##### 



United States
SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549
 
 FORM F-4
 REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
 
 STANTEC INC.
 (Exact name of Registrant as specified in its charter)
 CANADA
    
    8711
    
    Not Applicable(State or Other Jurisdiction of
    
    (Primary Standard Industrial
    
    (IRS EmployerIncorporation or Organization)
    
    Classification Code Number)
    
    Identification Number)
 10160  112 Street, Edmonton, Alberta, Canada, T5K 2L6, (780) 917-7000
(Address, including zip code, and telephone number, including area code, of Registrants principal executive offices) Jeffrey S. Lloyd
Vice President, Secretary and General Counsel
10160  112 Street,
Edmonton, Alberta, Canada, T5K 2L6
(780) 917-7000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Christopher J. Cummings, Esq.Shearman & Sterling LLP
    
    C.N. Franklin Reddick III, Esq.Commerce Court West
    
    Akin Gump Strauss Hauer &
Feld LLP.199 Bay Street, Suite 4405
    
    2029 Century Park East,
22ndFloorToronto, ON, Canada M5L 1E8
    
    Los Angeles, CA 90067(416) 360-8484
    
    (310) 728-3204
 Approximate date of commencement of proposed sale of the securities to the public:As
promptly as practicable after this Registration Statement becomes effective and upon consummation
of the transactions described in the enclosed prospectus. If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for
the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same
offering. CALCULATION OF REGISTRATION FEE Title of each class of securities to
    
    
    Amount to
    
    
    Proposed maximum
    
    
    Proposed maximum aggregate
    
    
    Amount of registrationbe registered
    
    
    be registered (1)
    
    
    offering price per unit (1)
    
    
    offering price (2)
    
    
    fee (3)Common Shares
    
    
    
    
    
    
    
    
    $85,310,994.44
    
    

$10,041.10
   (1)
    Pursuant to Rule 457(o) of the Securities Act of 1933, this information is not included.  (2)
    Estimated solely for the purpose of calculating the registration fee pursuant to Rules
457(f)(1) and (3) and Rule 457(c) of the Securities Act of 1933, based on (1) the product of
(i) $21.04, the average of the high and low sales prices of a share of common stock of The
Keith Companies, Inc. as reported by the Nasdaq National Market on May 6, 2005 and (ii)
8,497,111 shares of common stock of The Keith Companies, Inc., the number of shares of common
stock of The Keith Companies, Inc. outstanding at the close of business on April 2, 2005,
including all vested options to purchase common stock of The Keith Companies, Inc., less (2)
$93,468,221, the amount of cash to be paid by the Registrant in exchange for shares of common
stock of The Keith Companies, Inc. (equal to the product of (i) $11.00 and (ii) 8,497,111
shares of common stock of The Keith Companies, Inc.) .  (3)
    Computed in accordance with Rule 457(f) under the Securities
Act of 1933 to be $10,041.10,
which is equal to $117.70 per million of the proposed maximum aggregate offering price of
$85,310,994.44. 
 The registrant hereby amends this Registration Statement on such date or dates as may be
necessary to delay its effective date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission acting pursuant to said Section 8(a), may
determine.




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The information in this proxy statement/prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the Securities and
Exchange Commission is effective. The proxy statement/prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any state where the offer
or sale is not permitted. SUBJECT TO COMPLETION, DATED MAY 9, 2005 (TKC LOGO) [______] , 2005 To the Shareholders of The Keith Companies, Inc.: You are cordially invited to attend a special meeting of the shareholders of The Keith
Companies, Inc. to approve the merger of The Keith Companies, Inc. and Stantec Consulting
California Inc., a wholly-owned subsidiary of Stantec Inc. Your board of directors has unanimously
approved a merger agreement that will have the effect of combining the businesses of Keith and
Stantec. Your board of directors believes that the merger will benefit you as a shareholder of
Keith and asks for your support in voting to approve the merger agreement at the special meeting of
Keiths shareholders to be held at 10:30 a.m. Pacific Time, on [] at 19 Technology Drive,
Irvine, California 92618. In the proposed merger, Keith will be merged with and into Stantec Consulting California Inc.,
a wholly-owned subsidiary of Stantec, with Stantec Consulting California Inc. being the surviving
company. If the merger agreement is approved and the merger is consummated, each share of Keith
common stock will be converted into the right to receive (1) US$11.00 in cash, (2) 0.23 common
shares of Stantec and (3) that number of Stantec common shares equal to US$5.50, based on the
trading prices of Stantec shares for 20 trading days prior to the merger and then prevailing
currency exchange rates. You will have the right to select the form of merger consideration you
receive by electing (A) a mix of cash and Stantec common shares, as described above, (B) all
Stantec common shares or (C) all cash, subject to pro rata adjustment in the case of (B) or (C) if
one of these options is oversubscribed. Fractional shares will not be issued, but a cash payment
will be made for those fractional shares. Upon consummation of the merger, Keiths shareholders
will own approximately 17% of the outstanding Stantec common shares. If the merger does not qualify as a tax-free reorganization under Section 368(a) of the United
States Internal Revenue Code, Stantec has the option, at its discretion, to complete the merger by
paying cash merger consideration of US$22.00 per share. KEITHS BOARD OF DIRECTORS HAS APPROVED THE MERGER AND UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF KEITH VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT AND ITS TERMS. Approval of the merger agreement and adjournment of the special meeting requires the
affirmative vote of the holders of at least a majority of Keiths outstanding common stock. Attached to this letter is an important document providing detailed information concerning
Stantec, Keith, the merger and a more thorough explanation of Keiths board of directors view of
the merger, as well as other matters related to the special meeting. PLEASE READ THIS DOCUMENT CAREFULLY, INCLUDING THE SECTION DESCRIBING RISK FACTORS BEGINNING
ON PAGE 15. IT IS IMPORTANT TO VOTE YOUR SHARES, IN PERSON OR BY PROXY, BECAUSE THE FAILURE TO VOTE WILL
HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER. Whether or not you plan to attend the special
meeting, please submit your proxy promptly by internet in accordance with the instructions on the
enclosed proxy card or by completing, dating and returning your proxy card in the enclosed
envelope. Returning the proxy card or otherwise submitting your proxy does not deprive you of your
right to attend the special meeting and vote in person. We look forward to your support.
Sincerely,Aram H. Keith
Chairman of the Board and Chief Executive Officer
 Neither the Securities and Exchange Commission nor any state or Canadian provincial or
territorial securities regulatory authority has approved or disapproved the securities to be issued
in connection with the merger or determined if this proxy statement/prospectus is truthful or
complete. Any representation to the contrary is a criminal offense. This proxy statement/prospectus is dated [______], 2005 and is expected to be first mailed
to shareholders of Keith on or about that date.




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THE KEITH COMPANIES, INC.    NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON [______], 2005 TO THE SHAREHOLDERS OF THE KEITH COMPANIES, INC.: NOTICE IS HEREBY GIVEN that a special meeting of shareholders of The Keith Companies, Inc.
will be held at 10:30 a.m. Pacific Time, on [______], 2005 at 19 Technology Drive, Irvine, California
92618, for the following purposes of voting on:  (1)
    the approval of the Agreement and Plan of Merger and Reorganization, dated as
of April 14, 2005, as amended May 9, 2005, among Stantec Inc., Keith and Stantec
Consulting California Inc., a wholly-owned subsidiary of Stantec, a copy of which is
attached as Appendix A to the enclosed proxy statement/prospectus; and(2)
    to transact such other business as may properly come before the special
meeting, including authority to adjourn or postpone the special meeting to another time
and place for the purpose of soliciting additional proxies. Only shareholders of record at the close of business on [______] are entitled to notice of and
to vote at the special meeting and any adjournments or postponements thereof. KEITHS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL TO
APPROVE THE MERGER AGREEMENT AND ITS TERMS. Dissenters rights may be available under Chapter 13 of the California Corporations Code for
the shareholders of Keith in connection with the merger. In order to exercise dissenters rights,
Keith shareholders must deliver a written demand to Keith no later than the date of the special
meeting and must vote AGAINST approval of the merger proposal. A copy of the applicable
California statutory provisions is included as Appendix D to the attached proxy
statement/prospectus and a summary of these provisions can be found under The MergerDissenters
Rights in the attached proxy statement/prospectus. The merger of Keith and Stantec Consulting California Inc. is more fully described in the
proxy statement/prospectus accompanying this notice. You are encouraged to carefully read the
proxy statement/prospectus and the attached annexes. Whether or not you plan to attend the special meeting, we encourage you to read the proxy
statement/prospectus and submit your proxy as soon as possible. It is important that your shares
be represented at the special meeting. A FAILURE TO VOTE HAS THE SAME EFFECT AS VOTING AGAINST THE
MERGER. Whether or not you plan to attend the special meeting, please submit your proxy promptly
by internet in accordance with the instructions on the enclosed proxy card or by completing, dating
and returning your proxy card in the enclosed envelope. You may revoke your proxy at any time until
it is voted by a later dated proxy or by attending the special meeting and voting in person. Please do not send any stock certificates you may have at this time. Our principal executive offices are located at 19 Technology Drive, Irvine, California 92618.
Our telephone number is
(949) 923-6001. By Order of the Board of Directors
 [______], 2005 Gary C. CampanaroSecretary




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Table of Contents PageAdditional Information
    
    
    1Presentation of Financial and Other Information
    
    
    2Exchange Rate Data
    
    
    2Questions and Answers About the Merger
    
    
    3Summary
    
    
    8The Companies
    
    
    8Comparative Per Share Market Price and Exchange Rate Data
    
    
    9The Merger
    
    
    9The Special Meeting
    
    
    9The Merger Agreement
    
    
    10Other Agreements
    
    
    10Recommendation of Keiths Board of Directors
    
    
    10Recommendation of Keiths Financial Advisor
    
    
    10Interests of Keith and Stantec Executive Officers and Directors in the Merger
    
    
    10Material U.S. Federal Income Tax Consequences
    
    
    11Material Canadian Federal Income Tax Consequences
    
    
    11Accounting Treatment of the Merger
    
    
    12Regulatory Matters Related to the Merger
    
    
    12Dissenters Rights
    
    
    12No Solicitation
    
    
    12Conditions to the Merger
    
    
    13Termination
    
    
    14Termination Fee
    
    
    14Comparison of Shareholder Rights
    
    
    14Risk Factors
    
    
    15Forward-Looking Statements
    
    
    26Selected Historical and Pro Forma Consolidated Financial Data of Stantec Inc.
    
    
    28Selected Historical Consolidated Financial Data of The Keith Companies, Inc.
    
    
    29Comparative Per Share Data
    
    
    30Dividends
    
    
    30Comparative Per Share Market Price
    
    
    31Managements Discussion and Analysis of the Financial Condition and Results of Operations of Stantec
    
    
    32Description of Stantecs Business
    
    
    41Management of Stantec
    
    
    50Information Concerning the Special Meeting
    
    
    61Keith Special Meeting
    
    
    61Date, Time and Place
    
    
    61Purpose of the Special Meeting
    
    
    61Record Date; Voting Power
    
    
    61Required Vote; Quorum; How to Vote
    
    
    61Revocation of Proxy
    
    
    62Expenses of Solicitation
    
    
    62Exchange of Share Certificates
    
    
    63Questions About Voting Your Shares
    
    
    63Miscellaneous
    
    
    63The Merger
    
    
    64Background of The Merger
    
    
    64Recommendation of the Keith Board of Directors
    
    
    68Reasons for Keiths Board Recommendation
    
    
    68Opinion of Keiths Financial Advisor
    
    
    70Reasons for Stantecs Board Recommendation
    
    
    75Interests of Keiths and Stantecs Executive Officers and Directors in the Merger
    
    
    76Material U.S. Federal Income Tax Consequences of the Merger
    
    
    78Material Canadian Federal Income Tax Consequences of the Merger
    
    
    84Anticipated Accounting Treatment
    
    
    85Regulatory Matters Related to the Merger
    
    
    86




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PageMerger Fees, Costs and Expenses
    
    
    86Dissenters Rights
    
    
    86Stock Exchange Listing
    
    
    88Resale of Stantec Common Shares
    
    
    88The Merger Agreement
    
    
    89Structure of the Merger
    
    
    89Effective Time and Closing of the Merger
    
    
    89Surviving Corporation Governing Documents, Officers and Directors
    
    
    89Merger Consideration
    
    
    89Representations and Warranties
    
    
    90Conduct of Business Pending the Merger
    
    
    92Additional Agreements
    
    
    93Conditions to the Merger
    
    
    95Termination, Amendment and Waiver
    
    
    96General Provisions
    
    
    97Other Agreements
    
    
    98Beneficial Ownership of Securities
    
    
    99Description Of Stantec Share Capital
    
    
    100Comparison of Shareholders Rights
    
    
    101Experts
    
    
    114Legal Matters
    
    
    114Shareholder Proposals
    
    
    114Enforceability of Civil Liabilities
    
    
    115Where You Can Find More Information
    
    
    116Index to Consolidated Financial Statements
    
    
    F-1Appendix A   Agreement and Plan of Merger among Stantec, Stantec Consulting California Inc. and
Keith, dated as of
                       April 14,
2005, as amended May 9, 2005
    
    
    A-1Appendix B   Opinion of Bear, Stearns & Co. Inc.
    
    
    B-1Appendix C   Stockholders Support Agreement
    
    
    C-1Appendix D   Dissenters Rights and Procedures
    
    
    D-1
 2




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Additional Information This proxy statement/prospectus incorporates important business and financial information
about Keith from documents that are not included in or delivered with this document. This
information is available to you without charge upon your written or oral request. You can obtain
documents related to Keith that are incorporated by reference in this document, without charge, by
requesting them in writing or by telephone from any of: The Keith Companies, Inc.
    
    Stantec Inc.
    
    [Name and Address of Proxy19 Technology Drive
    
    10160-112 Street
    
    Solicitor]Irvine, California, USA 92618-2334
    
    Edmonton, Canada, T5K 2L6Phone: (949) 923-6001
    
    Phone: (780) 917-7000Attention: Investor Relations
    
    Attention: Investor Relations
 For information on where to obtain copies of such documents on the internet, see Where You
Can Find More Information elsewhere in this proxy statement/prospectus. Please note that copies
of the documents provided to you will not include exhibits, unless the exhibits are specifically
incorporated by reference into the documents or this proxy statement/prospectus. To obtain timely delivery, security holders must request this information no later than five
business days before the date they must make their investment decision. In order to receive timely
delivery of requested documents in advance of the special meeting, you should make your request no
later than [               ], 2005. For information on submitting your proxy, please refer to the instructions on the enclosed
proxy card. To submit your proxy through the internet, visit www.[              ] and follow instructions on
the website.




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Presentation of Financial and Other Information The historical consolidated financial data of Stantec Inc. contained in this proxy
statement/prospectus are reported in Canadian dollars and have been prepared in accordance with
accounting principles generally accepted in Canada, or Canadian GAAP. Canadian GAAP differs in
some material respects from United States generally accepted accounting principles, or U.S. GAAP,
and so this financial data may not be comparable to the financial data of U.S. companies. For a
discussion of the differences between Canadian GAAP and U.S. GAAP as they relate to Stantec, see
note 21 to Stantecs audited consolidated financial statements, which are included elsewhere in
this proxy statement/prospectus. The consolidated financial data of The Keith Companies, Inc. included and/or incorporated by
reference in this proxy statement/prospectus are reported in U.S. dollars and have been prepared in
accordance with U.S. GAAP. Unless otherwise stated or the context otherwise requires, all references in this proxy
statement/prospectus to C$ are to Canadian dollars and all references to US$ or U.S. dollars
are to United States dollars. Exchange Rate Data The following tables set forth certain exchange rates based on the inverse of the noon buying
rate in the city of New York for cable transfers in Canadian dollars as certified for customs
purposes by the Federal Reserve Bank of New York. On May 6, 2005 the inverse of the noon buying
rate was C$1.00 equals US$0.8046. Years Ended December 31,2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004Average (1)
    
    US$
    0.6725
    
    
    US$
    0.6443
    
    
    US$
    0.6368
    
    
    US$
    0.7186
    
    
    US$
    0.7701
    MonthNov. 2004
    
    
    Dec. 2004
    
    
    Jan. 2005
    
    
    Feb. 2005
    
    
    March 2005
    
    
    April 2005High
    
    US$
    0.8492
    
    
    US$
    0.8434
    
    
    US$
    0.8346
    
    
    US$
    0.8134
    
    
    US$
    0.8322
    
    
    US$
    0.8233Low
    
    US$
    0.8154
    
    
    US$
    0.8063
    
    
    US$
    0.8050
    
    
    US$
    0.7962
    
    
    US$
    0.8024
    
    
    US$
    0.7957
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Questions and Answers About the Merger The following questions and answers are intended to address briefly some commonly asked
questions regarding the special meeting and the merger. These questions and answers may not
address all questions that may be important to you as a Keith shareholder. Please refer to the
more detailed information contained elsewhere in this proxy statement/prospectus and the appendixes
attached to this proxy statement/prospectus. Unless otherwise stated or the context otherwise requires, all references in this proxy
statement/prospectus to Stantec, we, us, and our are to Stantec Inc. and its subsidiaries;
all references to Keith are to The Keith Companies, Inc. and its subsidiaries and all references
to Stantec Consulting are to Stantec Consulting California Inc.  Q1:        What am I being asked to vote on? A1
    
    You are being asked to vote to approve the Agreement and Plan of
Merger and Reorganization and its terms, which is referred to in this
proxy statement/prospectus as the merger agreement, dated as of April
14, 2005, as amended May 9, 2005, among Stantec, Keith and Stantec
Consulting, a newly formed, wholly-owned subsidiary of Stantec. If
the merger is completed, Keith will no longer be a public company.Q2:
    
    What consideration will be paid in connection with merger?A2:
    
    The merger consideration to be paid by Stantec includes a fixed amount
of cash equal to US$11.00 per share of Keith common stock, as well as
Stantec common shares, which as of May 6, 2005, had a value of
approximately US$10.81. The number of shares that Stantec will issue
as merger consideration is partly fixed and partly variable. The
fixed component is equal to 0.23 Stantec common shares per share of
Keith common stock. The variable component is equal to an amount of
Stantec common shares equal to US$5.50 per share of Keith common
stock, based on the 20-day average trading price of Stantec common
shares prior to the merger. As a consequence, the actual number of
Stantec common shares that will be issued in the merger and that you
may receive as merger consideration is not known at this time.The 20-day average trading price of Stantec common shares means the simple average of the
daily weighted average sales price of Stantec common shares on the Toronto Stock Exchange,
as reported by Bloomberg L.P., for each of the 20 consecutive trading days ending on, and
including, the second trading day prior to the merger. The weighted average sales price for
each trading day is converted from Canadian dollars to U.S. dollars at the inverse of the
noon buying rate quoted by the Federal Reserve Bank of New York on such trading day.Q3:
    
    What will I receive in the merger?A3:
    
    You will have the right to select the form of merger
consideration you will receive by electing one of the following
options:Option 1: a mix of cash and Stantec common shares:Option 2: all Stantec common shares; orOption 3: all cash.Because Stantec will pay a fixed amount of cash and will issue a specific amount of shares
in connection with the merger, the actual consideration you will receive will not be known
until after all shareholder elections have been made. Once all elections have been made,
the following procedure will be used to determine the actual form of merger consideration
that you will receive:
 (1
    )
    
    If you elect Option 1 (a mix of cash and Stantec common shares), you will
receive US$11.00 and the amount of Stantec common shares described in answer 2 above,
regardless of the number of Keith shareholders that elect this option.(2
    )
    
    If you elect Option 2 (all Stantec common shares) you will receive 0.23 Stantec
common shares per share of Keith common stock plus a variable amount of Stantec common
shares equal to US$16.50 per
 3




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share of Keith common stock, based on the 20-day average trading price of Stantec common
shares. However, if the number of Stantec common shares that Keith shareholders elect
to receive is greater than the total number of Stantec common shares that Stantec is
required to issue, then you will receive a proportionate allocation of Stantec common
shares and cash based on the formula set out in Section 2.01(e) of the merger agreement.(3
    )
    
    If you elect Option 3 (all cash) you will receive US$16.50 cash plus cash equal
to the value of 0.23 Stantec common shares, based on the 20-day average trading price
of Stantec common shares. However, if the amount of cash that Keith shareholders elect
to receive is greater than the total amount of cash that Stantec is required to pay,
then you will receive a proportionate allocation of cash and Stantec common shares
based on the formula set out in Section 2.01(f) of the merger agreement.
 If you do not make an election, you will be deemed to have elected, and will receive, Option
1, a mix of cash and Stantec common shares.You will not receive any fractional Stantec common shares in the merger. Instead, Stantec
will pay you cash for any fractional Stantec common share you would have otherwise received,
taking into account all shares of Keith common stock you own.If, for some reason, the merger would not qualify as a tax-free reorganization under the
provisions of Section 368(a) of the United States Internal Revenue Code of 1986, as amended,
referred to in this proxy statement/prospectus as the Code, Stantec has the option, at its
sole discretion, to complete the merger by paying cash merger consideration of US$22.00 per
share of Keith common stock rather than the merger consideration described above. In such
circumstances, you would receive US$22.00 in cash for each and every share of Keith common
stock you own. If the merger does not qualify as a tax-free reorganization and Stantec does
not exercise its option to pay all cash, Keith will not be obligated to consummate the
merger.Q4:
    
