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| |                    
| | -------------------
| | Notice of Annual   
| | and Special Meeting
| | of Shareholders    
|
| | April 20, 2005     



|            | 
|----------- | 
|(INCO LOGO) | 



| |                                
| | -------------------------------
| | Proxy Circular                 
| | and Statement                  
|
| | INCO LIMITED                   
| | To be held at 10:00 a.m.       
| | Wednesday, April 20, 2005      
| | Constitution Hall, Room 105    
| | Metro Toronto Convention Centre
| | 255 Front Street West          
| | Toronto, Ontario               



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March 18, 2005

Dear Shareholder:

The Companys Annual and Special Meeting of
Shareholders will be held at Constitution Hall, Room 105,
Metro Toronto Convention Centre, 255 Front Street West, Toronto,
Ontario on Wednesday, April 20, 2005 at 10:00 a.m.
(Toronto time). The formal Notice of Meeting and Proxy Circular
and Statement, which are contained in the following pages,
outline the actions to be taken by Shareholders at the Meeting.
We have included a Table of Contents to this document to help
Shareholders in locating specific items or sections included in
this document.

We sincerely hope that you will be able to attend
the Meeting. However, if you are not planning to be present, you
may vote your Common Shares in any one of the following three
ways: (1) by completing, signing and returning the
accompanying form of proxy or written voting instruction form in
the enclosed postage-paid envelope; (2) by following the
instructions for telephone voting in the accompanying Proxy
Circular and Statement; or (3) by following the
instructions for Internet voting in the accompanying Proxy
Circular and Statement. Regardless of the number of Common
Shares you may own, your vote is important.

Thank you for your continued interest in our
Company.



| |                                                                            
| | ---------------------------------------------------------------------------
| | Yours sincerely,                                                           
|
| | (-s- Scott M. Hand)Scott M. Hand 
     Chairman and Chief Executive Officer

INCO LIMITED, 145 King Street West,
Suite 1500, Toronto, Ontario M5H 4B7



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TABLE OF CONTENTS

|                                                                         |                                                           |  |     |    | 
|------------------------------------------------------------------------ | --------------------------------------------------------- |  | --- | -- | 
|NOTICE OF MEETING                                                        |                                                           |  | 1   |   
|PROXY CIRCULAR AND STATEMENT                                             |                                                           |  | 3   |   
|PART I  VOTING
    INSTRUCTIONS                                         |                                                           |  | 3   |   
|PART II  BUSINESS OF THE
    MEETING                                    |                                                           |  | 6   |   
|                                                                         | 1. Financial Statements                                   |  |     | 6  | 
|                                                                         | 2. Election of Directors                                  |  |     | 6  | 
|                                                                         | 3. Appointment of the Auditors                            |  |     | 9  | 
|                                                                         | 4. Shareholder Rights Plan Reconfirmation                 |  |     | 10 | 
|                                                                         | 5. 2005 Key Employees Incentive
    Plan Approval         |  |     | 15 | 
|                                                                         | 6. Other Business                                         |  |     | 20 | 
|PART III  CORPORATE
    GOVERNANCE                                      |                                                           |  | 21  |   
|                                                                         | Information Regarding the Board and Board
    Committees  |  |     | 21 | 
|                                                                         | Statement of Corporate Governance Practices               |  |     | 25 | 
|                                                                         | Audit Committee Report                                    |  |     | 29 | 
|PART IV  DIRECTOR AND EXECUTIVE
    COMPENSATION                        |                                                           |  | 31  |   
|                                                                         | Director Compensation                                     |  |     | 31 | 
|                                                                         | Executive Compensation                                    |  |     | 33 | 
|                                                                         | Report on Executive Compensation                          |  |     | 38 | 
|                                                                         | Comparative Shareholder Return                            |  |     | 43 | 
|PART V  OWNERSHIP OF
    SECURITIES                                     |                                                           |  | 44  |   
|                                                                         | Significant Security Holders                              |  |     | 44 | 
|                                                                         | Security Holdings of Directors and Executive
    Officers |  |     | 44 | 
|PART VI  OTHER
    INFORMATION                                          |                                                           |  | 46  |   
|                                                                         | Solicitation of Proxies                                   |  |     | 46 | 
|                                                                         | Shareholder Proposals and 2006 Annual Meeting             |  |     | 46 | 
|                                                                         | Additional Information about the Company                  |  |     | 46 | 
|                                                                         | Directors Approval                                       |  |     | 46 | 
|EXHIBIT A  SHAREHOLDER RIGHTS
    PLAN AGREEMENT                        |                                                           |  | A-1 |   
|EXHIBIT B  2005 KEY EMPLOYEES
    INCENTIVE PLAN                        |                                                           |  | B-1 |   
|EXHIBIT C  CHARTER OF THE AUDIT
    COMMITTEE (AS AMENDED AND RESTATED) |                                                           |  | C-1 |   



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##### 









NOTICE OF MEETING

NOTICE IS HEREBY GIVEN that the Annual and
Special Meeting of Shareholders (the Meeting) of
INCO LIMITED (the Company) will be held at
Constitution Hall, Room 105, Metro Toronto Convention
Centre, 255 Front Street West, Toronto, Ontario on Wednesday,
April 20, 2005 at the hour of ten oclock in the
morning for the purposes of:



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | receiving the Companys financial statements
    for the year ended December 31, 2004 and the Auditors
    report thereon;                                                                                                                                                                                                                                                                                                                                                                                        
|
| | (2) | electing all of the Companys Directors for
    a one-year term expiring in 2006;                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | (3) | appointing the Auditors of the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (4) | considering and, if thought fit, approving a
    resolution reconfirming the Companys Shareholder Rights
    Plan (the Shareholder Rights Plan), as it is
    proposed to be amended; the Shareholder Rights Plan was
    originally ratified and approved by the Shareholders in 1999 and
    subsequently reconfirmed by the Shareholders in 2002, in order
    to provide the Shareholders and the Company with sufficient time
    to assess the merits of any unsolicited takeover bid for the
    Company;
|
| | (5) | considering and, if thought fit, approving the
    Companys 2005 Key Employees Incentive Plan; and                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (6) | transacting such other business as may properly
    be brought before the Meeting.                                                                                                                                                                                                                                                                                                                                                                                                                                 

If you were a Shareholder at the close of
business on March 15, 2005, then you are entitled to
receive notice of and to vote at the Meeting. If you are unable
to attend the Meeting in person, please vote by completing the
enclosed form of proxy or voting instruction form and returning
it in the envelope provided for this purpose, or by following
the procedures for either telephone or Internet voting provided
in the accompanying Proxy Circular and Statement. For your vote
to be recorded, your proxy must be received no later than
10:00 a.m. (Toronto time) on Tuesday, April 19, 2005.
For further information, please see the section entitled
Voting Instructions in Part I of the
accompanying Proxy Circular and Statement.

By Order of the Board of Directors

-s- Stuart F. Feiner

Stuart F. Feiner


Executive Vice-President, General
Counsel & Secretary


Dated: March 18, 2005

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February 18, 2005




PROXY CIRCULAR AND STATEMENT

This Proxy Circular and Statement explains in
detail the items of business that will be considered at the
Annual and Special Meeting of Shareholders of Inco Limited (the
Meeting) to be held on Wednesday, April 20,
2005 beginning at 10:00 a.m. (local time) at Constitution
Hall, Room 105, Metro Toronto Convention Centre, 255 Front
Street West, Toronto, Ontario.It is
furnished to you by the Board of Directors and Management of
Inco Limited in connection with the solicitation of proxies to
be used at the Meeting and any adjournments of the Meeting. In
this document, references to the Company,
Inco, we and us refer to
Inco Limited and the Shareholders, you
and your refer to the Shareholders of Inco Limited.

All dollar amounts in this Proxy Circular and
Statement are stated in U.S. dollars unless otherwise
indicated. Information contained in or otherwise accessed
through the Companys website, or any other website
referred to in this Proxy Circular and Statement, does not form
part of this Proxy Circular and Statement and any website
addresses contained herein are inactive textual references only.
The Company has its executive offices at 145 King Street West,
Suite 1500, Toronto, Ontario, Canada
M5H 4B7.




PART I  VOTING
INSTRUCTIONS

Who Can Vote

If you were a Shareholder at the close of
business on March 15, 2005 (the Record Date),
then you will be entitled to vote at the Meeting. Each of the
Common Shares carries one vote. As of the date of this Proxy
Circular and Statement, February 18, 2005, 188,165,045
Common Shares were issued and outstanding. This number does not
include fractional share interests (aggregating 4,830 Common
Shares) which cannot be voted. The Common Shares are the only
securities of the Company which will have voting rights at the
Meeting.

How to Vote Your Common Shares

For Registered Shareholders

If you are a registered Shareholder (that is, you
have a share certificate registered in your name), then you may
vote in person at the Meeting or you may appoint someone else to
vote for you as your proxy holder, by following the instructions
set forth below. If you choose to vote by proxy, you may still
attend the Meeting in person.

You may appoint a person to act as your proxy
holder, and provide your voting instructions to that person, in
one of the following three ways:

By Mail.You may
vote by completing the form of proxy accompanying this Proxy
Circular and Statement and returning it in the postage-paid
envelope that is also provided.

By Telephone.You
may vote by dialing the following toll-free number using a
touch-tone telephone within North America: 1-866-271-1207. You
will be asked to provide your 13-digit Control Number (located
in the bottom left corner of the form of proxy accompanying this
Proxy Circular and Statement) in order to verify your identity.

By Internet.You may
vote by logging on to the following website:
www.eproxyvoting.com/incovote. Once you have accessed this
website, you will be asked to provide your 13-digit Control
Number (located in the bottom left corner of the form of proxy
accompanying this Proxy Circular and Statement) in order to
verify your identity.

The proxy holders named in the attached form of
proxy, and pursuant to telephone and Internet voting, are
Directors of the Company. You may appoint another person to act
as your proxy holder, including someone who

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is not a Shareholder, but only if you provide
that instruction on your proxy and send in your proxy by mail
(as making such an appointment is not available by telephone or
Internet).


Your proxy must be received by the Company no
later than 24 hours prior to the start of the Meeting (that
is, by 10:00 a.m. Toronto time on April 19, 2005) or
any adjournment of the Meeting. If you vote by mail, you must
ensure that your proxy is received in advance of that time.
Telephone and Internet voting will not be available after 10:00
a.m. Toronto time on April 19, 2005.

For Non-registered
Shareholders

If you are not a registered Shareholder (that is,
if your shares are registered in the name of an intermediary
such as a securities broker, clearing agency, financial
institution, trustee or custodian), you should carefully
follow the instructions on the request for voting instructions
or form of proxy that you receive from the intermediary, in
order to vote the Common Shares that you hold with that
intermediary. Non-registered Shareholders should follow the
instructions for mail, telephone or Internet voting provided to
them by their intermediary.

Since the Company does not have access to the
names of its non-registered Shareholders, if you wish to attend
the Meeting and vote in person, you should insert your own name
in the blank space provided in the request for voting
instructions or form of proxy to appoint yourself as proxy
holder and then follow your intermediarys instructions for
returning the request for voting instructions or proxy form.

Voting Instructions

On the form of proxy, you may indicate how you
want your proxy holder to vote your shares, or you may let your
proxy holder decide for you. If voting instructions are given,
then your proxy holder must vote your shares in accordance with
those instructions.

If no voting instructions are given, then your
proxy holder may vote your shares as he or she sees fit. If
you appoint the management representatives named on the attached
form of proxy, and do not specify how they should vote your
shares, then your shares will be voted as follows:



| |     |                                                                 
| | --- | ----------------------------------------------------------------
| | (1) | FOR the election of the
    Directors;                        
| | (2) | FOR the appointment of the
    Auditors;                      
| | (3) | FOR the reconfirmation of the
    Shareholder Rights Plan; and
| | (4) | FOR the approval of the 2005 Key
    Employees Incentive Plan.

At the time of the printing of this Proxy
Circular and Statement, the Company is not aware of any
amendments or variations to these matters or any other matter to
be presented at the Meeting. If any other matter should properly
be presented at the Meeting, your proxy holder will have the
discretion to vote your shares in accordance with his or her
best judgment.

In the case of the votes for the election of
Directors and the appointment of the Auditors, proxies may be
marked as FOR or WITHHOLD. In the case
of the other votes at the Meeting, proxies may be marked as
FOR or AGAINST. Proxies marked as
WITHHOLD will be treated as present for the purposes
of determining a quorum, but will be counted as having been
withheld from voting. The resolutions regarding the election of
Directors and the appointment of the Auditors require a majority
of the votes cast by the Shareholders at the Meeting in order to
pass. As a result, proxies marked as WITHHOLD will
have no effect on the outcome of the vote on these resolutions.

Proxies returned by Intermediaries as
non-votes on behalf of Common Shares held in street
name, because the Beneficial Shareholder has not provided voting
instructions or the Intermediary does not have the discretion to
vote such Common Shares, will be treated as present for purposes
of determining a quorum but will not be counted as having been
voted in respect of any such matter. As a result, such proxies
will have no effect on the outcome of the vote.

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If You Change Your Mind

If you are a registered Shareholder and you have
returned a form of proxy, you may revoke it by:



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | completing and signing a form of proxy at a later
    date than the form of proxy which you previously returned and
    depositing it with CIBC Mellon Trust Company; or                                                                                                                                                                                                                                                                                                                          
|
| | (b) | depositing a written statement signed by you or
    your attorney as authorized by you in writing (i) with the
    Office of the Secretary, at the head office of the Company, at
    any time up to and including April 19, 2005 or, if the
    Meeting is adjourned, the business day before the day to which
    the Meeting has been adjourned, or (ii) with the Chairman
    of the Meeting on the day of the Meeting or any adjournment of
    the Meeting, before the start of the Meeting.

Voting instructions conveyed by mail, by
facsimile or in person by a later dated instrument in writing or
conveyed by telephone or the Internet will revoke any prior
voting instructions.

If you are a non-registered Shareholder, you may
revoke voting instruction that you have given to your
intermediary at any time by written notice to the intermediary.
However, your intermediary may be unable to take any action on
the revocation if you do not provide your revocation
sufficiently in advance of the Meeting.

Votes Required for Approval

A simple majority of all of the votes cast, in
person or by proxy, is required for the approval of each of the
matters being voted on at the Meeting.

Counting the Votes

The Companys registrar and transfer agent,
CIBC Mellon Trust Company, or its authorized agents, will count
and tabulate the proxies.

Our registrar and transfer agent preserves the
confidentiality of individual Shareholder votes except
(a) in cases where the Shareholder clearly intends to
communicate his or her individual position to management, and
(b) where necessary to enable management to comply with
legal requirements.

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PART II  BUSINESS OF THE
MEETING



1.   FINANCIAL
STATEMENTS

The Companys financial statements for the
year ended December 31, 2004 and the Auditors report
thereon are included in the Companys 2004 Annual Report to
Shareholders. The financial statements will be placed before the
Shareholders at the Meeting.




2.   ELECTION OF
DIRECTORS

Eleven Directors will be elected at the Meeting,
each to hold office until the Companys next Annual Meeting
in 2006 or until a successor is elected or appointed. Last year,
the Shareholders approved an amendment to the Companys
by-laws to provide for the annual election of all of the
Companys Directors. Unless the Shareholder signing the
enclosed form of proxy specifies that the proxy be withheld from
voting on the election of all Directors, or except to the extent
that such Shareholder specifies that authority to vote for any
individual nominee be withheld, the persons named in the form of
proxy intend to vote the proxy for the election of the following
eleven persons, each of whom is currently a Director of the
Company: Glen A. Barton, Angus A. Bruneau, Ronald C. Cambre,
Scott M. Hand, Janice K. Henry, Chaviva M. Hosek, Peter C.
Jones, John T. Mayberry, David P. OBrien, Roger Phillips
and James M. Stanford. Each of these nominees has been
recommended by the Corporate Governance and Nominating Committee
and the Board of Directors for election by the Shareholders.
Mr. Stanford has indicated that, if elected at the Meeting,
he intends to retire as a Director in late July 2005. While
Mr. Stanford will step down as Chair of the Audit Committee
after the Meeting, and Janice K. Henry will succeed him as
Chair of this Committee, Mr. Stanford will continue to
serve as a member of the Audit Committee until his retirement in
order to assist in the transition of the new Chair of the Audit
Committee. The Corporate Governance and Nominating Committee is
currently searching for new Director candidates and the
Committee has engaged specialized director search consulting
firms to assist it in identifying suitable candidates.

The Board of Directors is not aware of any
circumstances that would cause any nominee to be unable to serve
as a Director. In the event that any nominee should be unable at
any time to serve as a Director, each of the persons named in
the accompanying form of proxy reserves the right to vote for
another person of his or her choice in such nominees
place, unless the Shareholder signing the form of proxy has
specified that the proxy be withheld from voting on the election
of all Directors.

Nominees for Election

Biographical information regarding each of the
nominees for election to the Board is set forth below.
Additional information regarding the security holdings of the
Directors and Officers of the Company is set forth beginning on
page 44.

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              
|(BARTON PHOTO) |  | Glen A. BartonPeoria, Illinois, USADirector since 1994
    Common Shares: 18,567
    Deferred Share Units: 4,941*
    Options: 10,000
    Mr. Barton, 65, is the retired Chairman and Chief Executive
    Officer of Caterpillar Inc., a leading heavy equipment and
    diesel engine manufacturer based in Peoria, Illinois.
    Mr. Barton held numerous marketing and general management
    positions throughout his 43-year career at Caterpillar and
    served as Chairman and Chief Executive Officer from February
    1999 until his retirement in January 2004. Mr. Barton is
    also a Director of Newmont Mining Corporation and Valmont
    Industries, Inc. He is a member of the Presidents Export
    Council and the Deans Engineering Advisory Council of the
    University of Missouri-Columbia. He is also Chairman of the
    Peoria Civic Foundation and a Director of Peoria Next.

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|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               
|(BRUNEAU PHOTO) |  | Angus A. Bruneau, O.C.St. Johns, Newfoundland,
    CanadaDirector since 1998
    Common Shares: 3,154
    Deferred Share Units: 8,789*
    Options:10,000
    Warrants: 1,125
    Dr. Bruneau, 69, is Chairman of Fortis Inc., a leading
    Newfoundland-based company with businesses in the electric
    utilities and real estate sectors, a position he has held since
    October 1987. From October 1987 to April 1996, Dr. Bruneau
    was Chairman and Chief Executive Officer of Fortis Inc. He is
    also a Director of Fortis Properties, Petro-Canada, SNC-Lavalin
    Group Inc., the Canada Institute for Child Health and the
    Foundation for Sustainable Development Technology Canada. He
    also serves as a trustee of the Nature Conservancy of Canada and
    is a member of the Canada Foundation for Innovation.                                      
|               
|(CAMBRE PHOTO)  |  | Ronald C. CambreDenver, Colorado, USADirector since 2002
    Common Shares: None
    Deferred Share Units: 7,454*
    Options: 10,000
    Mr. Cambre, 66, is the retired Chairman and Chief Executive
    Officer of Newmont Mining Corporation, a leading international
    producer and marketer of gold and certain other products.
    Mr. Cambre served as Chairman of Newmont Mining Corporation
    from January 1995 until December 2001, as Chief Executive
    Officer from November 1993 until December 2000 and as President
    from June 1994 until July 1999. Prior to that, he served as
    Vice-President and Senior Technical Advisor to the Office of the
    Chairman, Freeport-McMoRan Copper & Gold Inc. (formerly
    Freeport-McMoRan Inc.). He is currently a Director of Cleveland
    Cliffs Inc., McDermott International Inc. and W.R. Grace &
    Co.
|               
|(HAND PHOTO)    |  | Scott M. HandToronto, Ontario, CanadaDirector since 1991
    Common Shares: 147,826
    Options: 456,000
    Mr. Hand, 62, is Chairman and Chief Executive Officer of
    the Company, a position he has held since April 2002. From April
    2001 until April 2002, he served as Deputy Chairman and Chief
    Executive Officer of the Company. Mr. Hand has served in a
    series of increasingly senior roles at the Company, including
    Vice-President, General Counsel and Secretary from 1984 to 1991,
    Executive Vice-President, General Counsel and Secretary from
    April 1991 to April 1992 and President from April 1992 to April
    2001. Mr. Hand is also a Director of Independence Community
    Bank Corp.                                                                                                                                              
|               
|(HENRY PHOTO)   |  | Janice K. HenryRaleigh, North Carolina, USADirector since 2004
    Common Shares: None
    Deferred Share Units: 1,986*
    Options: None
    Ms. Henry, 53, is Senior Vice-President, Chief Financial
    Officer and Treasurer of Martin Marietta Materials, Inc., a
    leading producer and marketer of aggregates materials and a
    range of other industrial products, including magnesia-based
    chemicals and dolomitic lime used primarily in the steel
    industry. Ms. Henry joined Martin Marietta Materials, Inc.
    in 1994 when it was spun out of its then parent company, Martin
    Marietta Corporation. Prior to joining Martin Marietta
    Materials, Ms. Henry spent twenty years at Martin Marietta
    Corporation (now Lockheed Martin Corporation) in a number of
    financial and accounting positions.                                          

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|                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|---------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                
|(HOSEK PHOTO)    |  | Chaviva M. HosekToronto, Ontario, CanadaDirector since 2002
    Common Shares: None
    Deferred Share Units: 7,019*
    Options: 10,000
    Dr. Hosek, 58, is President and Chief Executive Officer of
    the Canadian Institute for Advanced Research, a leading
    not-for-profit organization that brings together Canadas
    top thinkers in areas of basic research with distinguished
    colleagues around the world. She has held this position since
    January 2001. From 1993 until December 2000, Dr. Hosek
    served as Director of Policy and Research for the Prime Minister
    of Canada. Over the 1985-1993 period, she held positions in
    government and private industry, including serving as Minister
    of Housing for the Province of Ontario and a partner in Gordon
    Capital Corporation, a major Canadian investment banking firm.
    Dr. Hosek has also served as President of the National
    Action Committee on the Status of Women in Canada and has held
    senior governance positions at the University of Toronto and the
    University of British Columbia. Dr. Hosek is a Director of
    Maple Leaf Foods, Inc., The Trudeau Foundation, and The Leading
    Edge Endowment Fund.
|                
|(JONES PHOTO)    |  | Peter C. JonesToronto, Ontario, CanadaDirector since 2003
    Common Shares: 18,882
    Options: 283,900
    Mr. Jones, 57, is President and Chief Operating Officer of
    the Company, a position he has held since April 2001.
    Mr. Jones joined the Company in January 1997. He served as
    Executive Vice-President, Operations, from April 1998 to April
    2001, and as Executive Vice-President, Technology and Project
    Development, from January 1997 to April 1998. Before joining the
    Company, Mr. Jones held a number of senior positions in the
    mining industry in North America and overseas, including serving
    as President and Chief Executive Officer of Hudson Bay Mining
    and Smelting Co., Limited.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                
|(MAYBERRY PHOTO) |  | John T. MayberryBurlington, Ontario, CanadaDirector since 2003
    Common Shares: 3,000
    Deferred Share Units: 4,119*
    Options: 5,000
    Mr. Mayberry, 60, is the retired Chairman and Chief
    Executive Officer of Dofasco Inc., a leading producer of primary
    steel and finished steel products. He served as President and
    Chief Executive Officer of Dofasco from January 1993 to May 2002
    and as Chairman and Chief Executive Officer from May 2002 until
    his retirement in May 2003. Mr. Mayberry is currently
    Chairman of the Board of MDS Inc. and a Director of The Bank of
    Nova Scotia, Decoma International Inc. and CFM Inc.
    Mr. Mayberry serves as Past Chairman and a Director of the
    American Iron and Steel Institute and is currently Chairman of
    the Board of the International Iron and Steel Institute.                                                                                                                                                                                                                                                                                                                                                                  

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|                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|---------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                
|(OBRIEN PHOTO)   |  | David P. OBrienCalgary, Alberta, CanadaDirector since 1996
    Common Shares: 6,642
    Deferred Share Units: 8,162*
    Options: 10,000
    Warrants: 225
    Mr. OBrien, 63, serves as Chairman of EnCana
    Corporation, one of the worlds leading independent oil and
    gas companies, and as Chairman of the Royal Bank of Canada, a
    leading Canadian financial institution. Mr. OBrien
    served as Chairman and Chief Executive Officer of Canadian
    Pacific Limited from May 1996 to October 2001. He also served as
    Chairman of PanCanadian Energy Corporation from 1992 until its
    merger with Alberta Energy Company Ltd. to form EnCana
    Corporation in April 2002. Mr. OBrien is also a
    Director of Fairmont Hotels & Resorts Inc., TransCanada
    PipeLines Limited, Molson Coors Brewing Company and the C.D.
    Howe Institute.                                                                                                                                                                             
|                
|(PHILLIPS PHOTO) |  | Roger Phillips, O.C., S.O.M.Regina, Saskatchewan, CanadaDirector since 2003
    Common Shares: 7,000
    Deferred Share Units: 4,654*
    Options: 5,000
    Mr. Phillips, 65, is the retired President and Chief
    Executive Officer of IPSCO Inc., a leading steel producer and
    fabricator. He served in that position from February 1982 until
    his retirement in January 2002. He is a Director of The
    Toronto-Dominion Bank, Canadian Pacific Railway Limited,
    Imperial Oil Limited and Cleveland Cliffs Inc. He is also a
    Director of the C.D. Howe Institute and a Trustee of the Fraser
    Institute.                                                                                                                                                                                                                                                                                                                                                                                                                         
|                
|(STANFORD PHOTO) |  | James M. Stanford, O.C.Calgary, Alberta, CanadaDirector since 1998
    Common Shares: 1,204
    Deferred Share Units: 12,455*
    Options: 10,000
    Mr. Stanford, 67, is the retired Chair, President and Chief
    Executive Officer of Petro-Canada and the President of Stanford
    Resource Management Inc. Mr. Stanford served as President
    and Chief Executive Officer of Petro-Canada, one of
    Canadas largest oil and gas companies, from 1993 until his
    retirement in January 2000, and as non-executive Chair of
    Petro-Canada from January to May 2000. Mr. Stanford is also
    a Director of EnCana Corporation, Terasen Inc., Iogen
    Corporation, OPTI Canada Inc., OMERS Resources and Nova
    Chemicals Corporation. He also serves as Chair of the Canadian
    Foundation for Sustainable Development Technology and serves on
    the Board of the Mount Royal College Foundation, the Council for
    Business and the Arts in Canada as well as with a variety of
    other industry and community organizations.



|  |                                                                                                                                    
|- | -----------------------------------------------------------------------------------------------------------------------------------
|* | Represents a bookkeeping entry on the books of
    the Company equal to the value of one Common Share at the time
    of the entry.




3.   APPOINTMENT OF THE
AUDITORS

PricewaterhouseCoopers LLP and its predecessors
have served as the Auditors of the Company since it was
incorporated in 1916.

The persons named in the accompanying form of
proxy intend to vote such proxy in favour of the appointment of
PricewaterhouseCoopers LLP as the Auditors of the Company for
the term expiring at the Companys Annual Meeting in 2006
at a remuneration to be approved by the Audit Committee of the
Board of Directors, unless the Shareholder signing such form of
proxy specifies otherwise. At its February 7, 2005 meeting,
the Audit Committee recommended the appointment of
PricewaterhouseCoopers LLP as the Auditors of the Company for
the term expiring at the Companys Annual Meeting in 2006.

9



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It is intended that PricewaterhouseCoopers LLP
will for 2005 conduct an audit of the scope customarily made by
it on behalf of the Company, as indicated in the Auditors
Report to the Shareholders dated February 14, 2005 set
forth beginning on page 78 of the 2004 Annual Report to
Shareholders of the Company, as well as deliver opinions on
managements assessment of the effectiveness of, and the
effectiveness of, the Companys internal control over
financial reporting based upon their audits, as required under
Section 404 of the U.S. Sarbanes-Oxley Act
of 2002.

Representatives of PricewaterhouseCoopers LLP
will attend the Meeting and will have the opportunity to make a
statement if they desire to do so and will respond to any
appropriate questions.

Auditors Fees

The following table sets forth the various
services provided by PricewaterhouseCoopers LLP and its
affiliates to the Company during each of the Companys last
two fiscal years, together with the fees billed for such
services:

|                       |  |                             |           |                             |  |   |           | 
|---------------------- |  | --------------------------- | --------- | --------------------------- |  | - | --------- | 
|                       |  | Fees Billed During the Year |           | Fees Billed During the Year
|Services               |  | Ended December 31, 2004     |           | Ended December 31, 2003    
|                       |  |                             |           |                            
|Audit services         |  | $                           | 4,328,000 |                             |  | $ | 1,872,000 | 
|Audit-related services |  |                             | 259,000   |                             |  |   | 198,000   | 
|Tax services           |  |                             | 729,000   |                             |  |   | 464,000   | 
|All other services     |  |                             | 52,000    |                             |  |   | 72,000    | 
|                       |  |                             |           |                             |  |   |           | 
|Total                  |  | $                           | 5,368,000 |                             |  | $ | 2,606,000 | 
|                       |  |                             |           |                             |  |   |           | 

The audit services represent professional
services rendered for audits of the Companys annual
financial statements and reviews of the Companys quarterly
financial statements and services that are normally provided by
PricewaterhouseCoopers LLP in connection with statutory and
regulatory filings or engagements. In 2004, audit services also
included audits of (i) managements assessment of the
effectiveness of internal control over financial reporting and
(ii) the effectiveness of internal control over financial
reporting as required by the U.S. Sarbanes-Oxley Act of 2002. No
audit services were provided with respect to such matters in
2003. The audit-related services pertained principally to
accounting related advice, audits in accordance with agreements
with certain of the Companys customers, audits of certain
of the Companys pension plans and environmental audits.
The tax services related to services for tax compliance, tax
planning and tax advice. The other services related to access to
online research tools and subscriptions, company liquidation
advisory services and translation services.

The Audit Committees policy is to
specifically pre-approve audit and non-audit services provided
to the Company by the independent auditors. All services
provided in 2004 were pre-approved by the Audit Committee. The
fees billed for tax services in 2004 included $177,000 for
services provided in years preceding 2003 for which pre-approval
was not required under applicable regulations or the
Companys policies in effect at the time such services were
provided. In 2003, certain tax services for which the Company
was billed approximately $48,000 (being approximately 10% of the
total tax services provided by PricewaterhouseCoopers LLP and
its affiliates to the Company in 2003) were not pre-approved,
but were subject to, and covered by, the de minimis exemption
for pre-approval under applicable regulations and the Audit
Committees own policies. The Audit Committee considered
whether the provision of the non-audit services described above
would be consistent with maintaining the Auditors
independence and determined that such services were fully
consistent with the maintenance of the Auditors
independence.






|   |                                           
|-- | ------------------------------------------
|4. | SHAREHOLDER RIGHTS PLAN
    RECONFIRMATION

Shareholders are being asked to approve a
resolution reconfirming the Companys Shareholder Rights
Plan. If the Shareholder Rights Plan is so reconfirmed, then it
will remain in effect until October 3, 2008.

10



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Background and Reasons for Recommendation to
Reconfirm the Companys Shareholder Rights Plan

The Company first adopted a shareholder rights
plan in 1988. The Companys current shareholder rights plan
was confirmed by the Shareholders in 1999 and, in accordance
with the terms of the plan, reconfirmed by the Shareholders in
2002. The purpose of the shareholder rights plan, which takes
the form of an agreement between the Company and the rights
agent, CIBC Mellon Trust Company, is to provide the Shareholders
with sufficient time to assess a take-over bid for the Company,
if such a bid were to be made, and to provide the Board of
Directors with the opportunity to explore and develop
alternatives to any bid that are in the best interests of the
Company and its Shareholders.

The current shareholder rights plan, as amended,
restated and reconfirmed by the Shareholders at the
Companys Annual and Special Meeting of Shareholders held
in April 2002, is referred to in this summary as the
current rights agreement or the
agreement. The current rights agreement provides
that it will terminate unless it is reconfirmed by the
Shareholders at the Meeting. Given this requirement, the Board
of Directors has considered whether the best interests of the
Company and its Shareholders would be served by having the
current rights agreement remain in effect. The Board of
Directors, as noted below, has concluded that the continuation
of the current rights agreement, subject to certain minor
amendments to the agreement which the Board proposes be adopted,
would be in the best interests of the Company and its
Shareholders.

Many public companies in Canada continue to have
shareholder rights plans in effect. These plans have as their
objectives providing shareholders of the companies involved, and
the boards of directors of such companies, with the time
necessary to ensure that, in the event of a take-over bid for
their company, alternatives to the bid are explored and
developed which may be in the best interests of the particular
company and its shareholders. Securities legislation in Canada
currently permits a take-over bid to expire in 35 days. The
Board of Directors is of the view that this is not sufficient
time to assess a take-over bid, were such a bid to be made, and
if the Board of Directors deems appropriate, to explore and
develop alternatives in the best interests of the Company and
its Shareholders. In the event that competing bids emerge, the
Board of Directors also believes that current securities
legislation in Canada does not provide a sufficient minimum
period of time for the Board of Directors to assess a competing
offer or for Shareholders to make a reasoned decision about the
merits of the competing bids. The current rights agreement is
not intended to prevent a take-over bid or deter offers for the
Companys Common Shares or any other voting securities of
the Company that might be issued in the future (collectively,
the Voting Shares). It is designed to encourage
anyone seeking to acquire control of the Company to make a bid
or offer that represents fair value to all holders of the Voting
Shares.

The existence of the current rights agreement
does not affect the duty of the Board of Directors to act
honestly and in good faith with a view to the best interests of
the Company and its Shareholders, and to consider any offer made
on that basis. The current rights agreement is designed to
provide the Board of Directors with the means to bring about
negotiations with an offeror on behalf of the Shareholders.

The Board of Directors, as part of its most
recent review and analysis in February 2005 of the continuation
of the current rights agreement, considered, among other
matters, (i) developments in shareholder rights plans since
the current rights agreement was reconfirmed by the Shareholders
in April 2002, (ii) the terms and conditions of current
rights plans adopted by other Canadian companies,
(iii) recent experience involving shareholder rights plans
in the context of take-over bids and (iv) the commentary of
the investment community on these plans. Based upon this review,
the Board of Directors determined that it would propose the
approval of minor amendments to the current rights agreement in
order to ensure both that the current rights agreement remained
consistent with the current generation of shareholder rights
plans in Canada and that it addressed the concerns of
institutional shareholders and investment industry commentators
on a basis which is consistent with the objectives of these
agreements. The proposed amendments to the current rights
agreement and the agreement as it is proposed to be amended and
restated, are summarized below.

Amendments to Current Rights
Agreement

The proposed amendments to the current rights
agreement are limited in number and effect. The amendments
include changes to reflect the changes in the Companys
capital structure since April 2002, including the issuance of
certain convertible debt securities. The only other material
amendment being proposed

11



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##### 



is a change to the definition of Beneficial
Ownership to add a provision that is designed to make
clear that a mutual fund will not trigger the plan by virtue of
holding Voting Shares in excess of 20% of the then outstanding
Voting Shares. As with other exemptions that are found in the
current rights agreement and that exempt other institutional
investors who hold Voting Shares as passive investors, the
exemption for a mutual fund is subject to the condition that the
mutual fund has not made a take-over bid for the Company.


Summary of Certain Key Provisions of the
Current Rights Agreement

This summary is qualified in its entirety by
reference to the full text of the current rights agreement, as
it is proposed that it be amended and restated, including the
definitions therein, set forth as Exhibit A to this Proxy
Circular and Statement.

The agreement is not intended to, and will not,
prevent a take-over of the Company. As discussed above, the
objectives of the agreement are to provide all holders of the
Voting Shares of the Company with sufficient time to assess and
evaluate a take-over bid and to permit the Board of Directors to
pursue other alternatives, if appropriate, designed to maximize
shareholder value.

The agreement provides that one right (a
Right) would be issued in respect of each of the
outstanding Voting Shares to holders as of the effective date of
the agreement, as well as in respect of each Common Share issued
after the effective date and prior to the Separation Time (as
defined below). Holders of the Companys Convertible
Debentures, Subordinated Convertible Debentures and the
certificates of entitlement thereto (which entitle the holders
thereof to receive Rights in the event that the related
securities are converted into Common Shares), together with
holders of the Companys LYON Notes, will generally be
entitled to receive, upon conversion and presentment of the
relevant securities and any related certificates of entitlement,
Rights in an amount equal to the number of Common Shares issued
upon the conversion of such securities.

Under the agreement, a bidder making a Permitted
Bid (as defined below) for Voting Shares of the Company may not
take up any shares before the close of business on the 60th day
after the date of the bid and then only if more than 50% of the
Common Shares not beneficially owned by the person making the
bid and certain related parties are deposited, in which case the
bid must be extended for 10 business days on the same terms. The
agreement is intended to encourage an offeror to proceed by way
of Permitted Bid or to approach the Board of Directors with a
view to negotiation by creating the potential for substantial
dilution of the offerors position. The Permitted Bid
provisions of the agreement are designed to ensure that, in any
take-over bid, all of the Shareholders are treated equally,
receive the maximum available value for their investment and are
given adequate time to properly assess the bid on a fully
informed basis. Under the agreement, a bid for less than all of
the Voting Shares may be a Permitted Bid.

It is not the intention of the Board of
Directors, in proposing the amendment, restatement and
reconfirmation of the current rights agreement, to secure the
continuance of existing Directors or management in office, or to
avoid a bid for control of the Company. Through the Permitted
Bid mechanism, described in more detail below, Shareholders may
tender to a bid which meets the Permitted Bid criteria without
triggering the agreement, regardless of the acceptability of the
bid to the Board of Directors. Even in the context of a bid that
does not meet the Permitted Bid criteria, the Board of Directors
will continue to be bound by its fiduciary duties to consider
any bid for the Companys Common Shares or Voting Shares in
deciding whether to exercise its discretion under the agreement
to waive the application of the agreement to the offer. In
discharging that responsibility, the Board of Directors must act
honestly and in good faith with a view to the best interests of
the Company and its Shareholders.

Furthermore, the amendment, restatement and
reconfirmation of the current rights agreement is not being
proposed in response to, or in anticipation of, any acquisition
or take-over offer. The agreement does not inhibit any
Shareholder from using the proxy mechanism set out in the
Canada Business Corporations Act, the corporate statute
governing the Company, to promote a change in the management or
direction of the Company, including the right of holders of not
less than 5% of the Companys issued Voting Shares to
requisition the Directors to call a meeting of the Shareholders
to transact any proper business stated in the requisition.

12



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Trading of Rights

Notwithstanding the effectiveness of the
agreement, the Rights are not exercisable until the Separation
Time (as defined below) and certificates representing the Rights
have not been sent to Shareholders. Certificates for Common
Shares issued after the effective date of the agreement will
contain a notation incorporating the agreement by reference.
Until the Separation Time, or earlier termination or expiration
of the Rights, the Rights are evidenced by and transferred with
the associated Common Shares and the surrender for transfer of
any certificate representing Common Shares will also constitute
the surrender for transfer of the Rights associated with those
Common Shares. After the Separation Time, the Rights will become
exercisable and begin to trade separately from the associated
Common Shares. The initial Exercise Price under each
Right in order to acquire a Common Share is Cdn. $200.

Separation of Rights

The Rights will become exercisable and begin to
trade separately from the associated Common Shares at the
Separation Time, which is generally the close of
business on the tenth trading day after the earliest to occur of
(a) a public announcement that a person or a group of
affiliated or associated persons (an Acquiring
Person) has acquired beneficial ownership of 20% or more
of the outstanding Common Shares or 20% or more of the
outstanding Voting Shares other than as a result of (i) a
reduction in the number of Common Shares or Voting Shares
outstanding, (ii) a Permitted Bid or Competing Permitted
Bid (see Permitted Bids below),
(iii) acquisitions of Common Shares or Voting Shares in
respect of which the Board has waived the application of the
agreement, or (iv) other specified exempt acquisitions in
which Shareholders participate on a pro rata basis; (b) the
date of commencement of, or the first public announcement of an
intention of any person to commence, a take-over bid where the
Common Shares or Voting Shares subject to the bid owned by that
person (including affiliates, associates and others acting
jointly or in concert therewith) would constitute 20% or more of
the outstanding Common Shares or Voting Shares; and (c) the
date upon which a Permitted Bid or Competing Permitted Bid
ceases to be such.

As soon as practicable following the Separation
Time, separate certificates evidencing rights (Rights
Certificates) will be mailed to the holders of record of
Common Shares as of the Separation Time and the Rights
Certificates alone will evidence the Rights.

When Rights become
Exercisable

After the Separation Time, each Right entitles
the holder thereof to purchase one Common Share at the Exercise
Price. Following a transaction which results in a person
becoming an Acquiring Person (a Flip-in-Event), the
Rights entitle the holder thereof (other than a holder who is an
Acquiring Person) to receive upon exercise Common Shares with a
market value equal to twice the then Exercise Price of the
Rights. For example, if at the time of such announcement the
Exercise Price is Cdn. $200 and the Common Shares have a market
price of Cdn. $50, the holder of each Right would be entitled to
receive Cdn. $400 in market value of the Common Shares (8 Common
Shares) for Cdn. $200, that is at a 50% discount. In such event,
however, any Rights beneficially owned by an Acquiring Person
(including affiliates, associates and others acting jointly or
in concert therewith), or a transferee or any such person, will
be void. A Flip-in-Event does not include acquisitions approved
by the Board or acquisitions pursuant to a Permitted
Bid or Competing Permitted Bid (as defined
below).

