Exhibit 10.1

ARRANGEMENT AGREEMENT

BY AND AMONG

UNITED STATES STEEL CORPORATION,

1344973 ALBERTA ULC

and

STELCO INC.

Dated as of August 26, 2007

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TABLE OF CONTENTS

 

ARTICLE I

  

THE ARRANGEMENT

   1

1.1

  

The Arrangement

   1

1.2

  

Implementation Steps by the Company

   2

1.3

  

Interim Order

   4

1.4

  

Articles of Arrangement

   4

1.5

  

Circular

   5

1.6

  

Preparation of Filings, etc

   5

1.7

  

Dissenting Shareholders

   6

1.8

  

Amendment

   6

1.9

  

List of Shareholders, Warrantholders and Optionholders

   7

1.10

  

Withholding

   7

1.11

  

Alternative Transaction Structure

   7

1.12

  

Closing

   8

1.13

  

Consideration

   8

ARTICLE II

  

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

   9

2.1

  

Organization and Good Standing

   9

2.2

  

Authority and Enforceability

   9

2.3

  

Authorizations

   9

2.4

  

Non-Contravention

   10

2.5

  

Capitalization

   10

2.6

  

Subsidiaries and Principal Joint Ventures of the Company

   12

2.7

  

Securities Laws Filings

   13

2.8

  

Financial Statements

   14

2.9

  

No Undisclosed Liabilities

   15

2.10

  

Circular

   15

2.11

  

Absence of Certain Changes or Events

   15

2.12

  

Compliance with Law

   16

2.13

  

Litigation

   17

2.14

  

Contracts

   17

2.15

  

Taxes

   19

2.16

  

Employee Benefits

   20

2.17

  

Properties

   23

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TABLE OF CONTENTS

(continued)

 

           Page

2.18

  

Real Property

   23

2.19

  

Intellectual Property

   25

2.20

  

Labour and Employment Matters

   26

2.21

  

Environmental

   28

2.22

  

Related Party Transactions

   30

2.23

  

Certain Business Practices

   30

2.24

  

Insurance

   30

2.25

  

Product Warranty

   31

2.26

  

Opinions of Financial Advisors

   31

2.27

  

Brokers or Finders

   31

2.28

  

Suppliers and Customers

   32

2.29

  

Rights Plan

   32

2.30

  

Books and Records

   32

2.31

  

No “Collateral Benefit” under Ontario Rule

   32

ARTICLE III

  

REPRESENTATIONS AND WARRANTIES OF PARENT

   32

3.1

  

Organization and Good Standing

   32

3.2

  

Authority and Enforceability

   33

3.3

  

Authorizations

   33

3.4

  

Non-Contravention

   33

3.5

  

Circular

   33

3.6

  

Availability of Funds

   34

3.7

  

Brokers or Finders

   34

3.8

  

No “Collateral Benefit” under Ontario Rule

   34

ARTICLE IV

  

COVENANTS OF THE COMPANY

   34

4.1

  

Conduct of the Business

   34

4.2

  

Access to Information

   37

4.3

  

Nonsolicitation

   38

4.4

  

Cooperation Regarding Reorganization

   40

4.5

  

Additional Covenants

   41

ARTICLE V

  

COVENANTS OF PARENT

   41

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TABLE OF CONTENTS

(continued)

 

           Page

5.1

  

Indemnification

   41

5.2

  

Additional Covenants

   43

ARTICLE VI

  

COVENANTS OF THE COMPANY AND PARENT

   43

6.1

  

Regulatory Approvals

   43

6.2

  

Public Announcements

   45

6.3

  

Notification of Certain Matters

   45

6.4

  

Further Assurances

   45

6.5

  

Debt Cooperation

   46

ARTICLE VII

  

CONDITIONS TO THE ARRANGEMENT

   46

7.1

  

Conditions to the Obligations of Each Party

   46

7.2

  

Conditions to the Obligations of Parent and Subco

   46

7.3

  

Conditions to the Obligation of the Company

   48

ARTICLE VIII

  

TERMINATION

   48

8.1

  

Termination

   48

8.2

  

Effect of Termination

   49

8.3

  

Remedies

   49

8.4

  

Termination Fee

   50

ARTICLE IX

  

MISCELLANEOUS

   50

9.1

  

Notices

   50

9.2

  

Survival

   52

9.3

  

Amendments and Waivers

   52

9.4

  

Fees and Expenses

   52

9.5

  

Successors and Assigns

   52

9.6

  

Company Disclosure Letter

   53

9.7

  

Governing Law

   53

9.8

  

Consent to Jurisdiction

   53

9.9

  

Counterparts

   53

9.10

  

Entire Agreement

   53

9.11

  

Captions

   54

9.12

  

Severability

   54

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TABLE OF CONTENTS

(continued)

 

           Page

9.13

  

Specific Performance

   54

ARTICLE X

  

DEFINITIONS

   54

10.1

  

Definitions

   54

10.2

  

Other Defined Terms

   61

10.3

  

Interpretation

   63

EXHIBIT A – Plan of Arrangement

  

EXHIBIT B – Arrangement Resolution

  

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ARRANGEMENT AGREEMENT

ARRANGEMENT AGREEMENT, dated as of August 26, 2007 (this “Agreement”), by and
among UNITED STATES STEEL CORPORATION, a Delaware corporation (“Parent”),
1344973 ALBERTA ULC, a corporation existing under the laws of Alberta and an
indirect wholly-owned Subsidiary of Parent (“Subco”), and STELCO INC., a
corporation existing under the laws of Canada (the “Company”). Capitalized terms
used in this Agreement shall have the meanings assigned to them in Article X, or
in the applicable Section of this Agreement to which reference is made in
Article X.

WHEREAS, subject to the terms and conditions of this Agreement, the parties
hereto intend to propose a statutory plan of arrangement under the CBCA pursuant
to which Parent will cause Subco to, and Subco will, acquire all of the
outstanding common shares in the capital stock of the Company (the “Company
Shares”) for $38.50 per Company Share in cash on the terms set forth in the Plan
of Arrangement attached hereto as Exhibit A;

WHEREAS, the Board of Directors of the Company (the “Board”) desires to support
and facilitate the Plan of Arrangement on the terms set forth in this Agreement
and has unanimously concluded, after receiving financial and legal advice and
following the receipt and review of recommendations from its special committee
of directors (the “Special Committee”), that it is in the best interests of the
Company and the holders of Company Shares (the “Shareholders”) to enter into
this Agreement; and

WHEREAS, concurrently with the execution of this Agreement, and as a condition
and inducement to Parent’s willingness to enter into this Agreement, certain
Shareholders, holding an aggregate of 20,887,548 Company Shares (being
approximately 77% of the issued and outstanding Company Shares) are each
entering into a support agreement with Parent (the “Support Agreement”).

NOW, THEREFORE, in consideration of the foregoing premises and the respective
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:

ARTICLE I

THE ARRANGEMENT

1.1 The Arrangement. The parties hereto agree, on the terms and subject to the
conditions of this Agreement, to carry out the Arrangement in accordance with
this Agreement on the terms set out in the Plan of Arrangement, subject to such
changes as may be mutually agreed to by the parties in accordance with this
Agreement, provided however, that no such change shall result in the
Shareholders, Optionholders or Warrantholders receiving cash consideration per
security less than that provided in Section 1.13

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as unamended on the date hereof, or having less than all of the outstanding
Company Shares, Options and Warrants be acquired. The parties will not add to or
amend the conditions to the Arrangement set forth in Article VII unless such
addition or amendment is made in response to an action by the Court in
connection with its consideration of the Arrangement or the Plan of Arrangement.

1.2 Implementation Steps by the Company. The Company covenants in favour of
Subco and Parent that the Company shall:

(a) file the initial press release contemplated by Section 6.2, together with a
material change report in prescribed form and a copy of this Agreement as a
material contract, with applicable securities regulatory authorities in each
province of Canada;

(b) as soon as reasonably practicable after the execution and delivery of this
Agreement, and in any event no later than 15 Business Days from the date of this
Agreement, bring an application before the Court pursuant to section 192 of the
CBCA for the Interim Order in a manner and form acceptable to Parent, acting
reasonably, providing for, inter alia, the calling and holding of the Company
Meeting, and thereafter proceed with such application and diligently pursue
obtaining the Interim Order in such form;

(c) fix a record date for the purposes of determining the Shareholders entitled
to receive notice of the Company Meeting in accordance with the Interim Order;

(d) subject to obtaining the Interim Order, convene and hold the Company Meeting
as soon as reasonably practicable and in any event on or before November 5, 2007
in accordance with the Interim Order and Applicable Law for the purpose of
having Shareholders consider the Arrangement Resolution and for any other proper
purpose as may be set out in the Circular (as agreed to with the prior written
consent of Parent, acting reasonably and in manner consistent with the purpose
of this Agreement and the transactions contemplated hereby); provided that:

(i) the Company Meeting shall be held regardless of whether the Board determines
at any time that this Agreement is no longer advisable or recommends that the
Shareholders reject the Arrangement Resolution or any other Change of
Recommendation has occurred at any time; and

(ii) the Arrangement Resolution shall be voted on before any other matter at the
Company Meeting, unless otherwise previously agreed to in writing by Parent or
required by a Governmental Entity;

(e) except to the extent required by a Governmental Entity or for quorum
purposes (in the case of an adjournment) or an adjournment pursuant to
Section 4.3(c)(iii), not adjourn, postpone or cancel (or propose the
adjournment, postponement or cancellation of) the Company Meeting without
Parent’s prior written consent, and without limiting the generality of the
foregoing, the Company agrees that its obligations pursuant to Section 1.2(d)
and this Section 1.2(e) shall not be affected by the commencement, public
proposal, public disclosure or communication to the Company or any other person
of any Third Party Proposal;

 

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(f) include in the Circular the unanimous recommendation of the members of the
Board entitled to vote that the Shareholders vote in favour of the Arrangement
Resolution (it being understood that such recommendation may be modified or
withdrawn in the event of a Change of Recommendation permitted by
Section 4.3(c));

(g) solicit from Shareholders proxies in favour of the approval of the
Arrangement Resolution and against any resolution submitted by any other
Shareholder including, if so requested by Parent, using the services of dealers
and proxy solicitation services, and take all other actions that are reasonably
necessary or desirable to seek the approval of the Arrangement by the
Shareholders, provided that if there has been a Change of Recommendation the
Company shall not be required to continue to solicit proxies but shall continue
to be required to hold the Company Meeting in accordance with Section 1.2(d);

(h) take all reasonable steps necessary to allow Parent and any Subsidiary of
Parent, directly or through representatives, to solicit, in accordance with
Applicable Law, from Shareholders proxies in favour of the approval of the
Arrangement Resolution, provided that any such solicitation shall be in a manner
approved by the Company acting reasonably and, if there is a Change of
Recommendation, as is permitted by Applicable Law;

(i) provide notice to Parent of the Company Meeting and, subject to Applicable
Law, allow representatives of Parent to attend and speak at the Company Meeting;

(j) subject to obtaining all approvals as required by the Interim Order, bring
an application as soon as reasonably practicable after the Company Meeting but
in any event not later than three Business Days thereafter, before the Court
pursuant to section 192 of the CBCA for the Final Order in a manner and form
acceptable to Parent, acting reasonably, and thereafter proceed with and
diligently pursue obtaining the Final Order in such form;

(k) subject to obtaining the Final Order and the satisfaction or waiver of the
conditions set forth in Article VII, send to the Director, for endorsement and
filing by the Director, the Articles of Arrangement and such other documents as
may be required in connection therewith under the CBCA to give effect to the
Arrangement pursuant to section 192 of the CBCA in a manner and form acceptable
to Parent, acting reasonably;

(l) permit Parent (and its counsel) to review and comment upon drafts of all
material to be filed by the Company with the Court, the Director or any
Governmental Entity in connection with the Arrangement (including the Circular
and any supplement or amendment contemplated by Section 1.5) prior to the
service (if applicable) and/or filing of such materials, give Parent and its
counsel reasonable time to review and comment upon such materials and accept any
reasonable comments of Parent and its

 

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counsel. The Company shall also provide to Parent’s counsel on a timely basis
copies of any notice of appearance or other Court documents served on the
Company in respect of the application for the Interim Order or the Final Order
or any appeal therefrom and of any notice, whether written or oral, received by
the Company indicating any intention to oppose the granting of the Interim Order
or the Final Order or to appeal the Interim Order or the Final Order;

(m) instruct counsel acting for the Company to bring the applications referred
to in Section 1.2(b) and Section 1.2(j) in cooperation with counsel to Parent;
and

(n) not: (i) file any material with the Court in connection with the Arrangement
or serve any such material, and not agree to modify or amend materials so filed
or served; or (ii) send to the Director, for endorsement and filing by the
Director, the Articles of Arrangement, except, in either case, as contemplated
hereby or with Parent’s prior written consent, such consent not to be
unreasonably withheld, conditioned or delayed.

1.3 Interim Order. The notice of motion for the application for the Interim
Order referred to in Section 1.2(b) shall request that the Interim Order
provide:

(a) for confirmation of the record date for the Company Meeting;

(b) for the classes of Persons to whom notice is to be provided in respect of
the Arrangement and the Company Meeting and for the manner in which such notice
is to be provided;

(c) that the requisite approval for the Arrangement Resolution shall be
two-thirds of the votes cast on the Arrangement Resolution by those entitled to
vote that are present in person or by proxy at the Company Meeting;

(d) that, in all other respects, the terms, restrictions and conditions of the
Company’s articles and bylaws, including quorum requirements and all other
matters, shall apply in respect of the Company Meeting;

(e) for the grant of the Dissent Rights as contemplated in the Plan of
Arrangement;

(f) for the notice requirements with respect to the making of the application to
the Court for the Final Order; and

(g) for such other matters as Parent and the Company may agree or Parent or
Subco may reasonably require subject to obtaining the prior consent of the
Company, such consent not to be unreasonably withheld or delayed.

1.4 Articles of Arrangement. The Articles of Arrangement shall, upon the
endorsement of a certificate thereon by the Director under section 192(7) of the
CBCA, with such other matters as are necessary to effect the Arrangement and
subject to the provisions of the Plan of Arrangement, consummate the Plan of
Arrangement. The Articles of Arrangement shall be prepared in draft prior to the
mailing of the Circular and shall be in form satisfactory to Parent.

 

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1.5 Circular. As promptly as practicable after the execution and delivery of
this Agreement, the Company, in consultation with Parent, will prepare and
complete the Circular together with any other documents required by the CBCA or
other Applicable Law in connection with the Arrangement and the Company Meeting.
The Company Circular and such other documents, together with any amendments
thereto, shall be in form and substance satisfactory to Parent acting reasonably
provided that Parent acknowledges that the contents of the Company Circular must
ultimately be determined by the Company acting reasonably in all the
circumstances. The Company will file the Circular and any other documentation
required to be filed under the Interim Order and Applicable Law in all
jurisdictions where the Circular is required to be filed by the Company and mail
or cause to be mailed the Circular and any other documentation required to be
mailed under the Interim Order and Applicable Law to Shareholders, the directors
of the Company, the auditors of the Company and any other required Persons on or
before September 27, 2007, all in accordance with the terms of the Interim Order
and Applicable Law. In a timely and expeditious manner, the Company shall
prepare (in consultation with Parent) and file amendments or supplements to the
Circular (which amendments or supplements shall be in a form satisfactory to
Parent and its counsel, acting reasonably) required by Applicable Law or as
otherwise agreed between the Company and Parent with respect to the Company
Meeting and mail or otherwise disseminate such amendments or supplements, as
required by the Interim Order and in accordance with all Applicable Law, to such
persons and in all jurisdictions where such amendments or supplements are
required to be mailed or disseminated, complying in all material respects with
all Applicable Law on the date of the mailing or dissemination thereof.

1.6 Preparation of Filings, etc.

(a) The Company shall (in consultation with Parent and its counsel) diligently
do all such acts and things as may be necessary to comply, in all material
respects, with National Instrument 54-101 – “Communication with Beneficial
Owners of Securities of a Reporting Issuer” in relation to the Company Meeting
and, without limiting the generality of the foregoing, shall, in consultation
with Parent, use all reasonable efforts to benefit from the accelerated timing
contemplated by such instrument.

(b) Parent and the Company shall cooperate in: (i) the preparation of the
Circular as described in Section 1.5; (ii) the preparation and filing of any
exemption or other applications or orders and any other documents required by
either of them to discharge their respective obligations under Applicable Law in
connection with the Arrangement; and (iii) the taking of all such action as may
be required under any applicable Securities Laws or the CBCA in connection with
the Arrangement and the Plan of Arrangement.

(c) Each of Parent and the Company shall furnish to the other of them, on a
timely basis, all information as may be reasonably required to effect the
actions contemplated by Section 1.6(a) and Section 1.6(b), and each covenants
that no information

 

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so furnished by it in writing in connection with those actions or otherwise in
connection with the consummation of the Arrangement will contain any
Misrepresentation. Each of the parties hereto will ensure that the information
relating to it and its Subsidiaries, which is provided in the Circular, will not
contain any Misrepresentation.

(d) Each of Parent and the Company shall promptly notify the other of them if,
at any time before the Effective Time, it becomes aware that the Circular or an
application for the Interim Order, the Final Order or any other filing under
Applicable Law contains a Misrepresentation or otherwise requires an amendment
or supplement to the Circular or such application. In any such event, each of
the parties hereto will co-operate in the preparation of a supplement or
amendment to the Circular or such other document, as the case may be, that
corrects that Misrepresentation, and the Company will cause the same to be
distributed or otherwise communicated to the Shareholders in accordance with the
Interim Order, the directors of the Company, the auditors of the Company and any
other required Persons and filed as required under Applicable Law.

(e) The Company shall ensure that the Circular provides Shareholders with
information in sufficient detail to permit them to form a reasoned judgment
concerning the matters to be placed before them at the Company Meeting and
include in the Circular a statement that the Board has unanimously determined
that the Arrangement is in the best interests of the Company and that the Board
unanimously recommends that Shareholders vote in favour of the Arrangement
Resolution (as contemplated by Section 1.2(f)).

1.7 Dissenting Shareholders. The Plan of Arrangement shall provide that
registered Shareholders may exercise Dissent Rights with respect to their
Company Shares in connection with the Arrangement pursuant to and in the manner
set forth in the Interim Order and the Plan of Arrangement. The Company shall
give Parent prompt notice of any written notice of a dissent, withdrawal of such
notice, and any other instruments served pursuant to such Dissent Rights and
received by the Company. The Company shall not make any payment or settlement
offer prior to the Effective Time with respect to any such notice of dissent
unless Parent shall have given its prior written consent to such payment or
settlement offer.

1.8 Amendment. This Agreement may, at any time and from time to time before and
after the holding of the Company Meeting, but not later than the Effective Time,
be amended by mutual written agreement of the parties hereto, without, subject
to Applicable Law, further notice to or authorization on the part of the
Shareholders, and any such amendment may, without limitation:

(a) change the time for the performance of any of the obligations or acts of the
parties, including an extension of the Outside Date;

(b) waive any inaccuracies or modify any representation or warranty contained
herein or in any document to be delivered pursuant hereto;

 

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(c) waive compliance with or modify any of the covenants contained herein or
waive or modify the performance of any of the obligations of the parties; and

(d) waive compliance with and modify any conditions precedent contained herein,

provided, however, that after receipt of approval of the Arrangement Resolution
by the Shareholders, there shall be no amendment that by Applicable Law requires
further approval by the Shareholders without further approval of such
Shareholders.

1.9 List of Shareholders, Warrantholders and Optionholders. At the reasonable
request of Parent from time to time, the Company shall provide Parent with a
list (in both written and electronic form) of the registered Shareholders,
together with their addresses and respective holdings of Company Shares, with a
list of the names and addresses and holdings of all Persons having rights issued
by the Company to acquire Company Shares (including Optionholders and registered
Warrantholders) and a list of non-objecting beneficial owners of Company Shares
or Warrants, together with their addresses and respective holdings of Company
Shares or Warrants. The Company shall from time to time require that its
registrar and transfer agent furnish Parent with such additional information,
including updated or additional lists of Shareholders and lists of holdings and
other assistance as Parent may reasonably request.

1.10 Withholding. The Company, Parent, Subco, one or more other Subsidiaries of
Parent or the Depositary, as the case may be, shall be entitled to directly or
indirectly deduct and withhold from any amount otherwise payable pursuant to
this Agreement or the Plan of Arrangement to any Shareholder, Optionholder or
Warrantholder such amounts as are entitled or required to be deducted and
withheld with respect to the making of such payment under the Tax Act or any
other provision of domestic or foreign (whether national, federal, provincial,
state, local or otherwise) Applicable Law relating to Taxes. To the extent that
amounts are so deducted and withheld and paid to the appropriate Governmental
Entity directly or indirectly by the Company, Parent, Subco or one or more
Subsidiaries of Parent or the Depositary, as the case may be, such deducted and
withheld amounts shall be treated for all purposes of this Agreement and the
Plan of Arrangement as having been paid to the Shareholders, Optionholders or
Warrantholders, as the case may be, in respect of which such deduction and
withholding was made by the Company, Parent, Subco, one or more Subsidiaries of
Parent or the Depositary, as the case may be, provided that such withheld
amounts are actually remitted to the appropriate Governmental Entity within the
time required and in accordance with the Tax Act or any other provision of
domestic or foreign (whether national, federal, provincial, state, local or
otherwise) Applicable Law relating to Taxes.

1.11 Alternative Transaction Structure. At the request of Parent, the Company
shall use commercially reasonable efforts to assist Parent to successfully
implement and complete any alternative transaction structure that: (a) does not
have negative financial consequences to the Company and its Subsidiaries in any
material respect, would provide Shareholders, Optionholders and Warrantholders
with cash consideration not less than the

 

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cash consideration per security receivable under Section 1.13 herein and would
provide for the acquisition of all of the outstanding Company Shares, Options
and Warrants; (b) would reasonably be expected to be completed prior to the
Outside Date; and (c) is otherwise on terms and conditions no more onerous in
any material respect than the Arrangement and this Agreement. In the event that
the transaction structure is so modified, the relevant provisions of this
Agreement shall be modified as necessary in order that they shall apply with
full force and effect, mutatis mutandis, but with the adjustments necessary to
reflect the revised transaction structure, and the parties hereto shall execute
and deliver an agreement in writing giving effect to and evidencing such
amendments as may be reasonably required as a result of such modifications and
adjustments.

1.12 Closing. The closing of the transactions contemplated hereby (the
“Closing”) shall take place at the offices of Osler, Hoskin & Harcourt LLP, 1
First Canadian Place, Toronto, Ontario, M5X 1B8, as soon as possible, but in any
event no later than two Business Days after satisfaction or waiver of the
conditions set forth in Article VII (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the satisfaction or
waiver of those conditions at the Closing), or on such other date or at such
other place as Parent and the Company may mutually agree (the “Closing Date”).