    How does the Keith board of directors recommend that I vote?A4:
    
    The Keith board of directors unanimously recommends that you vote FOR approval of the merger agreement and its terms.Q5:
    
    Why is the Board of Directors recommending that I vote for approval of the merger agreement?A5:
    
    The board of directors of Keith believes the merger consideration is fair and that the merger is in the best interests of
Keith stockholders. For a more detailed explanation of the beliefs of the board of directors of Keith, see The Merger 
Keiths Reasons for the Merger.Q6:
    
    What vote of Keiths shareholders and what vote of Stantec shareholders is required in connection with the merger?A6:
    
    Approval of the merger agreement requires the affirmative vote of the holders of at least a majority of Keiths
outstanding common stock. Aram H. Keith, Margie R. Keith and The Aram H. Keith and Margie R. Keith Revocable Trust
entered into a Stockholders Support Agreement pursuant to which the shareholders granted Stantec an irrevocable proxy to
vote their shares of Keith common stock, representing approximately 17% of the outstanding shares of Keith common stock,
in favor of the merger. No vote of Stantec shareholders is required (or will be sought) in connection with the merger.Q7:
    
    What happens if I do not vote?A7:
    
    IF YOU DO NOT VOTE YOUR SHARES, THAT WILL BE THE EQUIVALENT OF A VOTE AGAINST APPROVAL OF THE MERGER AGREEMENT AND,
THEREFORE, WILL BE THE SAME AS A VOTE AGAINST THE MERGER.Q8:
    
    What is the structure of the merger?
 4




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A8:
    
    Keith will be merged with and into Stantec Consulting. After the merger, Stantec Consulting will be the surviving
corporation and a wholly-owned subsidiary of Stantec. See The Merger Agreement  Structure of the Merger.Q9:
    
    After the merger, how much of the combined company will Keiths shareholders own?A9:
    
    After the merger, Keiths existing shareholders will own approximately 17% of the outstanding Stantec common shares (based
on 18,937,019 Stantec common shares outstanding as of April 13, 2005).Q10:
    
    Will any member of the board of directors of Keith join the board of directors of Stantec?A10:
    
    Yes. Upon completion of the merger, Aram H. Keith, currently the Chairman and Chief Executive Officer of Keith, will be
appointed as Vice-Chairman and a member of the board of directors of Stantec.Q11:
    
    Is the completion of the merger subject to the fulfillment of any conditions?A11:
    
    Yes. The merger is subject to various conditions, including approval by Keith shareholders. See The Merger Agreement.Q12:
    
    What are the tax consequences of the merger to Keiths shareholders?A12:
    
    For U.S. federal income tax purposes, the merger has been structured to qualify as a reorganization under Section 368(a)
of the Code. The following assumes that the merger qualifies as a reorganization under Section 368(a) of the Code. The U.S. federal income tax consequences of the merger to you will depend on the form of the merger
consideration that you receive. If you exchange your Keith common stock solely for Stantec common shares, you generally
will not recognize any gain or loss on the exchange except to the extent that you receive cash in lieu of fractional
Stantec common shares. If you exchange your Keith common stock for a combination of Stantec common shares and cash and
your adjusted tax basis in the Keith common stock surrendered in the merger is less than the sum of the fair market value
of the Stantec common shares and the cash that you receive, you generally will recognize gain equal to the lesser of (1)
the sum of the amount of cash and the fair market value of the Stantec common shares that you receive minus the adjusted
tax basis of the Keith common stock surrendered or (2) the amount of cash that you receive. If your adjusted tax basis in
the Keith common stock surrendered in the merger is greater than the sum of the amount of cash and the fair market value
of the Stantec common shares received in the merger, you will realize a loss that is not currently allowed or recognized
for U.S. federal income tax purposes. If you exchange your Keith
common stock solely for cash, you generally will recognize gain or
loss in an amount equal to the difference between the amount of cash
that you receive and your adjusted tax basis in the Keith common
stock surrendered. If the merger does not qualify as a reorganization
under Section 368(a) of the Code and Stantec elects to consummate the merger for US$22.00 cash,
you will generally recognize gain or loss in an amount equal to the difference between the amount of
cash you receive and your adjusted tax basis in the Keith common stock surrendered. For a more detailed description of
the U.S. federal income tax consequences of the merger, please see The Merger  Material U.S. Federal Income Tax
Consequences of the Merger.The conversion of shares of Keith common stock into the right to receive Stantec common
shares in the merger will not, in general, give rise to Canadian tax for holders of Keith
common stock who are not and who are not deemed to be resident in Canada. See The Merger 
Material Canadian Federal Income Tax Consequences of the Merger.Q13:
    
    What dividend, if any, will I receive after the merger?A13:
    
    Stantec currently has no plans to pay dividends on its common shares. Instead, Stantec plans to reinvest its net income
to continue its corporate strategy of growth. The payment of dividends on Stantec common shares in the future will depend
on the need of Stantec to finance growth, the financial condition of Stantec and other factors which the Stantec board of
directors may consider appropriate in the circumstances.Q14:
    
    If Stantec paid dividends, how would dividends received after the merger be taxed?A14:
    
    Subject to certain rules and limitations, distributions with respect to Stantec common shares (before reduction for
Canadian withholding taxes) paid out of Stantecs current or accumulated earnings and profits, as determined for U.S.
federal income tax purposes, will be dividends and will be includable in the U.S. Holders income when received. Subject
to certain limitations, dividends paid to non-corporate U.S.
 5




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Holders, including individuals, may be eligible for a reduced rate of taxation. Generally, dividends received by U.S. individual
holders of Stantec common shares will be subject to non-resident Canadian withholding tax which is currently 15%. A U.S. Holder may
be entitled to claim a U.S. foreign tax credit for, or deduct, Canadian taxes that are withheld on dividends received by the U.S.
Holder, subject to applicable limitations in the Code. See The Merger  Material U.S. Federal Income Tax Consequences of the
Merger and The Merger  Material Canadian Federal Income Tax Consequences of the Merger.Q15:
    
    When do you expect the merger to be completed?A15:
    
    We expect to complete the merger as promptly as practicable after we receive approval of Keith
shareholders at the special meeting. We currently anticipate closing the transaction in the third
calendar quarter of 2005.Q16:
    
    What do I need to do now?A16:
    
    After carefully reading and considering the information contained in this proxy statement/prospectus,
please submit your proxy promptly by internet in accordance with the instructions on the enclosed
proxy card or fill out, sign and date the proxy card, and then mail your signed proxy card in the enclosed
prepaid envelope as soon as possible so that your shares may be voted at the special meeting.Q17:
    
    If my shares are held in street name by my broker, will my broker vote my shares for me?A17:
    
    You should instruct your broker to vote your shares. Please check with your broker and follow the voting
procedures your broker provides. Your broker will advise you whether you may submit voting instructions
by telephone or internet. If you do not instruct your broker, your broker will generally not have the
discretion to vote your shares without your instructions. Because approval of the merger agreement
requires an affirmative vote of the holders of at least a majority of the outstanding shares of Keith
common stock, these so-called broker non-votes, where the broker does not vote for or against approval
of the merger agreement, have the same effect as votes cast against approval of the merger agreement. See
The Special Meeting  Required Vote; Quorum; How to Vote.Q18:
    
    May I change my vote after I have mailed my signed proxy card?A18:
    
    Yes. You may change your vote at any time before your proxy is voted at the special meeting. You can do
this in several ways. You can send a written notice stating that you want to revoke your proxy, or you
can complete and submit a new proxy card. If you choose either of these methods, you must submit your
notice of revocation or your new proxy card to:[Name and Address of Proxy Solicitor]You can also change your vote by submitting a proxy at a later date by internet, in which
case your later-submitted proxy will be recorded and your earlier proxy revoked. You can
also attend the special meeting and vote in person. Simply attending the special meeting,
however, will not revoke your proxy; you must vote at the special meeting.If you have instructed a broker to vote your shares, you must follow the voting procedures
received from your broker to change your vote.Q19:
    
    If I want to attend the special meeting, what do I do?A19:
    
    You must come to 19 Technology Drive, Irvine, California 92618, at
10:30 a.m. Pacific Time, on [______], 2005.Q20:
    
    Should I send in my stock certificates now?A20:
    
    No. If the merger is completed and you hold any Keith stock
certificates, you will receive written instructions for exchanging
those Keith stock certificates for the merger consideration. You may
not have received any stock certificates because your shares of Keith
common stock were directly registered. The written instructions you
will receive will advise you what to do if your shares were directly
registered.
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Q21:
    
    What if I cannot find my stock certificate?A21:
    
    There will be a procedure for you to elect to receive your merger
consideration even if you lost one or more of your Keith stock
certificates. This procedure, however, may take time to complete. In
order to ensure that you will be able to receive your merger
consideration promptly after the merger is completed, if you cannot
locate your Keith stock certificates after looking for them
carefully, we urge you to contact Keiths transfer agent, U.S. Stock
Transfer Corporation, as soon as possible and follow the procedure
for replacing your Keiths stock certificates. U.S. Stock Transfer
Corporation, can be reached at 1-800-835-8778, or you can write to
U.S. Stock Transfer Corporation at the following address: 1745
Gardena Avenue, Glendale, CA 91204-2991.Q22:
    
    Can I dissent and require appraisal of my shares?A22:
    
    Yes. Under the California Corporations Code, Keiths shareholders
may be entitled to appraisal rights in connection with the merger.
See The Merger  Dissenters Rights.Q23:
    
    Are there risks that I should consider in deciding whether to vote for approval of the merger
agreement?A23:
    
    Yes. We have set forth in the section entitled Risk Factors beginning on page 15 of this proxy statement/prospectus a
number of risk factors that you should consider carefully in connection with the merger.Q24:
    
    Will Keith common stock continue to be traded on the Nasdaq National Market after the merger is completed?A24:
    
    No. If the merger is consummated, Keith common stock will no longer be listed for trading on the Nasdaq National Market.
However, Stantec has applied to list Stantec common shares for trading on the New York Stock Exchange.Q25:
    
    Who can help answer my additional questions about the merger?A25:
    
    If you have questions about the merger, you should contact any of the following:
 The Keith Companies, Inc.
    
    Stantec Inc.
    
    [Name and Address of Proxy19 Technology Drive
    
    10160-112 Street
    
    Solicitor]Irvine, California, USA 92618-2334
    
    Edmonton, Canada, T5K 2L6Phone: (949) 923-6001
    
    Phone: (780) 917-7000Attention: Investor Relations
    
    Attention: Investor Relations
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Summary This summary highlights selected information from this proxy statement/prospectus. It does
not contain all of the information that may be important to you. You should carefully read this
entire proxy statement/prospectus and the other documents to which this document refers for a more
complete understanding of the matters being considered at the special meeting. See Where You Can
Find More Information About Stantec and Keith. Unless otherwise stated or the context otherwise requires, all references to Stantec, we,
us, and our are to Stantec Inc. and its subsidiaries; all references to Keith are to The
Keith Companies, Inc. and its subsidiaries; all references to Stantec Consulting are to Stantec
Consulting California Inc.; and all references to merger agreement are to the Agreement and Plan
of Merger and Reorganization between Stantec, Stantec Consulting and Keith dated as of April 14,
2005, as amended May 9, 2005. The Companies Stantec Inc. Stantec provides professional consulting services in planning, engineering, architecture,
interior design, landscape architecture, surveying, environmental sciences project management and
project economics for infrastructure and facilities projects. Stantec is focused on increasing the
size and profitability of its operations by acquiring professional consulting firms in Canada, the
United States and other countries and has consummated 18 such acquisitions since the beginning of
2002. Stantec provides services to clients in both the public and private sectors primarily in North
America through integrated and discipline specific consulting and project delivery. Stantec
believes that its organizational structure gives it both the strength and diversity of a large
organization and a strong regional presence to deliver its services locally. Stantecs consulting
services business unit focuses on providing total infrastructure solutions targeted to five market
segments  buildings, environment, industrial, transportation and urban land. Founded in 1954,
Stantec currently has approximately 4,350 employees, of whom approximately 2,150 are professionals.
For the year ended December 31, 2004, Stantec had gross revenue of approximately C$520.9 million
and net income of approximately C$30.2 million Stantec is a Canadian company. Its corporate headquarters are located at 10160  112 Street,
Edmonton, Alberta, T5K 2L6. Its phone number is (780) 917-7000. Stantec Consulting California Inc. Stantec Consulting California Inc., a California corporation, is a wholly-owned subsidiary of
Stantec that was recently incorporated solely for the purpose of effecting the merger with Keith.
Since its incorporation, Stantec Consulting has not carried on any activities, other than in
connection with the offer and the merger. The Keith Companies, Inc. Keith is a full service engineering and consulting services firm providing professional
services on a wide range of projects to the real estate development, public works/infrastructure,
and energy/industrial industries. Keith has a diverse public and private client base including
real estate developers, residential and commercial builders, architects, cities, counties, water
districts, state and federal agencies, landowners, commercial retailers, energy providers and
various manufacturers. Its professional staff and project workers provide a comprehensive menu of
services that are needed to effectively manage, engineer and design infrastructure and
state-of-the-art facilities. Keith has acquired eight companies since December 1, 1997 and as of January 31, 2005, Keith
had approximately 830 employees/project workers providing engineering and consulting services from
17 divisions in 7 states: California, Michigan, Nevada, Texas, Utah, Oregon and Arizona. In
addition, Keith also has the ability to provide start-up, testing and other energy-related
technical consulting services in Brazil. Keith is a California corporation. Its corporate headquarters are located at 19 Technology
Drive, Irvine, California 92618. Its phone number is (949) 923-6001.
 8




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Comparative Per Share Market Price and Exchange Rate Data. Stantec common shares are listed on the Toronto Stock Exchange under the trading symbol STN.
Stantec has applied to list its common shares on the New York Stock Exchange under the trading
symbol SXC. Keith common stock is listed on the Nasdaq National Market under the trading symbol
TKCI. Upon completion of the merger, Keith common stock will no longer trade on the Nasdaq
National Market. The following table sets forth the closing sale prices of Stantec common shares and Keith
common stock as reported on the Toronto Stock Exchange and the Nasdaq National Market,
respectively, on April 14, 2005, the last trading day before the public announcement of the merger,
and [___] 2005 the last practicable trading day before the distribution of this proxy
statement/prospectus. The price of Stantec common shares has been converted from Canadian dollars
to U.S. dollars at the inverse of the noon buying rate quoted by the Federal Reserve Bank of New
York on such trading day. We urge you to obtain current market quotations for both the Stantec
common shares and the Keith common stock. Stantec
    
    
    KeithCommon Shares
    
    
    Common StockAt April 14, 2005
    
    US$
    23.15
    
    
    US$
    16.85At []
    
    US$
    
    
    
    US$
 The Merger We are proposing a merger of Keith and Stantec Consulting, a wholly-owned subsidiary of
Stantec. Following completion of the merger, Stantec Consulting will continue as the surviving
corporation of the merger and as a wholly-owned subsidiary of Stantec. Pursuant to the merger agreement attached as Appendix A to this proxy statement/prospectus,
each share of Keith common stock will be exchanged for merger consideration equal to: (1) US$11.00
in cash, (2) 0.23 common shares of Stantec and (3) that number of Stantec common shares equal to
US$5.50, based on the 20-day average trading price of Stantec common shares prior to the merger. Holders of Keith common stock will have the right to elect to receive their merger
consideration in the form of (A) a mixture of cash and Stantec common shares, as described above,
(B) all Stantec common shares or (C) all cash, subject in the case of (B) and (C) to pro rata
adjustment if the amount of Stantec common shares or cash is oversubscribed. If the merger will not qualify as a tax-free reorganization under the provisions of Section
368(a) of the Code, Stantec has the option, at its sole discretion, to complete the merger by
paying cash merger consideration of US$22.00 per share of Keith common stock rather than the merger
consideration described above. In such circumstances, you would receive US$22.00 in cash for each
and every share of Keith common stock you own. If the merger does not qualify as a tax-free
reorganization and Stantec does not exercise its option to pay all cash, Keith will not be
obligated to consummate the merger. The Special Meeting When and Where. The special meeting will be held at 10:30 a.m. Pacific Time on [___], 2005
at Keiths corporate headquarters, 19 Technology Drive, Irvine, California 92618. Purpose of the Special Meeting. The purpose of the special meeting is to vote upon approval
of the merger agreement. Record Date; Voting Power. Only holders of Keith common stock as of the close of business on
[record date], the record date, are entitled to vote at the special meeting or any adjournment or
postponement of the special meeting. Each share of Keith common stock is entitled to one vote.
The holders of Keith options do not have voting rights and will not be entitled to vote at the
special meeting. Required Vote. The affirmative vote of the holders of a majority of the outstanding shares of
Keith common stock as of the record date is required to approve the merger agreement. Votes may be
cast by internet or by mailing a signed proxy card or by voting in person at the special meeting.
The failure to vote, or the abstention 9




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from voting, by a shareholder will have the same effect as a vote against approval of the
merger agreement. As of the record date, [___] shares of Keith common stock were
outstanding, held by [___] record holders. On the record date, [___]% of the
outstanding shares of Keith common stock were held by directors and executive officers of Keith and
their respective affiliates. All of the Keith directors have indicated that they intend to vote
their Keith shares of common stock in favor of the approval of the merger agreement. In addition,
Aram H. Keith, the Chairman and Chief Executive Officer of Keith, has granted his proxy to Stantec
to vote his shares of Keith common stock, representing approximately 17% of the outstanding shares
of Keith common stock, in favor of the merger. The Merger Agreement The merger agreement is described beginning on page 89. The merger agreement is also attached
as Appendix A to this document. We urge you to read the entire document because it is the legal
document governing the merger. Other Agreements Concurrently with entering into the merger agreement, Stantec, Stantec Consulting, Aram H.
Keith, Margie R. Keith and The Aram H. Keith and Margie R. Keith Revocable Trust entered into a
Stockholders Support Agreement pursuant to which the stockholders granted Stantec an irrevocable
proxy to vote their shares of Keith common stock in favor of the merger. See Other
AgreementsStockholders Support Agreement. Stantec and Keith also entered into a Confidentiality Agreement, dated as of February 18,
2005, containing terms customary for such confidentiality agreements. See Other
AgreementsConfidentiality Agreement. Stantec and Aram H. Keith entered into a letter agreement, dated as of April 14, 2005, in
which Stantec agreed to cause Stantec Consulting to make an offer of employment to Mr. Keith and
Mr. Keith agreed, subject to the satisfaction of certain other conditions, including the receipt of
US$525,000, to terminate his existing change in control agreement with Keith. See Other
AgreementsLetter Agreement. Recommendation of Keiths Board of Directors Keiths board of directors has unanimously determined that the merger agreement and the merger
are fair to, and in the best interests of, Keiths public shareholders, and approved and declared
advisable the merger agreement, the merger and the other transactions contemplated by the merger
agreement. KEITHS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER
AGREEMENT AND ITS TERMS. Recommendation of Keiths Financial Advisor In deciding to approve the merger agreement and the merger, Keiths board of directors
received a written opinion of Bear, Stearns & Co. Inc. delivered to Keiths board of directors on
April 14, 2005 to the effect that, as of the date of the opinion, based upon and subject to various
considerations and assumptions set forth in the opinion, the merger consideration to be received by
Keiths shareholders pursuant to the merger agreement is fair from a financial point of view. The
full text of Bear Stearns written opinion is attached to this proxy statement/prospectus as
Appendix B. You are encouraged to read this opinion carefully in its entirety for a description of
the assumptions made, procedures followed, matters considered and limitations on the reviews
undertaken by Bear Stearns. Interests of Keith and Stantec Executive Officers and Directors in the Merger When you consider the Keith board of directors recommendation to vote in favor of approval of
the merger agreement, you should be aware that Keiths executive officers and directors may have
interests in the merger that may be different from, or in addition to, the interests of the other
Keith shareholders. Aram H. Keith, the Chairman and Chief Executive Officer of Keith, has granted
a proxy to Stantec to vote the Keith common stock held by a trust in which he is one of the
trustees, in favor of the merger agreement. Mr. Keith has also entered into a letter agreement
with Stantec pursuant to which he will, subject to the satisfaction of certain conditions,
including the receipt of US$525,000, become Vice Chairman of Stantec at the first Stantec board
meeting following consummation of the merger. Mr. Keith as well as Eric C. Nielsen, Keiths
President and Chief Operating Officer, 10