Permitted Bids

The agreement continues to include a
Permitted Bid concept whereby a take-over bid will
not trigger the Rights if the bid meets certain conditions. A
Permitted Bid is defined as an offer to acquire
Voting Shares or securities that are eligible to be converted
into Voting Shares for cash or securities made by means of a
take-over bid circular where the Voting Shares (including Voting
Shares that may be acquired upon conversion of securities
convertible into Voting Shares) subject to the offer, together
with shares beneficially owned by the offeror at the date of the
offer (including its affiliates, associates and others acting
jointly or in concert therewith), constitute

13



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20% or more of the outstanding Common Shares or
20% or more of the outstanding Voting Shares and that also
complies with the following additional provisions:




| |      |                                                                                                                                       
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------
| | (i)  | the bid must be made to all the holders of Voting
    Shares as registered on the books of the Company other than the
    offeror; and
|
| | (ii) | the bid must contain the following irrevocable
    and unqualified conditions:                                                        



| |     |                                                                                                                                                                                                                                                                                                                     
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | no Voting Shares will be taken up or paid for
    prior to the close of business on the 60th day following the
    date of the bid and then only if more than 50% of the Common
    Shares held by Independent Shareholders (as referred to below)
    have been deposited or tendered to the bid and not withdrawn;
|
| | (b) | Voting Shares may be deposited pursuant to the
    bid, unless it is withdrawn, at any time prior to the date
    shares are first taken up or paid for under the bid;                                                                                                                                              
|
| | (c) | Voting Shares deposited pursuant to the bid may
    be withdrawn until taken up or paid for; and                                                                                                                                                                                                                    
|
| | (d) | if the deposit condition referred to in (ii)(a)
    above is satisfied, the offeror will extend the bid for deposit
    of Voting Shares for at least 10 business days from the date
    such extension is publicly announced.                                                                                      

Independent Shareholders are defined
as holders of Voting Shares other than (i) an Acquiring
Person, (ii) any offeror making a take-over bid,
(iii) any affiliate or associate of an Acquiring Person or
offeror, (iv) persons acting jointly or in concert with an
Acquiring Person, and (v) employee benefit, stock purchase
or certain other plans or trusts for employees of the Company or
its wholly-owned subsidiaries unless the beneficiaries of such
plans or trusts direct the voting or tendering to a take-over
bid of the Voting Shares.

The Board of Directors, when a Permitted Bid is
made, will continue to have the duty and power to take such
actions and make such recommendations to Shareholders as are
considered appropriate.

Competing Permitted Bids

A Competing Permitted Bid is a
take-over bid made after a Permitted Bid has been made and prior
to its expiry that satisfies all of the provisions of a
Permitted Bid, except that it must remain open for acceptance
until at least the 60th day after the earliest date on which
another Permitted Bid then in existence was made. The reduction
in the time for acceptance of a Competing Permitted Bid is
designed to allow, as nearly as practicable, all bids to be
dealt with by the Shareholders within substantially the same
timeframe.

Redemption and Waiver

The Rights may be redeemed by the Board of
Directors, with the prior approval of the holders of Voting
Shares or Rights, as the case may be, at any time prior to the
occurrence of a Flip-in-Event at a redemption price of Cdn.
$0.0001 per Right. Rights are deemed to have been redeemed if a
bidder successfully completes a Permitted Bid.

Under the agreement, in its current form and as
it is proposed that it be amended and restated, the Board can
(i) waive the application of the agreement to enable a
particular takeover bid to proceed, in which case the agreement
will be deemed to have been waived with respect to any other
takeover bid made prior to the expiry of any bid subject to such
waiver or (ii) with the prior approval of the holders of
Voting Shares or rights, redeem the rights for nominal
consideration at any time prior to a Flip-in-Event.

Protection Against Dilution

The Exercise Price, the number and nature of
securities which may be purchased upon the exercise of Rights
and the number of Rights outstanding are subject to adjustment
from time to time to prevent dilution in the event of stock
dividends, subdivisions, consolidations, reclassifications or
other changes in the outstanding Common Shares, pro rata
distributions to holders of Common Shares and other
circumstances where adjustments are required to appropriately
protect the interests of the holders of Rights.

14



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Proposal

The Board of Directors has been advised that,
taking into account the limited number of amendments to the
agreement that are being proposed, the current rights agreement,
as it is proposed that it be amended and restated as set forth
as Exhibit A to this Proxy Circular and Statement, is fully
consistent with recently adopted or reconfirmed rights
agreements of other Canadian public companies.

In light of the foregoing, the Shareholders will
be asked to consider, and if deemed advisable, approve by
resolution the continued existence of the current rights
agreement, as it is proposed that it be amended and restated,
and the Rights, and to ratify, confirm and approve the
agreement, as it is proposed that it be amended and restated. If
the Shareholder Rights Plan is so reconfirmed, then it will
remain in effect until October 3, 2008.

The text of the proposed resolution reconfirming
the Shareholder Rights Plan is as follows:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | BE IT RESOLVED THAT:                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | The continued existence of the rights agreement,
    as amended and restated as set forth as Exhibit A to the
    Proxy Circular and Statement of the Company dated
    February 18, 2005 (the Amended and Restated Rights
    Agreement), and the Rights therein, be and are hereby
    approved and the Amended and Restated Rights Agreement is hereby
    ratified, reconfirmed and approved by the Shareholders of the
    Company.

To become effective, the Shareholder Rights Plan
reconfirmation resolution must be approved by Shareholders
representing in the aggregate not less than a majority of the
votes cast by all of the Shareholders at the Meeting. Unless the
Shareholders signing the accompanying form of proxy specify
otherwise, the persons named in the form of proxy intend to vote
in favour of the Shareholder Rights Plan reconfirmation
resolution.

THE BOARD OF DIRECTORS HAS DETERMINED THAT THE
CURRENT RIGHTS AGREEMENT, AS IT IS PROPOSED THAT IT BE AMENDED
AND RESTATED AS SET FORTH AS EXHIBIT A, REMAINS A VALUABLE TOOL
THAT CAN BE UTILIZED TO ENHANCE SHAREHOLDER VALUE IN THE FACE OF
AN UNSOLICITED TAKE-OVER BID. ACCORDINGLY, THE BOARD UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE AT THE MEETING IN FAVOUR
OF THE SHAREHOLDER RIGHTS PLAN RECONFIRMATION
RESOLUTION.




5.   2005 KEY EMPLOYEES
INCENTIVE PLAN APPROVAL

The Board of Directors adopted the 2005 Key
Employees Incentive Plan (the Incentive Plan) on
February 8, 2005, subject to customary regulatory approval
and approval by the Shareholders at the Meeting. The Incentive
Plan was adopted to provide effective incentive compensation to
retain and attract or provide additional incentive to selected
employees of the Company and its subsidiaries. The Incentive
Plan will succeed and replace the 2001 Key Employees Incentive
Plan (the 2001 Plan) previously approved by the
Companys Shareholders, which, like its predecessor plans
dating back to 1968, has been an important aid to the Company in
attracting and retaining individuals of high caliber and in
motivating them to extend their maximum efforts on behalf of the
Company. As of February 18, 2005, options to purchase an
aggregate of 3,949,280 Common Shares have been granted and
still remain outstanding under the 1993 Key Employees
Incentive Plan, the 1997 Key Employees Incentive Plan and
the 2001 Plan, collectively representing approximately
2.10% of the aggregate number of Common Shares outstanding as of
February 18, 2005. With the planned annual grant of share
options in late February 2005, consistent with the policies
referred to in the Management Resources and Compensation
Committees Report on Executive Compensation,
beginning on page 38, about 1.4 million Common Shares
(representing approximately 0.75% of the aggregate number of
Common Shares outstanding as of February 18, 2005) will be
available for grants of stock options and share appreciation
rights (SARs) under the 2001 Plan. In addition,
options to purchase an additional aggregate of 70,000 Common
Shares granted under the 2002 Non-Employee Director Share Option
Plan prior to the suspension of future option grants thereunder
in February 2004 still remain outstanding, representing
approximately 0.04% of the aggregate number of Common Shares
outstanding as of February 18, 2005. The Board of Directors
believes that the Incentive Plan will aid the Company in
continuing to maintain and improve its position in the market
for executive talent. The following is a summary of the material
terms of the Incentive Plan. This summary is qualified in its
entirety by reference to the full text of the Incentive Plan,
which is attached as Exhibit B to this Proxy Circular and
Statement.

15



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##### 



As in the case of its predecessor plans, the
Incentive Plan has two aspects. First, the Incentive Plan
authorizes the granting of the options to purchase in total over
the life of the Incentive Plan not more than 5.5 million of
the Companys Common Shares (representing approximately
2.91% of the aggregate number of Common Shares outstanding as of
February 18, 2005) and the granting of SARs in connection
with such share options to selected employees of the Company and
its subsidiaries. Second, the Incentive Plan authorizes the
making of awards of incentive compensation out of a pool, based
upon up to 2% of the Companys consolidated net earnings
plus income and mining taxes, in the form of immediate or
deferred payments or deliveries of cash, shares or incentive
units or share units or other types of compensation, subject to
such terms, conditions and restrictions as the Committee (as
defined below) administering the Incentive Plan may determine.
No more than 500,000 Common Shares can be awarded as incentive
compensation under the terms of the Incentive Plan. Consistent
with the Companys long term incentive policies referred to
in the Management Resources and Compensation Committees
Report on Executive Compensation beginning on
page 38, such incentive awards will, if made, be based upon
the mid-term performance of the Company, as was the case under
the 2001 Plan. Under the 2001 Plan, since 2002 incentive awards
were approved by the Board of Directors and made if the
Companys (1) net earnings in accordance with Canadian
generally accepted accounting principles, subject to certain
adjustments, including the exclusion of certain unusual charges
such as non-cash currency translation adjustments (whether
favourable or unfavourable), and (2) return on capital
employed (ROCE) generally in relation to the Companys cost
of capital, in each year over a rolling three-year period, met
or exceeded specified targets as established by the Management
Resources and Compensation Committee. Any shares which may be
distributed as awards of incentive compensation under the
Incentive Plan, if approved at the Meeting, will be in addition
to shares delivered upon exercise of options or SARs granted
pursuant to the Incentive Plan, but will be subject to the
separate 500,000 Common Share ceiling referred to above.

The Board of Directors has determined that the
Incentive Plan, like the 2001 Plan, should have a term of five
years. Accordingly, under the Incentive Plan, no share options
or related SARs may be granted after the day before the fifth
anniversary of the date that the Incentive Plan is approved by
the Companys Shareholders and no awards of incentive
compensation may be made in respect of any year after 2010.

Administration

The Incentive Plan will be administered by the
Board of Directors Management Resources and Compensation
Committee (the Committee), members of which will not
be eligible to participate under the Incentive Plan or any
similar plan applicable to any employees of the Company. Share
options and SARs may be granted and incentive compensation
awarded under the Incentive Plan only as and if determined and
recommended by the Committee. No options, SARs or awards of
incentive compensation will be granted or made under the
Incentive Plan prior to Shareholder and any Canadian or other
regulatory approval of the Incentive Plan which may be required.
The Committee will have discretion to determine which employees
of the Company and its subsidiaries would be eligible to
participate in the Incentive Plan. Accordingly, it is not
possible to determine at this time which of the present
employees of the Company and its subsidiaries might be permitted
to participate or the extent of their participation. No share
options granted under the Incentive Plan can be repriced without
shareholder approval. Finally, as noted above, no new awards of
incentive compensation may be made under the Plan in respect of
any fiscal year ending after December 31, 2010.

Share Options and Share Appreciation
Rights

The Incentive Plan is substantially similar to
the 2001 Plan with regard to the terms of share options. The
Incentive Plan provides with regard to share options that
(i) the option price may not be less than 100% of the fair
market value of the Companys Common Shares at the time the
option is granted (being the average of the high and low trading
prices of the Common Shares on the New York Stock Exchange or
the Toronto Stock Exchange, as applicable); (ii) all shares
purchased must be fully paid for at the time the option is
exercised; and (iii) in the event of a share subdivision,
share dividend (other than an optional share dividend in lieu of
a cash dividend) or other relevant change in capitalization,
appropriate adjustment will be made in the number and kind of
shares available for or subject to options and in the option
price per share under each outstanding option. The Incentive
Plan provides that no option may be exercised more than seven
years after it is granted whereas the 2001 Plan

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permitted options to have up to a 10 year
term. In addition, under the Incentive Plan and subject to
applicable law, the Company may choose to allow an option holder
exercising an option covering Common Shares of the Company
granted under the Incentive Plan, the 2001 Plan and certain
predecessor plans to use the Companys Common Shares (taken
at their fair market value) instead of cash in payment of the
purchase price of the Common Shares subject to the option. In
Canada, the employee may pay cash only but may request the
Company to sell on his or her behalf Common Shares already owned
by the employee and apply the proceeds of sale to the
employees purchase of Common Shares pursuant to the
option. The Incentive Plan, like the 2001 Plan, also provides
for the grant of incentive share options in addition to other
forms of share options which may be granted. An incentive share
option is one that meets certain requirements of the
U.S. Internal Revenue Code and thereby entitles a holder
who is a U.S. citizen or resident to favored tax treatment
as described below.


There is no limit on the number of options
issuable to insiders or any one person under the terms of the
Incentive Plan. The Incentive Plan does not specify any
particular vesting requirements for options, although
historically options typically have vested as to 50% after 6 to
12 months after issuance with the remainder vesting after
18 to 24 months after issuance. Option award agreements
typically provide for earlier expiry of options upon termination
of employment. Generally, this period is three months following
voluntary termination of employment, 24 months in the event
of death, and five years in the event of retirement, unless the
option expires before then. Options are non-transferable other
than by will or the laws of descent and distribution.

The Incentive Plan, like the 2001 Plan, also
authorizes the grant of SARs in connection with any share option
(either at the time of grant of the share option or at any time
thereafter). SARs may also be granted under the Incentive Plan
with regard to share options outstanding under the 2001 Plan and
certain predecessor plans. In general, a SAR issued in
conjunction with a share option provides the option holder with
an alternative to exercising his or her share option by
entitling such person to surrender unexercised the option to
which the right relates (or a portion thereof) and to receive
upon such surrender shares which are subject to the share option
having an aggregate value equal to the excess of the then fair
market value of one such share (being the average of the high
and low trading prices of the Common Shares on the New York
Stock Exchange or the Toronto Stock Exchange, as applicable)
over the purchase price per share specified in the option,
multiplied by the number of shares covered by the option (or
portion of option) so surrendered. At the election of the
Company granting such right, the amount of such appreciation in
market value over the option exercise price may be paid in cash
rather than in shares, or in a combination of cash and shares
(such shares being valued for such purpose at their fair market
value at the time of exercise of the SAR).

Under the Incentive Plan, if an option terminates
or expires unexercised, the shares which were subject to the
option may be reoptioned; however, if an option is surrendered
unexercised in conjunction with the exercise of a related SAR,
the shares subject to the surrendered option may not be
reoptioned.

The Incentive Plan also provides that, in the
event of a Change of Control, as defined therein,
all outstanding options and related SARs which have been granted
under the Incentive Plan will become vested and exercisable in
full. In addition, the Incentive Plan provides that the
Committee may, in its sole discretion, (i) cancel any award
made under the Incentive Plan to any employee or former employee
in the event of any serious breach of conduct by such employee
or former employee (including, but not limited to, any conduct
prejudicial to or in conflict or competition with any of the
businesses of the Company or its subsidiaries) or (ii) if
such conduct occurs within one year following the exercise or
payment of an award under the Incentive Plan, require the
repayment of any gain realized on any exercise of options or
payment received by any such employee or former employee. The
foregoing cancellation and repayment provisions will not apply
in the event of a Change of Control as defined in
the Incentive Plan.

Incentive Compensation Awards

The Incentive Plan also authorizes, as indicated
above, the making of awards of incentive compensation in various
forms, provided the amount of the awards does not exceed certain
limitations which are dependent upon earnings specified in the
Incentive Plan. Under the Incentive Plan, the maximum incentive
fund for awards of incentive compensation in respect of any year
will be (i) 2% of the sum of (a) consolidated net
earnings of the Company and (b) the related provisions for
income and mining taxes (the Award Pool) in such
year and the

17



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Award Pool for each of the two immediately
preceding years (the Preceding Years) less
(ii) the aggregate amount of awards actually made from the
Award Pool in respect to each of the Preceding Years under the
Incentive Plan, or, as the case may be, under the 2001 Plan. No
more than 500,000 Common Shares can be issued as awards of
incentive compensation under the terms of the Incentive Plan.


The Incentive Plan, like the 2001 Plan, also
permits a portion of any award which is measured by or otherwise
dependent upon future consolidated net earnings of the Company
to be charged against such years incentive fund with the
remainder to be charged against incentive funds for subsequent
years. If such alternative method of charging is utilized, no
awards of incentive compensation may be made in respect of
subsequent years under the Incentive Plan until the total value
(as determined by the Committee) of all awards in respect of
prior years has been charged against an incentive fund or funds.

As in the past, the Company intends, when
appropriate, to make cash awards to selected employees under the
Companys annual Management Incentive Plan if the
Companys performance meets or exceeds certain threshold
levels of performance. (For more information, see
Management Incentive Plans beginning on
page 34.) As was the practice under the 2001 Plan, such
awards, if made, will be paid outside the Incentive Plan and not
charged against any incentive fund.

Employees eligible to participate in the
Incentive Plan are also eligible to participate in the
Companys retirement plans and security reserve plans
described beginning on page 36.

Tax Treatment of Share Options, Share
Appreciation Rights and Incentive Compensation Awards

The following summary of tax consequences is of a
general nature only and is not intended to be, and should not be
construed to be, legal or tax advice to any particular employee
and no representation is made with respect to the tax
consequences in Canada, the United States, or any other
jurisdiction, to any particular employee. Accordingly, employees
should consult their own tax advisors with respect to particular
tax consequences relevant to them, having regard to their own
particular circumstances. Where Canadian federal income tax
considerations are referred to in this summary, those
consequences are in general terms applicable to (i) an
employee of the Company or a subsidiary of the Company who is
subject to tax under the Income Tax Act (Canada) (the
Canadian Act) on employment income or (ii) the
Company or a subsidiary of the Company which is subject to tax
under the Canadian Act.

Share Options.Under
the Canadian Act, the grant of a share option will not give rise
to immediate tax consequences. An employee who exercises a share
option is deemed to have received an employment benefit equal to
the excess of the fair market value of the shares at the time
such employee acquires them over the option price, and such
benefit is included in the employees income in the year in
which such employee acquires the shares, unless the employee
makes a deferral election. The employer corporation receives no
tax deduction for such deemed employment benefit. An employee
who deals at arms length with the Company may be able to
elect to defer taxation of the employment benefit in respect of
all or a portion of the option exercised until the year in which
the shares acquired upon exercise of the option are disposed of
or, if earlier, the year in which the employee dies or ceases to
be a Canadian resident. A disposition of shares can occur
through sale, exchange, gift, death or other means. In very
general terms, the amount eligible for tax deferral is subject
to an annual limit of Cdn. $100,000. This limit will apply to
the value of share options (measured by the fair market value of
the underlying shares at the date of the option grant) that vest
each year.

In the year in which the employment benefit is
included in the income of the employee, the employee who deals
at arms length with the Company (and, if applicable, the
subsidiary that is the employer) will generally be permitted a
deduction in computing taxable income for that year in the
amount of one-half of the benefit, but such deduction will not
be available for alternative minimum tax purposes under the
Canadian Act. The full amount of the employment benefit will be
added to the employees cost of the shares acquired on the
exercise of the option.

When shares acquired as a result of the exercise
of an option are subsequently sold or otherwise disposed of, if
the shares are held as capital property by the employee, a
capital gain or capital loss will be realized in the amount by
which the proceeds of sale, net of any expenses of sale, exceed
or are exceeded by, the employees adjusted cost base of
the shares. Subject to limited exceptions, the adjusted cost
base at any particular time of

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Common Shares owned by the employee is determined
by reference to the average cost of all Common Shares owned by
the employee at that time, whether acquired through the exercise
of share options or otherwise.


The average cost rule will not apply to shares
for which the employee has claimed tax deferral (the
deferral shares). The deferral shares will have a
separate adjusted cost base, and the employee will be deemed to
dispose of his or her Common Shares, including deferral shares,
in a certain order as specified in the Canadian Act. One-half of
any capital gains (taxable capital gains) net of
one-half of any capital losses (allowable capital
losses) realized in a taxation year will be included in
computing the employees income for that year. Allowable
capital losses in excess of taxable capital gains realized in a
year may be carried over and deducted from taxable capital gains
in the three preceding taxation years or future taxation years,
subject to the rules in the Canadian Act. The full amount of any
capital gain realized by an employee will be relevant in
computing liability under the alternative minimum tax.

If the Company, on behalf of an employee
exercising a share option, sells Common Shares already owned by
the employee in order to fund the employees purchase of
the same type or class of shares pursuant to the option, there
will be a disposition by the employee of such shares for
purposes of the Canadian Act. If the shares are held as capital
property of the employee, there will be a capital gain (or
capital loss) equal to the amount by which the proceeds of
disposition, net of any costs of disposition, exceed (or are
exceeded by) the adjusted cost base to the employee of the
shares sold. The tax treatment of any capital gain will be as
described above. Any capital loss realized on the disposition of
the Common Shares used to fund the employees purchase
pursuant to the option will generally be denied as a deduction
and will be added to the cost of the same type or class of
shares acquired upon such exercise.

Under present United States federal income tax
law, when an employee exercises an Incentive Stock Option
(ISO), the difference between the fair market value
of the shares so acquired and the option price is not included
in the taxable income of the optionee at the time of exercise.
The difference is, however, a tax preference item and may
subject the optionee to the alternative minimum tax, depending
upon the optionees other items of income and investments.
In addition, if an employee disposes of shares acquired pursuant
to an ISO after two years from the date of grant and one year
from the date of exercise, then the difference between the
selling price per share and the option price will be included in
the employees income as a long term capital gain or loss
in the year in which the disposition occurs. If such employee
makes an early disposition of such shares before the end of the
holding periods referred to above, including a disposition in
payment of the option price for new shares, then income in an
amount equal to the lesser of (i) the fair market value of
the shares on the date of exercise minus the option price or
(ii) the amount realized on disposition minus the option
price, is treated as ordinary income to such employee. If the
selling price of shares not held for the holding periods
referred to above exceeds the fair market value as of the date
of exercise, then that portion of the gain is treated as a
capital gain.

Generally, an employee who exercises a share
option which is not an ISO would realize ordinary income under
present United States federal income tax law in the year of
exercise equal to the excess of the fair market value of the
shares on the date of exercise over the option price. Any gain
or loss on subsequent disposition of the shares over their fair
market value on the date of exercise would be a capital gain or
loss. Under present United States federal income tax law, the
maximum rate of tax on a long term capital gain (for shares held
more than 12 months) is 15%. The employees holding
period in the shares for capital gains purposes begins on the
date of exercise of the option.

In cases where an employee employed by a United
States subsidiary of the Company recognizes ordinary income for
United States tax purposes in connection with the exercise of a
share option that is not an ISO or the subsequent sale of shares
purchased upon exercise of an ISO before the end of the
previously described holding periods, the United States
subsidiary employing such employee would receive a United States
tax deduction to the extent of such ordinary income. No
deduction would be available for shares acquired upon exercise
of an ISO if the shares are held for the holding periods
described above.

Share Appreciation Rights
(SARs).Under the Canadian Act, the
receipt by an employee of a SAR in conjunction with an option,
whether granted concurrently with the option or after the grant
of the option, will not be subject to tax at the time of
receipt. Generally, an employee who exercises a SAR will realize
the same amount

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of taxable benefit and be subject to the same tax
treatment under the Canadian Act as would have been the case had
the employee exercised the corresponding option, as discussed
above, except that if the employee receives cash, no deferral
election will be available in respect of the cash payment.


The Company understands that the receipt by an
employee of a SAR in conjunction with an option (whether granted
concurrently with or after the grant of the option) will not be
subject to tax at the time of receipt under United States
federal income tax law. The fair market value of shares and/or
cash delivered upon the exercise of a SAR on the surrender of
the option to which the SAR relates will be treated as
compensation taxable to the employee in the year in which the
option is surrendered.

The employer corporation will generally be
entitled to a deduction equal to the value of the shares and/or
cash delivered to the employee upon the exercise of the SAR,
except that for Canadian federal income tax purposes, no
deduction will be allowed to the extent that newly issued shares
are delivered to the employee.

Incentive Compensation
Awards.In general, the value of
awards of incentive compensation will be subject to tax as
compensation income at the time of receipt by the employee of
the cash or shares. The employer corporation will generally be
entitled to a deduction equal to the value of the shares or cash
delivered to the employee, except that for Canadian federal
income tax purposes, no deduction will be allowed to the extent
that newly issued shares are delivered to the employee.

Tax Consequences in Other
Jurisdictions.It is not practicable
to describe all the possible tax consequences to the Company and
its subsidiaries and to the recipients of grants of share
options or SARs or awards of incentive compensation under the
laws of the many countries having income taxes in which the
Company and its subsidiaries are or may be incorporated or
operating or to which recipients may be subject. The range of
possible tax consequences includes immediate or deferred
liability of the recipient for income taxes at the full rate for
ordinary income or at some lesser capital gain or other rate on
all or part of any benefit which the recipient may have or be
deemed to have received. As far as the Company and its
subsidiaries are concerned, they might receive no tax deductions
or immediate or deferred deductions equal to part or all of the
amount of the benefit received or deemed to have been received
by the recipient resulting from the granting or exercise of the
share option or SAR or from the making or delivery or payment of
the award of incentive compensation or the termination of
restrictions thereon.

Amendments

The Board of Directors may amend the Incentive
Plan without Shareholder approval except in the circumstances
described below. Shareholder approval of an amendment will be
required if the amendment would increase the number of shares
which may be subject to options or would otherwise materially
increase the cost of the Incentive Plan, but no amendment can
provide for repricing of any share options. The Board of
Directors may suspend or terminate the Incentive Plan at any
time.

Votes Required

The Incentive Plan will not be put into effect
unless it is approved by the affirmative vote of Shareholders,
voting together, representing in the aggregate not less than a
majority of the votes cast by all Shareholders at the Meeting.




6.   OTHER BUSINESS

The Board of Directors is not aware that any
matters are to be presented for action at the Meeting other than
those specifically referred to in the Notice of Meeting.
However, if any other matters properly come before the Meeting,
it is the intention of the persons named in the accompanying
form or forms of proxy to vote on such matters in accordance
with their judgment. The accompanying form or forms of proxy
will also confer discretionary authority upon the persons named
therein with respect to any amendments to the matters set forth
in the Notice of Meeting.

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PART III  CORPORATE
GOVERNANCE



INFORMATION REGARDING THE BOARD AND BOARD
COMMITTEES

The system of governance practices followed by
the Company is set forth in the Guidelines of the Board of
Directors on Corporate Governance (the Governance
Guidelines) and the charters of the Committees of the
Board of Directors. The Governance Guidelines and Committee
charters are intended to assure that the Board will have the
necessary authority, procedures and practices in place to review
and evaluate the Companys business and operations and,
where necessary or appropriate, act, or make decisions that are,
independent of the Companys management. The Governance
Guidelines, which include guidelines for determining Director
independence and qualifications, are also intended to help align
the interests of the Companys Directors and management
with those of the Shareholders and establish practices that the
Board will follow with respect to board composition and
selection, board meetings and involvement of senior management,
chief executive officer performance evaluation, succession
planning, board committee structure and director compensation.
The Board annually conducts a self-evaluation to assess
compliance with its Governance Guidelines and Committee Charters
and identify opportunities to improve Board and Board Committee
performance. The Governance Guidelines and Committee charters
are reviewed at least annually and updated as necessary to
reflect changes in regulatory requirements and evolving
oversight practices.

The Board of Directors believes that the purpose
of corporate governance is to ensure that the Company maximizes
shareholder value in a manner consistent with legal requirements
and the highest standards of integrity. The Board has adopted
and adheres to corporate governance practices which the Board
and management believe promote this purpose, are sound and
represent best practices. The Board continually reviews these
governance practices, applicable laws and regulations, the rules
and listing standards of the New York Stock Exchange and the
Toronto Stock Exchange, and best practices suggested by
recognized corporate governance bodies and authorities.

Currently, the Board of Directors has eleven
members. The Board has reviewed its Governance Guidelines and
applicable securities laws and stock exchange listing standards
regarding director independence and, based upon its review and
its business judgment, has determined that nine of eleven
Directors (1) meet those guidelines and (2) are
independent as required by applicable securities
laws and stock exchange listing standards, including the listing
standards of the New York Stock Exchange. Each of the members of
the six standing committees of the Board also meets those
guidelines and is an independent Director for
purposes of applicable requirements and the relevant charters of
such committees. A copy of the Governance Guidelines may be
viewed on the Companys website at www.inco.com. In
2004, the Corporate Governance and Nominating Committee reviewed
a situation involving the son of one of the Companys
Directors, Angus Bruneau. Mr. Bruneaus son served as
an executive officer of a company that received approximately
$300,000 in fees to manage the construction of an office and
warehouse facility for the Companys Voiseys Bay
development project. Based upon its review of how this fee
arrangement was awarded and the services provided, the Committee
determined that this relationship did not in any way impair
Mr. Bruneaus independence.

Director Attendance Record

Directors are expected to attend all meetings,
absent unusual circumstances. During 2004, the Board held 23
meetings and each of the Directors attended over 78% of the
meetings of the Board and of the Committees of the Board on
which such Director served.

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The table below sets forth the number of meetings
of the Board of Directors and each Committee of the Board of
Directors held in the year ended December 31, 2004, as well
as a summary of the attendance of each of the Directors at those
meetings, including those who serve on particular Committees:

|                   |  |                  |       |              |  |              |     |              |  |              |     |                 |  |  |     |  |  |  |     |  |  |  |     | 
|------------------ |  | ---------------- | ----- | ------------ |  | ------------ | --- | ------------ |  | ------------ | --- | --------------- |  |  | --- |  |  |  | --- |  |  |  | --- | 
|                   |  |                  |       |              |  | Corporate    |     | Management   |  |              |     |                
|                   |  |                  |       |              |  | Governance & |     | Resources &  |  |              |     | Environment,   
|                   |  | Board of         |       | Audit        |  | Nominating   |     | Compensation |  | Pension      |     | Health & Safety
|                   |  | Directors        |       | Committee    |  | Committee    |     | Committee    |  | Committee    |     | Committee      
|Directors Name    |  | (23 Meetings)(1) |       | (9 Meetings) |  | (3 Meetings) |     | (3 Meetings) |  | (3 Meetings) |     | (3 Meetings)   
|                   |  |                  |       |              |  |              |     |              |  |              |     |                
|Glen A. Barton     |  |                  | 22/23 |              |  |              | 8/9 |              |  |              | 3/3 |                 |  |  |    |  |  |  |    |  |  |  |    | 
|Angus A. Bruneau   |  |                  | 18/23 |              |  |              |    |              |  |              | 3/3 |                 |  |  |    |  |  |  | 3/3 |  |  |  | 3/3 | 
|Ronald C. Cambre   |  |                  | 22/23 |              |  |              | 7/9 |              |  |              |    |                 |  |  | 3/3 |  |  |  |    |  |  |  |    | 
|Scott M. Hand(2)   |  |                  | 22/22 |              |  |              |    |              |  |              |     |                 |  |  |    |  |  |  |    |  |  |  |    | 
|Janice K. Henry(3) |  |                  | 12/13 |              |  |              | 4/4 |              |  |              |    |                 |  |  |    |  |  |  | 2/2 |  |  |  |    | 
|Chaviva M. Hosek   |  |                  | 22/23 |              |  |              |    |              |  |              |    |                 |  |  |    |  |  |  | 3/3 |  |  |  | 3/3 | 
|Peter C. Jones(2)  |  |                  | 20/22 |              |  |              |    |              |  |              |    |                 |  |  |    |  |  |  |    |  |  |  |    | 
|John T. Mayberry   |  |                  | 18/23 |              |  |              |    |              |  |              | 3/3 |                 |  |  |    |  |  |  |    |  |  |  | 1/2 | 
|David P. OBrien   |  |                  | 21/23 |              |  |              |    |              |  |              | 3/3 |                 |  |  | 3/3 |  |  |  |    |  |  |  |    | 
|Roger Phillips     |  |                  | 22/23 |              |  |              |    |              |  |              |    |                 |  |  | 1/1 |  |  |  |    |  |  |  | 3/3 | 
|James M. Stanford  |  |                  | 21/23 |              |  |              | 9/9 |              |  |              |    |                 |  |  | 3/3 |  |  |  |    |  |  |  |    | 






|    |                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes both regularly scheduled and
    non-regularly scheduled or telephonic meetings.                                                                                                                                                                                                                                        
|   
|(2) | As Directors who are employees of the Company,
    Mr. Hand and Mr. Jones were not invited to one of the
    meetings of the Board of Directors held in 2004. Mr. Hand
    is an ex officio member of the Corporate Governance and
    Nominating Committee and attended each of the meetings of that
    committee held in 2004.
|   
|(3) | Ms. Henry joined the Board of Directors, the
    Audit Committee and the Pension Committee on June 1, 2004.                                                                                                                                                                                                                      

The Governance Guidelines provide that the
Directors are expected to attend the Companys annual
meetings of shareholders. At the 2004 Annual Meeting of
Shareholders, eight of the ten then current Directors were
present.

Board Committees

The Board of Directors currently has six standing
committees: the Audit Committee, the Corporate Governance and
Nominating Committee, the Management Resources and Compensation
Committee, the Pension Committee, the Environment, Health and
Safety Committee and the Capital Projects Committee. The Board
may also form special committees as required to review
particular transactions or matters. The composition, mandate and
focus of each of the six standing committees of the Board of
Directors are discussed below.

Audit Committee

The Audit Committee is composed of at least four
Directors, each of whom must satisfy the Boards Governance
Guidelines and applicable securities laws and stock exchange
listing standards with respect to independence. Members of the
Audit Committee must also satisfy the Boards guidelines
and applicable securities laws and stock exchange rules
regarding financial knowledge, literacy and expertise. The Board
has adopted a written charter for the Audit Committee, which was
most recently revised in February 2005. A copy of the amended
and restated charter is set forth as Exhibit C to this
Proxy Circular and Statement and also may be viewed on the
Companys website at www.inco.com. The charter
provides the Audit Committee with the authority and
responsibility for the appointment, retention, compensation and
oversight of the Companys independent auditors, including
pre-approval of all audit and non-audit services to be performed
by them, and the review and evaluation of such auditors
independence. Pursuant to its charter, the Audit Committee meets
with the Companys financial management personnel, its
internal auditors and its independent auditors at least four
times a year to review and assist the Board of Directors in its
oversight responsibilities relating to, among other matters:
(1) accounting and financial reporting principles,
policies, practices and procedures of the Company; (2) the
adequacy of the Companys systems of internal accounting
control and the systems, policies and

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procedures to address and minimize the risk of
fraud; (3) the quality, integrity and transparency of the
Companys financial statements; (4) the independent
auditors qualifications, performance and independence; and
(5) the performance of the independent auditors and the
Companys internal audit function. Given that the Audit
Committees function is one of oversight and that its
members are not accountants or auditors, the members of the
Committee rely on the integrity of management, the internal
audit staff and the independent auditors from whom they receive
information, the accuracy of the information provided to them by
such persons and organizations and on representations made by
management in carrying out their responsibilities. In connection
with the discharge of its duties and responsibilities, the
Committee reviews, among other areas, the Companys
financial reporting practices and procedures, the Companys
quarterly and annual financial statements prior to their release
and filing with regulatory agencies, actual and prospective
changes in critical or significant accounting policies and their
effect, the planned scope of examinations by both the
independent auditors and internal audit staff and their findings
and recommendations. The Audit Committees annual report is
found beginning on page 29. The Audit Committee has the
following members: James M. Stanford, Chair, Glen A. Barton,
Ronald C. Cambre and Janice K. Henry. It is planned, as noted on
page 6, that Janice K. Henry will become Chair of the
Audit Committee immediately following the Meeting.


Corporate Governance and Nominating
Committee

The Corporate Governance and Nominating Committee
is composed of at least three Directors, each of whom must
satisfy the Boards Governance Guidelines and applicable
securities laws and stock exchange listing standards with
respect to independence. The Lead Director serves as the Chair
of the Committee. The Board has adopted a written charter for
the Committee, which was last revised in February 2004. A copy
of this charter may be viewed on the Companys website at
www.inco.com and will be mailed to any Shareholder upon
request. Pursuant to its charter, the Committee is responsible
for, among other things, the following: (1) making
recommendations with respect to the size of the Board and its
standing committees; (2) identifying and making
recommendations to the Board regarding individuals to be
nominated for election or appointment to the Board or any of its
standing committees; (3) evaluating the performance of the
Board as a whole and the performance and contribution of
individual Directors and making recommendations to the Board
with respect to Director compensation; (4) overseeing Board
and Board Committee tenure policies and policies covering the
resignation of incumbent Directors; (5) evaluating at least
on an annual basis the performance of the Chairman and Chief
Executive Officer; (6) reviewing and making recommendations
to the Board with respect to developments in corporate
governance practices (including best practices), and legislation
and initiatives relating to corporate governance practices; and
(7) reviewing the independence of the Directors and
considering questions of possible conflicts of interest. The
Corporate Governance and Nominating Committee has the following
members: Glen A. Barton, Chair, Angus A. Bruneau, John T.
Mayberry and David P. OBrien.

In identifying, evaluating or recommending
candidates for election or appointment to the Board, the
Committee is required to take into consideration the criteria
set forth in the Boards Governance Guidelines and such
other factors as it deems appropriate, including the judgment,
skill, integrity, independence, diversity and business
experience of the candidates. The Committee has the authority to
retain experts or consultants to assist it in carrying out its
responsibilities and has the sole authority to engage
consultants and search firms to identify Director candidates.
Nominees for election as Directors at the Meeting, as well as
members of each Committee of the Board of Directors, were
approved by the Committee at its meeting in early February 2005.
The Committee understands that Mr. Cambre currently serves
as a director of W.R. Grace & Co., which is currently
in bankruptcy protection, and that Mr. OBrien served
as a director of Air Canada when it filed for bankruptcy
protection in 2003.

The Committee will consider and evaluate any
candidates recommended by the Shareholders in accordance with
the same criteria as any other proposed candidate. Shareholders
who wish to have persons considered by the Committee for
nomination to the Board of Directors at the 2006 Annual Meeting
should submit their requests in writing, including biographical
data regarding such persons, to the Secretary of the Company for
referral to the Committee not later than December 18, 2005.

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Management Resources and Compensation
Committee

The Management Resources and Compensation
Committee is composed of at least three Directors, each of whom
must satisfy the Boards Governance Guidelines and
applicable securities laws and stock exchange listing standards
with respect to independence. The Board has adopted a written
charter for the Committee, which was last revised in February
2004. A copy of this charter may be viewed on the Companys
website at www.inco.com and will be mailed to any
Shareholder upon request. Among its responsibilities, the
Committee reviews and evaluates the performance of the
Companys senior executives, other than the Chairman and
Chief Executive Officer, against certain performance
measurements and other factors. The Committee also
(1) makes recommendations to the Board on the remuneration
of the Companys senior executives, including the Chairman
and Chief Executive Officer, (2) oversees the
administration of the Companys incentive compensation
plans, including the Companys annual Management Incentive
Plans, the Mid-Term Incentive Plan and the 2001 KEIP,
(3) oversees the development and implementation of the
Companys executive succession plans and plans for
developing and evaluating potential candidates for executive
positions, including the position of Chief Executive Officer,
and (4) oversees the Companys regulatory compliance
with respect to compensation matters, and prepares and approves
the Committees annual Report on Executive
Compensation (included in this Proxy Circular and
Statement on page 38). The Committee has the authority to
retain experts or consultants to assist it in carrying out its
responsibilities and has the sole authority to engage
compensation consultants to assist in the evaluation of CEO and
senior executive compensation. The Management Resources and
Compensation Committee has the following members: David P.
OBrien, Chair, Ronald C. Cambre, Roger Phillips and James
M. Stanford.

Pension Committee

The Pension Committee is composed of at least
three Directors, each of whom must satisfy the Boards
Governance Guidelines and any applicable regulatory or stock
exchange listing standards with respect to independence. The
Board has adopted a written charter for the Committee and a copy
of the charter may be viewed on the Companys website at
www.inco.com and will be mailed to any Shareholder upon
request. The Committee advises the Board on the financial
aspects of the pension plans of the Company and its
subsidiaries, including actuarial assumptions, the adequacy of
funding and the implementation of sound investment strategies
for such pension plans. In addition, the Committee recommends to
the Board the appointment of trustees and investment advisors or
managers for such pension plans. The Pension Committee has the
following members: Chaviva M. Hosek, Chair, Angus A. Bruneau and
Janice K. Henry.

Environment, Health and Safety
Committee

The Environment, Health and Safety Committee is
composed of at least four Directors, each of whom must satisfy
the Boards Governance Guidelines and any applicable
regulatory or stock exchange listing standards with respect to
independence. The Board has adopted a written charter for the
Committee and a copy of the charter may be viewed on the
Companys website at www.inco.com and will be mailed
to any Shareholder upon request. The Committee assists the Board
in its oversight responsibilities relating to, among other
matters: (1) the review of the Companys
environmental, health and safety policies, (2) the
monitoring of compliance with applicable environmental, health
and safety laws and regulations relating to the Companys
businesses and operations, and (3) the development, review
and evaluation of the Companys environmental and health
and safety goals and objectives. The Environment, Health and
Safety Committee has the following members: Angus A.
Bruneau, Chair, Chaviva M. Hosek, Roger Phillips and
John T. Mayberry.

