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                                 EXHIBIT 10.10
 
                  SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT
 
                                  DATED AS OF
 
                                FEBRUARY 8, 1994
 
                                    BETWEEN
 
                             REPAP ENTERPRISES INC.
 
                                      AND
 
                             MONTREAL TRUST COMPANY
 
                                AS RIGHTS AGENT
 
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                               TABLE OF CONTENTS
 
<TABLE>
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                                                                    PAGE
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<S>   <C>                                                          <C>
                      ARTICLE I -- INTERPRETATION
1.1   Certain Definitions.........................................       1
1.2   Currency....................................................      12
1.3   Headings....................................................      12
1.4   Grandfather Provisions......................................      12
                        ARTICLE 2 -- THE RIGHTS
2.1   Legend on Common Share Certificates.........................      13
2.2   Initial Exercise Price; Exercise of Rights; Detachment of         14
      Rights......................................................
2.3   Adjustments to Exercise Price; Number of Rights.............      17
2.4   Date on Which Exercise is Effective.........................      21
2.5   Execution, Authentication, Delivery and Dating of Rights          22
      Certificates................................................
2.6   Registration, Transfer and Exchange.........................      22
2.7   Mutilated, Destroyed, Lost and Stolen Rights Certificates...      23
2.8   Persons Deemed Owners.......................................      24
2.9   Delivery and Cancellation of Certificates...................      24
2.10  Agreement of Rights Holders.................................      24
2.11  Rights Certificate Holder not Deemed a Shareholder..........      25
                       ARTICLE 3 -- FLIP-IN EVENT
3.1   Flip-in Event...............................................      25
3.2   Exchange Option.............................................      26
                     ARTICLE 4 -- THE RIGHTS AGENT
4.1   General.....................................................      28
4.2   Merger or Amalgamation or Change of Name of Rights Agent....      29
4.3   Duties of Rights Agent......................................      29
4.4   Change of Rights Agent......................................      31
                       ARTICLE 5 -- MISCELLANEOUS
5.1   Redemption and Waiver.......................................      32
5.2   Expiration..................................................      33
5.3   Issuance of New Rights Certificates.........................      33
5.4   Supplements and Amendments..................................      34
5.5   Fractional Rights and Fractional Shares.....................      35
5.6   Rights of Action............................................      35
5.7   Regulatory Approvals........................................      36
5.8   Declaration as to Non-Canadian and Non-U.S. Holders.........      36
5.9   Notices.....................................................      36
5.10  Costs of Enforcement........................................      37
5.11  Successors..................................................      38
5.12  Benefits of this Agreement..................................      38
5.13  Governing Law...............................................      38
5.14  Severability................................................      38
5.15  Effective Date..............................................      38
5.16  Determinations and Actions by the Board of Directors........      38
5.17  Time of the Essence.........................................      39
5.18  Execution in Counterparts...................................      39
      Exhibit A -- Form of Rights Certificate
</TABLE>
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                  SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT
 
      MEMORANDUM OF AGREEMENT, dated as of the 8th day of February, 1994,
between Repap Enterprises Inc., a corporation incorporated under the Canada
Business Corporations Act (the "Corporation"), and Montreal Trust Company, a
trust company incorporated under the laws of Canada (the "Rights Agent");
 
      WHEREAS in order to implement the adoption of a shareholder protection
rights plan as established by this Agreement, the Board of Directors of the
Corporation (the "Board of Directors") has:
 
      (a)   authorized effective 5:00 p.m. (Montreal time) on February 8, 1994
           the issuance of one Right (as hereinafter defined) in respect of each
           Common Share (as hereinafter defined) outstanding at the Record Time
           (as hereinafter defined); and
 
      (b)   authorized the issuance of one Right in respect of each Common Share
           issued after the Record Time and prior to the earlier of the
           Separation Time and the Expiration Time (as hereinafter defined); and
 
      WHEREAS each Right entities the holder thereof, after the Separation Time,
to purchase securities or other assets of the Corporation pursuant to the terms
and subject to the conditions set forth herein; and
 
      WHEREAS the Corporation desires to appoint the Rights Agent to act on
behalf of the Corporation, and the Rights Agent is willing to so act, in
connection with the issuance, transfer, exchange and replacement of Rights
Certificates (as hereinafter defined), the exercise of Rights and other matters
referred to herein;
 
      NOW THEREFORE, in consideration of the premises and the respective
covenants and agreements set forth herein, subject to such covenants and
agreements, the parties hereby agree as follows:
 
                                   ARTICLE I
 
                                 INTERPRETATION
 
1.1    Certain Definitions
 
      For purposes of this Agreement, the following terms have the meanings
indicated:
 
      "ACQUIRING PERSON" shall mean, subject to Section 1.4 hereof, any Person
who, at any time after the date hereof and prior to the Expiration Time, is the
Beneficial Owner of 20 per cent or more of the outstanding Voting Shares,
specifically excluding the following Persons:
 
      (i)    the Corporation or any Subsidiary of the Corporation, any employee
           benefit plan or trust for the benefit of employees of the Corporation
           or any Subsidiary of the Corporation, or any Person organized,
           appointed or established by the Corporation for or pursuant to the
           terms of any such plan or trust and acting in such capacity; and
 
      (ii)   any Person who becomes the Beneficial Owner of [20] per cent or
           more of the outstanding Voting Shares as a result of one or any
           combination of (A) an acquisition or redemption by the Corporation of
           Voting Shares which, by reducing the number of Voting Shares
           outstanding, increases the proportionate number of Voting Shares
           Beneficially Owned by such Person to [20] per cent or more of the
           Voting Shares then outstanding, (B) Permitted Bid Acquisitions, or
           (C) Exempt Acquisitions; provided, however, that if a Person becomes
           the Beneficial Owner of 20 per cent or more of the outstanding Voting
           Shares by reason of one or any combination of the operation of parts
           (A), (B) or (C) above and, after so becoming, becomes the Beneficial
           Owner of any additional Voting Shares other than pursuant to
           Permitted Bid Acquisitions or through Exempt Acquisitions or employee
           stock option or purchase plans, or as a result of a stock dividend, a
           stock split or other event pursuant to which such Person receives or
           acquires Voting Shares on the same pro rata basis as all other
           holders of Voting Shares of the same class ("Pro Rata Acquisitions"),
           then as of the date of such additional Beneficial Ownership such
           Person shall become an "Acquiring Person";
 
      "AFFILIATE" shall have the meaning ascribed to such term in Section 1(2)
of the Securities Act (Quebec);
 
      "AGREEMENT" shall mean this shareholder protection rights plan agreement
dated as of February 8, 1994 between the Corporation and the Rights Agent, as
amended or supplemented from time to time; "hereof", "herein", "hereto" and
similar expressions mean and refer to this Agreement as a whole and not to any
particular part of this Agreement;
 
                                        2
<PAGE>   4
 
      "ANNUAL CASH DIVIDENDS" shall mean cash dividends paid in any fiscal year
of the Corporation on its Common Shares to the extent that such cash dividends
do not exceed, in the aggregate, the greatest of:
 
      (i)    200 per cent of the aggregate amount of cash dividends declared
           payable by the Corporation on its Common Shares in its immediately
           preceding fiscal year;
 
      (ii)   300 per cent of the arithmetic mean of the aggregate amounts of the
           annual cash dividends declared payable by the Corporation on its
           Common Shares in its three immediately preceding fiscal years; and
 
      (iii)  100 per cent of the aggregate consolidated net income of the
           Corporation, before extraordinary items, for its immediately
           preceding fiscal year;
 
      "ASSOCIATE" shall have the meaning ascribed to such term in the Securities
Act (Quebec), provided that a Fiduciary is not an Associate of a trust or trusts
for which the Fiduciary is acting as trustee or in a similar capacity and where
the Fiduciary has no investment authority (including none of the rights of
control or direction) and no beneficial interest in the securities owned by the
other person and the trust or trusts are not otherwise affiliated with or acting
jointly or in concert with the Fiduciary or each other;
 
      A Person shall be deemed the "BENEFICIAL OWNER" of, and to have
"BENEFICIAL OWNERSHIP" of, and to "BENEFICIALLY OWN":
 
      (i)    any securities as to which such Person or any of such Person's
           Affiliates or Associates is the direct or indirect beneficial owner
           and for this purpose a Person shall be deemed to be a beneficial
           owner of all securities (A) owned by a partnership of which the
           Person is a partner, (B) owned by a trust of which the Person is a
           beneficiary, (C) owned jointly or in common with others and (D) of
           which the Person may be deemed to be the beneficial owner (whether or
           not of record) pursuant to the provisions of the Canada Business
           Corporations Act, the Securities Act (Quebec), including Sections II
           1 and 1 12 thereof, or Rule 13d-3 or 13d-5 under the Securities
           Exchange Act of 1934, as amended (the "Exchange Act") (or pursuant to
           any comparable or successor laws, regulations or rules or, if such
           laws, regulations or rules shall be rescinded and there shall be no
           comparable or successor laws, regulations or rules, pursuant to the
           provisions of the Canada Business Corporations Act, the Securities
           Act (Quebec) or Rule 13d-3 or 13d-5 under the Exchange Act as in
           effect on the date of this Agreement);
 
      (ii)   any securities as to which such Person or any of such Person's
           Affiliates or Associates has either or both (A) the right to acquire
           (whether such right is exercisable immediately or after the lapse or
           passage of time and whether or not on condition or the happening of
           any contingency or otherwise) pursuant to any agreement, arrangement,
           pledge or understanding, whether or not in writing (other than
           customary agreements with and between underwriters and banking group
           or selling group members with respect to a bona fide public offering
           of securities and other than pledges of securities in the ordinary
           course of business which meet all of the conditions specified in Rule
           13d-3(d)(3) under the 1934 Exchange Act), or upon the exercise of any
           convertible debentures, conversion right, exchange right, share
           purchase right (other than the Rights), warrant or option, or
           otherwise or (B) the right to vote such security (whether such right
           is exercisable immediately or after the lapse or passage of time and
           whether or not on condition or the happening of any contingency or
           otherwise), pursuant to any proxy agreement, arrangement or
           understanding (whether or not in writing) or otherwise;
 
      (iii)  any securities which are Beneficially Owned within the meaning of
           clauses (i) or ii) by any other Person with which a Person or any of
           its Affiliates or Associates is acting in concert or jointly on has
           any proxy agreement, arrangement or understanding (whether or not in
           writing) with respect to or for the purpose of acquiring, holding,
           voting or disposing of any Voting Shares or acquiring, holding or
           disposing of a significant portion of the property or assets of the
           Corporation or any Subsidiary of the Corporation, other than (A)
           customary agreements with and between underwriters and banking group
           or selling group members with respect to a bona fide public offering
           of securities or (B) agreements between a Fiduciary, acting as such,
           and another Person, where the Fiduciary has no investment authority
           (including none of the rights of control or direction) and no
           beneficial interest in the securities owned by the other Person;
 
provided, however, that a Person shall not be deemed the "Beneficial Owner" or
to have "Beneficial Ownership" of,
                                        3
<PAGE>   5
 
or to "Beneficially Own", any security:
 
      (A)   solely because such security has been deposited or tendered pursuant
           to any Take-over Bid made by such Person or made by any of such
           Person's Affiliates or Associates until such deposited or tendered
           security has been taken up or paid for, whichever shall first occur;
           or
 
      (B)   solely because such Person or any of such Person's Affiliates or
           Associates has or shares the power to vote or direct the voting of
           such security pursuant to a revocable proxy given in response to a
           public proxy solicitation made pursuant to and in accordance with the
           applicable rules and regulations under the Canada Business
           Corporations Act or the Securities Act (Quebec); or
 
      (C)   solely because such Person or any of such Person's Affiliates or
           Associates has or shares the power to vote or direct the voting of
           such security in connection with or in order to participate in a
           public proxy solicitation made or to be made pursuant to and in
           accordance with the applicable rules and regulations referred to in
           (B) above; or
 
      (C)   held for or pursuant to the terms of any employee stock ownership or
           other employee benefit plan of the Corporation or a wholly owned
           Subsidiary of the Corporation.
 
