SC 13D/A 1 sc13da.txt ENRON NORTH AMERICA CORP. FOR KAFUS INDUSTRIES LTD 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D/A UNDER THE SECURITIES EXCHANGE ACT OF 1934 (Amendment No. 7) KAFUS INDUSTRIES LTD. --------------------- (Name of Issuer) COMMON STOCK, WITHOUT PAR VALUE ------------------------------- (Title of Class of Securities) 482910 10 6 ------------- (CUSIP Number) Julia Murray General Counsel - Finance Enron North America Corp. 1400 Smith Street Houston, Texas 77002 (713) 853-6161 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) August 1, 2000 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box: [ ]. NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Section 240.13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 (the "Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Page 1 of 11 2 SCHEDULE 13D CUSIP NO.: 482910 10 6 -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSON ECT Merchant Investments Corp. -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] -------------------------------------------------------------------------------- 3 SEC USE ONLY -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 0 SHARES ------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 3,545,482 REPORTING ------------------------------------------------ PERSON 9 SOLE DISPOSITIVE POWER WITH 0 ------------------------------------------------ 10 SHARED DISPOSITIVE POWER 3,545,482 -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,545,482 -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES N/A [ ] -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.3% -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO -------------------------------------------------------------------------------- Page 2 of 11 3 SCHEDULE 13D CUSIP NO.: 482910 10 6 -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSON Sundance Assets, L.P. -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] -------------------------------------------------------------------------------- 3 SEC USE ONLY -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS 00 -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 0 SHARES ------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 10,338,621 REPORTING ------------------------------------------------ PERSON 9 SOLE DISPOSITIVE POWER WITH 0 ------------------------------------------------ 10 SHARED DISPOSITIVE POWER 10,338,621 -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,338,621 -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] N/A -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 26.8% -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN -------------------------------------------------------------------------------- Page 3 of 11 4 SCHEDULE 13D CUSIP NO.: 482910 10 6 -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSON Enron North America Corp. -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] -------------------------------------------------------------------------------- 3 SEC USE ONLY -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 0 SHARES ------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 14,634,103 REPORTING ------------------------------------------------ PERSON 9 SOLE DISPOSITIVE POWER WITH 0 ------------------------------------------------ 10 SHARED DISPOSITIVE POWER 14,634,103 -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 14,634,103 -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] N/A -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 36.6% -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO -------------------------------------------------------------------------------- Page 4 of 11 5 SCHEDULE 13D CUSIP NO.: 482910 10 6 -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSON Enron Corp. -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] -------------------------------------------------------------------------------- 3 SEC USE ONLY -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS 00 -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Oregon -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 0 SHARES --------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 14,634,103 REPORTING --------------------------------------------- PERSON 9 SOLE DISPOSITIVE POWER WITH 0 --------------------------------------------- 10 SHARED DISPOSITIVE POWER 14,634,103 -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 14,634,103 -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] N/A -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 36.6% -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO -------------------------------------------------------------------------------- Page 5 of 11 6 STATEMENT ON SCHEDULE 13D/A Note: This Schedule 13D/A amendment is being filed by (i) Sundance Assets, L.P. ("Sundance"), (ii) Enron North America Corp. ("ENA"; formerly named Enron Capital & Trade Resources Corp.), (iii) Enron Corp. ("Enron"), and (iv) ECT Merchant Investments Corp. ("ECT Merchant"), which are collectively referred to as the "Reporting Entities." All information with respect to Kafus Industries, Ltd., a British Columbia corporation (the "Issuer"), is presented to the best knowledge and belief of the Reporting Entities. The joint Schedule 13D of Enron and ENA dated July 27, 1997, as amended by Schedule 13D/As dated September 4, 1998, January 12, 1999, March 22, 1999, January 3, 2000, March 20, 2000, and June 19, 2000 is further amended by the following: Item 2. Identity and Background. The Schedules to this statement report current information regarding the officers and directors of ECT Merchant, Enron