1.13 Consideration. The Articles of Arrangement shall provide that the
Shareholders, Optionholders and Warrantholders shall receive the following
consideration:

(a) $38.50 in cash per Company Share (the “Share Consideration”);

(b) for each Option outstanding as of the Effective Time, a cash payment equal
to the product of (i) the excess, if any, of the Share Consideration over the
exercise price per share of such Option, multiplied by (ii) the number of
Company Shares issuable upon exercise of such Option (with the aggregate amount
rounded down to the nearest cent); and

(c) for each Warrant outstanding as of the Effective Time, a cash payment equal
to the product of (i) the excess, if any, of the Share Consideration over the
exercise price per share of such Warrant, multiplied by (ii) the number of
Company Shares issuable upon exercise of such Warrant (with the aggregate amount
rounded down to the nearest cent).

If between the date of this Agreement and the Effective Time, the outstanding
Company Shares shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares or any similar event,
the Share Consideration and any other amounts payable pursuant to this Agreement
shall be correspondingly adjusted to the extent appropriate to reflect such
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares or similar event.

 

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ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the disclosure letter dated the date hereof and provided
to Parent by the Company (the “Company Disclosure Letter”), the Company
represents and warrants to Parent that:

2.1 Organization and Good Standing. The Company is a corporation duly organized
and validly existing under the laws of Canada and has all corporate powers
required to own, lease and operate its properties and to carry on its business
as now being conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where the failure to
be so qualified and in good standing would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. The Company
has delivered to Parent prior to the date of this Agreement complete and correct
copies of its constating documents as currently in effect.

2.2 Authority and Enforceability.

(a) The Company has all requisite corporate power and authority to enter into
this Agreement, and subject to the approval by the Shareholders in the manner
required by the Interim Order (the “Company Shareholder Approval”) and the
approval by the Court, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by the Board and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or the transactions contemplated hereby other than the
Company Shareholder Approval and the approval by the Court. This Agreement has
been duly executed and delivered by the Company and constitutes the valid and
binding obligation of the Company, enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
creditors’ rights generally, and the availability of injunctive relief and other
equitable remedies.

(b) At a meeting duly called and held, prior to the execution of this Agreement,
at which all directors of the Company were present, the Board, following
consultation with its financial and legal advisors and on receipt of a
recommendation of the Special Committee of the Board, unanimously (i) approved
and declared advisable this Agreement and the transactions contemplated hereby,
(ii) determined that the Arrangement is fair to the Shareholders and is in the
best interests of the Company, and (iii) resolved to recommend that the
Shareholders vote in favour of the Arrangement.

2.3 Authorizations. The execution, delivery and performance by the Company of
this Agreement and the consummation of the transactions contemplated hereby
require no action by or in respect of, or filing with, any Governmental Entity,
other than (i) the

 

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Interim Order, (ii) the Company Shareholder Approval, (iii) the Final Order,
(iv) compliance with the applicable requirements of (A) the Competition Act
(Canada), as amended (the “Canadian Competition Act”), (B) the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the “HSR Act”), (C) the Investment Canada
Act, and (D) the antitrust and competition laws of all relevant jurisdictions
other than those of the United States and Canada (the “Other Antitrust Laws”),
(v) compliance with the applicable requirements of applicable Canadian and U.S.
federal, national, state or provincial securities laws (the “Securities Laws”),
(vi) filings with the Director under the CBCA, (vii) such filings under the
rules of the TSX as may be required in connection with this Agreement and the
transactions contemplated hereby, and (viii) any other material consents,
approvals, orders, authorizations, registrations, declarations, filings and
notices.

2.4 Non-Contravention. The execution, delivery and performance by the Company of
this Agreement and the consummation of the Arrangement and the other
transactions contemplated hereby do not and will not (i) contravene, conflict
with, or result in any violation or breach of any provision of the constating
documents of the Company or any of its Subsidiaries, (ii) assuming compliance
with the matters referred to in Section 2.3, contravene, conflict with, or
result in a violation or breach of any provision of any Applicable Law or Order,
(iii) other than as set forth in Schedule 2.4 of the Company Disclosure Letter,
require any consent or other action by any Person under, constitute a default,
or an event that, with or without notice or lapse of time or both, would
constitute a default under, or cause or permit the termination, cancellation,
acceleration or other change of any right or obligation or the loss of any
benefit under, any provision of any Contract binding upon the Company or any of
its Subsidiaries or any Authorization affecting, or relating in any way to, the
assets or business of the Company or any of its Subsidiaries, or (iv) result in
the creation or imposition of any Lien on any asset of the Company or any of its
Subsidiaries, with such exceptions, in the case of each of clauses (ii) through
(iv), as would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.

2.5 Capitalization.

(a) The authorized capital stock of the Company consists of an unlimited number
of Company Shares, an unlimited number of preferred shares, issuable in series,
and an unlimited number of redeemable shares. As of the close of business on
August 24, 2007, (i) 27,128,870 Company Shares were issued and outstanding,
(ii) no preferred shares were issued and outstanding, (iii) no redeemable shares
were issued and outstanding, (iv) options to purchase an aggregate of 1,925,250
Company Shares (“Options”) were issued and outstanding (of which Options to
purchase an aggregate of 429,750 Company Shares were exercisable), and
(v) warrants to purchase an aggregate of 2,259,480 Company Shares (“Warrants”)
were issued and outstanding. All outstanding Company Shares have been duly
authorized and validly issued and are fully paid and nonassessable. None of the
Company Shares are subject to, nor were they issued in violation of, any
preemptive right, subscription right or similar right. No Company Shares are
owned by any Subsidiary or Affiliate of the Company.

 

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(b) Schedule 2.5(b) of the Company Disclosure Letter sets forth, as of the close
of business on August 24, 2007, a complete and correct list of (i) all
outstanding Options, including with respect to each such Option, the number of
shares subject to such Option, the name of the holder, the grant date, the
exercise price per share, the vesting schedule (including any portion that would
become vested as a result of the transactions contemplated hereby) and
expiration date of each such Option and of the form of Option award agreement
pursuant to which such option was granted. The Company has delivered to Parent a
complete and correct list of all registered Warrantholders as contemplated by
Section 1.9 of this Agreement. The Company Option Plans set forth in Schedule
2.5(b) of the Company Disclosure Letter are the only plans or programs the
Company or any of its Subsidiaries maintains under which stock options,
restricted shares, restricted share units, stock appreciation rights,
performance shares or other compensatory equity-based awards have been granted
and remain outstanding or may be granted. No Options contain terms that are
inconsistent with or in addition to the terms of the form of the Option award
agreement referred to above.

(c) Except as set forth in this Section 2.5 and Schedule 2.5(c) of the Company
Disclosure Letter and for changes since August 24, 2007 resulting from the
exercise of Options or Warrants outstanding on that date, there are no
outstanding (i) shares of capital stock or voting securities of the Company,
(ii) securities of the Company convertible into or exchangeable for shares of
capital stock or voting securities of the Company, (iii) options, warrants or
other rights or arrangements to acquire from the Company, or other obligations
or commitments of the Company to issue, any capital stock or other voting
securities or ownership interests in, or any securities convertible into or
exchangeable for capital stock or other voting securities or ownership interests
in, the Company, (iv) restricted shares, restricted share units, stock
appreciation rights, performance shares, contingent value rights, “phantom”
stock or similar securities or rights that are derivative of, or provide
economic benefits based, directly or indirectly, on the value or price of, any
capital stock of, or other voting securities or ownership interests in, the
Company (the items in clauses (i) through (iv) being referred to collectively as
the “Company Securities”), (v) voting trusts, proxies or other similar
agreements or understandings to which the Company or any of its Subsidiaries is
a party or by which the Company or any of its Subsidiaries is bound with respect
to the voting of any shares of capital stock of the Company or any of its
Subsidiaries, (vi) obligations or commitments of any character restricting the
transfer of, or requiring the registration for sale of, any shares of capital
stock of the Company or any of its Subsidiaries, or (vii) obligations or
commitments of any character of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any of the Company Securities. Neither
the Company nor any of its Subsidiaries is a party to any voting agreement with
respect to the voting of any Company Securities nor, to the knowledge of the
Company, are there any such voting agreements other than the Support Agreement.

(d) There are no outstanding bonds, debentures, notes or other obligations of
the Company the holders of which have the right to vote (or convertible into, or
exercisable or exchangeable for, securities having the right to vote) on any
matter on which the Shareholders may vote.

 

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2.6 Subsidiaries and Principal Joint Ventures of the Company.

(a) Schedule 2.6(a) of the Company Disclosure Letter sets forth a complete and
correct list of each Subsidiary of the Company, and its place and form of
organization. Each Subsidiary of the Company is validly existing and in good
standing under the laws of the jurisdiction of its formation, has all requisite
power to carry on its business as now being conducted and is duly qualified to
do business and is in good standing in each jurisdiction where such
qualification is necessary, except where the failure to be so qualified would
not reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect.

(b) Except as set forth in Schedule 2.6(b) of the Company Disclosure Letter, all
of the outstanding capital stock of, or other voting securities or ownership
interests in, each Subsidiary of the Company is owned by the Company, directly
or indirectly, free and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other voting securities or ownership
interests), other than Liens for taxes not yet due and payable that are payable
without penalty. There are no outstanding (i) securities of the Company or any
of its Subsidiaries convertible into or exchangeable for shares of capital stock
or other voting securities or ownership interests in the Company or any
Subsidiary of the Company, (ii) options, warrants or other rights or
arrangements to acquire from the Company or any of its Subsidiaries, or other
obligations or commitments of the Company or any of its Subsidiaries to issue,
any capital stock of or other voting securities or ownership interests in, or
any securities convertible into or exchangeable for any capital stock of or
other voting securities or ownership interests in, any Subsidiary of the
Company, or (iii) restricted shares, stock appreciation rights, performance
shares, contingent value rights, “phantom” stock or similar securities or rights
that are derivative of, or provide economic benefits based, directly or
indirectly, on the value or price of, any capital stock of, or other voting
securities or ownership interests in, any Subsidiary of the Company (the items
in clauses (i) through (iii), in addition to all shares of capital stock or
voting securities of the Company’s Subsidiaries, being referred to collectively
as the “Company Subsidiary Securities”). There are no outstanding obligations of
the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any of the Company Subsidiary Securities.

(c) Except as set forth on Schedule 2.6(c) of the Company Disclosure Letter, the
Company owns, directly or indirectly, the percentages of outstanding capital
stock of, or other voting securities or ownership interests in, each Principal
Joint Venture set forth in Schedule 2.6(c) of the Company Disclosure Letter
(collectively, the “Principal Joint Venture Interests”), and the Principal Joint
Venture Interests are owned by the Company free and clear of any Lien and free
of any other limitation or restriction (including any restriction on the right
to vote, sell or otherwise dispose of the Principal Joint Venture Interests),
other than Liens for taxes not yet due and payable that are payable without
penalty.

 

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(d) Except for the Company Subsidiary Securities and the Principal Joint Venture
Interests, and except as set forth in Schedule 2.6(d) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries directly or indirectly
owns any equity, ownership, profit, voting or similar interest in or any
interest convertible, exchangeable or exercisable for, any equity, profit,
voting or similar interest in, any Person.

2.7 Securities Laws Filings.

(a) The Company has filed with the Ontario Securities Commission (the “OSC”) all
forms, reports, schedules and other documents required to be filed by the
Company since January 1, 2006 (collectively, the “Company Securities Reports”).
As of the respective dates they were filed (and if amended or superseded by a
filing prior to the date of this Agreement then on the date of such filing),
(i) each Company Securities Report complied in all material respects with the
requirements of the Securities Act, and (ii) none of the Company Securities
Reports contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. No Subsidiary of the Company has filed, or is required to
file, any form, report or other document with the OSC, the United States
Securities and Exchange Commission or any similar Governmental Entity or any
stock exchange, national securities exchange or quotation service. As of the
date of this Agreement, there are no outstanding or unresolved comments in
comment or request letters received from the OSC staff with respect to the
Company Securities Reports.

(b) The Company has made available to Parent true, correct and complete copies
of all correspondence with the OSC since March 31, 2006. The Company is not
aware of any ongoing OSC review of the Company Securities Reports.

(c) The Company Shares are listed on the TSX and the Company is in compliance in
all material respects with the applicable listing and corporate governance rules
and regulations of the TSX.

(d) The Company has established and maintained disclosure controls and
procedures that are sufficient to ensure that all material information relating
to the Company, including its Subsidiaries, is made known to the Company’s chief
executive officer and chief financial officer by others within those entities as
appropriate to allow timely decisions regarding required disclosure in the
Company Securities Reports.

(e) The Company has established and maintained internal controls over financial
reporting that provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with Canadian generally accepted accounting principles
(“GAAP”). To the Company’s knowledge, (i) there are no significant deficiencies
or material weaknesses in the design or operation of the Company’s internal
controls which could adversely affect the Company’s ability to record, process,
summarize and report financial data and (ii) there is no fraud, whether or not
material, that involves management or other Employees who have a significant
role in the Company’s internal controls.

 

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(f) Neither the Company Shares nor any other securities of the Company are
registered, or required to be registered, pursuant to Section 12 of the United
States Securities Exchange Act of 1934, as amended, and the Company is not
required to file reports pursuant to Section 12 or 15(d) of such Act or pursuant
to any other Applicable Law governing the listing or trading of securities other
than the Securities Laws and the requirements of the TSX.

(g) The Company is a “reporting issuer” under the Securities Laws and is not in
default of any material requirements under the Securities Laws. No delisting,
suspension of trading or cease trading order with respect to the Company Shares
is pending or, to the knowledge of the Company, threatened. To the knowledge of
the Company, no inquiry, review or investigation (formal or informal) of the
Company by any securities regulatory authority under applicable Securities Laws
or the TSX is in effect or ongoing or expected to be implemented or undertaken.

(h) The chief executive officer of the Company and the chief financial officer
of the Company each has made all certifications required by Multilateral
Instrument 52 109 – “Certification of Disclosure in Issuers’ Annual and Interim
Filings”, as applicable, with respect to the Company Securities Reports, and the
statements contained in such certifications were accurate as of the date they
were made.

(i) Neither the Company nor any of its Subsidiaries is a party to, or has any
commitment to become a party to, any joint venture, off-balance sheet
partnership or any similar Contract (including any Contract relating to any
transaction or relationship between or among the Company and any of its
Subsidiaries, on the one hand, and any unconsolidated affiliate, including any
structured finance, special purpose or limited purpose entity or person, on the
other hand, or any “off-balance sheet arrangements” (as defined in Item 303(a)
of Regulation S-K of the United States Securities and Exchange Commission)),
where the result, purpose or effect of such Contract is to avoid disclosure of
any transaction involving, or liabilities of, the Company or any of its
Subsidiaries in the Company’s or any of its Subsidiaries’ published financial
statements or other Company Securities Reports.

2.8 Financial Statements. Each of the consolidated financial statements
(including, in each case, any notes thereto) contained in the Company Securities
Reports (the “Company Financial Statements”) was prepared in accordance with
GAAP applied on a consistent basis throughout the periods indicated (except, in
the case of unaudited statements, as permitted by the rules and regulations of
the OSC) and each presents fairly, in all material respects, the consolidated
financial position, results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring year end
adjustments which would not reasonably be expected to be, individually or in the
aggregate, material to the Company and its Subsidiaries taken as a whole and the
absence of notes that would be required in audited statements). The most recent
audited balance sheet of the Company contained in the Company Securities Reports
as of December 31, 2006 is hereinafter referred to as the “Company Balance
Sheet” and the date thereof is hereinafter referred to as the “Company Balance
Sheet Date”.

 

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2.9 No Undisclosed Liabilities. The Company and its Subsidiaries have no
liabilities or obligations of any nature whatsoever, asserted or unasserted,
known or unknown, absolute or contingent, accrued or unaccrued, matured or
unmatured or otherwise, except: (a) liabilities or obligations disclosed and
provided for in the Company Balance Sheet or disclosed in the notes thereto or
disclosed in the Company’s Securities Report; (b) liabilities or obligations
incurred in the ordinary course of business since the Company Balance Sheet
Date; (c) material liabilities or obligations incurred pursuant to the
transactions contemplated or permitted by this Agreement or the Company
Disclosure Letter; and (d) liabilities or obligations that are not, individually
or in the aggregate, material to the Company and its Subsidiaries taken as a
whole.

2.10 Circular. The Circular, and any amendments or supplements thereto, will
when filed, distributed or disseminated, as applicable, comply as to form in all
material respects with the applicable requirements of Applicable Law. The
Circular and any amendment or supplement thereto, at each of (i) the time such
Circular or any such amendment or supplement is first mailed to the Shareholders
and (ii) the time the Shareholders vote on adoption of this Agreement, will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties contained in this Section 2.10 will not apply to statements or
omissions included in the Circular based upon information furnished to the
Company by or on behalf of Parent or Subco specifically for use therein.

2.11 Absence of Certain Changes or Events. Since the Company Balance Sheet Date
and through to the date hereof, the Company and its Subsidiaries have conducted
their respective businesses in the ordinary course consistent with past practice
and there has not been:

(a) any change, circumstance, event, occurrence or development that has had or
would reasonably be expected to have a Company Material Adverse Effect;

(b) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any Company
Securities or Company Subsidiary Securities (except for any dividends or other
distributions by any direct or indirect wholly-owned Subsidiary to the Company
or a wholly-owned Subsidiary of the Company, and, in the case of Subsidiaries
which are not wholly-owned Subsidiaries, for dividends or other distributions
pursuant to Material Contracts in respect of such Subsidiaries entered into
prior to the date hereof, the amount of which the Company has received since
March 31, 2006 which the Company has disclosed to Parent in Schedule 2.11(b) of
the Company Disclosure Letter), or any repurchase, redemption or other
acquisition by the Company or any of its Subsidiaries of any outstanding shares
of capital stock or other securities of the Company or any of its Subsidiaries;

 

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(c) except as set forth in Schedule 2.11(c) of the Company Disclosure Letter,
any (i) increase in the compensation or benefits payable or to become payable to
its officers, directors or Employees (except for salary or wage increases that
are required by applicable Collective Agreements or in the case of officers,
directors or Employees that are increased in the ordinary course of business
consistent with past practice), or (ii) establishment, adoption, or entry into
of any bonus, severance, termination, pension, or other employee benefit plan,
agreement or arrangement made to, for or with any of its directors, officers or
Employees other than reimbursements and advances of expenses in the ordinary
course of business consistent with past practice and immaterial arrangements for
specific individuals;

(d) any material labour dispute, except for individual grievances which
individually, or in the aggregate, have not had, and are not reasonably expected
to have, a Company Material Adverse Effect, or to the knowledge of the Company,
except as set forth in Schedule 2.11(d) of the Company Disclosure Letter, any
activity or proceeding commenced by a labour union or representative thereof to
organize any Employees;

(e) any material damage, destruction or loss with respect to the material
property and assets owned, leased or otherwise used by the Company or any of its
Subsidiaries, whether or not covered by insurance;

(f) except as disclosed in the Company Securities Reports, any change in any
method of accounting principles, method or practices, except for any such change
required by reason of a concurrent change in or implemented to comply with, GAAP
or Applicable Law (as agreed to by the Company’s independent auditor) and except
for any changes in any accounting practices that are recommended by the
Company’s independent auditor, by the Company or any of its Subsidiaries;

(g) any Tax election, change in method of Tax accounting or settlement of any
claim for Taxes, other than claims that individually or in the aggregate are not
material; or

(h) any agreement, whether in writing or otherwise, to do any of the foregoing.

2.12 Compliance with Law. The Company and each of its Subsidiaries is and, since
January 1, 2006 has been, in compliance in all material respects with all
Applicable Law and Orders. Neither the Company nor any of its Subsidiaries has
received any written notice since January 1, 2006 which has not been resolved
prior to the date of this Agreement without material liability to the Company or
its Subsidiaries (i) of any administrative or civil, or criminal investigation
or audit by any Governmental Entity relating to the Company or any of its
Subsidiaries, or (ii) from any Governmental Entity alleging that the Company or
any of its Subsidiaries is not in compliance in any material respect with any
material Applicable Law or Order. Each of the Company and its Subsidiaries has
in effect all material Authorizations necessary for it to own, lease or
otherwise hold and to operate its material properties and assets and to carry on
its businesses and operations as now conducted. There have occurred no defaults
(with or without notice or lapse of time or both) under, violations of, or
events giving rise to any right of termination, amendment or cancellation of any
such material Authorizations.

 

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2.13 Litigation. There is no material action, suit or proceeding, claim,
arbitration, litigation or investigation (each, an “Action”) pending or, to the
Company’s knowledge, threatened (i) against or affecting the Company or any of
its Subsidiaries, except as set forth in Schedule 2.13 of the Company Disclosure
Letter (ii) that challenges or seeks to prevent, enjoin or otherwise delay the
Arrangement or any Support Agreement. There is no Action against any current
officer or director of the Company or, to the Company’s knowledge, any current
or former employee or former director or officer of the Company or any of its
Subsidiaries with respect to which the Company or any of its Subsidiaries has or
is reasonably likely to have an indemnification obligation. There is no material
unsatisfied judgment, penalty or award against or affecting the Company or any
of its Subsidiaries or any of their respective properties or assets. Except as
set forth in Schedule 2.13 of the Company Disclosure Letter, there is no
material Order to which the Company or any of its Subsidiaries or any of their
respective properties or assets is subject.

2.14 Contracts.

(a) “Material Contract” shall mean each Contract or series of related Contracts
to which the Company or any of its Subsidiaries is a party, and is currently
binding on the Company or any of its Subsidiaries, or is subject, or by which
any of their respective assets are bound:

(i) for the purchase of materials, supplies, goods, services, equipment or other
assets and that involves or would reasonably be expected to involve aggregate
payments by the Company or any of its Subsidiaries of $10,000,000 or more in the
year ending December 31, 2006, $5,000,000 or more between January 1, 2007 and
August 21, 2007 or are anticipated to involve aggregate payments of $10,000,000
or more in the year ending December 31, 2007;

(ii) for the sale by the Company or any of its Subsidiaries of materials,
supplies, goods, services, equipment or other assets pursuant to which the
Company or any of its Subsidiaries invoiced amounts of more than $10,000,000 in
the year ended December 31, 2006 or $5,000,000 or more between January 1, 2007
and July 31, 2007 or expects to invoice amounts of more than $10,000,000 in the
year ending December 31, 2007;

(iii) that requires the Company or any of its Subsidiaries to purchase its total
requirements of any material product or service from a third party or that
contains “take or pay” provisions;

(iv) that continues over a period of more than twelve (12) months from the date
hereof and provides for payments to or by the Company or any of its Subsidiaries
exceeding $5,000,000, except for arrangements disclosed pursuant to
subparagraphs (i), (ii) and (iii) above and (xii) below;

 

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(v) that is an employment, consulting, termination or severance Contract, except
for any such Contract that is terminable at-will or on notice where the payment
for termination does not exceed $500,000 by the Company or any of its
Subsidiaries without liability to the Company or such Subsidiary;

(vi) that is a partnership or joint venture Contract;

(vii) that is a (A) Lease or (B) Contract for the lease of personal property, in
each case which provides for payments to or by the Company or any of its
Subsidiaries in any one case of $5,000,000 or more over the term of the lease;

(viii) with any Governmental Entity;

(ix) with any current or former director or officer;

(x) that is a note, debenture, bond, equipment trust, letter of credit, loan or
other Contract for Indebtedness or lending of money (other than advances or
reimbursements to Employees in the ordinary course of business consistent with
past practice) owing to or by the Company or any of its Subsidiaries or Contract
for a line of credit or guarantee, pledge or undertaking of the Indebtedness of
any other Person;

(xi) for a charitable or political contribution in excess of $100,000;

(xii) for any capital expenditures or leasehold improvements in excess of
$10,000,000;

(xiii) that restricts or purports to restrict the right of the Company or any of
its Subsidiaries to engage in any line of business, acquire any property,
develop or distribute any product or provide any service (including geographic
restrictions) or to compete with any Person or granting any exclusive
distribution rights, in any market, field or territory;

(xiv) that relates to the acquisition or disposition of any material business,
operations, facilities or joint ventures (whether by merger, sale of stock, sale
of assets or otherwise);

(xv) that is a Collective Agreement with any labour organization, union or
association; and

(xvi) that is with any of the Principal Joint Ventures.