      For purposes of this Agreement, in determining the percentage of the
outstanding Voting Shares with respect to which a Person is or is deemed to be
the Beneficial Owner, all Voting Shares as to which such Person is deemed the
Beneficial Owner shall be deemed outstanding;
 
      "BOARD OF DIRECTORS" shall mean the board of directors of the Corporation
or any duly constituted and empowered committee thereof;
 
      "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day
on which banking institutions in Montreal are authorized or obligated by law or
executive order to close;
 
      "CANADA BUSINESS CORPORATIONS ACT" shall mean the Canada Business
Corporations Act, R.S.C. 1985, c. C-44, as amended, and the regulations made
thereunder and any comparable or successor laws or regulations thereto;
 
      "CANADIAN DOLLAR EQUIVALENT" of any amount which is expressed in United
States dollars shall mean on any day the Canadian dollar equivalent of such
amount determined by reference to the U.S.-Canadian Exchange Rate on such date;
 
      "CLOSE OF BUSINESS" on any given date shall mean the time on such date
(or, if such date is not a Business Day, the time on the next succeeding
Business Day) at which the principal transfer office in Montreal of the transfer
agent for the Common Shares (or, after the Separation Time, the principal
transfer office in Montreal of the Rights Agent) closes to the public;
 
      "CDN" shall mean the trade reporting and quotation system for over-the
counter trading operated by The Canadian Dealing Network Inc.;
 
      "COMMON SHARES" shall mean the subordinate voting shares and multiple
voting shares in the capital of the Corporation and any other shares of the
Corporation into which such shares may be subdivided, consolidated, reclassified
or changed, and so on from time to time, except in the case of clauses 2.2 (a),
(d), (e) and (g) where "COMMON SHARE" shall mean the subordinate voting shares
in the capital of the Corporation and any other shares of the Corporation into
which such shares may be subdivided, consolidated, reclassified or changed, and
so on from time to time;
 
      "CO-RIGHTS AGENTS" shall have the meaning ascribed thereto in clause
4.1(a);
 
      "ELECTION TO EXERCISE" shall have the meaning ascribed thereto in clause
2.2(d);
 
      "EXEMPT ACQUISITIONS" shall mean share acquisitions in respect of which
the Board of Directors has waived the application of Section 3.1 pursuant to the
provisions of clause 5.1(b) or clause 5.1(c) or which were made on or prior to
the date of this Agreement;
 
      "EXERCISE PRICE" shall mean, as of any date, the price at which a holder
may purchase the securities issuable upon exercise of one whole Right which,
until adjustment thereof in accordance with the terms hereof and in particular
in accordance with sections 2.3 and 3.1 hereof, shall be $25;
 
      "EXPANSION FACTOR" shall have the meaning ascribed thereto in clause
2.3(a);
 
                                        4
<PAGE>   6
 
      "EXPIRATION TIME" shall mean the earlier of:
 
      (i)    the Termination Time; or
 
      (ii)   the close of business on February 8, 1999 being the fifth year
           after the date hereof;
 
      "FIDUCIARY" shall mean a trust company registered under the trust company
legislation of Canada or any province thereof, a trust company organized under
the laws of any state of the United States, a portfolio manager registered under
the securities legislation of one or more provinces of Canada or an investment
adviser registered under the United States or any state of the United States;
 
      "FLIP-IN EVENT" shall mean a transaction in or pursuant to which any
Person becomes an Acquiring Person;
 
      "GRANDFATHERED PERSON", and "GRANDFATHERED BIDDER" shall have the
respective meanings ascribed thereto in Section 1.4;
 
      "HOLDER" shall have the meaning ascribed thereto in Section 2.8;
 
      "MARKET PRICE" per share of any securities on any date of determination
shall mean the average of the daily closing prices per share of such securities
(determined as described below) on each of the 20 consecutive Trading Days
through and including the Trading Day immediately preceding such date; provided,
however, that if an event of a type analogous to any of the events described in
Section 2.3 hereof shall have caused the closing prices used to determine the
Market Price on any Trading Days not to be fully comparable with the closing
price on such date of determination or, if the date of determination is not a
Trading Day, on the immediately preceding Trading Day, each such closing price
so used shall be appropriately adjusted in a manner analogous to the applicable
adjustment provided for in Section 2.3 hereof in order to make it fully
comparable with the closing price, on such date of determination or, if the date
of determination is not a Trading Day, on the immediately preceding Trading Day.
The closing price per share of any securities on any date shall be (i) the
closing board lot sale price or, if such price is not available, the average of
the closing-bid and asked prices, for each share as reported by the stock
exchange on which the greater number of shares has been traded on such day or if
the shares are listed only on one stock exchange at that time, that stock
exchange, or (ii) if for any reason none of such prices is available on such day
or the securities are not listed or admitted to trading on any stock exchange,
the closing board lot sale price or, if such price is not available, the average
of the closing bid and asked prices, for each share as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the securities exchange in Canada. or the United States
on which the Common Shares are primarily traded, or (iii) if for any reason none
of such prices is available on such day or the securities are not listed or
admitted to trading on a securities exchange in Canada or the United States or
on any consolidated reporting system, the last quoted price, or if not so
quoted, the average of the high bid and low asked prices for each share of such
securities in the over-the-counter market, as reported by NASDAQ or, if the
securities are not quoted on NASDAQ, as reported by CDN or such other system
then in use, or (iv) if on any such date the securities are not quoted by any
such organizations the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the securities selected in
good faith by the Board of Directors; provided however, that if on any such date
the securities are not traded in the over-the-counter market, the closing price
per share of such securities on such date shall mean the fair value per share of
securities on such date as determined in good faith by the Board of Directors,
after consultation with a nationally or internationally recognized investment
dealer or investment banker. The Market Price shall be expressed in Canadian
dollars and if initially determined in respect of any day forming part of the 20
consecutive trading day period in United States dollars, such amount shall be
translated into Canadian dollars at the Canadian Dollar Equivalent thereof.
Notwithstanding the foregoing, where the Board of Directors is satisfied that
the Market Price of securities as determined herein was affected by improper
manipulation, the Board of Directors may, acting in good faith, determine the
Market Price of securities, such determination to be based on a finding as to
the price of which a holder of securities of that class could reasonably have
expected to dispose of his securities immediately prior to the relevant date
excluding any change in price reasonably attributable to the improper
manipulation;
 
      "NASDAQ" shall mean the National Association of Dealers, Inc. Automated
Quotation System;
 
      "1933 SECURITIES ACT" shall mean the Securities Act of 1933 of the United
States, as amended, and the rules and regulations thereunder, and any successor
laws or regulations thereto;
 
                                        5
<PAGE>   7
 
      "1934 EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 of the
United States, as amended, and the rules and regulations thereunder, and any
successor laws or regulations thereto;
 
      "NOMINEE" shall have the meaning ascribed thereto in clause 2.2(c);
 
      "OFFER TO ACQUIRE" shall include:
 
      (i)    an offer to purchase, or a solicitation of an offer to sell, Voting
           Shares; and
 
      (ii)   an acceptance of an offer to sell Voting Shares, whether or not
           such offer to sell has been solicited;
 
or any combination thereof, and the Person accepting an offer to sell shall be
deemed to be making an Offer to Acquire to the Person that made the offer to
sell;
 
      "OFFEROR" shall mean a Person who has announced an intention to make or
who has made a Take-over Bid;
 
      "OFFEROR'S SECURITIES" means Voting Shares Beneficially Owned by an
Offeror;
 
      "PERMITTED BID" means a Take-over Bid made in compliance with, and not on
a basis which is exempt from or otherwise not subject to, the provisions of Part
XVII of the Canada Business Corporations Act and the regulations thereunder, the
provisions of Title IV of the Securities Act (Quebec) and the regulations
thereunder (or such comparable or successor laws or regulations or, if such
provisions shall be repealed and there shall be no comparable or successor laws
or regulations, pursuant to such provisions as in effect on the date of this
Agreement) and in compliance with all other applicable securities laws and
regulations, subject to any exemptions ordered or granted for purposes of
uniformity, and which also complies with the following additional provisions:
 
      (i)    the Take-over Bid is made for all Voting Shares to all holders of
           record of Voting Shares wherever resident as registered on the books
           of the Corporation and the time of expiry of the Take-over Bid does
           not occur prior to a date which is not less than 90 days following
           the Take-over Bid;
 
      (ii)   subject to clause 1.4(b) hereof, the Offeror does not at the
           commencement of nor at any time during the current, of the Take-over
           Bid Beneficially Own more than 5 per cent of the outstanding Voting
           Shares; the Take-over Bid contains, and the take up and payment for
           securities tendered or deposited is subject to, an irrevocable and
           unqualified provision that no Voting Shares will be taken up or paid
           for pursuant to the Take-over Bid prior to the close of business on a
           date which is not less than 90 days following the date of the
           Take-over Bid;
 
      (iv)   the Take-over Bid contains irrevocable and unqualified provisions
           that all Voting Shares may be deposited pursuant to the Take-over Bid
           at any time prior to the close of business on the date referred to in
           clause (iii) hereof and that all Voting Shares deposited pursuant to
           the Take-over Bid may be withdrawn at any time prior to the close of
           business on a date which is not less than 90 days following the date
           of the Take-over Bid;
 
      (v)   the Take-over Bid contains an irrevocable and unqualified condition,
           which for greater certainty may not be waived by the Offeror, and
           which may not be extended without the prior written approval of the
           Corporation, that not less than 50 per cent of the then outstanding
           Voting Shares, other than Offeror's Securities, must be deposited to
           the Take-over Bid and not withdrawn at the close of business on the
           80th day following the date of the Take-over Bid, and the Offeror
           shall publicly announce and advise the Corporation forthwith and in
           any event not more than one Business Day thereafter whether or not
           such condition has been satisfied;
 
      (vi)   the Offeror shall provide the Rights Agent, within two Business
           Days of the announcement of the Take-over Bid, with a list of all the
           Offeror's Securities together with the particulars of the
           registration of all such securities and an undertaking to update such
           list on a daily basis during the currency of the Take-over Bid to
           reflect any changes occurring or to occur in such Beneficial
           Ownership, and shall continually perform such obligation;
 
      (vii)  the Offeror, or any of its Affiliates or Associates, or any Person
           acting jointly or in concert with the Offeror or any of its
           Affiliates or Associates in connection with the Take-over Bid, shall
           not have entered into either prior to the commencement of the
           Take-over Bid nor at any time during the currency thereof any
           agreement, commitment or understanding, whether formal or informal,
           with a Person who Beneficially Owns 20 per cent or more of the
           outstanding Voting Shares with respect to the Voting Shares
           Beneficially Owned by such Person; and
 
                                        6
<PAGE>   8
 
      (viii) the Take-over Bid is made on terms and conditions that comply with,
           and which do not and will not, upon its completion, result in the
           Corporation or any Subsidiary of the Corporation being in default
           under, or in contravention of, any applicable laws; provided that,
           for greater certainty, the Offeror shall be entitled to withdraw its
           Take-over Bid at any time prior to the termination thereof should it
           be otherwise entitled to do so under applicable law;
 
      "PERMITTED BID ACQUISITIONS" shall mean share acquisitions made pursuant
to a Permitted Bid;
 
      "PERSON" shall mean an individual, body corporate, partnership, syndicate
or other form of unincorporated association, government, government agency or
instrumentality, entity or group whether or not having legal personality and any
of the foregoing acting in any derivative, representative or fiduciary capacity;
 
      "PRO RATA ACQUISITIONS" shall have the meaning ascribed thereto in
paragraph (ii) of the definition of "Acquiring Person" in Section 1.1;
 
      "RECORD TIME" shall mean the close of business on February 8, 1994;
 
      "REDEMPTION PRICE" shall have the meaning ascribed thereto in clause
5.1(a);
 
      "RIGHT" shall mean a right to purchase a Common Share, upon the terms and
subject to the conditions set forth in this Agreement;
 
      "RIGHTS CERTIFICATE" shall have the meaning ascribed thereto and be in the
form provided in clause 2.2(c);
 