Capital Projects Committee

In February 2005, the Board created the Capital
Projects Committee, composed of three Directors, to assist the
Board in its oversight responsibilities relating to, among other
matters, (1) the review of the Companys major capital
projects on a worldwide basis, (2) the monitoring of the
progress of all major capital projects in terms of both schedule
for completion and budget and any other issues of significance
in relation to a particular project, and (3) how a project
is meeting all applicable legal and regulatory requirements and
addresses all relevant political, social, community and economic
benefits issues. The Board has adopted a written charter for the
Committee and a copy of the charter may be viewed on the
Companys website at www.inco.com and will be

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mailed to any Shareholder upon request. The
Committee, as constituted by the Board in February 2005, has the
following members: Ronald A. Cambre, Chair, John T.
Mayberry and James M. Stanford. No formal meetings of this
Committee have been held since it was created.


Shareholder Communications to the
Board

Shareholders may contact an individual Director,
the Lead Director, the Board as a group, or a specified Board
Committee or group, including the non-employee Directors as a
group, by the following means:



| |           |                                                                                                                 
| | --------- | ----------------------------------------------------------------------------------------------------------------
| | By mail:  | Inco Limited 
     Office of the Secretary 
     145 King Street West 
     Suite 1500 
     Toronto, ON M5H 4B7
|
| | By email: | askboard@inco.com                                                                                               

Each communication should specify the applicable
addressee or addressees to be contacted as well as the general
topic of the communication. The Companys Office of the
Secretary will initially receive and process such communications
to confirm that they are not of a commercial nature or related
to an improper or irrelevant topic before forwarding them on to
the addressee(s). The Company generally will not forward to any
of the Directors a Shareholder communication that it determines
to be primarily commercial in nature or relates to an improper
or irrelevant topic or that requests general information about
the Company.




STATEMENT OF CORPORATE GOVERNANCE
PRACTICES

In accordance with guidelines adopted in 1995 by
the Toronto Stock Exchange (the Guidelines),
companies such as the Company, whose securities are listed on
that exchange, are required to include in their proxy materials
annually a discussion of their systems of corporate governance
with specific reference to the Guidelines. This Statement of
Corporate Governance Practices is intended to summarize the
Companys approach to corporate governance with reference
to, and taking into account, each of the Guidelines. In
preparing this Statement, we have also considered the New York
Stock Exchange listing standards regarding corporate governance.

The Company and its Board of Directors recognize
the importance of corporate governance to the effective
management of the Company and to its Shareholders and its other
stakeholders. The Companys approach to significant issues
of corporate governance has been, and continues to be, designed
with a view to ensuring that the business and affairs of the
Company are effectively managed so as to enhance long-term
shareholder value. The Company and its Board of Directors have
implemented procedures to ensure that the Companys
corporate governance practices have been, and will continue to
be, subject to review on a regular basis to ensure that adequate
structures, procedures and processes are in place to develop
approaches to, and address, significant issues of corporate
governance. Such periodic review, consistent with the
Guidelines, is one of the duties of the Corporate Governance and
Nominating Committee of the Companys Board of Directors.
The Corporate Governance and Nominating Committee and management
of the Company continue to monitor pending regulatory
initiatives and developments in the corporate governance area,
including the corporate governance guidelines recently proposed
by the Canadian Securities Administrators, and intend to meet
such proposed guidelines.

Mandate of Board of Directors of the
Company

Given that the Board of Directors is not in a
position to manage the business and affairs of the
Company on a day-to-day basis in meeting the requirements
applicable to directors of a corporation under the Canada
Business Corporations Act, as well as under other statutory
or legal requirements applicable to companies which carry on
business in numerous jurisdictions, the Board of Directors
delegates to the Companys Chief Executive Officer and
certain other members of the Companys senior management
certain of its powers of management. The mandate of the Board of
Directors focuses on its responsibility for the overall
stewardship of the business

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and affairs of the Company. In order to carry out
its mandate, the Board of Directors holds at least eight
regularly scheduled meetings annually, with additional meetings
being held as required to consider particular issues or conduct
specific reviews between regularly scheduled meetings whenever
appropriate. During 2004, the Board of Directors held 23
meetings.


In furtherance of its duties and
responsibilities, the functions which the Board of Directors has
assumed, either directly or through the standing committees of
the Board of Directors, include, as contemplated in the
Guidelines, (a) overseeing the Companys strategic
planning process and overall strategic and business plans and
their implementation, including the scope of operations and
business activities, and investments or divestitures;
(b) assessing the principal risks arising from or
incidental to the business and operations of the Company,
including financial, operational, regulatory, technological and
environmental, health and safety risks, and overseeing the
systems implemented to manage those risks; (c) electing or
appointing all senior executives of the Company, overseeing the
Companys executive compensation and development policies
and programs, and succession planning, and their implementation,
and reviewing the performance of senior executives in line with
corporate policies in effect and the applicable annual and
long-term business and strategic plans and other objectives of
the Company; (d) overseeing shareholder, investor and
public communications policies and their implementation,
including timely disclosure of material information;
(e) overseeing the Companys key capital projects; and
(f) monitoring and assessing the scope, implementation and
integrity of the Companys internal accounting control,
audit and management information systems and internal control
over financial reporting.

Decisions Requiring Board Approval

In light of the responsibilities of the Board of
Directors for the overall stewardship of the business and
affairs of the Company, all fundamental decisions relating to
the management of the Company are reviewed and approved in
advance by the Board. The Board of Directors has from time to
time delegated to senior management of the Company the authority
to enter into certain types of transactions, including financial
transactions, subject to specified limitations. Subject to such
delegation, major proposed decisions or actions concerning,
among other matters, the Companys corporate status,
capital structure, annual and long-term business and strategic
plans, major acquisitions or divestitures, strategic alliances
and other actions as required under the Canada Business
Corporations Act, are subject to the prior approval of the
Board. Capital investments and other expenditures above certain
minimum levels established by the Board are also subject to the
prior approval of the Board of Directors.

Boards Expectations of
Management

The Board of Directors does not believe that it
is appropriate for it to be involved in the day-to-day
management and functioning of the Company. It expects that
senior management will be responsible for the effective,
efficient, and prudent management of the Company, subject to the
Boards overall stewardship responsibilities. Given the
Boards overall stewardship responsibilities, the Board of
Directors expects management of the Company to meet the
following key objectives: (a) report, in a comprehensive,
accurate and timely fashion, on the business and affairs of the
Company generally, and on any specific matters that management
considers to be of material or significant consequence for the
Company and its Shareholders and other stakeholders;
(b) take timely action, and make all appropriate decisions
required, with respect to the Companys business and
operations in accordance with all applicable legal and other
requirements or obligations and within the framework of
corporate policies in effect, with a view to maximizing
long-term shareholder value; (c) conduct a comprehensive
annual budgeting process and monitor closely the Companys
financial and operating performance in conjunction with the
Companys annual business plan approved by the Board;
(d) review on an ongoing basis the Companys near term
and long-term strategic plans and their implementation in all
key areas of the Companys activities in light of, among
other critical factors, evolving market conditions and changes
in applicable laws, regulations and technology; and
(e) implement appropriate policies, procedures and
processes to assure the highest level of conduct and integrity
of the Companys management and employees worldwide.

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Board Composition and Independence

In this Statement of Corporate Governance
Practices, the term unrelated director has the
meaning given to it in the Guidelines: a director who is
independent of management and free from any interest and any
business or other relationship which could, or could reasonably
be perceived to, materially interfere with the directors
ability to act with a view to the best interests of the Company.
The Company has no significant shareholder for the
purposes of the Guidelines.

In deciding whether a particular Director is an
unrelated director for the purposes of the
Guidelines, as well as whether a particular Director is
independent under the New York Stock Exchange
listing standards, the Corporate Governance and Nominating
Committee annually reviews this issue in the context of a number
of factors, including the Boards guidelines on corporate
governance. The Committee most recently determined, at its
meeting in early February 2005, that no Director, other than the
Chairman and Chief Executive Officer and the President and Chief
Operating Officer, who are full-time employees of the Company,
currently has any significant business or other relationship
with the Company which would make such Director not
unrelated or independent. Accordingly,
the Committee determined that all of the members of the Board,
except the Chairman and Chief Executive Officer, Mr. Hand,
and the President and Chief Operating Officer, Mr. Jones,
are, in accordance with the Guidelines, unrelated
directors of the Company. At the same meeting, the
Committee also determined that all of the members of the Board,
other than Mr. Hand and Mr. Jones, are
independent in accordance with applicable New York
Stock Exchange listing standards and the Boards guidelines
on corporate governance.

The Board of Directors is currently comprised of
eleven members. The Board of Directors and the Corporate
Governance and Nominating Committee, as discussed below,
periodically consider the size of the Board. The Corporate
Governance and Nominating Committee and the Board believe that,
while a Board size of eleven members is adequate, the addition
of at least one new Director would be desirable, thus bringing
the size of the Board to twelve members. In addition, James M.
Stanford has indicated that, if elected at the Meeting, he
intends to retire as a Director prior to the expiry of his term.
As noted on page 6, Mr. Stanford has agreed to
continue to serve until late July 2005. Accordingly, the
Corporate Governance and Nominating Committee is currently
searching for two new Directors, thus bringing the size of the
Board to twelve members, and the Company has engaged specialized
director search consulting firms to assist it in identifying
suitable candidates.

As a part of existing procedures, and consistent
with the New York Stock Exchange listing standards, regular
executive sessions of the independent/ unrelated Directors are
held in conjunction with at least each face-to-face Board
meeting separately from the inside Directors and any management.
These sessions are chaired by the Lead Director. Any Board
Committee, individual, independent/ unrelated Director or group
of such Directors may at any time they believe to be necessary
or appropriate, taking into account the relevant circumstances
and subject to the approval of the Corporate Governance and
Nominating Committee, engage independent advisors at the expense
of the Company.

Chairman of the Board and Executive Officer
Positions and Responsibilities and Lead
Director Position

The Chief Executive Officer of the Company,
Mr. Hand, was appointed as Chairman of the Board of
Directors on April 17, 2002. Mr. Hand was reappointed
as Chairman of the Board in April 2003 and April 2004.
At the same time, the Board formalized the creation of a Lead
Director position and elected Glen A. Barton, an independent
Director, to serve as Lead Director. The principal duties and
responsibilities of the Lead Director include chairing the
executive sessions held by the non-employee Directors,
reviewing, to the extent appropriate, with the Chairman and
Chief Executive Officer the matters discussed in such executive
sessions, reviewing and interacting with management in the
preparation of the agendas for all Board meetings and arranging
for key issues identified by non-employee Directors to be
addressed at one or more Board meetings.

The Board of Directors has reviewed whether the
positions of Chair of the Board and Chief Executive Officer
should be held by separate persons and, in accordance with its
guidelines on corporate governance, the Board will implement,
when it believes it would be in the best interests of the
Company, on either an interim basis or otherwise, arrangements
whereby the positions of Chairman and Chief Executive Officer
would not be

27



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held by the same person. It will also continue to
evaluate new structures and procedures to enhance or supplement
existing structures and procedures regarding the operation of
the Board.


The Corporate Governance and Nominating
Committee, whose responsibilities are summarized beginning on
page 23, is responsible for overseeing and reviewing the
position description and performance of the Chairman and Chief
Executive Officer and the development, at least on an annual
basis, of the limits to the responsibilities of the Chief
Executive Officer and the corporate objectives which the Chief
Executive Officer will be responsible for meeting and the
Management Resources and Compensation Committee, whose
responsibilities are summarized on page 24, is responsible
for overseeing and reviewing the position descriptions,
performance and corporate objectives which the other Executive
Officers will be responsible for meeting.

Director Recruitment and New Director
Education and Orientation Program

The maintenance of a diverse, dedicated and
highly qualified group of independent and unrelated Directors is
critical to the functioning and effectiveness of the Board of
Directors. As summarized on page 23, the Corporate
Governance and Nominating Committee is charged with identifying,
evaluating and recommending Director nominees with the
assistance of senior management, other Directors and outside
advisors, as appropriate. Nominees are assessed based on the
criteria which have been developed for Director candidates,
which criteria are periodically reviewed and updated by the
Corporate Governance and Nominating Committee, taking into
account the desired size of the Board and the diversity of its
composition. The Committee recognizes the benefits of diversity
and in selecting candidates utilizes a comprehensive list of
criteria, including desired skills, areas of expertise,
experience and accomplishments, gender, age and other personal
characteristics, which are intended to result in the selection
of candidates who are best able to contribute to the direction
of the business, strategies and affairs of the Company.

The Corporate Governance and Nominating Committee
oversees an orientation and education program for new Directors.
While the program is tailored to the needs and experience of the
particular new Director, it includes sessions with the
Companys senior management on specific business,
operations, marketing, legal and financial issues relating to
the Company, tours of key operating facilities and utilization
of new director programs sponsored by recognized universities or
other organizations.

Board Committees and Board
Performance

As discussed above, the Board currently has six
standing committees: the Audit Committee, the Corporate
Governance and Nominating Committee, the Management Resources
and Compensation Committee, the Pension Committee, the
Environment, Health and Safety Committee and the Capital
Projects Committee. Special committees of the Board are formed
as required to review particular transactions or matters. The
Corporate Governance and Nominating Committee, consistent with
the Guidelines, regularly reviews, assesses and reports to the
Board and, when appropriate, makes recommendations on the size,
composition, compensation, effectiveness and performance of the
Board and the existing Board Committees, the charters of the
existing Board Committees, whether new Board Committees should
be created, the orientation and education programs developed by
the Company for new Directors and the Companys approach to
corporate governance and to the principles set forth in the
Guidelines. The compensation arrangements for the Companys
independent/ unrelated Directors are described under
Director Compensation, beginning on page 31.
All of the members of the six standing Board Committees are
independent/ unrelated Directors. The composition of the Audit
Committee and the functions, duties and responsibilities of the
Audit Committee are consistent with the requirements for such
committee as set forth in the Guidelines and other applicable
requirements, including the New York Stock Exchange listing
standards.

Shareholder/ Investor Communications and
Feedback

The Company has programs in place to effectively
communicate with its stakeholders, including its Shareholders,
employees and the general public. The fundamental objective of
these programs is to ensure an open, accessible and timely
exchange of information with Shareholders, employees and other
stakeholders concerning the business, affairs and performance of
the Company, subject to the requirements of applicable

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securities laws and other statutory and
contractual obligations. The Companys shareholder and
investor relations personnel are responsible for responding to
shareholder communications and addressing feedback from
Shareholders and other stakeholders with review, as appropriate,
by senior management and the Board of Directors. The
Companys shareholder and investor relations function
includes quarterly conference calls with industry analysts and
media representatives in conjunction with the release of the
Companys financial results, as well as regular
presentations to or meetings with industry analysts and with
institutional shareholders. Through webcasting services,
Shareholders and other stakeholders may access these conference
calls and slides and other materials utilized in connection with
such conference calls and all of the presentations made by the
Company to the investment community, except those sponsored by
third parties which do not webcast the presentations themselves.
Shareholders or other interested parties may contact the
Companys investor relations personnel through the
Companys website, at www.inco.com, or by telephone
at (416) 361-7670.





AUDIT COMMITTEE REPORT

The Audit Committee of the Board has four
members. The Board has reviewed its guidelines on corporate
governance and applicable securities laws and stock exchange
listing standards regarding director independence and, based
upon its review and its business judgment, has determined that
each of the members of the Audit Committee (1) meets those
guidelines and (2) is independent as required
by applicable securities laws and stock exchange listing
standards, including the listing standards of the New York Stock
Exchange. The Board has also determined that each of James M.
Stanford (Chair), Glen A. Barton, Ronald C. Cambre and
Janice K. Henry meets the applicable requirements and,
accordingly, is an audit committee financial expert
as that term is defined under applicable U.S. securities
legislation.

The role of the Audit Committee is to assist the
Board in its oversight of the Companys accounting and
financial reporting principles, policies and procedures, as well
as the adequacy of the Companys systems of internal
control over financial reporting and the quality and integrity
of the Companys financial statements. The Committee
operates pursuant to a charter that was most recently amended
and restated by the Board in February 2005. As set forth in the
charter, management of the Company is responsible for the
preparation, presentation and integrity of the Companys
financial statements, the Companys accounting and
financial reporting principles, and internal accounting and
other controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. The
Companys independent auditors are responsible for auditing
the Companys financial statements, including the note to
those financial statements relating to the significant
differences between Canadian GAAP and United States GAAP, and
expressing opinions as to (i) the conformity of the
Companys financial statements with generally accepted
accounting principles (GAAP) in Canada,
(ii) managements assessment of the effectiveness of
internal control over financial reporting, and (iii) the
effectiveness of internal control over financial reporting, in
each case as at year end 2004.

In assisting the Board in its oversight function,
the Committee has reviewed and discussed the Companys
audited financial statements for the year ended
December 31, 2004 with management, the Companys
internal audit staff and the Companys independent
auditors, PricewaterhouseCoopers LLP. The Committee has also
reviewed and discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards
No. 61, Communication with Audit Committees (as
codified by AU Section 380), and related guidance in
Canada. The Committee has also received the written disclosures
and the letter from the independent auditors required by the
current Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, in
the United States and related guidance in Canada, and has, as
part of its responsibilities, reviewed with the independent
auditors, taking into account recent legislation and
regulations, such auditors independence from the Company
and its management. The Audit Committee has also discussed with
management, the Companys internal audit staff and the
independent auditors the quality and adequacy of the
Companys internal accounting and other controls and the
Companys internal audit functions, organization,
responsibilities, budgets and staffing. The Audit Committee has
reviewed with both the independent auditors and the
Companys internal audit staff their respective audit
plans, audit scope and identification of audit risks for the
year ended December 31, 2004, and, having developed
policies and procedures relating to the pre-approval of such
services, has considered the nature and scope of the non-audit
services proposed to be supplied to the

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Company by its independent auditors and whether
the provision of any such non-audit services by the auditors is
fully compatible with the maintenance of their independence.


The members of the Audit Committee are not
professionally engaged in the practice of auditing or
accounting, are not experts in the fields of accounting or
auditing, including in respect of auditor independence, and are
not employed by the Company for accounting or financial
management or for any aspects of the Companys systems of
internal accounting control. Members of the Committee rely,
without independent verification, on the information provided to
them, and on the representations made, by management, the
Companys internal audit staff and the Companys
independent auditors. Accordingly, the Audit Committees
oversight does not provide an independent basis to determine
that management has maintained appropriate accounting and
financial reporting principles and policies, or internal
accounting controls and procedures, designed to assure
compliance with accounting standards and applicable laws and
regulations. In addition, the Audit Committees
considerations and discussions referred to above do not assure
that the audit of the Companys financial statements has
been carried out in accordance with applicable auditing
standards, that the Companys financial statements are
presented in accordance with Canadian GAAP, or that the
Companys auditors are in fact independent.

Based upon the reports, discussions and reviews
described in this Report, and subject to the limitations on the
role and responsibilities of the Committee referred to above and
in the Charter of the Audit Committee, the Committee has
(i) approved, subject to requisite Shareholder approval in
accordance with the Canada Business Corporations Act, the
appointment of PricewaterhouseCoopers LLP as independent
auditors for the Companys fiscal year ended
December 31, 2005, and (ii) recommended to the Board
of Directors, which has approved the Committees
recommendations, that the Companys audited financial
statements for the year ended December 31, 2004 be included
in the Companys Annual Report to Shareholders for the year
ended December 31, 2004 and in the Companys Annual
Report on Form 10-K for the year ended December 31,
2004 to be filed with the U.S. Securities and Exchange
Commission and Canadian securities regulatory authorities.

The Audit Committee

James M. Stanford, Chair

Glen A. Barton


Ronald C. Cambre


Janice K. Henry


February 14, 2005

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PART IV  DIRECTOR AND
EXECUTIVE COMPENSATION




DIRECTOR COMPENSATION

Directors Compensation in 2004

In 2004, the Company paid its non-employee
Directors an annual retainer for serving on the Board, plus
additional annual retainers for serving (1) on more than
two Committees, (2) as Chair of a Board Committee and/or
(3) as Lead Director. The Company also made an annual award
of Deferred Share Units to the non-employee Directors, in lieu
of the annual stock option grant that would have otherwise been
granted to them, given the decision of the Board to suspend
future annual grants of share option under the Companys
2002 Non-Employee Director Share Option Plan which provides for
annual share option grants to all non-employee Directors (the
Directors Option Plan). The Company does not
provide any additional compensation to Directors who are also
employees of the Company.

The following table sets forth the amount of each
of the retainers and awards paid to the Companys
non-employee Directors in 2004:

|                                                                        |  |                                                                        
|----------------------------------------------------------------------- |  | -----------------------------------------------------------------------
|Retainer, Fee or Option Grant                                           |  | Amount                                                                 
|                                                                        |  |                                                                        
|Annual Director Retainer                                                |  |  $30,000 in cash*  and
    1,100 Common Shares or Deferred Share Units
|Annual Award of Deferred Share Units                                    |  |  1,500 Deferred Share Units                                           
|Extra Committee Retainer (for service on
    more  than two Committees) |  |  200 Common Shares or Deferred Share
    Units                        
|Committee Chair Retainer (other than Audit
    Committee)               |  |  $2,000 in cash*  and
    200 Common Shares or Deferred Share Units   
|Audit Committee Chair Retainer                                          |  |  $2,000 in cash*  and
    500 Common Shares or Deferred Share Units   
|Lead Director Retainer                                                  |  |  $15,000 in Common Shares or Deferred
    Share Units                 



|  |                                                                                                                                                                             
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Non-employee Directors may elect to receive all
    or part of their nominal cash compensation in the form of Common
    Shares or Deferred Share Units, as described below.

Annual Awards of Common Shares or Deferred
Share Units.Some or all of the annual
retainer for service (1) on the Board, (2) on more
than two Board Committees, (3) as Chair of a Board
Committee and (4) as Lead Director of the Board are payable
in the form of awards of Common Shares or, at the
Directors election, Deferred Share Units, pursuant to the
Companys Non-Employee Director Share Ownership Plan (the
Ownership Plan). The Common Shares awarded under the
Ownership Plan are purchased in the secondary market, thereby
avoiding dilution. The Deferred Share Units awarded under the
Ownership Plan are bookkeeping entries on the books of the
Company that represent the value of a Common Share at the time
of the entry or award. In conjunction with a Directors
retirement from the Board, the Deferred Share Units are cashed
out by the Company based upon the fair market value of the
Companys Common Shares at such time.

Additional Equity Compensation and Minimum
Equity Ownership Requirements.The
Ownership Plan also provides the Companys non-employee
Directors with the opportunity to elect to receive all or part
of the portion of their compensation that would ordinarily be
payable in cash in the form of Common Shares or Deferred Share
Units. The Company has a share ownership requirement for
non-employee Directors, pursuant to which, in fiscal 2004, each
non-employee Director was required to hold, over time, the
greater of (a) 7,500 Common Shares and/or Deferred Share
Units, or (b) Common Shares and/or Deferred Share Units
having a fair market value of at least $180,000. Under the
Ownership Plan, a non-employee Director is required to take at
least 25% of his or her cash compensation in the form of Common
Shares or Deferred Share Units until such time as he or she has
satisfied these minimum share ownership requirements.

Annual Award of Deferred Share Units.As noted above, last year the Board
decided to suspend the operation of the Directors Option
Plan and, in lieu of the annual grant of 5,000 options which
would have been

31



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##### 



made thereunder, to initiate an annual award of
1,500 Deferred Share Units pursuant to the Ownership Plan. This
annual award was made on April 22, 2004 (or the day after
the Companys last Annual and Special Meeting of
Shareholders) to each of the non-employee Directors who was
serving on the Board at that time. Janice K. Henry received a
pro-rated award as at the date she joined the Board. The Board
decided to suspend the operation of the Directors Option
Plan because it concluded that a Deferred Share Units award
would more closely align the Directors interests with the
long-term interests of the Shareholders than share options. As
in the case of share options granted under the Directors
Option Plan, the Deferred Share Units granted pursuant to the
annual award will vest at the end of one year, so long as the
Director is still serving on the Board at the end of that period.


Aggregate Value of Compensation Package.Assuming that a non-employee Director
did not perform any additional functions (such as serving as
Chair of a Board Committee), the aggregate value of the
compensation package for service as a Non-Employee Director in
2004 would have been $111,835, consisting of (1) $30,000 in
cash; and (2) $81,835 in Common Shares or Deferred Share
Units (consisting of 1,100 Common Shares or Deferred Share Units
as part of the annual retainer and a pro rata (through December
2004) portion of the 1,500 Deferred Share Unit award, as
described above, valued at the closing price of the Common
Shares on the New York Stock Exchange on December 31, 2004,
$36.78).

Directors Compensation in 2005

For 2005, the Corporate Governance and Nominating
Committee recommended, and the Board of Directors approved, in
December 2004 certain changes to the Companys compensation
program for its non-employee Directors. The changes were
as follows:



| |     |                                                                                                                                                               
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | an increase in the cash portion of the annual
    Director retainer, from $30,000 to $45,000;                                                                 
|
| | (2) | an increase in the Lead Directors retainer,
    from $15,000 to $30,000 (which will continue to be payable in
    Common Shares or Deferred Share Units); and
|
| | (3) | an additional retainer for members of the Audit
    Committee of 200 Common Shares or Deferred Share Units.                                                   

In addition, the Board determined that members of
the new Capital Project Committee would receive a per meeting
fee of $3,000 in cash, but that members of this Committee would
not be eligible to receive any additional compensation in
respect of service on more than two Board Committees.

Given these changes for 2005, the following table
sets forth the amount of each of the retainers and awards
payable to the Companys non-employee Directors in 2005:

|                                                                                                                     |  |                                                                        
|-------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------
|Retainer, Fee or Option Grant                                                                                        |  | Amount                                                                 
|                                                                                                                     |  |                                                                        
|Annual Director Retainer                                                                                             |  |  $45,000 in cash*  and
    1,100 Common Shares or Deferred Share Units
|Annual Award of Deferred Share Units                                                                                 |  |  1,500 Deferred Share Units                                           
|Extra Committee Retainer (for service on more
    than two Committees, excluding the Capital
    Projects Committee) |  |  200 Common Shares or Deferred Share
    Units                        
|Committee Chair Retainer (other than Audit
    Committee)                                                            |  |  $2,000 in cash*  and
    200 Common Shares or Deferred Share Units   
|Audit Committee Chair Retainer                                                                                       |  |  $2,000 in cash*  and
    500 Common Shares or Deferred Share Units   
|Audit Committee Member Retainer                                                                                      |  |  200 Common Shares or Deferred Share
    Units                        
|Capital Project Committee Meeting Fees                                                                               |  |  $3,000 in cash per meeting                                           
|Lead Director Retainer                                                                                               |  |  $30,000 in Common Shares or Deferred
    Share Units                 



|  |                                                                                                                                                                             
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Non-employee Directors may elect to receive all
    or part of their nominal cash compensation in the form of Common
    Shares or Deferred Share Units, as described above.

32



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##### 






EXECUTIVE COMPENSATION

Compensation of Officers

The table below sets forth the compensation paid
by the Company to the Companys Chairman and Chief
Executive Officer, and to each of the Companys four next
most highly compensated Executive Officers, for services
rendered in all capacities to the Company in respect of the
years 2004, 2003 and 2002.




SUMMARY COMPENSATION TABLE(1)





|                                             |  |                     |  |            |         |              |  |              |           |               |  |        |           |  |  |  |         |  |  |  |        | 
|-------------------------------------------- |  | ------------------- |  | ---------- | ------- | ------------ |  | ------------ | --------- | ------------- |  | ------ | --------- |  |  |  | ------- |  |  |  | ------ | 
|                                             |  |                     |  |            |         |              |  |              |           |              
|                                             |  |                     |  |            |         |              |  | LONG TERM    |           |              
|                                             |  |                     |  |            |         |              |  | COMPENSATION |           |              
|                                             |  |                     |  |            |         |              |  | AWARDS       |           |              
|                                             |  |                     |  |            |         |              |  |              |           |              
|                                             |  |                     |  |            |         | Securities   |  |             
|                                             |  | ANNUAL COMPENSATION |  | Restricted |         | Underlying   |  | All Other   
|Name and                                     |  |                     |  | Share      |         | Options/SARs |  | Compensation
|Principal Position                           |  | Year                |  | Salary($)  |         | Bonus($)(2)  |  | Awards($)(3) |           | Granted(#)(4) |  | ($)(5)
|                                             |  |                     |  |            |         |              |  |              |           |               |  |       
|Scott M. Hand(6)                             |  | 2004                |  |            | 962,133 |              |  |              | 1,558,000 |               |  |        | 1,316,920 |  |  |  | 57,000  |  |  |  | 95,097 | 
|Chairman and Chief Executive Officer         |  | 2003                |  |            | 772,086 |              |  |              | 537,000   |               |  |        | 726,024   |  |  |  | 72,000  |  |  |  | 80,697 | 
|                                             |  | 2002                |  |            | 608,000 |              |  |              | 357,000   |               |  |        | 374,000   |  |  |  | 100,000 |  |  |  | 63,000 | 
|Peter C. Jones                               |  | 2004                |  |            | 686,067 |              |  |              | 874,940   |               |  |        | 697,000   |  |  |  | 40,000  |  |  |  | 70,669 | 
|President and Chief Operating Officer        |  | 2003                |  |            | 542,967 |              |  |              | 305,016   |               |  |        | 413,848   |  |  |  | 48,000  |  |  |  | 59,468 | 
|                                             |  | 2002                |  |            | 418,000 |              |  |              | 243,000   |               |  |        | 206,000   |  |  |  | 66,000  |  |  |  | 48,000 | 
|Peter J. Goudie                              |  | 2004                |  |            | 472,183 |              |  |              | 533,000   |               |  |        | 383,760   |  |  |  | 28,000  |  |  |  | 58,864 | 
|Executive Vice-President, Marketing          |  | 2003                |  |            | 373,752 |              |  |              | 179,000   |               |  |        | 221,960   |  |  |  | 32,000  |  |  |  | 49,402 | 
|                                             |  | 2002                |  |            | 292,000 |              |  |              | 152,000   |               |  |        | 106,000   |  |  |  | 44,000  |  |  |  | 41,000 | 
|Stuart F. Feiner                             |  | 2004                |  |            | 476,967 |              |  |              | 482,160   |               |  |        | 359,980   |  |  |  | 28,000  |  |  |  | 59,128 | 
|Executive Vice-President,                    |  | 2003                |  |            | 401,556 |              |  |              | 179,000   |               |  |        | 221,960   |  |  |  | 32,000  |  |  |  | 50,145 | 
|General Counsel and Secretary                |  | 2002                |  |            | 338,000 |              |  |              | 152,000   |               |  |        | 118,000   |  |  |  | 44,000  |  |  |  | 43,000 | 
|Logan W. Kruger(7)                           |  | 2004                |  |            | 433,917 |              |  |              | 451,000   |               |  |        | 328,820   |  |  |  | 28,000  |  |  |  | 35,923 | 
|Executive Vice-President, Technical Services |  | 2003                |  |            | 92,212  |              |  |              | 78,760    |               |  |        | 368,024   |  |  |  | 35,000  |  |  |  | 8,069  | 
|                                             |  | 2002                |  |            |        |              |  |              |          |               |  |        |          |  |  |  |        |  |  |  |       | 
|                                            



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | All salaries, bonuses and other compensation
    shown were paid in Canadian dollars. They have been converted
    into U.S. dollars at the average rate of exchange for the
    applicable year as follows: for 2004, U.S.$1.00 =
    Cdn.$1.2987; for 2003, U.S.$1.00 = Cdn.$1.3966; and for
    2002, U.S.$1.00 = Cdn.$1.5698.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(2) | The amounts shown represent cash bonus awards
    granted pursuant to the Companys annual Management
    Incentive Plans (described below). Awards earned in a particular
    year are paid in February of the immediately succeeding year.
    The Company reports these awards in the year in which they were
    earned, rather than in the year in which they were actually
    paid. See Report on Executive Compensation,
    beginning on page 38.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(3) | The amounts shown represent awards of restricted
    Common Shares and cash in an amount generally sufficient to
    cover tax liabilities in respect of the award. These awards were
    made pursuant to the Companys Mid-Term Incentive Plan
    (described below). Awards earned in a particular year are paid
    in February of the immediately succeeding year. The Company
    reports these awards in the year in which they were earned,
    rather than the year in which they were actually paid. The
    restricted Common Shares comprising part of such awards have
    been valued, for the purposes of the Summary Compensation Table,
    at the average of the high and low sales prices of the Common
    Shares on the Toronto Stock Exchange on the date of the award,
    which amount has been converted into U.S. dollars at the
    average rate of exchange for the year in which the awards were
    earned. The restricted Common Shares awarded in respect of
    2004 may not be transferred, sold or encumbered for a
    three-year period ending in February 2007, unless the awardee
    retires during such period, and will generally be subject to
    forfeiture within that three-year period if such restrictions
    have been violated by the awardee or the awardee leaves
    employment voluntarily (other than by reason of retirement or
    death) or is terminated for cause. Such restricted Common Shares
    will be held by the Company for the three-year period, but the
    awardee will have all rights as a holder of such shares,
    including rights to dividends, if any. The aggregate number and
    value of restricted Common Shares held by the Executive Officers
    as at February 18, 2005, based on the closing price of the
    Common Shares on the New York Stock Exchange on
    December 31, 2004 (being $36.78), is set forth in the
    following table:

|                  |  |                      |        |          |  |  |           | 
|----------------- |  | -------------------- | ------ | -------- |  |  | --------- | 
|                  |  | Number of Restricted |        |         
|Executive Officer |  | Common Shares Held*  |        | Value($)
|                  |  |                      |        |         
|Scott M. Hand     |  |                      | 35,925 |          |  |  | 1,321,322 | 
|Peter C. Jones    |  |                      | 19,634 |          |  |  | 722,139   | 
|Peter J. Goudie   |  |                      | 10,547 |          |  |  | 387,919   | 
|Stuart F. Feiner  |  |                      | 10,538 |          |  |  | 387,588   | 
|Logan W. Kruger   |  |                      | 5,560  |          |  |  | 204,497   | 

33



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##### 








| |   |                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | These numbers exclude the number of shares
    awarded in respect of the restricted share awards under the
    Companys Mid-Term Incentive Plan for the three-year period
    ended December 31, 2004 since the actual number of shares to be
    received based upon the value of such award was not determined
    until after February 18, 2005.



|    |                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | The restricted Common Shares shown in the table
    above have been included in the number of Common Shares shown to
    be beneficially owned by such Executive Officers in the table
    included under the heading Security Holdings of Directors
    and Officers, beginning on page 44.                                                                                                
|   
|(4) | The amounts shown represent options and related
    share appreciation rights (SARs) granted under the
    Companys 2001 Key Employees Incentive Plan. Grants of
    options and related SARs are reported in the year in which they
    are made.                                                                                                                                         
|   
|(5) | Consists of (a) an annual perquisite
    allowance of approximately $32,800 on an annualized basis,
    (b) annual contributions made by the Company under the
    Companys contributory security reserve plans (see
    page 36) and (c) the dollar value of insurance
    premiums paid by the Company for the benefit of such individuals
    for group term life insurance (see page 38).
|   
|(6) | Mr. Hand became Chairman of the Company
    effective April 17, 2002. From April 2001 to April 16,
    2002, he served as Deputy Chairman and Chief Executive Officer.                                                                                                                                                                                                                        
|   
|(7) | Mr. Kruger joined the Company on
    September 29, 2003. Prior to joining Inco, he was President
    of Hudson Bay Mining and Smelting Co., Limited.                                                                                                                                                                                                                                          

Management Incentive Plans

The Companys Executive Officers are
eligible to receive three forms of incentive compensation:
(1) cash bonuses under the Companys applicable annual
Management Incentive Plan (MIP), (2) awards of
restricted Common Shares and cash generally sufficient to cover
tax liabilities in respect thereof under the Companys
Mid-Term Incentive Plan (MTIP), and (3) grants
of options and related SARs under the Companys 2001 Key
Employee Incentive Plan (2001 KEIP). Each of these
plans is described below. The factors determining the size of
the payments and awards made under those plans in respect of
2004, or for the rolling three-year period ending as of
December 31, 2004 in the case of the MTIP, is discussed in
the Management Resources and Compensation Committees
Report on Executive Compensation, beginning on
page 38.

The Company establishes a MIP on an annual basis.
Under the MIP, cash bonus awards may be made to Officers and
other key employees of the Company and its subsidiaries. The
amount of the cash bonus awards, if any, is based on the
achievement of key strategic objectives, the financial and
operating performance of the Company and/or its applicable
operating units, and such other targets and objectives as may be
established and approved by the Management Resources and
Compensation Committee in respect of the applicable year, as
well as the performance of, and contribution made by, each
individual plan participant. Proposals for awards to be made
under the MIP are reviewed by the Management Resources and
Compensation Committee and are subject to the Boards
approval.

The Mid-Term Incentive Plan was approved by the
Board in April 2002, replacing a similar predecessor plan. Under
the MTIP, the Management Resources and Compensation Committee
establishes an incentive fund in respect of each financial year.
The maximum amount of the incentive fund is equal to (a) 2%
of the sum of (i) the consolidated net earnings of the
Company for the year and (ii) the related provisions for
income and mining taxes in such year (the Award
Pool) and the Award Pool for each of the two immediately
preceding years, less (b) the aggregate amount of awards
actually made from the Award Pool in respect of each of the two
immediately preceding years under the MTIP and the predecessor
thereto. Under the MTIP, incentive awards are based upon the
three-year performance of the Company and are paid in the form
of restricted Common Shares, valued at their fair market value
on the date of the award, and cash in an amount generally
sufficient to cover tax liabilities arising in respect of the
award. The 2001 KEIP also authorizes other awards which are
measured or otherwise dependent upon future consolidated net
earnings of the Company.

The 2001 KEIP provides for the issuance of
options to purchase Common Shares and related share appreciation
rights (SARs). SARs entitle an optionee, in lieu of
exercising an option to purchase Common Shares, to surrender the
option to the Company, in exchange for an amount equal to the
difference between the then-current market price of a Common
Share and the exercise price of the related option. The Company
may satisfy its obligation through the delivery of cash, Common
Shares or a combination of cash and Common Shares. The 2001 KEIP
is the successor to certain similar option/SAR plans of the
Company, which date back to 1979.

34



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##### 



Non-employee Directors are not eligible to
participate in the Companys 2004 MIP, the MTIP, the 2001
KEIP or any of the Companys previous management incentive
plans. Additional information concerning the securities that
were authorized for issuance under the Companys equity
compensation plans as at December 31, 2004 is set forth in
the Companys Annual Report on Form 10-K for the year
ended December 31, 2004, which is available on the
Companys website at www.inco.com, the SEDAR website
at www.sedar.com and upon request from the Company.

Share Option Grants and Exercises

The table below sets forth information related to
grants of options in 2004 pursuant to the 2001 KEIP to the
Chairman and Chief Executive Officer and to each of the four
next most highly compensated Executive Officers of the Company.
Effective with the grant of options in 2004, the Company ceased
granting SARs in tandem with share options, to reduce the
non-cash charges to net earnings associated with SARs.




OPTION GRANTS IN 2004





|                 |  |                   |        |            |  |              |      |            |  |                 |       |  |  |  |          |  |  |   |         | 
|---------------- |  | ----------------- | ------ | ---------- |  | ------------ | ---- | ---------- |  | --------------- | ----- |  |  |  | -------- |  |  | - | ------- | 
|                 |  |                   |        |           
|                 |  | Individual Grants |        |           
|                 |  |                   |        |           
|                 |  | Number of         |        | % of Total |  |              |      |           
|                 |  | Securities        |        | Options    |  |              |      |           
|                 |  | Underlying        |        | Granted to |  | Exercise or  |      |            |  |                
|                 |  | Options           |        | Employees  |  | Base Price   |      | Expiration |  | Grant Date     
|Name             |  | Granted(#)(1)     |        | in 2004    |  | ($/share)(2) |      | Date       |  | Value(U.S.$)(3)
|                 |  |                   |        |            |  |              |      |            |  |                
|Scott M. Hand    |  |                   | 57,000 |            |  |              | 5.44 | %          |  | $               | 36.40 |  |  |  | 2/2/2014 |  |  | $ | 591,090 | 
|Peter C. Jones   |  |                   | 40,000 |            |  |              | 3.82 | %          |  | $               | 36.40 |  |  |  | 2/2/2014 |  |  | $ | 414,800 | 
|Peter J. Goudie  |  |                   | 28,000 |            |  |              | 2.67 | %          |  | $               | 36.40 |  |  |  | 2/2/2014 |  |  | $ | 290,360 | 
|Stuart F. Feiner |  |                   | 28,000 |            |  |              | 2.67 | %          |  | $               | 36.40 |  |  |  | 2/2/2014 |  |  | $ | 290,360 | 
|Logan W. Kruger  |  |                   | 28,000 |            |  |              | 2.67 | %          |  | $               | 36.40 |  |  |  | 2/2/2014 |  |  | $ | 290,360 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Half of the options became exercisable on
    August 3, 2004 and the remaining half become exercisable on
    August 3, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(2) | The exercise price of the options is the average
    of the high and low sales prices for the Common Shares reported
    on the New York Stock Exchange on February 3, 2004, the
    date of the grant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(3) | This estimate of value has been developed for the
    purpose of comparative disclosure in accordance with the rules
    and regulations of the U.S. Securities and Exchange
    Commission and is consistent with the assumptions that the
    Company is using for Statement of Financial Accounting Standards
    (SFAS) 123 reporting purposes. The estimated value
    has been determined by application of the Black-Scholes option
    pricing model, based upon the terms of the option grant and the
    Companys share price performance history as at the date of
    the grant. The key assumptions used in this model are as
    follows: dividend yield: 0%; volatility: 35.0%; risk-free rate
    of return: 2.47%; and expected exercise period: 3.4 years.
    No adjustment has been made for risk of forfeiture or
    limitations on transferability. The assumptions used in the
    valuation are based upon experience and are not a forecast of
    future stock price or volatility or of future dividend policy.