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and Gary C. Campanaro, Keiths Chief Financial Officer, Secretary and a director of Keith, are
each a party to a change in control agreement with Keith, which provides for severance payments to
these executive officers in certain circumstances following a change in control of Keith. In
addition, pursuant to the merger agreement, prior to closing, Keith will offer to purchase all
unvested options to acquire Keith common stock, subject to the closing of the merger, for cash
equal to the merger consideration less the exercise price of such option. Stantec has also agreed
to substitute unvested restricted Stantec common shares for shares of unvested Keith restricted
common stock at the effective time of the merger. Several of Keiths executive officers and
directors hold unvested options to purchase Keith common stock and unvested Keith restricted common
stock. In the merger agreement, Stantec has agreed to maintain existing indemnification
arrangements for Keith directors and officers against certain liabilities arising before and after
the merger. Keiths board of directors was aware that these interests existed when it approved and
declared advisable the merger agreement and determined that the merger agreement and the merger are
fair to, and in the best interests of, Keith and its shareholders. See The MergerInterests of
Keith and Stantec Executive Officers and Directors in the Merger. Material U.S. Federal Income Tax Consequences For U.S. federal income tax purposes, the merger has been structured to qualify as a
reorganization under the provisions of Section 368(a) of the Code in which each of Stantec, Keith
and Stantec Consulting will be a party to the reorganization within the meaning of Section 368(b)
of the Code. Assuming the merger so qualifies, the exchange of Keith common stock for Stantec
common shares in the merger generally will not result in the recognition of gain by U.S. Holders
(as defined under Material U.S. Federal Income Tax Consequences) (except as described under
Material U.S. Federal Income Tax Consequences in the case of a 5% transferee shareholder who does
not enter into a gain recognition agreement in accordance with applicable Treasury regulations).
It is a condition to the closing that Stantec and Keith shall have each received opinions to such
effect from Shearman & Sterling LLP and Akin Gump Strauss Hauer & Feld LLP, respectively, which
opinions shall not have been withdrawn or modified in any material respect. These opinions rely
upon certain factual representations made by Stantec, Keith and Stantec Consulting as of the date
of this proxy statement/prospectus. The issuance of such opinions is conditioned upon the receipt
by each of Shearman & Sterling LLP and Akin Gump Strauss Hauer & Feld LLP of certain additional
factual representations to be made by Stantec, Keith and Stantec Consulting, which representations
shall be dated on or before the date of such opinions and shall not have been withdrawn or modified
in any material respects. The U.S. federal income tax consequences of the merger to a particular U.S. Holder of Keith
common stock will depend on the form of consideration received by the U.S. Holder in exchange for
its Keith common stock. Assuming that the merger qualifies as a reorganization under Section
368(a) of the Code, a U.S. Holder who exchanges Keith common stock solely for Stantec common shares
generally will not recognize any gain or loss on the exchange except to the extent that the U.S.
Holder receives cash in lieu of fractional Stantec common shares. If a U.S. Holder exchanges its
Keith common stock for a combination of Stantec common shares and cash and the U.S. Holders
adjusted tax basis in the Keith common stock surrendered in the merger is less than the sum of the
fair market value, as of the date of the merger, of the Stantec common shares and the amount of
cash received by the U.S. Holder, then the U.S. Holder generally will recognize gain equal to the
lesser of (1) the sum of the amount of cash and the fair market value, as of the date of the
merger, of the Stantec common shares received by the U.S. Holder minus the adjusted tax basis of
the Keith common stock surrendered therefor or (2) the amount of cash that the U.S. Holder
receives. If a U.S. Holders adjusted tax basis in the Keith common stock surrendered in the
merger is greater than the sum of the amount of cash and the fair market value of the Stantec
common shares received in the merger, the U.S. Holder will realize a loss that is not currently
allowed or recognized for U.S. federal income tax purposes. A U.S. Holder who exchanges Keith
common stock solely for cash in the merger generally will recognize gain or loss in an amount equal
to the difference between the amount of cash received and the U.S. Holders adjusted tax basis in
the Keith common stock surrendered in the merger. Material Canadian Federal Income Tax Consequences The conversion of Keith common stock into the right to receive Stantec common shares and cash
(including cash instead of fractional common shares) pursuant to the merger will not, in general,
give rise to Canadian tax for holders of Keith common stock who are not and who are not deemed to
be resident in Canada. Dividends paid or credited to holders of Stantec common shares who are not
and who are not deemed to be resident in Canada are subject to a Canadian withholding tax of 25%.
Under the Canada-United States Income Tax Convention (1980), referred to in this proxy
statement/prospectus as the Convention, the rate of that withholding tax is generally reduced to
15% for holders resident in the United States. Assuming that Stantec common shares are not 11




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taxable Canadian property, any capital gain realized on a disposition of those shares by
holders who are not and who are not deemed to be resident in Canada will not be subject to tax in
Canada. In general, Stantec common shares are not expected to constitute taxable Canadian
property. Accounting Treatment of the Merger Stantec will account for the merger as a purchase for financial reporting purposes under
Canadian and U.S. GAAP. Regulatory Matters Related to the Merger U.S. Antitrust Laws.The Hart-Scott-Rodino Antitrust Improvements Act of 1976, referred to in
this proxy statement/prospectus as the HSR Act, prohibits Stantec and Keith from completing the
merger until each of them notifies and furnishes required information to the Antitrust Division of
the U.S. Department of Justice and to the U.S. Federal Trade Commission, and the required waiting
period has expired or been earlier terminated. Each of Stantec and Keith have filed a pre-merger
notification form under the HSR Act. Unless a second request is made, the waiting period is
scheduled to expire on or about June 13, 2005. Dissenters Rights Dissenters rights may be available under Chapter 13 of the California Corporations Code,
referred to in this proxy statement/prospectus as the CCC, for Keith shareholders in connection
with the merger. In general, to preserve their dissenters rights, Keith shareholders who wish to
exercise these rights must:  
    deliver a written demand to Keith for purchase of their shares of Keith common stock,
which must be received by Keith no later than the date of the special meeting;
    vote their shares of Keith common stock AGAINST approval of the merger proposal;
    continuously hold their shares of Keith common stock from the date they make the demand
through the closing of the merger; and
    comply with the other provisions of Chapter 13 of the CCC. If, after the effective time of the merger, that shareholder withdraws or otherwise loses the
right to demand purchase of its shares of Keith common stock, those shares shall be treated as if
they had been converted as of the effective time of the merger into the right to receive the merger
consideration. See The MergerDissenters Rights beginning on page 86. The text of the CCC governing dissenters rights is attached to this proxy
statement/prospectus as Appendix D. Your failure to comply with the procedures described in
Appendix D will result in the loss of your dissenters rights. No Solicitation Subject to specified legal and fiduciary exceptions, the merger agreement precludes Keith or
any of its affiliates, whether directly or indirectly, from initiating, soliciting or encouraging
any proposals for, entering into any agreement in connection with, or participating in any
discussions or negotiations regarding, any third party proposal relating to (1) any merger,
consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or
other similar transaction involving Keith or any subsidiary; (2) any sale, lease, exchange,
transfer or other disposition of assets or businesses that constitute or represent 15% or more of
the total revenue, operating income, EBITDA or assets of Keith and its subsidiaries, taken as a
whole; (3) any sale, exchange, transfer or other disposition of 15% or more of any class of equity
securities of Keith or of any significant subsidiary (as defined in Rule 1-02 of Regulation S-X
under the Securities Act); (4) any tender offer or exchange offer that, if consummated, would
result in any person beneficially owning 15% or more of any class of equity securities of Keith or
of any significant subsidiary; (5) any solicitation in opposition to approval of this Agreement by
Keiths stockholders; or (6) any other transaction the consummation of which would reasonably be
expected to prevent or materially delay the merger. 12




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Conditions to the Merger The respective obligations of each of Stantec and Keith to effect the merger are conditioned
upon the satisfaction of the following conditions:  
    Keiths shareholders having affirmatively voted to approve the merger agreement by the
requisite vote;
    the Toronto Stock Exchange having approved the listing of the Stantec common shares to
be issued in connection with the merger;
    the waiting period under the HSR Act having expired or having been earlier terminated;
    the registration statement of which this proxy statement/prospectus is a part having
been declared effective under the Securities Act of 1933, and no stop order or proceeding
seeking a stop order being pending by or before the Securities and Exchange Commission; and
    no injunction, order or other legal restraint or prohibition preventing the consummation
of the merger being in effect and no statute, rule, regulation or order by any U.S. or
foreign governmental entity being in effect which makes the consummation of the merger
illegal. The obligation of each of Stantec and Keith to effect the merger is further subject to the
satisfaction (or waiver) of the following additional conditions:  
    the other party having performed in all material respects its obligations under the
merger agreement and its representations and warranties in the merger agreement being true
and correct as of the closing of the merger, except for failures to be true and correct
that would not reasonably be expected to have a material adverse effect (as defined in the
merger agreement);
    there shall not have been a material adverse change in the business of the other party
since the date of the merger agreement;
    the other party shall have delivered an officers certificate attesting to compliance of
such other party with its representations, warranties and covenants under the merger
agreement and to the absence of a material adverse change in such other partys business;
and
    each party having received an opinion from its U.S. tax counsel that:  
    the merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code; and
    each of Stantec, Stantec Consulting and Keith will be a party to the
reorganization within the meaning of Section 368(b) of the Code. The obligation of Stantec to effect the merger is further subject to the satisfaction (or
waiver) of the following additional conditions:  
    Keith shall have deposited with the Exchange Agent for the benefit of the holders of
Keith common stock the lesser of (1) US$18,000,000 and (2) the maximum amount of cash that
would not preclude the merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code;
    Keith shall have at least US$40,000,000 of cash or cash equivalents, less the amount of
cash deposited with the Exchange Agent;
    the number of dissenting shares shall be less than 5% of the issued and outstanding
 shares of Keith common stock; and
    Keith shall have terminated its existing 401(k) plan. 13




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The obligation of Keith to effect the merger is further subject to the satisfaction (or
waiver) of the following additional condition: Stantec common shares shall have been authorized for
listing or quotation, as the case may be, on the New York Stock Exchange or the Nasdaq National
Market, subject to official notice of issuance. Termination Stantec and Keith can mutually agree to terminate the merger agreement prior to the effective
time of the merger. Also, either party may terminate the merger agreement without the consent of
the other if:  
    the merger is not consummated by December 31, 2005, unless the party seeking to
terminate the merger agreement has failed to comply with the merger agreement and that
failure has been the cause of, or resulted in, the failure of the merger to occur on or
before December 31, 2005;
    Keith shareholders fail to adopt the merger agreement at the special meeting; or
    the other party breaches its representations, warranties, covenants or agreements
contained in the merger agreement; provided, however, that the non-breaching party may not
terminate the agreement prior to the expiration of 15 days from the date that notice of the
breach is provided to such other party and as long as such other party is exercising its
best efforts to cure the breach. Additionally, Stantec may terminate the merger agreement if Keiths board of directors has
withdrawn, modified or changed, in any manner adverse to Stantec, its support for the merger or
takes other specified actions that would be adverse to the completion of the merger. Furthermore,
Keith may terminate the merger agreement if it accepts a superior acquisition proposal and pays a
termination fee and pays Stantecs expenses. Termination Fee If the merger agreement is terminated after a change in recommendation by Keiths board of
directors or a termination by Keiths board of directors in order to enter into a binding agreement
with respect to a superior acquisition proposal, Keith is required to pay Stantec a termination fee
of US$3.0 million, plus Stantecs fees, costs and expenses in connection with the merger. The
termination fee could discourage other companies from seeking to acquire or merge with Keith. Comparison of Shareholder Rights The election by you to convert your shares of Keith common stock into the right to receive
Stantec common shares in the merger will result in differences between your rights as a Stantec
shareholder, governed by the Canada Business Corporations Act, and your rights as a Keith
shareholder, governed by the CCC. See Comparison of Shareholder Rights on page 101. 14




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Risk Factors

In addition to the other information included or incorporated by reference into this proxy
statement/prospectus, including the matters addressed under the caption Forward-Looking
Statements, you should carefully consider the
matters described below in evaluating an investment in Stantec common shares offered by this proxy statement/prospectus.

Risk Factors Relating to the Merger

You
cannot be certain of the value of merger consideration that you will receive in the merger.

Upon completion of the merger, you shall have the right to elect to receive any one of the
following forms of merger consideration in exchange for each and every share of Keith common stock
that you own:



| | (1) | a mix of cash and stock equal to (A) US$11.00 in cash, (B) 0.23 common shares of Stantec and (C) that number of Stantec common shares equal to US$5.50,
based on the 20-day average trading price of Stantec common shares prior to the
merger;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) | all Stantec common shares equal to (A) 0.23 Stantec common shares and (B)
that number of Stantec common shares equal to US$16.50, based on the 20-day
average trading price of Stantec common shares prior to the merger; or                   
|
| | (3) | all cash equal to (A) US$16.50 and (B) cash equal to the value of 0.23 common shares, based on the 20-day average trading price of Stantec common shares prior to the
merger.                                                                  

As is described above, and as is more fully detailed in the merger agreement attached to this
proxy statement/prospectus as Appendix A, a fixed exchange ratio of 0.23 forms part of the merger
consideration calculation regardless of which form of merger consideration you elect to receive.
Therefore, the dollar value of the merger consideration you receive under any of option (1), (2) or
(3) above is dependent on the trading price of Stantec common shares prior to the time that the
merger is consummated. The market price of Stantec common shares will likely be different, and may
be lower, on the date you receive your Stantec common shares than the market price of Stantec
common shares as of the date of this proxy statement/prospectus or the date of the special meeting.
Similarly, for those shareholders who elect to receive all or part of their consideration in
Stantec common shares, the number of Stantec common shares that such shareholders will receive will
vary depending on the average trading price of Stantec common shares prior to the merger. The
higher the average trading price, the fewer Stantec common shares you will receive and the lower
the average trading price, the more Stantec common shares you will receive. In addition, part of
the value in U.S. dollars of the merger consideration you receive will vary depending upon changes
in the applicable currency exchange rate. In all cases, the exact amount of cash or number of
shares you will receive is not currently known.

In addition, the price of Keith common stock immediately prior to the effective time of the
merger may vary from its price on the date the merger agreement was executed, on the date of this
proxy statement/prospectus and on the date of the special meeting. Variations in the prices of
Keith common stock and of Stantec common shares prior to the effective time of the merger and of
Stantec common shares after the effective time may be the result of various factors, including:



| |  | changes in the business, operations or prospects of Stantec or Keith;  
| | - | -----------------------------------------------------------------------
|
| |  | changes in economic conditions and the outlook for economic conditions;
|
| |  | market reaction to the proposed merger; and                            
|
| |  | the timing of the consummation of the merger.                          

If the merger is completed, it will not be completed until following the date of the special
meeting and the satisfaction or waiver of all conditions to the merger. Therefore, at the time of
the special meeting you will not know the precise dollar value of the merger consideration that you
will become entitled to receive at the effective time of the merger. You are urged to obtain a
current market quotation for Stantec common shares.

15



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Failure to complete the merger could negatively impact the price of Keith common stock
and Keiths future business and operations. The proposed merger with Keith is subject to a number of conditions, including the approval of
the Keith shareholders of the merger agreement, the receipt of tax opinions from legal counsel and
a requirement that Keith have cash and cash equivalents of at least $40.0 million. At March 31,
2005, Keith had cash and cash equivalents combined with securities available-for-sale of $40.2
million. If any of these conditions were to fail to be satisfied, the merger may not be
consummated. If the merger is not completed, the ongoing business of Keith and the trading price
of the Keith common stock may be adversely affected and Keith will be subject to several risks,
including the following:  
    failure to complete the merger may seriously harm investors and analysts perception of
Keiths underlying business and prospects which could seriously harm Keiths stock price;
    the price of the Keith common stock, which currently reflects a premium as a result of
the proposed merger, may decline to price ranges similar to, or below, those that existed
prior to the announcement of the merger;
    costs related to the merger, such as legal, accounting, financial advisory and financial
printing fees must be paid by Keith, even if the merger is not completed;
    Keith may be required to pay Stantec a termination fee of US$3.0 million plus its
expenses, if the merger agreement is terminated in certain circumstances;
    the diversion of Keiths managements attention from the day-to-day business of Keith
and the unavoidable disruption to Keiths employees and its relationships with customers
may, in turn, detract from Keiths ability to grow revenue and minimize costs and lead to a
loss of market position that Keith could be unable to regain;
    Keith management may not pursue operating plans and acquisitions and other opportunities
that could be beneficial to Keith;
    the announcement of the merger could have an adverse effect on Keiths revenue in the
near-term if customers delay, defer or cancel contracts pending resolution of the merger;
if this were to occur, Keiths results of operations and quarterly revenue could be
substantially below the expectations of market analysts and could cause a reduction in the
trading price of the Keith common stock; and
    Keith would not realize the benefits it expects to receive by being part of a combined
company with Stantec, as well as the potentially enhanced financial and competitive
position Keith believes would result from the merger. In addition, in the event that the merger is not completed and the Keith board of directors
determines to seek another merger or business combination, it may not be able to find a
partner willing to pay an equivalent or more attractive price than that which would have been
paid in the merger with Stantec Consulting. An election to receive all shares or all cash may not result in a payment in all shares or all
cash. Your ability to receive all shares or all cash will be subject to a pro rata adjustment should
one of these alternatives be oversubscribed. For example, on the one hand if the number of Stantec
common shares that Keith shareholders elect to receive is greater than the total number of Stantec
common shares that Stantec is required to issue, then you will receive a proportionate allocation
of Stantec common shares and cash based on the formula set out in the merger agreement. On the
other hand, if the amount of cash that Keith shareholders elect to receive is greater than the
total amount of cash that Stantec is required to pay, then you will receive a proportionate
allocation of cash and Stantec common shares based on the formula set out in the merger agreement.
Therefore, even if you elect to receive all stock and are required to take some cash as part of
your consideration, you may recognize a gain under U.S. federal income tax laws and thus be exposed
to a tax liability. Similarly, even if you should elect to receive all cash in exchange for your
Keith common stock, you may receive some Stantec common shares as part of your consideration and
the value of your all cash election will depend on the average trading price of Stantec common
shares prior to the merger. The fairness opinion provided by Bear Stearns was given as of the date of the merger agreement
and does not reflect subsequent changes in circumstances. 16




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The opinion of Bear Stearns, financial advisor to the Keith board of directors, addresses the
fairness from a financial point of view of the merger consideration to be received by Keith
shareholders based on the financial, economic, market and other conditions as they existed on April
14, 2005 and not at any later time. Significant time has elapsed since the date of the fairness
opinion and changes in conditions, which are beyond the control of Keith, Stantec and Bear Stearns,
and on which the opinion is based, may have altered the value of Keith common stock or Stantec
common shares. In addition, Bear Stearns has the ability to withdraw or modify the fairness
opinion. The fairness opinion provided by Bear Stearns is based on various assumptions and is subject
to various limitations. In its review and analysis and in formulating its opinion, Bear Stearns assumed and relied,
without independent verification, upon the accuracy and completeness of the financial and other
information provided to it by Keith and Stantec, including the range of projected financial results
provided to it by management of Keith, and assumed that the financial information and range of
projected financial results were reasonably prepared on bases reflecting the best currently
available judgments and estimates of Keith management. Bear Stearns did not assume any
responsibility for making or obtaining an independent valuation or appraisal of the assets or
liabilities of Keith or Stantec, and no such independent valuation or appraisal was provided to
Bear Stearns. Keiths shareholders may receive a lower return on their investment after the merger. Although Stantec and Keith believe that the merger will create financial, operational and
strategic benefits for the combined company and its shareholders, these benefits may not be
achieved. The combination of Keiths and Stantecs businesses, even if conducted in an efficient,
effective and timely manner, may not result in combined financial performance that is better than
what each company would have achieved independently if the merger had not occurred. Stantec and Keith may experience difficulties in integrating Keiths business with the
existing operations of Stantec and so may not realize the anticipated benefits of the merger. Stantecs and Keiths rationales for the merger are, in part, predicated on our ability to
leverage the combined strengths of the two companies to increase opportunities and grow revenue.
Integrating Keiths operations and personnel with those of Stantec will be a complex process and
Stantec may not be able to complete the process rapidly or without encountering difficulties. The
successful integration of Keiths operations with those of Stantec will require, among other
things, integration of Keiths and Stantecs professional services, sales and marketing operations,
information and software systems and coordination of employee retention and hiring and training
operations. The diversion of the attention of management to the integration effort and any
difficulties encountered in combining operations could adversely affect the combined companys
businesses and prevent them from realizing the anticipated improvement in professional service
offerings, market penetration and geographic presence that form the foundation for the merger. Uncertainties associated with the merger or Stantec as a new owner may cause Keith to lose
customers. Keiths customers may, in response to the announcement of the merger, delay or defer decisions
concerning their use of Keiths services because of uncertainties related to the consummation of
the merger, including that the merger may not be consummated if all of the conditions to the merger
are not fulfilled. This could have an adverse effect on Stantecs business, results of operations
or financial condition following the merger. Uncertainties associated with the merger may cause a loss of employees. The ability to attract and retain trained professionals is one of the key drivers of Stantecs
business and results. Therefore, the success of the combined company after the merger will depend
in part upon the ability of Stantec and Keith to retain key employees of both companies.
Competition for qualified personnel can be very intense. In addition, key employees may depart
because of issues relating to the uncertainty and difficulty of the consummation of the merger, the
integration or a desire not to remain with the combined company. Accordingly, no assurance can be
given that Stantec or Keith will be able to retain key employees to the same extent that they have
been able to do so in the past. The rights of Keiths shareholders will change when they become Stantec shareholders in
connection with the merger. 17