      "RIGHTS REGISTER" shall have the meaning ascribed thereto in clause
2.6(a);
 
      "RIGHTS REGISTRAR" shall have the meaning ascribed thereto in clause
2.6(a);
 
      "SECURITIES ACT (QUEBEC)" shall mean the Securities Act, R.S.Q., C.V1.1,
as amended, and the regulations thereunder, and comparable or successor laws or
regulations thereto;
 
      "SEPARATION TIME" shall mean the close of business on the eighth Trading
Day after the earliest of (i) the Stock Acquisition Date, (ii) the date of the
commencement of or first public announcement of the intent of any Person (other
than a Person referred to in clause (i) of the definition of "Acquiring Person")
to commence a Take-over Bid (other than a Permitted Bid) and (iii) the date upon
which a Take-over Bid that is a Permitted Bid ceases to be a Permitted Bid, or
such earlier or later time as may be determined by the Board of Directors,
provided that, if any Take-over Bid referred to in clause (ii) or (iii) of this
definition expires, is cancelled, terminated or otherwise withdrawn prior to the
Separation Time, such Take-over Bid shall be deemed, for the purposes of this
definition, never to have been made;
 
      "STOCK ACQUISITION DATE" shall mean the date of public announcement by the
Corporation that an Acquiring Person has become such;
 
      "SUBSIDIARY" of any Person shall mean any corporation or other entity of
which a majority of the voting power or a majority of the equity interest is
Beneficially Owned by such Person;
 
      "TAKE-OVER BID" means an Offer to Acquire Voting Shares where the Voting
Shares subject to the Offer to Acquire, together with the Offeror's Securities,
constitute in the aggregate 20 per cent or more of the outstanding Voting Shares
at the date of the Offer to Acquire;
 
      "TERMINATION TIME" shall mean the time at which the right to exercise
Rights shall terminate pursuant to Section 3.2 or 5.1 hereof;
 
      "TRADING DAY", when used with respect to any securities, shall mean a day
on which the principal securities exchange on which such securities are listed
or admitted to trading is open for the transaction of business or, if the
securities are not listed or admitted to trading on any securities exchange, a
Business Day;
 
      "U.S.-CANADIAN EXCHANGE RATE" shall mean on any date:
 
      (i)    if on such date the Bank of Canada sets an average noon spot rate
           of exchange for the conversion of one United States dollar into
           Canadian dollars, such rate; and
 
      (ii)   in any other case, the rate for such date for the conversion of one
           United States dollar into Canadian dollars which is calculated in the
           manner which shall be determined by the Board of Directors from time
           to time acting in good faith;
 
                                        7
<PAGE>   9
 
      "VOTING SHARES" shall mean the Common Shares and any other shares in the
capital of or voting interests of the Corporation entitled to vote generally in
the election of all directors; the percentage of Voting Shares Beneficially
Owned by any Person, shall, for the purposes of this Agreement, be and be deemed
to be the product determined by the formula:
                                    100 X A
                                       B
 
where
 
      A     the number of votes for the election of all directors generally
           attaching to the Voting Shares Beneficially Owned by such Person, and
 
      B     the number of votes for the election of all directors generally
           attaching to all outstanding Voting Shares;
 
provided that where any Person is deemed to Beneficially Own Unicode Voting
Shares, such Voting Shares shall be deemed to be outstanding for the Purpose of
calculating the percentage of Voting Shares Beneficially Owned by such Person.
 
1.2    Currency
 
      All sums of money which are referred to in this Agreement are expressed in
lawful money of Canada, unless otherwise specified.
 
1.3    Headings
 
      The division of this Agreement into Articles, Sections, clauses and
subclauses and the insertion of headings, subheadings and a table of contents
are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
 
1.4    Grandfather Provisions
 
      (a)   A Person shall not be and shall not tie deemed to be an Acquiring
           Person if such Person (a "Grandfathered Person") is the Beneficial
           Owner of 20% or more of the outstanding Voting Shares as at the
           Record Time; provided, however, that the exception in this clause
           1.4(a) shall cease to be applicable to a Grandfathered Person who
           shall after the Record Time become, pursuant to one or more
           transactions or events, the Beneficial Owner of additional Voting
           Shares constituting in the aggregate more than one per cent of the
           outstanding Voting Shares determined as at the Record Time, other
           than pursuant to Permitted Bid Acquisitions, Exempt Acquisitions or
           Pro Rata Acquisitions.
 
      (b)   A Person shall not be and shall not be deemed to be an Acquiring
           Person if such Person (a "Grandfathered Person Transferee") becomes
           the Beneficial Owner of 20% or more of the outstanding Voting Shares
           solely as a result of the acquisition of all but not less than all of
           the Voting Shares Beneficially Owned immediately prior thereto by a
           Grandfathered Person or a Grandfathered Person Transferee (the
           "Transferor") and such Person's Beneficial Ownership of Voting Shares
           after giving effect to such acquisition does not exceed the number of
           Voting Shares Beneficially Owned by the Transferor and by such Person
           immediately prior to such acquisition (the "Transfer Time");
           provided, however, that the exception in this clause 1.4(b) shall
           cease to be applicable to a Grandfathered Person Transferee who
           becomes, pursuant to one or more transactions or events, the
           Beneficial Owner of additional Voting Shares constituting in the
           aggregate more than 1% of the outstanding Voting Shares determined as
           at the Record Time, other than pursuant to Permitted Bid
           Acquisitions, Exempt Acquisitions or Pro Rata Acquisitions.
 
      (c)   For the purpose of determining whether a Person is entitled to make
           a Permitted Bid, the provisions of paragraph (ii) of the definition
           of "Permitted Bid' in Section 1.1 shall not apply to a Person (a
           "Grandfathered Bidder") who is either:
 
           (i)   a Grandfathered Person or a (Grandfathered Person Transferee
               who Beneficially Owns at the time of the commencement of and at
               all times while such Person's Take-over Bid remains outstanding
               more than 5 % of the outstanding Voting Shares; or
 
                                        8
<PAGE>   10
 
           (ii)  the Beneficial Owner of more than 5 % but less than 20 % of the
               outstanding Voting Shares as at the Record Time;
 
           provided that the exceptions in this clause 1.4(c) shall cease to be
           applicable to a Grandfathered Bidder (and a Take-over Bid that would
           otherwise constitute a Permitted Bid shall cease to be a Permitted
           Bid) if such Grandfathered Bidder shall after the Record Time (or, in
           the case of a Grandfather Person Transferee only, the Transfer Time)
           become, pursuant to one or more transactions or events, the
           Beneficial Owner of additional Voting Shares constituting in the
           aggregate more than 1 % of the outstanding Voting Shares determined
           as at the Record Time, other than pursuant to Permitted Bid
           Acquisitions, Exempt Acquisitions or Pro Rata Acquisitions.
 
      (d)   For greater certainty, for the purposes of this Section 1.4, a
           Person shall be deemed to have become the Beneficial Owner of
           additional Voting Shares if the Person becomes the Beneficial Owner
           of such Voting Shares pursuant to a transaction or event and, as a
           result, such Person is the Beneficial Owner of a greater number of
           Voting Shares than the number of Voting Shares that such Person
           Beneficially Owned immediately prior to such transaction or event.
 
                                   ARTICLE 2
                                   THE RIGHTS
 
2.1    Legend on Common Share Certificates
 
      Certificates representing Common Shares which certificates are issued
after the Record Time but prior to the earlier of the Separation Time and the
Expiration Time shall also evidence one Right for each Common Share represented
thereby and shall have impressed on, printed on, written on or otherwise affixed
to them the following legend:
 
      "Until the Separation Time (defined in the Rights Agreement referred to
      below), this certificate also evidences and entitles the holder thereof to
      certain rights described in a Shareholder Protection Rights Plan
      Agreement, dated as of February 8, 1994, as amended (the "Rights
      Agreement"), between the Repap Enterprises Inc. (the "Corporation") and
      Montreal Trust Company, a copy of which is on file at the principal
      executive offices of the Corporation the terms of which are incorporated
      herein by reference. Under certain circumstances set out in the Rights
      Agreement, the rights may be redeemed, may expire, may become null and
      void (if, in certain cases, they are "Beneficially Owned" by an "Acquiring
      Person") or may be evidenced by separate certificates and no longer
      evidenced by this certificate. Upon written request, a copy of the Rights
      Agreement will be mailed within five days to the holder of this
      Certificate."
 
      Certificates representing Common Shares that are issued and outstanding at
the Record Time shall also evidence one Right for each Common Share evidenced
thereby notwithstanding the absence of the foregoing legend until the Separation
Time.
 
2.2    Initial Exercise Price: Exercise of Rights: Detachment of Rights
 
      (a)   Subject to adjustment as herein set forth, each Right will entitle
           the holder thereof, after the Separation Time and prior to the
           Expiration Time, to purchase, for the Exercise Price, one Common
           Share. Notwithstanding any other provision of this Agreement, any
           Rights Beneficially Owned by the Corporation or any of its
           Subsidiaries shall be void.
 
      (b)   Until the Separation Time, (i) the Rights shall not be exercisable
           and no Right may be exercised, and (ii) for administrative purposes
           each Right will be evidenced by the certificates for Common Shares
           registered in the names of the holders thereof (which certificates
           shall also be deemed to be Rights Certificates) and will be
           transferable only together with, and will be transferred by a
           transfer of, such Common Shares.
 
      (c)   From and after the Separation Time and prior to the Expiration Time
           (i) the Rights shall be exercisable and (ii) the registration and
           transfer of the Rights shall be separate from and independent of
           Common Shares. Promptly following the Separation Time, the
           Corporation will prepare and the Rights Agent will mail to each
           holder of record of Common Shares as of the Separation Time (other
           than an Acquiring Person and, in respect of any Rights Beneficially
           Owned by such Acquiring Person which are not held of record by such
           Acquiring Person, the holder of record of such Rights
 
                                        9
<PAGE>   11
 
           (a "Nominee"), at such holder's address as shown by the records of
           the Corporation (the Corporation hereby agreeing to furnish copies of
           such records to the Rights Agent for this purpose), (x) a Rights
           Certificate in substantially the form of Exhibit A hereto
           appropriately completed, representing the number of Rights' held by
           such holder at the Separation Time and having such marks of
           identification or designation and such legends, summaries or
           endorsements printed thereon as the Corporation may deem appropriate
           and as are not inconsistent with the provisions of this Agreement, or
           as may be required to comply with any law, rule, regulation or
           judicial or administrative order or with any rule or regulation made
           pursuant thereto or with any rules or regulation of any
           self-regulatory organization, stock exchange or quotation system on
           which the Rights may from time to time be listed or traded, or to
           conform to usage, and (y) a disclosure statement describing the
           rights, provided that a Nominee shall be sent the materials provided
           for in (x) and (y) in respect of all Common Shares held of record by
           it which are not Beneficially Owned by an Acquiring Person.
 
      (d)   Rights may be exercised in whole or in part on any Business Day
           after the Separation Time and prior to the Expiration Time by
           submitting to the Rights Agent, at its principal stock transfer
           office in the City of Montreal, or the principal stock transfer
           office of the Rights Agent in the cities designated from time to time
           for that purpose by the Corporation, the Rights Certificate
           evidencing such Rights with an election to exercise such Rights (an
           "Election to Exercise") substantially in the form attached to the
           Rights Certificate duly completed, accompanied by payment by
           certified cheque, banker's draft or money order payable to the order
           of the Corporation of a sum equal to the Exercise Price multiplied by
           the number of Rights being exercised and a sum sufficient to cover
           any transfer tax or charge which may be payable in respect of any
           transfer involved in the transfer or delivery of Rights Certificates
           or the issuance or delivery of certificates for Common Shares in a
           name other than that of the holder of the Rights being exercised.
 