(b) Set forth in Schedule 2.14(b) of the Company Disclosure Letter is a complete
and accurate list of each Material Contract as of the date of this Agreement.
Each Material Contract is in full force and effect in all material respects and
is valid and enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to creditors’ rights
generally, and the availability of injunctive relief and other equitable
remedies. The Company has provided or made available accurate and complete
copies of each written Material Contract to Parent.

 

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(c) Neither the Company nor any of its Subsidiaries is, and to the Company’s
knowledge, no other party thereto is, in material default in the performance,
observance or fulfillment of any material obligation, covenant, condition or
other term contained in any Material Contract, and neither the Company nor any
of its Subsidiaries has given or received written notice to or from any Person
relating to any such alleged or potential default that has not been cured. To
the knowledge of the Company, no event has occurred that, with or without the
giving of notice or lapse of time, or both, would conflict with or result in a
material violation or breach of, or give any Person the right to exercise any
material remedy under or accelerate the maturity or performance of, or cancel,
terminate or modify, any Material Contract.

2.15 Taxes.

(a) Each of the Company and its Subsidiaries has timely made or prepared all
material Tax Returns and filed all material Tax Returns required to have been
made or prepared or filed by or with respect to the Company or such Subsidiary.
Each such Tax Return is correct and complete in all material respects. All Taxes
owed by the Company and each Subsidiary of the Company (whether or not shown on
any Tax Return) including all instalments on account of Taxes for the current
year have been timely paid. Except as set forth in Schedule 2.15(a) of the
Company Disclosure Letter, each of the Company and its Subsidiaries has
adequately provided for, in its books of account and related records, all
liability for all unpaid Taxes, being current Taxes not yet due and payable, as
well as reserves for Taxes that are in dispute with any Taxing Authority or that
may reasonably be expected to be in dispute in the future.

(b) Each of the Company and its Subsidiaries has withheld and timely remitted to
the appropriate Governmental Entity all Taxes required to have been withheld and
remitted by it and has complied in all material respects with Applicable Law
relating to the withholding of Taxes.

(c) Except as set forth in Schedule 2.15(c) of the Company Disclosure Letter,
there is no claim, audit, action, suit or proceeding pending, or, to the
Company’s knowledge, threatened against or with respect to the Company or any of
its Subsidiaries in respect of any Tax or Tax Return nor, to the Company’s
knowledge, is there any investigation with respect to the Company or any of its
Subsidiaries in respect of any Tax or Tax Return. There are no Liens for Taxes
(other than for current Taxes not yet due and payable) upon the assets of the
Company.

(d) Schedule 2.15(d) of the Company Disclosure Letter lists, as of the date of
this Agreement, all jurisdictions in which the Company or any of its
Subsidiaries currently files Tax Returns. No claim has been made by an authority
since January 1, 2002 in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that any of them is or may be subject to
taxation by that jurisdiction or that any of them must file Tax Returns.

 

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(e) Except as set forth in Schedule 2.15(e) of the Company Disclosure Letter,
neither the Company nor any of its Subsidiaries (i) has ever been a party to any
Tax allocation or sharing agreement or Tax indemnification agreement, (ii) has
ever been a member of an affiliated, consolidated, condensed or unitary group or
(iii) has any liability for or obligation to pay Taxes of any other Person under
United States Treasury Regulation section 1.1502 6 (or any similar provision of
Tax law), or as transferee or successor, by contract or otherwise.

(f) The Company has not entered into any transaction that constitutes a
“reportable listed transaction” within the meaning of United States Treasury
Regulation section 1.6011 4(b).

(g) Except as set forth in Schedule 2.15(g) of the Company Disclosure Letter,
none of the Company or any of its Subsidiaries has requested, offered to enter
into or entered into any agreement or other arrangement, or executed any waiver,
providing for any extension of time within which (i) to file any Tax Return
covering any Taxes for which the Company or any of its Subsidiaries is or may be
liable; (ii) to file any elections, designations or similar filings relating to
Taxes for which the Company or any of its Subsidiaries is or may be liable;
(iii) the Company or any of its Subsidiaries is required to pay or remit any
Taxes or amounts on account of Taxes; or (iv) any Governmental Entity may assess
or collect Taxes for which the Company or any of its Subsidiaries is or may be
liable.

(h) Each of the Company and its Subsidiaries has duly and timely collected all
amounts on account of any sales or transfer taxes, including goods and services,
harmonized sales and provincial, state or territorial sales taxes, required to
be collected by it and has duly and timely remitted to the appropriate
Governmental Entity any such amounts required to be remitted by it.

(i) None of the Company or any of its Subsidiaries has acquired property from a
non-arm’s length Person, within the meaning of the Tax Act, for consideration,
the value of which is less than the fair market value of the property acquired
in circumstances which could subject it to a liability under section 160 of the
Tax Act.

(j) Neither the Company or any of its Subsidiaries has any liability for any
Taxes of any Principal Joint Venture.

2.16 Employee Benefits.

(a) Current and complete copies of all written Company Benefit Plans, except
Multiemployer Plans, as amended to date or, where oral and material, written
summaries of the terms thereof, and all booklets and communications concerning
the Company Benefit Plans which have been provided to persons entitled to
benefits under the Company Benefit Plans, have been delivered or made available
to Parent together with copies of all material documents relating to the Company
Benefit Plans, including, as applicable: (i) all trust agreements, funding
agreements, insurance contracts and policies, investment management agreements,
subscription and participation agreements, and any

 

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benefit administration contracts; (ii) all significant, non-confidential legal
opinions, and consultants’ reports relating to the administration or funding of
any Company Benefit Plan or the use of the funds held under such Company Benefit
Plans; (iii) all financial and accounting statements and reports for each of the
last three years and all reports, statements, valuations, returns and
correspondence for each of the last three years which affect premiums,
contributions, refunds, deficits or reserves under any Company Benefit Plan;
(iv) the three most recent actuarial reports (whether or not such actuarial
reports were filed with a Governmental Entity) and any supplemental cost
certificates filed with any Governmental Entity; (v) all annual information
returns or other returns filed with, and significant correspondence from, any
Governmental Entity within the last three years relating to the Company Benefit
Plan; and (vi) all Company Benefit Plan amendments or other documents reflecting
ad hoc increases, upgrades and improvements to the Company Benefit Plans which
have been implemented within the last three years.

(b) Each Company Benefit Plan that is not a Multiemployer Plan has been and is
currently administered in compliance in all material respects with its
constituent documents and with all reporting, disclosure and other requirements
of Applicable Law. Schedule 2.16(b) of the Company Disclosure Letter identifies
each Company Benefit Plan that is a defined benefit Pension Plan or
Multiemployer Plan.

(c) Except as set forth in Schedule 2.16(c) of the Company Disclosure Letter,
with respect to each Company Benefit Plan, there are no actions, suits or claims
(other than routine claims for benefits in the ordinary course) pending or, to
the Company’s knowledge, threatened against any Company Benefit Plan that is not
a Multiemployer Plan, the Company, any Subsidiary of the Company, or, to the
Company’s knowledge, any trustee or agent of any Company Benefit Plan that is
not a Multiemployer Plan. Except as set forth in Schedule 2.16(c) of the Company
Disclosure Letter, no Company Benefit Plan that is not a Multiemployer Plan is
currently under any governmental investigation or audit and, to the knowledge of
the Company, no such investigation or audit is contemplated or under
consideration.

(d) The Company and its Subsidiaries have made all required contributions under
each Company Benefit Plan and with respect to all Company Benefit Plans, other
than Multiemployer Plans, that are funded plans, to the Company’s knowledge,
there has been no material adverse change in the funded status of such plans
since the effective date of the most recently filed funding valuations therefor.
The sole obligation of the Company and its Subsidiaries to or in respect of any
Multiemployer Plan is to make the required contributions to the Multiemployer
Plan in the amounts and in the manner set forth in Schedule 2.16(d) of the
Company Disclosure Letter.

(e) Except as set forth in Schedule (e)2.16(e) of the Company Disclosure Letter,
none of the Company, any Subsidiary of the Company or any Governmental Entity
has instituted proceedings to terminate any Company Benefit Plan that is not a
Multiemployer Plan or place any Company Benefit Plan that is not a Multiemployer
Plan under the administration of any trustee, receiver or Governmental Entity,
and no Governmental Entity has informed the Company or any Subsidiary of the
Company that it intends to institute any such proceedings.

 

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(f) Except as set forth in Schedule 2.16(f) of the Company Disclosure Letter,
none of the Company Benefit Plans, other than the Pension Plans, provide
benefits beyond retirement or other termination of service to Employees or
former Employees, or to their beneficiaries or dependants.

(g) Except as set forth in Schedule 2.16(g) of the Company Disclosure Letter,
the consummation of the Arrangement will not (either alone or in conjunction
with any other event) (i) entitle any current or former director, Employee,
contractor or consultant of the Company or any of its Subsidiaries to severance
pay, unemployment compensation or any other payment or (ii) accelerate the time
of payment or vesting, or increase the amount of compensation due to any such
director, Employee, contractor or consultant, or result in the payment of any
other benefits in a material way to any Person or the forgiveness of any
Indebtedness of any Person.

(h) With respect to each Company Benefit Plan that is funded wholly or partially
through an insurance policy, all premiums required to have been paid to date
under the insurance policy have been paid, all premiums required to be paid
under the insurance policy through the Closing will have been paid on or before
the Closing and, as of the Closing, there will be no liability of the Company or
any Subsidiary of the Company under any insurance policy or ancillary agreement
with respect to such insurance policy in the nature of a retroactive rate
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of events occurring prior to the Closing.

(i) The Company has provided to Parent copies of all material Contracts, Orders
or other understandings that the Company or any of its Subsidiaries has with any
Governmental Entity concerning any Company Benefit Plan that is not a
Multiemployer Plan.

(j) Neither the Company nor any of its Subsidiaries has a formal plan nor have
they made any promise or commitment, whether legally binding or not, to create
any additional plan that would be considered a Company Benefit Plan if it
currently existed, or to improve or change the benefits in a material way
provided under any Company Benefit Plan or otherwise amend any Company Benefit
Plan.

(k) There is no entity other than the Company or its Subsidiaries participating
in any Company Benefit Plan, other than any Multiemployer Plan.

(l) To the Company’s knowledge, all data necessary to administer each Company
Benefit Plan that is not a Multiemployer Plan is in the possession of the
Company or its agents and is in a form which is sufficient for the proper
administration of the Company Benefit Plan in accordance with its terms and all
Applicable Law and such data is complete and correct.

(m) Neither the Company nor any of its Subsidiaries is the sponsor or
administrator of, nor is it a party to, nor to the Company’s knowledge do any
Employees participate in, any employee benefit plan, program, policy, agreement
or arrangement sponsored, maintained or contributed to by any of the Principal
Joint Ventures or to which any of the Principal Joint Ventures is a party or is
bound, or in which the employees of any of the Principal Joint Ventures
participate.

 

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(n) Schedule 2.16(n) of the Company Disclosure Letter sets forth the number of
U.S. citizens and U.S. permanent resident aliens that participate in any Company
Benefit Plans.

2.17 Properties.

(a) Except as set forth in Schedule 2.17(a) of the Company Disclosure Letter,
with respect to all personal properties and assets that they purport to own,
including all properties and assets reflected as owned on the Company Balance
Sheet (other than personal property and assets disposed of in the ordinary
course of business since the date thereof), the Company or one of its
Subsidiaries has good and valid title to all of such properties and assets, free
and clear of all Liens other than Permitted Liens.

(b) With respect to personal properties and assets that are leased, the Company
or one of its Subsidiaries has a valid leasehold interest in such properties and
assets and all such leases are in full force and effect and constitute valid and
binding obligations of the other party(ies) thereto, except as such obligations
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to creditors’ rights generally, and the
availability of injunctive relief and other equitable remedies. Neither the
Company nor any of its Subsidiaries nor, to the Company’s knowledge, any other
party thereto is in violation in any material respect of any of the terms of any
such lease.

2.18 Real Property.

(a) Schedule 2.18(a) of the Company Disclosure Letter contains, as of the date
hereof, (i) a list of all material real property and interests in real property
owned in fee by the Company or any of its Subsidiaries (the “Owned Real
Property”), and (ii) a list of all real property and interests in real property
leased by the Company or any of its Subsidiaries or in which the Company has any
rights (the “Leased Real Property” and together with the Owned Real Property,
the “Real Property”). The Real Property listed in Schedule 2.18(a) of the
Company Disclosure Letter includes all interests in real property used in or
necessary for the conduct of the businesses and operations of the Company and
its Subsidiaries as currently conducted.

(b) With respect to each parcel of Owned Real Property:

(i) The Company or one of its Subsidiaries has valid title to each such parcel
of Owned Real Property free and clear of all Liens, except Permitted Liens.

(ii) To the knowledge of the Company, all buildings, structures and facilities
located on, and improvements to, such parcel of Owned Real Property are located
within the boundary lines of such Owned Real Property, do not encroach on any
easement, right of way or other encumbrance which burdens any portion of the
Owned

 

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Real Property and no structures, facilities or other improvements on any parcel
adjacent to the Owned Real Property encroach onto any portion of the Owned Real
Property, other than any encroachments that, individually or in the aggregate,
would not reasonably be expected to have a Company Material Adverse Effect.

(iii) The Company has provided or made available to Parent copies of the deeds
or other instruments (as registered) by which the Company or one of its
Subsidiaries acquired such parcel of Owned Real Property, and copies of all
title insurance policies, opinions, abstracts, surveys and appraisals in the
possession of the Company or any of its Subsidiaries relating thereto.

(iv) Except as set forth in Schedule 2.18(b)(iv) of the Company Disclosure
Letter, there are no outstanding options or rights of first refusal to purchase
any such parcel of Owned Real Property.

(c) With respect to Leased Real Property, the Company has made available to
Parent a true and complete copy of each real property lease pursuant to which
the Company or any Subsidiary of the Company is a party or by which any of them
is bound (each, a “Lease”). The Company or one of its Subsidiaries has peaceful,
undisturbed and exclusive possession of the Leased Real Property, except where
the failure to have such possession, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect.

(d) The uses for which the buildings, facilities and other improvements located
on the Real Property are zoned do not in the case of Owned Real Property, and do
not to the knowledge of the Company in the case of Leased Real Property,
restrict or impair the use of the Real Property for purposes of the business
conducted by the Company and its Subsidiaries. Neither the Company nor any of
its Subsidiaries has received any written notice from any Governmental Entity or
other Person that the Real Property does not comply with all applicable building
and zoning codes, deed restrictions, ordinances and rules, except for any
non-compliance that, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect.

(e) No Governmental Entity having the power of eminent domain or expropriation
over the Real Property has commenced or provided written notice to the Company
that it has commenced or intends to exercise the power of eminent domain,
expropriation or a similar power with respect to all or any part of the Real
Property and, to the knowledge of the Company, no such action is contemplated or
threatened.

(f) The Real Property is in suitable condition for the businesses of the Company
and its Subsidiaries as currently conducted, except where any failure to be in
suitable condition, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect.

 

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2.19 Intellectual Property.

(a) As used in this Agreement, “Intellectual Property” means: (i) inventions
(whether or not patentable), trade secrets, technical data, database
information, customer lists, designs, tools, methods, processes, technology,
ideas, know-how, source code, product road maps and other proprietary
information and materials; (ii) trademarks and service marks (whether or not
registered), trade names, logos, trade dress and other proprietary indicia and
all goodwill associated therewith; (iii) documentation, advertising copy,
marketing materials, web-sites, specifications, mask works, drawings, graphics,
databases, recordings and other works of authorship, whether or not protected by
Copyright; (iv) computer programs, including any and all software
implementations of algorithms, models and methodologies, whether in source code
or object code, design documents, flow-charts, user manuals and training
materials relating thereto and any translations thereof; and (v) all forms of
legal rights and protections that may be obtained for, or may pertain to, the
Intellectual Property set forth in clauses (i) through (iv) in any country of
the world (“Intellectual Property Rights”), including all letters patent, patent
applications, provisional patents, design patents, PCT filings, invention
disclosures and other rights to inventions or designs, including those listed in
Schedule 2.19(a) of the Company Disclosure Letter for Canada and the United
States (“Patents”), all registered and unregistered copyrights in both published
and unpublished works (“Copyrights”), all trademarks, service marks and other
proprietary indicia (whether or not registered), including those Canadian and
United States trademarks and the domain names and business names listed in
Schedule 2.19(a) of the Company Disclosure Letter (“Marks”), trade secret
rights, mask work rights, or other literary property or authors rights, and all
applications, registrations, issuances, divisions, continuations, renewals,
reissuances and extensions of the foregoing.

(b) Except as set forth in Schedule 2.19(b) of the Company Disclosure Letter,
the Company and/or one or more of its Subsidiaries (i) own sufficient right,
interest and title to all Intellectual Property that is used in, material to and
necessary for the businesses of the Company and its Subsidiaries as they are
currently conducted, including the design, manufacture, license and sale of all
products currently in production or announced for production, (the “Company
Intellectual Property”) free and clear of Liens other than Permitted Liens, or
(ii) otherwise rightfully use or otherwise enjoy such Company Intellectual
Property pursuant to the terms of a valid and enforceable license or other
authority, which may be a “shrink wrap” or similar commercially available end
user license.

(c) All registration, maintenance and renewal fees related to applied-for and
pending Patents, Marks, Copyrights and any other certifications, filings or
registrations that are owned by the Company or any of its Subsidiaries and that
are used in, material to and necessary for the businesses of the Company and its
Subsidiaries (“Company Registered Items”) that are currently due, have been paid
or are scheduled to be paid in the ordinary course of business of the Company or
the applicable Subsidiary in compliance with the subsisting intellectual
property policies and practices of same, and all documents and certificates
related to such Company Registered Items have been filed with the relevant
Governmental Entity in Canada or foreign jurisdictions, as the case may be, for
the purposes of maintaining such Company Registered Items. All Company
Registered Items are in good standing, held in compliance with all applicable
legal requirements and, subject to their legal validity, enforceable by the
Company and/or one or more of its Subsidiaries. All unlapsed and unexpired
Patents that have been issued to the Company or any of its Subsidiaries have not
been pronounced invalid by a court or other adjudicator of competent
jurisdiction.

 

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(d) To the knowledge of the Company: (i) there are no infringements by third
parties of any Company Intellectual Property that is owned by the Company and/or
one or more of its Subsidiaries; (ii) there are no challenges to the validity,
enforceability or use of same; and (iii) neither the Company nor its
Subsidiaries have used the Company Registered Items in a manner that would
result in the invalidity or unenforceability of the Company Registered Items.

(e) To the knowledge of the Company, none of the products or services developed,
manufactured, sold, distributed, provided, shipped or licensed by the Company or
any of its Subsidiaries, infringes upon the Intellectual Property Rights of any
third party, and no claim with respect to the foregoing has been asserted in
writing. To the knowledge of the Company, neither the Company nor any of its
Subsidiaries, by conducting its business as currently conducted, infringes upon
any Intellectual Property Rights of a third party, and no claim with respect to
the foregoing has been asserted in writing. No claim has been asserted in
writing against the Company or any of its Subsidiaries challenging the ownership
or validity of any Company Intellectual Property. No claim has been asserted in
writing against the Company or any of its Subsidiaries alleging that the conduct
of the business of the Company or its Subsidiaries infringes the moral rights of
any third party.

(f) To the knowledge of the Company, and in accordance with the subsisting
intellectual property policies and practices of the Company and its
Subsidiaries, the Company and its Subsidiaries have taken commercially
reasonable steps to protect and preserve the confidentiality of all trade
secrets owned by the Company or any of its Subsidiaries that are not covered by
an issued Patent and that are used in, material to and necessary for the
businesses of the Company and its Subsidiaries.

2.20 Labour and Employment Matters.

(a) Schedule 2.20(a) of the Company Disclosure Letter lists each Collective
Agreement and its expiry date. The Collective Agreements cover all Employees
represented by a labour union, are in full force and effect and none will expire
prior to December 31, 2008. No Collective Agreement is currently being
negotiated or is currently subject to negotiation or renegotiation by the
Company with respect to the Employees.

(b) Except as set forth in Schedule 2.20(b) of the Company Disclosure Letter,
there are no pending or threatened material labour disputes, work stoppages,
requests for representation, pickets, work slow-downs due to labour
disagreements or any material actions or arbitrations which involve the labour
or employment relations of the Company or any of its Subsidiaries. There is no
material unfair labour practice, material charge or material complaint pending,
unresolved or, to the Company’s knowledge, threatened before any Governmental
Entity.

 

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(c) All current assessments under workers’ compensation legislation in relation
to the Company or any of its Subsidiaries and all of their respective
contractors and subcontractors have been paid or accrued. None of the Company or
any of its Subsidiaries has been or is subject to any additional or penalty
assessment under such legislation which has not been paid or has been given
notice of any audit. Moreover, the Company’s accident cost experience is such
that there are no pending nor, to the knowledge of the Company, potential
assessments, experience rating charges or Claims which could adversely affect
the Company’s premium payments or accident cost experience or result in any
additional payments in connection with the Company or any of its Subsidiaries.

(d) The Company has made available to the Purchaser for review all inspection
reports, workplace audits or written equivalent (excluding internal department
workplace audits), made under any occupational health and safety legislation
which relate to the Company or any of its Subsidiaries. There are no outstanding
material inspection Orders or written equivalent made under any occupational
health and safety legislation which relate to the Company or any of its
Subsidiaries. Except as set forth in Schedule 2.20(d) of the Company Disclosure
Letter, there have been no fatal or critical accidents since January 1, 2005. To
the knowledge of the Company, the Company and its Subsidiaries have complied in
all material respects with any Orders issued under any occupational health and
safety legislation. Except as set forth in Schedule 2.20(d) of the Company
Disclosure Letter, there are no outstanding charges relating to fatal or
critical accidents since January 1, 2005 and there are no appeals of any Orders
under any occupational health and safety legislation against the Company or any
of its Subsidiaries which are currently outstanding.