The table below sets forth information concerning
exercises of options and related SARs in 2004 by the Chairman
and Chief Executive Officer and each of the four next most
highly compensated Executive Officers of the Company.




AGGREGATED OPTION/ SAR EXERCISES IN 2004 AND


YEAR-END 2004 OPTION/SAR VALUES





|                 |  |             |        |          |  |                             |         |                                |  |  |                |  |  |  |                  | 
|---------------- |  | ----------- | ------ | -------- |  | --------------------------- | ------- | ------------------------------ |  |  | -------------- |  |  |  | ---------------- | 
|                 |  |             |        | Value    |  | Number of Securities        |         | Value of Unexercised          
|                 |  | Common      |        | Realized |  | Underlying Unexercised      |         | In the Money                
|                 |  | Shares      |        | on       |  | Options/SARs at             |         | Options/SARs at               
|                 |  | Acquired on |        | Exercise |  | Year-End 2004 (#)           |         | Year-End 2004($)              
|Name             |  | Exercise(#) |        | ($)(1)   |  | (Exercisable/Unexercisable) |         | (Exercisable/Unexercisable)(2)
|                 |  |             |        |          |  |                             |         |                               
|Scott M. Hand    |  |             | 61,000 |          |  |                             | 473,360 | (3)                            |  |  | 427,500/28,500 |  |  |  | 5,350,790/10,830 | 
|Peter C. Jones   |  |             | 0      |          |  |                             | 0       |                                |  |  | 263,900/20,000 |  |  |  | 4,421,334/7,600  | 
|Peter J. Goudie  |  |             | 0      |          |  |                             | 0       |                                |  |  | 269,000/14,000 |  |  |  | 4,584,720/5,320  | 
|Stuart F. Feiner |  |             | 59,000 |          |  |                             | 808,510 | (3)                            |  |  | 107,000/14,000 |  |  |  | 920,810/5,320    | 
|Logan W. Kruger  |  |             | 0      |          |  |                             | 0       |                                |  |  | 31,500/31,500  |  |  |  | 165,620/165,620  | 






|    |                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The amounts shown represent the difference been
    the aggregate value of the Common Shares underlying the
    exercised options/SARs (based on the average of the high and low
    sales prices of the Common Shares on the New York Stock Exchange
    on the date of exercise) and the aggregate exercise price of
    such options/SARs.

35



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##### 





|    |                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | For the purposes of this table, options/SARs are
    in-the-money if the closing price of the Common
    Shares on the New York Stock Exchange on December 31, 2004
    (being $36.78) is greater than the exercise price of the
    options/SARs.                                                                                                                     
|   
|(3) | Mr. Hand exercised 61,000 SARs pursuant to
    which he received 1,000 Common Shares and $438,160 in cash, of
    which $109,843 was withheld to satisfy applicable income taxes.
    Mr. Feiner exercised 45,400 SARs pursuant to which he
    received 1,200 Common Shares and $613,705 in cash, of which
    $121,624 was withheld to satisfy applicable income taxes.

Termination of Employment and Change in
Control Arrangements

In order to encourage them to remain in the
Companys service, the Company has entered into agreements
with each of the named Executive Officers which entitle them, in
the event of (i) involuntary termination of employment
(except for cause) or resignation under circumstances making
such resignation not wholly voluntary (Good Cause
Resignation) or (ii) involuntary termination of
employment (except for cause) or a Good Cause Resignation within
two years following a change in control of the Company (as
defined in the agreements), to continue to receive salary and
certain other payments and benefits (including payments to which
they would be entitled under certain incentive plans as a result
of a change in control and participation in medical, insurance
and certain other benefit plans) for a severance period not
exceeding 36 months, and to exercise for a period of up to
five years any vested or unvested share options and related SARs
outstanding as of the date of an involuntary termination of
employment or Good Cause Resignation. These agreements also
provide that, during such severance period, each such Executive
Officer will continue to receive applicable age and service
credits under the Companys non-qualified retirement plans
discussed beginning on page 37 but such retirement benefits
would generally not be payable until the expiration of such
severance period, and will also be entitled to certain gross up
payments in respect of certain U.S. excise taxes, if
applicable, payable under these agreements as a result of an
involuntary termination or Good Cause Resignation following a
change in control under (ii) above. The rights outlined in
this paragraph are in lieu of any rights which such individual
would have had at common law and are in addition to rights which
such individual may have upon an involuntary termination of
employment pursuant to other benefit plans (other than severance
plans) of the Company.

The Company has also entered into agreements with
each of its other Officers under which such Officers will be
entitled, in the event of involuntary termination of employment
(except for cause) or Good Cause Resignation within two years
following a change in control of the Company (as defined in such
agreements), to receive substantially the same compensation and
other benefits as those referred to in the preceding paragraph.
Such rights are in lieu of any rights which such Officers would
have had at common law and are in addition to rights which they
may have upon an involuntary termination of employment pursuant
to other benefit plans (other than severance plans) of the
Company.

Security Reserve Plans

The Company provides a system of defined
contribution savings plans, which it refers to as security
reserve plans, for employees located at its major
operations in Canada and the United States. The plans are open
to substantially all of the Companys salaried employees,
including Officers, and to certain other employees. Non-employee
Directors are not eligible to participate in the security
reserve plans.

Under the Canadian plans, the majority of
eligible employees may elect to contribute from 1% to 6% of
their base pay. Subject to statutory limitations, the Company
may elect to match a given percentage of such contributions,
depending upon the age and years of service of the employee.
Company contributions for participating employees increase
gradually from a matching level of up to 50% for employees under
age 40 who have less than 15 years of service to a matching
level of up to 100% for employees aged 62 or over or who have 37
or more years of service. In addition, participating employees
may contribute amounts over and above 6% of base pay up to
specified limits. The Company does not make matching
contributions with respect to such additional contributions.

Under the U.S. plans, subject to certain
limitations, eligible employees may contribute up to 16% of
their gross compensation. Employees age 50 or over who have made
the maximum pre-tax contribution may contribute certain
additional amounts. The Company will make matching contributions
equal to 100% of employee contributions up to 3% of the
employees gross compensation up to certain limits and 50%
of additional employee contributions over the 3% level and not
exceeding 5% of the employees gross compensation, up to

36



---



##### 



certain limits. Employee contributions in excess
of 5% of gross compensation and additional contributions made by
employees age 50 and over are not matched by the Company.


The security reserve plans are administered by
their respective boards of administration, but recordkeeping and
trust services are provided by outside plan administration
firms. Plan assets are managed by professional fund managers and
participating employees may elect to have their contributions
invested in a number of mutual fund and other investment
vehicles. Funds in these plans become distributable as to vested
amounts upon retirement, death or other termination of
employment, or upon discontinuance of the particular plan.
Subject to certain conditions, a participating employee may also
make withdrawals of and borrow against his or her contributions
under such plans during employment.

Retirement Plans

Officers of the Company participate in the
Companys non-contributory retirement plans which provide
retirement income and a 50% surviving spouses pension
based on years of service and the employees average annual
compensation for the highest-paid five years of the last ten
years of service (Final Average Annual Compensation)
under a formula reflecting the Companys contributions to
applicable social security systems. Final Average Annual
Compensation for any year includes target bonus awards
established and approved by the Management Resources and
Compensation Committee and approved by the Board of Directors
under the Companys annual MIP in lieu of actual bonus
awards. A number of other factors may influence pension benefits
payable under such retirement plans, including age at retirement.

Canadian and U.S. legislation place certain
limits on the amount of pensions which may be paid out of, and
the maximum compensation that may be recognized in determining
benefits under, tax-qualified plans, such as the Companys
regular retirement plans. In the event that the pension benefit
of any employee of the Company, including any Officer, exceeds
such statutory limits, that excess portion of his or her pension
benefit would be paid by the Company in accordance with the
terms of certain supplemental retirement benefits agreements and
other non-qualified arrangements. Such agreements and
non-qualified arrangements also provide that the total pension
benefit payable to an Officer at normal retirement age with at
least 20 years of service may not be less than 50% or more
than 75% of such Officers Final Average Annual
Compensation (except in the case of an Officer who has met
retirement eligibility but not reached normal retirement age
where a proration factor will apply to reduce the total benefits
to below the 50% minimum if an Officer chooses to receive
pension benefits prior to normal retirement age).

The following table illustrates the net amount of
the maximum annual pension, computed without any adjustment for
survivor benefits and after integration of applicable
governmental benefits, for an employee retiring at age 65 as of
January 1, 2005 who has not elected any optional form of
payment that would be available to certain Officers to increase
the normal 50% surviving spouses pension under the
relevant tax-qualified plan. Any such elections would reduce the
annual pension payable to the employee.




PENSION PLAN TABLE





|                     |  |                                    |         |    |  |    |         |    |  |    |         |    |  |    |         |    |  |  |         |  |  |  |         |  |  |  |           |  |  |  |           | 
|-------------------- |  | ---------------------------------- | ------- | -- |  | -- | ------- | -- |  | -- | ------- | -- |  | -- | ------- | -- |  |  | ------- |  |  |  | ------- |  |  |  | --------- |  |  |  | --------- | 
|                     |  |                                   
|                     |  | Approximate Maximum Annual Pension
|                     |  | Years of Credited Service(2)      
|Final Average Annual |  |                                   
|Compensation(1)      |  | 10                                 |         | 15 |  | 20 |         | 25 |  | 30 |         | 35 |  | 40 |         | 45
|                    
|                    
|600,000              |  |                                    | 87,900  |    |  |    | 131,800 |    |  |    | 175,700 |    |  |    | 219,700 |    |  |  | 263,600 |  |  |  | 307,500 |  |  |  | 352,000   |  |  |  | 396,500   | 
|800,000              |  |                                    | 117,900 |    |  |    | 176,800 |    |  |    | 235,700 |    |  |    | 294,700 |    |  |  | 353,600 |  |  |  | 412,500 |  |  |  | 472,000   |  |  |  | 531,500   | 
|1,000,000            |  |                                    | 147,900 |    |  |    | 221,800 |    |  |    | 295,700 |    |  |    | 369,700 |    |  |  | 443,600 |  |  |  | 517,500 |  |  |  | 592,000   |  |  |  | 666,500   | 
|1,200,000            |  |                                    | 177,900 |    |  |    | 266,800 |    |  |    | 355,700 |    |  |    | 444,700 |    |  |  | 533,600 |  |  |  | 622,500 |  |  |  | 712,000   |  |  |  | 801,500   | 
|1,400,000            |  |                                    | 207,900 |    |  |    | 311,800 |    |  |    | 415,700 |    |  |    | 519,700 |    |  |  | 623,600 |  |  |  | 727,500 |  |  |  | 832,000   |  |  |  | 936,500   | 
|1,600,000            |  |                                    | 237,900 |    |  |    | 356,800 |    |  |    | 475,700 |    |  |    | 594,700 |    |  |  | 713,600 |  |  |  | 832,500 |  |  |  | 952,000   |  |  |  | 1,071,500 | 
|1,800,000            |  |                                    | 267,900 |    |  |    | 401,800 |    |  |    | 535,700 |    |  |    | 669,700 |    |  |  | 803,600 |  |  |  | 937,500 |  |  |  | 1,072,000 |  |  |  | 1,206,500 | 






|    |                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The compensation covered by the plans is composed
    of base salary and target bonus awards which may be payable
    under the Companys annual MIP (described under
    Management Incentive Plans on page 34).

37



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##### 





|    |                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | At age 65, Messrs. Hand, Jones, Goudie,
    Feiner, and Kruger will have 34, 16, 43, 37 and 12 years of
    credited service, respectively. As of February 18, 2005,
    Messrs. Hand, Jones, Goudie, Feiner and Kruger had 30, 8,
    34, 28 and 1 year(s) of credited service, respectively.

The aggregate cost to the Company in 2004 of all
pension benefits proposed to be paid under the Companys
regular retirement plans and agreements and arrangements
referred to above covering payments in excess of statutory
limits to all of the Officers of the Company as a group upon
retirement at age 65 is estimated to be $2,860,000.

Life Insurance

A standard group life insurance plan provides
eligible employees of the Company, including Officers, with life
insurance during retirement in an amount of not more than 50% of
their final annual salary. The Company provides supplemental
life insurance (Supplemental Insurance) to certain
Officers in an amount up to 75% of final annual salary, for a
total not to exceed 125% of such salary. This Supplemental
Insurance coverage applies from the earlier of age 65 or the
date of any involuntary termination, and continues to age 70.
Beginning at age 70, the Supplemental Insurance is progressively
reduced in annual amounts until age 74 to a floor of 25% of
final annual salary, at which time the combined supplemental and
standard life insurance becomes and remains at not more than 75%
of final annual salary.

Directors and Officers Liability
Insurance

The Directors and Officers of the Company as a
group are insured against certain liabilities pursuant to
directors and officers liability insurance policies maintained
by the Company. The general effect of these policies is that if,
during the policy period, any claims are made against Directors
or Officers of the Company for a wrongful act (as defined) while
acting in their capacities as Directors or Officers, the
insurers will pay for loss (as defined) which the Directors or
Officers shall become obligated to pay, up to a limit of
$80,000,000 in a policy year, subject to certain deductibles.
The premiums payable by the Company for such insurance for the
period July 15, 2004 to July 15, 2005 are $1,992,197.

Compensation Committee Interlocks and Insider
Participation

In 2004, the Management Resources and
Compensation Committee of the Board was comprised of David P.
OBrien (Chair), Ronald C. Cambre, Roger Phillips and James
M. Stanford. None of these individuals has ever been an officer
or employee of the Company or any of its subsidiaries. None of
the Companys current Executive Officers has served as a
member of the compensation committee or as a director of any
other entity in respect of which any of the members of the
Management Resources and Compensation Committee or any of the
other Directors is an executive officer.




REPORT ON EXECUTIVE COMPENSATION

The Management Resources and Compensation
Committee of the Board of Directors
(the MRC Committee), as part of its duties
and responsibilities, exercises broad oversight of the
Companys executive compensation. None of the members of
the MRC Committee is or may be an employee of the Company and
the Board has determined that each member meets the
independence requirements as a member of the Board
and this Committee under applicable stock exchange requirements
and the Boards guidelines on corporate governance. The
members of the MRC Committee currently serve on the following
other Committees of the Board:

|                         |  |                                              
|------------------------ |  | ---------------------------------------------
|Member                   |  | Service on Other Board Committee(s)          
|                         |  |                                              
|David P. OBrien (Chair) |  | Corporate Governance and Nominating Committee
|Ronald C. Cambre         |  | Audit Committee, Capital Projects Committee  
|Roger Phillips           |  | Environment, Health and Safety Committee     
|James M. Stanford        |  | Audit Committee, Capital Projects Committee  

38



---



##### 



Approach to Executive Compensation

The MRC Committee reviews and recommends to the
Board for its approval the Companys compensation policies.
The MRC Committee also makes recommendations to the Board of
Directors, after taking into account the evaluation of the
performance of the Chairman and Chief Executive Officer by the
Corporate Governance and Nominating Committee and the full
Board, concerning the compensation proposed to be paid to the
Chairman and Chief Executive Officer, the President and Chief
Operating Officer and the other Executive Officers of the
Company, as well as awards proposed to be made to them under the
Companys incentive plans. The MRC Committee also reviews
the Companys management development programs, its
succession plans relating to senior management and all of the
key performance targets or thresholds developed for purposes of
the Companys incentive plans. As a means of assisting the
MRC Committee, the Company retains external compensation
consultants. In addition, the MRC Committee may retain its own
compensation and other consultants in meeting its duties and
responsibilities, including those with respect to the
Companys compensation policies, executive compensation and
the design, scope and appropriateness of the Companys
incentive plans.

The policy of the Company and the MRC Committee
with respect to the compensation of the Chairman and Chief
Executive Officer, the President and Chief Operating Officer and
the other Executive Officers and other Officers of the Company
continues to be based upon the principles that compensation
must: (1) be competitive in order to help attract and
retain the talent needed to lead and grow the Companys
business and long-term shareholder value; (2) provide a
strong incentive for Executive and other Officers and key
employees to achieve the Companys goals and grow long-term
shareholder value; and (3) ensure that the interests of
management and the Companys shareholders are aligned.

The compensation paid to the Chairman and Chief
Executive Officer and the other Executive Officers of the
Company consists of base salary and performance-oriented
incentive compensation. Incentive compensation is contingent
upon the performance of the Company and the individuals
contribution toward that performance. The MRC Committees
current policy is that approximately 60% to 70% of the overall
compensation of the Chairman and Chief Executive Officer and the
President and Chief Operating Officer, and in the range of 50%
to 60% in the case of the other Executive Officers, be related
to and contingent upon Company performance and thus be at
risk.

Base Salaries

Annual base salary levels for Executive Officers
are normally established on a preliminary basis for each year
utilizing external surveys of base salaries paid to executive
officers having comparable responsibilities at other Canadian
companies engaged in the same or similar lines of business as
the Company with the objective of having base salaries be
competitive. Actual base salaries are then established by the
MRC Committee and approved by the Board based upon the average
salary levels so established and an assessment of each Executive
Officers actual performance during the prior year. At its
meeting in February 2004, the MRC Committee approved base salary
increases, as reflected in the Summary Compensation
Table on page 33, in the range of approximately 3.5%
to 10.4% for the Executive Officers and other Officers of the
Company. While base salaries are intended to be competitive, the
MRC Committee has continued to focus compensation on the
performance and growth of the Company and maximizing long-term
shareholder value.

Incentive Compensation

Incentive compensation of the Executive Officers
consists of (1) short-term incentive compensation in the
form of annual cash bonuses under the Companys annual MIP,
(2) longer-term incentive compensation in the form of
awards of restricted Common Shares and cash generally sufficient
to cover tax liabilities in respect of such awards under the
MTIP, and (3) longer-term incentive compensation in the
form of awards of share options under the 2001 KEIP. This
structure reflects the MRC Committees policy that the
Companys longer-term incentive compensation plans should
depend in part on the price performance of the Common Shares, as
in the case of the share option awards, but should also be
performance-based, as in the case of the restricted share
awards. As reported in the Companys Proxy Circular and
Statement for its Annual Meeting of Shareholders in 2004, in
February 2004 the MRC Committee had evaluated the split between
restricted shares awards under the

39



---



##### 



MTIP and share option grants under the 2001 KEIP
and determined, in enhancing the alignment of incentive
compensation with long-term shareholder value, to increase the
target award levels relating to restricted share awards under
the MTIP for the Chairman and Chief Executive Officer, the
President and Chief Operating Officer and the other Executive
Officers and to reduce the number and value, based upon the
Black-Scholes option pricing model, of share option awards to
Executive Officers under the 2001 KEIP. This change was made for
incentive compensation awarded in February 2004. This change was
also reflected in the awards levels for the same officers
relating to the restricted share awards under the MTIP, as
discussed under Awards Under MTIP below, made for
the three-year period ended December 31, 2004, and in the
number and value of share option awards made in February 2005.
The MIP, the MTIP and the 2001 KEIP are each described in
further detail under Management Incentive Plans
beginning on page 34.


Annual MIP Awards

Cash bonus awards under the Companys annual
MIP depend upon whether the Company and its principal operating
units have met or exceeded certain financial and operating
targets established for the applicable year by the MRC
Committee, as well as individual performance. The financial
targets relate to the Companys net earnings and the
Companys return on capital employed (ROCE), in
each case subject to adjustments as determined by the MRC
Committee. Subject to any adjustments approved by the MRC
Committee, ROCE generally represents the Companys pre-tax
earnings from operations divided by the sum of the
Companys shareholders equity, minority interest and
long-term (including convertible) debt, net of cash and cash
equivalents and the carrying value of the Companys
investments in its Voiseys Bay and Goro projects, all as
calculated in accordance with Canadian generally accepted
accounting principles. The 2004 MIP was approved by the MRC
Committee in February 2004 and provided, as in the case of
previous years MIPs, for a weighting of operating unit
targets and individual performance, with payments of bonuses
increasing in step with increases in the Companys ROCE.
Target award levels established under the 2004 MIP for the
Chairman and Chief Executive Officer and the other Executive
Officers ranged from 40% to 60% of base salaries, with the
possibility of higher awards, subject to certain maximum levels.
At its meeting in February 2005, the MRC Committee reviewed the
various financial and operating targets to be evaluated under
the terms of the 2004 MIP. The applicable financial targets
evaluated included the Companys level of pre-tax earnings
from operations for 2004, which amount included the writedown in
the carrying value of the Companys Goro project taken in
the second quarter of 2004 and ROCE for 2004. The applicable
operating targets included cash flow from operations operating
earnings, production levels, sales volume, safety and certain
other controllable performance targets for each of the
Companys principal operating units. Based upon
(i) the fact that virtually all of the key strategic,
operating, financial and other targets set forth in the 2004 MIP
had been exceeded, (ii) the Companys very favourable
financial performance for 2004, including the level of pre-tax
earnings from operations at each of the Companys principal
operating units, and the level of positive cash flow from
operations generated in 2004, and (iii) the Companys
ROCE as calculated totalling nearly 50%, based upon both its
absolute level and in relation to the target ROCE set forth in
the 2004 MIP, the MRC Committee approved cash bonus awards under
the 2004 MIP for the Chairman and Chief Executive Officer and
other Executive Officers significantly above target award levels
and in the range of approximately 75% to 160% of base salaries,
as reflected in the Summary Compensation Table on
page 33.

Awards Under MTIP

Awards of restricted Common Shares and cash
payments generally sufficient to pay the tax liability on the
value of such Common Shares under the MTIP are dependent upon
the Companys (1) net earnings in accordance with
Canadian generally accepted accounting principles but before
certain unusual charges such as non-cash currency translation
adjustments (whether favourable or unfavourable) meeting or
exceeding specified targets and (2) ROCE meeting or
exceeding specified targets generally in relation to the
Companys cost of capital target, in each case over a
rolling three-year period. In determining award levels, the MTIP
provides for a weighting of these two financial performance
measures together with individual performance. Depending upon
the extent to which the Companys actual net earnings as
may be adjusted and/or ROCE for the applicable three-year period
exceed the target levels set forth in the MTIP, target award
levels for the Chairman and Chief Executive Officer and the
other Executive Officers would be in the range of between 75% to
125% of base salaries, with higher

40



---



##### 



award levels when either or both financial
performance measures substantially exceed target levels, subject
to certain maximum award levels. As discussed above, in
establishing the target levels for awards under MTIP for 2003,
the MRC Committee had increased the target award levels for the
Chairman and Chief Executive Officer, the President and the
other Executive Officers from the previous range of between 45%
and 75%. Awards under the MTIP are also dependent on the
availability of positive consolidated pre-tax earnings for the
applicable three-year period in accordance with the terms of the
2001 KEIP, representing what is referred to as an Award Pool, as
discussed under Management Incentive Plans on
page 34. Based upon the applicable three-year measurement
period ended December 31, 2004 for awards payable in
February 2005, the three-year average of the Companys
ROCE, as calculated, exceeded the Companys cost of capital
target under the MTIP by approximately 50%. However, in the case
of the second financial performance target, the Companys
net earnings for the applicable three-year period, after the
writedown in 2004 of the carrying value of the Companys
Goro project and subject to adjustments for certain unusual
charges, did not exceed the three-year target under the MTIP
based upon certain assumed metals prices and other assumptions.
Taking into account the weighting of these two financial
performance measures under the terms of the MTIP, given the
degree to which the ROCE target had been exceeded, awards in the
range of approximately 60% to 135% of base salaries were made to
the Executive Officers, as reflected in the Summary
Compensation Table on page 33.


Share Option Awards

The MRC Committee recommends to the Board the
number of options to be granted to the Chairman and Chief
Executive Officer, the President and Chief Operating Officer and
the other Executive Officers under the 2001 KEIP. The number of
options awarded to the Chief Executive Officer and the other
Executive Officers in respect of 2004 (as set forth in the table
on page 35) reflected a reduction in the number of share
options by approximately 15% to 20% from the number of share
options awarded in respect of 2003. As discussed above, in
February 2004 the MRC Committee had shifted the allocation of
incentive awards under the MTIP and share option awards under
the 2001 KEIP. In reducing the share option awards for 2004, the
MRC Committee did take into account the value of the option
grants based upon the Black-Scholes option pricing model. In
2004, to reduce the non-cash charges to net earnings associated
with SARs, the MRC Committee approved the elimination of any
SARs as part of any option grants in 2004 and in future years.
In making the annual awards of options, the MRC Committee did
not consider the aggregate number of the options and SARs
already held by the recipients. The options and SARs are
exercisable over a period of ten years in order to maximize
their incentive value and to enhance the Companys ability
to retain its Executive Officers. The Company has had a
longstanding policy prohibiting the repricing of any share
options.

Share Ownership Requirements

In keeping with the principles set forth at the
beginning of this report, the MRC Committee established in 2004,
based upon the evaluation of data from the Companys senior
human resources personnel and external consultants, share
ownership requirements to be met over a five-year period for the
Chairman and Chief Executive Officer, the President and Chief
Operating Officer and the other members of the Companys
internal Management Committee. Executives have up to five years
from when these requirements became effective to meet these
minimum ownership requirements. Given the cyclical nature of the
Companys share price, these ownership requirements are
based upon the number of shares and not the fair market value of
shares. The minimum share ownership requirement for the CEO is
75,000 shares, for the President and Chief Operating Officer,
40,000 shares, and for the other Executive Officers,
17,000 shares.



---

41



---



##### 



In summary, the MRC Committee believes that the
Companys compensation structure appropriately takes into
account those factors that are particularly characteristic of
the mining and metals industry as a whole, including the
cyclicality of the industry, the Companys comparative
performance within that industry, and the individual
contributions toward that performance by the Chairman and Chief
Executive Officer, the President and Chief Operating Officer and
the other Executive Officers and other Officers of the Company.

The Management Resources and Compensation
Committee

David P. OBrien, Chair

Ronald C. Cambre


Roger Phillips


James M. Stanford


February 7, 2005

42



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##### 






COMPARATIVE SHAREHOLDER RETURN

The following line graph and succeeding table set
forth the total return on the Common Shares of the Company for
the period December 31, 1999 through December 31, 2004
assuming a $100 initial investment and the reinvestment of all
dividends, as compared to the cumulative returns, assuming a
corresponding investment and reinvestment of dividends in
respect of the S&P 500 Stock Index, the S&P/TSX
Composite Index and the S&P/TSX Capped Diversified Metals
& Mining Index. For the two S&P/TSX indices, the table
shows an investment in Canadian dollars.

Comparison of Five-Year Cumulative Total
Return on Common Shares

December 31, 1999 
December 31, 2004


(PERFORMANCE GRAPH)



---

INDEXED CUMULATIVE RETURN





|                                                        |  |      |        |      |  |      |        |      |  |      |        |      |  |  |        |  |  |  |        |  |  |  |        | 
|------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|                                                        |  | 1999 |        | 2000 |  | 2001 |        | 2002 |  | 2003 |        | 2004
|                                                        |  |      |        |      |  |      |        |      |  |      |        |     
|Inco Limited                                            |  |      | 100.00 |      |  |      | 71.32  |      |  |      | 72.09  |      |  |  | 90.30  |  |  |  | 169.45 |  |  |  | 156.51 | 
|S&P 500 Stock Index(1)                                  |  |      | 100.00 |      |  |      | 90.90  |      |  |      | 80.09  |      |  |  | 62.39  |  |  |  | 80.29  |  |  |  | 89.02  | 
|S&P/TSX Composite Index(2)                              |  |      | 100.00 |      |  |      | 131.71 |      |  |      | 141.47 |      |  |  | 123.69 |  |  |  | 156.74 |  |  |  | 179.44 | 
|S&P/TSX Capped Diversified Metals &
    Mining Index(3) |  |      | 100.00 |      |  |      | 86.75  |      |  |      | 97.61  |      |  |  | 106.26 |  |  |  | 189.78 |  |  |  | 221.61 | 






|    |                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The S&P 500 Stock Index is a broad
    market-weighted index of 500 companies designed to provide a
    measure of U.S. stock market performance. The Company was
    included in this index until July 2002, when Standard &
    Poors Corporation deleted non-U.S. companies,
    including the Company, from this index.
|   
|(2) | The S&P/TSX Composite Index is a broad
    market-weighted index of 300 companies on the Toronto Stock
    Exchange, including the Company.                                                                                                                                                                                 
|   
|(3) | The S&P/TSX Capped Diversified Metals &
    Mining Index is a sub-index of the S&P/TSX Composite Index
    that presently includes fourteen companies, including the
    Company. The index is subject to a cap so that no single issue
    may comprise more than 25% of the index.                                        

43



---



##### 






PART V  OWNERSHIP OF
SECURITIES



SIGNIFICANT SECURITY HOLDERS

The following table sets forth, as of
February 18, 2005, information concerning those persons
known to the Company to be the beneficial owner of more than 5%
of the Common Shares (being the only voting securities of the
Company). The Company is not aware of any other beneficial
holder of more than 5% of the Common Shares.

|                                        |  |       |               |            |  |          |            |     |  |  |       | 
|--------------------------------------- |  | ----- | ------------- | ---------- |  | -------- | ---------- | --- |  |  | ----- | 
|                                        |  |       |               | Beneficial |  | Percent 
|Name and Address of Beneficial Owner    |  | Class |               | Ownership  |  | of Class
|                                        |  |       |               |            |  |         
|Capital Research and Management Company |  |       | Common Shares |            |  |          | 12,606,680 | (1) |  |  | 6.70% | 
|333 South Hope Street                   |  |       |               |            |  |          |            |     |  |  |       | 
|Los Angeles, California 90071           |  |       |               |            |  |          |            |     |  |  |       | 
|Oppenheimer Capital LLC                 |  |       | Common Shares |            |  |          | 11,898,769 | (2) |  |  | 6.32% | 
|1345 Avenue of the Americas, 49th Floor |  |       |               |            |  |          |            |     |  |  |       | 
|New York, NY 10105                      |  |       |               |            |  |          |            |     |  |  |       | 






|    |                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents beneficial ownership as of
    December 31, 2004, according to the Schedule 13G filed
    by Capital Research and Management Company on February 9,
    2005. Includes 690,380 Common Shares resulting from the assumed
    conversion of $26 million aggregate principal amount at
    maturity of the Companys zero coupon convertible notes
    (LYON Notes).
|   
|(2) | Represents beneficial ownership as of
    December 31, 2004, according to the Schedule 13G filed
    by Oppenheimer Capital LLC on February 10, 2005.                                                                                                                                                                                                                         




SECURITY HOLDINGS OF DIRECTORS AND EXECUTIVE
OFFICERS

The following table sets forth, as of
February 18, 2005, information regarding beneficial
ownership of each class of equity securities of the Company and
its subsidiaries by each Director, each nominee for Director,
the Chairman and Chief Executive Officer, the four other most
highly compensated Executive Officers of the Company, and all of
the Directors and the Executive Officers of the Company as a
group. The equity securities of the Company and its subsidiaries
consist of its Common Shares, Common Share Purchase Warrants
(Warrants), Convertible Debentures due 2023,
3 1/2% Subordinated Convertible Debentures due 2052, LYON
Notes and common shares of PT International Nickel
Indonesia Tbk, the 61% owned subsidiary of the Company
(PTI Common Shares). No family relationships exist
among any of the Directors, Executive Officers or other Officers
of the Company.

|                         |  |                   |  |                 |        |          |  |          |        |       |  |             |       |  |  |  |        |  |  |  |   | 
|------------------------ |  | ----------------- |  | --------------- | ------ | -------- |  | -------- | ------ | ----- |  | ----------- | ----- |  |  |  | ------ |  |  |  | - | 
|                         |  |                   |  | Beneficial      |        |          |  |          |        |       |  |            
|                         |  |                   |  | Ownership       |        |          |  |          |        |       |  |            
|                         |  |                   |  | (excluding      |        |          |  |          |        |       |  |            
|                         |  |                   |  | Options/SARs    |        |          |  | Deferred |        |       |  |            
|                         |  |                   |  | and Deferred    |        | Options/ |  | Share    |        |       |  | Percent    
|Name of Beneficial Owner |  | Class             |  | Share Units)(1) |        | SARs(2)  |  | Units(3) |        | Total |  | of Class(4)
|                         |  |                   |  |                 |        |          |  |          |        |       |  |            
|Glen A. Barton           |  | Common Shares     |  |                 | 18,567 |          |  |          | 10,000 |       |  |             | 4,941 |  |  |  | 33,508 |  |  |  | * | 
|                         |  | Warrants          |  |                 | 0      |          |  |          |       |       |  |             |      |  |  |  | 0      |  |  |  | * | 
|                         |  | PTI Common Shares |  |                 | 0      |          |  |          |       |       |  |             |      |  |  |  |        |  |  |  | * | 
|                        
|Angus A. Bruneau         |  | Common Shares     |  |                 | 3,154  |          |  |          | 10,000 |       |  |             | 8,789 |  |  |  | 21,943 |  |  |  | * | 
|                         |  | Warrants          |  |                 | 1,125  |          |  |          |       |       |  |             |      |  |  |  | 1,125  |  |  |  | * | 
|                         |  | PTI Common Shares |  |                 | 0      |          |  |          |       |       |  |             |      |  |  |  | 0      |  |  |  | * | 
|                        
|Ronald C. Cambre         |  | Common Shares     |  |                 | 0      |          |  |          | 10,000 |       |  |             | 7,454 |  |  |  | 17,454 |  |  |  | * | 
|                         |  | Warrants          |  |                 | 0      |          |  |          |       |       |  |             |      |  |  |  | 0      |  |  |  | * | 
|                         |  | PTI Common Shares |  |                 | 0      |          |  |          |       |       |  |             |      |  |  |  | 0      |  |  |  | * | 
|                        
|Janice K. Henry          |  | Common Shares     |  |                 | 0      |          |  |          | 0      |       |  |             | 1,986 |  |  |  | 1,986  |  |  |  | * | 
|                         |  | Warrants          |  |                 | 0      |          |  |          |       |       |  |             |      |  |  |  | 0      |  |  |  | * | 
|                         |  | PTI Common Shares |  |                 | 0      |          |  |          |       |       |  |             |      |  |  |  | 0      |  |  |  | * | 
|                        
|Chaviva M. Hosek         |  | Common Shares     |  |                 | 0      |          |  |          | 10,000 |       |  |             | 7,019 |  |  |  | 17,019 |  |  |  | * | 
|                         |  | Warrants          |  |                 | 0      |          |  |          |       |       |  |             |      |  |  |  | 0      |  |  |  | * | 
|                         |  | PTI Common Shares |  |                 | 0      |          |  |          |       |       |  |             |      |  |  |  | 0      |  |  |  | * | 
|                        
|John T. Mayberry         |  | Common Shares     |  |                 | 3,000  |          |  |          | 5,000  |       |  |             | 4,119 |  |  |  | 12,119 |  |  |  | * | 
|                         |  | Warrants          |  |                 | 0      |          |  |          |       |       |  |             |      |  |  |  | 0      |  |  |  | * | 
|                         |  | PTI Common Shares |  |                 | 0      |          |  |          |       |       |  |             |      |  |  |  | 0      |  |  |  | * | 

44



---



##### 



|                            |  |                   |  |                 |         |          |  |          |           |       |  |             |        |  |  |  |           |  |  |  |      |  
|--------------------------- |  | ----------------- |  | --------------- | ------- | -------- |  | -------- | --------- | ----- |  | ----------- | ------ |  |  |  | --------- |  |  |  | ---- | -
|                            |  |                   |  | Beneficial      |         |          |  |          |           |       |  |            
|                            |  |                   |  | Ownership       |         |          |  |          |           |       |  |            
|                            |  |                   |  | (excluding      |         |          |  |          |           |       |  |            
|                            |  |                   |  | Options/SARs    |         |          |  | Deferred |           |       |  |            
|                            |  |                   |  | and Deferred    |         | Options/ |  | Share    |           |       |  | Percent    
|Name of Beneficial Owner    |  | Class             |  | Share Units)(1) |         | SARs(2)  |  | Units(3) |           | Total |  | of Class(4)
|                            |  |                   |  |                 |         |          |  |          |           |       |  |            
|David P. OBrien            |  | Common Shares     |  |                 | 6,642   |          |  |          | 10,000    |       |  |             | 8,162  |  |  |  | 24,804    |  |  |  | *    |  
|                            |  | Warrants          |  |                 | 225     |          |  |          |          |       |  |             |       |  |  |  | 225       |  |  |  | *    |  
|                            |  | PTI Common Shares |  |                 | 0       |          |  |          |          |       |  |             |       |  |  |  | 0         |  |  |  | *    |  
|                           
|Roger Phillips              |  | Common Shares     |  |                 | 7,000   |          |  |          | 5,000     |       |  |             | 4,654  |  |  |  | 16,654    |  |  |  | *    |  
|                            |  | Warrants          |  |                 | 0       |          |  |          |          |       |  |             |       |  |  |  | 0         |  |  |  | *    |  
|                            |  | PTI Common Shares |  |                 | 0       |          |  |          |          |       |  |             |       |  |  |  | 0         |  |  |  | *    |  
|                           
|James M. Stanford           |  | Common Shares     |  |                 | 1,204   |          |  |          | 10,000    |       |  |             | 12,455 |  |  |  | 23,659    |  |  |  | *    |  
|                            |  | Warrants          |  |                 | 0       |          |  |          |          |       |  |             |       |  |  |  | 0         |  |  |  | *    |  
|                            |  | PTI Common Shares |  |                 | 0       |          |  |          |          |       |  |             |       |  |  |  | 0         |  |  |  | *    |  
|                           
|Scott M. Hand(6)            |  | Common Shares     |  |                 | 147,826 | (5)      |  |          | 456,000   |       |  |             |       |  |  |  | 603,826   |  |  |  | *    |  
|                            |  | Warrants          |  |                 | 0       |          |  |          |          |       |  |             |       |  |  |  | 0         |  |  |  | *    |  
|                            |  | PTI Common Shares |  |                 | 200,000 |          |  |          |          |       |  |             |       |  |  |  | 200,000   |  |  |  | *    |  
|                           
|Peter C. Jones(6)           |  | Common Shares     |  |                 | 18,882  |          |  |          | 283,900   |       |  |             |       |  |  |  | 302,782   |  |  |  | *    |  
|                            |  | Warrants          |  |                 | 0       |          |  |          |          |       |  |             |       |  |  |  | 0         |  |  |  | *    |  
|                            |  | PTI Common Shares |  |                 | 76,000  |          |  |          |          |       |  |             |       |  |  |  | 76,000    |  |  |  | *    |  
|                           
|Peter J. Goudie(6)          |  | Common Shares     |  |                 | 10,942  |          |  |          | 283,000   |       |  |             |       |  |  |  | 293,942   |  |  |  | *    |  
|                            |  | Warrants          |  |                 | 0       |          |  |          |          |       |  |             |       |  |  |  | 0         |  |  |  | *    |  
|                            |  | PTI Common Shares |  |                 | 248,000 |          |  |          |          |       |  |             |       |  |  |  | 248,000   |  |  |  | *    |  
|                           
|Stuart F. Feiner(6)         |  | Common Shares     |  |                 | 19,541  |          |  |          | 121,000   |       |  |             |       |  |  |  | 140,541   |  |  |  | *    |  
|                            |  | Warrants          |  |                 | 0       |          |  |          |          |       |  |             |       |  |  |  | 0         |  |  |  | *    |  
|                            |  | PTI Common Shares |  |                 | 0       |          |  |          |          |       |  |             |       |  |  |  | 0         |  |  |  | *    |  
|                           
|Logan W. Kruger(6)          |  | Common Shares     |  |                 | 6,448   |          |  |          | 63,000    |       |  |             |       |  |  |  | 69,448    |  |  |  | *    |  
|                            |  | Warrants          |  |                 | 0       |          |  |          |          |       |  |             |       |  |  |  | 0         |  |  |  | *    |  
|                            |  | PTI Common Shares |  |                 | 0       |          |  |          |          |       |  |             |       |  |  |  | 0         |  |  |  | *    |  
|                           
|Directors and Executive     |  | Common Shares     |  |                 | 278,449 |          |  |          | 1,793,150 |       |  |             |       |  |  |  | 2,074,599 |  |  |  | 1.10 | %
|Officers as a group,        |  | Warrants          |  |                 | 1,350   |          |  |          |          |       |  |             |       |  |  |  | 1,350     |  |  |  | *    |  
|27 persons in total,        |  | PTI Common Shares |  |                 | 524,000 |          |  |          |          |       |  |             |       |  |  |  | 524,000   |  |  |  | *    |  
|including those individuals |  |                   |  |                 |         |          |  |          |           |       |  |             |        |  |  |  |           |  |  |  |      |  
|listed above                |  |                   |  |                 |         |          |  |          |           |       |  |             |        |  |  |  |           |  |  |  |      |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For purposes of the table, beneficial
    ownership is determined pursuant to Rule 13d-3 under
    the U.S. Securities Exchange Act of 1934, as amended,
    pursuant to which a person or group of persons is deemed to have
    beneficial ownership of a class of outstanding
    shares which such person or group has the right to acquire
    within 60 days after February 18, 2005. The
    individuals named herein have sole voting power and investment
    power with respect to the Common Shares, Warrants and PTI Common
    Shares shown in the table as being beneficially owned by them,
    except as otherwise noted in footnote (5) below.
|   
|(2) | The options shown in this column may be exercised
    to acquire an equivalent number of Common Shares as at
    February 18, 2005 or within 60 days of
    February 18, 2005. The options were granted pursuant to the
    2001 KEIP, the Directors Option Plan or certain
    predecessor plans. The term SARs refers to share
    appreciation rights related to options granted under the 2001
    KEIP and certain of its predecessor plans.                                                                                                                                                                                                               
|   
|(3) | This column shows whole Deferred Share Units
    credited to the account of a non-executive Director pursuant to
    the Ownership Plan (see Directors Compensation in
    2004 at page 31).                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(4) | For purposes of computing the percentage of the
    outstanding class of shares held by each person or group named
    above, any shares which such person or group has the right to
    acquire within 60 days after February 18, 2005 are
    deemed to be outstanding, except for the purpose of computing
    the percentage ownership of any other person. As of
    February 18, 2005, 188,165,045 Common Shares (not including
    fractional share interests), 11,022,322 Warrants and 993,633,872
    PTI Common Shares were issued and outstanding.                                                                                                      
|   
|(5) | Includes an aggregate of 115,995 Common Shares
    held jointly by Mr. Hand and his spouse. Also includes an
    aggregate of 222 Common Shares held by Mr. Hand for the
    benefit of one of his children, as to which he disclaims any
    beneficial ownership.                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(6) | Does not include the number of Common Shares to
    be received as restricted share awards for the three-year period
    ended December 31, 2004 under the Companys MTIP since
    the number of shares to be received pursuant to such awards was
    not determined until after February 18, 2005.                                                                                                                                                                                                                                                                                                                                                              
|   
|*   | Less than 1%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

45



---



##### 






PART VI  OTHER
INFORMATION



SOLICITATION OF PROXIES

The Company will bear the cost of solicitation of
proxies. Solicitation will be by mail, possibly supplemented by
telephone or other personal contact by employees of the Company.
In addition, the Company has retained Georgeson Shareholder
Communications Canada, 66 Wellington Street West,
Suite 5210, TD Tower, Toronto Dominion Centre,
Toronto, Ontario M5K 1J3 to aid in the solicitation of
proxies from individuals and institutional holders in Canada.
Georgeson Shareholder Communications Canada will, in turn,
coordinate with Georgeson Shareholder Communications Inc.,
17 State Street, 10th Floor, New York,
New York 10004 to aid in that process in the United States.
The toll free number to contact Georgeson in Canada or the
United States is 1-866-282-1092. The aggregate fee for these
services in Canada and the United States is expected to be
approximately Cdn.$37,500 plus out-of-pocket expenses.