      (e)   Upon receipt of a Rights Certificate, which is accompanied by (x) a
           completed Election to Exercise that does not indicate that such Right
           is null and void as provided by clause 2.2(a) or 3.1(b) and (y)
           payment as set forth in clause 2.2(d), the Rights Agent (unless
           otherwise instructed by the Corporation as a result of the
           Corporation being of the opinion that such Right is null and void as
           provided in clause 2.2(a) or 3.l(b) or that it would be inappropriate
           to issue such Right where the circumstances of clause 3.2 shall
           apply) will thereupon promptly:
 
           (i)    requisition from a transfer agent for the Common Shares
                certificates representing the number of such Common Shares to be
                purchased (the Corporation hereby irrevocably authorizing its
                transfer agents to comply with all such requisitions); and
 
           (ii)   after receipt of such certificates, deliver the same to or
                upon the order of the registered holder of such Rights
                Certificate, registered in such name or names as may be
                designated by such holder.
 
      (f)    In case the holder of any Rights shall exercise less than all the
           Rights evidenced by such holder's Rights Certificate, a new Rights
           Certificate evidencing the Rights remaining unexercised will be
           issued by the Rights Agent to such holder or to such holder's duly
           authorized assigns.
 
      (g)   The Corporation covenants and agrees that it will:
 
           (i)    take all such action as may be necessary and within its power
                to ensure that all securities delivered upon exercise of Rights
                shall, at the time of delivery of the certificates for such
                securities (subject to payment of the Exercise Price), be duly
                and validly authorized, executed, issued and delivered and fully
                paid and nonassessable;
 
           (ii)   take all such action as may be necessary and within its power
                to comply with the requirements of the Canada Business
                Corporations Act, the Securities Act (Quebec), the securities
                laws or comparable legislation of each of the provinces of
                Canada and the 1933 Securities Act and the 1934 Exchange Act and
                any other applicable law, rule or regulation applicable to the
                issuance and delivery of the Rights Certificates and the
                issuance of any securities upon exercise of Rights;
 
                                       10
<PAGE>   12
 
           (iii)  use reasonable efforts to cause all securities issued upon
                exercise of Rights to be listed upon issuance on the principal
                exchanges on which the Common Shares were traded prior to the
                Stock Acquisition Date;
 
           (iv)   cause to be reserved and kept available out of its authorized
                and unissued Common Shares, the number of Common Shares that, as
                provided in this Agreement, will from time to time be sufficient
                to permit the exercise in full of all outstanding Rights;
 
      (v)   pay when due and payable any and all Canadian and, if applicable,
           United States, federal, provincial and state transfer taxes and
           charges (not including any income or capital gain taxes of the holder
           or exercising holder or any liability of the Corporation to withhold
           tax) which may be payable in respect of the original issuance or
           delivery of the Rights Certificates, provided that the Corporation
           shall not be required to pay any transfer tax or charge which may be
           payable in respect of any transfer involved in the transfer or
           delivery of Rights Certificates or the issuance or delivery of
           certificates for securities in a name other than that of the holder
           of the Rights being transferred or exercised; and
 
      (vi)   after the Separation Time, except as permitted by Section 5.1 or
           Section 5.4 hereof, not take (or permit any Subsidiary to take) any
           action if at the time such action is taken it is reasonably
           foreseeable that such action will diminish substantially or otherwise
           eliminate the benefits intended to be afforded by the Rights.
 
2.3    Adjustments to Exercise Price: Number of Rights
 
      The Exercise Price, the number and kind of securities subject to purchase
upon exercise of each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 2.3.
 
      (a)   In the event the Corporation shall, at any time after the date of
           this Agreement (i) declare or pay a dividend on its Common Shares
           payable in Common Shares (or other capital, stock or securities
           exchangeable for or convertible into or giving a right to acquire its
           Common Shares or other capital stock) other than pursuant to any
           optional stock dividend program and other than a dividend payable in
           Common Shares in lieu of annual cash dividends, (ii) subdivide or
           change the outstanding Common Shares into a greater number of Common
           Shares, (iii) combine or change the outstanding Common Shares into a
           smaller number of Common Shares or (iv) issue any Common Shares (or
           other securities exchangeable for or convertible into or giving a
           right to acquire Common Shares or other securities) in respect of, in
           lieu of or in exchange for existing Common Shares except as otherwise
           provided in this Section 2.3, the Exercise Price and the number of
           Rights outstanding, or, if the payment or effective date therefor
           shall occur after the Separation Time, the securities purchasable
           upon exercise of Rights shall be adjusted as of the payment or
           effective date in the manner set forth below. If the Exercise Price
           and number of Rights outstanding are to be adjusted, (x) the Exercise
           Price in effect after such adjustment will be equal to the Exercise
           Price in effect immediately prior to such adjustment divided by the
           number of Common Shares (or other capital stock) (the "Expansion
           Factor") that a holder of one Common Share immediately prior to such
           dividend, subdivision, change, combination or issuance would hold
           thereafter as a result thereof and (y) each Right held prior to such
           adjustment will become that number of Rights equal to the Expansion
           Factor, and the adjusted number of Rights will be deemed to be
           distributed among the Common Shares with respect to which the
           original Rights were associated (if they remain outstanding) and the
           shares issued in respect of such dividend, subdivision, change,
           combination or issuance, so that each such Common Share (or other
           capital stock) will have exactly one Right associated with it. If the
           securities purchasable upon exercise of Rights are to be adjusted,
           the securities purchasable upon exercise of each Right after such
           adjustment will be the securities that a holder of the securities
           purchasable upon exercise of one Right immediately prior to such
           dividend, subdivision, change, combination or issuance would hold
           thereafter as a result thereof. If after the Record Time and prior to
           the Expiration Time the Corporation shall issue any shares of capital
           stock other than Common Shares in a transaction of a type described
           in the first sentence of this clause 2.3(a), shares of such capital
           stock shall be treated herein as nearly equivalent to Common Shares
           as may be practicable and appropriate under the circumstances and the
           Corporation and the Rights Agent agree to amend this Agreement in
           order to effect, and the Corporation will not
 
                                       11
<PAGE>   13
 
           consolidate with, amalgamate with or into or enter into an
           arrangement with, any other Person unless such Person agrees to be
           bound by the terms of an amendment effecting, such treatment:
 
           In the event the Corporation shall at any time after the Record Time
           and prior to the Separation Time issue any Common Shares otherwise
           than in a transaction referred to in the preceding paragraph, each
           such Common Share so issued shall automatically have one new Right
           associated with it, which Right shall be evidenced by the certificate
           representing such share.
 
      (b)   In the event the Corporation shall at any time after the Record Time
           and prior to the Expiration Time fix a record date for the issuance
           of rights, options or warrants to all or substantially all of the
           holders of Common Shares entitling them (for a period expiring within
           45 calendar days after such record date) to subscribe for or purchase
           Common Shares (or securities convertible into or exchangeable for or
           carrying a right to purchase Common Shares) at a price per Common
           Share (or, if a security convertible into or exchangeable for or
           carrying a right to purchase or subscribe for Common Shares having a
           conversion, exchange or exercise price, including the price required
           to be paid to purchase such convertible or exchangeable security or
           right per share) of less than 90% of the Market Price per Common
           Share on such record date, the Exercise Price to be in effect after
           such record date shall be determined by multiplying the Exercise
           Price in effect immediately prior to such record date by a fraction,
           the numerator of which shall be the number of Common Shares
           outstanding on such record date plus the number of Common Shares that
           the aggregate offering price of the total number of Common Shares so
           to be offered (and/or the aggregate initial conversion, exchange or
           exercise price of the convertible or exchangeable securities or
           rights so to be offered, including the price required to be paid to
           purchase such convertible or exchangeable securities or rights) would
           purchase at such Market Price per Common Share, and the denominator
           of which shall be the number of Common Shares outstanding on such
           record date plus the number of additional Common Shares to be offered
           for subscription or purchase (or into which the convertible or
           exchangeable securities or rights so to be offered are initially
           convertible, exchangeable or exercisable). In case such subscription
           price may be paid by delivery of consideration, part or all of which
           may be in a form other than cash, the value of such consideration
           shall be, as determined in good faith by the Board of Directors,
           whose determination shall be described in a statement filed with the
           Rights Agent and shall be binding on the Rights Agent and the holders
           of the Rights. Such adjustment shall be made successively whenever
           such a record date is fixed, and in the event that such rights or
           warrants are not so issued, the Exercise Price shall be adjusted to
           be the Exercise Price which would then be in effect if such record
           date had not been fixed.
 
           For purposes of this Agreement, the granting of the right to purchase
           Common Shares (whether from treasury shares or otherwise) pursuant to
           any dividend or interest reinvestment plan and/or any Common Share
           purchase plan providing for the reinvestment of dividends or interest
           payable on securities of the Corporation and/or the investment of
           periodic optional payments and/or employee benefit, stock option or
           similar plans (so long as such right to purchase is in no case
           evidenced by the delivery of rights or warrants) shall not be deemed
           to constitute an issue of rights, options or warrants by the
           Corporation; provided, however, that, in the case of any dividend or
           interest reinvestment plan, the right to purchase Common Shares is at
           a price per share of not less than 90 percent of the current market
           price per share (determined as provided in such plans) of the Common
           Shares.
 
      (c)   In the event the Corporation shall at any time after the Record Time
           and prior to the Expiration Time fix a record date for a distribution
           to all or substantially all of the holders of Common Shares
           (including any such distribution made in connection with a merger or
           amalgamation in which the Corporation is the continuing corporation)
           of evidences of indebtedness, cash (other than annua1 cash
           dividends), assets (including securities, but except a dividend
           described in subclause 2.3(a)(i) above), or rights, options or
           warrants (excluding those referred to in clause 2.3(b) hereof, the
           Exercise Price to be in effect after such record date shall be
           determined by multiplying the Exercise Price in effect immediately
           prior to such record date by a fraction, the numerator of which shall
           be the Market Price per Common Share on such record date, less the
           fair market value (as determined in good faith by the Board of
           Directors, whose determination shall be described in a statement
           filed with the Rights Agent) of the portion of the cash, assets or
           evidences of indebtedness so to be
 
                                       12
<PAGE>   14
 
           distributed or of such rights or warrants applicable to a Common
           Share and the denominator of which shall be such Market Price per
           Common Share. Such adjustments shall be made successively whenever
           such a record date is fixed, and in the event that such distribution
           is not so made, the Exercise Price shall be adjusted to be the
           Exercise Price which would have been in effect if such record date
           had not been fixed.
 
      (d)   Notwithstanding anything herein to the contrary, no adjustment in
           the Exercise Price shall be required unless such adjustment would
           require an increase or decrease of at least one percent in the
           Exercise Price; provided, however, that any adjustments which by
           reason of this clause 2.3(d) are not required to be made shall be
           carried forward and taken into account in any subsequent adjustment.
           All calculations under this Section 2.3 shall be made to the nearest
           cent or to the nearest hundredth of a share. Notwithstanding the
           first sentence of this clause 2.3(d), any adjustment required by this
           Section 2.3 shall be made no later than the earlier of (i) three
           years from the date of the transaction which mandates such adjustment
           or (ii) the Termination Date.
 
      (e)   In the event the Corporation shall at any time after the Record Time
           and prior to the Separation Time issue any shares of capital stock
           (other than Common Shares), or rights or warrants to subscribe for or
           purchase any such capital stock, or securities convertible into or
           exchangeable for any such capital stock, in a transaction referred to
           in clause (a)(i) or (a)(iv) above, or if the Corporation shall take
           any other action (other than the issue of Common Shares) which might
           have a negative effect on the holders of Rights, then, unless the B4)
           and of Directors acting in good faith determines that the adjustments
           contemplated by clauses (a), (b) and (c) above in connection with
           such transaction will appropriately protect the interests of the
           holders of Rights, the Corporation will determine what other
           adjustments to the Exercise Price, number of Rights and/or securities
           purchasable upon exercise of Rights would be appropriate and,
           notwithstanding clauses (a), (b) and (c) above, such adjustments,
           rather than the adjustments contemplated by clauses (a), (b) and (c)
           above, shall be made. The Corporation and the Rights Agent shall
           amend this Agreement as appropriate to provide for such adjustments.
 
      (f)    Each Right originally issued by the Corporation subsequent to any
           adjustment made to the Exercise Price hereunder shall evidence the
           right to purchase, at the adjusted Exercise Price, the number of
           Common Shares purchasable from time to time hereunder upon exercise
           of a Right immediately prior to such issue, all subject to further
           adjustment as provided herein.
 