Ponderosa Management Holdings, Inc. ("EPMH"), ENA, and Enron. None of the Reporting Entities nor, to their knowledge, any person listed on the Schedules hereto, has been, during the last five years (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violation of, or prohibiting or mandating activities subject to, U.S. federal or state securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration; Item 4. Purpose of Transaction and Item 5. Interest in Securities of the Issuer. A. Changes in Reported Information. This Schedule 13D amendment reports: (i) the purchase by ECT Merchant of a convertible promissory note, (ii) the purchase by ECT Merchant of a 68,500 share warrant, (iii) the accrual of a right to obtain 283,419 shares of common stock, no par value per share ("Common Stock"), that were payable as dividends on the Series I Preference Shares (the "Preference Shares") for the first semiannual period of 2000, (iv) the accrual of interest on the Convertible Promissory Note (Term Loan A), and (v) the execution of a registration rights agreement and other agreements in connection with the foregoing. Certain of these events are further described as below. This amendment is also filed to report that Mr. Randy Maffett, Vice President of ENA, resigned from the Board of Directors of the Issuer on August 1, 2000. (i). Term Loan E. On June 28, 2000, the Issuer issued to ECT Merchant a Convertible Promissory Note (Term Loan E), dated as of June 28, 2000, in the original principal amount of $685,000 (the "Term E Note") in consideration of $685,000 in principal advanced thereunder. The outstanding Page 6 of 11 7 principal balance and interest accrued on the note (which accrues at 15% simple interest per annum) are convertible at any time at the holder's option into Common Stock at a price per share equal to the lesser of (a) U.S.$4.00 and (b) the trade weighted average price of such shares (as reported on Bloomberg) for the five trading days preceding conversion. At an estimated trade weighted average price of $2.38, the principal component on the Term E Note would convert into approximately 287,815 shares of Common Stock and the principal component on the Term D Note would convert into approximately 420,168 shares of Common Stock. A copy of the Term E Note is attached hereto as Exhibit 1. (ii). Second June 2000 Warrant. On June 28, 2000, the Issuer also issued to ECT Merchant a warrant to acquire 68,500 shares of Common Stock (the "Second June 2000 Warrant"). The exercise price of this warrant, subject to certain antidilution adjustments, is equal to the lesser of (a) U.S.$4.00 and (b) the trade weighted average price (as reported on Bloomberg) of such shares for the five trading days preceding conversion. The exercise period of the Second June 2000 Warrant terminates on June 30, 2010. A copy of the Second June 2000 Warrant is attached hereto as Exhibit 2. Both the Term E Note and the Second June 2000 Warrant were purchased pursuant to the Second Amendment to Amended and Restated Note Agreements dated as of June 28, 2000 among the Issuer, ECT Merchant, Sundance, and ENA, in its capacity as Servicer of certain investments held by ENA CLO I Holding Company I L.P. (the "Note Agreement Amendment"). A copy of the Note Agreement Amendment is attached hereto as Exhibit 3. (iii). Accrual of Convertible Interest. The Average Price of the Common Stock during the 30-day period preceding July 27, 2000 was approximately $3.07. Therefore, the interest accrued through such date with respect to the Convertible Promissory Note (Term Loan A) dated as of December 31, 1998 can be converted into approximately 541,326 shares of Common Stock. (iv). Related Agreements. In consideration of the advancement of the loan represented by the Term E Note, the Issuer also (a) granted certain registration rights with respect to the Term E Note Page 7 of 11 8 and the Warrants pursuant to the Amendment to Registration Rights Agreement set forth as Exhibit 4, and (b) executed the Second Amendment to Warrant Agreement dated as of June 28, 2000 between the Issuer and ECT Merchant in the form set forth as Exhibit 5. This Second Amendment to Warrant Agreement amended the Warrant Agreement dated as of March 11, 1999 to incorporate the Second June 2000 Warrant. B. Beneficial Ownership. (i) Sundance. Sundance directly owns 1,730,001 shares of Common Stock. It also holds the following instruments that, subject to antidilution adjustments, are exercisable or convertible within the next sixty days into an aggregate of 10,338,621 shares of Common Stock: (a) five warrants to purchase 1,000,000, 500,000, 750,000, 45,000, and 250,000 shares of Common Stock, respectively, which are immediately exercisable, (b) 15,000 Series I Preference Shares ("Preference Shares"), which may be converted into 3,750,000 shares of Common Stock at any time, (c) a Convertible Promissory Note (Term Loan A) issued by the Issuer in the original principal amount of $10 million (the "Term Loan A Note"), which has (x) a principal balance of $10 million that may be converted into 1,250,000 shares of Common Stock at any time and (y) an interest component which, including the interest accrued through July 27, 2000, may be converted upon conversion of such note into 541,326 shares of Common Stock (assuming an Average Price of the Common Stock during the 30-day period preceding July 27, 2000 of approximately $3.07), and (d) a right to accrued dividends on the Preference Shares in the amount of 522,294 shares of Common Stock. If Sundance converted or exercised all instruments and securities held by it that are convertible or exercisable within