(e) Each of the Company and its Subsidiaries has complied in all material
respects with each, and is not in violation in any material respect of any, law
relating to anti-discrimination and equal employment opportunities and there
are, and have been, no violations in any material respect of any other law
respecting the hiring, hours, wages, occupational safety and health, employment,
termination or benefits of any Employee or other Person. Each of the Company and
its Subsidiaries has filed all material notices required under any law
respecting the hiring, hours, wages, occupational safety and health, employment,
promotion, termination or benefits of any Employee or other Person.

(f) Except as set out in the Collective Agreements, neither the Company nor any
of its Subsidiaries is a party to any Contract that restricts the Company or any
of its Subsidiaries from relocating, closing or terminating any of its
operations or facilities or any portion thereof.

(g) Except pursuant to the agreements listed in Schedule 2.14(a)(v) of the
Company Disclosure Letter or pursuant to a Collective Agreement, there are no
Employment Contracts which are not terminable on the giving of reasonable notice
in accordance with Applicable Law.

(h) There are no material claims, pending material claims nor, to the knowledge
of the Company, threatened material claims pursuant to Applicable Law relating
to the Employees or former Employees, including such material claims relating to
employment standards, human rights, occupational health and safety, workers’

 

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compensation, or pay equity. To the knowledge of the Company, nothing has
occurred which might lead to a material claim under any such Applicable Law.
There are no outstanding decisions, Orders or settlements or pending settlements
which place any obligation upon the Company or any of its Subsidiaries to do or
refrain from doing any act.

(i) No labour organization, union or association has bargaining rights in
respect of the Company or any of its Subsidiaries, any Employees or any Persons
providing on site services in respect of the Company or any of its Subsidiaries,
except as covered by Collective Agreements in force on the date of this
Agreement.

(j) None of the Company or any of its Subsidiaries has engaged in any plant
closing or employee lay-off activities within the past five years that would
violate or in any way subject the Company or any of its Subsidiaries to the
group termination or lay-off requirements of any applicable employment standards
legislation.

2.21 Environmental.

(a) Except as would not reasonably be expected to have a Company Material
Adverse Effect or as disclosed in Schedule 2.21(a) of the Company Disclosure
Letter:

(i) Each of the Company and its Subsidiaries has secured, and is in compliance
in all material respects with, all Environmental Permits required in connection
with its operations and the Real Property. Each Environmental Permit, together
with the name of the Governmental Entity issuing such Environmental Permit, is
set forth in Schedule 2.21(a)(i) of the Company Disclosure Letter. All such
Environmental Permits are valid and in full force and effect, none of such
Environmental Permits will be terminated or impaired or become terminable as a
result of the consummation of the Arrangement and, to the Company’s knowledge,
there are no circumstances that exist which would reasonably be expected to
result in the revocation, suspension, amendment or material alteration of any
Environmental Permit. Each of the Company and its Subsidiaries is in compliance
in all material respects with all Environmental Laws. Neither the Company nor
any of its Subsidiaries has received written notice alleging that the Company or
any of its Subsidiaries is not in such compliance with Environmental Laws.

(ii) There are no past, pending or, to the Company’s knowledge, threatened
Environmental Actions against or affecting the Company or any of its
Subsidiaries, and the Company is not aware of any facts or circumstances which
could reasonably be expected to form the basis for any material Environmental
Action against the Company or any of its Subsidiaries.

(iii) Neither the Company nor any of its Subsidiaries has entered into or agreed
to any material Order, and neither the Company nor any of its Subsidiaries is
subject to any outstanding material Order, relating to compliance with any
Environmental Law or to investigation or cleanup of a Hazardous Substance under
any Environmental Law.

 

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(iv) No Lien has been attached to, or asserted against, the assets, property or
rights of the Company or any of its Subsidiaries pursuant to any Environmental
Law, and, to the Company’s knowledge, no such Lien has been threatened.

(v) There are no Hazardous Substances present in, on, at under or migrating to
or from any Real Property or other real property currently or formerly owned
operated or leased by the Company or any of its Subsidiaries (for former
properties, where such substances arise out of the period of ownership or
occupation by the Company or any of its Subsidiaries) in amount or condition
that could be expected to give rise to an Environmental Action against, or any
Environmental Liability of the Company or any of its Subsidiaries.

(vi) To the Company’s knowledge, there has been no Release of any Hazardous
Substance from any Real Property or other real property currently or formerly
owned, operated or leased by the Company or any of its Subsidiaries (for former
properties, where such substances were Released during the period of ownership
or occupation by the Company or any of its Subsidiaries).

(vii) To the Company’s knowledge, neither the Company nor any of its
Subsidiaries has transported or arranged for the treatment, storage, handling,
disposal, or transportation of any Hazardous Substances to any off site location
which is an Environmental Clean-up Site.

(viii) None of the Real Property is or, to the knowledge of the Company, is
being considered to become an Environmental Clean-up Site.

(ix) To the Company’s knowledge, no part of the Real Property has ever been used
as a landfill or for the disposal or deposit of waste.

(x) To the Company’s knowledge, there is no written restriction imposed,
pursuant to any Environmental Law, on the use of any Real Property or any part
of the Real Property or on the operations or scope of the operations of the
Company or any of its Subsidiaries (except as may be apparent in any
Environmental Permits).

(xi) To the Company’s knowledge, there are no underground storage tanks on the
Real Property.

(xii) None of the Company or any of its Subsidiaries have expressly assumed the
liability of any Person relating to the Environment in connection with the sale
or purchase of businesses or real properties.

(b) The Company has provided or made available to Parent true and complete
copies of, or access to, all material: (i) Environmental Permits, (ii) all
written communications with any Governmental Entity except for routine ones
received since April 1, 2006 relating to any Environmental Permit or
Environmental Law; and (iii) written environmental assessment materials and
reports that have been prepared by or on behalf of the Company or any of its
Subsidiaries in the last five years.

 

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2.22 Related Party Transactions. There are no Contracts by the Company or any of
its Subsidiaries with, or for the benefit of, any officer, director or
Shareholder beneficially owning or exercising control or direction over 10% or
more of the Company Shares of the Company or, to the knowledge of the Company,
any Affiliate of any of them, except in each case, for (a) Employment Contracts,
fringe benefits and other compensation paid to directors, officers and Employees
consistent with previously established policies or awards, (b) reimbursements of
ordinary and necessary expenses incurred in connection with their employment or
service, and (c) amounts paid pursuant to Company Benefit Plans. To the
knowledge of the Company, none of such Persons has any material ownership
interest in any firm or corporation with which the Company or any of its
Subsidiaries has a business relationship, or with any firm or corporation that
competes with the Company or any of its Subsidiaries (other than ownership of
securities in a publicly traded company representing less than one percent of
the outstanding capital stock of such company).

2.23 Certain Business Practices. Neither the Company nor any of its Subsidiaries
nor, to the knowledge of the Company, any director, officer, agent or Employee
(i) used any funds for unlawful contributions, gifts, entertainment or other
expenses relating to political activity or for the business of the Company or
any of its Subsidiaries, (ii) made any bribe or kickback, illegal political
contribution, unlawful payment from corporate funds which was incorrectly
recorded on the books and records of the Company or any of its Subsidiaries,
unlawful payment from corporate funds to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
or violated any provision of the United States Foreign Corrupt Practices Act of
1977, or (iii) made any other unlawful payment.

2.24 Insurance.

(a) Schedule 2.24(a) of the Company Disclosure Letter sets forth as of the date
of this Agreement an accurate and complete list of each insurance policy, binder
of insurance and fidelity bond which covers the Company or any of its
Subsidiaries or their respective businesses, properties, assets, directors or
Employees (the “Policies”).

(b) Schedule 2.24(b) of the Company Disclosure Letter describes any
self-insurance arrangement by or affecting the Company or any of its
Subsidiaries, including any reserves thereunder, and describes the loss
experience for all claims that were self-insured in the current year and since
January 1, 2006.

(c) To the knowledge of the Company, all Policies are enforceable in accordance
with their terms. Such Policies are sufficient for compliance with all laws and
Material Contracts to which the Company or any of its Subsidiaries is a party or
by which it is bound, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to creditors rights generally, and the availability of
injunctive relief and other equitable remedies.

 

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(d) All premiums due under the Policies have been paid in full when due. Neither
the Company nor any of its Subsidiaries has received a written notice of
cancellation of any Policy or of any material changes that are required in the
conduct of the business of the Company or any of its Subsidiaries as a condition
to the continuation of coverage under, or renewal of, any such Policy. To the
knowledge of the Company, there is no existing default or event which, with the
giving of notice or lapse of time or both, would constitute a default under any
Policy or entitle any insurer to terminate or cancel any Policy. The Company has
not received written notice of any threatened termination of, or material
premium increase with respect to, any Policy and none of such Policies provides
for retroactive premium adjustments.

2.25 Product Warranty.

(a) To the knowledge of the Company, there are no warranties (express or
implied) outstanding with respect to any products manufactured, sold,
distributed, provided, shipped or licensed (“Products”), or any services
rendered, by the Company or any of its Subsidiaries, except (x) those set forth
in the standard conditions of sale or service and (y) those implied or arising
as a result of Applicable Law.

(b) To the knowledge of the Company, except as would otherwise result,
individually or in the aggregate, in a Company Material Adverse Effect (i) each
Product manufactured, sold, distributed, provided, shipped or licensed, or
service rendered, by the Company or any of its Subsidiaries has been in
conformity with all applicable contractual commitments and warranties,
(ii) there is no material design, manufacturing or other defects, latent or
otherwise, with respect to any Products and (iii) each Product that has been
manufactured, sold, distributed, provided, shipped or licensed prior to Closing
contains all warnings required by Applicable Law and such warnings are in
accordance with reasonable industry practice.

(c) The Company is not aware of any pattern or series of claims against the
Company or any of its Subsidiaries which could reasonably be expected to result
in a generalized product recall relating to the Products, regardless of whether
such product recall is formal, informal, voluntary or involuntary.

2.26 Opinions of Financial Advisors. The financial advisors to the Company, UBS
Securities Canada Inc. and CIBC World Markets Inc. (the “Company Financial
Advisors”), have each delivered to the Company an opinion dated the date of this
Agreement to the effect that, as of such date and based upon and subject to the
qualifications and assumptions set forth therein, the consideration to be
received by the Shareholders pursuant to the Arrangement is fair to such
Shareholders from a financial point of view, copies of which opinions have been
delivered to Parent.

2.27 Brokers or Finders. There is no investment banker, broker, finder,
financial advisor or other intermediary that has been retained by or is
authorized to act on behalf of the Company or the Shareholders who is entitled
to any fee or commission in connection with the transactions contemplated by
this Agreement, other than the Company Financial Advisors. The Company has
provided to Parent true and complete copies of all agreements under which such
fees or expenses are payable and all indemnification and other agreements
related to the engagement of the Persons to whom the fees are payable.

 

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2.28 Suppliers and Customers. Schedule 2.28 of the Company Disclosure Letter
sets forth (a) the names of the 10 suppliers with the greatest dollar volume of
sales to the Company and its Subsidiaries in each of the years ended
December 31, 2005 and 2006; and (b) the names of the 10 customers with the
greatest dollar volume of purchases from the Company and its Subsidiaries in
each of the years ended December 31, 2005 and 2006. None of the suppliers listed
on Schedule 2.28 of the Company Disclosure Letter constitutes a sole source of
supply. The Company has not received any written (or, to the knowledge of the
Company, other) notice that any customer, supplier, distributor or sales
representative intends to cancel, terminate or otherwise modify or not renew its
relationship with the Company or any of its Subsidiaries and, to the knowledge
of the Company, no such action has been threatened, which in either case,
individually or in the aggregate, would reasonably be expected to have a Company
Material Adverse Effect.

2.29 Rights Plan. The Company has no shareholder rights plan, “poison-pill” or
other agreement or arrangement designed to have the effect of delaying,
deferring or discouraging another party from acquiring control of the Company.

2.30 Books and Records. The corporate records and minute books of the Company
and its Subsidiaries have been maintained in accordance with Applicable Law in
all material respects and the minute books of the Company and its Subsidiaries
are complete and accurate in all material respects. The financial books and
records and accounts of the Company and any of its Subsidiaries, in all material
respects: (a) have been maintained in accordance with good business practices on
a basis consistent with prior years; (b) are stated in reasonable detail and
accurately and fairly reflect the transactions and dispositions of assets of the
Company and the Subsidiaries; and (c) in the case of its Subsidiaries,
accurately and fairly reflect the basis for the Company’s consolidated financial
statements.

2.31 No “Collateral Benefit” under Ontario Rule. To the knowledge of the
Company, no related party of the Company (within the meaning of Ontario
Securities Commission Rule 61 501 – Insider Bids, Issuer Bids, Business
Combinations and Related Party Transactions) will receive a “collateral benefit”
(within the meaning of such rule) as a consequence of the transactions
contemplated by this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PARENT

Parent represents and warrants to the Company that:

3.1 Organization and Good Standing. Each of Parent and Subco is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all corporate powers required to carry
on its business as now conducted. Since the date of its incorporation, Subco has
not engaged in any activities other than in connection with or as contemplated
by this Agreement.

 

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3.2 Authority and Enforceability. Each of Parent and Subco has all requisite
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance by each of Parent and Subco of this
Agreement and the consummation by each of them of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Parent and Subco. This Agreement has been duly executed and delivered by each
of Parent and Subco and constitutes the valid and binding obligation of each of
them, enforceable against Parent and Subco in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to creditors’ rights
generally, and the availability of injunctive relief and other equitable
remedies.

3.3 Authorizations. The execution, delivery and performance by Parent and Subco
of this Agreement and the consummation by Parent and Subco of the transactions
contemplated hereby require no action by or in respect of, or filing with, any
Governmental Entity, other than (i) the Interim Order, (ii) the Company
Shareholder Approval, (iii) the Final Order, (iv) compliance with the applicable
requirements of (A) the Canadian Competition Act, (B) the HSR Act, (C) the
Investment Canada Act, and (D) the Other Antitrust Laws, (v) compliance with the
applicable requirements of the Securities Laws, (vi) filings with the Director
under the CBCA, (vii) such filings under the rules of the TSX as may be required
in connection with this Agreement and the transactions contemplated hereby, and
(viii) any other consents, approvals, orders, authorizations, registrations,
declarations, filings and notices, with such exceptions, as would not reasonably
be expected to prevent, materially delay or materially impair Parent’s or
Subco’s ability to consummate the transactions contemplated by this Agreement.

3.4 Non-Contravention. The execution, delivery and performance by Parent and
Subco of this Agreement and the consummation by Parent and Subco of the
transactions contemplated hereby do not and will not (i) contravene, conflict
with, or result in any violation or breach of any provision of the certificate
of incorporation or bylaws of Parent or the constating documents of Subco,
(ii) assuming compliance with the matters referred to in Section 3.3,
contravene, conflict with or result in a violation or breach of any provision of
any Applicable Law or Order, (iii) require any consent or other action by any
Person under, constitute a default under, or cause or permit the termination,
cancellation, acceleration or other change of any right or obligation or the
loss of any benefit to which Parent or any of its Subsidiaries is entitled
under, any provision of any agreement or other instrument binding upon Parent or
Subco, with such exceptions, in the case of each of clauses (ii) and
(iii) above, as would not reasonably be expected to prevent, materially delay or
materially impair Parent’s or Subco’s ability to consummate the transactions
contemplated by this Agreement.

3.5 Circular. The information with respect to Parent and any of its Subsidiaries
that Parent furnishes to the Company in writing specifically for use in the
Circular or any amendment or supplement thereto will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made,

 

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not misleading, as supplemented or amended, if applicable, at each of (i) the
time such Circular or any amendment or supplement thereto is first mailed to the
Shareholders and (ii) at the time the Shareholders vote on the Arrangement.

3.6 Availability of Funds. Parent has sufficient cash, available lines of credit
or other sources of immediately available funds to enable it to pay the
aggregate Share Consideration pursuant to Article I.

3.7 Brokers or Finders. Except for JP Morgan Securities, whose fees will be paid
by Parent, there is no investment banker, broker, finder, financial advisor or
other intermediary that has been retained by or is authorized to act on behalf
of Parent or Subco who is entitled to any fee or commission in connection with
the transactions contemplated by this Agreement.

3.8 No “Collateral Benefit” under Ontario Rule. To the knowledge of Parent, no
related party of the Company (within the meaning of Ontario Securities
Commission Rule 61-501 – Insider Bids, Issuer Bids, Business Combinations and
Related Party Transactions) will receive a “collateral benefit” (within the
meaning of such rule) as a consequence of the transactions contemplated by this
Agreement.

ARTICLE IV

COVENANTS OF THE COMPANY

4.1 Conduct of the Business. From the date of this Agreement until the Effective
Time, the Company shall, and shall cause each of its Subsidiaries to, conduct
its business in the ordinary course consistent with past practice and in
compliance with Applicable Law and use commercially reasonable efforts to
(i) preserve intact its assets and business organization, (ii) maintain in
effect all of its material Authorizations, (iii) keep available the services of
its directors, officers and Employees and (iv) maintain satisfactory
relationships with its customers, partners, suppliers, distributors and others
having material business relationships with it. Without limiting the generality
of the foregoing, from the date of this Agreement until the Effective Time,
except as set forth in Schedule 4.1 of the Company Disclosure Letter, as
required by Applicable Law or with the prior written consent of Parent (which
consent, in the cases of Sections 4.1(e), 4.1(h), 4.1(j), 4.1(k), 4.1(l),
4.1(m), 4.1(o) and, solely with respect to the matters covered by the foregoing
sections, 4.1(r), shall not be unreasonably withheld, conditioned or delayed)
the Company shall not, nor shall it permit any of its Subsidiaries to:

(a) amend its articles of incorporation, bylaws or other constating documents or
reduce its stated capital;

(b) (i) declare, set aside or pay any dividends (other than dividends in the
ordinary course consistent with past practice) on, or make any other
distributions (whether in cash, stock, property or otherwise) in respect of any
shares of capital stock of the Company or any of its Subsidiaries, other than
dividends and distributions by a direct or indirect Subsidiary of the Company to
its securityholders, (ii) split, combine or

 

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reclassify any shares of capital stock of the Company or any of its Subsidiaries
or (iii) purchase, redeem or otherwise acquire (other than upon the exercise of
any Warrant or Option) any Company Securities or Company Subsidiary Securities;

(c) (i) issue, deliver, sell, grant, pledge, transfer, subject to any Lien or
otherwise encumber or dispose of any Company Securities or Company Subsidiary
Securities, other than the issuance of Company Shares upon the exercise of
Options or Warrants that are outstanding on the date of this Agreement or
(ii) amend any term of any Company Security or any Company Subsidiary Security;

(d) adopt a plan or agreement of, or resolutions providing for or authorizing,
complete or partial liquidation, dissolution, arrangement, amalgamation,
consolidation, restructuring, recapitalization or other reorganization;

(e) incur any capital expenditures or any obligations or liabilities in respect
thereof, except for (i) those contemplated by the capital expenditure budget of
the Company that has been provided to Parent, (ii) any capital expenditures
resulting from the replacement of assets to the extent funded from the proceeds
of any insurance, and (iii) other capital expenditures not to exceed $5,000,000
in the aggregate;

(f) acquire (including by merger, arrangement, amalgamation, consolidation or
acquisition of stock or assets) any interest in any corporation, partnership,
other business organization or division thereof, in excess of $1,000,000 in the
aggregate;

(g) except as permitted in Section 4.1(k), sell, lease, license, pledge,
transfer, assign, subject to any Lien (other than Permitted Liens) or otherwise
dispose of, or create, incur, assume or subject any Lien on, any of the assets,
securities, properties, interests, businesses or rights of the Company or any of
its Subsidiaries, except (i) sales of inventory, by-products or used equipment
in the ordinary course of business consistent with past practice, (ii) the sale
of Wabush Mines in accordance with the Letter of Intent dated June 6, 2007, and
the right of first refusal related thereto, and (iii) arm’s length sales of
surplus vacant land for fair market value;

(h) (i) increase the compensation, bonus or other benefits of any directors,
officers or Employees, other than in accordance with the terms of the Collective
Agreements and other increases to non-executive Employees in the ordinary course
of business, consistent with past practices, (ii) increase any severance, change
of control or termination pay or benefits, other than in respect of
non-executive Employees in the ordinary course of business consistent with past
practice, (iii) enter into any employment, deferred compensation or other
similar agreement, or amend any such existing agreement, with any director,
officer or Employee, other than in respect of non-executive Employees in the
ordinary course of business consistent with past practice, (iv) establish, adopt
or enter into any Company Benefit Plan, or any plan that would be considered a
Company Benefit Plan if it currently existed, or Collective Agreement, or amend
(except as would not reasonably be expected to increase any benefit payable
thereunder or any administrative expense thereof) any Company Benefit Plan or
Collective Agreement, (v) take any action to accelerate any rights or benefits
or take any action to fund or in any

 

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other way secure the payment of compensation or benefits under any Company
Benefit Plan, or (vi) make any Person a beneficiary of any retention or
severance plan under which such Person is not as of the date of this Agreement a
beneficiary which would entitle such Person to payments, vesting, acceleration
or any other right as a consequence of consummation of the transactions
contemplated by this Agreement and/or termination of employment;

(i) make any change in any method of accounting principles, method or practices,
except for any such change required by reason of a concurrent change in, or
implemented to comply with, GAAP or Applicable Law (as agreed to by the
Company’s independent auditor) and except for any changes in any accounting
practices that are recommended by the Company’s independent auditor;

(j) make any loans, advances or capital contributions to, or investments in, any
other Person, other than (i) to the Company or any of its Subsidiaries or any
associated business entities in the ordinary course of business consistent with
past practice, (ii) investments required pursuant to the terms of Material
Contracts as in effect on the date of this Agreement and (iii) trade credit in
the ordinary course of business consistent with past practice;

(k) create, incur, assume or otherwise become liable with respect to any
Indebtedness, other than (i) in the ordinary course of business consistent with
past practice in an amount not to exceed $1,000,000 in the aggregate,
(ii) inter-company Indebtedness between any of the Company and its Subsidiaries,
(iii) borrowings and re-borrowings under existing credit facilities consistent
with past practice and (iv) lease financing transactions in an amount not to
exceed $5,000,000 in the aggregate; provided, that, in each case other than
(iii) and (iv), all such Indebtedness is prepayable at any time by the Company
without penalty or premium;

(l) enter into any Material Contract or terminate, renew, amend or modify in any
material respect or fail to enforce any material term of any Material Contract,
other than any Material Contract for (i) the sale of goods or services in the
ordinary course of business consistent with past practice or (ii) the
procurement of goods or services entered into on arm’s length terms in the
ordinary course of business consistent with past practice, provided that the
term of any such Material Contract being entered into or renewed and referred to
in clauses (i) and (ii) above shall not exceed one year in duration;

(m) (i) pay, discharge, settle or satisfy any material claims, liabilities or
obligations (whether absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction in the
ordinary course of business consistent with past practice, or as required by
their terms as in effect on the date of this Agreement, of claims, liabilities
or obligations reserved against on the Company Balance Sheet (for amounts not in
excess of such reserves) or incurred since the date of such financial statements
in the ordinary course of business consistent with past practice, in each case,
the payment, discharge, settlement or satisfaction of which does not include any
obligation (other than the payment of money) to be performed by the Company or
any of its Subsidiaries following the Closing Date or (ii) waive, relinquish,
release, grant, transfer or assign any right of material value;

 

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(n) make or change any material Tax election, change any annual Tax accounting
period, adopt or change any method of Tax accounting, amend any material Tax
Returns or file claims for Tax refunds, enter into any closing agreement, enter
into (or offer to enter into) any agreement (including any waiver) with any
Governmental Entity relating to Taxes, settle (or offer to settle) any Tax
claim, audit or assessment, or surrender any right to claim a Tax refund, offset
or other reduction in Tax liability or take any action or enter into any
transaction, other than a transaction effected at the request of Parent pursuant
to Section 4.4, that would have the effect of reducing, or eliminating the
amount of the increase in Tax cost pursuant to paragraphs 88(1)(d), 98(3)(c) or
98(5)(c) of the Tax Act that may otherwise be available to Subco and its
successors in respect of the non-depreciable capital properties owned by the
Company and its Subsidiaries;

(o) institute, settle, or agree to settle any material litigation,
investigation, arbitration or proceeding, or other material claim pending or
threatened before any arbitrator, court or other Governmental Entity;

(p) take any action or fail to take any action that is intended to, or would
reasonably be expected to, individually or in the aggregate, prevent, delay or
impede the ability of the Company to consummate the Arrangement or the other
transactions contemplated by this Agreement;

(q) enter into any interest rate, currency swaps, hedges, caps, collars, forward
sales or other similar financial instruments; or

(r) authorize, resolve, commit or agree to take any of the foregoing actions.