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In connection with the merger, you may receive Stantec common shares as part of the merger
consideration. There are numerous differences between the rights of a shareholder in Keith, a
California corporation, and the rights of a shareholder of Stantec, a Canadian corporation. For a
detailed discussion of these differences, see Comparison of Shareholder Rights in addition to the
other risk factors set forth in this proxy statement/prospectus relating to being a shareholder of
a Canadian corporation. Keiths directors and officers have conflicts of interest in recommending the merger to
Keiths shareholders. In considering the recommendation of Keiths board of directors to approve the merger
agreement, Keiths shareholders should recognize that certain Keith directors and officers have
interests in the merger that are different from, or are in addition to, their interests as Keith
shareholders. These interests include:  
    future employment arrangements;
    severance benefits in the merger;
    acceleration of the vesting of stock options as a result of the merger; and
    indemnification against certain liabilities arising both before and after the merger. These and additional interests are described under the section of this proxy
statement/prospectus captioned Interests of Keiths and Stantecs Executive Officers and Directors
in the Merger. Stantec is governed by the laws of Canada, and, as a result, it may not be possible for
shareholders to enforce civil liability provisions of the securities laws of the United States. Stantec is governed by the laws of Canada. A substantial portion of Stantecs assets are
located outside the United States, and some of Stantecs directors and all of its officers and some
of the experts named in this proxy statement/prospectus are residents outside of the United States.
As a result, it may be difficult for investors to effect service within the United States upon
Stantec and those directors, officers and experts, or to realize in the United States upon
judgments of courts of the United States predicated upon civil liability of Stantec and such
directors, officers or experts under the United States federal securities laws. There is
uncertainty as to the enforceability in Canada by a court in original actions, or in actions to
enforce judgments of United States courts, of the civil liabilities predicated upon the United
States federal securities laws. Stantec expects to maintain its status as a foreign private issuer under the rules and
regulations of the SEC and, thus, will be exempt from a number of rules under the Securities
Exchange Act of 1934 and will be permitted to file less information with the SEC than a company
incorporated in the United States. As a foreign private issuer, Stantec will be exempt from rules under the Securities Exchange
Act of 1934, referred to in the proxy statement/prospectus as the Exchange Act, that impose certain
disclosure and procedural requirements for proxy solicitations under Section 14 of the Exchange
Act. In addition, Stantecs officers, directors and principal shareholders will be exempt from the
reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and the
rules under the Exchange Act with respect to their purchases and sales of Stantec common shares.
Moreover, Stantec will not be required to file periodic reports and financial statements with the
SEC as promptly as U.S. companies whose securities are registered under the Exchange Act, nor will
it be required to comply with Regulation FD, which restricts the selective disclosure of material
information. Accordingly, there may be less publicly available information concerning Stantec than
there is for U.S. public companies such as Keith. Moreover, Stantec expects to be eligible to use
the Canada-U.S. multijurisdictional disclosure system, which will permit Stantec to meet most of
its continuous disclosure obligations by filing Canadian disclosure documents with the Securities
and Exchange Commission. Such Canadian disclosure documents differ from the disclosure required of
a U.S. company. In addition, Stantec will not be required to have its internal controls audited
pursuant to Section 404 of the Sarbanes-Oxley Act until it issues its annual report for the year
ended December 31, 2006. Stantec common shares are not currently listed on any U.S. stock exchange or quotation system
and its listing application may not be approved. Currently, Stantec common shares are only tradable through the facilities of the Toronto Stock
Exchange and are not listed on any U.S. stock exchange or quotation system. While Stantec has
applied to list its common 18




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shares on the New York Stock Exchange, such application may not be approved. The listing of
Stantec common shares on the New York Stock Exchange or Nasdaq National Market is a condition to
Keiths obligations under the merger agreement. However, Keith has the ability to waive this
requirement and consummate the merger even if Stantec is unable to list its common shares on a U.S.
exchange. If Stantec is unsuccessful in listing its common shares on the New York Stock Exchange
or the Nasdaq National Market, and Keith waives the listing condition, your Stantec common shares
will only be tradable through the facilities of the Toronto Stock Exchange. The merger agreement contains provisions that may discourage other companies from trying to
acquire Keith. The merger agreement contains provisions that may discourage a third party from submitting a
business combination proposal to Keith that might result in greater value to Keiths shareholders
than the merger. These provision include the prohibition on Keith from soliciting any acquisition
proposals or offers for competing transactions and the requirement that Keith pay a US$3.0 million
termination fee plus Stantecs expenses if the merger agreement is terminated in specified
circumstances. Risks Related to Stantecs Business We may be unsuccessful in our goal to increase the size and profitability of our operations. To help reduce our susceptibility to industry-specific and regional economic cycles and to
take advantage of economies of scale in the highly fragmented professional services industry, we
intend to continue to diversify our business both in terms of geographic presence and service
offerings. Since the beginning of 2002, we have completed 18 acquisitions and we expect to
continue to pursue selective acquisitions of business that will enable us to enhance our market
penetration and increase and diversify our revenue base. However, we may not be able to locate
suitable acquisitions or be able to consummate any such transactions on terms and conditions
acceptable to us. As the professional services industry consolidates, suitable acquisition
candidates are expected to become more difficult to locate and may only be available at prices or
under terms that are less favorable than in the past. In addition, some of our competitors are
much larger than us and have greater financial resources than us and can better afford to pay a
premium for potential acquisition candidates. If we are unable to effectively compete for or
locate suitable acquisitions, our business will not grow in the manner we expect and we will have
difficulty achieving our goals for growth. If we are unable to effectively manage our growth, we may experience a decline in our revenue
and profitability. We have grown rapidly in the recent past. For example, our gross revenue has doubled in the
past five years. We intend to pursue further growth through acquisitions and otherwise, as part of
our business strategy, but we may not be able to manage our growth effectively and efficiently.
Our inability to manage our growth could cause us to incur unforeseen costs, time delays or other
negative impacts, any of which could cause a decline in our revenue and profitability. Our rapid
growth has presented and will continue to present, numerous administrative and operational
challenges, including the management of an expanding array of engineering and consulting services,
the assimilation of financial reporting systems, increased pressure on our senior management and
increased demand on our systems and internal controls. Furthermore, as we expand our service
offerings and geographic presence, we may not be able to maintain the current level of quality of
services. We also may encounter difficulties integrating acquisitions that we do make. For example, we
acquired Beak International Incorporated in October 2002, but were not successful in
integrating that firm and have sold the majority of that business back to various employee groups.
Acquired businesses may not be profitable because we may not be successful in generating the same
level of operating performance that an acquired company experienced prior to the acquisition.
Also, we may not be able to maintain our reputation in an acquired entitys geographic area or
service offerings and as a consequence our ability to attract and retain clients in those or other
areas may be negatively impacted. Any of these integration issues could divert managements
attention from other business activities. Such a diversion, together with other difficulties we
may encounter in integrating an acquired business, could have a material adverse effect on its
business, financial condition and results of operations. From time to time, we have pursued and may continue to pursue and invest in business
opportunities that are not directly within our core competencies. If these business opportunities
are not profitable, our results of operations may be materially adversely affected. 19




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Acquisitions may bring us into businesses that we have not previously conducted and expose us
to additional business risks that are different than those we have traditionally experienced. For
example, we acquired GKO Engineering in March of 2002. GKO provided services in the industrial
market segment, an area in which we previously did not have a significant presence. Consequently,
we may depend in part upon the knowledge and expertise of the professional service providers and
management teams that we acquire in order to make these business opportunities profitable. New
business opportunities frequently bring with them a learning curve that may require substantial
management time, which may create a distraction from our day-to-day business operations. If these
business opportunities do not perform as anticipated or are not profitable, our earnings in those
periods may be materially adversely affected and we may experience a partial or complete loss of
our investment. We may be unable to secure the additional capital required to fund our acquisition strategy. In order to fund future acquisitions we will need access to substantial amounts of capital.
However, we may be unable to obtain the necessary capital to finance a successful acquisition
program while meeting our other cash needs. If we are unable to obtain additional capital on
acceptable terms, we may be required to reduce the scope of our anticipated expansion, which may
negatively affect our future competitiveness and results of operations. Currently, we intend to use cash and our common shares as consideration in making future
acquisitions. Using internally generated cash or taking on debt to complete acquisitions could
substantially limit our operational and financial flexibility. The extent to which we will be able
or willing to use our common shares for acquisitions will depend on the market value of our shares
from time to time and the willingness of potential sellers to accept our shares as full or partial
payment. In addition, using our shares for future acquisitions may result in a significant
dilution to existing shareholders. The professional consulting services industry is highly competitive. The markets that we serve are highly competitive and we have numerous competitors for all of
the services we offer. The principal competitive factors in the services we offer are: reputation;
experience; breadth and quality of services; technical proficiency; local offices; competitive
total project fees; and service delivery. The number and identity of competitors varies widely
with the type of service we provide. For small to medium sized projects, we compete with many
engineering, architectural and other professional consulting firms. With larger projects, there
are fewer but still many competitors and many of these competitors have greater financial and other
resources than we do. While we compete with other large private and public companies in certain
geographic locations, our primary competitors are smaller privately held regional firms in the
United States and Canada. Competition places downward pressure on our contract prices and profit
margins. Intense competition is expected to continue in these markets, presenting us with
significant challenges in our ability to maintain strong growth rates and acceptable profit
margins. If we are unable to meet these competitive challenges, we could lose market share to our
competitors and experience an overall reduction in our profits. We may not be able to compete
successfully with such competitors and such competition could cause us to lose customers, increase
expenditures or reduce pricing, any of which could have a material adverse effect on our earnings
and stock price. Economic downturns could have a negative impact on our businesses. Demand for the services offered by us has been, and is expected to continue to be, subject to
significant fluctuations due to a variety of factors beyond our control, including economic
conditions. During economic downturns, the ability of both private and governmental entities to
make expenditures may decline significantly. We cannot be certain that economic or political
conditions will be generally favorable or that there will not be significant fluctuations adversely
affecting our industry as a whole or key markets targeted by us. Our business could suffer if there is a downturn in the real estate market. On a pro forma basis, after giving effect to the merger as if it had occurred on January 1,
2004, we estimate that approximately 43% of our 2004 net revenue would have been derived from
services related to residential and commercial real estate development projects. Consequently,
reduced demand in the real estate market would likely have an adverse impact on our urban land
group. The real estate market and, therefore, our business, may be impacted by a number of
factors, which may include:  
    changes in employment levels and other general economic conditions; 20




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
    changes in interest rates and in the availability, cost and terms of financing;
    the impact of present or future environmental, zoning or other laws and regulations;
    changes in real estate tax rates and assessments and other operating expenses;
    changes in levels of government infrastructure spending and fiscal policies; and
    natural or manmade disasters and other factors which are beyond our control. A significant decrease in the demand for our real estate related services could have a material
adverse effect on our overall business, including our results of operations and liquidity. We derive revenue from contracts with government agencies. Any disruption in government
funding or in our relationship with those agencies could adversely affect our business. The demand for our services is related to the level of government funding that is allocated to
rebuild, improve and expand infrastructure systems. We derive a significant amount of our revenue
from government or government-funded projects and expect to continue to derive a significant amount
of our revenue from such projects in the future. Significant changes in the level of government
funding could have an unfavorable impact on our business, financial position, results of operations
and cash flows. We believe that the success and further development of our business depends, in part, upon the
continued funding of these government programs and upon our ability to participate in them.
Governments may not have the available resources to fund these programs or may not fund these
programs even if governments have available financial resources. Some of these government
contracts are subject to renewal or extensions annually, so we cannot be assured of our continued
work under these contracts in the future. In addition, government agencies can terminate these
contracts at their convenience. As a result, we may incur costs in connection with the termination
of these contracts and suffer a loss of business. Also, contracts with government agencies are
sometimes subject to substantial regulation and audit of actual costs incurred. Consequently,
there may be a downward adjustment to our revenue if accrued recoverable costs exceed actual
recoverable costs. We may have difficulty in attracting and retaining qualified professionals, which may harm our
reputation in the marketplace and restrict our ability to implement our business strategy. We derive our revenue almost exclusively from services performed by our professionals.
Consequently, one of the key drivers of our business is our ability to attract and retain qualified
professionals. We may not be able to attract and retain the desired number of professionals over
the short or long term. There is significant competition for professionals with the skills
necessary for providing our services from major and boutique consulting, engineering, public
agency, research and other professional service firms. Our inability to attract and retain
qualified professionals could impede our ability to secure and complete engagements, in which event
we may lose market share and our revenue and profit may decline. In addition, if our employees
leave our company and become competitors of ours, we may lose other employees and some of our
existing clients that have formed relationships with such former employees. We may also lose
future clients to a former employee as a new competitor. In either event, we could lose clients
and revenue, and our profitability could decline. If we are unable to engage qualified subcontractors, we may lose projects, revenue and
clients. We often contract with outside companies to perform designated portions of the services we
perform for our clients. In 2004, subcontractor costs accounted for approximately 8.6% of our
gross revenue. If we are unable to engage qualified subcontractors, our ability to perform under
some of our contracts may be impeded and the quality of our service may decline. As a consequence,
we may lose projects, revenue and clients. The nature of our business exposes us to potential liability claims and contract disputes,
which may reduce our profits. Our operations are subject to the risk of third-party claims in the normal course of our
business, some of which may be substantial. We have been and may in the future be named as a
defendant in legal proceedings where parties may make a claim for damages or other remedies with
respect to our projects or other matters. For example, one of our subsidiaries is named in a
lawsuit related to design services it provided for a roadway in New York State in connection with a
multi-vehicle accident that occurred on the roadway. See Description of Stantecs BusinessLegal
Proceedings. Any litigation resulting from our business operations could distract management
attention from normal business operations, divert financial resources to the defense of such claims
or result in significant attorney 21




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fees and damage awards, for which we may not be fully insured and which could harm our
reputation. Any of these circumstances could adversely affect our profitability. Our insurance may not cover all claims for which we may be liable and expenses related to
insurance coverage may adversely impact our profitability. We maintain insurance coverage for our operations, including policies covering general
liability, automobile liability, environmental liability, workers compensation and employers
liability, directors and officers liability and professional liability insurance. The maximum
coverage under our professional liability policy is generally C$35 million per claim and per year,
with a per claim deductible of C$500,000 and an aggregate excess deductible of C$2.5 million. In
September 2003, we established a regulated captive insurance company to insure and fund the payment
of any professional liability self-insured retentions related to claims arising after August 1,
2003. We, or our clients, also obtain project-specific insurance for designated projects from
time-to-time. Although we believe that we have made adequate arrangements for insuring against the
above risks, there is no assurance that these arrangements will sufficiently cover any particular
risk. When it is determined that we have liability, we may not be covered by insurance or, if
covered, the dollar amount of these liabilities may exceed our policy limits. Our professional
liability coverage is on a claims-made basis covering only claims actually made during the policy
period currently in effect. In addition, even where insurance is maintained for such exposures,
the policies have deductibles resulting in our assuming exposure for a layer of coverage with
respect to any such claims. Any liability not covered by our insurance, in excess of our insurance
limits or, if covered by insurance but subject to a high deductible, could result in a significant
loss for us, which may reduce our profits and cash available for operations. Moreover, we may
become subject to liability that cannot be insured against or against which we may choose not to
insure because of high premium costs or for other reasons. Our expansion into new services or
geographic areas could result in our failure to obtain coverage for these services or areas, or the
coverage being offered may be at a higher cost than our current coverage. Due to the current
insurance environment, we have experienced and may continue to experience an increase in our
insurance premiums. We may not be able to pass these increases on to our clients in increased
billing rates. If we experience delays and/or defaults in customer payments, we could suffer liquidity
problems or we could be unable to recover our expenditures. Because of the nature of our contracts, at times we commit resources to projects prior to
receiving payments from the customer in amounts sufficient to cover expenditures on client projects
as they are incurred. Delays in customer payments may require us to make a working capital
investment. If a customer defaults in making its payments on a project in which we have devoted
significant resources, it could have a material negative effect on our liquidity and results of
operations. In addition, clients that withhold payment are more likely to bring claims against us
and they have a higher tendency toward dissatisfaction with the services we provide. We bear the risk of cost overruns in a significant number of our contracts. We may experience
reduced profits or, in some cases, losses under these contracts if costs increase above our
estimates. We conduct our business under various types of contractual arrangements, most of which are fee
for service. However, approximately 67% of the dollar-value of our contracts are based on a fixed
fee or time-and-materials contract with a ceiling on the maximum costs to the client. Under
fixed-fee contracts, we perform services at a stipulated price. Under time-and-materials contracts
with not-to-exceed provisions, we are reimbursed for the number of labor hours expended at an
established hourly rate plus the cost of materials incurred, subject, however, to a stated maximum
dollar amount for the services to be provided under the contract. In both of these types of
contracts, we agree to provide our services based on our estimate of the costs a particular project
will involve. These estimates are established in part on cost and scheduling projections, which
may prove inaccurate, or circumstances may change such as unanticipated technical problems,
weaknesses in project management, difficulties in obtaining permits or approvals, changes in local
laws or delays beyond our ability to control. Underestimation of costs for these types of
contracts may cause us to incur losses or result in a project not being as profitable as we
expected. In addition, projects not completed on schedule further reduce profitability because
personnel must continue to work on the project longer than anticipated, which may prevent them from
pursuing and working on new projects. Projects that are over budget or not on schedule can also
lead to client dissatisfaction. We derive revenue from contracts for work performed in countries other than Canada and the
United States, which are subject to a number of risks that could adversely affect the results of
these projects and the results of our operations. 22




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The work that we currently perform in locations other than Canada and the United States does
not represent a significant part of our business, and during 2004, net revenue generated from work
in such locations, including Asia, South America, the Middle East, the Caribbean and Africa,
represented approximately 1% of our net revenue. We may, however, continue to seek opportunities
abroad in the future which may increase our concentration of net revenue from locations other than
Canada and the United States. Such foreign business is subject to the customary risks associated
with foreign transactions, including political risks, local laws and taxes, difficulty in enforcing
contracts, the potential imposition of trade or currency exchange restrictions, tariff increases
and difficulties or delays in collecting accounts receivables. Weak foreign economies could have
an adverse impact on our business, financial condition and results of operations. Our backlog is subject to unexpected adjustments and cancellations and is, therefore, an
uncertain indicator of our future earnings. As of December 31, 2004, our backlog was approximately C$380.0 million. The revenue projected
in our backlog may not be realized or, if realized, may not result in profits. Projects may remain
in our backlog for an extended period of time. In addition, project cancellations or scope
adjustments may occur, from time to time, with respect to contracts reflected in our backlog.
Backlog reductions can adversely affect the revenue and profit we actually receive from contracts
reflected in our backlog. Future project cancellations and scope adjustments could further reduce
the dollar amount of our backlog and the revenue and profits that we actually receive. Finally,
poor project or contract performance could also impact our profits. We are exposed to currency exchange risk that could have a material adverse effect on our
results of operations and financial condition. While we report our financial results in Canadian dollars, a substantial portion of our
revenue and expenses are in U.S. dollars. For purposes of financial reporting under Canadian GAAP,
revenue and expenses denominated in foreign currencies are translated into Canadian dollars at the
average exchange rates prevailing during the year. We expect to continue to report our financial
results in Canadian dollars in accordance with Canadian GAAP. Therefore, if the Canadian dollar
were to strengthen relative to the U.S. dollar and other currencies, the amount of net income from
non-Canadian dollar denominated business could decrease which could have a material adverse effect
on our business, financial condition and results of operations. We enter into forward contracts to manage risk associated with net operating assets outside of
our U.S. operations denominated in U.S. dollars (other than with respect to net operating assets
that are owned by U.S. subsidiaries). These derivative contracts, which are not accounted for as
hedges, are marked to market, and any changes in the market value are recorded in income or expense
when the changes occur. As a result, we may not benefit from any weakening of the Canadian dollar
relative to the U.S. dollar. We may not be able to adequately protect our intellectual property. To establish and protect our intellectual property rights, we rely upon a combination of
trademark and trade secret laws, together with licenses, exclusivity agreements and other
contractual covenants. The measures we take to protect our intellectual property rights may prove
inadequate to prevent misappropriation of its intellectual property. Litigation may be necessary
to enforce our intellectual property rights or to determine the validity and scope of the
proprietary rights of others. Litigation of this type could result in substantial costs and
diversion of resources, may result in counterclaims or other claims against us and could
significantly harm our results of operations. Adverse weather conditions and natural or other disasters may cause a delay or elimination of
our net revenue which otherwise would have been recognized and adversely affect our profitability. Field activities are generally performed outdoors and may include surveying, archeology, plant
start-up and testing, and plant operations. Certain weather conditions and natural and other
disasters, such as fire, floods, and similar events, may cause postponements in the initiation
and/or completion of our field activities and may hinder the ability of our office employees to
arrive at work, which may result in a delay or elimination of revenue that otherwise would have
been recognized, while certain costs will continue to be incurred. Adverse weather conditions or
disasters may also delay or eliminate our initiation and/or completion of the various phases of
work relating to our other engineering services that commence concurrent with or subsequent to
field activities. Any delay in completion of the field, office and/or other activities may require
us to incur additional costs attributable to overtime work 23




