap's cost of providing coverage under any
               life insurance policy on the Executive's life in force
               immediately prior to the date of termination for a period of
               three years from the date of termination;
 
           (ii)  entitlement, for a period of three years following the date of
               termination, to Repap's medical, dental, drug and other health
               benefits and thereafter, at the election of the Executive and
               upon payment of all premiums associated therewith from time to
               time, to continue to be entitled to the benefits of Repap's
               medical, dental, drug and other health programs;
 
           (iii) not later than the thirtieth day following the date of
               termination, Repap shall transfer to the Executive if the
               Executive so elects the automobile, if any, placed at his
               disposal, at the date of termination, at no cost to the
               Executive, other than such income tax as he may be required to
               pay;
 
           (iv) all legal fees and expenses incurred by the Executive in seeking
               to obtain or enforce any right or benefit provided by this
               Agreement;
 
           (v)  for the purpose of the Repap Head Office Registered Pension Plan
               and the Repap Head Office Top Executives Supplementary Pension
               Plan a credit of two years past service in addition to the period
               of past service to which the Executive is otherwise entitled.
 
2.2    FINANCIAL PLANNING.  Repap shall, provided it is not prejudiced and on
the recommendation of the Executive's financial advisors, vary the nature,
manner and timing of payments to be made to the Executive pursuant to this
Agreement in order to optimize the Executive's financial planning.
 
                                       57
<PAGE>   4
 
                                   ARTICLE 3
 
          COOPERATION WITH EMPLOYER AFTER TERMINATION OF THE AGREEMENT
 
3.1    COOPERATION.  The Executive hereby undertakes, as partial consideration
for the payments to be made pursuant to section 2.1(d), to cooperate with Repap,
after the termination of this Agreement (except in the case of termination for
Cause or Good Reason), in all matters related to the conclusion of the
Executive's ongoing work or projects and to facilitate an orderly transfer of
the Executive's responsibilities or functions and duties hereunder to such other
employees as may be designated by Repap.
 
                                   ARTICLE 4
 
                          CONFIDENTIALITY OF AGREEMENT
 
4.1    CONFIDENTIALITY.  The Executive hereby agrees to keep strictly
confidential all information concerning the present Agreement.
 
                                   ARTICLE 5
 
                                    GENERAL
 
5.1    FURTHER ASSURANCES.  The parties hereto hereby agree in their own name
and on behalf of, as the case may be, their respective heirs, legatees,
successors, testamentary executors and permitted assigns, to sign all documents
and to take all necessary or desirable measures to fulfill the terms and intent
of this Agreement.
 
5.2    NOTICE.  Any offer, notice, direction or other instrument required or
permitted to be given hereunder shall be in writing and given by registered
mail, by delivery or sent by telecopier or similar telecommunications device and
addressed to the other party at the address of such party first mentioned in
this Agreement.
 
      Any notice, direction or other instrument given as aforesaid shall be
deemed to have been effectively given and received, if by registered mail then
on the date of delivery thereof, if sent by telecopier or similar
telecommunications device on the next business day following such transmission
or, if delivered, to have been given and received on the date of such a
delivery. Any address for service may be changed by written notice given as
aforesaid.
 
5.3    ASSIGNMENT.  Except as otherwise expressly provided for herein, this
Agreement, and the rights granted and the obligations incurred hereunder, are
not assignable, whether in whole or in part, by the Executive without the prior
written consent of Repap.
 
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of
the date and at the place first hereinabove mentioned.
 
                                         REPAP ENTERPRISES INC.
 
                                         by:
 
                                         by:
                                                   Michelle A. Cormier
 
                                       58