4.2 Access to Information. Subject to Applicable Law relating to the exchange of
information and the terms of the Confidentiality Agreement by and between Parent
and the Company dated February 1, 2007 (the “Confidentiality Agreement”), the
Company shall, and shall cause its Subsidiaries to, afford to Parent’s officers,
directors, employees, accountants, counsel, consultants, advisors and agents
(“Representatives”) reasonable access to and the right to inspect, during normal
business hours and upon reasonable notice, all of the Real Property, properties,
assets, records, Contracts and other documents related to the Company and its
Subsidiaries, and shall permit them to consult with the officers, Employees,
accountants, counsel and agents of the Company and its Subsidiaries for the
purpose of making such investigation of the Company and its Subsidiaries as
Parent shall desire to make. The Company shall furnish to Parent all such
material documents and copies of material documents and records and information
with respect to the Company and its Subsidiaries and copies of any working
papers relating thereto as Parent may request. The Company hereby releases
Parent and Subco from any standstill agreement with the Company to which Parent
or Subco is a party, including the standstill agreement contained in the
Confidentiality Agreement.

 

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4.3 Nonsolicitation.

(a) Subject to Section 4.3(b), the Company agrees that it will not, and it will
cause its Subsidiaries and its and their respective directors, officers,
employees, Affiliates and other agents and representatives (including any
investment banking, legal or accounting firm retained by it or any of them and
any individual member or employee of the foregoing) (each, an “Agent”) not to:
(i) initiate, solicit, encourage or seek, directly or indirectly, any inquiries
relating to or the making or implementation of any Third Party Proposal;
(ii) engage in any negotiations concerning, or provide any information or data
to, or have any substantive discussions with, any Person relating to a Third
Party Proposal; (iii) otherwise cooperate in or knowingly facilitate any effort
or attempt to make, implement or accept any proposal or offer that constitutes,
or may reasonably be expected to lead to, any Third Party Proposal; (iv) enter
into a Contract with any Person relating to a Third Party Proposal or
(v) release any third party from, or waive any provision of, any confidentiality
or standstill agreement to which it is a party. The Company will immediately
cease, and will cause its Subsidiaries and Agents immediately to cease, any and
all existing activities, discussions or negotiations with any third parties
conducted heretofore with respect to (or reasonably likely to lead to) any Third
Party Proposal. “Third Party Proposal” means any Contract, proposal or offer
(including any proposal or offer to the Shareholders) with respect to a proposed
or potential Acquisition Transaction. “Acquisition Transaction” means: (A) any
sale, lease or other disposition, direct or indirect (and however structured),
of any business or assets of the Company and/or any of its Subsidiaries (which
business or assets represent 15% or more of the consolidated revenues, net
income or assets of the Company and its Subsidiaries, taken as a whole), (B) any
tender offer (including a self-tender offer) or exchange offer that, if
consummated, would result in a third party beneficially owning 15% or more of
any class of securities of the Company, (C) a merger, amalgamation, arrangement,
consolidation, share exchange, business combination, reorganization, joint
venture, recapitalization, liquidation, dissolution or other similar transaction
involving the Company and/or any of its Subsidiaries (which Subsidiaries
represent 15% or more of the consolidated revenues, net income or assets of the
Company and its Subsidiaries, taken as a whole), (D) the issuance, sale or other
disposition, direct or indirect (and however structured), of securities (or
securities or other rights convertible into, or exercisable or exchangeable for,
such securities) representing 15% or more of the voting power or capital stock
of the Company and/or any of its Subsidiaries (which Subsidiaries represent 15%
or more of the consolidated revenues, net income or assets of the Company and
its Subsidiaries, taken as a whole) or (E) any combination of the foregoing
(other than the Arrangement or any other transaction by or on behalf of Parent
or Subco).

(b) Notwithstanding any other provision of this Agreement, prior to approval of
the Arrangement Resolution by the Shareholders, in response to an unsolicited
bona fide written Third Party Proposal made after the date hereof that the Board
determines in good faith (after receiving the advice of its financial advisors
and outside counsel) constitutes or is reasonably likely to lead to a Superior
Proposal, the Company may, after giving Parent prompt notice of such
determination, (i) furnish information with respect to the Company and its
Subsidiaries to the Person making such Third Party Proposal (and its
Representatives) pursuant to a confidentiality and standstill agreement on

 

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terms no less favourable to the Company than those contained in the
Confidentiality Agreement and containing additional provisions that expressly
permit the Company to comply with the terms of this Section 4.3 (a copy of which
confidentiality agreement shall be promptly (and in all events within 24 hours)
provided for informational purposes only to Parent); provided, that (A) prior to
providing any information or data to any Person or entering into discussions or
negotiations with any Person, the Company notifies Parent promptly of any such
inquiry, proposal or offer received by, any such information requested from, or
any such discussions or negotiations sought to be initiated or continued with,
the Company or any of its officers, directors, Employees, advisors and agents
indicating, in connection with such notice, the material terms and conditions of
the Third Party Proposal, the identity of the Person making such Third Party
Proposal and provides a copy of any written Third Party Proposal and (B) all
such information (to the extent such information has not been previously
provided or otherwise made available to Parent) is provided or made available to
Parent, as the case may be, substantially concurrent with the time it is
provided or made available to such Person, as the case may be, and
(ii) participate in discussions or negotiations with the Person making such
Third Party Proposal (and its Representatives) regarding such Third Party
Proposal; provided, that the Company shall keep Parent reasonably informed, on a
prompt basis, of the status and material terms of any such proposals or offers
and the status of any such discussions or negotiations and will notify Parent
promptly of any determination by the Board that a Superior Proposal has been
made. For purposes of this Agreement, a “Superior Proposal” means an unsolicited
written bona fide Third Party Proposal pursuant to which a Person or Persons (or
their stockholders) would own, if consummated, all of the outstanding capital
stock of the Company (or of the surviving entity in a merger or the direct or
indirect parent of the surviving entity in a merger) or all or substantially all
of the assets of the Company and its Subsidiaries taken as a whole on terms that
the Board determines, in its good faith judgment, after consultation with its
financial advisors, that such Third Party Proposal (i) is not subject to any
financing conditions or, if any financing is required, financing satisfactory to
the Company is committed, (ii) is more favourable to the Shareholders from a
financial point of view than the terms of the Arrangement, and (iii) without
regard to any support agreement between the Parent and any Shareholder, is
reasonably likely to be completed on the terms proposed.

(c) Neither the Board nor any committee thereof shall fail to make or withdraw,
amend, change, modify or qualify in a manner adverse to Parent or Subco, or
propose publicly to withdraw, amend, change, modify or qualify in a manner
adverse to Parent or Subco, the approval, recommendation or declaration of
advisability by the Board or any such committee of this Agreement or the
Arrangement, or recommend, or propose publicly to recommend, the approval or
adoption of any Third Party Proposal, or resolve or agree to take any such
action (each, a “Change of Recommendation”), unless all of the following
conditions are satisfied:

(i) a Superior Proposal is made to the Company and is not withdrawn;

(ii) the Company Meeting has not occurred;

 

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(iii) the Company shall have provided at least five Business Days’ prior written
notice (the “Notice Period”) to Parent stating (A) that it has received a
Superior Proposal, (B) the terms and conditions of such Superior Proposal, the
identity of the Person making such Superior Proposal (and including a copy of
all documentation containing or related to such Superior Proposal) and (C) that
it intends to effect a Change of Recommendation and the manner in which it
intends to do so and in the event that the Company Meeting is to be held within
such Notice Period, the Company Meeting will be adjourned to a date not later
than five Business Days after the expiry of the Notice Period;

(iv) Parent shall not have, within the Notice Period, made an offer that the
Board by a majority vote determines in its good faith judgment (based on the
written advice of its financial advisor) to be at least as favourable to the
Company and the Shareholders as such Superior Proposal (it being agreed that the
Board shall convene a meeting to consider any such offer by Parent promptly
following the receipt thereof);

(v) the Board concludes in good faith, after receiving the advice of its outside
legal counsel, that, in light of such Superior Proposal, the failure of the
Board to effect a Change of Recommendation would be inconsistent with its
fiduciary obligations to the Company under Applicable Law; and

(vi) the Company shall not have breached any of the provisions set forth in this
Section 4.3.

(d) The Company acknowledges and agrees that each successive modification of any
Superior Proposal shall constitute a new Superior Proposal for the purposes of
this Section 4.3 and shall initiate a new Notice Period.

(e) Nothing in this Agreement shall prevent the Board from responding through a
directors’ circular or otherwise as required by applicable Securities Laws to a
Third Party Proposal that it determines is not a Superior Proposal.

4.4 Cooperation Regarding Reorganization. The Company shall, and shall cause
each of its Subsidiaries to, cooperate with Parent and Subco in structuring,
planning and implementing any reorganization (including for Tax purposes) of
their respective capital, assets and corporate structure or such other planning
as Parent and Subco may reasonably require provided, however, that (i) such
reorganization not take place until such time as the parties agree, acting
reasonably, that the Arrangement is likely to be completed on the terms and
conditions contemplated, (ii) such requested cooperation does not unreasonably
interfere with the ongoing operations of the Company and its Subsidiaries, and
(iii) Parent and Subco shall pay the implementation costs and any direct or
indirect costs and liabilities, fees, damages, penalties, Taxes and other
amounts that may be incurred as a consequences of the implementation of or to
unwind, any such transaction if the Arrangement is not completed, including
actual out-of-pocket costs and expenses for filing fees and external counsel and
auditors which may be incurred.

 

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4.5 Additional Covenants.

(a) The Company shall not take any action or enter into any transaction, or
permit any of its Subsidiaries to take any action or enter into any transaction,
which would, or which reasonably may be expected to (i) render any
representation or warranty made by it in this Agreement inaccurate, (ii) result
in a breach of any of its covenants or obligations under this Agreement, or
(iii) cause any condition in Section 7.1 or 7.2 to become incapable of
satisfaction or materially more difficult to satisfy, or (iv) render the
transactions contemplated by this Agreement incapable of completion or more
difficult to complete.

(b) The Company shall promptly notify Parent orally and in writing of the
occurrence of (i) any Company Material Adverse Effect, (ii) any material
governmental or third party complaints, investigations or hearings (or
communications indicating that the same are being contemplated), or (iii) any
material communications with respect to labour union or collective bargaining
matters or any material developments in relation to the foregoing, and the
Company shall consult with Parent in respect of any matters relating to the
foregoing.

(c) The Company shall execute and deliver, or cause to be executed and
delivered, at the Closing such customary agreements, certificates, resolutions
and other closing documents as may be reasonably requested by Parent.

(d) The Company shall use its reasonable best efforts to maintain the listing of
the Company Shares and the Warrants on the TSX until the Effective Date and
shall cooperate with Parent and shall use reasonable best efforts to take, or
cause to be taken, all actions, and do or cause to be done all things,
reasonably necessary, proper or advisable on its part under Applicable Law and
the rules and policies of the TSX to enable the delisting by the Company of the
Company Shares and the Warrants from the TSX after the Effective Date.

(e) The Company shall, and shall cause the Subsidiaries to, advise Parent
forthwith in writing of any transaction or event occurring after the date
hereof, to the extent known to the Company or a Subsidiary, that could
reasonably be expected to prevent Subco and its successors from obtaining a full
increase in Tax cost pursuant to paragraphs 88(1)(d), 98(3)(c) or 98(5)(c) of
the Tax Act that may otherwise be available to Subco and its successors in
respect of non-depreciable capital property owned by the Company or a Subsidiary
at the Effective Time.

ARTICLE V

COVENANTS OF PARENT

5.1 Indemnification.

(a) From and after the Effective Time, Parent and Subco shall cause the Company
to, to the fullest extent permitted by Applicable Law, indemnify, defend and
hold harmless, and provide advancement of expenses to, each Person who is now or
who becomes prior to the Effective Time, an officer, director or Employee of the
Company or

 

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any of its Subsidiaries (the “Indemnified Parties”) against all losses, claims,
damages, costs, expenses, liabilities or judgments or amounts that are paid in
settlement of or in connection with any claim or Action that is based in whole
or in part on, or arises in whole or in part out of, the fact that such Person
is or was a director, officer or Employee of the Company or any of its
Subsidiaries, and pertaining to any matter existing or occurring, or any acts or
omissions occurring, at or prior to the Effective Time, whether asserted or
claimed prior to, or at or after, the Effective Time (including matters, acts or
omissions occurring in connection with the approval of this Agreement and the
consummation of the transactions contemplated hereby) to the same extent such
Persons are entitled to be indemnified or have the right to advancement of
expenses as of the date of this Agreement by the Company or any of its
Subsidiaries pursuant to the articles of incorporation and bylaws of such entity
and indemnification agreements of the Company and its Subsidiaries, if any, in
existence on the date hereof with any directors, officers and Employees of the
Company and its Subsidiaries.

(b) Parent shall obtain prior to the Effective Time a prepaid “tail” insurance
policy with a claims period of six years from the Effective Time with respect to
directors’ and officers’ liability or fiduciary liability insurance covering
each person covered by the Company’s directors’ and officers’ liability or
fiduciary liability insurance policy for act or omissions occurring prior to the
Effective Time on terms that are no less favourable that those of such policy of
the Company in effect on the date of this Agreement; provided that if the
aggregate annual premiums for such policies at any time during such period
exceed 200% of the amount paid by the Company in respect of its last full fiscal
year, which amount is set forth in Schedule 5.1(b) of the Company Disclosure
Letter, Parent shall be required to provide such coverage as will then be
available at an annual premium equal to 200% of such rate.

(c) This Section 5.1 is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties and their heirs and personal
representatives and shall be binding on Parent, Subco and the Company and their
respective successors and assigns.

(d) In the event the Company or any of its successors or assigns
(i) consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity in such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
Person, then, and in each case, proper provision shall be made so that the
successors and assigns of the Company honour the indemnification obligations set
forth in this Section 5.1.

(e) The parties constitute the Company as trustee for the Indemnified Parties of
the rights and benefits of this Section 5.1 and the Company accepts such trust
and agrees to hold the rights and benefits of this Section 5.1 in trust for and
on behalf of the Indemnified Parties. The obligations of Parent and Subco under
this Section 5.1 shall not be terminated or modified in such a manner as to
adversely affect the rights of any indemnified party to whom this Section 5.1
applies unless (i) such termination or modification is required by Applicable
Law or (ii) the affected Indemnified Party shall have consented in writing to
such termination or modification.

 

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5.2 Additional Covenants.

(a) Except as otherwise provided in this Agreement, neither Parent nor Subco
shall take any action or enter into any transaction, which would, or which
reasonably may be expected to (i) render any representation or warranty made by
Parent in this Agreement inaccurate, (ii) result in a breach of any of Parent’s
or Subco’s covenants or obligations under this Agreement, (iii) cause any
condition in Section 7.1 or 7.3 to become incapable of satisfaction or
materially more difficult to satisfy or (iv) render the transactions
contemplated by this Agreement incapable of completion or more difficult to
complete.

(b) Parent unconditionally and irrevocably guarantees the due and punctual
performance by Subco of its obligations under this Agreement and the Plan of
Arrangement and undertakes to perform such obligations to the extent that Subco
fails to do so.

ARTICLE VI

COVENANTS OF THE COMPANY AND PARENT

6.1 Regulatory Approvals.

(a) Each of the Company, Parent and Subco shall promptly apply for, and take all
reasonably necessary actions to obtain or make, as applicable, all
Authorizations, Orders, declarations, submissions and filings with, and notices
to, any Governmental Entity required to be obtained or made by it for the
consummation of the transactions contemplated hereby. Each party shall cooperate
with and promptly furnish information to the other parties necessary in
connection with any requirements imposed upon such other parties in connection
with the consummation of the Arrangement. Without limiting the generality of the
foregoing, each of the Company and Parent shall, as promptly as practicable and
before the expiration of any relevant legal deadline, but in no event later than
10 Business Days following the execution and delivery of this Agreement, file
(i) a long form notification pursuant to Part IX of the Canadian Competition
Act, (ii) the notification and report form required for the Arrangement and the
transactions contemplated hereby pursuant to the HSR Act, (iii) any supplemental
information requested or considered by Parent to be desirable to be submitted in
connection with obtaining Competition Act Approval and the review of the
transactions contemplated hereby pursuant to the HSR Act, and (iv) with any
other Governmental Entity, any other filings, reports, information and
documentation required for the consummation of the Arrangement and the
transactions contemplated hereby pursuant to the Investment Canada Act or any
Other Antitrust Laws.

(b) Each of the Company and Parent shall furnish to each other’s counsel such
information and reasonable assistance as the other may request in connection
with its preparation of any filing or submission that may be necessary or
considered desirable by Parent in connection with (i) obtaining Competition Act
Approval or Investment Canada Act Approval, or (ii) the HSR Act and any Other
Antitrust Laws.

 

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(c) Each of the Company and Parent shall use its reasonable best efforts to
obtain promptly Competition Act Approval and any clearance or approval required
under the Investment Canada Act, the HSR Act and any Other Antitrust Laws for
the consummation of the Arrangement and the transactions contemplated hereby.
Each of the Company and Parent shall keep the other apprised of the status of
any communications with, and any inquiries or requests for additional
information from any Governmental Entities and shall comply promptly with any
such inquiry or request. Each of the Company and Parent shall give the other
reasonable prior notice of any communication with, and any proposed
understanding or agreement with, any Governmental Entity regarding any
Authorizations, Orders, responses to information requests, declarations and
filings with, and notices to, any Governmental Entity, and permit the other to
review and discuss in advance, and consider in good faith the views of the other
in connection with, any proposed communication, understanding or agreement with
any Governmental Entity with respect to the Arrangement and the transactions
contemplated by this Agreement. Notwithstanding the foregoing or any other
provision of this Agreement, (i) Parent shall not be required to (A) consent to
the divestiture, license or other disposition or holding separate (through the
establishment of a trust or otherwise) of any of its or its Affiliates’ assets
or any assets of the Company or any of its Subsidiaries or (B) regarding
antitrust matters, consent to any other structural or conduct remedy or enter
into any settlement or agree to any Order respecting the transactions
contemplated by this Agreement, and (ii) neither Parent nor any of its
Affiliates shall have any obligation to contest, administratively or in court,
any ruling, order or other action of any Governmental Entity or any other Person
respecting the transactions contemplated by this Agreement; provided, that each
of the Company and Parent shall both promptly respond to any Governmental Entity
with respect to any request for additional information.

(d) Each of the Company and Parent shall instruct their respective counsel to
cooperate with each other and use reasonable best efforts to facilitate and
expedite the identification and resolution of any issues arising under the
Canadian Competition Act, the Investment Canada Act, the HSR Act and the Other
Antitrust Laws, the approval of the Arrangement under the Canadian Competition
Act and the Investment Canada Act and the expiration of the applicable HSR Act
waiting period and any waiting periods under the Other Antitrust Laws at the
earliest practicable dates. Such reasonable efforts and cooperation include
counsel’s undertaking (i) to keep each other appropriately informed of
communications from and to personnel of the reviewing Governmental Entity, and
(ii) to confer with each other regarding appropriate contacts with and response
to personnel of any Governmental Entity. Notwithstanding the foregoing, counsel
to Parent shall have the primary responsibility for contacting and communicating
with the Commissioner, the Minister responsible for the Investment Canada Act,
the U.S. Department of Justice and U.S. Federal Trade Commission and government
authorities responsible for Other Antitrust Laws, in connection with the
satisfaction of conditions set forth in Sections 7.1(c), 7.1(d) and 7.1(e).

 

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6.2 Public Announcements. The initial press release relating to this Agreement
shall be a joint press release the text of which has been agreed to by each of
Parent and the Company. Thereafter, neither Parent nor the Company shall issue
or cause the publication of any press release or otherwise make any public
statements with respect to this Agreement, the Arrangement or the transactions
contemplated by this Agreement without the prior consent of the other parties
(such consent not to be unreasonably withheld, conditioned or delayed);
provided, that a party may, without such consent (but after prior consultation
to the extent practicable in the circumstances), issue such press releases and
make such public statements that it believes are required by Applicable Law or
the rules of the TSX or the New York Stock Exchange. Notwithstanding the
foregoing, each of Parent and the Company may make any public statement in
response to questions from the press, analysts, investors or those attending
industry conferences or financial analyst conference calls, make presentations
at such conferences and conference calls and make internal announcements to
employees, so long as such statements and announcements are consistent with
previous press releases, public disclosures or public statements made jointly by
the Company and Parent (or individually, if approved by the other party).

6.3 Notification of Certain Matters. Each of the Company and Parent shall
promptly notify the other of:

(a) any notice or other communication from any Person alleging that the consent
of such Person is or may be required in connection with the transactions
contemplated by this Agreement;

(b) any notice or other communication from any Governmental Entity in connection
with the transactions contemplated by this Agreement;

(c) any litigation, investigation, arbitration, proceeding, or other claim
commenced or, to its knowledge, threatened against, relating to or involving or
otherwise affecting the Company or any of its Subsidiaries, that, if pending on
the date of this Agreement, would have been required to have been disclosed
pursuant to Article II, or that relates to the consummation of the transactions
contemplated by this Agreement;

(d) any inaccuracy of any representation or warranty contained in this Agreement
at any time during the term hereof that could reasonably be expected to cause
the conditions set forth in Article VII not to be satisfied; and

(e) any failure of such party to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder.