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necessary to meet the clients required schedule. Due to various factors, a delay in the
commencement or completion of a project may also result in a cancellation of the contract. As a
result, our net revenue and profitability may be adversely affected. Terrorism and related conflicts may have a material adverse effect on our operating results. The terrorist attacks that took place in the United States on September 11, 2001, along with
the United States military campaign in Afghanistan, Iraq and elsewhere, and ongoing violence in the
Middle East, have created many economic and political uncertainties, some of which may continue to
materially affect the markets in which we operate, and our operations and profitability. The
short-term and long-term effects of these developments on our customers, the markets for our
services and the U.S. economy are uncertain. The consequences of any terrorist attacks, or any
armed conflicts, are unpredictable, and we may not be able to foresee events that could have an
adverse effect on our markets or our business. We may experience loss of reputation due to client dissatisfaction with the quality of our
services. Although we serve many diverse clients and are not dependent on any one client or group of
clients to sustain our business, our reputation for delivering effective and efficient solutions on
complex projects is one of our most valuable business development assets. We believe one of our
primary competitive advantages is our reputation and experience. The loss of this reputation due
to client dissatisfaction represents a significant risk to our ability to win additional business
both from existing clients and from those whom we may have dealings with in the future. Risks Related to Stantec Common Shares The trading price of our common shares may be affected by factors different from those that
affect the price of Keith common stock. Upon completion of the merger, you may become a holder of our common shares. Our overall
business differs from that of Keith, and our results of operations, as well as the trading price of
our common shares, may be affected by factors different from those affecting Keiths results of
operations and the price of Keith common stock. For a discussion of our business and information
to consider in connection with such businesses, see Description of Stantecs Business and for a
discussion of Keiths business and information to consider in connection with such businesses, see
Keiths Annual Report on Form 10-K for the fiscal year ended December 31, 2004, which is
incorporated by reference in this proxy statement/prospectus. The price of our common shares may fluctuate substantially, which could negatively affect the
holders of our common shares. The price of our common shares may fluctuate substantially due to, among other things, the
following factors: (1) the failure of our quarterly or annual operating results to meet
expectations; (2) the reaction of markets and securities analysts to announcements and developments
involving us; (3) adverse developments in the worldwide, Canadian or U.S. economy, the financial
markets and the engineering and consulting services market; (3) changes in interest rates; (4)
announcements by key competitors; (5) additions or departures of key personnel; (6) announcements
of legal proceedings or regulatory matters; and (7) general volatility in the stock market. In addition, the stock market has experienced volatility that has affected the market prices
of equity securities of many companies, and that has often been unrelated to the operating
performance of such companies. A number of other factors, many of which are beyond our control,
could also cause the market price of our common shares to fluctuate substantially. As a result,
you may not be able to resell your shares at or above the associated value of Keiths shares on the
date of the merger, if at all. Our share price could be adversely affected if a large number of our common shares are offered
for sale or sold. Notwithstanding the ability of Keiths shareholders to elect to receive cash or stock or mixed
consideration in exchange for their Keith shares upon consummation of the merger, some of the Keith
shareholders may subsequently decide to dispose of their Stantec shares following the merger which
could lead to a large supply of our common shares on the market. If the supply of our common
shares is significantly greater than the associated demand, the market price of our common shares
may significantly decline and may not recover. 24




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##### 



Significant fluctuation in the market price of our common shares could result in securities
class action claims against us. In the past, following periods of downward volatility in the market price of a companys
securities, class action litigation has often been pursued against the respective company. If our
common shares were similarly volatile and similar litigation were pursued against us, it could
result in substantial costs and a diversion of managements attention and resources. If we need to sell or issue additional common shares and/or incur additional debt to finance
future acquisitions, your stock ownership could be diluted and our results of operations could be
adversely affected. Our business strategy is to expand into new markets and enhance our position in existing
markets through the acquisition of complementary businesses. In order to successfully complete
targeted acquisitions or to fund our other activities, we may issue additional equity securities
that could dilute your stock ownership. We may also incur additional debt if we acquire another
company and this could negatively impact our results of operations. 25




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Forward-Looking Statements Some of the statements contained in this proxy statement/prospectus, including those relating
to Stantecs strategies and other statements that are predictive in nature, that depend upon or
refer to future events or conditions, or that include words such as expects, anticipates,
intends, plans, believes, estimates or similar expressions, are forward-looking statements.
Forward-looking statements include, without limitation, the information concerning possible or
assumed future results of operations of Stantec and Keith as set forth under The Merger  Reasons
for Stantecs Board Recommendation, The Merger  Reasons for Keiths Board Recommendation, and
The Merger  Opinion of the Keiths Financial Advisor. These statements are not historical facts
but instead represent only Stantecs and/or Keiths expectations, estimates and projections
regarding future events. Many factors could cause the actual results, performance or achievements of Stantec, Keith or
the combined company to be materially different from any future results, performance, or
achievements that may be expressed or implied by such forward-looking statements, including, among
others:  
    difficulties in integrating Stantec and Keith and in achieving anticipated cost savings
and growth opportunities;
    difficulties in implementing Stantecs business strategy, including difficulties in the
identification of suitable acquisition candidates, satisfactory completion of acquisitions
and the successful integration of acquisition targets;
    the inability to secure additional capital financing to fund our acquisition growth strategy.
    increase in competition by United States, Canadian and international competitors;
    the impact of adverse economic conditions and future catastrophic events;
    delays, cancellations, or suspension of, or changes in the scope of, existing contracts;
    changes in the level of government funding for infrastructure projects both within North
America and abroad;
    limited availability of qualified professional personnel and qualified subcontractors;
    loss of key employees or customers due to the merger;
    future litigation or regulatory action;
    delays or defaults in customer payments for services performed;
    cost overruns on fixed-price, guaranteed maximum price, or unit price contracts;
    exposure to risks inherent in doing business in countries other than Canada and the United States;
    fluctuation in interest rates and exchange rates;
    protection of intellectual property;
    adverse changes in future results of operations, liquidity and financial position; and
    fluctuations in the market price of Keith common stock or Stantec common shares. Should one or more of these risks or uncertainties materialize, or should assumptions
underlying the forward-looking statements prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated or expected. 26




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The forward-looking statements contained in this proxy statement/prospectus are not guarantees
of future performance and involve risks and uncertainties that are difficult to predict. The
future results and shareholder value of Stantec may differ materially from those expressed in the
forward-looking statements contained in this proxy statement/prospectus due to, among other
factors, the matters set forth under Risk Factors as well as the other information incorporated
by reference in this proxy statement/prospectus. See Where You Can Find More Information. Except
as required by law, neither Stantec nor Keith undertakes any obligation to update or release any
revisions to these forward-looking statements to reflect events or circumstances after the date of
this proxy statement/prospectus or to reflect the occurrence of unanticipated events, except as
required by law. 27




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Selected Historical and Pro Forma Consolidated Financial Data of Stantec Inc. The selected historical consolidated financial data of Stantec set forth below is presented in
Canadian dollars and the financial statements from which the data was derived were prepared in
accordance with Canadian GAAP, which differs in certain respects from U.S. GAAP. For a discussion
of the principal differences between Canadian GAAP and U.S. GAAP as they relate to Stantec, see
note 21 to Stantecs consolidated financial statements included elsewhere in this proxy
statement/prospectus. You should read the selected historical consolidated financial data of
Stantec set forth below in conjunction with Stantecs consolidated financial statements and the
related notes and Managements Discussion and Analysis of Financial Condition and Results of
Operations of Stantec included elsewhere in this proxy statement/prospectus. The selected pro forma consolidated financial data of Stantec set forth below is presented in
Canadian dollars and has been prepared in accordance with U.S. GAAP, based on the historical
financial statements of Stantec and Keith, as at and for the year ended December 31, 2004, adjusted
to give effect to the acquisition of Keith by Stantec. The pro forma condensed consolidated
statement of income data for the year ended December 31, 2004 gives effect to the acquisition as if
the acquisition had occurred as of January 1, 2004. The pro forma condensed consolidated balance
sheet data as of December 31, 2004 gives effect to the acquisition as if the acquisition had
occurred as of December 31, 2004. The pro forma data is based upon available information and
certain assumptions that management of Stantec believes are reasonable and does not purport to
represent Stantecs results of operations or financial condition for any future period or as of any
date. You should read the selected pro forma consolidated financial data of Stantec set forth
below in conjunction with Stantecs pro forma condensed consolidated financial statements and the
related notes, consolidated financial statements and the related notes and Managements Discussion
and Analysis of Financial Condition and Results of Operations of Stantec included elsewhere in
this proxy statement/prospectus as well as in conjunction with Keiths consolidated financial
statements and the related notes which are incorporated by reference in this proxy
statement/prospectus. Years Ended December 31,(in thousands of Canadian dollars, except for share data)Pro Forma2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2004Statement of Income Data:Gross revenue
    
    C$
    265,568
    
    
    C$
    356,942
    
    
    C$
    428,456
    
    
    C$
    459,942
    
    
    C$
    520,879
    
    
    C$
    658,619Net revenue
    
    
    221,263
    
    
    
    298,772
    
    
    
    365,148
    
    
    
    391,396
    
    
    
    449,151
    
    
    
    575,657Income before income taxes
    
    
    20,867
    
    
    
    27,306
    
    
    
    33,095
    
    
    
    39,628
    
    
    
    44,660
    
    
    
    55,487Net income
    
    
    11,226
    
    
    
    15,370
    
    
    
    20,192
    
    
    
    25,070
    
    
    
    30,190
    
    
    
    36,620Earnings per sharediluted
    
    
    0.76
    
    
    
    0.88
    
    
    
    1.07
    
    
    
    1.31
    
    
    
    1.59
    
    
    
    1.60Weighted average shares
outstandingdiluted
    
    
    14,851,022
    
    
    
    17,378,646
    
    
    
    18,799,484
    
    
    
    19,118,016
    
    
    
    19,007,289
    
    
    
    22,905,289
 As of December 31,(in thousands of Canadian dollars)Pro Forma2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2004Balance Sheet Data:Total assets
    
    C$
    179,161
    
    
    C$
    217,492
    
    
    C$
    299,001
    
    
    C$
    326,575
    
    
    C$
    362,100
    
    
    C$
    573,356Total
long-term debt, including
current portion and bank
indebtedness
    
    
    26,375
    
    
    
    39,518
    
    
    
    62,256
    
    
    
    61,726
    
    
    
    33,975
    
    
    
    104,707Net assets
    
    
    92,233
    
    
    
    107,450
    
    
    
    151,426
    
    
    
    160,528
    
    
    
    189,056
    
    
    
    295,581Capital stock
    
    
    60,259
    
    
    
    61,555
    
    
    
    83,973
    
    
    
    84,281
    
    
    
    87,656
    
    
    
    196,532
 28




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##### 



Selected Historical Consolidated Financial Data of The Keith Companies, Inc. The selected historical consolidated financial data of Keith set forth below is presented in
U.S. dollars and the financial statements from which the data was derived were prepared in
accordance with U.S. GAAP. You should read the selected historical financial data set forth below
in conjunction with Keiths consolidated financial statements and the related notes and
Managements Discussion and Analysis of Financial Condition and Results of Operations
incorporated by reference in this proxy statement/prospectus. Years Ended December 31,(U.S. dollars in thousands, except for share data)2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004Statement of Income Data :Gross revenue
    
    US$
    57,835
    
    
    US$
    74,314
    
    
    US$
    106,487
    
    
    US$
    99,950
    
    
    US$
    105,346Net revenue
    
    
    53,381
    
    
    
    66,844
    
    
    
    91,598
    
    
    
    90,744
    
    
    
    96,754Costs of revenue
    
    
    34,118
    
    
    
    42,655
    
    
    
    59,286
    
    
    
    58,359
    
    
    
    60,363Gross profit
    
    
    19,263
    
    
    
    24,189
    
    
    
    32,312
    
    
    
    32,385
    
    
    
    36,391Selling, general and administrative expenses
    
    
    11,078
    
    
    
    14,330
    
    
    
    19,535
    
    
    
    21,070
    
    
    
    23,013Income from operations
    
    
    8,185
    
    
    
    9,859
    
    
    
    12,777
    
    
    
    11,315
    
    
    
    13,378Interest (expense) income, net
    
    
    (310
    )
    
    
    289
    
    
    
    431
    
    
    
    264
    
    
    
    481Other income (expense), net
    
    
    44
    
    
    
    (54
    )
    
    
    625
    
    
    
    259
    
    
    
    46Income before provision for income taxes and discontinued operations
    
    
    7,919
    
    
    
    10,094
    
    
    
    13,833
    
    
    
    11,838
    
    
    
    13,905Provision for income taxes
    
    
    3,199
    
    
    
    3,916
    
    
    
    5,397
    
    
    
    4,617
    
    
    
    5,468Income from continuing operations
    
    
    4,720
    
    
    
    6,178
    
    
    
    8,436
    
    
    
    7,221
    
    
    
    8,437Loss from discontinued operations, net of income taxes
    
    
    3⁄4
    
    
    
    329
    
    
    
    628
    
    
    
    
    
    
    
    430Net income
    
    US$
    4,720
    
    
    US$
    5,849
    
    
    US$
    7,808
    
    
    US$
    7,221
    
    
    US$
    8,007Earnings per share from continuing operations-diluted
    
    US$
    0.89
    
    
    US$
    0.87
    
    
    US$
    1.07
    
    
    US$
    0.91
    
    
    US$
    1.05Earnings per sharediluted
    
    US$
    0.89
    
    
    US$
    0.82
    
    
    US$
    0.99
    
    
    US$
    0.91
    
    
    US$
    1.00Weighted average shares outstandingdiluted
    
    
    5,299,679
    
    
    
    7,092,505
    
    
    
    7,868,877
    
    
    
    7,957,344
    
    
    
    8,039,457
 As of December 31,(U.S. dollars in thousands)2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004Balance Sheet Data:Working capital
    
    US$
    7,343
    
    
    US$
    38,781
    
    
    US$
    39,613
    
    
    US$
    47,416
    
    
    US$
    55,472Total assets
    
    
    33,312
    
    
    
    71,492
    
    
    
    82,226
    
    
    
    87,536
    
    
    
    97,969Total debt, excluding issuable common stock
    
    
    5,745
    
    
    
    1,912
    
    
    
    70
    
    
    
    
    
    
    
    Total shareholders equity
    
    
    18,239
    
    
    
    53,733
    
    
    
    63,612
    
    
    
    71,962
    
    
    
    81,921
 29




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Comparative Per Share Data The following table presents, as at and for the year ended December 31, 2004, selected pro
forma per share amounts for the Stantec common shares, pro forma per share equivalent amounts for
shares of Keith common stock and the comparative historical per share data for the Stantec common
shares and Keith common stock. The pro forma amounts included in the table below are presented as
if the merger had been effective for the period presented, have been prepared in accordance with
U.S. GAAP and are based on the purchase method of accounting. All amounts shown are in Canadian
dollars. Keith per share amounts have been converted from U.S. dollars to Canadian dollars at a
rate of C$1.3075 equals US$1.000. The Keith merger equivalent per share amounts were calculated by
multiplying the Stantec unaudited pro forma per share amounts by an assumed exchange ratio of 0.475
based on the portion of the merger consideration to be paid in Stantec common shares and excluding
the cash portion of the merger consideration. The actual exchange ratio will vary based on the
average price of Stantec common shares for each of the 20 trading days ending on the second trading
day prior to the closing of the merger. The pro forma amounts in the tables below do not include
the potential financial benefits from such items as costs savings and revenue synergies arising
from the merger, nor do these amounts include the portion of restructuring and integration costs to
be incurred by Stantec. You should read this information in conjunction with, and the information is qualified in its
entirety by, the consolidated financial statements and accompanying notes of Stantec and Keith
included or incorporated by reference into this proxy statement/prospectus and Stantecs unaudited
pro forma condensed consolidated financial statements and accompanying notes included elsewhere in
this proxy statement/prospectus. The pro forma amounts in the table below are presented for
information purposes only. You should not rely on the pro forma amounts as being indicative of the
financial position or results of operations of the combined company that would have actually
occurred had the merger been effective as at or during the period presented or of the future
financial position or future results of operations of the combined company. The combined financial
information as at and for the period presented may have been different had the companies actually
been combined as at and during those periods. Year endedDecember 31, 2004Statement of Operations Data:Net income from operations per diluted share:Stantec
    
    
    C$
    
    1.59Keith
    
    
    C$
    
    1.37Stantec pro forma
    
    
    C$
    
    1.60Keith merger equivalent (1)
    
    
    C$
    
    0.76Balance Sheet Data:Net book value per diluted share:Stantec
    
    
    C$
    
    9.95Keith
    
    
    C$
    
    13.32Stantec pro forma
    
    
    C$
    
    12.90Keith merger equivalent (1)
    
    
    C$
    
    6.13
   (1)
    
    The Keith merger equivalent per diluted share represents the Stantec pro forma
per share amount that is attributable to one share of Keith common stock that has been
exchanged for 0.475 Stantec common shares. As the holders of Keith common stock will
receive a combination of cash and Stantec common shares, the exchange ratio excludes
the cash portion of the merger consideration. Dividends Stantec has not declared or paid dividends on its common shares since it became a public
company in 1994. Stantec currently has no plans to pay dividends on its common shares. Instead,
Stantec plans to reinvest its net income to continue its corporate strategy of growth. The payment
of dividends on Stantec common shares in the future will depend on the need of Stantec to finance
growth, the financial condition of Stantec and other factors which the Stantec board of directors
may consider appropriate in the circumstances. Keith has not declared or paid any cash dividends
on its capital stock. 30




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Comparative Per Share Market Price Stantec common shares are listed on the Toronto Stock Exchange under the symbol STN.
Stantec has applied to list its common shares, including those issued in connection with the
merger, on the New York Stock Exchange under the trading symbol SXC. Keith common stock is
listed on the Nasdaq National Market under the trading symbol TKCI. The following table sets
forth, for the respective quarters indicated, the high and low sale prices per share of Stantec
common shares as reported on the Toronto Stock Exchange and the high and low bid prices per share
of Keith common stock as reported by the Nasdaq National Market. The Toronto Stock Exchange sale
prices of Stantec common shares are presented in Canadian dollars and the Nasdaq National Market
bid prices of Keith common stock are presented in U.S. dollars. Stantec
    
    
    KeithHigh
    
    
    Low
    
    
    High
    
    
    LowSecond Quarter Ended June 30, 2005(through
May 5, 2005)
    
    
    C$29.45
    
    
    
    C$27.65
    
    
    US$
    21.35
    
    
    US$
    16.25First Quarter Ended March 31, 2005
    
    
    C$29.25
    
    
    
    C$24.50
    
    
    US$
    17.43
    
    
    US$
    15.25Year Ended December 31, 2004Quarter Ended March 31, 2004
    
    
    C$27.39
    
    
    
    C$22.20
    
    
    US$
    14.86
    
    
    US$
    13.45Quarter Ended June 30, 2004
    
    
    C$29.39
    
    
    
    C$24.20
    
    
    US$
    14.89
    
    
    US$
    13.50Quarter Ended September 30, 2004
    
    
    C$27.15
    
    
    
    C$20.60
    
    
    US$
    15.49
    
    
    US$
    13.25Quarter Ended December 31, 2004
    
    
    C$26.48
    
    
    
    C$20.35
    
    
    US$
    18.75
    
    
    US$
    13.60Year Ended December 31, 2003Quarter Ended March 31, 2003
    
    
    C$18.24
    
    
    
    C$14.50
    
    
    US$
    13.00
    
    
    US$
    9.00Quarter Ended June 30, 2003
    
    
    C$20.15
    
    
    
    C$15.50
    
    
    US$
    11.16
    
    
    US$
    9.23Quarter Ended September 30, 2003
    
    
    C$21.48
    
    
    
    C$17.55
    
    
    US$
    13.39
    
    
    US$
    9.85Quarter Ended December 31, 2003
    
    
    C$23.48
    
    
    
    C$19.11
    
    
    US$
    14.46
    
    
    US$
    11.55Year Ended December 31, 2004
    
    
    C$29.39
    
    
    
    C$20.35
    
    
    US$
    18.75
    
    
    US$
    13.25Year Ended December 31, 2003
    
    
    C$23.48
    
    
    
    C$14.50
    
    
    US$
    14.46
    
    
    US$
    9.00Year Ended December 31, 2002
    
    
    C$20.50
    
    
    