SHAREHOLDER PROPOSALS AND 2006 ANNUAL
MEETING

A shareholder proposal that was submitted to the
Company by the Carpenters Local 27 Pension Trust Fund
for consideration at the Meeting was withdrawn by mutual
agreement to further explore the issue raised by the proposal.
The proposed concerned the indexing of the exercise or purchase
price of future share options awarded to senior executives of
the Company to the share performance of a peer group of
companies.

Under the CBCA, Shareholders who wish to present
proposals for action at the 2006 Annual Meeting must forward
their proposals to the Company by December 18, 2005 (being
90 days prior to the anniversary date of the Notice of this
Meeting), after which date any proposals shall be considered to
be untimely. The 2006 Annual Meeting is expected to be held on
Wednesday, April 19, 2006.




ADDITIONAL INFORMATION ABOUT THE
COMPANY

Current financial information on the Company is
provided in the Companys comparative financial statements
and Managements Discussion and Analysis of Financial
Condition and Results of Operations for the most recently
completed financial year. This information and additional
information relating to the Company can be found on the SEDAR
website at www.sedar.com and on the Companys website at
www.inco.com.

Copies of the Companys latest Annual Report
on Form 10-K, together with the documents incorporated
therein by reference, Annual Report to Shareholders and this
Proxy Circular and Statement may be obtained upon request to the
Companys Director of Investor Relations. The Company may
require the payment of a reasonable charge if the request is
made by a person who is not a Shareholder.

The Companys Guidelines on Business
Conduct, Conflict of Interest Statement of Policy and Code of
Ethics for Financial Personnel are also posted on the
Companys website and will be mailed to any Shareholder
upon request.




DIRECTORS APPROVAL

The Board of Directors has approved in substance
the contents of this Proxy Circular and Statement and also its
mailing to Shareholders.

-s- Stuart F. Feiner

Stuart F. Feiner


Executive Vice-President, General
Counsel & Secretary


46



---



##### 






EXHIBIT A

SHAREHOLDER RIGHTS PLAN

AGREEMENT


DATED AS OF


SEPTEMBER 14, 1998


AND AS AMENDED AND RESTATED AS OF


APRIL 28, 1999,


APRIL 17, 2002 AND APRIL 20, 2005


BETWEEN


INCO LIMITED


AND


CIBC MELLON TRUST COMPANY


AS RIGHTS AGENT


A-1



---



##### 



|                                                                                                          |  |      |      | 
|--------------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                          |  | Page
|                                                                                                          |  |     
|ARTICLE 1  INTERPRETATION                                                                                 |  |      | A-5  | 
|1.1     Certain
    Definitions                                                                           |  |      | A-5  | 
|1.2     Currency                                                                                          |  |      | A-14 | 
|1.3     Headings                                                                                          |  |      | A-14 | 
|1.4     Calculation
    of Number and Percentage of Beneficial Ownership of Outstanding
    Voting Shares |  |      | A-15 | 
|1.5     Acting
    Jointly or in Concert                                                                  |  |      | A-15 | 
|1.6     Generally
    Accepted Accounting Principles                                                      |  |      | A-15 | 
|ARTICLE 2  RIGHTS AND CERTIFICATES OF
    ENTITLEMENT                                                     |  |      | A-15 | 
|2.1     Certificates
    of Entitlement                                                                   |  |      | A-15 | 
|2.2     Legend on
    Share Certificates for Common Shares                                                |  |      | A-16 | 
|2.3     Initial
    Exercise Price; Exercise of Rights; Detachment of
    Rights                          |  |      | A-16 | 
|2.4     Adjustments
    to Exercise Price; Number of Rights                                               |  |      | A-18 | 
|2.5     Date on Which
    Exercise Is Effective                                                           |  |      | A-22 | 
|2.6     Execution,
    Authentication, Delivery and Dating of Rights
    Certificates                     |  |      | A-22 | 
|2.7     Registration,
    Transfer and Exchange                                                           |  |      | A-23 | 
|2.8     Mutilated,
    Destroyed, Lost and Stolen Rights Certificates                                     |  |      | A-23 | 
|2.9     Persons
    Deemed Owners of Rights                                                               |  |      | A-24 | 
|2.10   Delivery and
    Cancellation of Certificates                                                      |  |      | A-24 | 
|2.11   Agreement of Rights
    Holders                                                                    |  |      | A-24 | 
|2.12   Rights Certificate
    Holder Not Deemed a Shareholder                                             |  |      | A-25 | 
|ARTICLE 3  ADJUSTMENTS TO THE RIGHTS IN
    THE EVENT OF CERTAIN TRANSACTIONS                             |  |      | A-25 | 
|3.1     Flip-in
    Event                                                                                 |  |      | A-25 | 
|ARTICLE 4  THE RIGHTS AGENT                                                                               |  |      | A-26 | 
|4.1     General                                                                                           |  |      | A-26 | 
|4.2     Merger,
    Amalgamation or Consolidation or Change of Name of Rights
    Agent                   |  |      | A-27 | 
|4.3     Duties of
    Rights Agent                                                                        |  |      | A-27 | 
|4.4     Change of
    Rights Agent                                                                        |  |      | A-28 | 
|ARTICLE 5  MISCELLANEOUS                                                                                  |  |      | A-29 | 
|5.1     Redemption
    and Waiver                                                                         |  |      | A-29 | 
|5.2     Expiration                                                                                        |  |      | A-30 | 
|5.3     Issuance of
    New Rights Certificates                                                           |  |      | A-30 | 
|5.4     Supplements
    and Amendments                                                                    |  |      | A-31 | 
|5.5     Fractional
    Rights and Fractional Shares                                                       |  |      | A-32 | 
|5.6     Rights of
    Action                                                                              |  |      | A-32 | 
|5.7     Regulatory
    Approvals                                                                          |  |      | A-32 | 
|5.8     Declaration
    as to Non-Canadian Holders                                                        |  |      | A-32 | 
|5.9     Notices                                                                                           |  |      | A-33 | 
|5.10   Costs of
    Enforcement                                                                           |  |      | A-34 | 
|5.11   Successors                                                                                         |  |      | A-34 | 

A-2



---



##### 



|                                                                |  |      |      | 
|--------------------------------------------------------------- |  | ---- | ---- | 
|                                                                |  | Page
|                                                                |  |     
|5.12   Benefits of this
    Agreement                           |  |      | A-34 | 
|5.13   Governing Law                                            |  |      | A-34 | 
|5.14   Severability                                             |  |      | A-34 | 
|5.15   Effective Time                                           |  |      | A-34 | 
|5.16   Determinations and
    Actions by the Board of Directors |  |      | A-34 | 
|5.17   Time of the
    Essence                                  |  |      | A-35 | 
|5.18   Execution in
    Counterparts                            |  |      | A-35 | 

A-3



---



##### 



SHAREHOLDER RIGHTS PLAN AGREEMENT

MEMORANDUM OF
AGREEMENTdated as of
September 14, 1998 and as amended and restated as of
April 20, 2005 between Inco Limited (Inco), a
corporation incorporated under the laws of Canada, and CIBC
Mellon Trust Company, a trust company incorporated under the
laws of Canada (the Rights Agent);

WHEREASthe board of
directors of Inco has determined that it is in the best
interests of Inco to adopt a shareholder rights plan to ensure,
to the extent possible, that all shareholders of Inco are
treated fairly in connection with any take-over bid for Inco;

AND WHEREASin order
to implement the adoption of a shareholder rights plan as
established by this Agreement, the board of directors of Inco:



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | authorized the issuance, effective at the
    Effective Time (as hereinafter defined), of one Right (as
    hereinafter defined) in respect of each Common Share (as
    hereinafter defined) outstanding at the Effective Time (the
    Record Time);                                                                                                                                                                                                                                                                     
|
| | (b) | authorized the issuance, effective at the
    Effective Time, of one Certificate of Entitlement (as
    hereinafter defined) in respect of each Convertible Debenture
    (as hereinafter defined), and Subordinated Convertible Debenture
    (as hereinafter defined) (each, a Convertible
    Security) outstanding as at the Record Time or that is
    issued after the Record Time and prior to the earlier of the
    Separation Time (as hereinafter defined) and the Expiration Time
    (as hereinafter defined);
|
| | (c) | authorized the issuance of one Right in respect
    of each Common Share of Inco issued after the Record Time (other
    than Common Shares issued in connection with a conversion or
    redemption, as the case may be, of Convertible Securities) and
    prior to the earlier of the Separation Time and the Expiration
    Time; and                                                                                                                                                                                    
|
| | (d) | authorized the issuance of one Right in respect
    of each Certificate of Entitlement attached to a Convertible
    Security that is surrendered for conversion or exchanged upon
    redemption, as the case may be, prior to the earlier of the
    Separation Time and the Expiration Time;                                                                                                                                                                                                                              

AND WHEREASeach
Right entitles the holder thereof, after the Separation Time, to
purchase securities of Inco pursuant to the terms and subject to
the conditions set forth herein;

AND WHEREASInco
desires to appoint the Rights Agent to act on behalf of Inco and
the holders of Rights, and the Rights Agent is willing to so
act, in connection with the issuance, transfer, exchange and
replacement of Rights Certificates (as hereinafter defined), the
exercise of Rights and other matters referred to herein;

AND WHEREASthe
board of directors of Inco proposed that this Agreement be in
place for a period of ten years, subject to the Agreement being
reconfirmed by Incos shareholders every three years;

AND WHEREASthe
board of directors of Inco approved the adoption of this
Agreement on September 14, 1998 and subsequently approved
certain amendments to this Agreement on February 10, 1999
and February 5, 2002, which amendments formed part of this
Agreement as amended and restated as at April 28, 1999 and
April 17, 2002, respectively, with such Agreement having
been confirmed by Incos shareholders on April 20,
1999 and April 17, 2002 respectively;

AND WHEREASthe
board of directors of Inco approved certain additional
amendments to this Agreement on February 8, 2005, which
amendments shall only become effective as at the date that
Incos shareholders reconfirm the Agreement as so amended
in the manner provided for in Section 5.4(b) and 5.15 of
this Agreement;

NOW THEREFORE, in
consideration of the premises and the respective covenants and
agreements set forth herein, and subject to such covenants and
agreements, the parties hereby agree as follows:

A-4



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##### 



ARTICLE 1

INTERPRETATION




|    |                    
|--- | -------------------
|1.1 | Certain Definitions

For purposes of this Agreement, the following
terms have the meanings indicated:



| |     |                                                                                                                                                                                                                                
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Acquiring
    Personmeans any Person who is
    the Beneficial owner of 20 per cent or more of the
    outstanding Common Shares or Voting Shares; provided, however,
    that the term Acquiring Person shall not include:



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | Inco or any Subsidiary of Inco;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | (ii)  | any Person who becomes the Beneficial owner of
    20 per cent or more of the outstanding Common Shares
    or Voting Shares as a result of one or any combination of
    (A) an acquisition or redemption by Inco of Common Shares
    or Voting Shares which, by reducing the number of Voting Shares
    outstanding, increases the proportionate number of Common Shares
    or Voting Shares Beneficially owned by such Person to
    20 per cent or more of the Common Shares or Voting
    Shares then outstanding, (B) Permitted Bid Acquisitions,
    (C) Pro Rata Acquisitions, or (D) Exempt Acquisitions;
    provided, however, that if a Person becomes the Beneficial owner
    of 20 per cent or more of the outstanding Common
    Shares or Voting Shares by reason of one or any combination of
    the operation of Paragraphs (A), (B), (C), or
    (D) above and such Person thereafter becomes the Beneficial
    owner of more than 1% of the number of outstanding Common Shares
    or Voting Shares (other than pursuant to one or more of any
    combination of Paragraphs (A), (B), (C) or (D) above),
    as the case may be, then as of the date such Person becomes the
    Beneficial owner of such additional Common Shares or Voting
    Shares, as the case may be, such Person shall become an
    Acquiring Person;
|
| | (iii) | for a period of 10 calendar days after the
    Disqualification Date (as defined below), any Person who becomes
    the Beneficial owner of 20% or more of the outstanding Common
    Shares or Voting Shares as a result of such Person becoming
    disqualified from relying on Clause 1.1(f)(B) solely
    because such Person is making or has announced a current
    intention to make a Take-over Bid, either alone or by acting
    jointly or in concert with any other Person. For the purposes of
    this definition, Disqualification Date means the
    first date of a public announcement of facts indicating that any
    Person is making or has announced a current intention to make a
    Take-over Bid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (iv)  | an underwriter or member of a banking or selling
    group that becomes the Beneficial owner of 20% or more of the
    Common Shares or Voting Shares in connection with a distribution
    of securities of Inco; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | (v)   | a Person (a Grandfathered Person) who
    is the Beneficial owner of more than 20% of the outstanding
    Common Shares or Voting Shares determined as at the Record Time,
    provided, however, that this exception shall not be, and shall
    cease to be, applicable to a Grandfathered Person in the event
    that such Grandfathered Person shall, after the Record Time:
    (1) cease to own more than 20% of the outstanding Common
    Shares or Voting Shares, as the case may be, or (2) become
    the Beneficial owner of any additional Common Shares or Voting
    Shares that increases its Beneficial ownership of Common Shares
    or Voting Shares, as the case may be, by more than 1% of the
    number of Common Shares or Voting Shares, as the case may be,
    outstanding as at the Record Time, other than through an
    acquisition pursuant to which a Person becomes a Beneficial
    Owner of additional Common Shares or Voting Shares by reason of
    one or any combination of the operation of
    Paragraphs 1.1(a)(ii)(A), (B), (C) or (D).                                                                                                                                                                                                                                                                    



| |     |                                                                                                                                                                                                                                                                                                                
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | Affiliate,
    when used to indicate a relationship with a specified
    corporation, shall mean a Person that directly, or indirectly
    through one or more controlled intermediaries, controls, or is a
    corporation controlled by, or is under common control with, such
    a specified corporation.

A-5



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##### 





| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | Agreementmeans this shareholder rights plan agreement dated as of
    September 14, 1998 and as amended and restated as of
    April 28, 1999, April 17, 2002 and April 20, 2005
    between Inco and the Rights Agent, as may be further amended
    and/or supplemented from time to time; hereof,
    herein, hereto and similar expressions
    mean and refer to this Agreement as a whole and not to any
    particular part of this Agreement;
|
| | (d) | annual cash
    dividendmeans cash dividends
    paid in any fiscal year of Inco, to the extent that such cash
    dividends do not exceed in the aggregate, the greatest of:                                                                                                                                                                                                                                                                              



| |       |                                                                                                                                                                                                         
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | 200 per cent of the aggregate amount of
    cash dividends declared payable by Inco on its Common Shares in
    its immediately preceding fiscal year;                                                  
|
| | (ii)  | 300 per cent of the arithmetic mean of
    the aggregate amounts of the annual cash dividends declared
    payable by Inco on its Common Shares in its three immediately
    preceding fiscal years; and
|
| | (iii) | 100 per cent of the aggregate
    consolidated net income of Inco, before extraordinary items, for
    its immediately preceding fiscal year;                                                           



| |     |                                                                                                                                                                                                                                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (e) | Associatemeans, when used to indicate a relationship with a specified
    Person, a spouse of that Person, any Person of the same or
    opposite sex with whom that Person is living in a conjugal
    relationship outside marriage, a child of that Person, or a
    relative of that Person who has the same residence as that
    Person;
|
| | (f) | A Person shall be deemed the Beneficial
    owner of, and to have Beneficial
    ownership of, and to Beneficially
    own,                                                                                                                                                                                                               



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | any securities as to which such Person or any of
    such Persons Affiliates or Associates is the owner at law
    or in equity;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | (ii)  | any securities as to which such Person or any of
    such Persons Affiliates or Associates has the right to
    become the owner at law or in equity (where such right is
    exercisable within a period of 60 days, whether or not on
    condition or the happening of any contingency or the making of
    any payment) pursuant to any agreement, arrangement, pledge or
    understanding, whether or not in writing (other than customary
    agreements with and between underwriters and/or banking group
    members and/or selling group members with respect to a
    distribution of securities and other than pledges of securities
    in the ordinary course of business), or upon the exercise of any
    conversion right, exchange right, share purchase right (other
    than the Rights), warrant or option; and
|
| | (iii) | any securities which are Beneficially owned
    within the meaning of Clauses 1.1(f)(i) or (ii) by any
    other Person with whom such Person is acting jointly or in
    concert;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | provided, however, that a Person shall not be
    deemed the Beneficial owner of, or to have
    Beneficial ownership of, or to Beneficially
    own, any security:



| |     |                                                                                                                                                                                                                                                                                                                                      
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (A) | because such security has been deposited or
    tendered pursuant to any Take-over Bid made by such Person, made
    by any of such Persons Affiliates or Associates or made by
    any other Person referred to in Clause 1.1(f)(iii), until
    the earlier of such deposited or tendered security being taken
    up or paid for;
|
| | (B) | because such Person, any of such Persons
    Affiliates or Associates or any other Person referred to in
    Clause 1.1(f)(iii) holds such security provided that,                                                                                                                                                                  



| |     |                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | the ordinary business of any such Person (the
    Investment Manager) includes the management of
    investment funds for others (which others, for greater
    certainty, may include or be limited to one or more employee
    benefit plans or pension plans) and such security is held by the
    Investment Manager in the ordinary course of such business in
    the performance of such Investment

A-6



---



##### 



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | Managers duties for the account of any
    other Person (a Client), including non-discretionary
    accounts held on behalf of a Client by a dealer or broker
    registered under applicable law;                                                                                                                                                                                                                                                                                     
|
| | (2) | such Person is (i) the manager or trustee (the
    Manager) of a mutual fund (a Mutual
    Fund) that is registered or qualified to issue its
    securities to investors under the securities laws of any
    province of Canada or the laws of the United States and such
    security is held in the ordinary course of business in the
    performance of the Managers duties with respect to the
    Mutual Fund, or (ii) a Mutual Fund;                                        
|
| | (3) | such Person (the Trust Company) is
    licensed to carry on the business of a trust company under
    applicable laws and, as such, acts as trustee or administrator
    or in a similar capacity in relation to the estates of deceased
    or incompetent Persons (each an Estate Account) or
    in relation to other accounts (each an Other
    Account) and holds such security in the ordinary course of
    such duties for such Estate Accounts or for such Other Accounts;
|
| | (4) | such Person is established by statute for
    purposes that include, and the ordinary business or activity of
    such Person (the Statutory Body) includes, the
    management of investment funds for employee benefit plans,
    pension plans, insurance plans or various public bodies;                                                                                                                                                                                            
|
| | (5) | such Person (the Administrator) is
    the administrator or trustee of one or more pension funds, plans
    or related trusts (a Plan) registered or qualified
    under the laws of Canada or any Province thereof or the laws of
    the United States of America or any state thereof or is a Plan;
    or                                                                                                                                                                         
|
| | (6) | such Person is a Crown agent or agency;                                                                                                                                                                                                                                                                                                                                                                                                                                                   



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | provided, in any of the above cases, that the
    Investment Manager, the Manager, the Mutual Fund, the Trust
    Company, the Statutory Body, the Administrator, the Plan, or the
    Crown agent or agency, as the case may be, is not then making a
    Take-over Bid or has not then announced an intention to make a
    Take-over Bid, other than an Offer to Acquire Voting Shares or
    other securities by means of a distribution by Inco or by means
    of ordinary market transactions (including pre-arranged trades
    entered into in the ordinary course of business of such Person)
    executed through the facilities of a stock exchange or organized
    over-the-counter market, alone or by acting jointly or in
    concert with any other Person;



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (C) | because such security has been agreed to be
    deposited or tendered pursuant to a Lock-up Agreement, or is
    otherwise deposited or tendered, to any Take-over Bid made by
    such Person, made by any of such Persons Affiliates or
    Associates or made by any other Person acting jointly or in
    concert with such Person until such deposited or tendered
    security has been taken up or paid for, whichever shall first
    occur;
|
| | (D) | because such Person (1) is a Client of the
    same Investment Manager as another Person on whose account the
    Investment Manager holds such security, (2) has an Estate
    Account or an Other Account of the same Trust Company as another
    Person on whose account the Trust Company holds such security or
    (3) is a Plan with the same Administrator as another Plan
    on whose account the Administrator holds such security;      
|
| | (E) | where such Person (1) is a Client of an
    Investment Manager and such security is owned at law or in
    equity by the Investment Manager, or (2) has an Estate
    Account or an Other Account of a Trust Company and such security
    is owned at law or in equity by the Trust Company or (3) is
    a Plan and such security is owned at law or in equity by the
    Administrator of the Plan; or                                            

A-7



---



##### 





| |     |                                                                                                                                                                  
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (F) | where such Person is a registered holder of such
    security as a result of carrying on the business of, or acting
    as a nominee of, a securities depositary;



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (g) | Board of
    Directorsmeans the board of
    directors of Inco or any duly constituted and empowered
    committee thereof;                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (h) | Business
    Daymeans any day other than a
    Saturday, Sunday or a day on which banking institutions in
    Toronto are authorized or obligated by law to close;                                                                                                                                                                                                                                                                                                                                                               
|
| | (i) | Canada Business Corporations
    Actmeans the Canada
    Business Corporations Act, R.S.C. 1985, C. 44, as
    amended, and the regulations made thereunder, and any comparable
    or successor laws or regulations thereto;                                                                                                                                                                                                                                                                                                    
|
| | (j) | Canadian Dollar
    Equivalentof any amount which
    is expressed in United States Dollars means, on any date, the
    Canadian dollar equivalent of any such amount determined by
    multiplying such amount by the U.S.  Canadian
    Exchange Rate in effect on such date;                                                                                                                                                                                                                                                 
|
| | (k) | Canadian  U.S. Exchange
    Ratemeans, on any date, the
    inverse of the U.S.  Canadian Exchange Rate in effect
    on such date;                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (l) | Certificate of
    Entitlementmeans a
    non-detachable certificate of contingent entitlement to Rights
    which entitles the holder thereof to receive that number of
    Rights equal to the number of Common Shares received prior to
    the earlier of the Separation Time or the Expiration Time upon
    the surrender for conversion into Common Shares or exchange upon
    redemption for Common Shares, as the case may be, of the
    Convertible Security to which the Certificate of Entitlement is
    attached;
|
| | (m) | close of
    businesson any given date means
    the time on such date (or, if such date is not a Business Day,
    the time on the next succeeding Business Day) at which the
    principal transfer office in Toronto of the transfer agent for
    the Common Shares of Inco (or, after the Separation Time, the
    principal office in Toronto of the Rights Agent) is closed to
    the public;                                                                                                                            
|
| | (n) | Common
    Sharesmeans the common shares
    in the capital of Inco;                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | (o) | Competing Permitted
    Bidmeans a Take-over Bid that:                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | is made after a Permitted Bid has been made and
    prior to the expiry of that other Permitted Bid;                                                                                                                                                                                                                                                                                                                                                                                             
|
| | (ii)  | satisfies all components of the definition of a
    Permitted Bid other than the requirements set out in
    clause (ii) (A) of the definition of a Permitted Bid;
    and                                                                                                                                                                                                                                                                                                                       
|
| | (iii) | contains, and the take-up and payment for
    securities tendered or deposited is subject to, an irrevocable
    and unqualified provision that no Voting Shares will be taken up
    or paid for pursuant to the Take-over Bid prior to the close of
    business on a date that is no earlier than the later of:
    (a) 35 days after the date of the Take-over Bid; and
    (b) the 60th day after the earliest date on which any other
    Permitted Bid that is then in existence was made;



| |     |                                                                                                                              
| | --- | -----------------------------------------------------------------------------------------------------------------------------
| | (p) | controlled
    a corporation is controlled by another Person or two
    or more Persons acting jointly or in concert if:



| |      |                                                                                                                                                                                                                                                                                  
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)  | securities entitled to vote in the election of
    directors carrying more than 50 per cent of the votes
    for the election of directors are held, directly or indirectly,
    by or on behalf of the other Person or two or more Persons
    acting jointly or in concert; and
|
| | (ii) | the votes carried by such securities are
    entitled, if exercised, to elect a majority of the board of
    directors of such corporation;                                                                                                                                      



| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | and controls, controlling
    and under common control with shall be interpreted
    accordingly;

A-8



---



##### 





| |     |                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (q) | Convertible
    Debenturesmeans the Convertible
    Debentures due 2023 which Inco issued pursuant to the terms of
    an indenture dated as of March 7, 2003 between Inco and The
    Bank of New York, as trustee;                                                                                                                                                                             
|
| | (r) | Subordinated Convertible
    Debenturesmeans the 3 1/2%
    Subordinated Convertible Debentures due 2052 which Inco issued
    pursuant to an indenture dated as of March 7, 2003 between
    Inco and The Bank of New York, as trustee;                                                                                                                                                         
|
| | (s) | LYON
    Notesmeans the Zero Coupon
    Yield NotesTM (TM trademark of Merrill
    Lynch & Co. Inc.) Notes Due March 29, 2021 which Inco
    issued pursuant to the terms of an indenture dated as of
    March 29, 2001 between Inco and The Bank of New York, as
    trustee;                                                                                                                  
|
| | (t) | Convertible
    Securitiesmeans the Convertible
    Debentures, the Subordinated Convertible Debentures, the LYON
    Notes and any other securities that Inco may issue that may be
    surrendered for conversion into, or exchanged upon redemption
    for, Common Shares;                                                                                                                   
|
| | (u) | Co-Rights
    Agentshas the meaning ascribed
    thereto in Subsection 4.1(a);                                                                                                                                                                                                                                                                                                                   
|
| | (v) | Disposition
    Datehas the meaning ascribed
    thereto in Subsection 5.1(a);                                                                                                                                                                                                                                                                                                                   
|
| | (w) | Dividend Reinvestment
    Acquisitionmeans an acquisition
    of Voting Shares of any class pursuant to a Dividend
    Reinvestment Plan;                                                                                                                                                                                                                                                        
|
| | (x) | Dividend Reinvestment
    Planmeans the Optional Stock
    Dividend Program and Share Purchase Plan of Inco or any other
    regular dividend reinvestment or other program or plan of Inco
    made available by Inco to holders of its securities and/or to
    holders of securities of a Subsidiary of Inco, where such
    program or plan permits the holder to direct that some or all of:



| |       |                                                                              
| | ----- | -----------------------------------------------------------------------------
| | (i)   | dividends paid in respect of shares of any class
    of Inco or a Subsidiary;
|
| | (ii)  | proceeds of redemption of shares of Inco or a
    Subsidiary;                
|
| | (iii) | interest paid on evidences of indebtedness of
    Inco or a Subsidiary; or   
|
| | (iv)  | optional cash payments;                                                      



| |                                             
| | --------------------------------------------
| | be applied to the purchase of Voting Shares;



| |      |                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (y)  | Effective
    Timemeans the close of business
    on October 3, 1998;                                                                                                                                                                                                                                                                                                                                               
|
| | (z)  | Election to
    Exercisehas the meaning
    ascribed thereto in Subsection 2.3(d);                                                                                                                                                                                                                                                                                                                                  
|
| | (aa) | Exempt
    Acquisitionmeans a share
    acquisition in respect of which the Board of Directors has
    waived the application of Section 3.1 pursuant to the
    provisions of Subsections 5.1(a), (b) or (e);                                                                                                                                                                                                      
|
| | (bb) | Exercise
    Pricemeans, as of any date, the
    price at which a holder may purchase the securities issuable
    upon exercise of one whole Right which, until adjustment thereof
    in accordance with the terms hereof, shall be $200.00;                                                                                                                                                                       
|
| | (cc) | Expansion
    Factorhas the meaning ascribed
    thereto in Subsection 2.4(a);                                                                                                                                                                                                                                                                                                                                      
|
| | (dd) | Expiration
    Timemeans the close of business
    on that date which is the earliest date of termination of this
    Agreement as provided for in Section 5.15 or, if this
    Agreement is reconfirmed pursuant to Section 5.15 at the
    sixth annual meeting following Incos annual and special
    meeting of shareholders in 1999, the close of business on the
    tenth anniversary of the Effective Time;
|
| | (ee) | Flip-in
    Eventmeans a transaction in or
    pursuant to which any Person becomes an Acquiring Person;                                                                                                                                                                                                                                                                                                            
|
| | (ff) | holderhas the meaning ascribed thereto in Section 2.9;                                                                                                                                                                                                                                                                                                                                                              
|
| | (gg) | Incomeans Inco Limited, a corporation incorporated under the laws of
    Canada, together, where the context requires, with its
    Subsidiaries;                                                                                                                                                                                                                                                                   

A-9



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##### 





| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (hh) | Independent
    Shareholdersmeans holders of
    any Voting Shares, other than (a) any Acquiring Person,
    (b) any Offeror (other than any Person who pursuant to
    Clause 1.1(f)(B) is not deemed to Beneficially own the
    Voting Shares held by such Person), (c) any Affiliate or
    Associate of any Acquiring Person or Offeror, (d) any
    Person acting jointly or in concert with any Acquiring Person or
    Offeror, and (e) any employee benefit plan, stock purchase
    plan, deferred profit sharing plan and any similar plan or trust
    for the benefit of employees of Inco or a Subsidiary of Inco,
    unless the beneficiaries of the plan or trust direct the manner
    in which the Voting Shares are to be voted or withheld from
    voting or direct whether the Voting Shares are to be tendered to
    a Take-over Bid;                                                                                                   
|
| | (ii) | Lock-up
    Agreementmeans an agreement
    between a Person and one or more holders of Voting Shares (each
    a Locked-up Person) the terms of which are
    publicly disclosed and a copy of which agreement is made
    available to the public (including Inco) not later than
    (i) the date the Lock-up Bid (as defined below) is publicly
    announced or, (ii) if the Lock-up Bid has been made prior
    to the date on which such agreement is entered into then as soon
    as possible after it is entered into and in any event not later
    than the date following the date of such agreement, pursuant to
    which each Locked-up Person agrees to deposit or tender Voting
    Shares to a Take-over Bid (the Lock-up Bid)
    to be made or made by the Person or any of such Persons
    Affiliates or Associates or any other Person referred to in
    clause (iii) of the definition of Beneficial Owner and
    which provides:



| |     |                                                                                                                                                                                                                                                                                 
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) | that any agreement to deposit or tender to, or to
    not withdraw Voting Shares from, the Lock-up Bid is terminable
    at the option of the Locked-up Person in order to tender or
    deposit such Voting Shares to another Take-over Bid or support
    another transaction:



| |     |                                                                                                                                                                                                        
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (A) | where the price or value per Voting Shares
    offered under such other Take-over Bid or transaction is higher
    than the price or value per Voting Share offered under the
    Lock-up Agreement; or
|
| | (B) | if:                                                                                                                                                                                                    



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | the price or value per Voting Share offered under
    the other Take-over Bid or transaction exceeds the price or
    value per Voting Share offered or proposed to be offered under
    the Lock-up Bid by an amount that is equal to or greater than
    the lesser of (x) any amount specified in the agreement and
    (y) 7%; or                                                                                                                                 
|
| | (2) | the number of Voting Shares to be purchased under
    the other Take-over Bid or transaction exceeds the number of
    Voting Shares offered to be purchased under the Lock-up Bid by
    an amount that is equal to or greater than the lesser of
    (x) any amount specified in the agreement and (y) 7%,
    at a price or value per Voting Share, as applicable, that is not
    less than the price or value per Voting Share offered under the
    Lock-up Bid;



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | and the agreement may contain a right of first
    refusal or require a period of delay to give such Person an
    opportunity to match a higher price or value in another
    Take-over Bid or transaction or other similar limitation on a
    Locked-up Persons right to withdraw Voting Shares from the
    agreement, so long as the limitation does not preclude the
    exercise by the Locked-up Person of the right to withdraw Voting
    Shares during the period of the other Take-over Bid or
    transaction; and



| |      |                                                                                                                             
| | ---- | ----------------------------------------------------------------------------------------------------------------------------
| | (ii) | no break-up fees, top-up
    fees, penalties, expenses or other amounts that exceed in the
    aggregate the greater of:



| |     |                                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (A) | the cash equivalent of 2.5% of the price or value
    payable under the Lock-up Bid to a Locked-up Person; and                                                                                                                                              
|
| | (B) | 50% of the amount by which the price or value
    payable under another Take-over Bid or transaction to a
    Locked-up Person exceeds the price or value of the consideration
    that such Locked-up Person would have received under the Lock-up
    Bid,

A-10



---



##### 





| |                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | shall be payable by a Locked-up Person pursuant
    to the agreement in the event a Locked-up Person fails to
    deposit or tender Voting Shares to the Lock-up Bid or withdraw
    Voting Shares previously tendered thereto in order to tender to
    another Take-over Bid or support another transaction;



| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (jj) | Market
    Priceper share of any
    securities on any date of determination means the average of the
    daily closing sale prices per share of such class of securities
    (determined as described below) on each of the 20 consecutive
    Trading Days through and including the Trading Day immediately
    preceding such date; provided, however, that if an event of a
    type analogous to any of the events described in
    Section 2.4 hereof shall have caused the closing sale
    prices used to determine the Market Price on any Trading Days
    not to be fully comparable with the closing sale price on such
    date of determination or, if the date of determination is not a
    Trading Day, on the immediately preceding Trading Day, each such
    closing sale price so used shall be appropriately adjusted in a
    manner analogous to the applicable adjustment provided for in
    Section 2.4 hereof in order to make it fully comparable
    with the closing sale price on such date of determination or, if
    the date of determination is not a Trading Day, on the
    immediately preceding Trading Day. The closing sale price per
    share of any securities on any date shall be:



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | the closing board lot sale price per share or, if
    such price is not available, the average of the closing bid and
    asked prices, for each of such securities as reported by the
    principal Canadian securities exchange (as determined by volume
    of trading) on which such securities are listed or admitted to
    trading, or if for any reason neither of such prices is
    available on such day or the securities are not listed or
    admitted to trading on a Canadian securities exchange, the
    closing board lot sale price per share or, if such price is not
    available, the average of the closing bid and asked prices, for
    each security as reported by the principal United States
    securities exchange (as determined by volume of trading) on
    which such securities are listed or admitted for trading;
|
| | (ii)  | if for any reason none of such prices is
    available on such date or the securities are not listed or
    admitted to trading on a Canadian stock exchange or a United
    States securities exchange, the last sale price, or in case no
    sale takes place on such date, the average of the high bid and
    low asked prices for each of such securities in the
    over-the-counter market, as quoted by any reporting system then
    in use; or                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (iii) | if for any reason none of such prices is
    available on such day or the securities are not listed or
    admitted to trading on a Canadian stock exchange or a United
    States securities exchange or quoted by any such reporting
    system, the average of the closing bid and asked prices as
    furnished by a professional market maker making a market in the
    securities;                                                                                                                                                                                                                                                                                                                                                                                                                                                                



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | provided, however, that if on any such date none
    of such prices is available, the closing sale price per share of
    such securities on such date shall mean the fair value per share
    of the securities on such date as determined by a nationally or
    internationally recognized investment dealer or investment
    banker and provided further that if an event of a type analogous
    to any of the events described in Section 2.4 hereof shall
    have caused any price used to determine the Market Price on any
    Trading Day not to be fully comparable with the price as so
    determined on the Trading Day immediately preceding such date of
    determination, each such price so used shall be appropriately
    adjusted in a manner analogous to the applicable adjustment
    provided for in Section 2.4 hereof in order to make it
    fully comparable with the price on the Trading Day immediately
    preceding such date of determination. The Market Price shall be
    expressed in Canadian dollars and, if initially determined in
    respect of any day forming part of the 20 consecutive Trading
    Day period in question in United States dollars, such amount
    shall be translated into Canadian dollars on such date at the
    Canadian Dollar Equivalent thereof.



| |      |                                                                
| | ---- | ---------------------------------------------------------------
| | (kk) | Nomineehas the meaning ascribed thereto in Subsection 2.3(c);

A-11



---



##### 





| |      |                                
| | ---- | -------------------------------
| | (ll) | Offer to
    Acquireincludes:



| |      |                                                                                                                                       
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------
| | (i)  | an offer to purchase or a solicitation of an
    offer to sell Voting Shares of any class or classes, and                             
|
| | (ii) | an acceptance of an offer to sell Voting Shares
    of any class or classes, whether or not such offer to sell has
    been solicited,



| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | or any combination thereof, and the Person
    accepting an offer to sell shall be deemed to be making an Offer
    to Acquire to the Person that made the offer to sell;



| |      |                                                                                                                                                                                                                                                                       
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (mm) | Offerormeans a Person who has announced, and has not withdrawn, an
    intention to make or who has made, and has not withdrawn, a
    Take-over Bid, other than a Person who has completed a Permitted
    Bid, a Competing Permitted Bid or an Exempt Acquisition;
|
| | (nn) | Offerors
    Securitiesmeans Voting Shares
    Beneficially owned by an Offeror on the date of the Offer to
    Acquire;                                                                                                                                           
|
| | (oo) | Permitted
    Bidmeans a Take-over Bid made
    by an Offeror that is made by means of a Take-over Bid circular
    and which also complies with the following additional provisions:                                                                               



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | the Take-over Bid is made to all holders of
    Voting Shares as registered on the books of Inco, other than the
    Offeror;                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (ii)  | the Take-over Bid contains, and the take-up and
    payment for securities tendered or deposited is subject to, an
    irrevocable and unqualified provision that no Voting Shares will
    be taken up and paid for pursuant to the Take-over Bid
    (A) prior to the close of business on a date which is not
    less than 60 days following the date of the Take- over Bid
    and (B) unless at such date more than 50% of the Common
    Shares held by Independent Shareholders shall have been
    deposited or tendered pursuant to the Take-over Bid and not
    withdrawn;
|
| | (iii) | unless the Take-over Bid is withdrawn, the
    Take-over Bid contains an irrevocable and unqualified provision
    that Voting Shares may be deposited pursuant to such Take-over
    Bid at any time during the period described in
    Clause 1.1(oo)(ii)(A) and that any Voting Shares deposited
    pursuant to the Take-over Bid may be withdrawn until taken up
    and paid for; and                                                                                                                                                                                           
|
| | (iv)  | unless the Take-over Bid is withdrawn, the
    Take-over Bid contains an irrevocable and unqualified provision
    that in the event that the deposit condition set forth in
    Clause 1.1(oo)(ii)(B) is satisfied the Offeror will make a
    public announcement of that fact and the Take-over Bid will
    remain open for deposits and tenders of Voting Shares for not
    less than 10 Business Days from the date of such public
    announcement;                                                                                                                           



| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (pp) | Permitted Bid
    Acquisitionmeans an acquisition
    of Voting Shares made pursuant to a Permitted Bid or a Competing
    Permitted Bid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (qq) | Personincludes an individual, firm, association, trustee, executor,
    administrator, legal personal representative, body corporate,
    corporation, trust, partnership, joint venture syndicate or
    other form of unincorporated association, a government and its
    agencies or instrumentalities, any entity or group whether or
    not having legal personality, any successor (by merger,
    statutory amalgamation or otherwise) and any of the foregoing
    acting in any derivative, representative or fiduciary capacity;                                                                                                                                                                                                                                                                                                                             
|
| | (rr) | Pro Rata
    Acquisitionmeans an acquisition
    of Common Shares or Voting Shares by a Person pursuant to:
    (i) a Dividend Reinvestment Acquisition; (ii) a
    Dividend Reinvestment Plan; or (iii) the receipt and/or
    exercise of rights issued by Inco to all the holders of a class
    of Voting Shares to subscribe for or purchase Voting Shares,
    provided that such rights are acquired directly from Inco as
    part of a rights offering and not from any other Person and
    provided that the Person does not thereby acquire a greater
    percentage of Voting Shares than the Persons percentage of
    Voting Shares Beneficially Owned immediately prior to such
    receipt or exercise; or (iv) a distribution by Inco of a
    class of Voting Shares, or securities convertible into or
    exchangeable for a class of Voting Shares