      (g)   Irrespective of any adjustment or change in the Exercise Price or
           the number of Common Shares issuable upon the exercise of the Rights,
           the Rights Certificates theretofore and thereafter issued may
           continue to express the Exercise Price per Common Share and the
           number of Common Shares which were expressed in the initial Rights
           Certificates issued hereunder.
 
      (h)   In any case in which this Section 2.3 shall require that an
           adjustment in the Exercise Price be made effective as of a record
           date for a specified event, the Corporation may elect to defer until
           the occurrence of such event the issuance to the holder of any Right
           exercised after such record date the number of Common Shares and
           other securities of the Corporation, if any, issuable upon such
           exercise over and above the number of Common Shares and other
           securities of the Corporation, if any, issuable upon such exercise on
           the basis of the Exercise Price in effect prior to such adjustment;
           provided, however, that the Corporation shall deliver to such holder
           an appropriate instrument evidencing such holder's right to receive
           such additional shares (fractional or otherwise) or securities upon
           the occurrence of the event requiring such adjustment.
 
      (i)    Notwithstanding anything in this Section 2.3 to the contrary, the
           Corporation shall be entitled to make such reductions in the Exercise
           Price, in addition to those adjustments expressly required by this
           Section 2.3, as and to the extent that in their good faith judgment
           the Board of Directors shall determine to be advisable in order that
           any (i) consolidation or subdivision of the Common Shares, (ii)
           issuance wholly or in part for cash of Common Shares or securities
           that by their terms are convertible into or exchangeable for Common
           Shares, (iii) stock dividends or (iv) issuance of rights, options or
           warrants referred to in this Section 2.3, hereafter made by the
           Corporation to holders of its Common Shares, shall not be taxable to
           such shareholders.
 
                                       13
<PAGE>   15
 
      In any case in which this Section 2.3 shall require any adjustment, the
      Corporation shall deliver to the Rights Agent a certificate duly executed
      by an officer of the Corporation describing such adjustment, in addition
      to any other statement or document required by this Section 2.3.
 
2.4    Date on Which Exercise is Effective
 
      Each Person in whose name any certificate for Common Shares or other
securities, if applicable, is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the Common Shares or
other securities, if applicable, represented thereby on, and such certificate
shall be dated, the date upon which the Rights Certificate evidencing such
Rights was duly surrendered (together with a duly completed Election to
Exercise) and payment of the Exercise Price for such Rights (and any applicable
transfer taxes and other governmental charges payable by the exercising holder
hereunder) was made; provided, however, that if the date of such surrender and
payment is a date upon which the relevant transfer books of the Corporation are
closed, such Person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business Day
on which the relevant transfer books of the Corporation are open.
 
2.5    Execution on, Delivery and Dating of Rights Certificates
 
      (a)   The Rights Certificates shall be executed on behalf of the
           Corporation by its Chairman, President or any of its Vice Presidents
           and by its Secretary or one of its Assistant Secretaries. The
           signature and attestation of any of these officers on the Rights
           Certificates may be manual or facsimile. Rights Certificates bearing
           the manual or facsimile signatures of individuals who were at any
           time the proper officers of the Corporation shall bind the
           Corporation, notwithstanding that such individuals or any of them
           have ceased to hold such offices prior to the countersignature and
           delivery of such Rights Certificates.
 
      (b)   Promptly after the Corporation learns of the Separation Time, the
           Corporation will notify the Rights Agent of such Separation Time and
           will deliver Rights Certificates executed by the Corporation to the
           Rights Agent for countersignature, and the Rights Agent shall
           manually countersign and send such Rights Certificates to the holders
           of the Rights pursuant to clause 2.2(c) hereof. No Rights Certificate
           shall be valid for any purpose until countersigned by the Rights
           Agent as aforesaid.
 
      (c)   Each Rights Certificate shall be dated the date of countersignature
           thereof.
 
2.6    Registration of Transfer and Exchange
 
      (a)   The Corporation will cause to be kept a register (the "Rights
           Register") in which, subject to such reasonable regulations as it may
           prescribe, the Corporation will provide for the registration and
           transfer of Rights. The Rights Agent is hereby appointed registrar
           for the Rights (the "Rights Registrar") for the purpose of
           maintaining the Rights Register for the Corporation and registering
           Rights and transfers of Rights as herein provided and the Rights
           Agent hereby accepts such appointment. In the event that the Rights
           Agent shall cease to be the Rights Registrar, the Rights Agent will
           have the right to examine the Rights Register at all reasonable
           times.
 
      After the Separation Time and prior to the Expiration Time, upon surrender
      for registration of transfer or exchange of any Rights Certificate, and
      subject to the provisions of clause 2.6(c) below, the Corporation will
      execute, and the Rights Agent will manually countersign and deliver, in
      the name of the holder or the designated transferee or transferees, as
      required pursuant to the holder's instructions, one or more new Rights
      certificates evidencing the same aggregate number of Rights as did the
      Rights Certificates so surrendered.
 
      (b)   All Rights issued upon any registration of transfer or exchange of
           Rights Certificates shall be the valid obligations of the
           Corporation, and such Rights shall be entitled to the same benefits
           under this Agreement as the Rights surrendered upon such registration
           of transfer or exchange.
 
      (c)   Every Rights Certificate surrendered for registration of transfer or
           exchange shall be duly endorsed, or be accompanied by a written
           instrument of transfer in form satisfactory to the Corporation or the
           Rights Agent, as the case may be, duly executed by the holder thereof
           or such holder's attorney duly authorized in writing. As a condition
           to the issuance of any new Rights Certificate under this Section 2.6,
           the Corporation may require the payment of a sum sufficient to cover
           any tax or other governmental charge that may be imposed in relation
           thereto and any other expenses (including the fees and expenses of
           the Rights Agent) connected therewith.
 
                                       14
<PAGE>   16
 
2.7    Mutilated, Destroyed, Lost and Stolen Rights Certificates
 
      (a)   If any mutilated Rights Certificate is surrendered to the Rights
           Agent prior to the Expiration Time, the Corporation shall execute and
           the Rights Agent shall countersign and deliver in exchange therefor a
           new Rights Certificate evidencing the same number of Rights as did
           the Rights Certificate so surrendered.
 
      (b)   If there shall be delivered to the Corporation and the Rights Agent
           prior to the Expiration Time (i) evidence to their reasonable
           satisfaction of the destruction, loss or theft of any Rights
           Certificate and (ii) such security or indemnity as may be reasonably
           required by them to save each of them and any of their agents
           harmless, then, in the absence of notice to the Corporation or the
           Rights Agent that such Rights Certificate has been acquired by a bona
           fide purchaser, the Corporation shall execute and upon the
           Corporation's request the Rights Agent shall countersign and deliver,
           in lieu of any such destroyed, lost or stolen Rights Certificate, a
           new Rights Certificate evidencing the same number of Rights as did
           the Rights Certificate so destroyed, lost or stolen.
 
      (c)   As a condition to the issuance of any new Rights Certificate under
           this Section 2.7, the Corporation may require the payment of a sum
           sufficient to cover any tax or other governmental charge that may be
           imposed in relation thereto and any other expenses (including the
           fees and expenses of the Rights Agent) connected therewith.
 
      (d)   Every new Rights Certificate issued pursuant to this Section 2.7 in
           lieu of any destroyed, lost or stolen Rights Certificate shall
           evidence the contractual obligation of the Corporation whether or not
           the destroyed, lost or stolen Rights Certificate shall be at any time
           enforceable by anyone, and shall be entitled to all the benefits of
           this Agreement equally and proportionately with any and all other
           Rights duly issued by the Corporation.
 
2.8    Persons Deemed Owners
 
      The Corporation, the Rights Agent and any agent of the Corporation or the
Rights Agent may deem and treat the Person in whose name a Rights Certificate
(or, prior to the Separation Time, the associated Common Share certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby for
all purposes whatsoever. As used in this Agreement, unless the context otherwise
requires, the term "holder" of any Rights shall mean the registered holder of
such Rights (or, prior to the Separation Time, the associated Common Share
certificate).
 
2.9    Delivery and Cancellation of Certificates
 
      All Rights Certificates surrendered, upon exercise or for redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than the Rights Agent, be delivered to the Rights Agent and, in any case, shall
be promptly cancelled by the Rights Agent. The Corporation may at any time
deliver to the Rights Agent for cancellation any Rights Certificates previously
countersigned and delivered hereunder which the Corporation may have acquired in
any manner whatsoever, and all Rights Certificates so delivered shall be
promptly cancelled by the Rights Agent. No Rights Certificate shall be
countersigned in lieu of or in exchange for any Rights Certificates cancelled as
provided in this Section 2.9, except as expressly permitted by this Agreement.
The Rights Agent shall destroy all cancelled Rights Certificates and deliver a
certificate of destruction to the Corporation.
 
2.10   Agreement of Rights Holders
 
      Every holder of Rights, by accepting the same, consents and agrees with
the Corporation and the Rights Agent and with every other holder of Rights:
 
      (a)   to be bound by and subject to the provisions of this Agreement, as
           amended from time to time in accordance with the terms hereof, in
           respect of all Rights held;
 
      (b)   that prior to the Separation Time, each Right will be transferable
           only together with, and will be transferred by a transfer of, the
           Common Share certificate representing such Right;
 
      (c)   that prior to due presentment of a Rights Certificate (or, prior to
           the Separation Time, the associated Common Share certificate) for
           registration of transfer, the Corporation, the Rights Agent and any
           agent of the Corporation or the Rights Agent may, deem and treat the
           Person in whose name the Rights Certificate (or, prior to the
           Separation Time, the associated Common Share certificate)
 
                                       15
<PAGE>   17
 
           is registered as the absolute owner thereof and of the Rights
           evidenced thereby (notwithstanding any notations of ownership or
           writing on such Rights Certificate or the associated Common Share
           certificate made by anyone other than the Corporation or the Rights
           Agent) for all purposes whatsoever, and neither the Corporation nor
           the Rights Agent shall be affected by any notice to the contrary;
 
      (d)   that such holder of Rights has waived his right to receive any
           fractional Rights or any fractional shares or other securities upon
           exercise of a Right (except as provided herein); and
 
      (e)   that without the approval of any holder of Rights and upon the sole
           authority of the Board of Directors acting in good faith this
           Agreement may be supplemented or amended from time to time pursuant
           to and as provided herein.
 
2.11   Rights Certificate Holder not Deemed a Shareholder
 
      No holder, as such, of any Rights or Rights Certificate shall be entitled
to vote, receive dividends or be deemed for any purpose whatsoever the holder of
any Common Share or any other share or security of the Corporation which may at
any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Rights Certificate be construed or
deemed or confer upon the holder of any Right or Rights Certificate, as such,
any of the rights, titles, benefits or privileges of a holder of Common Shares
or any other shares or securities of the Corporation or any right to vote at any
meeting of shareholders of the Corporation whether for the election of Directors
or otherwise or upon any matter submitted to holders of shares of the
Corporation at any meeting thereof, or to give or withhold consent to any action
of the Corporation, or to receive notice of any meeting or other action
affecting any holder of Common Shares or any other shares or securities of the
Corporation except as expressly provided herein, or to receive dividends,
distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by Rights Certificates shall have been duly exercised in accordance
with the terms and provisions hereof.
 
                                   ARTICLE 3
 
                                 FLIP-IN EVENT
 
3.1    Flip-in Event
 
      (a)   Subject to clause 3.1(b), Section 3.2, clause 5.1(b), clause 5.1(c)
           and the second sentence of clause 2.2(a), in the event that prior to
           the Expiration Time a Flip-in Event shall occur, each Right shall
           constitute, effective on and after the Stock Acquisition Date, the
           right to purchase from the Corporation, upon payment of the Exercise
           Price and otherwise exercising such Right in accordance with the
           terms hereof, that number of Common Shares as shall equal the result
           obtained by (i) multiplying the then current Exercise Price by the
           number of Common Shares for which each Right is exercisable
           immediately prior to the Stock Acquisition Date and dividing that
           product by (ii) 50 per cent of the Market Price on the Stock
           Acquisition Date of the Common Shares (such Right to be appropriately
           adjusted in a manner analogous to the applicable adjustment provided
           for in Section 2.3 in the event that after the Stock Acquisition Date
           an event of a type analogous to any of the events described in
           Section 2.3 shall have occurred).
 