    C$12.87
    
    
    US$
    16.15
    
    
    US$
    8.91Year Ended December 31, 2001
    
    
    C$14.25
    
    
    
    C$7.25
    
    
    US$
    26.00
    
    
    US$
    7.26Year Ended December 31, 2000
    
    
    C$8.00
    
    
    

    C$5.25
    
    
    US$
    8.50
    
    
    US$
    3.06
 The table below sets forth the high and low sale prices for each of the six most recent full
calendar months for Stantec common shares as reported on the Toronto Stock Exchange and the high
and low bid prices for each of the six most recent full calendar months for Keith common stock on
the Nasdaq National Market. The Toronto Stock Exchange sale prices of Stantec common shares are
presented in Canadian dollars and Keith common stock bid prices are presented in U.S. dollars. Stantec
    
    
    KeithHigh
    
    
    Low
    
    
    High
    
    
    LowApril 30, 2005
    
    
    C$29.45
    
    
    
    C$27.65
    
    
    US$
    21.33
    
    
    US$
    16.25March 31, 2005
    
    
    C$29.25
    
    
    
    C$27.32
    
    
    US$
    17.35
    
    
    US$
    16.40February 28, 2005
    
    
    C$28.00
    
    
    
    C$24.61
    
    
    US$
    17.15
    
    
    US$
    15.25January 31, 2005
    
    
    C$26.40
    
    
    
    C$24.50
    
    
    US$
    17.43
    
    
    US$
    16.70December 31, 2004
    
    
    C$26.48
    
    
    
    C$24.25
    
    
    US$
    18.49
    
    
    US$
    16.35November 30, 2004
    
    
    C$25.00
    
    
    
    C$21.83
    
    
    US$
    18.75
    
    
    US$
    15.90
 The closing sale prices of Stantec common shares as reported on the Toronto Stock Exchange on
April 14, 2005, the last trading day before the public announcement of the merger, and [___],
2005, the last practicable trading day before the distribution of this proxy statement/prospectus
were US$23.15 and US$[___], respectively, converted from Canadian dollars to U.S. dollars at the
inverse of the noon buying rate quoted by the Federal Reserve Bank of New York on such trading day.
The closing bid price of Keith common shares as reported on by the Nasdaq National Market on April
14, 2005, the last trading day before the public announcement of the merger, and [___], 2005, the
last practicable trading day before the distribution of this proxy statement/prospectus were
US$16.85 and US$[___], respectively. We urge you to obtain current market quotations for both the
Stantec common shares and the Keith common stock. 31




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##### 



Managements Discussion and Analysis of the Financial Condition and Results of Operations of Stantec The following discussion is based upon, should be read in conjunction with and is qualified by
our consolidated financial statements and the accompanying notes included elsewhere in this proxy
statement/prospectus. Our financial statements have been prepared in accordance with Canadian
GAAP, which differ from financial statements prepared in accordance with U.S. GAAP. For a further
discussion of these differences, see note 21 to our audited financial statements included
elsewhere in this proxy statement/prospectus. The following discussion includes certain
forward-looking statements. For a discussion of important factors, including the continuing
development of our business and other factors which could cause actual results to differ materially
from the results referred to in the forward-looking statements, see Risk Factors and
Forward-Looking Statements. Overview We provide professional consulting services in planning, engineering, architecture, interior
design, landscape architecture, surveying, environmental sciences project management and project
economics for infrastructure and facilities projects. Our goal is to become a top 10 global design
and consulting services firm with C$1 billion in annual revenue by the year 2008. To achieve this
objective, we will continue to deliver fee-for-service professional services in the US$50 billion
infrastructure and facilities market through our focused, sustainable business model. Our
three-dimensional model  which is based on diversifying our operations in distinct geographic
regions, specializing in distinct but complementary practice areas, and providing services in all
five phases of the infrastructure and facilities project life cycle  allows us to manage risk
while continuing to increase our revenue and earnings. Geographic Diversification.We currently have operations in five economic regions in Canada
and the United States as well as a project presence in the Caribbean and other selected
international locations. Our strategy for geographic diversification has two components. The
first component is to grow our existing regional operations by expanding our services particularly
in areas where we have not yet reached a mature market presence. We target to achieve a market
penetration of C$10 million in revenue per one million population in these regions. The second
component includes expansion outside our existing regions principally in the United States and
Canada. We expect to continue to expand geographically primarily by acquiring firms that meet our
integration criteria and to a lesser extent by growing organically. Practice Area Specialization.Specialization and diversification of services are achieved by
providing services in 17 distinct practice areas that can generally be grouped into five key market
segments  buildings, environment, industrial, transportation, and urban land. Focusing on this
combination of project services helps differentiate us from our competitors, allowing us to enhance
our presence in new geographic regions and markets and to establish and maintain client
relationships. Our strategy for strengthening this dimension of our business model is to increase
the depth of our expertise in our current practice areas and to selectively add complementary
practice areas to our operations. Life Cycle Solutions.We seek to provide professional services in all five phases of the
project life cycle  planning, design, construction, maintenance, and decommissioning. This
inclusive approach allows us to deliver services during periods of strong new capital project
activity, such as design and construction, as well as periods of lower new capital project
expenditures, such as maintenance and rehabilitation. Beginning with the planning and design
stages, we provide conceptual and detailed design services, conduct feasibility studies, and
prepare plans and specifications. During the construction phase, we generally act as the owners
representative, providing project management, surveying, and resident engineering services. We
focus principally on fee-for-service type work and generally do not act as the contractor or take
on construction risk. Following project completion, during the maintenance stage, we provide
ongoing professional services for maintenance and rehabilitation in areas such as facilities and
infrastructure management, facilities operations, and performance engineering. Finally, in the
decommissioning phase, we provide solutions and recommendations for taking facilities out of active
service. Through our One Team. Infinite Solutions. approach to our business, we are able to
undertake infrastructure and facilities projects of any size for both public and private sector
clients. Currently, the majority of assignments we pursue are small to midsize projects with a
capital value of less than C$100 million and potential project fees for Stantec of less than C$10
million. These types of projects represent the largest share of the infrastructure and facilities
market. Focusing on this project mix continues to ensure that we do not rely on a few large,
single projects for our revenue and that no single client or project accounts for more than 5% of
our overall business. 32




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Key Performance Drivers Our performance depends on our ability to attract and retain qualified people, make the most
of market opportunities, find, acquire, and integrate firms and/or new employees into our
operations, finance our growth, and achieve top-three market penetration in the geographic areas we
serve. Based on our success with these drivers, we believe that we are well positioned to continue
to be a major provider of professional design and consulting services in our principal geographic
regions. People.Because we are a professional services firm, the most important driver of our
performance is our people. Our employees create the project solutions we deliver to clients.
Thus, to achieve our goal of becoming a top 10 global design firm, we must grow our workforce
through a combination of internal hiring and acquisitions. We measure our success in this area by
total staff numbers. In 2004 our staff increased to approximately 4,350 from 3,700 in 2003.
Currently, our workforce is made up of about 2,150 professionals, 1,550 technical staff and 650
support personnel. We expect our employee numbers to continue to increase in 2005 and beyond as we
pursue our growth plan. To attract and retain qualified staff, we offer opportunities to be part of a multidiscipline
team working on challenging projects with some of the best people in our industry. We are
continually strengthening our people-oriented culture, and in 2004 we completed a number of
activities, including revising our career development and performance review process to enhance our
focus on career development, and modifying and realigning our benefits programs to provide more
personal choice and emphasize wellness and preventative care. These programs will be implemented
in the first quarter of 2005. In addition, improved and enhanced staff training programs are
slated for introduction in the second quarter. Because of our diversified portfolio approach to business  operating in different regions
and practice areas  we are generally able to redeploy a portion of our workforce when faced with
changes in local, regional, or national economies or practice area demand. Currently, we see no
overall shortage of qualified staff for our operations. Although there will always be some areas
where it will be difficult to find appropriate staff during certain periods, as we increase in size
we become better able to address these issues by using staff from other parts of the company either
through temporary relocation or changes in work allocation. We are continually improving our
ability to work on projects from multiple office locations through Web-based technology. Industry Environment/Market Opportunities.Another key driver of our success is our ability
to make the most of opportunities to grow in our marketplace. We believe that growth is necessary
in order to enhance the depth and breadth of our expertise, broaden our services, increase our
shareholder value, provide more opportunities for our employees and lever our information
technology systems. Over the last 11 years, we have integrated a total of approximately 3,400
employees into our operations through a combination of direct hiring and acquisitions. We are
confident that we can continue to take advantage of acquisition opportunities because we operate in
an industry sector that includes more than 100,000 firms and is estimated to generate over US$50
billion in revenue in North America every year, of which we currently have less than a 1% market
share. (According to the Engineering News Record, the largest 500 engineering and architecture
companies in the United States alone generated nearly US$50 billion in fees in 2003.) Acquisition and Integration.Our strategy for increasing our market share is to combine
internal growth with the acquisition of firms that believe in our vision and want to be part of our
growing company. In 2004 we completed four acquisitions for total consideration of C$20.3 million,
one in the United States which established a new region for us in the Northeast, and three in
Canada, adding approximately 530 employees to our operations. In 2003 we completed four
acquisitions for total consideration of C$9.4 million in our two Canadian regions, adding
approximately 225 employees to our operations. In 2002 we completed 10 acquisitions for total
consideration of C$38.5 million, adding approximately 550 employees to our operations. The integration of acquired firms begins immediately following the acquisition closing date
and may take between six months and three years. It involves incorporation into our company-wide
information technology and financial management systems as well as provision of back office
support services from our corporate office. This approach allows our new staff to focus on
continuing to serve clients with as little interruption as possible. Our acquisition program is managed by an acquisition team dedicated to supporting our growth
objectives. The team is responsible for identifying and valuing acquisition candidates,
undertaking and coordinating due diligence, negotiating and closing transactions, and assisting
with the integration of employees and systems. 33




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##### 



Financing.Our success also depends on our continuing ability to finance our growth.
Adequate financing gives us the flexibility to make appropriate investments in our future. Over
the past 11 years, we have grown at a compound annual rate of 19%. To fund this growth, we require
cash generated from both internal and external sources. Historically, we have completed
acquisitions using mostly cash and notes, with very little use of our common shares. We have sought additional financing through the public sale of shares to maintain our internal
debt to equity guidelines at times when our growth has outpaced our ability to generate cash from
operations. Our practice is to raise additional equity to replenish our cash reserves, pay down
debt, or strengthen our balance sheet. To date, we have issued additional shares for these
purposes on three occasionsin 1997, 2000 and 2002. Market Penetration.Also key to our success is achieving a certain level of market
penetration in the geographic areas we serve. Our goal is to be among the top three service
providers in our geographic regions and practice areas. With this level of market presence, we are
less likely to be affected by downturns in regional economies. Top-three positioning also gives us
increased opportunities to work for the best clients, obtain the best projects, and attract the
best employees in a region, and is important for building or maintaining the critical mass of staff
needed to generate consistent performance and support regional infrastructure. 2004 Highlights The results we achieved in 2004 compared to the expected ranges established by management at
the beginning of the year are as follows: Measure
    
    Expected Range
    
    Result AchievedDebt to equity ratio (1)
    
    At or below 0.5 to 1
    
    
    <0.0Return on equity (2)
    
    At or above 14%
    
    
    17.3
    %Net income as % of net revenue
    
    At or above 5%
    
    
    6.7
    %Gross margin as % of net revenue
    
    Between 52 and 54%
    
    
    54.2
    %Administrative and marketing
expenses as % of net revenue
    
    Between 39 and 41%
    
    
    40.9
    %Effective income tax rate
    
    Between 36.5 and 37.5%
    
    
    32.4
    %
   (1)
    
    Debt to equity ratio is calculated as long-term debt plus current portion of long-term debt
plus bank indebtedness less cash, all divided by shareholders equity.(2)
    
    Return on equity is calculated as net income for the year divided by average shareholders
equity over each of the last four quarters. Earnings per share.Our basic earnings per share increased 19.0% to C$1.63 from C$1.37
in 2003. Our diluted earnings per share increased 21.4% to C$1.59 from C$1.31. Effective income tax rate.Our effective tax rate decreased to 32.4% in 2004 from 36.7% in
2003. Growth by acquisition.We completed four acquisitions in 2004, including the addition of The
Sear-Brown Group, Inc., a New York-based firm with approximately 400 employees, the acquisition of
two architecture companiesGBR Architects Limited and Dunlop Architects Inc.and the addition of
Shaflik Engineering Ltd. through an asset purchase. Investment in costs and estimated earnings in excess of billings and in accounts receivable.
We reduced our investment in accounts receivable (measured by number of days revenue) to 101 days
at the end of 2004 from 119 days at the end of 2003. The implementation of our new enterprise
management system during 2003 had a significant impact on our resourcesboth in terms of people and
finances. Adjusting to the breadth of the new system created a significant learning curve. One of
the impacts was an initial increase in the time required to prepare invoices to send to clients.
As a result, we experienced an increase in costs and estimated earnings in excess of billings
during the fourth quarter of 2003. Divestitures.In 2003 we entered into an agreement in principle to dispose of our 50% share
in Lockerbie Stanley Inc. This agreement was finalized in Q3 04. During Q4 04, we divested of our
interest in Goodfellow EFSOP technology, which comprised our Technology segment. 34




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##### 



Property sale.During the fourth quarter of 2004, we completed the sale of our office
building in Edmonton, Alberta, for cash proceeds of C$34.5 million. Concurrent with the sale, we
leased the property back for a period of 15 years. The gain of C$7.1 million realized on the sale
has been deferred and will be recognized as a reduction of rental expense over the 15-year term of
the operating lease. Results of Operations: 2004, 2003 and 2002 In 2004 we disposed of our operations that previously made up our design build and technology
segments. As a result, all of our operations are now reported in one segment  consulting
services. The following table summarizes key financial data for 2004, 2003 and 2002. (in millions of Canadian dollars, except per share, share amounts and option amounts)2004
    
    
    2003
    
    
    2002Gross revenue
    
    
    520.9
    
    
    
    459.9
    
    
    
    428.5Net income
    
    
    30.2
    
    
    
    25.1
    
    
    
    20.2Earnings per share  basic
    
    
    1.63
    
    
    
    1.37
    
    
    
    1.12Earnings per share  diluted
    
    
    1.59
    
    
    
    1.31
    
    
    
    1.07Cash dividends declared per common share
    
    Nil
    
    
    Nil
    
    
    NilTotal assets
    
    
    362.1
    
    
    
    326.6
    
    
    
    299.0Total long-term debt
    
    
    34.0
    
    
    
    44.6
    
    
    
    62.3Outstanding common shares  as at December 31
    
    
    18,871,085
    
    
    
    18,327,284
    
    
    
    18,282,720Outstanding share options  as at December 31
    
    
    1,071,333
    
    
    
    1,479,100
    
    
    
    1,296,200
 The information reflected above is impacted by the four acquisitions we completed in 2004, the
four completed in 2003, and the 10 completed in 2002. Each of these acquisitions increased the
gross revenue and net income in the year of acquisition and subsequent years. In the course of providing services, we incur certain direct costs for subconsultants,
equipment, and other expenditures that are recoverable directly from our clients. The revenue
associated with these direct costs is included in our gross revenue. Since such direct costs and
their associated revenue can vary significantly from contract to contract, changes in our gross
revenue may not be indicative of our revenue trends. Accordingly, we also report net revenue,
which is gross revenue less subconsultant and other direct expenses, and analyze our results in
relation to net revenue rather than gross revenue. The following table summarizes our key operating results on a percentage of net revenue basis
and the percentage increase in the dollar amount of these results from year to year: Percentage of Net Revenue
    
    
    Percentage Increase2004
    
    
    2003
    
    
    2002
    
    
    2004 vs.2003
    
    
    2003 vs.2002Gross revenue
    
    
    116.0
    %
    
    
    117.5
    %
    
    
    117.3
    %
    
    
    13.2
    %
    
    
    7.3
    %Net revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    14.8
    %
    
    
    7.2
    %Direct payroll costs
    
    
    45.8
    %
    
    
    46.9
    %
    
    
    47.6
    %
    
    
    12.0
    %
    
    
    5.7
    %Gross margin
    
    
    54.2
    %
    
    
    53.1
    %
    
    
    52.4
    %
    
    
    17.2
    %
    
    
    8.6
    %Administrative and
marketing expenses
    
    
    40.9
    %
    
    
    39.5
    %
    
    
    39.9
    %
    
    
    18.7
    %
    
    
    6.4
    %Depreciation of
property and equipment
    
    
    2.7
    %
    
    
    2.5
    %
    
    
    2.6
    %
    
    
    20.9
    %
    
    
    4.3
    %Amortization of intangible
assets
    
    
    0.2
    %
    
    
    0.2
    %
    
    
    0.3
    %
    
    
    0.2
    %
    
    
    (14.3
    )%Net interest expense
    
    
    0.6
    %
    
    
    0.7
    %
    
    
    0.7
    %
    
    
    6.4
    %
    
    
    0.3
    %Foreign exchange (gains) losses
    
    
    0.0
    %
    
    
    0.2
    %
    
    
    0.0
    %
    
    
    (115.3
    )%
    
    
    743.9
    %Share of income from
associated companies
    
    
    (0.1
    )%
    
    
    (0.1
    )%
    
    
    (0.1
    )%
    
    
    (33.6
    )%
    
    
    63.4
    %Income before income taxes
    
    
    9.9
    %
    
    
    10.1
    %
    
    
    9.0
    %
    
    
    12.7
    %
    
    
    19.7
    %Income taxes
    
    
    3.2
    %
    
    
    3.7
    %
    
    
    3.5
    %
    
    
    (0.6
    )%
    
    
    12.8
    %Net income
    
    
    6.7
    %
    
    
    6.4
    %
    
    
    5.5
    %
    
    
    20.4
    %
    
    
    24.2
    %
 35




---



##### 



As indicated in the highlights above, our operating results for 2004 are generally
consistent with the goals we established in 2003. In particular, our administrative and marketing
expenses were within the range we expected to achieve, while our gross margin slightly exceeded
expectations. In addition, our effective tax rate continued to fall and, for 2004, was below the
expected range due to factors discussed below. Gross and Net Revenue.The following tables summarize the impact of acquisitions, internal
growth and foreign exchange on our gross and net revenue for 2004 compared to 2003 and for 2003
compared to 2002. 2004 vs. 2003
    
    
    2003 vs. 2002Gross revenue(in millions of Canadian dollars)Increase (decrease) due to:Acquisitions completed in current and prior two years
    
    C$
    42.3
    
    
    C$
    41.0Net internal growth
    
    
    30.0
    
    
    
    10.2Impact of foreign exchange
    
    
    (11.3
    )
    
    
    (19.8
    )Total increase over prior year
    
    C$
    61.0
    
    
    C$
    31.4
 2004 vs. 2003
    
    
    2003 vs. 2002Net revenue(in millions of Canadian dollars)Increase (decrease) due to:Acquisitions completed in current and prior two years
    
    C$
    36.4
    
    
    C$
    36.7Net internal growth
    
    
    31.3
    
    
    
    7.0Impact of foreign exchange
    
    
    (9.9
    )
    
    
    (17.4
    )Total increase over prior year
    
    C$
    57.8
    
    
    C$
    26.3
 Gross revenue earned in Canada during 2004 increased to C$325.8 million from C$290.4 million
in 2003 and C$238.8 million in 2002. Gross revenue generated in the United States increased to
C$190.4 million in 2004 compared to C$161.6 million in 2003 and C$180.3 million in 2002. Gross
revenue earned outside of Canada and the United States in 2004 was C$4.7 million, compared to C$7.9
million in 2003 and C$9.4 million in 2002. As indicated above, the increase value of the Canadian
dollar compared to the U.S. dollar adversely impacted gross revenue from our U.S. operations by
C$11.3 million. This decrease was offset by the acquisition of The Sear-Brown Group, Inc. in April
of 2004, which resulted in an overall increase in our U.S.-generated revenue. The continuing
strength of the Canadian economy also resulted in growth in revenue generated in Canada in 2004. Gross Margin.Gross margin is calculated as the difference of net revenue minus direct
payroll costs, expressed as a percentage of net revenue. Direct payroll costs include the cost of
salaries and related fringe benefits for labor hours that are directly associated with the
completion of projects. Labor costs and related fringe benefits for labor hours that are not
directly associated with the completion of projects are included in administrative and marketing
expenses. Gross margin increased to 54.2% in 2004 from 53.1% in 2003 and 52.4% in 2002. The
increase in our gross margin is due to the lower proportion of total labor that was charged to
projects during 2004 compared to 2003 and 2002 as well as the mix of projects in progress and being
pursued throughout the year. Total labor costs as a percentage of net revenue are consistent from
2003 to 2004 at approximately 67.4% for both years. Administrative and Marketing Expenses.Administrative and marketing expenses as a percentage
of net revenue for 2004 were 40.9% (within the expected range of 39 to 41% for these expenses),
compared to 39.5% in 2003 and 39.9% in 2002. Administrative and marketing expenses fluctuate as a
result of the amount of staff time charged to marketing and administrative labor, which is
influenced by the mix of projects in progress and being pursued throughout the year. In 2004 a
higher proportion of total labor was charged to administrative and marketing labor compared to 2003
and 2002. Depreciation of Property and Equipment.Depreciation of property and equipment as a percentage
of net revenue increased to 2.7% in 2004, compared to 2.5% for 2003 and 2.6% in 2002. In 2004 we
began depreciating our new enterprise management system as well as our new office building in
Edmonton, Alberta. Foreign Exchange (Gains) Losses.We recorded a foreign exchange gain of C$0.1 million in
2004, compared to a foreign exchange loss of C$0.6 million in 2003 and C$0.1 million in 2002. The
foreign exchange gains and losses reported in 2004, 2003 and 2002 arose on the translation of the
foreign-denominated assets and liabilities held in our Canadian companies and foreign subsidiaries
(excluding our U.S. subsidiaries). While there was periodic weakening in the Canadian dollar in
2002, in 2003 the Canadian dollar rose from US$0.63 at the beginning of the year to US$0.77 at the
end of the year, and the impact of this significant change on our overall exposure to foreign
currency assets resulted in an exchange loss of C$0.6 million. In 2004 the Canadian dollar
continued to strengthen to US$0.83. To minimize our exposure to foreign currency fluctuations, we
used U.S. 36