A-12



---



##### 



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       | (and the conversion or exchange of such
    convertible or exchangeable securities) made pursuant to a
    prospectus or by way of private placement by Inco, provided that
    the Person does not thereby acquire a greater percentage of such
    class of Voting Shares, or securities convertible or
    exchangeable for Voting Shares of that class, than the
    Persons percentage of that class of Voting Shares
    Beneficially owned immediately prior to such acquisition;
|
| | (ss)  | Record
    Timehas the meaning set forth
    in the recitals to this Agreement;                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | (tt)  | Redemption
    Pricehas the meaning set forth
    in Subsection 5.1(c) of this Agreement;                                                                                                                                                                                                                                                                                                                                                                                              
|
| | (uu)  | Rightmeans a right to purchase a Common Share of Inco, upon the terms
    and subject to the conditions set forth in this Agreement, and
    for greater certainty includes a Right issued upon presentation
    of a Certificate of Entitlement in connection with the surrender
    for conversion or exchange upon redemption of a Convertible
    Security to which the Certificate of Entitlement is attached;                                                                    
|
| | (vv)  | Rights
    Agentmeans the CIBC Mellon
    Trust Company, a trust company incorporated under the laws of
    Canada or any successor Rights Agent appointed pursuant to
    Section 4.4;                                                                                                                                                                                                                                                                                                
|
| | (ww)  | Rights
    Certificatemeans the
    certificates representing the Rights after the Separation Time,
    which shall be substantially in the form attached hereto as
    Attachment 1;                                                                                                                                                                                                                                                                                                  
|
| | (xx)  | Rights Holders Special
    Meetingmeans a meeting of the
    holders of Rights called by the Board of Directors for the
    purpose of approving a supplement or amendment to this Agreement
    pursuant to Subsection 5.4(c);                                                                                                                                                                                                                                                       
|
| | (yy)  | Rights
    Registerand Rights
    Registrar have the meanings ascribed thereto in
    Subsection 2.7(a);                                                                                                                                                                                                                                                                                                                                                                             
|
| | (zz)  | Securities Act(Ontario)means the
    Securities Act, R.S.O. 1990, c.S.5, as amended, and the
    regulations and rules thereunder, and any comparable or
    successor laws or regulations or rules thereto;                                                                                                                                                                                                                                                                           
|
| | (aaa) | Separation
    Timemeans the close of business
    on the tenth Trading Day after the earlier of:                                                                                                                                                                                                                                                                                                                                                                                      



| |       |                                                                                                                                                                                                                                                                    
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | the Stock Acquisition Date;                                                                                                                                                                                                                                        
|
| | (ii)  | the date of the commencement of or first public
    announcement of the intent of any Person (other than Inco or any
    Subsidiary of Inco) to commence a Take-over Bid (other than a
    Permitted Bid or a Competing Permitted Bid, as the case may be);
    and
|
| | (iii) | the date upon which a Permitted Bid or Competing
    Permitted Bid ceases to be such,                                                                                                                                                                              



| |                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | or such later date as may be determined by the
    Board of Directors, provided that, if any such Take-over Bid
    expires, is cancelled, terminated or otherwise withdrawn prior
    to the Separation Time, such Take-over Bid shall be deemed, for
    the purposes of this definition, never to have been made;



| |       |                                                                                                                                                                                                                                                                                                                                                                   
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (bbb) | Special
    Meetingmeans a special meeting
    of the holders of Voting Shares, called by the Board of
    Directors for the purpose of approving a supplement, amendment
    or variation to this Agreement pursuant to
    Subsection 5.4(b) or Subsection 5.4(c);                                                                                            
|
| | (ccc) | Stock Acquisition
    Datemeans the first date of
    public announcement (which, for purposes of this definition,
    shall include, without limitation, a report filed pursuant to
    section 101 of the Securities Act (Ontario) or
    Section 13(d) of the U.S. Exchange Act) by Inco
    or an Acquiring Person that an Acquiring Person has become such;
|
| | (ddd) | Subsidiary
    a corporation is a Subsidiary of another corporation if:                                                                                                                                                                                                                                                                                        



| |     |                     
| | --- | --------------------
| | (i) | it is controlled by:



| |     |               
| | --- | --------------
| | (A) | that other, or

A-13



---



##### 





| |     |                                                                                          
| | --- | -----------------------------------------------------------------------------------------
| | (B) | that other and one or more corporations each of
    which is controlled by that other, or
|
| | (C) | two or more corporations each of which is
    controlled by that other, or               



| |      |                                                                         
| | ---- | ------------------------------------------------------------------------
| | (ii) | it is a Subsidiary of a corporation that is that
    others Subsidiary;



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (eee) | Take-over
    Bidmeans an Offer to Acquire
    Voting Shares or securities convertible into Voting Shares if,
    assuming that the Voting Shares or convertible securities
    subject to the Offer to Acquire are acquired and are
    Beneficially Owned at the date of such Offer to Acquire by the
    Person making such Offer to Acquire, such Voting Shares
    (including Voting Shares that may be acquired upon conversion of
    securities convertible into Voting Shares) together with the
    Offerors Securities constitute in the aggregate
    20 per cent or more of either the outstanding Common
    Shares or the outstanding Voting Shares at the date of the offer
    to Acquire;
|
| | (fff) | Trading
    Day, when used with respect to
    any securities, means a day on which the principal Canadian
    securities exchange on which such securities are listed or
    admitted to trading is open for the transaction of business or,
    if the securities are not listed or admitted to trading on any
    Canadian securities exchange, a day on which the principal
    United States securities exchange on which such securities are
    listed or admitted to trading is open for the transaction of
    business or, if the securities are not listed or admitted to
    trading on any Canadian or United States securities exchange, a
    Business Day;                                  
|
| | (ggg) | U.S.  Canadian Exchange
    Ratemeans, on any date:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        



| |      |                                                                                                                                                                                                                                            
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)  | if on such date the Bank of Canada sets an
    average noon spot rate of exchange for the conversion of one
    United States dollar into Canadian dollars, such rate; and                                                                 
|
| | (ii) | in any other case, the rate for such date for the
    conversion of one United States dollar into Canadian dollars
    calculated in such manner as may be determined by the Board of
    Directors from time to time acting in good faith;



| |       |                                                                                                                                                                                                                                                                           
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (hhh) | U.S. Dollar
    Equivalentof any amount which
    is expressed in Canadian dollars means, on any date, the United
    States dollar equivalent of such amount determined by
    multiplying such amount by the Canadian 
    U.S. Exchange Rate in effect on such date;
|
| | (iii) | U.S. Exchange
    Actmeans the United States
    Securities Exchange Act of 1934, as amended, and the rules and
    regulations thereunder as now in effect or as the same may from
    time to time be amended, re-enacted or replaced;                                
|
| | (jjj) | U.S. Securities
    Actmeans the United States
    Securities Act of 1933, as amended, and the rules and
    regulations thereunder as now in effect or as the same may from
    time to time be amended, re-enacted or replaced; and                                   
|
| | (kkk) | Voting
    Sharesmeans the Common Shares
    of Inco and any other shares in the capital of Inco entitled to
    vote in the election of directors.                                                                                                                     



|    |         
|--- | --------
|1.2 | Currency

All sums of money which are referred to in this
Agreement are expressed in lawful money of Canada, unless
otherwise specified.

1.3   Headings

The division of this Agreement into Articles,
Sections, Subsections, Clauses, Paragraphs, Subparagraphs or
other portions hereof and the insertion of headings, subheadings
and a table of contents are for convenience of reference only
and shall not affect the construction or interpretation of this
Agreement.

A-14



---



##### 





|    |                                                                                              
|--- | ---------------------------------------------------------------------------------------------
|1.4 | Calculation of Number and Percentage of
    Beneficial Ownership of Outstanding Voting Shares

For purposes of this Agreement, the percentage of
Voting Shares of any class Beneficially owned by any Person,
shall be and be deemed to be the product (expressed as a
percentage) determined by the formula:

100 × A/B

where:



|        |                                                                                                                                                                                                                                                                                 
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|A     = | the number of votes for the election of all
    directors on the Board of Directors (other than directors to be
    elected only by any specified class of shares of Inco) generally
    attaching to the Voting Shares of that class Beneficially owned
    by such Person; and



|        |                                                                                                                                                                                                                                                   
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|B     = | the number of votes for the election of all
    directors on the Board of Directors (other than directors to be
    elected only by any specified class of shares of Inco) generally
    attaching to all outstanding Voting Shares of such class.

Where any Person is deemed to Beneficially own
unissued Voting Shares, such Voting Shares shall be deemed to be
outstanding for the purpose of calculating the percentage of
Voting Shares owned by such Person.



|    |                             
|--- | ----------------------------
|1.5 | Acting Jointly or in Concert

For purposes of this Agreement, a Person is
acting jointly or in concert with every Person who, as a result
of any agreement, commitment or understanding whether formal or
informal, with the first Person, acquires or offers to acquire
Voting Shares (other than customary agreements with and between
underwriters and/or banking group members and/or selling group
members with respect to a public offering or private placement
of securities or pledges of securities in the ordinary course of
business).



|    |                                             
|--- | --------------------------------------------
|1.6 | Generally Accepted Accounting
    Principles

Wherever in this Agreement reference is made to
generally accepted accounting principles, such reference shall
be deemed to be the recommendations at the relevant time of the
Canadian Institute of Chartered Accountants, or any successor
institute, applicable on a consolidated basis (unless otherwise
specifically provided herein to be applicable on an
unconsolidated basis) as at the date on which a calculation is
made or required to be made in accordance with generally
accepted accounting principles. Where the character or amount of
any asset or liability or item of revenue or expense is required
to be determined, or any consolidation or other accounting
computation is required to be made for the purpose of this
Agreement or any document, such determination or calculation
shall, to the extent applicable and except as otherwise
specified herein or as otherwise agreed in writing by the
parties, be made in accordance with generally accepted
accounting principles applied on a consistent basis.

ARTICLE 2

RIGHTS AND CERTIFICATES OF
ENTITLEMENT




|    |                            
|--- | ---------------------------
|2.1 | Certificates of Entitlement



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Upon the presentation of a Certificate of
    Entitlement, together with the surrender of the Convertible
    Security to which it is attached for conversion into Common
    Shares prior to the earlier of the Separation Time or the
    Expiration Time, there shall be issued to the holder of such
    Certificate of Entitlement pursuant thereto one Right for each
    Common Share issued to such holder upon the surrender for
    conversion upon redemption of the Convertible Security to which
    such Certificate of Entitlement is attached.
|
| | (b) | Any Certificate of Entitlement which has not been
    presented for Rights prior to the earlier of the Separation Time
    or the Expiration Time shall expire and shall no longer entitle
    the holder thereof to receive any Rights.                                                                                                                                                                                                                                                                                                                      

A-15



---



##### 





| |     |                                                                                                                                                                                                                                                                                                
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | Notwithstanding Section 2.2, Rights shall
    not be issued pursuant to such Section 2.2 in respect of
    any Common Shares issued upon the surrender for conversion upon
    redemption of Convertible Securities for Common Shares, but
    shall be issued pursuant to paragraph (a) above.

2.2   Legend on Share
Certificates for Common Shares



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Certificates for the Common Shares that are
    issued after the Record Time but prior to the earlier of the
    Separation Time and the Expiration Time, shall also evidence one
    Right for each Common Share represented thereby and shall have
    impressed on, printed on, written on or otherwise affixed to
    them the following legend:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |     | Until the Separation Time (defined in the
    Shareholder Rights Plan Agreement referred to below), this
    certificate also evidences rights of the holder described in a
    Shareholder Rights Plan Agreement, dated as of
    September 14, 1998 (the Shareholder Rights Plan
    Agreement), between Inco Limited (the
    Corporation) and CIBC Mellon Trust Company, the
    terms of which are incorporated herein by reference and a copy
    of which is on file at the principal executive offices of the
    Corporation. Under certain circumstances set out in the
    Shareholder Rights Plan Agreement, the rights may expire, may
    become null and void or may be evidenced by separate
    certificates and no longer evidenced by this certificate. The
    Corporation will mail or arrange for the mailing of a copy of
    the Shareholder Rights Plan Agreement to the holder of this
    certificate without charge as soon as practicable after the
    receipt of a written request therefor.
|
| |     | Certificates representing Common Shares that are
    issued and outstanding at the Record Time, which as at the
    Effective Time represent Common Shares, shall also evidence one
    Right for each Common Share evidenced thereby, notwithstanding
    the absence of the foregoing legend, until the close of business
    on the earlier of the Separation Time and the Expiration Time.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (b) | Certificates representing Convertible Debentures
    or Subordinated Convertible Debentures that are issued and
    outstanding at the Record Time, which as at the Effective Time
    represent Convertible Debentures or Subordinated Convertible
    Debentures, as the case may be, shall also evidence one
    Certificate of Entitlement for each Convertible Debenture or
    Subordinated Convertible Debenture evidenced thereby,
    notwithstanding the absence of legends to the foregoing effect,
    until the close of business on the earlier of the Separation
    Time and the Expiration Time.                                                                                                                                                                                                                                                                                                                                                                                                              

2.3   Initial Exercise Price;
Exercise of Rights; Detachment of Rights



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Subject to adjustment as herein set forth, each
    Right will entitle the holder thereof, from and after the
    Separation Time and prior to the Expiration Time, to purchase
    one Common Share for the Exercise Price (with the Exercise Price
    and number of Common Shares being subject to adjustment as set
    forth below). Notwithstanding any other provision of this
    Agreement, any Rights held by Inco or any of its Subsidiaries
    shall be void.
|
| | (b) | Until the Separation Time,                                                                                                                                                                                                                                                                                                                                                                                                                                                



| |      |                                                                                                                                                                                                                                                                                                                                                                 
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)  | the Rights shall not be exercisable and no Right
    may be exercised; and                                                                                                                                                                                                                                                                                      
|
| | (ii) | each Right will be evidenced by the certificate
    for the associated Common Share of Inco registered in the name
    of the holder thereof (which certificate shall also be deemed to
    represent a Rights Certificate) and will be transferable only
    together with, and will be transferred by a transfer of, such
    associated Common Share of Inco.



| |     |                                                                         
| | --- | ------------------------------------------------------------------------
| | (c) | From and after the Separation Time and prior to
    the Expiration Time:



| |      |                                                                                                             
| | ---- | ------------------------------------------------------------------------------------------------------------
| | (i)  | the Rights shall be exercisable; and                                                                        
|
| | (ii) | the registration and transfer of Rights shall be
    separate from and independent of Common Shares of Inco.

A-16



---



##### 





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Promptly following the Separation Time, Inco will
    prepare and the Rights Agent will mail to each holder of record
    of Common Shares as of the Separation Time (other than an
    Acquiring Person, any other Person whose Rights are or become
    void pursuant to the provisions of subsection 3.1(b) hereof
    and, in respect of any Rights Beneficially owned by such
    Acquiring Person which are not held of record by such Acquiring
    Person, the holder of record of such Rights (a
    Nominee)), at such holders address as shown by
    the records of Inco (Inco hereby agreeing to furnish copies of
    such records to the Rights Agent for this purpose):



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (x) | a Rights Certificate in substantially the form
    set out in Attachment 1 hereof appropriately completed,
    representing the number of Rights held by such holder at the
    Separation Time and having such marks of identification or
    designation and such legends, summaries or endorsements printed
    thereon as Inco may deem appropriate and as are not inconsistent
    with the provisions of this Agreement, or as may be required to
    comply with any law, rule or regulation or judicial or
    administrative order or with any rule or regulation of any
    self-regulatory organization, stock exchange or quotation system
    on which the Rights may from time to time be listed or traded,
    or to conform to usage; and
|
| | (y) | a description of the Rights,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | provided that a Nominee shall be sent the
    materials provided for in (x) and (y) in respect of all
    Common Shares of Inco held of record by it which are not
    Beneficially owned by an Acquiring Person. In order for Inco to
    determine whether any Person is holding Common Shares which are
    Beneficially owned by another Person, Inco may require such
    first mentioned Person to furnish such information and
    documentation as Inco deems necessary or appropriate in order to
    make such determination.



| |     |                                                                                                                                                                                                                              
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (d) | Rights may be exercised, in whole or in part, on
    any Business Day after the Separation Time and prior to the
    Expiration Time by submitting to the Rights Agent in the manner
    specified in the Rights Certificate:



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | the Rights Certificate evidencing such Rights;                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | (ii)  | an election to exercise such Rights (an
    Election to Exercise) substantially in the form
    attached to the Rights Certificate appropriately completed and
    executed by the holder or his executors or administrators or
    other personal representatives or his or their legal attorney
    duly appointed by an instrument in writing in form and executed
    in a manner satisfactory to the Rights Agent; and                                                                                         
|
| | (iii) | payment by certified cheque, bankers draft
    or money order payable to the order of Inco, of a sum equal to
    the Exercise Price multiplied by the number of Rights being
    exercised and a sum sufficient to cover any transfer tax or
    charge which may be payable in respect of any transfer involved
    in the transfer or delivery of Rights Certificates or the
    issuance or delivery of certificates for Common Shares in a name
    other than that of the holder of the Rights being exercised.



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (e) | Upon receipt of a Rights Certificate, together
    with a completed Election to Exercise executed in accordance
    with Clause 2.3(d)(ii), which does not indicate that such
    Right is null and void as provided by Subsection 3.1(b),
    and payment as set forth in Clause 2.3(d)(iii), the Rights
    Agent (unless otherwise instructed by Inco in the event that
    Inco is of the opinion that the Rights cannot be exercised in
    accordance with this Agreement) will thereupon promptly:



| |      |                                                                                                                                                                                                                           
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)  | requisition from the transfer agent certificates
    representing the number of such Common Shares to be purchased
    (Inco hereby irrevocably authorizing its transfer agents to
    comply with all such requisitions);
|
| | (ii) | when appropriate, requisition from Inco the
    amount of cash to be paid in lieu of issuing fractional Common
    Shares;                                                                                                

A-17



---



##### 





| |       |                                                                                                                                                                                                                                                 
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (iii) | after receipt of the certificates referred to in
    Clause 2.3(e)(i), deliver the same to or upon the order of
    the registered holder of such Rights Certificates, registered in
    such name or names as may be designated by such holder;
|
| | (iv)  | when appropriate, after receipt, deliver the cash
    referred to in Clause 2.3(e)(ii) to or to the order of the
    registered holder of such Rights Certificate; and                                                                          
|
| | (v)   | tender to Inco all payments received on the
    exercise of the Rights.                                                                                                                                                                         



| |     |                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (f) | In case the holder of any Rights shall exercise
    less than all the Rights evidenced by such holders Rights
    Certificate, a new Rights Certificate evidencing the Rights
    remaining unexercised (subject to the provisions of
    Subsection 5.5(a)) will be issued by the Rights Agent to
    such holder or to such holders duly authorized assigns.
|
| | (g) | Inco covenants and agrees that it will:                                                                                                                                                                                                                                                                                                                         



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | take all such action as may be necessary and
    within its power to ensure that all Common Shares delivered upon
    exercise of Rights shall, at the time of delivery of the
    certificates for such Common Shares (subject to payment of the
    Exercise Price), be duly authorized, validly issued and fully
    paid and non-assessable;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | (ii)  | take all such action as may be necessary and
    within its power to comply with the requirements of the
    Canada Business Corporations Act, the Securities
    Act (Ontario), the U.S. Securities Act, the
    U.S. Exchange Act and the securities laws or
    comparable legislation of each of the provinces of Canada and
    any other applicable law, rule or regulation, in connection with
    the issuance and delivery of the Rights Certificates and the
    issuance of any Common Shares upon exercise of Rights;                                                                                                                                                                                                                                                                                                                      
|
| | (iii) | use reasonable efforts to cause all Common Shares
    issued upon exercise of Rights to be listed on the principal
    stock exchanges on which such Common Shares were traded
    immediately prior to the Stock Acquisition Date;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | (iv)  | pay when due and payable, if applicable, any and
    all Canadian and United States federal, provincial, state and
    municipal transfer taxes and charges (not including any income
    or capital taxes of the holder or exercising holder or any
    liability of Inco to withhold tax) which may be payable in
    respect of the original issuance or delivery of the Rights
    Certificates, or certificates for Common Shares to be issued
    upon exercise of any Rights, provided that Inco shall not be
    required to pay any transfer tax or charge which may be payable
    in respect of any transfer involved in the transfer or delivery
    of Rights Certificates or the issuance or delivery of
    certificates for Common Shares in a name other than that of the
    holder of the Rights being transferred or exercised; and
|
| | (v)   | after the Separation Time, except as permitted by
    Section 5.1, not take (or permit any Subsidiary to take)
    any action if at the time such action is taken it is reasonably
    foreseeable that such action will diminish substantially or
    otherwise eliminate the benefits intended to be afforded by the
    Rights.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

2.4   Adjustments to Exercise
Price; Number of Rights

The Exercise Price, the number and kind of
securities subject to purchase upon exercise of each Right and
the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 2.4.



| |     |                                                                                                            
| | --- | -----------------------------------------------------------------------------------------------------------
| | (a) | In the event Inco shall at any time after the
    date of the Record Time and prior to the Expiration Time:



| |     |                                                                                                                                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) | declare or pay a dividend on Common Shares
    payable in Common Shares (or other securities exchangeable for
    or convertible into or giving a right to acquire Common Shares
    or other securities of Inco) other than pursuant to any Dividend
    Reinvestment Plan;

A-18



---



##### 





| |       |                                                                                                                                                                                                                                                                                                
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)  | subdivide or change the then outstanding Common
    Shares into a greater number of Common Shares;                                                                                                                                                                                             
|
| | (iii) | consolidate or change the then outstanding Common
    Shares into a smaller number of Common Shares; or                                                                                                                                                                                        
|
| | (iv)  | issue any Common Shares (or other securities
    exchangeable for or convertible into or giving a right to
    acquire Common Shares or other securities of Inco) in respect
    of, in lieu of or in exchange for existing Common Shares except
    as otherwise provided in this Section 2.4,



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the Exercise Price and the number of Rights
    outstanding, or, if the payment or effective date therefor shall
    occur after the Separation Time, the securities purchasable upon
    exercise of Rights, shall be adjusted as of the payment or
    effective date in the manner set forth below. If an event occurs
    which would require an adjustment under both this
    Section 2.4 and subsection 3.1(a), the adjustment
    provided for in this Section 2.4 shall be in addition to,
    and shall be made prior to, any adjustment required under
    subsection 3.1(a).
|
| | If the Exercise Price and number of Rights
    outstanding are to be adjusted:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (x) | the Exercise Price in effect after such
    adjustment will be equal to the Exercise Price in effect
    immediately prior to such adjustment divided by the number of
    Common Shares (or other capital stock) (the Expansion
    Factor) that a holder of one Common Share immediately
    prior to such dividend, subdivision, change, consolidation or
    issuance would hold thereafter as a result thereof; and
|
| | (y) | each Right held prior to such adjustment will
    become that number of Rights equal to the Expansion Factor,                                                                                                                                                                                                                                                                                                             



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | and the adjusted number of Rights will be deemed
    to be distributed among the Common Shares with respect to which
    the original Rights were associated (if they remain outstanding)
    and the shares issued in respect of such dividend, subdivision,
    change, consolidation or issuance, so that each such Common
    Share (or other capital stock) will have exactly one Right
    associated with it.                                                                          
|
| | For greater certainty, if the securities
    purchasable upon exercise of Rights are to be adjusted, the
    securities purchasable upon exercise of each Right after such
    adjustment will be the securities that a holder of the
    securities purchasable upon exercise of one Right immediately
    prior to such dividend, subdivision, change, consolidation or
    issuance would hold thereafter as a result of such dividend,
    subdivision, change, consolidation or issuance.
|
| | If, after the Record Time and prior to the
    Expiration Time, Inco shall issue any shares of capital stock
    other than Common Shares in a transaction of a type described in
    Clause 2.4(a)(i) or (iv), shares of such capital stock
    shall be treated herein as nearly equivalent to Common Shares as
    may be practicable and appropriate under the circumstances and
    Inco and the Rights Agent agree to amend this Agreement in order
    to effect such treatment.       
|
| | In the event Inco shall at any time after the
    Record Time and prior to the Separation Time issue any Common
    Shares otherwise than in a transaction referred to in this
    Subsection 2.4(a), each such Common Share so issued shall
    automatically have one new Right associated with it, which Right
    shall be evidenced by the certificate representing such
    associated Common Share.                                                                                    



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | In the event Inco shall at any time after the
    Record Time and prior to the Separation Time fix a record date
    for the issuance of rights, options or warrants to all holders
    of Common Shares entitling them (for a period expiring within
    45 calendar days after such record date) to subscribe for
    or purchase Common Shares (or securities convertible into or
    exchangeable for or carrying a right to purchase Common Shares)
    at a price per Common Share (or, if a security convertible into
    or exchangeable for or carrying a right to purchase or subscribe
    for Common Shares, having a conversion, exchange or exercise
    price, including the price required to be paid to purchase such
    convertible or exchangeable security or right per share) less
    than the Market Price per Common

A-19



---



##### 



| |  |                                                                                                                                                                                                                      
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Share on such record date, the Exercise Price to
    be in effect after such record date shall be determined by
    multiplying the Exercise Price in effect immediately prior to
    such record date by a fraction:



| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)  | the numerator of which shall be the number of
    Common Shares outstanding on such record date, plus the number
    of Common Shares that the aggregate offering price of the total
    number of Common Shares so to be offered (and/or the aggregate
    initial conversion, exchange or exercise price of the
    convertible or exchangeable securities or rights so to be
    offered, including the price required to be paid to purchase
    such convertible or exchangeable securities or rights) would
    purchase at such Market Price per Common Share; and
|
| | (ii) | the denominator of which shall be the number of
    Common Shares outstanding on such record date, plus the number
    of additional Common Shares to be offered for subscription or
    purchase (or into which the convertible or exchangeable
    securities or rights so to be offered are initially convertible,
    exchangeable or exercisable).                                                                                                                                                                                                                  



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In case such subscription price may be paid by
    delivery of consideration, part or all of which may be in a form
    other than cash, the value of such consideration shall be as
    determined in good faith by the Board of Directors, whose
    determination shall be described in a statement filed with the
    Rights Agent and shall be binding on the Rights Agent and the
    holders of Rights. Such adjustment shall be made successively
    whenever such a record date is fixed, and in the event that such
    rights, options or warrants are not so issued, or if issued, are
    not exercised prior to the expiration thereof, the Exercise
    Price shall be readjusted to the Exercise Price which would then
    be in effect if such record date had not been fixed, or to the
    Exercise Price which would be in effect based upon the number of
    Common Shares (or securities convertible into, or exchangeable
    or exercisable for Common Shares) actually issued upon the
    exercise of such rights, options or warrants, as the case may be.
|
| | For purposes of this Agreement, the granting of
    the right to purchase Common Shares (whether from treasury or
    otherwise) pursuant to a Dividend Reinvestment Plan or any
    employee benefit, stock option or similar plans shall be deemed
    not to constitute an issue of rights, options or warrants by
    Inco; provided, however, that, in all such cases, the right to
    purchase Common Shares is at a price per share of not less than
    95% of the current market price per share (determined as
    provided in such plans) of the Common Shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | In the event Inco shall at any time after the
    Record Time and prior to the Separation Time fix a record date
    for the making of a distribution to all holders of Common Shares
    (including any such distribution made in connection with a
    merger or amalgamation) of evidences of indebtedness, cash
    (other than an annual cash dividend or a dividend referred to in
    Section 2.4(a)(i), but including any dividend payable in
    securities other than Common Shares), assets or rights, options
    or warrants (excluding those referred to in
    Subsection 2.4(b) hereof), the Exercise Price to be in
    effect after such record date shall be determined by multiplying
    the Exercise Price in effect immediately prior to such record
    date by a fraction:



| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)  | the numerator of which shall be the Market Price
    per Common Share on such record date, less the fair market value
    (as determined in good faith by the Board of Directors, whose
    determination shall be described in a statement filed with the
    Rights Agent and shall be binding on the Rights Agent and the
    holders of Rights), on a per share basis, of the portion of the
    cash, assets, evidences of indebtedness, rights, options or
    warrants so to be distributed; and
|
| | (ii) | the denominator of which shall be such Market
    Price per Common Share.                                                                                                                                                                                                                                                                                                                                                                                                                              



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Such adjustments shall be made successively
    whenever such a record date is fixed, and in the event that such
    a distribution is not so made, the Exercise Price shall be
    adjusted to be the Exercise Price which would have been in
    effect if such record date had not been fixed.



| |     |                                                                                                                                                                                                               
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (d) | Notwithstanding anything herein to the contrary,
    no adjustment in the Exercise Price shall be required unless
    such adjustment would require an increase or decrease of at
    least 1% in the Exercise

A-20



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##### 



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Price; provided, however, that any adjustments
    which by reason of this Subsection 2.4(d) are not required
    to be made shall be carried forward and taken into account in
    any subsequent adjustment. All calculations under
    Section 2.4 shall be made to the nearest cent or to the
    nearest ten-thousandth of a share. Notwithstanding the first
    sentence of this Subsection 2.4(d), any adjustment required
    by Section 2.4 shall be made no later than the earlier of:



| |      |                                                                                         
| | ---- | ----------------------------------------------------------------------------------------
| | (i)  | three years from the date of the transaction
    which gives rise to such adjustment; or
|
| | (ii) | the Expiration Date.                                                                    



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (e) | In the event Inco shall at any time after the
    Record Time and prior to the Separation Time issue any shares of
    capital stock (other than Common Shares), or rights, options or
    warrants to subscribe for or purchase any such capital stock, or
    securities convertible into or exchangeable for any such capital
    stock in a transaction referred to in Clauses 2.4(a)(i) or
    (iv) above, if the Board of Directors acting in good faith
    determines that the adjustments contemplated by
    Subsections 2.4(a), (b) and (c) above in connection
    with such transaction will not appropriately protect the
    interests of the holders of Rights, the Board of Directors may
    determine what other adjustments to the Exercise Price, number
    of Rights and/or securities purchasable upon exercise of Rights
    would be appropriate and, notwithstanding
    Subsections 2.4(a), (b) and (c) above, such
    adjustments, rather than the adjustments contemplated by
    Subsections 2.4(a), (b) and (c) above, shall be made,
    subject to the prior consent of the holders of the Voting Shares
    or the Rights as set forth in Subsection 5.4(b) or (c), and
    Inco and the Rights Agent shall have authority upon receiving
    such prior consent of the holders of the Voting Shares to amend
    this Agreement as appropriate to provide for such adjustments.
|
| | (f) | Each Right originally issued by Inco subsequent
    to any adjustment made to the Exercise Price hereunder shall
    evidence the right to purchase, at the adjusted Exercise Price,
    the number of Common Shares purchasable from time to time
    hereunder upon exercise of a Right immediately prior to such
    issue, all subject to further adjustment as provided for herein.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (g) | Irrespective of any adjustment or change in the
    Exercise Price or the number of Common Shares issuable upon the
    exercise of the Rights, the Rights Certificates theretofore and
    thereafter issued may continue to express the Exercise Price per
    Common Share and the number of Common Shares which were
    expressed in the initial Rights Certificates issued hereunder.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (h) | In any case in which this Section 2.4 shall
    require that an adjustment in the Exercise Price be made
    effective as of a record date for a specified event, Inco may
    elect to defer until the occurrence of such event the issuance
    to the holder of any Right exercised after such record date the
    number of Common Shares and other securities of Inco, if any,
    issuable upon such exercise over and above the number of Common
    Shares and other securities of Inco, if any, issuable upon such
    exercise on the basis of the Exercise Price in effect prior to
    such adjustment; provided, however, that Inco shall deliver to
    such holder an appropriate instrument evidencing such
    holders right to receive such additional shares
    (fractional or otherwise) or other securities upon the
    occurrence of the event requiring such adjustment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | (i) | Notwithstanding anything contained in this
    Section 2.4 to the contrary, Inco shall be entitled to make
    such reductions in the Exercise Price, in addition to those
    adjustments expressly required by this Section 2.4, as and
    to the extent that in their good faith judgment the Board of
    Directors shall determine to be advisable, in order that any:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        



| |       |                                                                                                                                                         
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | consolidation or subdivision of Common Shares;                                                                                                          
|
| | (ii)  | issuance (wholly or in part for cash) of Common
    Shares or securities that by their terms are convertible into or
    exchangeable for Common Shares;
|
| | (iii) | stock dividends; or                                                                                                                                     
|
| | (iv)  | issuance of rights, options or warrants referred
    to in this Section 2.4,                                                                            

A-21



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##### 





| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | hereafter made by Inco to holders of its Common
    Shares, shall not be taxable to such shareholders.



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (j) | If, as a result of an adjustment made pursuant to
    Section 3.1, the holder of any Right thereafter exercised
    shall become entitled to receive any securities other than
    Common Shares, thereafter the number of such other securities so
    receivable upon exercise of any Right and the applicable
    Exercise Price thereof shall be subject to adjustment from time
    to time in a manner and on terms as nearly equivalent as may be
    practicable to the provisions with respect to the Common Shares
    contained in the foregoing subsections of this Section 2.4
    and the provisions of this Agreement with respect to the Common
    Shares shall apply on like terms to any such other securities.
|
| | (k) | Whenever an adjustment to the Exercise Price or a
    change in the securities purchasable upon the exercise of Rights
    is made pursuant to this Section 2.4, the Corporation shall
    promptly:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



| |       |                                                                                                                               
| | ----- | ------------------------------------------------------------------------------------------------------------------------------
| | (i)   | prepare a certificate setting forth such
    adjustment and a brief statement of the facts accounting for
    such adjustment;
|
| | (ii)  | file with the Rights Agent and with each transfer
    agent for the Common Shares, a copy of such certificate; and            
|
| | (iii) | cause notice of the particulars of such
    adjustment or change to be given to the holders of the Rights.                    



| |                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Failure to file such certificate or to cause such
    notice to be given as aforesaid, or any defect therein, shall
    not affect the validity of any such adjustment or change.

2.5   Date on Which Exercise Is
Effective

Each Person in whose name any certificate for
Common Shares or other securities, if applicable, is issued upon
the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the Common Shares or other
securities, if applicable, represented thereon, and such
certificate shall be dated the date upon which the Rights
Certificate evidencing such Rights was duly surrendered in
accordance with Subsection 2.3(d) (together with a duly
completed Election to Exercise) and payment of the Exercise
Price for such Rights (and any applicable transfer taxes and
other governmental charges payable by the exercising holder
hereunder) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Common Share
transfer books of Inco are closed, such Person shall be deemed
to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on
which the Common Share transfer books of Inco are open.

2.6   Execution,
Authentication, Delivery and Dating of Rights
Certificates



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | The Rights Certificates shall be executed on
    behalf of Inco by its Chairman of the Board, President or any
    Executive or Senior Vice President or any Vice President and by
    its Secretary or one of its Assistant Secretaries under the
    corporate seal of Inco reproduced thereon. The signature of any
    of these officers on the Rights Certificates may be manual or
    facsimile. Rights Certificates bearing the manual or facsimile
    signatures of individuals who were at any time the proper
    officers of Inco shall bind Inco, notwithstanding that such
    individuals or any of them have ceased to hold such offices
    either before or after the countersignature and delivery of such
    Rights Certificates.
|
| | (b) | Promptly after Inco learns of the Separation
    Time, Inco will notify the Rights Agent of such Separation Time
    and will deliver Rights Certificates executed by Inco to the
    Rights Agent for countersignature, and the Rights Agent shall
    countersign (in a manner satisfactory to Inco) and send such
    Rights Certificates to the holders of the Rights pursuant to
    Subsection 2.3(c) hereof. No Rights Certificate shall be
    valid for any purpose until countersigned by the Rights Agent as
    aforesaid.                                                                                                                                                                                                                 
|
| | (c) | Each Rights Certificate shall be dated the date
    of countersignature thereof.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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##### 



2.7   Registration, Transfer
and Exchange



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Inco will cause to be kept a register (the
    Rights Register) in which, subject to such
    reasonable regulations as it may prescribe, Inco will provide
    for the registration and transfer of Rights. The Rights Agent is
    hereby appointed registrar for the Rights (the Rights
    Registrar) for the purpose of maintaining the Rights
    Register for Inco and registering Rights and transfers of Rights
    as herein provided and the Rights Agent hereby accepts such
    appointment. In the event that the Rights Agent shall cease to
    be the Rights Registrar, the Rights Agent will have the right to
    examine the Rights Register at all reasonable times.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | After the Separation Time and prior to the
    Expiration Time, upon surrender for registration of transfer or
    exchange of any Rights Certificate, and subject to the
    provisions of Subsection 2.7(c), Inco will execute, and the
    Rights Agent will countersign and deliver, in the name of the
    holder or the designated transferee or transferees, as required
    pursuant to the holders instructions, one or more new
    Rights Certificates evidencing the same aggregate number of
    Rights as did the Rights Certificates so surrendered.
|
| | All Rights issued upon any registration of
    transfer or exchange of Rights Certificates shall be the valid
    obligations of Inco, and such Rights shall be entitled to the
    same benefits under this Agreement as the Rights surrendered
    upon such registration of transfer or exchange.                                                                                                                                                                                                                                                                



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | Every Rights Certificate surrendered for
    registration of transfer or exchange shall be duly endorsed, or
    be accompanied by a written instrument of transfer in form
    satisfactory to Inco or the Rights Agent, as the case may be,
    duly executed by the holder thereof or such holders
    attorney duly authorized in writing. As a condition to the
    issuance of any new Rights Certificate under this
    Section 2.7, Inco may require the payment of a sum
    sufficient to cover any tax or other governmental charge that
    may be imposed in relation thereto and any other expenses
    (including the reasonable fees and expenses of the Rights Agent)
    connected therewith.
|
| | (c) | Inco shall not be required to register the
    transfer or exchange of any Rights after the Rights have been
    terminated pursuant to the provisions of this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

2.8   Mutilated, Destroyed,
Lost and Stolen Rights Certificates



| |     |                                                                                                                                                                                                                                                                                                                                
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | If any mutilated Rights Certificate is
    surrendered to the Rights Agent prior to the Expiration Time,
    Inco shall execute and the Rights Agent shall countersign and
    deliver in exchange therefor a new Rights Certificate evidencing
    the same number of Rights as did the Rights Certificate so
    surrendered.
|
| | (b) | If there shall be delivered to Inco and the
    Rights Agent prior to the Expiration Time:                                                                                                                                                                                                                                     



| |      |                                                                                                                                
| | ---- | -------------------------------------------------------------------------------------------------------------------------------
| | (i)  | evidence to their reasonable satisfaction of the
    destruction, loss or theft of any Rights Certificate; and                 
|
| | (ii) | such security or indemnity as may be reasonably
    required by them to save each of them and any of their agents
    harmless,



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | then, in the absence of notice to Inco or the
    Rights Agent that such Rights Certificate has been acquired by a
    bona fide purchaser, Inco shall execute and upon
    Incos request the Rights Agent shall countersign and
    deliver, in lieu of any such destroyed, lost or stolen Rights
    Certificate, a new Rights Certificate evidencing the same number
    of Rights as did the Rights Certificate so destroyed, lost or
    stolen.



| |     |                                                                                                                                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | As a condition to the issuance of any new Rights
    Certificate under this Section 2.8, Inco may require the
    payment of a sum sufficient to cover any tax or other
    governmental charge that may be imposed in relation thereto and
    any other expenses (including the reasonable fees and expenses
    of the Rights Agent) connected therewith.

A-23



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##### 





| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (d) | Every new Rights Certificate issued pursuant to
    this Section 2.8 in lieu of any destroyed, lost or stolen
    Rights Certificate shall evidence the contractual obligation of
    Inco, whether or not the destroyed, lost or stolen Rights
    Certificate shall be at any time enforceable by anyone, and
    shall be entitled to all the benefits of this Agreement equally
    and proportionately with any and all other Rights duly issued
    hereunder.

2.9   Persons Deemed Owners of
Rights

Inco, the Rights Agent and any agent of Inco or
the Rights Agent may deem and treat the Person in whose name a
Rights Certificate (or, prior to the Separation Time, the
associated Common Share certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby for
all purposes whatsoever. As used in this Agreement, unless the
context otherwise requires, the term holder of any
Rights shall mean the registered holder of such Rights (or,
prior to the Separation Time, of the associated Common Share).

2.10 Delivery and Cancellation of
Certificates

All Rights Certificates surrendered upon exercise
or for redemption, registration of transfer or exchange shall,
if surrendered to any Person other than the Rights Agent, be
delivered to the Rights Agent and, in any case, shall be
promptly cancelled by the Rights Agent. Inco may at any time
deliver to the Rights Agent for cancellation any Rights
Certificates previously countersigned and delivered hereunder
which Inco may have acquired in any manner whatsoever, and all
Rights Certificates so delivered shall be promptly cancelled by
the Rights Agent. No Rights Certificate shall be countersigned
in lieu of or in exchange for any Rights Certificates cancelled
as provided in this Section 2.10, except as expressly
permitted by this Agreement. The Rights Agent shall, subject to
applicable laws, destroy all cancelled Rights Certificates and
deliver a certificate of destruction to Inco.