6.4 Further Assurances. Upon the terms and subject to the conditions hereof each
of the parties hereto shall cooperate and perform all obligations to be
performed by it under this Agreement in order to consummate the transactions
contemplated by this Agreement and shall execute such documents and other
instruments and take such further actions as may be reasonably required to carry
out the provisions hereof and consummate the Arrangement and the transactions
contemplated by this Agreement.

 

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6.5 Debt Cooperation. To the extent reasonably requested by Parent, the Company
shall cooperate with Parent in any efforts to retire, redeem or purchase on or
immediately prior to the Closing Date any of the Company’s outstanding debt or
in any other action with respect to such debt reasonably requested by Parent,
including any offer to purchase all of the outstanding aggregate principal
amount of the Company’s Secured Floating Rate Notes due 2016 (the “Notes”);
provided that, in the case of the Notes, in no event will the Company be
required to accept for payment Notes prior to the Effective Time and, in all
cases, Parent agrees to reimburse the Company and its Subsidiaries and hold them
harmless from and against any liabilities, losses, costs and expenses incurred
in connection with this Section 6.5.

ARTICLE VII

CONDITIONS TO THE ARRANGEMENT

7.1 Conditions to the Obligations of Each Party. The obligations of Parent,
Subco and the Company to consummate the Arrangement are subject to the
satisfaction (or, to the extent permissible, waiver) on or prior to the Closing
Date of the following conditions:

(a) The Arrangement Resolution shall have been approved and adopted at the
Company Meeting in accordance with the Interim Order.

(b) The Interim Order and the Final Order shall each have been obtained on terms
consistent with this Agreement and will not have been set aside.

(c) The waiting period applicable to the Arrangement under the HSR Act shall
have expired or been terminated and any applicable waiting periods or approvals
under the Other Antitrust Laws, which counsel for the parties agree are
necessary or required, shall have expired, been terminated or obtained, as the
case may be.

(d) Competition Act Approval shall have been obtained.

(e) Investment Canada Act Approval shall have been obtained.

(f) No Applicable Law or Order shall prohibit the consummation of the
Arrangement.

7.2 Conditions to the Obligations of Parent and Subco. The obligations of Parent
and Subco to consummate the Arrangement are subject to the satisfaction (or
waiver by Parent in its sole discretion) of the following further conditions:

(a) The representations and warranties of the Company set forth in this
Agreement (without regard to materiality or Company Material Adverse Effect
qualifiers contained therein), shall be true and correct at and as of the date
of this Agreement and the Closing Date as if made at and as of such date (except
to the extent that such representations and warranties refer specifically to an
earlier date, in which case such

 

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representations and warranties shall have been true and correct as of such
earlier date), except where the failure of the representations and warranties to
be true and correct, individually or in the aggregate has not had and would not
reasonably be expected to have a Company Material Adverse Effect; provided, that
the representations and warranties set forth in Sections 2.1, 2.2 and 2.5 shall
be true and correct in all material respects at and as of the date of this
Agreement and the Closing Date as if made as of such date. Parent shall have
received a certificate dated the Closing Date signed on behalf of the Company by
the chief executive officer or the chief financial officer of the Company to the
effect of the foregoing.

(b) The Company shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Closing
Date. Parent shall have received a certificate dated the Closing Date signed on
behalf of the Company by the chief executive officer or the chief financial
officer of the Company to the effect of the foregoing.

(c) There shall not have occurred any event, occurrence or change after the date
hereof that has had, or would reasonably be expected to have, a Company Material
Adverse Effect.

(d) No Action shall be pending by a Governmental Entity (i) seeking to prevent
consummation of the Arrangement, (ii) seeking to impose any limitation on the
right of Parent to control the Company and its Subsidiaries or any other
Affiliate of Parent, or (iii) seeking to restrain or prohibit the Company’s or
Parent’s ownership or operation (or that of their respective Subsidiaries or
Affiliates) of any portion of the business or assets of the Company or Parent or
any of their respective Subsidiaries or Affiliates, or to compel the Company or
Parent or any of their respective Subsidiaries or Affiliates to dispose of or
hold separate any portion of the business or assets of the Company or Parent or
any of their respective Subsidiaries or Affiliates.

(e) The Interim Order and the Final Order shall not have been set aside or
modified in a manner unacceptable to Parent, acting reasonably, on appeal or
otherwise.

(f) The Final Order shall vary the 2006 Final Order by deleting paragraph 17 of
the 2006 Final Order in its entirety, effective at the Effective Time, and shall
order, as part of the Plan of Arrangement, the deletion of section 2.03 of the
2006 Plan of Arrangement in its entirety and the deletion of the reference to
section 2.03 in section 5.01 of the 2006 Plan of Arrangement.

(g) All requisite consents, waivers, permits, exemptions, Orders and approvals
from a Governmental Entity that are legally necessary to implement the Plan of
Arrangement shall have been obtained or received on terms that are satisfactory
to Parent, acting reasonably, and reasonable evidence shall have been delivered
to Parent.

 

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7.3 Conditions to the Obligation of the Company. The obligation of the Company
to consummate the Arrangement is subject to the satisfaction (or waiver by the
Company in its sole discretion) of the following further conditions:

(a) The representations and warranties of Parent set forth in this Agreement
shall have been true and correct in all material respects at and as of the date
of this Agreement and the Closing Date as if made at and as of such date (except
to the extent that such representations and warranties refer specifically to an
earlier date, in which case such representations and warranties shall have been
true and correct in all material respects as of such earlier date), and the
Company shall have received a certificate dated the Closing Date signed on
behalf of Parent by the chief executive officer or chief financial officer of
Parent to such effect.

(b) Parent and Subco shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to
the Closing Date. The Company shall have received a certificate signed on behalf
of Parent by the chief executive officer or chief financial officer of Parent to
such effect.

ARTICLE VIII

TERMINATION

8.1 Termination.

(a) This Agreement may be terminated and the Arrangement abandoned at any time
prior to the Effective Time (with any termination by Parent also being an
effective termination by Subco):

(i) by mutual written consent of Parent and the Company;

(ii) by Parent or the Company if:

(A) the Arrangement is not consummated on or before January 31, 2008 (the
“Outside Date”); provided, however, that if all of the conditions set forth in
Article VII have been satisfied or waived on that date, with the exception of
the conditions set forth in Sections 7.1(c), 7.1(d), 7.1(e), 7.1(f), 7.2(d) and
7.2(g) (collectively, the “Regulatory Conditions”), then the Outside Date shall
be extended to the earlier of two Business Days after the Regulatory Conditions
have been satisfied or waived, and April 30, 2008;

(B) a Governmental Entity shall have issued an Order or taken any other action,
in any case having the effect of making illegal or permanently restraining,
enjoining or otherwise prohibiting the consummation of the Arrangement, which
Order or other action is final and non-appealable; or

(C) the Arrangement Resolution shall have failed to receive the requisite vote
for approval at the Company Meeting (including any adjournment, continuation or
postponement thereof) in accordance with the Interim Order.

 

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(iii) by Parent, on behalf of itself and Subco, if:

(A) the Company has breached or failed to perform any of its representations,
warranties, covenants or agreements contained in this Agreement, which breach or
failure to perform (1) would cause the conditions set forth in Section 7.2 not
to be satisfied and (2) cannot be cured or, if curable, is not cured within 30
days after written notice of such breach is given to the Company by Parent;

(B) the Board shall effect a Change of Recommendation or publicly propose to do
so.

(iv) by the Company if Parent or Subco has breached or failed to perform any of
its representations, warranties, covenants or agreements contained in this
Agreement, which breach or failure to perform (1) would cause the conditions set
forth in Section 7.3 not to be satisfied and (2) cannot be cured or, if curable,
is not cured within 30 days after written notice of such breach is given to
Parent or Subco by the Company.

(b) The party desiring to terminate this Agreement pursuant to Section 8.1(a)
(ii), (iii) or (iv) shall give written notice of such termination to the other
parties hereto specifying the provision hereof pursuant to which such
termination is made.

8.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 8.1, this Agreement shall immediately become void and there
shall be no liability or obligation on the part of the Company or Parent or
their respective officers, directors, stockholders or Affiliates, except as set
forth in Sections 8.3 and 8.4; provided, however, that the provisions of
(i) Section 6.2 (Public Announcements), Section 8.2 (Effect of Termination),
Section 8.3 (Remedies), Section 8.4 (Termination Fee) and Article IX of this
Agreement, (ii) Section 4.4 (Cooperation Regarding Reorganization) and
Section 6.5 (Debt Cooperation) with respect to the reimbursement by Parent of
any costs, penalties, interest, damages, Taxes, expenses or liabilities incurred
by the Company or any of its Subsidiaries contemplated by such sections and
(iii) the Confidentiality Agreement in accordance with its terms, in each case,
shall remain in full force and effect and survive any termination of this
Agreement.

8.3 Remedies. Any material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement that is wilful
or intentional shall not be affected by termination of this Agreement or any
payment of the Termination Fee. The parties agree that if Subco or Parent fail
to deliver or arrange to be delivered any cash amounts to the Depositary or the
Company, as and when required by the Plan of Arrangement, and all of the
conditions set forth in Sections 7.1 and 7.2 have been satisfied or waived
(other than any deliveries to be made, and actions to be taken, as at the
Effective Time), such failure will be deemed to be a wilful and intentional
material breach of this Agreement by each of Subco and Parent.

 

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8.4 Termination Fee.

(a) The Company shall pay Parent, by wire transfer of immediately available
funds to an account designated by Parent, a fee of $26,000,000 (the “Termination
Fee”) if this Agreement is terminated as follows:

(i) if Parent terminates this Agreement pursuant to Section 8.1(a)(iii)(B), the
Company shall pay Parent the Termination Fee in full on the date of such
termination provided that the Termination Fee will not be payable if,
notwithstanding the occurrence of a Change of Recommendation, the Arrangement
Resolution has been approved and the Final Order has been obtained on terms and
conditions contemplated by this Agreement; or

(ii) if (x) this Agreement is terminated pursuant to Section 8.1(a)(ii)(A) or
(C), (y) at any time after the date of this Agreement and at or before the date
of such termination a proposal with respect to an Acquisition Transaction shall
have been publicly announced or disclosed, and (z) within twelve (12) months
after the date of such termination (A) the Company shall have consummated an
Acquisition Transaction or (B) entered into an agreement with respect to an
Acquisition Transaction and such Acquisition Transaction is subsequently
completed, within twelve (12) months after such termination, then, in any such
case in (A) or (B), the Company shall promptly on the date of the consummation
of any such Acquisition Transaction pay Parent the Termination Fee. When used in
this Section 8.4(a)(ii) only, the term “Acquisition Transaction” shall have the
meaning assigned to such term in Section 4.3(a), except the reference to “15% or
more” in the definition of “Acquisition Transaction” shall be deemed to be a
reference to “more than 50%”.

(b) In the event that the Company fails to pay the Termination Fee when due, the
Company will also pay the costs and expenses of Parent or Subco in connection
with a legal action to enforce this Agreement, together with interest on such
Termination Fee, commencing on the date that such Termination Fee became due, at
a rate equal to 8% per annum.

ARTICLE IX

MISCELLANEOUS

9.1 Notices. Any notice, request, demand, waiver, consent, approval or other
communication which is required or permitted hereunder shall be in writing and
shall be deemed given: (a) on the date established by the sender as having been
delivered personally; (b) on the date delivered by a private courier as
established by the sender by evidence obtained from the courier; (c) on the date
sent by facsimile, with confirmation of transmission, if sent during normal
business hours of the recipient, if not, then on the next Business Day; or
(d) on the fifth day after the date mailed, by certified or registered mail,
return receipt requested, postage prepaid. Such communications, to be valid,
must be addressed as follows:

 

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If to Parent or Subco, to:

United States Steel Corporation

600 Grant Street

Pittsburgh, Pennsylvania 15219

Attn: James D. Garraux

Facsimile: 412-433-1121

With a required copy (which shall not constitute notice) to:

Osler, Hoskin & Harcourt LLP

1 First Canadian Place

Box 50

Toronto, Ontario M5X 1B8

Attn: Donald C. Ross

Facsimile: (416) 862-6666

With a required copy (which shall not constitute notice) to:

Morgan, Lewis & Bockius LLP

One Oxford Centre, Thirty-Second Floor

301 Grant Street

Pittsburgh, PA 15219

Attn: Marlee S. Myers

Facsimile: (412) 560-7001

If to the Company, to:

Stelco Inc.

386 Wilcox Street

Hamilton, Ontario

L8N 3T1

Attn: D. Chad Hutchison

Facsimile: 905-308-7002

With a required copy (which shall not constitute notice) to:

McCarthy Tétrault LLP

Suite 4700, Box 48

Toronto Dominion Bank Tower

Toronto Dominion Centre

Toronto, Ontario M5K 1E6

Attn: Blair Cowper-Smith

Facsimile: (416) 868-0673

 

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or to such other address or to the attention of such Person or Persons as the
recipient party has specified by prior written notice to the sending party (or
in the case of counsel, to such other readily ascertainable business address as
such counsel may hereafter maintain). If more than one method for sending notice
as set forth above is used, the earliest notice date established as set forth
above shall control.

9.2 Survival. None of the representations and warranties in this Agreement or in
any certificate or instrument delivered pursuant to this Agreement shall survive
the Effective Time. This Section 9.2 shall not limit any covenant or agreement
of the parties which by its terms contemplates performance after the Effective
Time.

9.3 Amendments and Waivers.

(a) Subject to the provisions of the Interim Order and Applicable Law, any
provision of this Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and is signed, in the case of an amendment, by
each party to this Agreement, or in the case of a waiver, by the party against
whom the waiver is to be effective.

(b) No failure or delay by any party in exercising any right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.

(c) To the maximum extent permitted by Applicable Law, (i) no waiver that may be
given by a party shall be applicable except in the specific instance for which
it was given and (ii) no notice to or demand on one party shall be deemed to be
a waiver of any obligation of such party or the right of the party giving such
notice or demand to take further action without notice or demand.

9.4 Fees and Expenses. Except as set forth in this Section 9.4 or in
Section 8.4, all fees and expenses incurred in connection with the Arrangement,
this Agreement and the transactions contemplated by this Agreement shall be paid
by the party incurring such fees or expenses, whether or not the Arrangement is
consummated. Each of the Company and Parent shall bear and pay one-half of the
filing fees with respect to the filings under the Canadian Competition Act, the
HSR Act, the Investment Canada Act and the Other Antitrust Laws.

9.5 Successors and Assigns. This Agreement may not be assigned by any party
hereto without the prior written consent of the other parties; provided, that
Parent or Subco may assign any of their respective rights and obligations to any
direct or indirect Subsidiary of Parent, provided that Parent will continue to
be bound by all the obligations of Parent and Subco under this Agreement as if
such assignment had not occurred, and perform such obligations to the extent
that the assignee Subsidiary fails to do so. Subject

 

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to the foregoing, all of the terms and provisions of this Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
executors, heirs, personal representatives, successors and assigns. Any
purported assignment not permitted under this Section 9.5 shall be null and
void.

9.6 Company Disclosure Letter. The parties hereto agree that any reference in a
particular Schedule or subsection of the Company Disclosure Letter shall only be
deemed to be an exception to (or, as applicable, a disclosure for purposes of)
(i) the representations and warranties of the Company that are contained in the
corresponding Section or subsection of this Agreement, and (ii) the
representations and warranties of the Company that are contained in any other
Section or subsection of this Agreement, but only to the extent the relevance of
that reference as an exception to (or a disclosure for purposes of) such
representations and warranties is reasonably apparent from such disclosure.

9.7 Governing Law. This Agreement is a contract made under and shall be governed
by and construed in accordance with the laws of the Province of Ontario and the
federal laws of Canada applicable in the Province of Ontario.

9.8 Consent to Jurisdiction. Each party submits to the exclusive jurisdiction of
any Ontario courts sitting in Toronto in any action, application, reference or
other proceeding arising out of or related to this Agreement and agrees that all
claims in respect of any such actions, application, reference or other
proceeding shall be heard and determined in such Ontario courts. Each of the
parties irrevocably waives, to the fullest extent it may effectively do so, the
defence of an inconvenient forum to the maintenance of such action, application
or proceeding. Each party consents to any action, application, reference or
other proceeding arising out of or related to this Agreement being tried in
Toronto and, in particular, being placed on the Commercial List of the Ontario
Superior Court of Justice. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

9.9 Counterparts. This Agreement may be executed in any number of counterparts,
and any party hereto may execute any such counterpart, each of which when
executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other parties hereto. The parties agree that
the delivery of this Agreement may be effected by means of an exchange of
facsimile signatures with original copies to follow by mail or courier service.

9.10 Entire Agreement. This Agreement and the documents, instruments and other
agreements specifically referred to herein or delivered pursuant hereto set
forth the entire understanding of the parties hereto with respect to the
Arrangement. All Exhibits and Schedules referred to herein are intended to be
and hereby are specifically made a part of this Agreement. Any and all previous
agreements and understandings between or

 

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among the parties regarding the subject matter hereof, whether written or oral,
are superseded by this Agreement, other than the Confidentiality Agreement which
shall continue in full force and effect in accordance with its terms. Without
limiting the generality of the foregoing, the Company, Parent and Subco make no
representation or warranty other than as specified in this Agreement.

9.11 Captions. All captions contained in this Agreement are for convenience of
reference only, do not form a part of this Agreement and shall not affect in any
way the meaning or interpretation of this Agreement.

9.12 Severability. If, in any jurisdiction, any provision of this Agreement or
its application to any party or circumstance is restricted, prohibited or
unenforceable, such provision shall, as to such jurisdiction, be ineffective
only to the extent of such restriction, prohibition or unenforceability without
invalidating the remaining provisions of this Agreement and without affecting
the validity or enforceability of such provision in any other jurisdiction or
without affecting its application to other parties or circumstances.

9.13 Specific Performance. Parent and the Company each agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed by them in accordance with the terms hereof and that each
party shall be entitled to specific performance of the terms hereof, in addition
to any other remedy at law or equity.

ARTICLE X

DEFINITIONS

10.1 Definitions. When used in this Agreement, the following terms shall have
the meanings assigned to them in this Section 10.1, or in the applicable Section
of this Agreement to which reference is made in this Section 10.1.

“2006 Final Order” means the final order of the Court dated February 14, 2006
approving the 2006 Plan of Arrangement;

“2006 Plan of Arrangement” means the plan of arrangement attached to the
certificate and articles of arrangement of the Company issued by the Director on
March 31, 2006;

“Affiliate” means, with respect to any specified Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such specified Person. For this purpose, “control” (including, with correlative
meanings, “controlled by” and “under common control with”) shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of management or policies of a Person, whether through the ownership
of securities or partnership or other ownership interests, by contract or
otherwise.

 

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“Applicable Law” means, with respect to any Person, any domestic, foreign,
national, federal, provincial, state or local law (statutory, common or
otherwise), constitution, treaty, convention, ordinance, code, rule, regulation,
policy or other similar requirement enacted, adopted, promulgated or applied by
a Governmental Entity that is binding upon or applicable to such Person, as
amended unless expressly specified otherwise.

“Arrangement” means the arrangement involving Subco, Parent and the Company
under the provisions of section 192 of the CBCA on the terms and conditions set
forth in this Agreement resulting, inter alia, in the direct acquisition by
Subco of all of the outstanding Company Shares or any successor thereof, all on
such terms and subject to the conditions set out in this Agreement and as more
particularly described in the Plan of Arrangement, subject to any amendments or
variations thereto made in accordance with this Agreement or the Plan of
Arrangement or made at the direction of the Court.

“Arrangement Resolution” means the special resolution of the Shareholders
approving the Arrangement to be considered at the Company Meeting, substantially
in the form of Exhibit B, and any amendments or variations thereto made in
accordance with the provisions of this Agreement or made at the direction of the
Court in the Interim Order or otherwise.

“Articles of Arrangement” means the articles of arrangement of the Company to be
filed with the Director in connection with the Arrangement.

“Authorization” means any authorization, approval, consent, certificate,
directives, notices, “no action” letter, license, Order, permit (including
Environmental Permits), variances, agreements, instructions, registrations or
franchise of or from any Governmental Entity or pursuant to any law, including
Competition Act Approval and Investment Canada Act Approval.

“Business Day” means a day other than a Saturday, Sunday or other day on which
the OSC or banks located in Toronto or New York City are authorized or required
by law to close.

“CBCA” means the Canada Business Corporations Act, as now enacted or as the same
may from time to time be amended, re-enacted or replaced.

“Certificate of Arrangement” means the Certificate of Arrangement to be issued
by the Director pursuant to section 192(7) of the CBCA in respect of the
Articles of Arrangement.

“Circular” means the notice of meeting and management information circular of
the Company to be prepared and sent to Shareholders in connection with the
Company Meeting, including the exhibits thereto.

 

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“Collective Agreements” means collective agreements (including expired
collective agreements which have not been renewed) and related documents
including benefit agreements, letters of understanding, letters of intent and
other written communications (including arbitration awards) by which the Company
or any of its Subsidiaries is bound or which impose any obligations upon the
Company or any of its Subsidiaries or set out the understanding of the parties
or an interpretation with respect to the meaning of any provisions of such
collective agreements.

“Commissioner” means the Commissioner of Competition appointed under the
Canadian Competition Act.

“Company Benefit Plan” means any employee benefit plan, program, policy,
agreement or material arrangement sponsored, maintained or contributed to by the
Company or any of its Subsidiaries or to which the Company or any of its
Subsidiaries is a party or is bound, or in which the employees of the Company or
any of its Subsidiaries participate, or under which the Company or any of its
Subsidiaries has, or will have, any liability or contingent liability, including
any deferred compensation or retirement plan or arrangement, defined
contribution retirement plan or arrangement, defined benefit retirement plan or
arrangement, Multiemployer Plan, medical, dental, sickness, health, disability,
death benefit or other employee welfare benefit plan or program, or stock
purchase, stock option, severance pay, employment, change-in-control, vacation
pay, company awards, salary continuation, sick leave, excess benefit, bonus or
other incentive compensation, life insurance, or other employee benefit plan,
contract, program, policy or other material arrangement, whether oral or
written, formal or informal, funded or unfunded, insured or uninsured,
registered or unregistered.