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##### 



dollar-denominated debt in 2003 and through most of 2004, and late in 2004, with the
improvement of our cash position, we were able to reduce the amount of this debt. As a result, we
entered into forward contracts to sell U.S. dollars in exchange for Canadian dollars to minimize
our exposure to currency fluctuations. At December 31, 2004, we had contracted to sell US$10.0
million at forward rates ranging from C$1.2050 to C$1.2386. Income Taxes.The effective income tax rate for Stantec in 2004 was 32.4%, compared to 36.7%
in 2003 and 39.0% in 2002. At the beginning of 2004, we anticipated that our effective tax rate
would be in the range of 36.5 to 37.5%. This rate was estimated based on known statutory rate
reductions as well as estimates of income in each of our taxing jurisdictions. Throughout 2004,
the effective tax rate reported in each quarter was reduced to account for the 0.75% reduction in
provincial statutory rates during the year as well as to reflect increases in earnings in some of
our lower tax rate jurisdictions. During the fourth quarter of 2004, on the basis of an actuarial
report, we reflected additional income in our regulated insurance subsidiary. A portion of that
income of the subsidiary is subject to tax at lower rates, contributing 1.2% to the reduction of
our consolidated tax rate. Liquidity and Capital Resources Our cash flow from operating activities was C$77.4 million in 2004, compared to C$16.9 million
in 2003 and C$36.1 million in 2002. The implementation of our new enterprise management system in
the fourth quarter of 2003 contributed to the significant reduction in cash flows from operating
activities for the year. The reduction in our investment in costs and estimated earnings in excess
of billings and in accounts receivable from 119 to 101 days during 2004 was the primary reason for
the increased cash flow in 2004. Maintaining and slightly improving
this level of investment should
continue to provide adequate funds to finance our working capital requirements. In 2004, C$10.2 million in cash was used in investing activities, compared to C$33.5 million
in 2003 and C$29.2 million in 2002. A number of significant investing activities occurred during
2004, including the sale of our Edmonton office building, the sale of our interest in Goodfellow
EFSOPT technology, the completion of our largest acquisition to date, and our investment in
short-term investments related to self-insured liabilities arising on the implementation of our
regulated insurance company. In 2003 our investment activities included investment in our new
enterprise management system, investment in construction costs associated with an addition to our
Edmonton office building, and investment in four acquisitions. The net impact of these various
investment activities was to decrease the amount of cash used in 2004 from 2003 by C$23.3 million.
We completed fewer acquisitions in 2003 than in 2002, resulting in a net decrease in cash expended
on acquisitions of approximately C$11.4 million. This difference was offset by an increased
investment in property and equipment of C$11.3 million in 2003 compared to 2002. The implementation
of our new business information system, the construction of the Stantec Atrium Tower in Edmonton,
and continued renovations to Stantec Centre in Edmonton accounted for this additional investment.
The remaining difference is the amount of proceeds received in 2002 on the disposition of our
minority interest in Linnet Geomatics International Inc. and on the divestiture of our 50-person
operation in Gatineau, Quebec. As a professional services organization, we are not capital intensive. Our capital
expenditures have historically been primarily for property and equipment that includes such items
as computer equipment and business information systems software, furniture, leasehold improvements
and other office and field equipment. As indicated above, the largest capital expenditures
incurred in 2002 through 2004 relate to the construction of the addition to the Edmonton office
building, the renovations to the original Edmonton office building, the costs associated with the
implementation of our new business information system, and leasehold improvements incurred on new
office space. Other normal capital expenditures accounted for approximately C$10.8 million, C$9.2
million and C$7.8 million in each of 2002, 2003 and 2004. We expect our capital expenditures in
2005 to be approximately C$16.0 million to C$18.0 million that includes improvements to our
Winnipeg office building and upgrades to a number of our desktop computers to support updated
versions of certain application and operating system software. We used C$36.0 million in financing activities in 2004, compared to the use of C$4.2 million
in 2003 and the generation of C$14.9 million in 2002. Additional funds received in 2004 on the
exercise of share options, as well as the net decrease in funds used to repurchase shares under our
Normal Course Issuer Bid, were offset by the use of funds to pay down our bank indebtedness and
long-term borrowings. This bank indebtedness had been incurred in 2003 and early 2004 to finance
the level of investment in accounts receivable and in costs and estimated earnings in excess of
billings that resulted from the implementation of our new enterprise management system.
Improvement in the level of these investments, as well as proceeds received on the sale of our
Edmonton office building, provided the additional funds to repay our long-term debt and bank
indebtedness. We issued 1.2 million 37




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common shares for net cash proceeds of C$18.3 million in 2002 and borrowed C$30.0 million on
our existing acquisition credit facility. During 2004, we renegotiated our credit facility with a major Canadian chartered bank. Our
new credit facility provides for an operating line of credit of C$30 million. At December 31,
2004, no borrowing had been drawn on this facility (C$8.3 million had been drawn at December 31,
2003 and none at December 31, 2002). We also maintain a US$17.0 million acquisition credit
facility, which was unused at December 31, 2004, and a four-year reducing U.S. dollar-denominated
term facility, of which C$24.0 million was used at December 31, 2004 (C$19.2 million had been used
at December 31, 2003). Our shareholders equity increased C$28.6 million to C$189.1 million at the end of 2004 from
C$160.5 million at the end of 2003. This increase resulted from net income of C$30.2 million in
2004, the recognition of the fair value of share-based compensation of C$0.7 million, and the issue
of shares on the exercise of options of C$3.5 million, offset by the repurchase of our common
shares of C$0.7 million during the year pursuant to our normal course issuer bid and the C$5.1
million change in our cumulative translation account arising on the translation of our U.S.-based
foreign subsidiaries. The C$5.1 million change is due to the continued strengthening of the
Canadian dollar  from C$0.77 to C$0.83  in relation to the U.S. dollar during the year. Our
shareholders equity increased C$9.1 million to C$160.5 million at the end of 2004 from C$151.4
million at the end of 2003. This increase resulted from net income of C$25.1 million, the
recognition of the fair value of share-based compensation of C$0.6 million in 2003, and the issue
of shares on the exercise of options of C$0.6 million, offset by the repurchase of our common
shares of C$1.4 million during the year and the C$15.8 million change in our cumulative translation
account arising on the translation of our U.S.-based foreign subsidiaries in 2003. The C$15.8
million change is due to the significant strengthening of the Canadian dollarfrom C$0.63 to
C$0.77in relation to the U.S. dollar during the year. Our normal course issuer bid was renewed in 2004 and allows us to repurchase up to 554,388
shares on the Toronto Stock Exchange. We continue to believe that, from time to time, the market
price of our common shares does not fully reflect the value of our business or future business
prospects and that, at such times, outstanding common shares are an attractive, appropriate, and
desirable use of our available funds. In 2004 we purchased 29,300 common shares at an average
price of C$24.57 per share for an aggregate price of C$720,000. In 2003 we purchased 74,700 common
shares at an average price of C$18.63 per share for an aggregate price of C$1,392,000. In 2002 we
purchased 54,600 common shares at an average price of C$16.12 per share for an aggregate price of
C$880,000. Contractual Obligations The following table summarizes the contractual obligations due on our long-term debt, other
liabilities, and operating lease commitments as of December 31, 2004: (in thousands of Canadiandollars)
    
    Payments Due by Periodless than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    
    year
    
    
    2 - 3 years
    
    
    4 - 5 years
    
    
    yearsLong-term debt
    
    C$
    33,975
    
    
    C$
    12,820
    
    
    C$
    19,585
    
    
    C$
    1,459
    
    
    C$
    111Other liabilities
    
    
    19,868
    
    
    
    3,050
    
    
    
    6,079
    
    
    
    3,400
    
    
    
    7,339Operating lease commitments
    
    
    207,666
    
    
    
    29,509
    
    
    
    50,301
    
    
    
    34,211
    
    
    
    93,645Total contractual obligations
    
    C$
    261,509
    
    
    C$
    45,379
    
    
    C$
    75,965
    
    
    C$
    39,070
    
    
    C$
    101,095
 Off-Balance Sheet Arrangements As of December 31, 2004, our only material off-balance sheet financing arrangements relate to
letters of credit in the amount of C$1.7 million as disclosed in note 8 to our consolidated
financial statements. Market Risk We are also exposed to various market factors that can affect our performance primarily with
respect to currency and interest rate. 38




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Currency.Because a significant portion of our revenue and expenses is generated or
incurred in U.S. dollars, we face the challenge of dealing with fluctuations in exchange rates. To
the extent that U.S. dollar revenues are greater than U.S. dollar expenses in a strengthening U.S.
dollar environment, we expect to see a positive impact on our income from operations. Conversely,
to the extent that U.S. dollar revenues are greater than U.S. dollar expenses in a weakening U.S.
dollar environment, we expect to see a negative impact. This exchange rate risk primarily
reflects, on an annual basis, the impact of fluctuating exchange rates on the net difference
between total U.S. dollar professional revenue and U.S. dollar expenses. Other exchange rate risk
arises from the revenue and expenses generated or incurred by subsidiaries located outside of
Canada and the United States. Our income from operations will be impacted by exchange rate
fluctuations used in translating these revenue and expenses. In addition, the impact of exchange
rates on the balance sheet accounts of subsidiaries located outside of Canada and the United States
will affect our operating results. We also continue to be exposed to exchange rate risk for the
U.S. dollar and other foreign currency-denominated balance sheet items carried by our Canadian,
U.S. and international operations. Interest Rate.Changes in interest rates present a risk to our performance. All of our bank
facilities, which are comprised of operating loans and an acquisition loan, carry a floating rate
of interest. We estimate that, based on our balances at December 31, 2004, a 1% change in interest
rates would impact our earnings per share by less than C$0.01. In addition, we are subject to
interest rate risk to the extent that our investments held for self-insured liabilities include
fixed rate government and corporate bonds. Critical Accounting Estimates The notes to our December 31, 2004 consolidated financial statements outline our significant
accounting estimates. The accounting estimates discussed below are considered particularly
important since they require the most difficult, subjective, or complex management judgments.
Because of the uncertainties inherent in making assumptions and estimates regarding unknown future
outcomes, future events may result in significant differences between estimates and actual results.
We believe that each of our assumptions and estimates is appropriate to the circumstances and
represents the most likely future outcome. Revenue Recognition and Cost Estimates on Contracts.Revenue from fixed fee and variable fee
with ceiling contracts is recognized using the percentage of completion method based on the ratio
of contract costs incurred to total estimated contract costs. We believe that costs incurred are
the best available measure of progress toward completion of these contracts. Estimating total
direct contract costs is subjective and requires the use of our best judgments based upon the
information we have available at that point in time. Our estimate of total direct contract costs
has a direct impact on the revenue we recognize. If our current estimates of total direct contract
costs turn out to be higher or lower than our previous estimates, we would have over- or
under-recognized revenue for the previous period. We also provide for estimated losses on
incomplete contracts in the period in which such losses are determined. Changes in our estimates
are reflected in the period in which such changes are made. Goodwill.Goodwill is assessed for impairment at least annually. This assessment includes a
comparison of the carrying value of the reporting unit to the estimated fair value to ensure that
the fair value is greater than the carrying value. We arrive at the estimated fair value of a
reporting unit using valuation methods such as discounted cash flow analysis. These valuation
methods employ a variety of assumptions, including revenue growth rates, expected operating income,
discount rates, and earnings multiples. Estimating the fair value of a reporting unit is a
subjective process and requires the use of our best estimates. If our estimates or assumptions
change from those used in our current valuation, we may be required to recognize an impairment loss
in future periods. Provision for Doubtful Accounts.We use estimates in determining our allowance for doubtful
accounts related to trade receivables. These estimates are based on our best assessment of the
collectibility of the related receivable balance based, in part, on the age of the specific
receivable balance. Future collections of receivables that differ from our current estimates will
affect the results of our operations in future periods. Outlook The infrastructure and facilities market within North American is diverse and varies
significantly from region to region. The market is made up of many technical disciplines, clients,
and industries, and engages both the private and public sectors. Over the next few years, we
expect the demand for services in this market to be driven by continued population growth,
compliance with new government regulations and the need to maintain and replace an aging North
American infrastructure. The market should also benefit from continued outsourcing of technical
services, especially in the public sector. The state of the infrastructure and facilities market
is also tied to general 39




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economic performance. The overall market outlook offers increasing prospects for accelerating
growth, particularly in the non-residential sectors. Much of the actual growth seen in 2004 and over the past several years has been driven by
residential construction. However, spending on public construction appears to be rising, while
private non-residential construction continues to rebound from an extended downturn. Commercial
and industrial participants should increase capital spending as their earnings prospects improve.
In addition, a variety of public agencies have begun planning for increased investment in
infrastructure projects after several years of below-trend spending. As predicted by many
forecasters, the residential construction market could flatten this year both in Canada and the
United States. However, we anticipate that 2005 will continue to be a high-performance year for
housing, contributing to ongoing strong performance in our urban land market segment. As well, we
expect strength in commercial construction markets, particularly industrial projects, to support
higher project activity. Although much attention has been focused on delays in U.S. government funding for programs
such as the Transportation Equity Act for the 21st Century, a recovery in state tax revenue as
incomes improve is likely to be a more significant factor in driving spending on transportation,
environmental, and other capital projects in the United States. The Canadian market should also
benefit from the promised transfer of federal funding to the provinces for health care and to
municipalities for new infrastructure and the rehabilitation of existing facilities. Within this overall market outlook, we expect to continue to grow through a combination of
internal hiring and acquisitions. We target to achieve long-term average annual compound growth
rates of 15 to 20%, although we may not see growth in this range every year. We have chosen this
target because we believe that it is an attainable goal that allows us to enhance the depth of our
expertise, broaden our service provision, provide expanded opportunities for our employees, and
lever our information technology systems. Our ability to continue to grow at this rate depends to
a large extent on the availability of acquisition opportunities. Since our industry is made up of
100,000, mostly small firms, there are many acquisition candidates. At any one time, we are
engaged in discussions with up to 20 or more firms ranging from very small firms to firms that are
larger than Keith. We plan to support our targeted level of growth using a combination of cash flow from
operations and additional financing while maintaining a return on our equity at or above 14% and a
net income at or above 5% of net revenue. Although we believe that a normal debt to equity ratio
at or below 0.5 to 1 is an appropriate target for our Company, opportunities to conclude
transactions may make it necessary for us to increase the amount of debt we carry beyond that
limit. If the need to finance a larger acquisition arises, we may seek to raise cash by issuing
additional shares. Looking at the results of our current mix of project activity in the United States and Canada, we
anticipate that our gross margin as a percentage of net revenue will remain in the range of 53 to
55% for 2005 and that our administrative expenses will remain in the range of 40 to 42% of net
revenue. In addition, we expect our effective tax rate for 2005 to be between 33 and 35%. 40




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Description of Stantecs Business General We provide professional consulting services in planning, engineering, architecture, interior
design, landscape architecture, surveying, environmental sciences project management and project
economics for infrastructure and facilities projects. Our goal is to become a top 10 global design
and consulting services firm with C$1 billion in annual revenue by the year 2008. To achieve this
objective, we will continue to deliver fee-for-service professional services in the US$50 billion
infrastructure and facilities market through our focused, sustainable business model. For the
fiscal year ended December 31, 2004, we had gross revenue of approximately C$520.9 million and net
income of approximately C$30.2 million. Our three-dimensional model  which is based on diversifying our operations in distinct
geographic regions, specializing in distinct but complementary practice areas, and providing
services in all five phases of the infrastructure and facilities project life cycle  allows us to
manage risk while continuing to increase our revenue and earnings. Geographic Diversification.We currently have operations in five economic regions in Canada
and the United States as well as a project presence in the Caribbean and other selected
international locations. Our strategy for geographic diversification has two components. The
first component is to grow our existing regional operations by expanding our services particularly
in areas where we have not yet reached a mature market presence. We target to achieve a market
penetration of C$10 million in revenue per one million population in these regions. The second
component includes expansion outside our existing regions principally in the United States and
Canada. We expect to continue to expand geographically primarily by acquiring firms that meet our
integration criteria and to a lesser extent by growing organically. Practice Area Specialization.Specialization and diversification of services are achieved by
providing services in 17 distinct practice areas that can generally be grouped into five key market
segments  buildings, environment, industrial, transportation, and urban land. Focusing on this
combination of project services helps differentiate us from our competitors, allowing us to enhance
our presence in new geographic regions and markets and to establish and maintain client
relationships. Our strategy for strengthening this dimension of our business model is to increase
the depth of our expertise in our current practice areas and to selectively add complementary
practice areas to our operations. Life Cycle Solutions.We seek to provide professional services in all five phases of the
project life cycle  planning, design, construction, maintenance, and decommissioning. This
inclusive approach allows us to deliver services during periods of strong new capital project
activity, such as design and construction, as well as periods of lower new capital project
expenditures, such as maintenance and rehabilitation. Beginning with the planning and design
stages, we provide conceptual and detailed design services, conduct feasibility studies, and
prepare plans and specifications. During the construction phase, we generally act as the owners
representative, providing project management, surveying, and resident engineering services. We
focus principally on fee-for-service type work and generally do not act as the contractor or take
on construction risk. Following project completion, during the maintenance stage, we provide
ongoing professional services for maintenance and rehabilitation in areas such as facilities and
infrastructure management, facilities operations, and performance engineering. Finally, in the
decommissioning phase, we provide solutions and recommendations for taking facilities out of active
service. Through our One Team. Infinite Solutions. approach to our business, we are able to
undertake infrastructure and facilities projects of any size for both public and private sector
clients. Currently, the majority of assignments we pursue are small to midsize projects with a
capital value of less than C$100 million and potential project fees for Stantec of less than C$10
million. These types of projects represent the largest share of the infrastructure and facilities
market. Focusing on this project mix continues to ensure that we do not rely on a few large,
single projects for our revenue and that no single client or project accounts for more than 5% of
our overall business. We provide services to clients in both the public and private sectors mainly in North America
through integrated and discipline-specific consulting and project delivery. Our organizational
structure gives us both the strength and diversity of a large organization and a strong regional
presence to deliver our services locally. Our Consulting Services business unit focuses on
providing total infrastructure solutions targeted to five market segments  buildings, environment,
industrial, transportation and urban land. 41




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We were incorporated under the Canada Business Corporations Act on March 23, 1984 as 131277
Canada Ltd. Our Articles of Incorporation were amended on several occasions, namely to change our
name, amend share attributes, create and delete classes of shares, reorganize our outstanding share
capital and split our common shares, and change the minimum and maximum number of directors. On
August 15, 1984 the name 131277 Canada Ltd. was changed to Stanley Engineering Group Inc. and on
October 18, 1989, it was changed to Stanley Technology Group Inc. On March 30, 1994, Stanley
Technology Group Inc. amalgamated with 3013901 Canada Limited to continue as Stanley Technology
Group Inc. On October 28, 1998, the name Stanley Technology Group Inc. was changed to Stantec Inc. Our corporate headquarters are located at 10160  112 Street, Edmonton, Alberta, T5K 2L6. Business Units Consulting Services is our principal focus and we currently operate in five geographic
regions: Canada West, Canada Central, the US Southwest, the US Southeast and the US Northeast.
Affiliated companies, which accounted for less than 1% of our revenue, fall within the
responsibilities of the regional management or within the corporate administration group. We
balance our geographic structure and management by also aligning services and management in five
market segments  buildings, environment, industrial, transportation and urban land. In 2003, we realigned our organizational units to better reflect its balanced regional focus
and practice area specialization. The two largest and most mature regional operating units 
Canada West and Canada Central, were further divided into smaller sub-regions. At present, our
regions in Canada include British Columbia, Alberta South, Alberta North, Saskatchewan/Manitoba,
Ontario Southwest, Ontario GTA (Greater Toronto Area), and Ontario East. Our three US regions are
US Southwest, US Southeast and US Northeast. The five market segments consist of 17 distinct specialist practice areas including:  1.
    architecture & interior design;2.
    buildings engineering;3.
    facilities planning & operations;4.
    program & project management;5.
    strategic management;6.
    environmental infrastructure;7.
    environmental management;8.
    bio/pharmaceuticals;9.
    manufacturing/industrial;10.
    power resources & chemicals;11.
    infrastructure management & pavement engineering;12.
    transportation infrastructure;13.
    transportation planning & traffic engineering;14.
    planning & landscape architecture;15.
    urban land engineering;16.
    surveys; and17.
    quality control/assurance. Consulting Services We provide consulting services in five provinces in Canada, 15 states in the United States and
selected international markets. International projects generally have been in the water supply,
wastewater treatment, environmental protection, transportation and health care sectors, often in
countries with developing economies. 42