2.11 Agreement of Rights
Holders

Every holder of Rights, by accepting the same,
consents and agrees with Inco and the Rights Agent and with
every other holder of Rights:



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | to be bound by and subject to the provisions of
    this Agreement, as amended from time to time in accordance with
    the terms hereof, in respect of all Rights held;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (b) | that prior to the Separation Time, each Right
    will be transferable only together with, and will be transferred
    by a transfer of, the associated Common Share certificate
    representing such Right;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | (c) | that after the Separation Time, the Rights
    Certificates will be transferable only on the Rights Register as
    provided herein;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (d) | that prior to due presentment of a Rights
    Certificate (or, prior to the Separation Time, the associated
    Common Share certificate) for registration of transfer, Inco,
    the Rights Agent and any agent of Inco or the Rights Agent may
    deem and treat the Person in whose name the Rights Certificate
    (or, prior to the Separation Time, the associated Common Share
    certificate) is registered as the absolute owner thereof and of
    the Rights evidenced thereby (notwithstanding any notations of
    ownership or writing on such Rights Certificate or the
    associated Common Share certificate made by anyone other than
    Inco or the Rights Agent) for all purposes whatsoever, and
    neither Inco nor the Rights Agent shall be affected by any
    notice to the contrary;
|
| | (e) | that such holder of Rights has waived his right
    to receive any fractional Rights or any fractional shares or
    other securities upon exercise of a Right (except as provided
    herein);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | (f) | that without the approval of any holder of Rights
    or Voting Shares and upon the sole authority of the Board of
    Directors, this Agreement may be supplemented or amended from
    time to time pursuant to Subsection 5.4(a) and the last
    sentence of the penultimate paragraph of Subsection 2.4(a);
    and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (g) | that notwithstanding anything in this Agreement
    to the contrary, neither Inco nor the Rights Agent shall have
    any liability to any holder of a Right or to any other Person as
    a result of its inability to perform any of its obligations
    under this Agreement by reason of any preliminary or permanent                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

A-24



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##### 



| |  |                                                                                                                                                                                                                                                                                                                                                                  
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | injunction or other order, decree or ruling
    issued by a court of competent jurisdiction or by a government,
    regulatory or administrative agency or commission, or any
    statute, rule, regulation or executive order promulgated or
    enacted by any governmental authority, prohibiting or otherwise
    restraining performance of such obligation.

2.12 Rights Certificate Holder Not Deemed
a Shareholder

No holder, as such, of any Rights or Rights
Certificate shall be entitled to vote, receive dividends or be
deemed for any purpose whatsoever the holder of any Common Share
or any other share or security of Inco which may at any time be
issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Rights Certificate be
construed or deemed or confer upon the holder of any Right or
Rights Certificate, as such, any right, title, benefit or
privilege of a holder of Common Shares or any other shares or
securities of Inco or any right to vote at any meeting of
shareholders of Inco whether for the election of directors or
otherwise or upon any matter submitted to holders of Common
Shares or any other shares of Inco at any meeting thereof, or to
give or withhold consent to any action of Inco, or to receive
notice of any meeting or other action affecting any holder of
Common Shares or any other shares of Inco except as expressly
provided herein, or to receive dividends, distributions or
subscription rights, or otherwise, until the Right or Rights
evidenced by Rights Certificates shall have been duly exercised
in accordance with the terms and provisions hereof.

ARTICLE 3

ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF
CERTAIN TRANSACTIONS


3.1   Flip-in Event



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Subject to Subsection 3.1(b) and
    Section 5.1, in the event that prior to the Expiration Time
    a Flip-in Event shall occur, each Right shall constitute,
    effective at the close of business on the tenth Trading Day
    after the Stock Acquisition Date, the right to purchase from
    Inco, upon exercise of the Right in accordance with the terms of
    this Agreement, that number of Common Shares having an aggregate
    Market Price on the date of consummation or occurrence of such
    Flip-in Event equal to twice the Exercise Price for an amount in
    cash equal to the Exercise Price (such right to be appropriately
    adjusted in a manner analogous to the applicable adjustment
    provided for in Section 2.4 in the event that after the
    consummation or occurrence or event, an event of a type
    analogous to any of the events described in Section 2.4
    shall have occurred);
|
| | (b) | Notwithstanding anything in this Agreement to the
    contrary, upon the occurrence of any Flip-in Event, any Rights
    that are or were Beneficially owned on or after the earlier of
    the Separation Time or the Stock Acquisition Date by:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)  | an Acquiring Person (or any Affiliate or
    Associate of an Acquiring Person or any Person acting jointly or
    in concert with an Acquiring Person or any Affiliate or
    Associate of an Acquiring Person); or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | (ii) | a transferee of Rights, directly or indirectly,
    from an Acquiring Person (or any Affiliate or Associate of an
    Acquiring Person or any Person acting jointly or in concert with
    an Acquiring Person or any Affiliate or Associate of an
    Acquiring Person), where such transferee becomes a transferee
    concurrently with or subsequent to the Acquiring Person becoming
    such in a transfer that the Board of Directors has determined is
    part of a plan, arrangement or scheme of an Acquiring Person (or
    any Affiliate or Associate of an Acquiring Person or any Person
    acting jointly or in concert with an Acquiring Person or any
    Associate or Affiliate of an Acquiring Person), that has the
    purpose or effect of avoiding Clause 3.1(b)(i),



| |                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | shall become null and void without any further
    action, and any holder of such Rights (including transferees)
    shall thereafter have no right to exercise such Rights under any
    provision of this Agreement and further shall thereafter not
    have any other rights whatsoever with respect to such Rights,
    whether under any provision of this Agreement or otherwise.

A-25



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##### 





| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | From and after the Separation Time, Inco shall do
    all such acts and things as shall be necessary and within its
    power to ensure compliance with the provisions of
    Section 3.1, including without limitation, all such acts
    and things as may be required to satisfy the requirements of the
    Canada Business Corporations Act, the Securities
    Act (Ontario), the U.S. Securities Act, the
    U.S. Exchange Act and the securities laws or
    comparable legislation in each of the provinces of Canada and
    each of the States of the United States in respect of the issue
    of Common Shares upon the exercise of Rights in accordance with
    this Agreement.
|
| | (d) | Any Rights Certificate that would represent
    Rights Beneficially owned by a Person described in either
    Clause 3.1(b)(i) or (ii) or transferred to any nominee
    of any such Person, and any Rights Certificate that would be
    issued upon transfer, exchange, replacement or adjustment of any
    other Rights Certificate referred to in this sentence, shall
    either not be issued upon the instruction of Inco in writing to
    the Rights Agent or contain the following legend:                                                                                                                                                                                          



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Rights represented by this Rights Certificate
    were issued to a Person who was an Acquiring Person or an
    Affiliate or an Associate of an Acquiring Person (as such terms
    are defined in the Shareholder Rights Plan Agreement) or a
    Person who was acting jointly or in concert with an Acquiring
    Person or an Affiliate or Associate of an Acquiring Person. This
    Rights Certificate and the Rights represented hereby are void or
    shall become void in the circumstances specified in
    Subsection 3.1(b) of the Shareholder Rights Plan Agreement.                              
|
| | Provided, however, that the Rights Agent shall
    not be under any responsibility to ascertain the existence of
    facts that would require the imposition of such legend but shall
    impose such legend only if instructed to do so by Inco in
    writing or if a holder fails to certify upon transfer or
    exchange in the space provided on the Rights Certificate that
    such holder is not a Person described in such legend. The
    issuance of a Rights Certificate without the legend referred to
    in this Subsection 3.1(d) shall be of no effect on the
    provisions of Subsection 3.1(b).

ARTICLE 4

THE RIGHTS AGENT


4.1   General



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Inco hereby appoints the Rights Agent to act as
    agent for Inco and the holders of the Rights in accordance with
    the terms and conditions of this Agreement, and the Rights Agent
    hereby accepts such appointment. Inco may from time to time
    appoint one or more co-Rights Agents (Co-Rights
    Agents) as it may deem necessary or desirable, subject to
    the approval of the Rights Agent. In the event Inco appoints one
    or more Co-Rights Agents, the respective duties of the Rights
    Agent and Co-Rights Agents shall be as Inco may determine with
    the approval of the Rights Agent and the Co-Rights Agents. Inco
    also agrees to indemnify the Rights Agent, its officers,
    directors and employees for, and to hold it harmless against,
    any loss, liability, or expense, incurred without negligence,
    bad faith or wilful misconduct on the part of the Rights Agent,
    for anything done or omitted by the Rights Agent in connection
    with the acceptance and administration of this Agreement,
    including legal costs and expenses, which right to
    indemnification will survive the termination of this Agreement
    or the resignation or removal of the Rights Agent.
|
| | (b) | The Rights Agent shall be protected and shall
    incur no liability for or in respect of any action taken,
    suffered or omitted by it in connection with its administration
    of this Agreement in reliance upon any certificate for Common
    Shares, Rights Certificate, certificate for other securities of
    Inco, instrument of assignment or transfer, power of attorney,
    endorsement, affidavit, letter, notice, direction, consent,
    certificate, opinion, statement, or other paper or document
    believed by it to be genuine and to be signed, executed and,
    where necessary, verified or acknowledged, by the proper Person
    or Persons.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

A-26



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##### 





| |                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Inco shall inform the Rights Agent in a
    reasonably timely manner of events which may materially affect
    the administration of this Agreement by the Rights Agent and, at
    any time upon request, shall provide to the Rights Agent an
    incumbency certificate certifying the then current officers of
    Inco.

4.2   Merger, Amalgamation or
Consolidation or Change of Name of Rights Agent



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Any corporation into which the Rights Agent may
    be merged or amalgamated or with which it may be consolidated,
    or any corporation resulting from any merger, amalgamation,
    statutory arrangement or consolidation to which the Rights Agent
    is a party, or any corporation succeeding to the securityholder
    services business of the Rights Agent, will be the successor to
    the Rights Agent under this Agreement without the execution or
    filing of any paper or any further act on the part of any of the
    parties hereto, provided that such corporation would be eligible
    for appointment as a successor Rights Agent under the provisions
    of Section 4.4 hereof. In case at the time such successor
    Rights Agent succeeds to the agency created by this Agreement
    any of the Rights Certificates have been countersigned but not
    delivered, any successor Rights Agent may adopt the
    countersignature of the predecessor Rights Agent and deliver
    such Rights Certificates so countersigned; and in case at that
    time any of the Rights have not been countersigned, any
    successor Rights Agent may countersign such Rights Certificates
    in the name of the predecessor Rights Agent or in the name of
    the successor Rights Agent; and in all such cases such Rights
    Certificates will have the full force provided in the Rights
    Certificates and in this Agreement.
|
| | (b) | In case at any time the name of the Rights Agent
    is changed and at such time any of the Rights Certificates shall
    have been countersigned but not delivered, the Rights Agent may
    adopt the countersignature under its prior name and deliver
    Rights Certificates so countersigned; and in case at that time
    any of the Right Certificates shall not have been countersigned,
    the Rights Agent may countersign such Rights Certificates either
    in its prior name or in its changed name; and in all such cases
    such Right Certificates shall have the full force provided in
    the Right Certificates and in this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

4.3   Duties of Rights
Agent

The Rights Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms
and conditions, all of which Inco and the holders of
certificates for Common Shares and Rights Certificates, by their
acceptance thereof, shall be bound:



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | the Rights Agent may retain and consult with
    legal counsel (who may be legal counsel for Inco) and the
    opinion of such counsel will be full and complete authorization
    and protection to the Rights Agent as to any action taken or
    omitted by it in good faith and in accordance with such opinion
    and the Rights Agent may also consult with such other experts as
    the Rights Agent shall consider necessary or appropriate to
    properly carry out the duties and obligations imposed under this
    Agreement (at Incos expense) and the Rights Agent shall be
    entitled to act and rely in good faith on the advice of any such
    expert;                                                                                                                                                                                       
|
| | (b) | whenever in the performance of its duties under
    this Agreement, the Rights Agent deems it necessary or desirable
    that any fact or matter be proved or established by Inco prior
    to taking or suffering any action hereunder, such fact or matter
    (unless other evidence in respect thereof be herein specifically
    prescribed) may be deemed to be conclusively proved and
    established by a certificate signed by a Person believed by the
    Rights Agent to be the Chairman of the Board, President, any
    Vice President, Treasurer, Secretary, or any Assistant Secretary
    of Inco and delivered to the Rights Agent; and such certificate
    will be full authorization to the Rights Agent for any action
    taken or suffered in good faith by it under the provisions of
    this Agreement in reliance upon such certificate;
|
| | (c) | the Rights Agent will be liable hereunder for its
    own negligence, bad faith or wilful misconduct;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

A-27



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##### 





| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (d) | the Rights Agent will not be liable for or by
    reason of any of the statements of fact or recitals contained in
    this Agreement or in the certificates for Common Shares or the
    Rights Certificates (except its countersignature thereof) or be
    required to verify the same, but all such statements and
    recitals are and will be deemed to have been made by Inco only;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | (e) | the Rights Agent will not be under any
    responsibility in respect of the validity of this Agreement or
    the execution and delivery hereof (except the due authorization,
    execution and delivery hereof by the Rights Agent) or in respect
    of the validity or execution of any certificate for a Common
    Share or Rights Certificate (except its countersignature
    thereof); nor will it be responsible for any breach by Inco of
    any covenant or condition contained in this Agreement or in any
    Rights Certificate; nor will it be responsible for any change in
    the exerciseability of the Rights (including the Rights becoming
    void pursuant to Subsection 3.1(b) hereof) or any
    adjustment required under the provisions of Section 2.4
    hereof or responsible for the manner, method or amount of any
    such adjustment or the ascertaining of the existence of facts
    that would require any such adjustment (except with respect to
    the exercise of Rights after receipt of the certificate
    contemplated by Section 2.4 describing any such
    adjustment); nor will it by any act hereunder be deemed to make
    any representation or warranty as to the authorization of any
    Common Shares to be issued pursuant to this Agreement or any
    Rights or as to whether any Common Shares will, when issued, be
    duly and validly authorized, executed, issued and delivered and
    fully paid and non-assessable;
|
| | (f) | Inco agrees that it will perform, execute,
    acknowledge and deliver or cause to be performed, executed,
    acknowledged and delivered all such further and other acts,
    instruments and assurances as may reasonably be required by the
    Rights Agent for the carrying out or performing by the Rights
    Agent of the provisions of this Agreement;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | (g) | the Rights Agent is hereby authorized and
    directed to accept instructions in writing with respect to the
    performance of its duties hereunder from any individual believed
    by the Rights Agent to be the Chairman of the Board, President,
    any Executive or Senior Vice President or any other Vice
    President, Treasurer, Secretary or any Assistant Secretary of
    Inco, and to apply to such individuals for advice or
    instructions in connection with its duties, and it shall not be
    liable for any action taken or suffered by it in good faith in
    accordance with instructions of any such individual;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (h) | the Rights Agent and any shareholder or
    stockholder, director, officer or employee of the Rights Agent
    may buy, sell or deal in Common Shares, Rights or other
    securities of Inco or become pecuniarily interested in any
    transaction in which Inco may be interested, or contract with or
    lend money to Inco or otherwise act as fully and freely as
    though it were not the Rights Agent under this Agreement.
    Nothing herein shall preclude the Rights Agent from acting in
    any other capacity for Inco or for any other legal entity; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (i) | the Rights Agent may execute and exercise any of
    the rights or powers hereby vested in it or perform any duty
    hereunder either itself or by or through its attorneys or
    agents, and the Rights Agent will not be answerable or
    accountable for any act, default, neglect or misconduct of any
    such attorneys or agents or for any loss to Inco resulting from
    any such act, default, neglect or misconduct, provided
    reasonable care was exercised in the selection and continued
    employment thereof.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

4.4   Change of Rights
Agent

The Rights Agent may resign and be discharged
from its duties under this Agreement upon 60 days
notice (or such lesser notice as is acceptable to Inco) in
writing mailed to Inco and to each transfer agent of Common
Shares by registered or certified mail. Inco may remove the
Rights Agent upon 60 days notice in writing, mailed
to the Rights Agent and to each transfer agent of the Common
Shares by registered or certified mail. If the Rights Agent
should resign or be removed or otherwise become incapable of
acting, Inco will appoint a successor to the Rights Agent. If
Inco fails to make such appointment within a period of
60 days after such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent, then by prior written notice to Inco
the resigning Rights Agent (at Incos expense) or the
holder of any Rights (which

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##### 



holder shall, with such notice, submit such
holders Rights Certificate, if any, for inspection by
Inco), may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent,
whether appointed by Inco or by such a court, shall be a
corporation incorporated under the laws of Canada or a province
thereof authorized to carry on the business of a trust company
in the Province of Ontario. After appointment, the successor
Rights Agent will be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as
Rights Agent without further act or deed; but the predecessor
Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute
and deliver any further assurance, conveyance, act or deed
necessary for the purpose. Not later than the effective date of
any such appointment, Inco will file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the
Common Shares, and mail a notice thereof in writing to the
holders of the Rights in accordance with Section 5.9.
Failure to give any notice provided for in this
Section 4.4, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of
the Rights Agent or the appointment of any successor Rights
Agent, as the case may be.


ARTICLE 5

MISCELLANEOUS


5.1   Redemption and
Waiver



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | The Board of Directors shall waive the
    application of Section 3.1 in respect of the occurrence of
    any Flip-in Event if the Board of Directors has determined,
    following a Stock Acquisition Date and prior to the Separation
    Time, that a Person became an Acquiring Person by inadvertence
    and without any intention to become, or knowledge that it would
    become, an Acquiring Person under this Agreement and, in the
    event that such a waiver is granted by the Board of Directors,
    such Stock Acquisition Date shall be deemed not to have
    occurred. Any such waiver pursuant to this
    Subsection 5.1(a) must be on the condition that such
    Person, within 14 days after the foregoing determination by
    the Board of Directors or such earlier or later date as the
    Board of Directors may determine (the Disposition
    Date), has reduced its Beneficial ownership of Voting
    Shares such that the Person is no longer an Acquiring Person. If
    the Person remains an Acquiring Person at the close of business
    on the Disposition Date, the Disposition Date shall be deemed to
    be the date of occurrence of a further Stock Acquisition Date
    and Section 3.1 shall apply thereto.
|
| | (b) | The Board of Directors acting in good faith may,
    prior to a Flip-in Event having occurred, upon prior written
    notice delivered to the Rights Agent, determine to waive the
    application of Section 3.1 to a Flip-in Event that may
    occur by reason of a Take-over Bid made by means of take-over
    bid circular to all holders of record of Voting Shares (which
    for greater certainty shall not include the circumstances
    described in Subsection 5.1(a)), provided that if the Board
    of Directors waives the application of Section 3.1 to a
    particular Flip-in Event pursuant to this
    Subsection 5.1(b), the Board of Directors shall be deemed
    to have waived the application of Section 3.1 to any other
    Flip-in Event occurring by reason of any Take-Over Bid which is
    made by means of a Take-Over Bid circular to all holders of
    record of Voting Shares prior to the expiry of any Take-Over Bid
    (as the same may be extended from time to time) in respect of
    which a waiver is, or is deemed to have been granted under this
    Subsection 5.1(b).                                                                                                                                      
|
| | (c) | In the event that prior to the occurrence of a
    Flip-in Event a Person acquires, pursuant to a Permitted Bid, a
    Competing Permitted Bid or an Exempt Acquisition under
    Subsection 5.1(b), outstanding Voting Shares, then the
    Board of Directors shall, immediately upon the consummation of
    and acquisition without further formality be deemed to have
    elected to redeem the Rights at a redemption price of $0.0001
    per Right appropriately adjusted in a manner analogous to the
    applicable adjustment provided for in Section 2.4 if an
    event of the type analogous to any of the events described in
    Section 2.4 shall have occurred (such redemption price
    being herein referred to as the Redemption Price).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (d) | The Board of Directors may, with the prior
    approval of the holders of Voting Shares or Rights given in
    accordance with the terms of Section 5.4, at any time prior
    to the occurrence of a Flip-in Event elect to redeem all but not
    less than all of the then outstanding Rights at the Redemption
    Price appropriately adjusted in a manner analogous to the
    applicable adjustments provided for in Section 2.4, which
    adjustments shall only be made in the event that an event of the
    type analogous to any of the events described in
    Section 2.4 shall have occurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | (e) | The Board of Directors may, prior to the close of
    business on the tenth Trading Day following a Stock Acquisition
    Date or such later Business Day as they may from time to time
    determine, upon prior written notice delivered to the Rights
    Agent, waive the application of Section 3.1 to the related
    Flip-in Event, provided that the Acquiring Person has reduced
    its beneficial ownership of Voting Shares (or has entered into a
    contractual arrangement with the Corporation, acceptable to the
    Board of Directors, to do so within 10 calendar days of the
    date on which such contractual arrangement is entered into or
    such other date as the Board of Directors may have determined)
    such that at the time the waiver becomes effective pursuant to
    this Subsection 5.1(e) such Person is no longer an
    Acquiring Person. In the event of such a waiver becoming
    effective prior to the Separation Time, for the purposes of this
    Agreement, such Flip-in Event shall be deemed not to have
    occurred.
|
| | (f) | Where a Take-over Bid that is not a Permitted Bid
    Acquisition is withdrawn or otherwise terminated after the
    Separation Time has occurred and prior to the occurrence of a
    Flip-in Event, the Board of Directors may elect to redeem all
    the outstanding Rights at the Redemption Price. Upon the Rights
    being redeemed pursuant to this subsection 5.1(f), all the
    provisions of this Agreement shall continue to apply as if the
    Separation time had not occurred and Rights Certificates
    representing the number of Rights held by each holder of record
    of Common Shares as of the separation Time had not been mailed
    to each such holder and for all purposes of this agreement the
    Separation Time shall be deemed not to have occurred and Inco
    shall be deemed to have issued replacement Rights to the holders
    of its then outstanding Common Shares.                                                                                                                                                            
|
| | (g) | If the Board of Directors is deemed under
    Subsection 5.1(c) to have elected or elects under
    Subsections 5.1(d) or (f) to redeem the Rights, the
    right to exercise the Rights will thereupon, without further
    action and without notice, terminate and the only right
    thereafter of the holders of Rights shall be to receive the
    Redemption Price.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | (h) | Within 10 calendar days after the Board of
    Directors is deemed under Subsection 5.1(c) to have elected
    or elects under Subsection 5.1(d) or (f) to redeem the
    Rights, Inco shall give notice of redemption to the holders of
    the then outstanding Rights by mailing such notice to each such
    holder at his last address as it appears upon the registry books
    of the Rights Agent or, prior to the Separation Time, on the
    registry books of the transfer agent for the Voting Shares. Any
    notice which is mailed in the manner herein provided shall be
    deemed given, whether or not the holder receives the notice.
    Each such notice of redemption will state the method by which
    the payment of the Redemption Price will be made.                                                                                                                                                                                                                                                                                              
|
| | (i) | Inco shall give prompt written notice to the
    Rights Agent of any waiver of the application of
    Section 3.1 pursuant to this subsection 5.1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

5.2   Expiration

No Person shall have any rights whatsoever
pursuant to this Agreement or in respect of any Right after the
Expiration Time, except the Rights Agent as specified in
Subsection 4.1(a) of this Agreement.

5.3   Issuance of New Rights
Certificates

Notwithstanding any of the provisions of this
Agreement or of the Rights to the contrary, Inco may, at its
option, issue new Rights Certificates evidencing Rights in such
form as may be approved by the Board of Directors to reflect any
adjustment or change in the number or kind or class of
securities purchasable upon exercise of Rights made in
accordance with the provisions of this Agreement.

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##### 



5.4   Supplements and
Amendments



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Inco may make any amendments to this Agreement to
    correct any clerical or typographical error or which are
    required to maintain the validity of the Agreement as a result
    of any change in any applicable legislation, regulations or
    rules thereunder. Notwithstanding anything in this
    Section 5.4 to the contrary, no amendment shall be made to
    the provisions of ARTICLE 4 except with the written concurrence
    of the Rights Agent to such supplement or amendment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | (b) | Subject to Section 5.4(a), Inco may, with
    the prior consent of the holders of Voting Shares obtained as
    set forth below, at any time before the Separation Time, amend,
    vary or rescind any of the provisions of this Agreement and the
    Rights (whether or not such action would materially adversely
    affect the interests of the holders of Rights generally). Such
    consent shall be deemed to have been given if provided by the
    holders of Voting Shares at a Special Meeting, which Special
    Meeting shall be called and held in compliance with applicable
    laws and regulatory requirements and the requirements in the
    articles and by-laws of Inco. Subject to compliance with any
    requirements imposed by the foregoing, consent shall be given if
    the proposed amendment, variation or rescission is approved by
    the affirmative vote of a majority of the votes cast by all
    holders of Voting Shares (other than any holder who does not
    qualify as an Independent Shareholder, with respect to all
    Voting Shares Beneficially owned by such Person), represented in
    person or by proxy at the Special Meeting.                                                                                                                                                                                                                                                                                  
|
| | (c) | Inco may, with the prior consent of the holders
    of Rights obtained as set forth below, at any time after the
    Separation Time and before the Expiration Time, amend, vary or
    rescind any of the provisions of this Agreement and the Rights
    (whether or not such action would materially adversely affect
    the interests of the holders of Rights generally), provided that
    no such amendment, variation or deletion shall be made to the
    provisions of ARTICLE 4 except with the written concurrence of
    the Rights Agent thereto. Such consent shall be deemed to have
    been given if provided by the holders of Rights at a Rights
    Holders Special Meeting, which Rights Holders
    Special Meeting shall be called and held in compliance with
    applicable laws and regulatory requirements and, to the extent
    possible, with the requirements in the articles and by-laws of
    Inco applicable to meetings of holders of Common Shares, applied
    mutatis mutandis. Subject to compliance with any
    requirements imposed by the foregoing, consent shall be given if
    the proposed amendment, variation or rescission is approved by
    the affirmative vote of a majority of the votes cast by holders
    of Rights (other than holders of Rights whose Rights have become
    null and void pursuant to Subsection 3.1(b)), represented
    in person or by proxy at the Rights Holders Special
    Meeting.
|
| | (d) | Any approval of the holders of Rights shall be
    deemed to have been given if the action requiring such approval
    is authorized by the affirmative votes of the holders of Rights
    present or represented at and entitled to be voted at a meeting
    of the holders of Rights and representing a majority of the
    votes cast in respect thereof. For the purposes hereof, each
    outstanding Right (other than Rights which are null and void
    pursuant to the provisions hereof) shall be entitled to one
    vote, and the procedures for the calling, holding and conduct of
    the meeting shall be those, as nearly as may be, which are
    provided in Incos by-laws and the Canada Business
    Corporation Act with respect to the meetings of holders of
    Common Shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | (e) | Any amendments made by Inco to this Agreement
    pursuant to Subsection 5.4(a) which are required to
    maintain the validity of this Agreement as a result of any
    change in any applicable legislation, regulation or rule
    thereunder shall:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



| |      |                                                                                                                                                                                                                                                              
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)  | if made before the Separation Time, be submitted
    to the holders of Voting Shares at the next meeting of
    shareholders and the holders of Voting Shares may, by the
    majority referred to in Subsection 5.4(b) confirm or reject
    such amendment;
|
| | (ii) | if made after the Separation Time, be submitted
    to the holders of Rights at a meeting to be called for on a date
    not later than immediately following the next meeting of
    shareholders of                                                        

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##### 



| |  |                                                                                                                                                    
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Inco and the holders of Rights may, by resolution
    passed by the majority referred to in Subsection 5.4(d)
    confirm or reject such amendment.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Any such amendment shall be effective from the
    date of the resolution of the Board of Directors adopting such
    amendment, until it is confirmed or rejected or until it ceases
    to be effective (as described in the next sentence) and, where
    such amendment is confirmed, it continues in effect in the form
    so confirmed. If such amendment is rejected by the shareholders
    or the holders of Rights or is not submitted to the shareholders
    or holders of Rights as required, then such amendment shall
    cease to be effective from and after the termination of the
    meeting at which it was rejected or to which it should have been
    but was not submitted or from and after the date of the meeting
    of holders of Rights that should have been but was not held, and
    no subsequent resolution of the Board of Directors to amend this
    Agreement to substantially the same effect shall be effective
    until confirmed by the shareholders or holders of Rights as the
    case may be.

5.5   Fractional Rights and
Fractional Shares



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Inco shall not be required to issue fractions of
    Rights or to distribute Rights Certificates which evidence
    fractional Rights and Inco shall not be required to pay any
    amount to a holder of record of Rights Certificates in lieu of
    such fractional Rights.                                                                                                                                                                                                                                                                                                                                                          
|
| | (b) | Inco shall not be required to issue fractions of
    Common Shares upon exercise of Rights or to distribute
    certificates which evidence fractional Common Shares. In lieu of
    issuing fractional Common Shares, Inco shall be entitled to pay
    to the registered holders of Rights Certificates, at the time
    such Rights are exercised as herein provided, an amount in cash
    equal to the fraction of the Market Price of one Common Share
    that the fraction of a Common Share that would otherwise be
    issuable upon the exercise of such Right is of one whole Common
    Share at the date of such exercise.

5.6   Rights of
Action

Subject to the terms of this Agreement, all
rights of action in respect of this Agreement, other than rights
of action vested solely in the Rights Agent, are vested in the
respective holders of the Rights. Any holder of Rights, without
the consent of the Rights Agent or of the holder of any other
Rights, may, on such holders own behalf and for such
holders own benefit and the benefit of other holders of
Rights, enforce, and may institute and maintain any suit, action
or proceeding against Inco to enforce such holders right
to exercise such holders Rights, or Rights to which such
holder is entitled, in the manner provided in such holders
Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it
is specifically acknowledged that the holder of Rights would not
have an adequate remedy at law for any breach of this Agreement
and will be entitled to specific performance of the obligations
under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this
Agreement.

5.7   Regulatory
Approvals

Any obligation of Inco or action or event
contemplated by this Agreement shall be subject to the receipt
of any requisite approval or consent from any governmental or
regulatory authority, and without limiting the generality of the
foregoing, necessary approvals of The Toronto Stock Exchange,
the Montreal Exchange and the New York Stock Exchange shall be
obtained, such as approvals relating to the issuance of Common
Shares upon the exercise of Rights under Subsection 2.3(d).

5.8   Declaration as to
Non-Canadian Holders

If in the opinion of the Board of Directors (who
may rely upon the advice of counsel) any action or event
contemplated by this Agreement would require compliance by Inco
with the securities laws or comparable legislation of a
jurisdiction outside Canada, the Board of Directors acting in
good faith shall take such actions as it may deem appropriate to
ensure such compliance. In no event shall Inco or the Rights
Agent be required to issue or deliver Rights or securities
issuable on exercise of Rights to persons who are citizens,
residents or

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##### 



nationals of any jurisdiction other than Canada
or the United States, in which such issue or delivery would be
unlawful without registration of the relevant Persons or
securities for such purposes.


5.9   Notices



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Notices or demands authorized or required by this
    Agreement to be given or made by the Rights Agent or by the
    holder of any Rights to or on Inco shall be sufficiently given
    or made if delivered, sent by registered or certified mail,
    postage prepaid (until another address is filed in writing with
    the Rights Agent), or sent by facsimile or other form of
    recorded electronic communication, charges prepaid and confirmed
    in writing, as follows:                                                                                                                                                                                                                                                                                                                                                 
|
| |     | Inco Limited 
     145 King Street West 
     Suite 1500 
     Toronto, Ontario 
     M5H 4B7                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |     | Attention: Corporate Secretary                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |     | Telecopy No.: (416) 361-7734                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | (b) | Notices or demands authorized or required by this
    Agreement to be given or made by Inco or by the holder of any
    Rights to or on the Rights Agent shall be sufficiently given or
    made if delivered, sent by registered or certified mail, postage
    prepaid (until another address is filed in writing with Inco),
    or sent by facsimile or other form of recorded electronic
    communication, charges prepaid, and confirmed in writing, as
    follows:                                                                                                                                                                                                                                                                                                                                                            
|
| |     | CIBC Mellon Trust Company 
     320 Bay Street 
     Toronto, Ontario 
     M5H 4A6                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |     | Attention: AVP, Client Services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |     | Telecopy No.: (416) 643-5570                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | (c) | Notices or demands authorized or required by this
    Agreement to be given or made by Inco or the Rights Agent to or
    on the holder of any Rights shall be sufficiently given or made
    if delivered or sent by certified mail, postage prepaid,
    addressed to such holder at the address of such holder as it
    appears upon the register of the Rights Agent or, prior to the
    Separation Time, on the register of Inco for its Common Shares.
    Any notice which is mailed or sent in the manner herein provided
    shall be deemed given, whether or not the holder receives the
    notice.                                                                                                                                                                                                                      
|
| | (d) | Any notice given or made in accordance with this
    Section 5.9 shall be deemed to have been given and to have
    been received on the day of delivery, if delivered, on the third
    Business Day (excluding each day during which there exists any
    general interruption of postal service due to strike, lockout or
    other cause) following the mailing thereof, if mailed, and on
    the day of telegraphing, telecopying or sending of the same by
    other means of recorded electronic communication (provided such
    sending is during the normal business hours of the addressee on
    a Business Day and if not, on the first Business Day
    thereafter). Each of Inco and the Rights Agent may from time to
    time change its address for notice by notice to the other given
    in the manner aforesaid.

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##### 





|     |                     
|---- | --------------------
|5.10 | Costs of Enforcement

Inco agrees that if Inco fails to fulfil any of
its obligations pursuant to this Agreement, then Inco will
reimburse the holder of any Rights for the costs and expenses
(including legal fees) incurred by such holder to enforce his
rights pursuant to any Rights or this Agreement.



|     |           
|---- | ----------
|5.11 | Successors

All the covenants and provisions of this
Agreement by or for the benefit of Inco or the Rights Agent
shall bind and enure to the benefit of their respective
successors and assigns hereunder.



|     |                           
|---- | --------------------------
|5.12 | Benefits of this Agreement

Nothing in this Agreement shall be construed to
give to any Person other than Inco, the Rights Agent and the
holders of the Rights any legal or equitable right, remedy or
claim under this Agreement; further, this Agreement shall be for
the sole and exclusive benefit of Inco, the Rights Agent and the
holders of the Rights.



|     |              
|---- | -------------
|5.13 | Governing Law

This Agreement and each Right issued hereunder
shall be deemed to be a contract made under the laws of the
Province of Ontario and for all purposes shall be governed by
and construed in accordance with the laws of such Province
applicable to contracts to be made and performed entirely within
such Province.



|     |             
|---- | ------------
|5.14 | Severability

If any term or provision hereof or the
application thereof to any circumstance shall, in any
jurisdiction and to any extent, be invalid or unenforceable,
such term or provision shall be ineffective only as to such
jurisdiction and to the extent of such invalidity or
unenforceability in such jurisdiction without invalidating or
rendering unenforceable or ineffective the remaining terms and
provisions hereof in such jurisdiction or the application of
such term or provision in any other jurisdiction or to
circumstances other than those as to which it is specifically
held invalid or unenforceable.



|     |               
|---- | --------------
|5.15 | Effective Time

This Agreement is effective and in full force and
effect in accordance with its terms from and after the Effective
Time.

This Agreement must be reconfirmed by a
resolution passed by a majority of the votes cast by all holders
of Voting Shares who vote in respect of such reconfirmation
(other than any holder who does not qualify as an Independent
Shareholder, with respect to all Voting Shares Beneficially
owned by such Person) at the sixth annual meeting following
Incos annual and special meeting of shareholders in 1999.
If this Agreement is not so reconfirmed or is not presented for
reconfirmation at such annual meeting, then this Agreement and
all outstanding Rights shall terminate and be void and of no
further force and effect on and from the date of termination of
the annual meeting; provided that termination shall not occur if
a Flip-in Event has occurred (other than a Flip-in Event which
has been waived pursuant to subsection 5.1(a) or
(b) hereof), prior to the date upon which this Agreement
would otherwise terminate pursuant to this Section 5.15.

5.16 Determinations and Actions by the Board
of Directors

All actions, calculations and determinations
(including all omissions with respect to the foregoing) which
are done or made by the Board hereunder, in good faith, shall
not subject the Board or any director of Inco to any liability
to the holders of the Rights.

5.17 Time of the Essence

Time shall be of the essence in this Agreement.

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##### 



5.18 Execution in Counterparts

This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts
shall together constitute one and the same instrument.

IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be duly
executed as of the date first above written.



| |                          
| | -------------------------
| | INCO LIMITED             
|
| | By:  c/s                 
|
| | CIBC MELLON TRUST COMPANY
|
| | By:  c/s                 
|
| | And By:                  

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##### 



ATTACHMENT 1

INCO LIMITED

SHAREHOLDER RIGHTS PLAN AGREEMENT

[Form of Rights Certificate]



|                |       
|--------------- | ------
|Certificate No. | Rights

THE RIGHTS ARE SUBJECT TO TERMINATION ON THE
TERMS SET FORTH IN THE SHAREHOLDER RIGHTS PLAN AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES (SPECIFIED IN SUBSECTION 3.1(b) OF THE
SHAREHOLDER RIGHTS PLAN AGREEMENT), RIGHTS BENEFICIALLY OWNED BY
AN ACQUIRING PERSON OR CERTAIN RELATED PARTIES, OR TRANSFEREES
OF AN ACQUIRING PERSON OR CERTAIN RELATED PARTIES, MAY BECOME
VOID.

Rights Certificate

This certifies
that ________________________________________, or
registered assigns, is the registered holder of the number of
Rights set forth above, each of which entitles the registered
holder thereof, subject to the terms, provisions and conditions
of the Shareholder Rights Plan Agreement, dated as of
September 14, 1998 and as amended and restated as of
April 28, 1999 and April 17, 2002 and April 20,
2005, as the same may be further amended or supplemented from
time to time, (the Shareholder Rights Plan
Agreement), between Inco Limited, a corporation duly
incorporated under the laws of Canada, and CIBC Mellon Trust
Company, a trust company incorporated under the laws of Canada
(the Rights Agent) (which term shall include any
successor Rights Agent under the Shareholder Rights Plan
Agreement), to purchase from Inco Limited at any time after the
Separation Time (as such term is defined in the Shareholder
Rights Plan Agreement) and prior to the Expiration Time (as such
term is defined in the Shareholder Rights Plan Agreement), one
fully paid common share of Inco Limited (a Common
Share) at the Exercise Price referred to below, upon
presentation and surrender of this Rights Certificate with the
Form of Election to Exercise (in the form provided hereinafter)
duly executed and submitted to the Rights Agent at its principal
office in any of the cities of Vancouver, Toronto and Montreal
or duly executed and submitted to Chase Mellon Trust Company at
its principal office in New York. The Exercise Price shall
initially be $200.00 (Cdn.) per Right and shall be subject to
adjustment in certain events as provided in the Shareholder
Rights Plan Agreement.

This Rights Certificate is subject to all of the
terms and provisions of the Shareholder Rights Plan Agreement,
which terms and provisions are incorporated herein by reference
and made a part hereof and to which Shareholder Rights Plan
Agreement reference is hereby made for a full description of the
rights, limitations of rights, obligations, duties and
immunities thereunder of the Rights Agent, Inco Limited and the
holders of the Rights Certificates. Copies of the Shareholder
Rights Plan Agreement are on file at the registered office of
Inco Limited.

This Rights Certificate, with or without other
Rights Certificates, upon surrender at any of the offices of the
Rights Agent designated for such purpose, may be exchanged for
another Rights Certificate or Rights Certificates of like tenor
and date evidencing an aggregate number of Rights equal to the
aggregate number of Rights evidenced by the Rights Certificate
or Rights Certificates surrendered. If this Rights Certificate
shall be exercised in part, the registered holder shall be
entitled to receive, upon surrender hereof, another Rights
Certificate or Rights Certificates for the number of whole
Rights not exercised.

No holder of this Rights Certificate, as such,
shall be entitled to vote or receive dividends or be deemed for
any purpose the holder of Common Shares or of any other
securities which may at any time be issuable upon the exercise
hereof, nor shall anything contained in the Shareholder Rights
Plan Agreement or herein be construed to confer upon the holder
hereof, as such, any of the Rights of a shareholder of Inco
Limited or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting
thereof, or to give or withhold consent to any corporate action,
or to receive notice of meetings or other actions affecting
shareholders (except as provided in the Shareholder Rights Plan
Agreement), or to receive dividends or subscription rights, or

A-36



---



##### 



otherwise, until the Rights evidenced by this
Rights Certificate shall have been exercised as provided in the
Shareholder Rights Plan Agreement.


This Rights Certificate shall not be valid or
obligatory for any purpose until it shall have been
countersigned by the Rights Agent.

WITNESS the facsimile signature of the proper
officers of Inco Limited and its corporate seal.



|                          | 
|------------------------- | 
|Date:                     | 
|                         
|INCO LIMITED              | 
|                         
|                         
|                         
|By:                       | 
|                         
|Countersigned:            | 
|                         
|CIBC MELLON TRUST COMPANY | 
|                         
|                         
|                         
|By:                       | 
|Authorized Signature      | 
|                         
|                         
|                         
|By:                       | 
|Authorized Signature      | 

A-37



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##### 



FORM OF ASSIGNMENT

(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)

FOR VALUE
RECEIVED  hereby
sells, assigns and transfers
unto



(Please print name and address of transferee.)


the Rights represented by this Rights
Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
___________________________________________________________________________,
as attorney, to transfer the within Rights on the books of Inco
Limited, with full power of substitution.

|                      |  |                                                                                                                                                                                 
|--------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Dated:                |  | Signature                                                                                                                                                                       
|                      |  |                                                                                                                                                                                 
|Signature Guaranteed: |  | (Signature must correspond to name as written
    upon the face of this Rights Certificate in every particular,
    without alteration or enlargement or any change whatsoever.)

Signature must be guaranteed by a member firm of
a recognized stock exchange in Canada, a registered national
securities exchange in the United States, a member of the
National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or
correspondent in Canada or the United States.

A-38



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##### 



CERTIFICATE

(To be completed if true.)