      (b)   Notwithstanding anything in this Agreement to the contrary, upon the
           occurrence of any Flip-in Event, any Rights that are Beneficially
           Owned by (i) an Acquiring Person (or any Affiliate or Associate of an
           Acquiring Person or any Person acting jointly or in concert with an
           Acquiring Person or any Affiliate or Associate of an Acquiring
           Person) or (ii) a transferee of Rights, directly or indirectly, of an
           Acquiring Person (or of any Affiliate or Associate of an Acquiring
           Person or of any Person acting jointly or in concert with an
           Acquiring Person or any Associate or Affiliate of an Acquiring
           Person) who becomes a transferee concurrently with or subsequent to
           the Acquiring Person becoming such shall become null and void without
           any further action, and any holder of such Rights (including
           transferees) shall not have any rights whatsoever to exercise such
           Rights under any provision of this Agreement and shall not have
           thereafter any other rights whatsoever with respect to such Rights,
           whether under any provision of this Agreement or otherwise.
 
                                       16
<PAGE>   18
 
      (c)   From and after the Separation Time, the Corporation shall do all
           such acts and things as shall be necessary and within its power to
           ensure compliance with the provisions of this Section 3.1, including
           without limitation, all such acts and things as may be required to
           satisfy the requirements of the Canada Business Corporations Act, the
           Securities Act (Quebec), the securities laws or comparable
           legislation in each of the provinces of Canada, the 1933 Securities
           Act and the 1934 Exchange Act and the rules of the stock exchangers)
           where the Common Shares are listed at such time in respect of the
           issue of Common Shares upon the exercise of Rights in accordance with
           this Agreement.
 
3.2    Exchange Option
 
      (a)   In the event that the Board of Directors acting in good faith shall
           determine that conditions exist which would eliminate or otherwise
           materially diminish in any respect the benefits intended to be
           afforded to the holders of Rights pursuant to this Agreement, the
           Board of Directors, at its option, at any time after a Flip-in Event
           has occurred, may authorize the Corporation to issue or deliver in
           respect of each Right which is not void pursuant to the second
           sentence of clause 2.2(a) or clause 3.1 (b), either (i) in return for
           the Exercise Price and the Right, debt or equity securities or assets
           of the Corporation (or a combination thereof) having a value equal to
           twice the Exercise Price, or (ii) in return for the Right, subject to
           any amounts that may be required to be paid under applicable law,
           debt or equity securities or- assets of the Corporation (or a
           combination thereof) having a value equal to the value of the Right,
           in full and final settlement of all rights attaching to the Rights,
           where in either case the value of such debt or equity securities or
           assets (or a combination thereto and, in the case of an issue of debt
           or equity securities or assets (or a combination thereof) pursuant to
           (ii), the value of the Right shall be determined by the Board of
           Directors who may rely upon the advice of a nationally or
           internationally recognized firm of investment dealers or investment
           bankers selected by the Board of Directors.
 
      (b)   If the Board of Directors authorizes the exchange of debt or equity
           securities or assets of the Corporation (or a combination thereof)
           for Rights pursuant to clause 3.2(a), without any further action or
           notice the right to exercise the Rights will terminate and the only
           right thereafter of a holder of Rights shall be to receive the debt
           or equity securities or assets of the Corporation (or a combination
           thereof) in accordance with the exchange formula authorized by the
           Board of Directors. Within 10 Business Days after the Board of
           Directors has authorized an exchange for Rights pursuant to clause
           3.2(a), the Corporation shall give notice of such exchange to the
           holders of such Rights by mailing such notice to all such holders at
           their last addresses as they appear upon the register of Rights
           holders maintained by the Rights Agent. Each such notice of exchange
           will state the method by which the exchange of debt or equity
           securities or assets of the Corporation (or a combination thereof)
           for Rights will be effected.
 
      (c)   In the event that there shall not be sufficient securities
           authorized but unissued to permit the exchange in full of such Rights
           pursuant to this Section 3.2, the Corporation shall take all such
           action as may be necessary and within its power to authorize
           additional securities for issuance upon the exchange of Rights.
 
      (d)   The Corporation shall not be required to issue fractions of
           securities or to distribute certificates evidencing fractional
           securities. In lieu of issuing such fractional securities, there
           shall be paid to the registered holders of Rights to whom such
           fractional securities would otherwise be issuable an amount in cash
           equal to the same friction of the Market Price of a whole security.
           Alternatively, fractional shares may, at the election of the
           Corporation, be evidenced by scrip certificates.
 
                                   ARTICLE 4
 
                                THE RIGHTS AGENT
 
4.1    General
 
      (a)   The Corporation hereby appoints the Rights Agent to act as agent for
           the Corporation in accordance with the terms and conditions hereof,
           and the Rights Agent hereby accepts such appointment. The Corporation
           may from time to time appoint such Co-Rights Agents ("Co-Rights
           Agents") as it may deem necessary or desirable. In the event the
           Corporation appoints one or more Co-Rights Agents,
 
                                       17
<PAGE>   19
 
           the respective duties of the Rights Agent and Co-Rights Agents shall
           be as the Corporation may determine. The Corporation also agrees to
           indemnify the Rights Agent for, and to hold it harmless against, any
           loss, liability, or expense, incurred without negligence, bad faith
           or willful misconduct on the part of the Rights Agent, for anything
           done or omitted by the Rights Agent in connection with the acceptance
           and administration of this Agreement, including the costs and
           expenses of defending against any claim of liability, which right to
           indemnification will survive the termination of this Agreement.
 
      The Corporation agrees to pay to the Rights Agent reasonable compensation
      for all services rendered by it hereunder and, from time to time, on
      demand of the Rights Agent, its reasonable expenses and counsel fees and
      other disbursements incurred in the administration and execution of this
      Agreement and the exercise and performance of its duties hereunder.
 
      (b)   The Rights Agent shall be protected and shall incur no liability for
           or in respect of any action taken, suffered or omitted by it in
           connection with its administration of this Agreement in reliance upon
           any certificate for Voting Shares or Common Shares or any Rights
           Certificate or certificate for other securities of the Corporation,
           instrument of assignment or transfer, power of attorney, endorsement,
           affidavit, letter, notice, direction, consent, certificate,
           statement, or other paper or document believed by it to be genuine
           and to be signed, executed and, where necessary, verified or
           acknowledged, by the proper Person or Persons.
 
4.2    Merger or Amalgamation or Change of Name of Rights Agent
 
      (a)   Any corporation into which the Rights Agent or any successor Rights
           Agent may be merged or amalgamated or with which it may be
           consolidated, or any corporation resulting from any merger,
           amalgamation, statutory arrangement or consolidation to which the
           Rights Agent or any successor Rights Agent is a party, or any
           corporation succeeding to the shareholder or stockholder services
           business of the Rights Agent or any successor Rights Agent, will be
           the successor to the Rights Agent under this Agreement without the
           execution or filing of any paper or any further act on the part of
           any of the parties hereto, provided that such corporation would be
           eligible for appointment as a successor Rights Agent under the
           provisions of Section 4.4 hereof. In case at the time such successor
           Rights Agent succeeds to the agency created by this Agreement any of
           the Rights Certificates have been countersigned but not delivered,
           any such successor Rights Agent may adopt the countersignature of the
           predecessor Rights Agent and deliver such Rights Certificates so
           countersigned; and in case at that time any of the Rights
           Certificates have not been countersigned, any successor Rights Agent
           may countersign such Rights Certificates either in the name of the
           predecessor Rights Agent or in the name of the successor Rights
           Agent; and in all such cases such Rights Certificates will have the
           full force provided in the Rights Certificates and in this Agreement.
 
      (b)   In case at any time the name of the Rights Agent is changed and at
           such time any of the Rights Certificates shall have been
           countersigned but not delivered, the Rights Agent may adopt the
           countersignature under its prior name and deliver Rights Certificates
           so countersigned; and in case at that time any of the Right
           Certificates shall not have been countersigned, the Rights Agent may
           countersign such Rights Certificates either in its prior name or in
           its changed name; and in all such cases such Right Certificates shall
           have the full force provided in the Right Certificates and in this
           Agreement.
 
4.3    Duties of Rights Agent
 
      The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the
Corporation and the holders of Rights Certificates, by their acceptance thereof,
shall be bound:
 
      (a)   the Rights Agent may consult with legal counsel (who may be legal
           counsel for the Corporation) and the opinion of such counsel will be
           full and complete authorization and protection to the Rights Agent as
           to any action taken or omitted by it in good faith and in accordance
           with such opinion;
 
      (b)   whenever in the performance of its duties under this Agreement the
           Rights Agent deems it necessary or desirable that any fact or matter
           be proved or established by the Corporation prior to taking or
           suffering any action hereunder, such fact or matter (unless other
           evidence in respect thereof be herein
                                       18
<PAGE>   20
 
           specifically prescribed) may be deemed to be conclusively proved and
           established by a certificate signed by a Person believed by the
           Rights Agent to be the Chairman of the Board, the President or any
           Vice President of the Corporation and delivered to the Rights Agent;
           and such certificate will be full authorization to the Rights Agent
           for any action taken or suffered in good faith by it under the
           provisions of this Agreement in reliance upon such certificate;
 
      (c)   the Rights Agent will be liable hereunder only for its own
           negligence, bad faith or willful misconduct;
 
      (d)   the Rights Agent will not be liable for or by reason of any of the
           statements of fact or recitals contained in this Agreement or in the
           certificates for Voting Shares or Common Shares or the Rights
           Certificates (except its countersignature thereof) or be required to
           verify the same, but all such statements and recitals are and will be
           deemed to have been made by the Corporation only;
 
      (e)   the Rights Agent will not be under any responsibility in respect of
           the validity of this Agreement or the execution and delivery hereof
           (except the due authorization, execution and delivery hereof by the
           Rights Agent) or in respect of the validity or execution of any
           Common Share certificate or Rights Certificate (except its
           countersignature thereof); nor will it be responsible for any breach
           by the Corporation of any covenant or condition contained in this
           Agreement or in any Rights Certificate; nor will it be responsible
           for any change in the exercisability of the Rights (including the
           Rights becoming void pursuant to clause 3.1(b) hereof) or any
           adjustment required under the provisions of Section 2.3 hereof or
           responsible for the manner, method or amount of any such adjustment
           or the ascertaining of the existence of facts that would require any
           such adjustment (except with respect to the exercise of Rights after
           receipt of the certificate contemplated by Section 2.3 describing any
           such adjustment); nor will it by any act hereunder be deemed to make
           any representation or warranty as to the authorization of any Common
           Shares to be issued pursuant to this Agreement or any Rights or as to
           whether any Common Shares will, when issued, be duly and validly
           authorized, executed, issued and delivered and fully paid and
           non-assessable;
 
      (f)    the Corporation agrees that it will perform, execute, acknowledge
           and deliver or cause to be performed, executed, acknowledged and
           delivered all such further and other acts, instruments and assurances
           as may reasonably be required by the Rights Agent for the carrying
           out or performing by the Rights Agent of the provisions of this
           Agreement;
 
      (g)   the Rights Agent is hereby authorized and directed to accept
           instructions with respect to the performance of its duties hereunder
           from any Person believed by the Rights Agent to be the Chairman of
           the Board, the President, any Vice President, or the Treasurer or the
           Controller of the Corporation, and to apply to such Persons for
           advice or instructions in connection with its duties, and it shall
           not be liable for any action taken or suffered by it in good faith in
           accordance with instructions of any such Person;
 
      (h)   the Rights Agent and any shareholder or stockholder, director,
           officer or employee of the Rights Agent may buy, sell or deal in
           Common Shares, Rights or other securities of the Corporation or
           become pecuniarily interested in any transaction in which the
           Corporation may be interested, or contract with or lend money to the
           Corporation or otherwise act as fully and freely as though it were
           not Rights Agent under this Agreement. Nothing herein shall preclude
           the Rights Agent from acting in any other capacity for the
           Corporation or for any other legal entity; and
 
      (i)    the Rights Agent may execute and exercise any of the rights or
           powers hereby vested in it or perform any duty hereunder either
           itself or by or through its attorneys or agents, and the Rights Agent
           will not be answerable or accountable for any act, default, neglect
           or misconduct of any such attorneys or agents or for any loss to the
           Corporation resulting from any such act, default, neglect or
           misconduct, provided reasonable care was exercised in the selection
           and continued employment thereof.
 