“Company Material Adverse Effect” means any state of facts, development, event,
circumstance, condition, occurrence or effect that, individually or taken
collectively with all other events, circumstances, conditions, occurrences or
effects, is materially adverse to (a) the business, assets, financial condition
or results of operations of the Company and its Subsidiaries taken as a whole,
or (b) the ability of the Company to perform its obligations hereunder and
consummate the transactions contemplated hereby; provided, however, for purposes
of clause (a) above, in no event shall any of the following be deemed to
constitute, nor shall any of the following be taken into account in determining
whether there has been or will be a Company Material Adverse Effect: (i) any
changes affecting the industry in which the Company and its Subsidiaries operate
or sell principal product lines, including changes relating to the price of raw
materials or changes relating to selling prices or market demand, that do not
have a disproportionate impact on the Company and its Subsidiaries, taken as a
whole, (ii) any changes in the economy or the financial or capital markets,
including changes in interest or exchange rates that do not have a
disproportionate impact on the Company and its Subsidiaries, taken as a whole,
(iii) changes in law or in generally accepted accounting principles or in
accounting standards, or changes in general legal, regulatory or political
conditions that do not have a disproportionate impact on the Company and its
Subsidiaries, taken as a whole, and (iv) acts of war, sabotage or terrorism, or
any escalation or worsening of any such acts of war, sabotage or terrorism that
do not have a disproportionate impact on the Company and its Subsidiaries, taken
as a whole, (v) the execution, announcement or performance of the Agreement or
consummation of the transactions contemplated hereby, (vi) any change in

 

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the market price or trading volume of any securities of the Company, provided
that the exception in this clause (vi) shall not prevent or otherwise affect a
determination that any fact, development, event, circumstance, condition,
occurrence or effect underlying such failure has resulted in, or contributed to,
a Company Material Adverse Effect, (vii) any actions taken upon the written
request of Parent, (viii) any failure to complete the sale of Wabush Mines and
(ix) any failure to meet any internal or external projections, provided that the
exception in this clause (ix) shall not prevent or otherwise affect a
determination that any fact, development, event, circumstance, condition,
occurrence or effect underlying such failure has resulted in, or contributed to,
a Company Material Adverse Effect.

“Company Meeting” means the special meeting of the Shareholders (including any
adjournments or postponements thereof) to be held to consider, among other
things, the Arrangement Resolution.

“Competition Act Approval” means the Commissioner shall have: (a) issued an
advance ruling certificate under section 102 of the Canadian Competition Act; or
(b) advised Parent in writing that the Commissioner has determined not to file
an application for an Order under Part VIII of the Canadian Competition Act and
any terms and conditions attached to such advice shall be acceptable to Parent.

“Contract” means any agreement, contract, license, lease, commitment,
arrangement or understanding, written or oral, including any sales order and
purchase order.

“Court” means the Ontario Superior Court of Justice (Commercial List).

“Depositary” has the meaning given in the Plan of Arrangement.

“Director” means the Director appointed pursuant to the CBCA.

“Dissent Rights” means the rights of dissent in favour of registered
Shareholders in respect of the Arrangement as described in the Interim Order and
the Plan of Arrangement.

“Effective Date” means the date upon which the Arrangement becomes effective as
established by the date shown on the Certificate of Arrangement issued by the
Director pursuant to the CBCA.

“Effective Time” means the time at which Articles of Arrangement are filed with
the Director on the Effective Date.

“Employees” means individuals employed by the Company or any of its Subsidiaries
on a full-time, part-time or temporary basis, including those employees on
layoff, disability leave, parental leave or other absence.

“Employment Contracts” means Contracts, other than Company Benefit Plans,
whether oral or written, relating to an Employee, including any communication or
practice relating to an Employee which imposes any obligation on the Company or
any of its Subsidiaries.

 

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“Environment” means the natural environment as defined in any Environmental
Laws, and includes air, water, soil, groundwater, all fish, wildlife, biota and
all other natural resources.

“Environmental Action” means any claim, proceeding or other Action brought or
threatened under any Environmental Law asserting that the Company or any of its
Subsidiaries has incurred any Environmental Liability.

“Environmental Clean-up Site” means any location that is listed on any public
domestic or foreign national, federal, state, provincial or local list of sites
requiring investigation or cleanup.

“Environmental Laws” means any and all Applicable Law and Authorizations issued,
promulgated or entered into by any Governmental Entity relating to the
Environment, preservation or reclamation of natural resources, or to the
management, handling, use, generation, treatment, storage, transportation,
disposal, manufacture, distribution, formulation, packaging, labelling, Release
or threatened Release into the Environment of Hazardous Substances; and any
common law doctrine, including negligence, nuisance, trespass, personal injury,
or property damage related to or arising out of the presence or Release into the
Environment of Hazardous Substances.

“Environmental Liabilities” means liabilities based in whole or in part upon or
arising out of (A) the ownership or operation of the business of the Company or
any of its Subsidiaries or their respective contractors or (B) the ownership,
operation or condition of the Real Property or any other real property currently
or formerly owned, operated or leased by the Company or any of its Subsidiaries,
in each case to the extent based upon or arising out of (i) Environmental Law,
(ii) a failure to obtain, maintain or comply with any Environmental Permit or
(iii) a Release of any Hazardous Substance into the Environment.

“Environmental Permit” means any Authorization or Order under Environmental Law
or otherwise relating to the Environment.

“Final Order” means the order of the Court approving the Arrangement as such
order may be amended at any time prior to the Effective Date or, if appealed,
then unless such appeal is withdrawn or denied, as affirmed or as amended on
appeal.

“Governmental Entity” means any government, regulatory authority, governmental
department, agency, commission, bureau, official, minister, Crown corporation,
court, body, board, tribunal or dispute settlement panel or other law, rule or
regulation-making organization or entity: (a) having or purporting to have
jurisdiction on behalf of any nation, province, territory or state or any other
geographic or political subdivision of any of them; or (b) exercising, or
entitled or purporting to exercise any administrative, executive, judicial,
legislative, policy, regulatory or taxing authority or power.

 

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“Hazardous Substances” means all wastes of any nature, hazardous materials,
hazardous substances, toxic substances, pollutants, dangerous goods or
contaminants as defined, judicially, interpreted or identified under
Environmental Laws.

“Indebtedness” means any of the following: (a) any indebtedness for borrowed
money, (b) any obligations evidenced by bonds, debentures, notes or other
similar instruments, (c) any obligations to pay the deferred purchase price of
property or services, except trade accounts payable and other current
liabilities arising in the ordinary course of business, (d) any obligations as
lessee under capitalized leases, (e) any indebtedness created or arising under
any conditional sale or other title retention agreement with respect to acquired
property, (f) any obligations, contingent or otherwise, under acceptance credit,
letters of credit or similar facilities, and (g) any guaranty of any of the
foregoing.

“Interim Order” means the interim order of the Court made pursuant to the
application therefor contemplated by Section 1.3 of this Agreement.

“Investment Canada Act” means the Investment Canada Act (Canada).

“Investment Canada Approval” means the approval or deemed approval of the
Minister responsible for the Investment Canada Act.

“knowledge” of the Company or any similar phrase means, with respect to any fact
or matter, the actual knowledge of the individuals set forth in Schedule 10.1 to
the Company Disclosure Letter.

“Lien” means, with respect to any property or asset, any mortgage, lien, pledge,
hypothec, charge, security interest, encumbrance, claim, infringement,
interference, right of first refusal, preemptive right, community property right
or other adverse claim of any kind in respect of such property or asset. For
purposes of this Agreement, a Person shall be deemed to own subject to a Lien,
any property or asset that it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such property or asset.

“Misrepresentation” has the meaning ascribed thereto in the Securities Act.

“Multiemployer Plan” means a Company Benefit Plan to which the Company or any of
its Subsidiaries is required to contribute and: (i) which is not maintained or
administered by the Company or any of its Subsidiaries; or (ii) to which Persons
other than the Company and its Subsidiaries or their Employees makes or has made
contributions.

“Optionholder” means a holder of Options.

“Order” means any award, injunction, judgment, decree, order, ruling, subpoena
or verdict or other decision entered, issued or rendered by any Governmental
Entity.

 

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“Pension Plans” means Company Benefit Plans providing pensions, superannuation
benefits or retirement savings including pension plans, top up pensions or
supplemental pensions, “registered retirement savings plans” (as defined in the
Tax Act), “registered pension plans” (as defined in the Tax Act) and “retirement
compensation arrangements” (as defined in the Tax Act).

“Permitted Liens” means (i) liens for current real or personal property Taxes
not yet due and payable and with respect to which the Company maintains adequate
reserves, (ii) workers’, carriers’ and mechanics’ or other like liens incurred
in the ordinary course of business with respect to which payment is not due and
that do not impair the conduct of the Company’s or any of its Subsidiaries’
business or the present or proposed use of the affected property and (iii) liens
that are immaterial in character, amount, and extent and which do not detract
from the value or interfere with the present or proposed use of the properties
they affect.

“Person” means an individual, a corporation, a partnership, a limited liability
company, a trust, an unincorporated association, a Governmental Entity or any
agency, instrumentality or political subdivision of a Governmental Entity, or
any other entity or body.

“Plan of Arrangement” means, in relation to the Arrangement, the plan of
arrangement in the form and having the content of Exhibit A and any amendments
or variations thereto made in accordance with the provisions hereof or made at
the direction of the Court in the Final Order.

“Principal Joint Ventures” means Hibbing Taconite Company, Tilden Mining
Company, LLC and Wabush Mines.

“Release” has the meaning prescribed in any Environmental Laws and includes any
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, burying, disposing, placement or introduction into
the Environment.

“Securities Act” means the Securities Act (Ontario), as now enacted or as the
same may from time to time be amended, re-enacted or replaced.

“Subsidiary” or “Subsidiaries” means, with respect to any party, any Person, of
which (i) such party or any Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting
interest in such partnership) or (ii) at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the Board or others performing similar functions with respect to such Person
is directly or indirectly owned or controlled by such party and/or by any one or
more of its Subsidiaries.

 

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“Tax” or “Taxes” means any and all federal, provincial, state, local, or foreign
net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, goods and services, harmonized sales, franchise, bank shares,
withholding, payroll, employment, employee health, excise, property, deed,
stamp, alternative or add-on minimum, environmental, profits, windfall profits,
transaction, license, lease, service, service use, occupation, severance,
energy, unemployment, health insurance, Canada and Québec and other government
pension plan, social security, workers’ compensation, capital, premium, surtax
and other taxes, assessments, customs, duties, import and export taxes,
countervail and anti-dumping, fees, levies, or other governmental charges of any
nature whatever, whether disputed or not, together with any interest, penalties,
additions to tax, or additional amounts with respect thereto.

“Tax Act” means the Income Tax Act (Canada), as now enacted or as the same may
from time to time be amended, re-enacted or replaced.

“Tax Returns” means any return, declaration, report, claim for refund, or
information return or statement (whether in tangible, electronic or other form)
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.

“Taxing Authority” means any Governmental Entity having or purporting to have
jurisdiction with respect to any Tax.

“TSX” means the Toronto Stock Exchange.

“Warrantholder” means a holder of Warrants.

“$” means Canadian dollars.

10.2 Other Defined Terms. The following terms have the meanings assigned to such
terms in the Sections of the Agreement set forth below:

 

Acquisition Transaction

   4.3(a)

Action

   2.13

Agent

   4.3(a)

Agreement

   Preface

Board

   Preface

Canadian Competition Act

   2.3

Change of Recommendation

   4.3(c)

Closing

   1.12

Closing Date

   1.12

Company

   Preface

Company Balance Sheet

   2.8

Company Balance Sheet Date

   2.8

Company Disclosure Letter

   Preamble Article II

 

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Company Financial Advisor

   2.26

Company Financial Statements

   2.8

Company Intellectual Property

   2.19(b)

Company Registered Items

   2.19(c)

Company Securities

   2.5(c)

Company Securities Reports

   2.7(a)

Company Shareholder Approval

   2.2(a)

Company Shares

   Preface

Company Subsidiary Securities

   2.6(b)

Confidentiality Agreement

   4.2

Copyrights

   2.19(a)

GAAP

   2.7(e)

HSR Act

   2.3

Indemnified Parties

   5.1(a)

Intellectual Property

   2.19(a)

Intellectual Property Rights

   2.19(a)

Lease

   2.18(c)

Leased Real Property

   2.18(a)

Marks

   2.19(a)

Material Contract

   2.14(a)

Notes

   6.5

Notice Period

   4.3(c)(iii)

Options

   2.5(a)

OSC

   2.7(a)

Other Antitrust Laws

   2.3

Outside Date

   8.1(a)(ii)(A)

Owned Real Property

   2.18(a)

Parent

   Preface

Patents

   2.19(a)

Policies

   2.24(a)

Principal Joint Venture Interests

   2.6(c)

Products

   2.25(a)

Real Property

   2.18(a)

Regulatory Conditions

   8.1(a)(ii)(A)

 

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Representatives

   4.2

Securities Laws

   2.3

Share Consideration

   1.13(a)

Shareholders

   Preface

Special Committee

   Preface

Subco

   Preface

Superior Proposal

   4.3(b)

Support Agreement

   Preface

Termination Fee

   8.4(a)

Third Party Proposal

   4.3(a)

Warrants

   2.5(a)

10.3 Interpretation.

(a) The meaning assigned to each term defined herein shall be equally applicable
to both the singular and the plural forms of such term and vice versa, and words
denoting either gender shall include both genders as the context requires. Where
a word or phrase is defined herein, each of its other grammatical forms shall
have a corresponding meaning.

(b) The terms “hereof”, “herein” and “herewith” and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this Agreement.

(c) When a reference is made in this Agreement to an Article, Section,
paragraph, Exhibit or Schedule, such reference is to an Article, Section,
paragraph, Exhibit or Schedule to this Agreement unless otherwise specified.

(d) The word “include”, “includes”, and “including” when used in this Agreement
shall be deemed to be followed by the words “without limitation”, unless
otherwise specified.

(e) A reference to any party to this Agreement or any other agreement or
document shall include such party’s successors and permitted assigns.

(f) Reference to any law means such law as amended, modified, codified, replaced
or re-enacted, and all rules and regulations promulgated thereunder.

(g) The parties have participated jointly in the negotiation and drafting of
this Agreement. Any rule of construction or interpretation otherwise requiring
this Agreement to be construed or interpreted against any party by virtue of the
authorship of this Agreement shall not apply to the construction and
interpretation hereof.

 

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(h) All accounting terms used and not defined herein shall have the respective
meanings given to them under GAAP.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, Parent, Subco and the Company have caused this Agreement to
be signed by their respective officers thereunto, duly authorized as of the date
first written above.

 

UNITED STATES STEEL CORPORATION By:   /s/ James D. Garraux   Name: James D.
Garraux   Title:   General Counsel & Senior Vice President 1344973 ALBERTA ULC
By:   /s/ James D. Garraux   Name: James D. Garraux   Title:   Vice President

--------------------------------------------------------------------------------

STELCO INC. By:   /s/ Rodney B. Mott   Name: Rodney B. Mott   Title:   President
and Chief Executive Officer

Signature Page to Arrangement Agreement

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EXHIBIT A

PLAN OF ARRANGEMENT

PLAN OF ARRANGEMENT

UNDER SECTION 192 OF THE

CANADA BUSINESS CORPORATIONS ACT

ARTICLE 1

DEFINITIONS AND INTERPRETATION

 

1.1 Definitions

In this Plan of Arrangement, unless there is something in the subject matter or
context inconsistent therewith, the following terms shall have the respective
meanings set out below and grammatical variations of such terms shall have
corresponding meanings:

“2006 Plan of Arrangement” means the plan of arrangement attached to the
certificate and articles of arrangement of the Company issued by the Director on
March 31, 2006;

“2006 Final Order” means the final order of the Court dated February 14, 2006
approving the 2006 Plan of Arrangement;

“Aggregate Share Consideration” shall have the meaning ascribed thereto in
Section 2.4(a)(i);

“Aggregate Option Consideration” shall have the meaning ascribed thereto in
Section 2.4(a)(iii);

“Aggregate Warrant Consideration” shall have the meaning ascribed thereto in
Section 2.4(a)(ii);

“Applicable Law” means, with respect to any Person, any domestic, foreign,
national, federal, provincial, state or local law (statutory, common or
otherwise), constitution, treaty, convention, ordinance, code, rule, regulation
or other similar requirement enacted, adopted, promulgated or applied by a
Governmental Entity that is binding upon or applicable to such Person, as
amended unless expressly specified otherwise;

“Arrangement” means an arrangement under the provisions of section 192 of the
CBCA on the terms and conditions set forth in this Plan of Arrangement, subject
to any amendment or modification thereto made in accordance with the terms of
the Arrangement Agreement and this Plan of Arrangement, or made at the direction
of the Court in the Final Order (with the consent of the Company and Parent,
each acting reasonably);

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“Arrangement Agreement” means the arrangement agreement made as of the
August 26, 2007 between the Company, Subco and Parent, as same may be amended,
supplemented or restated in accordance with its terms providing for, among other
things, the Arrangement;

“Arrangement Resolution” means the special resolution of the Shareholders,
approving the Arrangement, such resolution to be in substantially the form of
Exhibit B attached to the Arrangement Agreement;

“Articles of Arrangement” means the articles of arrangement of the Company in
respect of the Arrangement, to be filed with the Director after the Final Order
is made;

“Business Day” means a day other than a Saturday, Sunday or other day on which
the Ontario Securities Commission or banks located in Toronto or New York City
are authorized or required by law to close.

“CBCA” means the Canada Business Corporations Act;

“Certificate” means the certificate or other confirmation of filing giving
effect to the Arrangement to be issued by the Director pursuant to section
192(7) of the CBCA after the Articles of Arrangement have been filed;

“Circular” means the notice of Company Meeting and the accompanying management
information circular dated l, 2007, including the schedules and appendices
attached thereto and all amendments from time to time made thereto, sent to
Shareholders in connection with the Company Meeting;

“Company” means Stelco Inc., a corporation incorporated under the CBCA;

“Company Meeting” means the special meeting of the Shareholders (including any
adjournments or postponements thereof) to be held to consider, among other
things, the Arrangement Resolution;

“Company Shares” means the issued and outstanding common shares in the capital
of the Company (including common shares issued upon the exercise of Options or
Warrants) and shall include any shares into which the Company Shares may be
reclassified, subdivided, consolidated or converted and any rights or benefits
arising therefrom including any extraordinary distribution of securities which
may be declared in respect of the Company Shares (except in accordance with this
Plan of Arrangement);

“Court” means the Ontario Superior Court of Justice (Commercial List);

“Depositary” means l at its principal office in Toronto, Ontario;

“Director” means the Director appointed pursuant to the CBCA;

 

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“Dissent Rights” shall have the meaning ascribed thereto in Section 3.1(a);

“Dissenting Shareholder” means a registered Shareholder who has properly and
validly dissented in respect of the Arrangement Resolution in strict compliance
with the Dissent Rights, who has not withdrawn or been deemed to have withdrawn
such dissent and who is ultimately determined to be entitled to be paid the fair
value of its Company Shares, but only in respect of the Company Shares in
respect of which Dissent Rights are validly exercised by such registered
Shareholder;

“Effective Date” means the date upon which the Arrangement becomes effective as
established by the date of issue shown on the Certificate;

“Effective Time” means the time at which Articles of Arrangement are issued by
the Director on the Effective Date;

“Final Order” means the order of the Court approving the Arrangement as such
order may be amended by the Court (with the consent of the Company and Parent,
each acting reasonably) at any time prior to the Effective Date or, if appealed,
then unless such appeal is withdrawn or denied, as affirmed or amended (provided
that any such amendment shall be acceptable to Parent and the Company, each
acting reasonably) on appeal;

“Governmental Entity” means any government, regulatory authority, governmental
department, agency, commission, bureau, official, minister, Crown corporation,
court, body, board, tribunal or dispute settlement panel or other law, rule or
regulation-making organization or entity: (a) having or purporting to have
jurisdiction on behalf of any nation, province, territory or state or any other
geographic or political subdivision of any of them; or (b) exercising, or
entitled or purporting to exercise any administrative, executive, judicial,
legislative, policy, regulatory or taxing authority or power;

“Interim Order” means the interim order of the Court, as the same may be amended
by the Court (with the consent of the Company and Parent, each acting
reasonably) pursuant to section 192(4) of the CBCA, made in connection with the
Arrangement following the application therefor contemplated by the Arrangement
Agreement;

“Letter of Transmittal” means a letter of transmittal to be forwarded or made
available by the Company to either the Shareholders or the Warrantholders, as
the case may be, in a form acceptable to Subco, acting reasonably, for use by
such Shareholders or such Warrantholders, as applicable, in connection with the
Arrangement as contemplated herein;

“Liens” means any hypothecs, mortgages, liens, charges, security interests,
encumbrances, restrictions, adverse claims or other claims of third parties of
any kind;

 

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“Notice of Dissent” means a written notice provided by a registered Shareholder
to the Company setting forth such registered Shareholder’s objection to the
Arrangement Resolution and exercise of Dissent Rights;

“Option Consideration” has the meaning given in Section 2.2(e);

“Optionholder” means a holder of Options;

“Option” means an outstanding option to purchase Company Shares issued pursuant
to the Stock Option Plan;

“Option Loan” has the meaning given in Section 2.2(c);

“Parent” means United States Steel Corporation, a corporation existing under the
laws of Delaware;

“Person” means an individual, a corporation, a partnership, a limited liability
company, a trust, an unincorporated association, a Governmental Entity or any
agency, instrumentality or political subdivision of a Governmental Entity, or
any other entity or body.

“Plan of Arrangement” means this plan of arrangement, and references to
“Article” or “Section” mean the specified Article or Section of this Plan of
Arrangement;

“Share Consideration” shall mean $38.50 cash, subject to adjustment in
accordance with Section 2.6;

“Shareholders” means, at any time and unless the context otherwise requires, the
registered holders of Company Shares at such time;

“Specified Third Party Debt” means indebtedness or borrowed money owed by the
Company or any Subsidiary that is specified by Parent to be repaid on the
Effective Date in accordance with the Arrangement Agreement;

“Stock Option Plan” means the incentive stock option plan of the Company,
established on May 10, 2006;

“Subco” means 1344973 Alberta ULC, an unlimited liability company existing under
the laws of Alberta;

“Tax Act” means the Income Tax Act (Canada);

“Third Party Debt Payoff Loans” has the meaning given in Section 2.2(c);

“Warrant Consideration” has the meaning given in Section 2.2(f);

 

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“Warrant Indenture” means the Warrant Indenture dated as of March 31, 2006
between the Company and CIBC Mellon Trust Company, as trustee;

“Warrant” means an outstanding warrant to purchase Company Shares issued
pursuant to the Warrant Indenture;

“Warrant Loan” has the meaning given in Section 2.2(c); and

“Warrantholder” means a holder of Warrants.

 

1.2 Number and Gender

In this Plan of Arrangement, unless the context otherwise requires, words
importing the singular number include the plural and vice versa, and words
importing any gender include all genders.

 

1.3 Interpretation Not Affected by Headings, etc.

The division of this Plan of Arrangement into Articles, Sections and other parts
and the insertion of headings are for convenience only and shall not affect the
construction or interpretation of this Plan of Arrangement.

 

1.4 Time

All times expressed herein or in any Letter of Transmittal are local time
(Toronto, Ontario) unless otherwise stipulated herein or therein.

 

1.5 Currency

All references to currency in this Plan of Arrangement are to Canadian dollars,
being lawful money of Canada, unless otherwise specified.

 

1.6 Statutory References

Unless otherwise expressly provided herein, any reference in this Plan of
Arrangement to a statute includes all regulations made thereunder, all
amendments to such statute or regulations in force from time to time, and any
statute or regulation that supplements or supersedes such statute or
regulations.