The undersigned party transferring Rights
hereunder, hereby represents, for the benefit of all holders of
Rights and Common Shares, that the Rights evidenced by this
Rights Certificate are not, and, to the knowledge of the
undersigned, have never been, Beneficially owned by an Acquiring
Person or an Affiliate or Associate thereof or a Person acting
jointly or in concert with an Acquiring Person or an Affiliate
or Associate thereof. Capitalized terms shall have the meaning
ascribed thereto in the Shareholder Rights Plan Agreement.



| |          
| | ---------
| |          
| | Signature

(To be attached to each Rights Certificate.)

A-39



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##### 



FORM OF ELECTION TO EXERCISE

(To be exercised by the registered holder if such
holder desires to exercise the Rights Certificate.)

TO: Inco Limited and CIBC Mellon Trust Company

The undersigned hereby irrevocably elects to
exercise  whole
Rights represented by the attached Rights Certificate to
purchase the Common Shares or other securities, if applicable,
issuable upon the exercise of such Rights and requests that
certificates for such securities be issued in the name of:




(Name)





(Address)





(City and Province)





Social Insurance, Social Security or other
taxpayer identification number.


If such number of Rights shall not be all the
Rights evidenced by this Rights Certificate, a new Rights
Certificate for the balance of such Rights shall be registered
in the name of and delivered to:




(Name)





(Address)





(City and Province)





Social Insurance, Social Security or other
taxpayer identification number.


|                      |  |                                                                                                                                                                                 
|--------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Dated:                |  | Signature                                                                                                                                                                       
|                      |  |                                                                                                                                                                                 
|Signature Guaranteed: |  | (Signature must correspond to name as written
    upon the face of this Rights Certificate in every particular,
    without alteration or enlargement or any change whatsoever.)

Signature must be guaranteed by a member firm of
a recognized stock exchange in Canada, a registered national
securities exchange in the United States, a member of the
National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or
correspondent in Canada or the United States.

A-40



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##### 



CERTIFICATE

(To be completed if true.)

The undersigned party transferring Rights
hereunder, hereby represents, for the benefit of all holders of
Rights and Common Shares, that the Rights evidenced by this
Rights Certificate are not, and, to the knowledge of the
undersigned, have never been, Beneficially owned by an Acquiring
Person or an Affiliate or Associate thereof or a Person acting
jointly or in concert with an Acquiring Person or an Affiliate
or Associate thereof. Capitalized terms shall have the meaning
ascribed thereto in the Shareholder Rights Plan Agreement.



| |          
| | ---------
| |          
| | Signature

(To be attached to each Rights Certificate.)

NOTICE

In the event the certification set forth above in
the Forms of Assignment and Election is not completed, Inco
Limited will deem the Beneficial owner of the Rights evidenced
by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof. No Rights Certificates shall be
issued in exchange for a Rights Certificate owned or deemed to
have been owned by an Acquiring Person or an Affiliate or
Associate thereof, or by a Person acting jointly or in concert
with an Acquiring Person or an Affiliate or Associate thereof.

A-41



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##### 






EXHIBIT B

INCO LIMITED 2005 KEY EMPLOYEES INCENTIVE
PLAN



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | Purpose.The 2005
    Key Employees Incentive Plan of Inco Limited (the
    Plan) is designed to provide additional incentive
    for selected employees (including Officers who are full-time
    employees, whether or not they might also serve as Directors) of
    the Company and its current or future subsidiaries by the grant
    of options to purchase Common Shares of the Company and/or by
    the making of awards of incentive compensation. It is intended
    that the share options and awards of incentive compensation will
    be awarded in a way calculated to be most effective to retain or
    attract and to provide additional incentive to these selected
    employees, having regard to their individual potential,
    location, contributions to the Company and other applicable
    considerations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|2. | Administration.The
    Plan shall be administered by a Committee of three or more
    Directors, appointed annually by the Board of Directors of the
    Company from those of its members who (a) shall satisfy all
    applicable stock exchange and other regulatory requirements and
    the Guidelines on Corporate Governance of the Board of Directors
    of the Company with respect to (i) having no material
    relationships with the Company and who are otherwise
    independent and (ii) any other statutory or
    regulatory qualifications to serve on such Committee and
    (b) are not, will not be, and have not been, eligible to
    participate under the Plan or any other plans of the Company or
    any of its subsidiaries or other affiliates entitling the
    participants therein to acquire shares, share options or share
    appreciation rights of the Company or any of its subsidiaries or
    other affiliates other than the Companys 2002 Non-Employee
    Director Share Option Plan and Non-Employee Director Share
    Ownership Plans which are applicable only to independent or
    non-employee Directors of the Company as part of their
    compensation arrangements for service as independent or
    non-employee Directors of the Company. The Committee shall have
    full authority to establish regulations for the administration
    of the Plan and to interpret the Plan.
|  
|3. | Share Options and Share Appreciation
    Rights.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | The Board of Directors of the Company may from
    time to time, as and if recommended by the Committee, grant to
    selected employees of the Company and its subsidiaries options
    to purchase not exceeding in the aggregate 5,500,000 Common
    Shares of the Company, provided that the Committee, subject to
    ratification by the Board of Directors of the Company, may make
    adjustments in the number and kind of shares available for or
    subject to option, and in the purchase price of shares subject
    to option, as it may deem appropriate in the event of a share
    subdivision, share consolidation, share dividend (other than an
    optional share dividend in lieu of a cash dividend),
    amalgamation, merger, consolidation, share reclassification or
    other change in the capital structure of the Company. The
    Company may issue shares or may acquire outstanding shares for
    the purpose of satisfying the exercise of an option or of a
    share appreciation right.                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | (b) | The purchase price of the shares purchasable upon
    exercise of each option which shall not be less than 100% of
    their fair market value on the date the option is granted, and
    all other terms and conditions of each option shall be fixed by
    the Board of Directors of the Company or of the subsidiary, as
    the case may be, in each case on recommendation of the
    Committee, provided that (i) no shares subject to option
    shall be purchasable after the expiration date fixed in the
    option, which date shall not be later than seven years after the
    date the option is granted, and (ii) no person shall have
    any of the rights of a Shareholder in respect of shares subject
    to an option until such shares have been paid for in full and
    issued to such person. In the case of option grants in
    U.S. dollars, the fair market value of the
    shares subject to option shall be the average of the high and
    the low sales prices of the Companys Common Shares as
    reported as New York Stock Exchange  Composite
    Transactions on the date of the grant, provided however, if
    there is no trading in such shares on such Exchange on the date
    of grant, then the average of the high and low sales prices for
    such shares on the next preceding date on which there is trading
    shall be used for such calculation. In the case of option grants
    in Canadian

B-1



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##### 



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | dollars, the fair market value of the
    shares subject to option shall be the average of the high and
    low sales prices of the Companys Common Shares, as
    reported on the Toronto Stock Exchange on the date of the grant,
    provided however, if there is no trading in such shares on such
    Exchange on the date of grant, then the average of the high and
    low sales prices for such shares on the next preceding date on
    which there is trading shall be used for such calculation. If
    the Board of Directors of the Company shall so authorize, the
    purchase price of shares payable upon exercise of options
    covering Common Shares granted under the Plan, or Common Shares
    under the Key Employees Incentive Plans approved by the
    Shareholders of the Company on April 25, 2001 and
    April 23, 1997 may, subject to applicable law, be paid
    in lieu of cash, by the delivery to the Company of certificates
    for Common Shares of the Company already owned by the optionee
    having a fair market value equal to the purchase price of the
    shares (or any part thereof) for which the option is exercised,
    or by any combination of cash and shares. In Canada, the
    purchase price shall be paid only in cash, but at the request of
    the optionee, the Company may sell on the optionees behalf
    Common Shares already owned by the optionee and apply the
    proceeds of the sale to the optionees purchase of the same
    type or class of shares pursuant to the exercise of the share
    option. An option may provide that the optionee may exercise the
    option by delivering to the Company an exercise notice and
    irrevocable instructions for the Company to deliver directly to
    a broker named in the exercise notice the number of Common
    Shares set forth in the notice in exchange for payment of the
    purchase price of the same type or class of shares. Any share
    subject to an option which shall have terminated or expired
    (other than to the extent surrendered upon the exercise of a
    share appreciation right) may thereafter be reoptioned. In the
    case of options intended to qualify for the tax treatment
    provided by Section 422 of the U.S. Internal Revenue
    Code of 1986, as amended (ISOs), the aggregate fair
    market value (determined at the time of the grant of such ISOs)
    of the shares with respect to which ISOs granted after
    December 31, 1986 are exercisable for the first time by any
    selected employee during any calendar year shall not exceed
    $100,000.
|
| | (c) | Any option may include a share appreciation right
    at the time of grant, if recommended by the Committee and
    authorized by the Board of Directors of the Company. Any option
    previously granted under the Plan or under the Key Employees
    Incentive Plans approved by the Shareholders of the Company on
    April 25, 2001 and April 23, 1997 and remaining
    unexercised may be amended to include a share appreciation
    right, if recommended by the Committee and authorized by the
    Board of Directors of the Company. Subject to such terms and
    conditions as the authorizing Board may provide, such right
    shall entitle the optionee to surrender unexercised the option
    to which the right relates, or any portion thereof, but only to
    the extent such option is then exercisable, and to receive upon
    such surrender that number of shares having an aggregate value
    equal to the amount of the excess of the then market value of
    one share over the purchase price per share specified in the
    option multiplied by the number of shares purchasable upon
    exercise of the option, or portion of option, so surrendered;
    provided that, at the election of the Company or the subsidiary
    which granted such right, it may deliver cash, or a combination
    of cash and shares, equal in value to the amount of such excess.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4. | Incentive
    Compensation.Awards of incentive
    compensation under the Plan may be made in respect of each
    fiscal year, beginning with 2005, in accordance with the
    provisions of this Section 4. Such awards may be made in,
    or in commitments to deliver, cash, shares of the Company,
    incentive units evidencing commitments to pay or deliver at some
    future date or dates cash or shares in amounts measured by or
    otherwise dependent upon earnings or other performance criteria,
    or share units evidencing commitments to deliver or pay at some
    future date or dates shares or cash equal to the market value of
    shares at such date or dates, together, in each case, if so
    provided, with amounts equal to dividends and other
    distributions paid on an equivalent number of shares, or such
    other kind or form of compensation as may, in the judgment of
    the Committee, be best calculated to further the purposes of the
    Plan, all on such terms and subject to such conditions as the
    Committee may determine, provided that, the total number of
    Common Shares of the Company to be awarded pursuant to this
    Section 4 may not exceed in the aggregate 500,000. In Canada,
    because of certain tax rules that might adversely affect the
    recipient of a deferred award, each award shall

B-2



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##### 



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | be paid not later than the end of the third year
    following the end of the year in which the award to an employee
    is declared.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   | In respect of each year, the Committee, subject
    to ratification by the Board of Directors of the Company, shall
    from time to time, but not later than the end of the year
    immediately following such year, fix the extent, if any, to
    which, within the limits of the Incentive Fund for
    such year, awards of incentive compensation shall be made in
    respect of such year by the Company, and, subject to
    ratification by the Board of Directors of the Company, determine
    the participants for the year, the award to be made to each
    participant and the time when such award is to be paid. The
    maximum amount of the Incentive Fund in respect of any year
    shall be equal to (i) 2% of the sum of (a) the
    consolidated net earnings of the Company and (b) the
    related provisions for income and mining taxes (the Award
    Pool) in such year, as confirmed by the Companys
    independent auditors for such year, and the Award Pool for each
    of the two immediately preceding years (the Preceding
    Years) less (ii) the aggregate amount of awards
    actually made from the Award Pool in respect of each of the
    Preceding Years under the Plan or, as the case may be, under the
    Key Employees Incentive Plan approved by the Shareholders of the
    Company on April 25, 2001. Awards made under this
    Section 4 shall be deemed for the purpose only of
    determining the amount to be charged therefor against an
    Incentive Fund or Funds to have the value of the cash or shares
    or incentive units or share units or other kind or form of
    compensation awarded that is determined by the Committee, as of
    the time the award is made and disregarding the effect of any
    restrictions or delayed delivery provisions which would
    otherwise reduce such value, on such basis as the Committee
    shall deem reasonable. The value of any award made under this
    Section 4 shall be charged against the Incentive Fund for
    the year in respect of which such award is made, except that, in
    the case of any award the amount of which is measured by or
    otherwise dependent upon future consolidated earnings of the
    Company, the Committee may, at the time such award is made,
    elect that there shall be charged against the Incentive Fund for
    the year in respect of which such award is made or as otherwise
    determined by the Committee. No awards shall be made under this
    Section 4 in respect of any year unless and until the total
    value of all awards made under this Section 4 in respect of
    prior years shall have been charged against the Incentive Fund
    or Funds for such year or prior years.
|  
|   | If awards are, subject to the
    500,000 maximum referred to above, made in shares (or
    amounts of cash equal to the value of shares) or share units, or
    other forms measured by shares and in the valuation thereof, to
    be delivered or paid in the future, appropriate adjustments in
    the number and kind of shares or units measured by shares shall
    be made in the same way as is provided for share options in
    Section 3 (a) in the event of a change in the capital
    structure of the Company. The Company may issue shares or may
    acquire outstanding shares for such purpose.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|5. | Other Compensation; No Right To Employment;
    Transferability of Options.Nothing in
    the Plan shall prevent a participant from being included in any
    other employee plan of the Company or any of its subsidiaries or
    other affiliates or from receiving any compensation (whether
    regular, special, supplemental, incentive, current, deferred or
    otherwise) now or hereafter provided by the Company or any of
    its subsidiaries or other affiliates. Neither the Plan nor any
    action taken thereunder shall be understood as giving to any
    person any right to be retained in the employ of the Company or
    any subsidiary or other affiliate, nor shall any person
    (including persons selected as participants for a prior year) be
    entitled as of right to be selected as a participant in the Plan
    for any year. Any option or similar right (including any share
    appreciation right, whether or not included in an option granted
    under the Plan) granted or awarded under the Plan shall be
    nontransferable other than by will or the laws of descent and
    distribution and, during the lifetime of the participant to whom
    such option or right shall have been granted or awarded, shall
    be exercisable only by such participant or by his guardian or
    legal representative, in the case of options not intended to
    qualify as ISOs, or by such participant, in the case of options
    intended to qualify as ISOs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|6. | Amendment, Suspension and Termination of the
    Plan.The Board of Directors of the
    Company may amend, suspend or terminate the Plan in whole or in
    part at any time, provided that the rights and interests of
    participants to whom unexpired share options or awards of
    incentive compensation have theretofore been granted or made
    shall not thereby be adversely affected without their consent
    and no amendment which                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

B-3



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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | would increase the number of shares which may be
    made subject to share options or otherwise materially increase
    the cost of the Plan shall be made effective unless approved at
    a meeting of the holders of the shares of the Company carrying
    general voting rights. Notwithstanding any other provision of
    the Plan, except as provided in Section 3(a), no amendment
    to the Plan shall be made which would reduce the purchase price
    of an option granted pursuant to the Plan. Subject to these
    limitations on amendments to the Plan, amendments to this Plan
    shall not require shareholder approval under the terms of this
    Plan. The Plan shall become effective on the date of its
    approval by the Companys Shareholders. Unless the Plan is
    sooner terminated by the Board of Directors, no share options or
    share appreciation rights may be granted after the day before
    the fifth anniversary of the date that the Plan is approved by
    the Companys Shareholders, and no awards of incentive
    compensation may be made in respect of any fiscal year ending
    after December 31, 2010, provided that the provisions of
    the Plan shall continue with respect to any options or awards
    theretofore granted or made.
|  
|7. | Change of Control.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



| |     |                                                                                                                                                                      
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | In the event of a Change in Control (as defined
    in (b) below), all options and related share appreciation
    rights shall become vested and exercisable in full.
|
| | (b) | For purposes of the Plan, Change in
    Control means the occurrence of any of the following
    events:                                                           



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | individuals who, as of the close of business on
    April 20, 2005, constitute the Board of Directors of the
    Company (the Incumbent Directors) cease for any
    reason to constitute at least a majority of the Board of
    Directors for at least one full year, provided that any person
    becoming a Director subsequent to the close of business on
    April 20, 2005, whose election or nomination for election
    was approved by a vote of at least two-thirds of the Incumbent
    Directors then on the Board of Directors (either by a specific
    vote or by approval of the proxy statement and circular of the
    Company in which such person is named as a nominee for Director,
    without objection to such nomination) shall be an Incumbent
    Director; provided, however, that no individual elected
    or nominated as a Director of the Company initially as a result
    of an actual or threatened election contest with respect to
    Directors or as a result of any other actual or threatened
    solicitation of proxies or consents by or on behalf of any
    person other than the Board of Directors shall be deemed to be
    an Incumbent Director;                                                                                                                                                                                                                                                    
|
| | (ii)  | any person (as such term is defined
    in Section 3(a)(9) of the U.S. Securities Exchange Act
    of 1934 (the Exchange Act) and as used in
    Section 13(d)(3) and 14(d)(2) of the Exchange Act) is or
    becomes a beneficial owner (as defined in
    Rule 13d-3 under the Exchange Act), directly or indirectly,
    of securities of the Company representing 25% or more of the
    combined voting power of the Companys then outstanding
    securities eligible to vote for the election of the Board of
    Directors (the Company Voting Securities);
    provided, however, that the event described in this
    paragraph (ii) shall not be deemed to be a Change in
    Control by virtue of any of the following acquisitions:
    (A) by the Company or any subsidiary, (B) by any
    employee benefit plan sponsored or maintained by the Company or
    any Subsidiary, (C) by any underwriter temporarily holding
    securities pursuant to an offering of such securities,
    (D) pursuant to a Non-Qualifying Transaction (as defined in
    paragraph (iii), or (E) a transaction (other than one
    described in (iii) below) in which Company Voting
    Securities are acquired from the Company, if a majority of the
    Incumbent Directors approve a resolution providing expressly
    that the acquisition pursuant to this clause (E) shall not
    constitute a Change in Control under this paragraph (ii);
|
| | (iii) | shareholder approval of a merger, consolidation,
    share exchange or similar form of corporate transaction
    involving the Company or any of its subsidiaries, whether for
    such transaction or for the issuance of securities in the
    transaction (a Business Combination), unless
    immediately following such Business Combination: (A) more
    than 50% of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

B-4



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##### 



| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      | the total voting power of (x) the
    corporation resulting from such Business Combination (the
    Surviving Corporation), or (y) if applicable,
    the ultimate parent corporation that directly or indirectly has
    beneficial ownership of 100% of the voting securities eligible
    to elect directors of the Surviving Corporation (the
    Parent Corporation), would be represented by Company
    Voting Securities that were outstanding immediately prior to the
    consummation of such Business Combination (or, if applicable,
    would be represented by shares into which such Company Voting
    Securities were converted pursuant to such Business
    Combination), and such voting power among the holders thereof is
    in substantially the same proportion as the voting power of such
    Company Voting Securities among the holders thereof immediately
    prior to the Business Combination, (B) no person (other
    than any employee benefit plan sponsored or maintained by the
    Surviving Corporation or the Parent Corporation) would be or
    becomes the beneficial owner, directly or indirectly, of 25% or
    more of the total voting power of the outstanding voting
    securities eligible to elect directors of the Parent Corporation
    (or, if there is no Parent Corporation, the Surviving
    Corporation), and (C) at least a majority of the members of
    the board of directors of the Parent Corporation (or, if there
    is no Parent Corporation, the Surviving Corporation) will have
    been Incumbent Directors at the time of the Boards
    approval of the execution of the initial agreement providing for
    such Business Combination (any Business Combination which
    satisfies all of the criteria specified in (A), (B) and
    (C) above shall be deemed to be a Non-Qualifying
    Transaction);
|
| | (iv) | shareholder approval of a plan of complete
    liquidation or dissolution of the Company or a sale or other
    disposition of all or substantially all of the Companys
    assets; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | (v)  | in the case of any employee of the Company or any
    subsidiary who is party to an agreement which provides such
    employee with certain rights in the event of a change of
    control, as defined in such agreement, any event that
    constitutes a change of control as set forth in such agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Notwithstanding the foregoing, a Change in
    Control of the Company shall not be deemed to occur solely
    because any person acquires beneficial ownership of more than
    25% of Company Voting Securities as a result of the acquisition
    of Company Voting Securities by the Company which reduces the
    number of Company Voting Securities outstanding; provided,
    that if after such acquisition by the Company such person
    becomes the beneficial owner of additional Company Voting
    Securities that increases the percentage of outstanding Company
    Voting Securities beneficially owned by such person, a Change in
    Control of the Company shall then occur.



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8. | Breach of Conduct.Notwithstanding anything in the Plan to the contrary, the
    Committee may, in its sole discretion, in the event of a serious
    breach of conduct by an employee or former employee (including,
    without limitation, any conduct prejudicial to or in conflict
    with the Company or its subsidiaries), or any activity of any
    employee or former employee in competition with any of the
    businesses of the Company or any subsidiary, (a) cancel any
    outstanding award granted to such employee or former employee,
    in whole or in part, whether or not vested or deferred, and/or
    (b) if such conduct or activity occurs within one year
    following the exercise or payment of an award, require such
    employee or former employee to repay to the Company any gain
    realized or payment received upon the exercise or payment of
    such award (with such gain or payment valued as of the date of
    exercise or payment). Such cancellation or repayment obligation
    shall be effective as of the date specified by the Committee.
    Any repayment obligation may be satisfied in Common Shares or
    cash or a combination thereof (based upon the fair market value
    of Common Shares, determined pursuant to Section 3(b), on
    the day prior to the date of payment), and the Committee may
    provide for an offset to any future payments owed by the Company
    or any subsidiary to the employee or former employee if
    necessary to satisfy the repayment obligation. The determination
    of whether an employee or former employee has engaged in a
    serious breach of conduct or any activity in competition with
    any of the businesses of the Company or any subsidiary shall be
    determined by the Committee in good faith and in its sole
    discretion. This Section 8 shall have no application
    following a Change in Control.

B-5



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##### 






EXHIBIT C

INCO LIMITED CHARTER OF THE AUDIT
COMMITTEE

As amended and restated as of February 7,
2005

I.    Committee
Composition and Meetings

The members of the Audit Committee (the
Committee) shall, subject to appointments made as a
result of resignations, removals or retirements, be appointed
annually by the Board of Directors (Board) of Inco
Limited (the Company), taking into account the
recommendations made by the Corporate Governance and Nominating
Committee with respect to who should serve on the Committee. The
Board shall annually designate a Chair of the Committee from
among the members of the Committee. The Committee shall consist
of at least four Directors, each of whom shall satisfy all
applicable stock exchange and other regulatory requirements and
the Guidelines of the Board of Directors on Corporate Governance
with respect to (a) having no material relationships with
the Company and who are otherwise independent and
(b) their financial knowledge, literacy and expertise and
other requisite qualifications. The requirements for
qualification of members of the Committee shall be determined
and interpreted by the Board from time to time based upon
recommendations by the Corporate Governance and Nominating
Committee.

No Director may serve as a member of the
Committee if such Director serves on the audit committee of more
than two other public companies unless the Board determines that
such simultaneous service would not impair the ability of such
Director to effectively serve on the Committee, and discloses
this determination in the Companys annual proxy circular
and statement. No member of the Committee may receive directly
or indirectly any consulting, advisory or other compensatory
fees or other payments from the Company other than
(i) annual retainer and meeting fees, which may be received
in cash, common shares or deferred share units, and stock
options or any other in-kind consideration ordinarily payable to
non-employee Directors for serving as a Director and a chair
and/or member of any committee of the Board and (ii) other
regular benefits that other non-employee Directors receive.

The Committee shall hold at least four regularly
scheduled meetings in each calendar year in person or by
conference call or by means of similar communications equipment
hook-up and shall meet more frequently if circumstances warrant,
including convening a meeting to cover any matters at the
request of the independent auditors or the head of internal
audit.

Attendance by at least three members of the
Committee either in person or by conference call or by means of
similar communications equipment hook-up shall constitute a
quorum for the transaction of any business that may properly
come before any meeting of such Committee. The head of internal
audit shall serve as secretary of the Committee and shall be
responsible for preparing and circulating the agenda and all
supporting and supplementary material for each meeting and
preparing the minutes of each meeting.

II.   Function, Duties and
Responsibilities

The purpose of the Committee is to assist the
Board in its oversight of (a) the accounting and financial
reporting principles, policies, practices and procedures of the
Company and its subsidiaries and affiliates, (b) the
adequacy of the systems of internal accounting control
throughout the Company and its subsidiaries and affiliates,
(c) the adequacy of the systems, policies, practices, and
procedures throughout the Company which are designed to address,
monitor and minimize the risks of fraud in the Companys
businesses and operations, (d) the quality, integrity and
transparency of the Companys financial statements,
(e) the independent auditors qualifications and
independence, (f) the performance of the independent
auditors and the Companys internal audit function and
(g) the Companys compliance with all legal and
regulatory requirements with respect to (i) financial
reporting principles, policies, practices and procedures of the
Company and its subsidiaries and affiliates, (ii) the
Companys financial statements, and (iii) the duties
and responsibilities of the Committee. The independent auditors
and any other registered public accounting firm engaged pursuant
to paragraph (A)(1)(b) below shall report directly to the
Committee. The head of the Companys internal audit
function and the independent auditors shall have direct and
ready access to the Chair of the Committee.

C-1



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##### 



Management of the Company is responsible for the
preparation, presentation and integrity of the Companys
financial statements and for the effectiveness of internal
control over financial reporting. Management of the Company is
also responsible for maintaining appropriate accounting and
financial reporting principles and policies and internal
accounting controls and procedures designed to assure compliance
with accounting standards and all applicable laws and
regulations. The Companys independent auditors are
responsible for planning and carrying out proper audits and
reviews, including reviews of the Companys quarterly
financial statements prior to the filing of each quarterly
report on Form 10-Q and any similar reporting or filing
requirements and procedures, and, in connection with the
Companys annual financial statements, annually auditing
managements assessment of the effectiveness of internal
control over financial reporting in accordance with all legal
and regulatory requirements, and other procedures. In fulfilling
their responsibilities, it is recognized that members of the
Committee are not full-time employees of the Company and are
not, and do not represent themselves to be, performing the
functions of accountants or auditors. As such, it is not the
duty or responsibility of the Committee or any of its members to
conduct field work or other types of auditing or
accounting reviews or procedures, and each member of the
Committee shall be entitled reasonably to rely on (i) the
integrity of those persons and organizations within and outside
the Company from whom the Committee receives information and
(ii) the accuracy of the financial and other information
provided to the Committee by such persons or organizations
absent actual knowledge to the contrary (in which event any such
occurrence shall be promptly reported to the Board).

In assisting the Board in fulfilling its function
of oversight, the Committee shall have the following duties and
responsibilities:



| |     |                                          
| | --- | -----------------------------------------
| | (A) | With respect to the independent auditors:



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | appoint, retain, terminate and oversee the work
    of (a) the independent auditors (subject to nominating, or
    recommending to the Board for nomination of, the independent
    auditors to be proposed for shareholder approval or ratification
    in any proxy circular or statement and the approval of such
    nomination by shareholders) including, in each case, the
    resolution of disagreements between management and the
    independent auditors regarding financial reporting, and
    (b) any other registered public accounting firm engaged for
    the purpose of preparing or issuing an audit report or
    performing audit, review, attestation or similar services;                                                                                          
|
| | (2) | pre-approve, or adopt appropriate procedures to
    pre-approve, all audit and permitted non-audit services to be
    provided by the independent auditors, including all auditing and
    non-auditing services deemed necessary or desirable to
    facilitate the Companys offering and issuance of
    securities (which may involve having such auditors participate
    in due diligence sessions, prepare comfort letters and
    agreed-upon procedures letters, and provide consents in
    connection with any such offerings and issuances), and to
    consider whether the independent auditors provision of
    particular non-audit services to the Company is compatible with
    maintaining the independence of the independent auditors;                               
|
| | (3) | ensure that the independent auditors prepare and
    deliver annually the Annual Independent Auditors
    Statement, as defined below (it being understood that the
    independent auditors are responsible for the accuracy and
    completeness of this Statement) and discuss with the independent
    auditors any relationships or services disclosed in such
    Statement that may impact the quality of audit services or the
    objectivity and independence of the independent auditors;                                                                                                                                                                                                                                                                                       
|
| | (4) | obtain from the independent auditors in
    connection with any audit relating to the Companys annual
    audited financial statements a timely report relating to the
    Companys annual financial statements which describes all
    critical accounting policies and practices used, all alternative
    treatments within generally accepted accounting principles for
    policies and procedures related to material items that have been
    discussed with management, the ramifications of the use of such
    alternative treatments, and the treatment preferred by the
    independent auditors, and any material written communications
    between the independent auditors and management, such as any
    management letters or schedule of unadjusted
    differences;

C-2



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##### 





| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (5) | review and evaluate the qualifications,
    performance and independence of the lead audit partner and other
    key members of the audit team of the independent auditors,
    taking into account the opinions of management and the
    Companys internal audit personnel in assessing the
    qualifications, performance and independence of such personnel
    of the independent auditors;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (6) | discuss with management the timing and process
    for implementing the rotation of the lead audit partner, the
    concurring partner and any other active audit engagement team
    partner of the independent auditors, and to consider whether
    there should be a regular rotation of the independent auditors
    themselves;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (7) | obtain, and review and evaluate, the independent
    auditors annual formal written statement (the Annual
    Independent Auditors Statement) addressing or
    describing at least the following; (a) the independent
    auditors internal quality-control procedures; (b) any
    material issues raised by the most recent internal
    quality-control review or peer review of the independent
    auditors, or by any inquiry or investigation by governmental or
    professional authorities, within the preceding five years, with
    respect to one or more independent audits carried out by the
    independent auditors, and any steps taken to deal with any such
    issues; and (c) all relationships between the independent
    auditors and the Company, including each permitted non-audit
    service provided to the Company and at least all of the matters
    set forth in Independence Standards Board Standard No. 1
    and any other similar standards or other requirements applicable
    to such auditors;                                                                                                                                                          
|
| | (8) | obtain, and review and evaluate, at least
    annually the independent auditors formal and appropriately
    detailed written statement of its fees billed for each of the
    last two fiscal years covering each of the following categories
    of services rendered by the independent auditors: (a) the
    audit of the Companys annual financial statements for
    those fiscal years and the reviews of the financial statements
    included in the Companys Quarterly Reports on
    Form 10-Q for those fiscal years and any other services
    that are normally provided by the independent auditors in
    connection with statutory and regulatory filings or engagements;
    (b) assurance and related services not included in
    clause (a) that are reasonably related to the performance
    of the audit or review of the Companys annual and
    quarterly financial statements; (c) tax compliance, tax
    consulting and tax planning services, in the aggregate and by
    each service; and (d) all other products and services
    provided or rendered by the independent auditors for those
    fiscal years, in the aggregate and by each product or service;
    and
|
| | (9) | obtain from the independent auditors assurance
    that their audit was conducted in a manner consistent with
    Section 10A  Audit Requirements of the
    U.S. Securities Exchange Act of 1934, as amended, and all
    applicable rules and regulations thereunder, and any
    corresponding legislation or rules and regulations applicable to
    the Company, which sets forth certain procedures to be followed
    in any audit of financial statements required under such
    legislation and rules and regulations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



| |     |                                                                                                                                                                  
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (B) | With respect to accounting principles, financial
    reporting principles, policies, practices and procedures, and
    internal control over financial reporting:



| |     |                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | advise management, the head of internal audit and
    the independent auditors that they are expected to provide to
    the Committee a timely analysis of significant issues and
    practices relating to accounting principles and policies,
    financial reporting and internal control over financial
    reporting;                                                         
|
| | (2) | consider any reports or communications (and
    managements and/or the internal audit departments
    responses thereto) submitted to the Committee by the independent
    auditors required by or referred to in Statement on Auditing
    Standards No. 61, Communication with Audit
    Committees (as codified by AU Section 380), as such
    Statement may be modified or

C-3



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##### 



| |     |                                                                                                                                                                  
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | supplemented, and any other similar standards or
    requirements, as such other standards or requirements may be
    modified or supplemented from time to time;
|
| | (3) | meet with management of the Company, the
    independent auditors and, if appropriate, the head of internal
    audit, to:                                       



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | discuss the planned scope of the annual audit by
    the independent auditors and (a) the annual financial
    statements (including the notes thereto) and related financial
    material and the independent auditors report and opinion
    to be included in the Companys Annual Report to
    Shareholders, Annual Report on Form 10-K, Annual
    Information Form and any other similar filings with regulatory
    agencies, stock exchanges and other bodies as may be required,
    (b) the quarterly financial statements of the Company prior
    to their inclusion in any Quarterly Report on Form 10-Q and
    any similar filings to be made with any regulatory agencies,
    stock exchanges or other bodies, (c) the Companys
    disclosures under Managements Discussion and
    Analysis of Financial Condition and Results of Operations
    set forth in any report including the Companys quarterly
    or annual financial statements, and (d) the results of the
    Companys periodic surveys relative to compliance with the
    Companys Conflicts of Interest policy
    statement and Guidelines on Business Conduct, and
    the results of compliance with any other codes, surveys, policy
    statements, guidelines and policies covering appropriate
    standards of conduct reported on to the Committee, and any
    amendments to such policy statements, guidelines or policies,
    and any other matters covering such policy statements,
    guidelines and policies brought to the attention of the
    Committee by management of the Company;
|
| |  | discuss any significant matters arising from any
    audit, including any audit problems or difficulties, whether
    raised by management, the head of internal audit or the
    independent auditors, relating to the Companys financial
    statements;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | discuss any difficulties the independent auditors
    encountered in the course of the audit, including any
    restrictions on their activities or access to requested
    information and any significant disagreements with management;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | discuss any management or
    internal control letters issued, or proposed to be
    issued, by the independent auditors to the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | review the form of report and opinion the
    independent auditors propose to render to the Board and
    shareholders; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | discuss, as appropriate, the following:
    (a) any major issues regarding accounting principles and
    financial statement presentations, including any significant
    changes in the Companys selection or application of
    accounting principles, and major issues as to the adequacy of
    the Companys internal controls and any special audit steps
    adopted in light of material control deficiencies;
    (b) analyses prepared by management of the Company and/or
    the independent auditors setting forth significant financial
    reporting issues and judgments made in connection with the
    preparation of the financial statements, including analyses of
    the effects of alternative generally accepted accounting
    principles on the financial statements; and (c) the effect
    of regulatory and accounting initiatives, as well as off-balance
    sheet structures, on the financial statements of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (4) | inquire of the Companys Chief Executive
    Officer and Chief Financial Officer as to the existence of any
    significant deficiencies or material weaknesses in the design or
    operation of internal control over financial reporting that are
    reasonably likely to adversely affect the Companys ability
    to record, process, summarize and report financial information
    and as to the existence of any fraud, whether or not material,
    that involves management or other employees who have a
    significant role in the Companys internal control over
    financial reporting;

C-4



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| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (5)  | (a) discuss guidelines and policies governing the
    process by which senior management of the Company and the
    relevant departments of the Company assess and manage the
    Companys exposure to risk, and discuss the Companys
    major financial risk exposures and the steps management has
    taken to monitor and control such exposures and (b) review
    and evaluate the quarterly reports on the Companys risk
    management policies and procedures;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | (6)  | discuss with the Chief Financial Officer
    generally (representing a discussion of the general types of
    information to be disclosed) the substance of all financial
    results press releases, including the transparency of such
    results and the financial measures included in such releases
    that are not in accordance with generally accepted accounting
    principles and earnings and related guidance provided in such
    releases, and the types of presentations made to the investment
    community and credit rating agencies;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | (7)  | establish procedures for the receipt, retention
    and treatment of complaints received by the Company regarding
    accounting, internal accounting controls or auditing matters,
    and for the confidential, anonymous submission by Company
    employees of concerns regarding questionable accounting or
    auditing matters relating to the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (8)  | establish hiring policies for employees or former
    employees of the independent auditors;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | (9)  | meet with management of the Company, the head of
    internal audit, and/or the independent auditors to review and
    discuss (a) any significant matters arising from any audit
    or report or communication, whether raised by management, the
    internal audit staff or the independent auditors, relating to
    the Companys financial statements, (b) significant
    changes to the Companys auditing and accounting
    principles, policies, controls, procedures and practices
    proposed or contemplated by the independent auditors, the
    internal audit staff or management of the Company,
    (c) significant risks and exposures, if any, relating to
    (i) the integrity of the Companys financial
    information and systems of internal accounting control, and
    (ii) the systems, policies, practices and procedures
    throughout the Company which are designed to address, monitor
    and minimize the risks of fraud in the Companys businesses
    and operations, and the steps taken to address, monitor and
    minimize such risks and exposures and (d) critical security
    and other measures implemented or to be considered relating to
    the integrity of the Companys financial information;
|
| | (10) | discuss with the Companys General Counsel
    any significant legal, compliance or regulatory matters that may
    have a material effect on the Companys financial
    statements, business or compliance policies, including material
    notices to or inquiries received from governmental or other
    similar agencies or bodies;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (11) | with respect to the systems of internal
    accounting control throughout the Company, review and evaluate
    (i) the adequacy of the quality of such systems after
    consultation with appropriate members of management of the
    Company, the head of internal audit and the independent
    auditors, (ii) managements performance in maintaining
    and improving these systems and whether management is setting
    the appropriate control culture by communicating the importance
    of internal control and management of risks and
    (iii) recommendations made by the independent auditors and
    the head of internal audit relative to improvements to these
    systems;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (12) | review and evaluate the results of any special
    investigation undertaken by the Committee at the request of the
    Board; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (13) | review and evaluate the integrity of the
    Companys policies, procedures, practices and systems
    covering the security of Company information stored, maintained
    and transmitted electronically or by or through any electronic
    device and any significant breaches in such policies,
    procedures, practices and systems.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

C-5



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| |     |                                             
| | --- | --------------------------------------------
| | (C) | With respect to the internal audit function:



| |     |                                                                                                                                                                                                                                                                        
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | review the appointment and replacement of the
    head of internal audit and any other key personnel of this
    function and the coordination of responsibilities between the
    Companys independent auditors and the internal audit
    function;                 
|
| | (2) | review and discuss with the independent auditors
    and management the internal audit functions
    responsibilities, budget and staffing, performance and
    effectiveness and any recommended changes in the planned scope
    of the internal audit function; and
|
| | (3) | advise the head of internal audit that he or she
    is expected to provide to the Committee summaries of and, as
    appropriate, copies of, all significant reports to management
    prepared by the internal audit function and managements
    responses thereto.



| |     |                                                                                                       
| | --- | ------------------------------------------------------------------------------------------------------
| | (D) | With respect to its responsibilities involving
    its meetings and its reporting and related matters:



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | prepare any report or other disclosures from the
    Committee, including any recommendations of the Committee,
    required by the rules of the U.S. Securities and Exchange
    Commission or any other applicable regulatory agency or body or
    stock exchange, to be included in the Companys annual
    proxy circular and statement or any other reports, disclosures
    or filings required by the Committee with any other regulatory
    agencies or bodies or stock exchanges;                                                                                                                                                                                                                                                                                        
|
| | (2) | review this Charter at least annually and
    recommend any changes thereto to the Board;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (3) | report its activities to the Board on a regular
    basis and make such recommendations with respect to matters
    relating to the Committee as the Committee may deem necessary or
    appropriate;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (4) | prepare and review with the Board an annual
    performance evaluation of the Committee, which evaluation shall
    compare the performance of the Committee with the requirements
    of this Charter and recommend to the Board any improvements or
    changes to this charter deemed necessary or desirable by the
    Committee. Such performance evaluation by the Committee shall be
    conducted in such manner as the Committee deems appropriate and
    may take the form of an oral report by the Chair of the
    Committee or any other member of the Committee designated by the
    Committee to make such report;                                                                                                                                                  
|
| | (5) | during its regularly scheduled meetings, and any
    special meetings as it deems necessary or appropriate, meet
    privately (in executive session) with the independent auditors
    and the head of the internal audit; the Committee may request
    any officer or employee of the Company or the Companys
    outside counsel or independent auditors, or any advisors or
    experts the Committee has retained, to attend all or any part of
    any meeting of the Committee or to meet with any members of, or
    advisors or experts to, the Committee; the Committee shall also
    meet separately to discuss any matters that the Committee or any
    of these persons or firms believe should be discussed with the
    Committee and/or management privately; and
|
| | (6) | the Chair of the Committee shall review and
    approve at least annually the business expenses incurred by the
    Chief Executive Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

III.  Delegation to
Subcommittee

The Committee may, in its discretion, delegate
all or a portion of its functions, duties and responsibilities
to a subcommittee of the Committee. The Committee may, in its
discretion, delegate to one or more of its members the authority
to pre-approve any audit or permitted non-audit services to be
performed by the independent auditors, provided that any such
approvals are presented to the Committee for ratification at its
next scheduled meeting.

C-6



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##### 



IV.  Resources and Authority of
the Committee

The Committee shall have the resources and
authority appropriate to fully discharge its functions, duties
and responsibilities, including the authority to select, retain,
terminate and approve the fees of and other terms of retention
of special or independent counsel, accountants, auditors or
other experts and advisors as it deems necessary or appropriate,
in connection with its functions, duties and responsibilities
without seeking approval of the Board or management. The
Committee shall have unrestricted access to management,
employees and information it believes will be relevant in
carrying out its functions, duties and responsibilities.

The Company shall provide for appropriate funding
as determined by the Committee, in its capacity as a formal
committee of the Board, for payment of:



| |     |                                                                                                                                                                                                                                     
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | compensation to the independent auditors and any
    other public accounting firm engaged for the purpose of
    preparing or issuing an audit report or performing other audit,
    review or attestation services for the Company;
|
| | (2) | compensation of any counsel, experts or advisors
    retained by the Committee; and                                                                                                                                                 
|
| | (3) | ordinary administrative expenses of the Committee
    that are necessary or appropriate in carrying out its functions,
    duties and responsibilities.                                                                             

C-7