sixty days, the 10,338,621 shares it would hold would represent approximately 26.8% of the Issuer's outstanding Common Stock. (ii) ECT Merchant. ECT Merchant holds (a) 2,099,999 shares of Common Stock, (b) immediately exercisable warrants to acquire 487,500, 150,000, 100,000 and 68,500 shares of Common Stock, (c) the Term D Note, the principal component of which is exercisable into an estimated Page 8 of 11 9 420,168 shares of Common Stock, and (d) the Term E Note, the principal component of which is exercisable into an estimated 287,815 shares of Common Stock. If ECT Merchant exercised its warrants and converted its notes, the 3,545,482 shares it would hold would represent approximately 11.3% of the Issuer's outstanding Common Stock. (iii) ENA. ENA holds 750,000 shares of Common Stock. When aggregated with the shares beneficially owned by ECT Merchant and Sundance, these 14,634,103 shares would represent approximately 36.6% of the Issuer's outstanding Common Stock that would be outstanding upon the exercise and conversion of the foregoing securities. (iv) Enron. The 14,634,103 shares of Common Stock in the aggregate that are beneficially owned by Sundance, ECT Merchant, and ENA collectively represent approximately 36.6% of the Issuer's outstanding Common Stock that would be outstanding upon the exercise and conversion of the foregoing securities. C. Disclaimer of Beneficial Ownership. Enron may be deemed to beneficially own the shares held by ENA, and ENA may be deemed to beneficially own both the shares beneficially owned by Sundance and the shares beneficially owned by ECT Merchant. Further, ENA, Enron, Ponderosa Assets, L.P., which is Sundance's general partner ("Ponderosa"), and Enron Ponderosa Management Holdings, Inc. ("EPMH"), which is Ponderosa's general partner, may be deemed to share voting and dispositive power over the Common Stock beneficially owned by Sundance. Similarly, ENA and Enron could be deemed to share voting and dispositive power over the shares of Common Stock beneficially owned by ECT Merchant. Enron and ENA each hereby disclaims beneficial ownership of all Common Stock which it does not directly own, and the filing of this statement on Schedule 13D/A shall not be construed as an admission that ECT Merchant, Sundance, Ponderosa, EPMH, ENA, Enron or any director, officer, partner, or other person or entity associated with any of them, for the purposes of Section 13(d) or 13(g) of the Act, is the beneficial owner of any securities covered by this statement. All percentage ownership Page 9 of 11 10 calculations utilized herein are calculated in accordance with Rule 13-d-3(d)(1)(i)(D) and assume that 29,952,569 shares of Common Stock are actually outstanding on the date of this statement. D. Other Instruments. In addition to the shares of Common Stock reported herein, the Reporting Persons hold convertible promissory notes and other instruments that entitle or require the Reporting Entities to purchase a substantial number of shares of Common Stock. Such shares are not reported herein as being beneficially owned because the instruments do not entitle the holder to acquire shares within 60 days after the filing of this statement, except upon the occurrence of extraordinary and unpredictable events, such as a default on indebtedness. Other than the transactions described herein and in the previously filed Schedule 13D/As, none of the Reporting Entities, nor, to their knowledge, Ponderosa, EPMH or any of the persons named in the Schedules hereto, has effected any transaction in the Common Stock during the preceding sixty days. Item 7. Material to Be Filed as Exhibits. Exhibit 1. U.S.$685,000 Convertible Promissory Note (Term Loan E) dated as of June 28, 2000 issued by the Issuer to ECT Merchant. Exhibit 2. Warrant dated as of June 28, 2000 issued by the Issuer to ECT Merchant in the amount of 68,500 shares. Exhibit 3. Second Amendment to Note Agreements dated as of June 28, 2000, among the Issuer, ECT Merchant, Sundance, ENA CLO I Holding Company I L.P. ("ENA CLO"), and ENA as Servicer of certain investments held by ENA CLO. Exhibit 4. Amendment to Registration Rights Agreement dated as of June 28, 2000 between the Issuer and ECT Merchant. Exhibit 5. Second Amendment to Warrant Agreement dated as of June 28, 2000 between the Issuer and ECT Merchant. Page 10 of 11 11 After reasonable inquiry and to the best knowledge and belief of the undersigned, the undersigned certify that the information set forth in this statement is true, complete and correct. Date: August 1, 2000 SUNDANCE ASSETS, L.P. By: Ponderosa Assets, L.P. its general partner By: Enron Ponderosa Management Holdings, Inc. its general partner By: -------------------------------- Name: Raymond M. Bowen, Jr. Title: Managing Director Date: August 1, 2000 ENRON NORTH AMERICA CORP. By: -------------------------------- Name: Raymond M. Bowen, Jr. Title: Managing Director Date: August 1, 2000 ENRON CORP. By: -------------------------------- Name: Angus H. Davis Title: Vice President and Deputy Corporate Secretary Date: August 1, 2000 ECT MERCHANT INVESTMENTS CORP. By: -------------------------------- Name: Raymond M. Bowen, Jr. Title: Managing Director Page 11 of 11 12 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS ENRON NORTH AMERICA CORP. (FORMERLY ENRON CAPITAL & TRADE RESOURCES CORP.)

13 SCHEDULE II DIRECTORS AND EXECUTIVE OFFICERS ENRON CORP.

16 SCHEDULE III DIRECTORS AND EXECUTIVE OFFICERS ECT MERCHANT INVESTMENTS CORP.

17 SCHEDULE IV DIRECTORS AND EXECUTIVE OFFICERS ENRON PONDEROSA MANAGEMENT HOLDINGS, INC.

18 INDEX TO EXHIBITS

KAFUS INDUSTRIES LTD SC 13D/A