 

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ARTICLE 2

THE ARRANGEMENT

 

2.1 Effectiveness

This Plan of Arrangement is made pursuant to, and is subject to the provisions
of the Arrangement Agreement. This Plan of Arrangement will become effective at
the Effective Time (except as otherwise provided herein) and will be binding
from and after the Effective Time on: (i) the Company (ii) Subco; (iii) Parent;
(iv) all holders and all beneficial owners of Company Shares; (v) all holders
and all beneficial owners of Options; (vi) all holders and all beneficial owners
of Warrants; (vii) all holders of Specified Third Party Debt; (viii) the
registrar and transfer agent in respect of the Company Shares; and (ix) the
Depositary.

 

2.2 The Arrangement

Commencing at the Effective Time, the following shall occur and be deemed to
occur in the following sequence without any further act or formality required on
the part of any Person, except as expressly provided herein:

 

  (a) Notwithstanding the terms of the 2006 Plan of Arrangement, the 2006 Plan
of Arrangement shall be amended to delete section 2.03 in its entirety and the
reference to section 2.03 in section 5.01.

 

  (b) Notwithstanding the terms of the 2006 Final Order, the 2006 Final Order
shall be amended to delete paragraph 17 in its entirety.

 

  (c) Parent (or one of its Affiliates) will provide: (i) one or more loans (the
“Third Party Debt Payoff Loans”) to the Company in an aggregate amount equal to
the aggregate of all amounts owing under the Specified Third Party Debt required
to repay such Specified Third Party Debt; (ii) a loan to the Company equal to
the Aggregate Warrant Consideration (the “Warrant Loan”); and (iii) a loan to
the Company equal to the Aggregate Option Consideration (the “Option Loan”). The
Third Party Debt Payoff Loans, the Warrant Loan and the Option Loan will be
evidenced by demand promissory notes issued by the Company to Parent (or
applicable Affiliate of Parent);

 

  (d) immediately upon receipt of the Third Party Debt Payoff Loans, the Company
will repay in full all amounts owing under the Specified Third Party Debt;

 

  (e)

notwithstanding the terms of the Stock Option Plan, or the terms of any
agreement evidencing the grant of any Options, two minutes after completion of
the immediately preceding step and subject to applicable withholdings determined
in accordance with Section 5.4, each Option granted and outstanding immediately
prior to the Effective Time shall, without any further act or formality by or on
behalf of any Optionholder or

 

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the Company, be transferred by the holder of such Option to the Company, free
and clear of all Liens, in exchange for a cash payment from the Company equal to
an amount (if any) equal to: (A) the product of the number of Company Shares
underlying such Option held by such Optionholder and the Share Consideration,
less (B) the aggregate exercise price payable under such Option by such
Optionholder to acquire the number of Company Shares underlying such Option (the
difference (if any) being, the “Option Consideration”). All Options granted and
outstanding immediately prior to the Effective Time shall thereafter be
cancelled and terminated;

 

  (f) notwithstanding the terms of the Warrant Indenture, or the terms of any
agreement evidencing the grant of any Warrants, two minutes after completion of
the step in Section 2.2(d) and subject to applicable withholdings determined in
accordance with Section 5.4, each Warrant granted and outstanding immediately
prior to the Effective Time shall, without any further act or formality by or on
behalf of any Warrantholder or the Company, be transferred by the holder of such
Warrant to the Company, free and clear of all Liens, in exchange for a cash
payment from the Company equal to an amount (if any) equal to: (A) the product
of the number of Company Shares underlying such Warrant held by such
Warrantholder and the Share Consideration, less (B) the aggregate exercise price
payable under such Warrant by such Warrantholder to acquire the number of
Company Shares underlying such Warrant (the difference (if any) being, the
“Warrant Consideration”). All Warrants granted and outstanding immediately prior
to the Effective Time shall thereafter be cancelled and terminated;

 

  (g) two minutes after completion of the immediately preceding step, each
Company Share in respect of which Dissent Rights have been validly exercised
before the Effective Time shall be transferred and deemed to be transferred by
the holder thereof, without any further act or formality on its part, free and
clear of all Liens, to Subco in consideration for a debt claim against Subco in
an amount determined and payable in accordance with Article 3, and the name of
such holder will be removed from the register of Shareholders (in respect of the
Company Shares for which Dissent Rights have been validly exercised before the
Effective Time), and Subco shall be recorded as the registered holder of Company
Shares so transferred and shall be deemed to be the legal and beneficial owner
of such Company Shares, free and clear of any Liens;

 

  (h)

two minutes after completion of the immediately preceding step, each Company
Share outstanding immediately prior to the Effective Time (including any Company
Share issued upon the effective exercise of Options or Warrants prior to the
Effective Date), other than Company Shares held by Subco and its affiliates, and
other than Company Shares

 

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held (or previously held) by a Dissenting Shareholder, shall be transferred and
deemed to be transferred by the holder thereof, without any further act or
formality on its part, free and clear of all Liens, to Subco in exchange for a
payment in cash equal to the Share Consideration, subject to applicable
withholdings determined in accordance with Section 5.4, and the name of such
holder will be removed from the register of holders of Company Shares and Subco
shall be recorded as the registered holder of Company Shares so transferred and
shall be deemed to be the legal and beneficial owner of such Company Shares,
free and clear of any Liens;

 

  (i) notwithstanding the terms of the Warrant Indenture, the Warrant Indenture
shall be terminated; and

 

  (j) notwithstanding the terms of the Stock Option Plan, the Stock Option Plan
shall be terminated.

 

2.3 Letter of Transmittal

At the time of mailing the Circular or as soon as practicable after the
Effective Date, the Company shall forward to each Shareholder and each
Warrantholder at the address of such holder as it appears on the register
maintained by or on behalf of the Company in respect of Shareholders and
Warrantholders, respectively, a Letter of Transmittal and instructions for
obtaining delivery of that portion of the Aggregate Share Consideration or the
Aggregate Warrant Consideration, as the case may be, payable to such holder
following the Effective Date pursuant to this Plan of Arrangement.

 

2.4 Delivery of Aggregate Share Consideration, Aggregate Option Consideration
and Aggregate Warrant Consideration

 

  (a) On or immediately prior to the Effective Date:

 

  (i) Subco shall deliver or arrange to be delivered to the Depositary the cash
required for the payment of the aggregate Share Consideration (the “Aggregate
Share Consideration”) for the Company Shares, which are acquired pursuant to
Sections 2.2(g) and 2.2(h), for the benefit of and in trust for the Shareholders
entitled to receive Share Consideration for each Company Share held by them in a
special account with the Depositary to be paid to or to the order of the
respective former holders of such Company Shares without interest;

 

  (ii) the Company shall deliver or arrange to be delivered to the Depositary
the cash required for the payment of the aggregate Warrant Consideration (the
“Aggregate Warrant Consideration”) for the Warrants, which are acquired by the
Company for cash pursuant to Section 2.2(f), for the benefit of and in trust for
the Warrantholders in a special account with the Depositary to be paid to or to
the order of the respective former holders of such Warrants without interest;
and

 

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  (iii) the Company shall deliver or arrange to be delivered with the Depositary
the cash required for the payment of the aggregate Option Consideration (the
“Aggregate Option Consideration”) for the Options, which are acquired by the
Company for cash pursuant to Section 2.2(e), for the benefit of and in trust for
the Optionholders in a special account with the Depositary to be paid to or to
the order of the respective former holders of such Options without interest.

The Aggregate Share Consideration, the Aggregate Warrant Consideration and the
Aggregate Option Consideration shall be cash, denominated in Canadian dollars in
same day funds payable. Such money shall not be used for any purpose except as
provided in this Plan of Arrangement. Upon delivery of the Aggregate Share
Consideration, the Aggregate Warrant Consideration and the Aggregate Option
Consideration, Subco shall be fully and completely discharged from its
obligation to pay the Aggregate Share Consideration to the former Shareholders
and the Company shall be fully and completely discharged from its obligation to
pay the Aggregate Warrant Consideration to the former Warrantholders and the
Aggregate Option Consideration to former Optionholders, and, in each case, the
rights of such holders shall be limited to receiving, without interest, from the
Depositary their proportionate part of the money so deposited in accordance with
this Plan of Arrangement. Any interest on the deposit of the Aggregate Share
Consideration shall belong to Subco. Any interest on the deposit of the
Aggregate Warrant Consideration or the Aggregate Option Consideration shall
belong to the Company.

 

  (b) Upon surrender to the Depositary for cancellation of a certificate which
immediately prior to the Effective Time represented one or more outstanding
Company Shares which were acquired for the applicable Share Consideration in
accordance with Section 2.2(h), together with a duly completed Letter of
Transmittal and such other documents and instruments as would have been required
to effect the transfer of the Company Shares formerly represented by such
certificate under the CBCA and the bylaws of the Company and such additional
documents and instruments as Parent, Subco or the Depositary may reasonably
require, the holder of such surrendered certificate shall be entitled to receive
in exchange therefor, and as soon as practicable after the Effective Time the
Depositary shall deliver to such holder, by cheque (or, if required by
Applicable Law, a wire transfer) for the aggregate Share Consideration such
holder is entitled to receive under the Arrangement (together, if applicable,
with any unpaid dividends or distributions declared on the Company Shares, if
any, prior to the Effective Time) in accordance with Section 2.2(h).

 

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  (c) Upon surrender to the Depositary for cancellation of a certificate which
immediately prior to the Effective Time represented one or more outstanding
Warrants which were acquired for the applicable Warrant Consideration in
accordance with Section 2.2(f), together with a duly completed Letter of
Transmittal and such other documents and instruments as would have been required
to effect the transfer of the Warrants formerly represented by such certificate
under the CBCA and the bylaws of the Company and such additional documents and
instruments as Parent, Subco or the Depositary may reasonably require, the
holder of such surrendered certificate shall be entitled to receive in exchange
therefor, and as soon as practicable after the Effective Time the Depositary
shall deliver to such holder, by cheque (or, if required by Applicable Law, a
wire transfer) for the aggregate Warrant Consideration such holder is entitled
to receive under the Arrangement in accordance with Section 2.2(f).

 

  (d) As soon as practicable after the Effective Time, the Depositary shall
deliver on behalf of the Company to each Optionholder as reflected on the books
and records of the Company a cheque (or, if required by Applicable Law, a wire
transfer) representing payment of the portion of the Aggregate Option
Consideration to which such Optionholder is entitled in accordance with
Section 2.2(e).

 

  (e) In the event of a transfer of ownership of Company Shares that was not
registered in the applicable securities register of the Company, the aggregate
Share Consideration payable for such Company Shares in accordance with
Section 2.2(h) may be delivered to the transferee if the certificate
representing such Company Shares is presented to the Depositary as provided in
Section 2.4(b), accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable share transfer taxes have been
paid. In the event of a transfer of ownership of Warrants that was not
registered in the applicable securities register of the Company, the aggregate
Warrant Consideration payable for such Company Shares in accordance with
Section 2.2(f) may be delivered to the transferee if the certificate
representing such Warrants is presented to the Depositary as provided in
Section 2.4(c), accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable transfer taxes have been paid.

 

2.5 Expiration of Rights

Subject to applicable escheat laws, any amounts deposited with the Depositary
for the payment of the Aggregate Share Consideration, the Aggregate Warrant
Consideration or the Aggregate Option Consideration which remain unpaid or
unclaimed on the date which is six years from the Effective Date shall be
forfeited to Subco and paid over to or as directed by Subco and the former
Shareholders, Warrantholders and Optionholders shall thereafter have no right to
receive their respective entitlement to the Aggregate Share Consideration, the
Aggregate Option Consideration or the Aggregate Warrant Consideration, as
applicable.

 

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2.6 Dividends and Distributions

If the Company declares, sets aside or pays any dividend on, or makes any other
actual, constructive or deemed distribution in respect of any of the Company
Shares, or otherwise makes any payments to the Shareholders in their capacity as
such, during the period commencing on the date of the Arrangement Agreement and
ending on the Effective Date, Subco may reduce the amount of the Share
Consideration by any amount it determines in its sole discretion, provided that
such discount shall not exceed the amount of such dividend, distribution or
payment received per Company Share. No dividend or other distribution declared
or made after the Effective Time with respect to the Company Shares with a
record date after the Effective Time shall be delivered to the holder of any
unsurrendered certificate which, immediately prior to the Effective Time,
represented outstanding Company Shares.

 

2.7 Transfers Free and Clear

Any transfer of securities pursuant to this Plan of Arrangement shall be free
and clear of any Liens.

ARTICLE 3

RIGHTS OF DISSENT

 

3.1 Dissent Rights

 

  (a) Each Shareholder may exercise rights of dissent with respect to its
Company Shares pursuant to and in the manner set forth in section 190 of the
CBCA as modified by the Interim Order and this Section 3.1 (the “Dissent
Rights”); provided that a Notice of Dissent is received by the Company by no
later than 5:00 p.m. (Toronto time) on the Business Day that is two Business
Days prior to the date of the Company Meeting, or, if the Meeting is adjourned
or postponed, 5:00 p.m. (Toronto time) on the Business Day that is two Business
Days preceding the date of such adjourned or postponed Company Meeting.

 

  (b)

Shareholders who duly and validly exercise their Dissent Rights shall be deemed
to have transferred their respective Company Shares, without any further act or
formality on their part, free and clear of all Liens, to Subco as provided in
Section 2.2(g), and such Shareholders who: (i) are ultimately determined to be
entitled to be paid fair value for their respective Company Shares shall be
entitled to a payment of cash equal to such fair value, and will not be entitled
to any other payment or consideration, including any payment that would be
payable under the Arrangement in respect of such Company Shares had such
Shareholders not exercised their Dissent Rights; or (ii) are ultimately
determined not to be entitled, for any reason, to be paid fair value for their
respective

 

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Company Shares shall have participated and shall be deemed to have participated
in the Arrangement, as at the time stipulated in Section 2.2(h), on the same
basis as a non-Dissenting Shareholder and shall receive cash consideration in
respect of their respective Company Shares on the basis set forth in Article 2.

 

  (c) In addition to any other restrictions under Section 190 of the CBCA, none
of the following shall be entitled to exercise Dissent Rights:
(i) Optionholders; (ii) Warrantholders; and (iii) Shareholders who vote in
favour of the Arrangement Resolution.

 

  (d) In no case shall the Company, Subco, the Depositary, the registrar and
transfer agent in respect of the Company Shares or any other Person be required
to recognize a Dissenting Shareholder as a holder of Company Shares after the
Effective Time and the name of each Dissenting Shareholder shall be deleted from
the registers of holders of Company Shares as at the Effective Time as provided
in Article 2.

ARTICLE 4

CERTIFICATES

 

4.1 Certificates

From and after the Effective Time, until surrendered as contemplated by Sections
2.4(b) and 2.4(c):

 

  (a) each certificate formerly representing Company Shares that, under the
Arrangement, were transferred or deemed to be transferred to Subco in return for
cash pursuant to Section 2.2 shall represent and be deemed, at all times after
the time stipulated in Section 2.2(g) or 2.2(h), to represent only the right to
receive upon such surrender the applicable Share Consideration specified in
Section 2.2(g) or 2.2(h); and

 

  (b) each certificate formerly representing Warrants that, under the
Arrangement, were transferred or deemed to be transferred to the Company in
return for cash pursuant to Section 2.2, shall represent and be deemed, at all
times after the time stipulated in Section 2.2(f), to represent only the right
to receive upon such surrender the applicable Warrant Consideration specified in
Section 2.2(f).

 

4.2 Lost Certificates

In the event that any certificate which immediately prior to the Effective Time
represented one or more outstanding Company Shares or Warrants shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such certificate to be lost, stolen or destroyed, the Depositary
will pay such Person the cash that such Person would have been entitled to had
such share or warrant certificate not been lost, stolen or destroyed. When
authorizing such payment in exchange for any

 

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lost, stolen or destroyed certificate, the Person to whom cash is to be paid
shall, at the sole discretion of Subco, give a bond satisfactory to Subco in
such sum as Subco may direct or otherwise indemnify the Depositary and Subco in
a manner satisfactory to each of them against any claim that may be made against
the Depositary or Subco with respect to the certificate alleged to have been
lost, stolen or destroyed.

ARTICLE 5

GENERAL

 

5.1 Paramountcy

From and after the Effective Time (i) this Plan of Arrangement shall take
precedence and priority over any and all Company Shares, Warrants and Options
issued prior to the Effective Time, (ii) the rights and obligations of the
registered holders of Company Shares, Warrants and Options, and the Company,
Parent, Subco, the Depositary and any trustee or transfer agent therefor in
relation thereto, shall be solely as provided for in this Plan of Arrangement,
and (iii) all actions, causes of action, claims or proceedings (actual or
contingent and whether or not previously asserted) based on or in any way
relating to any Company Shares, Warrants or Options shall be deemed to have been
settled, compromised, released and determined without liability except as set
forth herein.

 

5.2 Amendment

 

  (a) Subject to Sections 5.2(b), 5.2(d) and 5.2(e), the Company, Parent and
Subco reserve the right to amend, modify and/or supplement this Plan of
Arrangement at any time and from time to time prior to the Effective Date,
provided that any such amendment, modification and/or supplement must be
contained in a written document which is (i) agreed to in writing by the
Company, Parent and Subco, (ii) filed with the Court and, if made following the
Company Meeting, approved by the Court subject to such conditions as the Court
may impose, and (iii) if so required by the Court, communicated to Shareholders,
Warrantholders and/or Optionholders if and in the manner as required by the
Court.

 

  (b) Notwithstanding anything in this Plan of Arrangement or the Arrangement
Agreement, Parent and Subco shall be entitled, at any time prior to or following
the Company Meeting, to modify this Plan of Arrangement to increase the
consideration Subco is prepared to make available to Shareholders,
Warrantholders or Optionholders pursuant to the Arrangement, whether or not the
board of directors of the Company has changed its recommendation, provided that
Parent and Subco shall use their commercially reasonable efforts to provide not
less than one Business Day’s prior written notice of such proposal to the
Company. Any such proposed amendment, modification or supplement to this Plan of
Arrangement shall become part of this Plan of Arrangement for all purposes.

 

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  (c) Any amendment, modification or supplement to this Plan of Arrangement may
be proposed by the Company, Parent or Subco at any time prior to or at the
Company Meeting (provided that the Company, Parent and Subco shall have
consented thereto in writing), with or without any prior notice or
communication, and if so proposed and accepted by the Persons voting at the
Company Meeting (other than as may be required under the Interim Order), shall
become part of this Plan of Arrangement for all purposes.

 

  (d) Any amendment, modification and/or supplement to this Plan of Arrangement
that is approved by the Court following the Company Meeting shall be effective
only if: (i) it is agreed to by each of the Company, Parent and Subco; (ii) it
is filed with the Court (other than amendments contemplated in Section 5.2(b) or
5.2(e), which shall not require such filing), and (iii) if required by the
Court, it is consented to by holders of the Company Shares voting in the manner
directed by the Court.

 

  (e) Any amendment, modification and/or supplement to this Plan of Arrangement
may be made by Subco unilaterally after the Effective Date without the approval
of the Shareholders, the Company or Parent provided that it concerns a matter
which, in the reasonable opinion of Subco, is of an administrative or
ministerial nature required to better give effect to the implementation of this
Plan of Arrangement and is not adverse to the financial or economic interests of
the former Shareholders, Warrantholders and Optionholders.

 

5.3 Further Assurances

Notwithstanding that the transactions and events set out in this Plan of
Arrangement shall occur and be deemed to have occurred in the order set out
herein, without any further act or formality, each of the parties to the
Arrangement Agreement shall make, do and execute, or cause to be made, done and
executed, all such further acts, deeds, agreements, transfers, assurances,
instruments or documents as may reasonably be required by any of them in order
to implement this Plan of Arrangement and to further document or evidence any of
the transactions or events set out herein.

 

5.4 Withholding Rights

The Company, Parent, Subco, one or more other subsidiaries of Parent or the
Depositary, as the case may be, shall be entitled to directly or indirectly
deduct and withhold from any amount otherwise payable pursuant to this Agreement
or the Plan of Arrangement to any Shareholder, Optionholder or Warrantholder
such amounts as are entitled or required to be deducted and withheld with
respect to the making of such payment under the Tax Act or any other provision
of domestic or foreign (whether national, federal, provincial, state, local or
otherwise) Applicable Law relating to taxes. To the extent that amounts are so
deducted and withheld and paid to the appropriate Governmental Entity directly
or indirectly by the Company, Parent, Subco or one or more Subsidiaries of
Parent or the Depositary, as the case may be, such deducted and withheld amounts
shall be treated for all purposes of this Agreement and the Plan of Arrangement
as having been paid to the Shareholders, Optionholders or Warrantholders, as the
case may be, in respect of which such deduction and withholding was made by the
Company, Parent, Subco, one or more Subsidiaries of the Parent or the
Depository, as the case may be, provided that such withheld amounts are actually
remitted to the appropriate Governmental Entity within the time required and in
accordance with Tax Act or any other provision of domestic or foreign (whether
national, federal, provincial, state, local or otherwise) Applicable Law
relating to taxes.

 

- A14 -

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EXHIBIT B

ARRANGEMENT RESOLUTION

SPECIAL RESOLUTION OF THE SHAREHOLDERS OF

STELCO INC.

BE IT RESOLVED THAT:

 

1. The arrangement (the “Arrangement”) under section 192 of the Canada Business
Corporations Act (the “CBCA”) involving Stelco Inc. (the “Company”), United
States Steel Corporation (“Parent”) and 1344973 Alberta ULC (“Subco”), as more
particularly described and set forth in the management information circular (the
“Circular”) of the Company accompanying the notice of this meeting (as the
Arrangement may be modified or amended in accordance with its terms) is hereby
authorized, approved and adopted.

 

2. The plan of arrangement (the “Plan of Arrangement”) involving the Company,
the full text of which is set out as Schedule A to the Arrangement Agreement
made as of August 26, 2007 between Parent, the Company and Subco (the
“Arrangement Agreement”) (as the Plan of Arrangement may be modified or amended
in accordance with its terms) is hereby authorized, approved and adopted.

 

3. Notwithstanding that this resolution has been passed, and the Arrangement
adopted, by the holders of common shares of the Company (“Common Shares”) or
that the Arrangement has been approved by the Superior Court of Justice
(Ontario), the directors of the Company are hereby authorized and empowered
without further notice to or approval of the holders of Common Shares (i) to
amend the Arrangement Agreement or the Plan of Arrangement, to the extent
permitted by the Arrangement Agreement, and (ii) subject to the terms of the
Arrangement Agreement, not to proceed with the Arrangement.

 

4. Any officer or director of the Company is hereby authorized and directed for
and on behalf of the Company to execute, under the seal of the Company or
otherwise, and to deliver articles of arrangement and such other documents as
are necessary or desirable to the Director under the CBCA in accordance with the
Arrangement Agreement for filing.

 

5. Any officer or director of the Company is hereby authorized and directed for
and on behalf of the Company to execute or cause to be executed, under the seal
of the Company or otherwise, and to deliver or cause to be delivered, all such
other documents and instruments and to perform or cause to be performed all such
other acts and things as in such Person’s opinion may be necessary or desirable
to give full effect to the foregoing resolutions and the matters authorized
thereby, such determination to be conclusively evidenced by the execution and
delivery of such document or instrument or the doing of any such act or thing.