4.4    Change of Rights Agent
 
      The Rights Agent may resign and be discharged from its duties under this
Agreement upon 90 days' notice (or such lesser notice as is acceptable to the
Corporation) in writing mailed to the Corporation and to each transfer agent of
Common Shares by registered or certified mail, and to the holders of the Rights
in accordance with Section 5.9. The Corporation may remove the Rights Agent upon
30 days' notice in writing, mailed to the Rights Agent and to each transfer
agent of the Common Shares by registered or certified mail, and to the holders
of the
                                       19
<PAGE>   21
 
Rights in accordance with Section 5.9. If the Rights Agent should resign or be
removed or otherwise become incapable of acting, the Corporation will appoint a
successor to the Rights Agent. If the Corporation fails to make such appointment
within a period of 30 days after such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the; holder of any Rights (which holder shall, with such
notice, submit such holder's Rights, Certificate for inspection by the
Corporation), then the holder of any Rights may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Corporation or by such a court, shall be a
corporation incorporated under the laws of Canada or a province thereof
authorized to carry on the business of a trust company. After appointment, the
successor Rights Agent will be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Corporation will file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Common Shares, and mail a notice thereof in
writing to the holders of the Rights. Failure to give any notice provided for in
this Section 4.4, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
 
                                   ARTICLE 5
 
                                 MISCELLANEOUS
 
5.1    Redemption and Waiver
 
      (a)   The Board of Directors may, at its option, at any time prior to the
           Separation Time, elect to redeem all but not less than all of the
           then outstanding Rights at a redemption price of $0.0001 per Right
           appropriately adjusted in a manner analogous to the applicable
           adjustment provided for in Section 2.3 in the event that an event of
           the type analogous to any of the events described in Section 2.3
           shall have occurred (such redemption price being herein referred to
           as the "Redemption Price"). The redemption of the Rights by the Board
           of Directors may be made effective at such time, on such basis and
           with such conditions as the Board of Directors in its sole discretion
           may establish.
 
      (b)   The Board of Directors may until the Separation Time determine, upon
           prior written notice delivered to the Rights Agent, to waive the
           application of Section 3.1 to any particular Flip-in Event.
 
      (c)   The Board of Directors may prior to the Separation Time waive the
           application of Section 3.1 to any particular Flip-in Event, provided
           that both of the following conditions are satisfied:
 
           (i)   the Board of Directors has determined that the Acquiring Person
               became an Acquiring Person by inadvertence and without any intent
               or knowledge that he would become an Acquiring Person; and
 
           (ii)  such Acquiring Person has reduced his Beneficial Ownership of
               Voting Shares such that at the time of waiver pursuant to this
               clause he is no longer an Acquiring Person.
 
      (d)   The Board of Directors shall, without further formality, be deemed
           to have elected to redeem the Rights at the Redemption Price on the
           date of expiry of a Permitted Bid, provided that the Offeror takes up
           and pays for the Voting Shares pursuant to the terms and conditions
           of the Permitted Bid.
 
      (e)   If the Board of Directors elects to redeem the Rights, the right to
           exercise the Rights will thereupon, without further action and
           without notice, terminate and the only right thereafter of the
           holders of Rights shall be to receive the Redemption Price.
 
      (f)    Within 10 days after the Board of Directors electing to redeem the
           Rights, the Corporation shall give notice of redemption to the
           holders of the then outstanding Rights by mailing such notice to all
           such holders at their last address as they appear upon the registry
           books of the Rights Agent or, prior to the Separation Time, on the
           registry books of the transfer agent for the Common Shares. Any
           notice which is mailed in the manner herein provided shall be deemed
           given, whether or not the holder receives the notice. Each such
           notice of redemption will state the method by which the payment of
           the Redemption Price will be made. The Corporation shall not be
           required to make any payment of
 
                                       20
<PAGE>   22
 
           the Redemption Price to a holder of Rights if any such payment is
           less than $10. The Corporation may not redeem, acquire or purchase
           for value any Rights at any time in any manner other than that
           specifically set forth in this Section 5. 1, or other than in
           connection with the purchase of Common Shares prior to the Separation
           Time.
 
5.2    Expiration
 
      No Person shall have any rights whatsoever pursuant to or arising out of
this Agreement or in respect of any Right after the Expiration Time, except the
Rights Agent as specified in clause 4. 1 (a) of this Agreement.
 
5.3    Issuance of New Rights Certificates
 
      Notwithstanding any of the provisions of this Agreement or of the Rights
to the contrary, the Corporation may, at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by the Board of
Directors to reflect any adjustment or change in the number or kind or class of
securities purchasable upon exercise of Rights made in accordance with the
provisions of this Agreement.
 
5.4    Supplements and Amendments
 
      (a)   Subject to prior written approval of the Montreal Exchange and The
           Toronto Stock Exchange, the Corporation may from time to time
           supplement or amend this Agreement without the approval of any
           holders of Rights:
 
           (i)   to make any changes which the Board of Directors acting in good
               faith may deem necessary or desirable, provided that no such
               supplement or amendment made on or after the Separation Time
               shall materially adversely affect the interests of the holders of
               Rights generally and provided further that no supplement or
               amendment shall be made to the provisions of Article 4 except
               with the written concurrence of the Rights Agent to such
               supplement or amendment; or
 
           (ii)  in order to cure any ambiguity or to correct or supplement any
               provision contained herein which may be inconsistent with any
               other provisions herein or otherwise defective.
 
      (b)   The Corporation may, with the consent of the holders of Rights
           obtained as set forth below, at any time after the Separation Time,
           amend, vary or rescind any of the provisions of this Agreement and
           the Rights (whether or not such action would materially adversely
           affect the interests of the holders of Rights generally). Such
           consent shall be deemed to have been given and be binding upon all
           holders of Rights if such action is authorized by the affirmative
           votes of the holders of Rights present or represented at and entitled
           to be voted at a meeting of the holders and representing 50 per cent
           plus one of the votes cast in respect thereof. For the purposes
           hereof, each outstanding Right (other than Rights which are void
           pursuant to the provisions hereof) shall be entitled to one vote, and
           the procedures for the calling, holding and conduct of the meeting
           shall be those, as nearly as may be, which are provided in the
           Corporation's by-laws with respect to meetings of its shareholders.
 
      (c)   Any supplement or amendment to this Agreement made by the Board of
           Directors pursuant to subclause (a)(i) in connection with the
           definitions of "Acquiring Person", "Exercise Price", "Expiration
           Time", "Flip-in Event", "Grandfathered Person" or "Permitted Bid"
           shall, if made prior to the Separation Time, be submitted to the
           shareholders of the Corporation at the next meeting of shareholders
           and the shareholders may, by ordinary resolution, confirm or reject
           such supplement or amendment; if made at or after the Separation Time
           such supplement or amendment shall be submitted to the holders of the
           Rights at a meeting to be called for on a date not later than
           immediately following the next meeting of shareholders and the
           holders of Rights may, by ordinary resolution (on the same basis as
           described in clause (b) hereof), confirm or reject such supplement or
           amendment. A supplement or amendment to this Agreement made by the
           Board of Directors as contemplated by the previous sentence shall be
           effective from the date of the relevant resolution of the Board of
           Director; until it is confirmed or rejected or until it ceases to be
           effective (as described in the next following sentence) and, where
           the supplement or amendment is confirmed, it continues in effect in
           the form in which it was so confirmed. If such supplement or
           amendment to this Agreement made by the Board of Directors is
           rejected by the shareholders or holders of Rights or is not submitted
           to the shareholders or holders of Rights as required, then such
           supplement or amendment shall cease to be effective from and after
           the termination of the meeting at which it was rejected or to
 
                                       21
<PAGE>   23
 
           which it should have been but was not submitted, or from and after
           the last date on which a meeting of holders of Rights should have
           been but was not held, and no subsequent resolution of the Board of
           Directors to supplement or amend the Agreement to substantially the
           same effect shall be effective until confirmed by the shareholders or
           holders of Rights, as the case may be.
 
5.5    Fractional Rights and Fractional Shares
 
      (a)   Subject to clause 3.2(d) in respect of circumstances referred to in
           clause 3.2(a), the Corporation shall not be required to issue
           fractions of Rights or to distribute Rights Certificates which
           evidence fractional Rights and no amount shall be paid to the
           registered holders of the Rights Certificates with regard to which
           such fractional Rights would otherwise be issuable.
 
      (b)   The Corporation shall not be required to issue fractions of Common
           Shares upon exercise of the Right, or to distribute certificates
           which evidence fractional Common Shares. Fractions of Common Shares
           may, at the election of the Corporation, be evidenced by scrip
           certificates. In lieu of issuing fractional Common Shares, the
           Corporation may pay to the registered holders of Rights Certificates,
           at the time such Rights are exercised as herein provided, an amount
           in cash equal to the same fraction of the Market Price of one Common
           Share.
 
5.6    Rights of Action
 
      Subject to the terms of this Agreement, all rights of action in respect of
this Agreement, other than rights of action vested solely in the Rights Agent,
are vested in the respective registered holders of the Rights; and any
registered holder of any Rights, without the consent of the Rights Agent or of
the registered holder of any other Rights, may, on such holder's own behalf and
for such holder's own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Corporation to enforce such holder's right to
exercise such holder's Rights in the manner provided in such holder's Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of the obligations of any Person subject to, this Agreement.
 
5.7    Regulatory Approvals
 
      Any obligation of the Corporation or action or event contemplated by this
Agreement shall be subject to the receipt of any requisite approval or consent
from any governmental or regulatory authority.
 
5.8    Declaration as to Non-Canadian and Non-U.S. Holders
 
      If in the opinion of the Board of Directors (who may rely upon the advice
of counsel) any action or event contemplated by this Agreement would require
compliance with the securities laws or comparable legislation of a jurisdiction
outside Canada and the United States of America, the Board of Directors acting
in good faith may take such actions as it may deem appropriate to ensure that
such compliance is not required, including without limitation establishing
procedures for the issuance to a Canadian resident Fiduciary of Rights or
securities issuable on exercise of Rights, the holding thereof in trust for the
Persons entitled thereto (but reserving to the Fiduciary or to the Fiduciary and
the Corporation, as the Corporation may determine, absolute discretion with
respect thereto) and the sale thereof and remittance of the proceeds of such
sale, if any, to the persons entitled thereto. In no event shall the Corporation
or the Rights Agent be required to issue or deliver Rights or securities
issuable on exercise of Rights to persons who are citizens, residents or
nationals of any jurisdiction other than Canada and any province or territory
thereof and the United States of America in which such issue or delivery would
be unlawful without registration of the relevant Persons or securities for such
purposes.
 
                                       22
<PAGE>   24
 
5.9    Notices
 
      Notices or demands authorized or required by this Agreement to be given or
made by the Rights Agent or by the holder of any Rights to or on the Corporation
shall be sufficiently given or made if delivered or sent by first class mail,
postage prepaid, by telecopier or by other similar means of telecommunications
addressed (until another address is filed in writing with the Rights Agent) as
follows:
 
           REPAP ENTERPRISES INC.
           1250 Rene-Levesque Blvd., West
           Suite 3800
           Montreal, Quebec
           H3B 4W8
 
           Telephone: (514) 846-1316
           Telecopier: (514) 846-1313
 
           Attention: President and Chief Executive Officer
 
      Any notice or demand authorized or required by this Agreement to be given
or made by the Corporation or by the holder of any Rights to or on the Rights
Agent shall be sufficiently given or made if delivered or sent by first-class
mail, postage prepaid, by telecopier or by other similar means of
telecommunications addressed (until another address is filed in writing with the
Corporation) as follows:
 
           Montreal Trust Company
           1800 McGill College Avenue
           7th Floor
           Montreal, Quebec
           H3A 3K9
 
           Telephone: (514) 982-7000
           Telecopier: (514) 982-7580
 
           Attention: Manager, Stock Transfer Services
 
      Notices or demands authorized or required by this Agreement to be given or
made by the Corporation or the Rights Agent to or on the holder of any Rights
shall be sufficiently given or made if delivered or sent by first-class mail,
postage prepaid, by telecopier or by other similar means of telecommunications
addressed to such holder at the address of such holder as it appears upon the
registry books of the Rights Agent or, prior to the Separation Time, on the
registry books of the Corporation for its Common Shares. Any notice which is
mailed or sent in the manner herein provided shall be deemed given, whether or
not the holder receives the notice.
 
5.10   Costs of Enforcement
 
      The Corporation agrees that if the Corporation fails to fulfill any of its
obligations pursuant to this Agreement, then the Corporation will reimburse the
holder of any Rights for the costs and expenses (including legal fees) incurred
by such holder to enforce his rights pursuant thereto in any action, suit or
proceeding in which a court of competent jurisdiction in a final non-appealable
judgment has rendered judgment in favor of the holder.
 
5.11   Successors
 
      All the covenants and provisions of this Agreement by or for the benefit
of the Corporation or the Rights Agent shall bind and inure to the benefit of
their respective successors and assigns hereunder.
 
5.12   Benefits of this Agreement
 
      Nothing in this Agreement shall be construed to give to any Person other
than the Corporation, the Rights Agent and the holders of the Rights any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Corporation, the Rights Agent
and the holders of the Rights.
 
5.13   Governing Law
 
      This Agreement and each Right issued hereunder shall be deemed to be a
contract made under the laws of the Province of Quebec and for all purposes
shall be governed by and construed in accordance with the laws of such Province
applicable to contracts to be made and performed entirely within such Province.
 
                                       23
<PAGE>   25
 
5.14   Severability
 
      If any Section, clause, term or provision hereof or the application
thereof to any circumstance or any right hereunder shall, in any jurisdiction
and to any extent, be invalid or unenforceable, such Section, clause, term or
provision or such right shall be ineffective only as to such jurisdiction and to
the extent of such invalidity or unenforceability in such jurisdiction without
invalidating or rendering unenforceable or ineffective the remaining Sections,
clauses, terms and provisions hereof or rights hereunder in such jurisdiction or
the application of such Section, clause, term or provision or rights hereunder
in any other jurisdiction or to circumstances other than those as to which it is
specifically held invalid or unenforceable.
 
5.15   Effective Date
 
      This Agreement is effective and in full force and effect in accordance
with its terms from the date hereof.
 
5.16   Determinations and Actions by the Board of Directors
 
      The Board of Directors shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors or the Corporation, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, (ii) make the public announcement referred to under "Stock
Acquisition Date" in section 1.1 hereof and (iii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not to redeem the Rights or to amend the Agreement).
All such actions, calculations, interpretations and determinations (including,
for purposes of clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board of Directors, in good faith, shall (x) be
final, conclusive and binding on the Corporation, the Right, Agent, the holders
of the Rights Certificates (including Rights which are void pursuant to the
provisions hereof) and all other parties, and (y) not subject the Board of
Directors or any director of the Corporation to any liability to the holders of
the Rights Certificates (including Rights which are void pursuant to the
provisions hereof).
 
5.17   Time of the Essence
 
      Time shall be of the essence in this Agreement.
 
5.18   Execution In Counterparts
 
      This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute one and the same instrument.
 
      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
 
                                       REPAP ENTERPRISES INC.
 
                                       By:
 
                                       By:
 
                                       MONTREAL TRUST COMPANY
 
                                       By:
 
                                       By:
 
                                       24
<PAGE>   26
 
                                  EXHIBIT "A"
 
Form of Rights Certificate
 
                                                     Certificate No.
 
THE RIGHTS ARE SUBJECT TO TERMINATION, AT THE OPTION OF THE CORPORATION, ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED
IN SECTION 3.1(b) OF THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON OR TRANSFEREE OF AN ACQUIRING PERSON OR ITS AFFILIATES OR
ASSOCIATES (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) MAY BECOME VOID.
 
                                       25
<PAGE>   27
 
                               RIGHTS CERTIFICATE
 
      This certifies that,                       or
registered assigns, is the registered holder of the number of Rights set forth
above, each of which entitles the registered holder thereof, subject to the
terms, provisions and conditions of the Shareholder Protection Rights Plan
Agreement dated as of the 8th day of February, 1994 (the "Rights Agreement")
between Repap Enterprises Inc., a corporation duly incorporated under the Canada
Business Corporations Act (the "Corporation") and Montreal Trust Company, a
trust company incorporated under the laws of Canada (the "Rights Agent") (which
term shall include any successor Rights Agent under the Rights Agreement, as
amended, to purchase from the Corporation at any time after the Separation Time
(as such term is defined in the Rights Agreement) and prior to the Expiration
Time (as such terms is defined in the Rights Agreement), one fully paid common
share of the Corporation (a "Common Share") at the Exercise Price referred to
below, upon presentation and surrender of this Rights Certificate with the Form
of Election to Exercise duly executed and submitted to the Rights Agent at its
principal office in the city of Montreal. The Exercise Price shall initially be
$25 (Cdn.) per Right and shall be subject to adjustment in certain events as
provided in the Rights Agreement.
 
      In certain circumstances described in the Rights Agreement, each Right
evidenced hereby may entitle the registered holder thereof to purchase or
receive assets, debt securities or shares in the capital stock of the
Corporation other than Common Shares or more or less than one Common Share (or a
combination thereof), all as provided in the Rights Agreement.
 
      This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Rights Agent, the. Corporation and the holders of the Rights Certificates.
Copies of the Rights Agreement are on file at the registered office of the
Corporation.
 
      This Rights Certificate, with or without other Rights Certificates, upon
surrender at any of the offices of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing an aggregate number of Rights equal to the aggregate
number of Rights evidenced by the Rights Certificate or Rights Certificates
surrendered. If this Rights Certificate shall be exercised in part, the
registered holder shall be entitled to receive, upon surrender hereof, another
Rights Certificate or Rights Certificates for the number of whole, Rights not
exercised.
 
      Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be terminated by the Corporation under certain
circumstances at its option.
 
      No holder of this Rights Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of Common Shares or
of any other securities which may at any time be issuable upon the exercise
hereof, nor shall anything contained in the Rights Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Corporation or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting shareholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Rights evidenced by this Rights Certificate shall have been exercised
as provided in the Rights Agreement.
 
      This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
 
      WITNESS the facsimile signature of the proper officers of the Corporation.
 
REPAP ENTERPRISES INC.
 
Date:
 
By:
 
Title:
 
By:
 
Title:
 
                                       26
<PAGE>   28
 
Countersigned:
 
MONTREAL TRUST COMPANY
 
By
                      Authorized Signature
 
                               FORM OF ASSIGNMENT
 
  (To be executed by the registered holder if such holder desires to transfer
                           the Rights Certificates.)
 
FOR VALUE RECEIVED hereby sells, assigns and transfers unto
                              (Please print name and address of transferee) this
Rights Certificate, together with all right, tide and interest therein, and does
hereby                       irrevocably constitute and appoint
                      , as attorney, to transfer the within Rights Certificate
on the books of the within-named Corporation, with full power of substitution.
 
Dated:
 
Signature Guaranteed:
 
Signature
 
                                         (Signature must correspond to name as
                                         written upon the face of this Rights
                                         Certificate in every particular,
                                         without alteration or enlargement or
                                         any change whatsoever)
 
      Signature must be guaranteed by a member firm of a recognized stock
exchange in Canada, a registered national securities exchange in the United
States, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in Canada or
the United States.
 
                           (To be completed if true)
 
      The undersigned hereby represents, for the benefit of all holders of
Rights and Common Shares, that the Rights evidenced by this Rights Certificate
are not, and, to the knowledge of the undersigned, have never been, Beneficially
Owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in
the Rights Agreement).
 
                                         Signature
 
                  [To be attached to each Rights Certificate]
 
                          FORM OF ELECTION TO EXERCISE
 
TO:   REPAP ENTERPRISES INC.
 
      The undersigned hereby irrevocably elects to exercise   whole    Rights
represented by the attached Rights Certificate to PURCHASE the Common Shares or
other securities, if applicable, issuable upon the exercise of such Rights and
requests that certificates for such securities be issued in the name of:
 
                                       27
<PAGE>   29
 
Address:
 
Social Insurance, Social Security
or Other Taxpayer Identification Number
 
      If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
 
Address:
 
Social Insurance, Social Security
or Other Taxpayer Identification Number
 
Dated:
 
Signature Guaranteed:
 
Signature
 
                                         (Signature must correspond to name as
                                         written upon the face of this Rights
                                         Certificate in every particular,
                                         without alteration or enlargement or
                                         any change whatsoever)
 
      Signature must be guaranteed by a member firm of a recognized stock
exchange in Canada, a registered national securities exchange in the United
States, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in Canada or
the United States.
 
                           (To be completed if true)
 
      The undersigned hereby represents, for the benefit of all holders of
Rights and Common Shares, that the Rights evidenced by this Rights Certificate
are not, and, to the knowledge of the undersigned, have never been, Beneficially
Owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in
the Rights Agreement).
 
                                         Signature
 
                                       28
<PAGE>   30
 
                                     NOTICE
 
      In the event the certification set forth above in the Forms of Assignment
and Election is not completed, the Corporation will deem the Beneficial Owner of
the Rights evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement). No Rights
Certificates shall be issued in exchange for a Rights Certificate owned or
deemed to have been owned by an Acquiring Person or an Affiliate or Associate
thereof Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
of Directors, in good faith, shall (x) be final, conclusive and binding on the
Corporation, the Rights Agent, the holders of the Rights Certificates (including
Rights which are void pursuant to the provisions hereof) and all other parties,
and (y) not subject the Board of Directors or any director of the Corporation to
any liability to the holders of the Rights Certificates (including Rights which
are void pursuant to the provisions hereof).
 
5.17   Time of the Essence
 
      Time shall be of the essence in this Agreement.
 
5.18   Execution In Counterparts
 
      This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be original, and all such
counterparts shall together constitute one and the same instrument.
 
      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
                                         REPAP ENTERPRISES INC.
 
                                         MONTREAL TRUST COMPANY
 
                                         By:
 
                                         By:
 
                                         By:
 
                                         By:
 
                                       29
<PAGE>   31
 
         AMENDMENT TO THE SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT
        DATED AS OF FEBRUARY 8, 1994 BETWEEN REPAP ENTERPRISES INC. AND
                             MONTREAL TRUST COMPANY
 
1      Paragraph 5.1 (b) of the Shareholder Protection Rights Plan Agreement
      dated as of February 8, 1994 between Repap Enterprises Inc. ("Repap") and
      Montreal Trust Company as Rights Agent (the "Plan") is hereby amended to
      read as follows:
 
      (b)   The Board of Directors may until the occurrence of any particular
           Flip-in Event determine, upon prior written notice delivered to the
           Rights Agent, to waive the application of Section 3.1 to such Flip-in
           Event."
 
2.     All other provisions of the Plan continue in full force and effect
      unamended.
 
3.     This amendment shall be governed by and construed in accordance with the
      laws of the Province of Quebec and the laws of Canada applicable therein.
 
Dated as of July 31, 1996
 
REPAP ENTERPRISES INC.
                                         PER:
                                              George S. Petty -- Chairman
 
                                         PER:
                                              Terry W. McBride -- Secretary
 
                                         MONTREAL TRUST COMPANY
 
                                         PER:
                                              Ronald Bourdon -- Senior Manager
 
                                         PER:
                                              Steve Gilbert -- Account Manager
 
                                       30