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Our staff and system capabilities allow us to undertake infrastructure and facilities projects
of any size. Currently, most of our projects have total capital costs of less than C$100 million
and our potential fees from these types of projects are generally in the range of 10% of the
capital costs, assuming we provide most of the services required. Joint ventures, associations or
subcontract arrangements are often established to deal with larger projects. As a result, we
mitigate our overall risk by working on several thousand projects each year, none of which would
normally exceed 5% of our revenue. As mentioned above, our core capabilities in the consulting services area are provided through
17 practice areas, most of which can generally be grouped into five broad market segments:
buildings, environment, industrial, transportation and urban land. Some practice areas such as
project and program management, and strategic management services are offered in all five market
segments. Buildings Market Segment.We provide comprehensive solutions for commercial, industrial and
institutional facilities. Typical projects include hospitals, educational and recreational
facilities, research and technology facilities, office buildings and commercial centers. Services
are delivered through three practice areas: architecture & interior design, buildings engineering
and facilities planning and operations, and include project/program management, facilities
management, strategic planning, architectural design, interior design, and structural, mechanical
and electrical engineering. Our services are provided both in connection with new construction and
for existing buildings and facilities. For existing buildings and facilities, we provide expertise
in building operating systems, performance engineering and ongoing tenant improvements. We also
provide services designed to maximize the efficiency of a buildings existing systems and improve
its operations, including analyzing a buildings exterior envelope and evaluating air quality,
lighting and energy efficiency. The demand for these specialized types of services for existing
buildings and facilities tends to be counter-cyclical and improves our ability to generate fees
during periods of economic downturn and reduced capital spending. Our clients in the buildings market segment include institutional and commercial building
owners and large multinational firms, as well as government agencies that build, administer and
operate public buildings. Our clients also include independent authorities or agencies, such as
airport authorities, transportation commissions and transit systems. Environment Market Segment.We apply our specialized knowledge and experience to develop and
manage sustainable solutions for air, water and soil. Our services are focused in two practice
areas: environmental infrastructure and environmental management. The core services we provide in
these two practice areas include:  
    assimilative capacity
    wastewater collection systems
    municipal & industrial wastewater treatment
    infiltration & inflow/CSO
    odor and corrosion control
    wastewater pumping
    water treatment
    water storage
    distribution systems
    water reclamation & reuse
    environmental site management
    environmental assessment
    water resources management
    heritage and natural resource assessment
    waste management
    risk assessment
    health and safety
    air quality assessment
    ecotoxicology and GLP testing
    microbiology laboratory We also have specialized expertise in advanced processes for water and wastewater solutions,
including biological/enhanced nutrient removal (BNR/ENR), microbiological assessment of activated
sludge and advanced 43




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water treatment. Our environment services provide multidisciplinary teams of qualified and
experienced engineers, scientists, process specialists, occupational hygienists, and specialists in
environmental regulation and policy. Industrial Market Segment.Our comprehensive industrial services are provided in three
practice areas: bio/pharmaceutical, manufacturing/industrial, and power, resources and chemicals.
Services are provided to clients principally in the private sector in the automotive, chemical,
consumer products, forestry, food and beverage, bio/pharmaceutical, power generation, pulp and
paper, utilities, mining and general manufacturing sectors. Our services to these clients include
planning, engineering and project management. We also provide specialty services including
occupational health and safety (industrial hygiene and prestart operator safety reviews), system
integration, instrumentation and control, electrical energy and power management, facility planning
and design, industrial engineering, logistics, material handling and commissioning. Projects range
from the design of pilot versions of new processes to the design, process verification, equipment
and materials procurement and project management for the construction of entire industrial plants.
Our bio/pharmaceutical group provides solutions to companies involved in the discovery, research
and development, and manufacturing of a wide range of pharmaceutical and biotechnology products. Transportation Market Segment.We offer coordinated solutions for the safe and efficient
movement of people, vehicles, aircraft and goods. Our core services include project management,
planning and engineering, which we provide through three practice areas: transportation planning
and traffic engineering, transportation infrastructure and infrastructure management and pavement
engineering. Our services include: transportation master plans for communities and airports;
transportation investment studies; design of new and upgraded airport facilities, such as
terminals, runways and taxiways; transit facilities, such as bus and light rail transit systems;
new and upgraded bridges; urban roadways; freeways; interchanges; rural highways; and rail systems.
Our specialty services include simulation modeling, a comprehensive understanding of
transportation demand and supply management principles, extensive use of a range of life cycle cost
and statistical analysis techniques and public consultation and environmental assessment skills in
developing practical, cost-effective, long-term infrastructure facility plans with broad public
support. A key feature of our transportation services is our expertise in integrated
infrastructure/asset management systems and decision-support tools. Our infrastructure management
and pavement engineering practice area includes transportation and bridge engineers, roadway and
bridge inspection specialists, infrastructure management specialists, geographic information system
(GIS) specialists and software specialists. This team designs, develops and implements integrated
infrastructure/asset management systems and work management applications for pavement, bridges,
right-of-way features, water, wastewater, storm water, utilities and other assets. These systems
allow governments to prioritize and to optimize the use of available funds through efficient and
cost-effective planning for public works maintenance, rehabilitation and capital projects. Our clients in this market segment are primarily public sector agencies, transportation
authorities and commercial and institutional clients. Urban Land Market Segment.Services in this market segment include planning, engineering,
surveying, project management and landscape architecture services. These services are provided
principally to the land development and real estate industries. Services are delivered through four
practice areas: planning and landscape architecture, urban land engineering, surveys and quality
control/assurance. We assist our urban land clients through the entire land development process
providing services from the initial master plan development to project management of the
construction of the infrastructure. Services include or relate to conceptual plans, zoning
approval of design infrastructure, transportation planning, traffic engineering, landscape
architecture, urban planning, design construction review and surveying. Acquisitions We compete in the professional consulting service industry. This industry, which includes the
engineering, architecture and environmental sciences consulting industries, is highly fragmented.
We believe that industry trends continue to create acquisition opportunities. Our goal is to
continue to increase our size and profitability. This goal will be accomplished partly through the
acquisition of established professional consulting firms in Canada, the United States and
internationally. Our principal acquisition focus is in selected regions in the United States and
Canada. The following list summarizes our acquisitions since the beginning of 2002: 44




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Year
    
    Business Acquired
    
    Services Provided
    
    Location2004
    
    The Sear-Brown Group, Inc.
    
    engineering, planning, and architectural
services
    
    New York, Ohio,
Pennsylvania and
Puerto Rico2004
    
    GBR Architects Limited
    
    architectural design services
    
    Manitoba2004
    
    Dunlop Architects Inc.
    
    architectural design services
    
    Ontario2004
    
    Shaflik Engineering Ltd.
    
    electrical engineering services
specializing in traffic and sport facility
lighting
    
    British Columbia2003
    
    Ecological Services Group
Inc.
    
    environmental management services
    
    Ontario2003
    
    APAI Architecture Inc.
    
    architectural design services
    
    British Columbia2003
    
    Optimum Energy Management
Inc.
    
    engineering management consulting services
    
    Alberta2003
    
    Inner Dimension Design
Associates Inc.
    
    interior design services
    
    Saskatchewan2002
    
    McCartan Consulting Ltd.
    
    mechanical engineering services
    
    Saskatchewan2002
    
    Webster & Simmonds
Surveying Ltd.
    
    surveying services
    
    Ontario2002
    
    Cosburn Patterson Mather
Limited
    
    engineering and planning services
specializing in the land development and
real estate industry
    
    Ontario2002
    
    GKO Design Consultants
Inc.
    
    consulting services specializing in energy,
resources, chemicals and pharmaceuticals
    
    Alberta2002
    
    M.R.S.F.M. Holdings Ltd.
(Graeme & Murray
Consultants Ltd.)
    
    civil and structural engineering consulting
services
    
    British Columbia2002
    
    GeoViro Engineering Ltd.
    
    environmental consulting services
    
    British Columbia2002
    
    Site Consultants, Inc.
    
    civil and environmental engineering, land
use planning and surveying services
    
    North Carolina2002
    
    English Harper Reta
Architects
    
    architectural design services
    
    California2002
    
    The RPA Group Limited
    
    project management services
    
    Ontario, Alberta
and British
Columbia2002
    
    Beak International
Incorporated
    
    specialist environmental consulting services
    
    Ontario
 We expect that the number of acquisitions we complete will fluctuate from time to time because
of the availability of suitable firms on terms acceptable to us. In addition, at any given time we
may be focusing our efforts on integrating previously acquired firms, which will reduce our
acquisition activity. Generally, we seek to acquire firms with 50 or more employees which will complement one of our
existing practice areas or regions or which add a new practice area or regional presence. We
consider smaller acquisitions in markets in which we have existing operations. We have experienced internal growth when existing clients of newly acquired firms are offered
the additional services that we provide. Similarly, acquired firms services are cross-marketed to
our existing clients. We achieve moderate cost savings through the sharing of administrative
overhead, such as payroll services, the sharing of office facilities, if possible, and the
provision of group insurance and centralized financing which can generally be provided at lower
rates than smaller firms can obtain. 45




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Foreign Operations We conduct a portion of our business outside of North America. Specifically, foreign
operations included projects undertaken in the Caribbean (primarily in Barbados but also in
Trinidad, Tobago, Antigua, Belize and Puerto Rico), in Asia (China, India and Korea), in South
America (Peru, Brazil, Bolivia and Columbia) and in other locations (Cyprus, UAE, Madagascar, Kenya
and Pakistan). Such operations accounted for 1% of our revenue in 2004. Some of this work
involves political risk, contracts with foreign clients and working under foreign legal systems. Risk Management We mitigate our operating risks through our business strategy and other protective measures.
As mentioned previously, our three-dimensional business model of geographic, practice area and
project life cycle diversification minimizes our dependency on any particular geographic area,
industry or economic sector for our income. We also mitigate risk by entering into a diverse range
of contracts with a wide range of fee amounts. To address the risk of competition for qualified personnel and to maintain our ability to
attract and retain staff, we offer a number of employment incentives, including training programs,
employee share ownership (for Canadian employees) and opportunities for professional development
and enhancement, along with compensation plans which we believe to be innovative, flexible and
designed to reward top performance. We maintain insurance coverage for our operations, including policies covering general
liability, automobile liability, environmental liability, workers compensation and employers
liability, directors and officers liability and professional liability insurance. The maximum
coverage under our professional liability policy is generally C$35 million per claim and per annum,
with a per claim deductible of C$500,000 and an aggregate excess deductible of C$2.5 million. In
September 2003, we established a regulated captive insurance company to insure and fund the payment
of any professional liability self-insured retentions related to claims arising after August 1,
2003. We, or our clients, also obtain project-specific insurance for designated projects from
time-to-time. In addition, we invest resources in a risk management team dedicated to providing
company-wide support and guidance on risk avoidance and professional practices and procedures. One
such practice is to carry out select client evaluations, including credit risk appraisals, before
entering into contract agreements in order to reduce the risk of non-payment for our services. We have a comprehensive project manager training program aimed at skill development in risk
mitigation, project planning, quality control and assurance, and financial administration, among
other project management responsibilities. We believe that improved project management across our
operations will increase our ability to deliver projects on schedule and within budget. As well, we believe our experience and knowledge in conducting business outside North America
help us mitigate the risks of undertaking international projects. This work involves political
uncertainties, contracts with foreign clients and operating under foreign legal systems. Competition We operate in highly competitive markets and have numerous competitors for all of the services
we offer. The number and identity of competitors varies widely with the type of service we
provide. Moreover, for small to medium sized projects, we compete with many engineering,
architectural and other professional consulting firms. With larger projects, there are fewer but
still many competitors, however some of these competitors have greater financial and other
resources than we do. While we compete with other large private and public companies in certain
geographic locations, our primary competitors are smaller privately held regional firms in the
United States and Canada. We believe that our operating structure, our enterprise systems and the breadth of our
professional services differentiate us from other engineering, architecture and professional
consulting firms. Furthermore, our focus on small to midsize projects distinguishes us from some
larger competitors. The principal competitive factors in the services we offer are: reputation; experience;
breadth and quality of services; technical proficiency; local offices; competitive total project
fees; and service delivery. Given the expanding demand for the services we provide, it is likely
that additional competitors will emerge. Notwithstanding 46




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this increased competition, we believe that we will retain the ability to compete effectively
with our competition because of our strengths and expertise in engineering, architecture and
related professional services. We serve many diverse clients in both the private and public sectors. We seek to establish
ongoing relationships with clients that are likely to produce repeat business. We are not
dependent on any one client or group of clients for our business. No single client represents more
than 5% of our total revenue. We offer a range of pricing structures to our clients but primarily offer our services based
on either a fixed or variable fee contract with a ceiling or a time-and-material contract without a
stated ceiling. We secure our assignments primarily based on our expertise and contacts, and
sometimes on a competitive bidding process. Backlog Our gross revenue backlog for fixed fee and variable fee with ceiling contracts as of December
31, 2004 was approximately C$380 million compared to C$310 million at December 31, 2003. Our
backlog represents an estimate of the remaining future gross revenue from existing contracts. We
do not believe that backlog is fully indicative of the amount of potential future revenue that we
may achieve due to the short-term nature of the contracts under which we generally provide our
services. Research and Development We generally conduct research and development in the context of our clients specific project
requirements. Most research and development is conducted in the areas of infrastructure evaluation
and management systems, hydraulic modeling of water and wastewater systems, pavement evaluation and
management systems and wastewater treatment. Intellectual Property We rely primarily upon trade secret laws to protect our proprietary rights in our specialized
technologies. There can be no assurance that the protection provided to our proprietary technology
by the laws of foreign jurisdictions would be substantially similar to the remedies available to us
under the laws of Canada and the United States. Organizational Structure The following chart lists, as of May 6, 2005, our subsidiaries, their jurisdiction of
incorporation and the percentage of voting securities held by us. Percentage of
    
    Jurisdiction ofSubsidiary
    
    Voting Shares
    
    Incorporation659243 B.C. Ltd.
    
    
    100
    
    
    British Columbia0714993 B.C. Ltd.
    
    
    100
    
    
    British Columbia0715004 B.C. Ltd.
    
    
    100
    
    
    British Columbia0715007 B.C. Ltd.
    
    
    100
    
    
    British Columbia3053837 Nova Scotia Company
    
    
    100
    
    
    Nova ScotiaAPAI Architecture Inc.
    
    
    100
    
    
    British ColumbiaArchitectura Inc.
    
    
    0
    (1)
    
    AlbertaDunlop Murphy Hilgers Architects Inc.
    
    
    50
    
    
    OntarioGKO Power Engineering Ltd.
    
    
    100
    
    
    Alberta
 47




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Percentage of
    
    Jurisdiction ofSubsidiary
    
    Voting Shares
    
    IncorporationInternational Insurance Group Inc.
    
    
    100
    
    
    BarbadosJ. Muller International  Stanley Joint Venture Inc.
    
    
    30
    
    
    New BrunswickPentacore ADA Consulting, LLC
    
    
    100
    
    
    NevadaPlanning & Stantec Limited
    
    
    50
    
    
    Trinidad & TobagoProject Delivery Holdings LLC
    
    
    100
    
    
    New YorkSB K-12 Architecture and Engineering, P.C.
    
    
    0
    (1)
    
    New JerseyS.B. Long Island Architecture, Engineering and LandSurveying, P.C.
    
    
    0
    (1)
    
    New YorkSEA, Incorporated
    
    
    100
    
    
    NevadaSpink Corporation, The
    
    
    100
    
    
    CaliforniaSSBV Consultants Inc.
    
    
    33.33
    
    
    British ColumbiaStantec Architecture Inc.
    
    
    0
    (1)
    
    North CarolinaStantec Architecture Ltd.
    
    
    0
    (1)
    
    CanadaStantec Consulting Associates P.C.
    
    
    0
    (1)
    
    New YorkStantec Consulting California Inc.
    
    
    100
    
    
    CaliforniaStantec Consulting Caribbean Ltd.
    
    
    100
    
    
    BarbadosStantec Consulting Inc.
    
    
    100
    
    
    ArizonaStantec Consulting International Ltd.
    
    
    100
    
    
    CanadaStantec Consulting Ltd.
    
    
    100
    
    
    CanadaStantec Consulting Services Inc.
    
    
    100
    
    
    New YorkStantec Engineering (Puerto Rico) P.S.C.
    
    
    0
    (1)
    
    Puerto RicoStantec Facilities Ltd.
    
    
    100
    
    
    AlbertaStantec Geomatics Ltd.
    
    
    50
    (1)
    
    AlbertaStantec Holdings (Delaware) II Inc.
    
    
    100
    
    
    DelawareStantec Holdings Ltd.
    
    
    100
    
    
    AlbertaStantec International Enterprises Limited
    
    
    100
    
    
    BahamasStantec International Limited
    
    
    100
    
    
    BarbadosStantec Technology International Inc.
    
    
    100
    
    
    DelawareTeshmont Consultants Inc.
    
    
    50
    
    
    Canada
 48




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(1)
    
    We have entered into an agreement with respect to 100% of the voting shares of this
subsidiary that allows us to direct control over any disposition of the voting shares of this
subsidiary. Employees As of December 31, 2004, we had approximately 4,350 staff. This total staff number is
comprised of 2,150 professionals, 1,550 technologists and technicians and 650 support personnel. We are a knowledge-based organization and are always seeking talented and skilled
professionals in all of our specialist practice areas. Since the supply of qualified candidates at
times is limited, we use various recruitment strategies to address those needs. Examples of our
recruitment strategies include an employee referral bonus program, website job postings, career
fairs, student programs and the ability to offer geographic mobility. Properties Our corporate headquarters is located in Edmonton, Alberta, where we lease approximately
188,550 square feet of space. The lease on our corporate headquarters expires in 2019. In
addition, we lease office space in locations in which we operate on commercially available terms.
As of December 31, 2004, we had approximately 50 leased premises in locations throughout North
America in addition to our corporate headquarters. The lease terms range from a minimum of one
year to a maximum of 15 years with options, depending on the particular lease, for renewal,
expansions, contraction and termination, sublease rights and allowances for improvements. We
believe that our current facilities are sufficient for the operation of our business and that
suitable additional space in various local markets is available to accommodate any needs that may
arise and that suitable additional or substitute space will be available as needed to accommodate
any expansion of operations. Lease payments for all of our leased premises totaled approximately
C$23.1 million in 2004. Legal Proceedings We are from time to time involved in litigation incidental to the conduct of our business. As
of March 31, 2005, we were named as a defendant in the following action: Sear-Brown, a company we acquired in April 2004, has been named in a lawsuit related to design
services it provided for a roadway in New York State in connection with a multi-vehicle accident
that occurred on the roadway in November 2001. Valerie Parris advanced a civil claim in New York
State on or about December 1, 2003 alleging, among other things, negligence in the design and
construction of the roadway. Ms. Parris alleges that as a result of the accident, Alonzo Raynard
Parris sustained fatal injuries and his son, Raynard Parris, sustained injury and mental distress.
Sear-Brown is one of a number of defendants in the legal proceeding. Damages sought total US$43
million. Sear-Browns insurer has responded to the claim. The allegations against Sear-Brown have
been denied and are being contested. In addition to the claim noted above, we have other claims and suits pending, both by and
against us. These are normal and typical to the industries in which we operate. Where
appropriate, these claims have been reported to our and our predecessors insurers who are in the
process of adjusting and/or defending them. None are expected to have a material adverse effect on
our financial position. 49




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Management of Stantec The existing directors and officers of Stantec will remain as directors and officers of
Stantec following the merger, except that Aram H. Keith, currently the Chairman and Chief Executive
Officer of Keith, will be appointed to the board of directors of Stantec following the merger. Executive Officers and Directors The following table sets forth information about Stantecs executive officers and directors,
and their respective ages and positions as of the date of this proxy statement/prospectus: Name
    
    Age
    
    PositionRonald Triffo
    
    
    66
    
    
    Chairman of the BoardAnthony P. Franceschini
    
    
    54
    
    
    President, Chief Executive Officer and DirectorNeilson A. Dutch Bertholf, Jr.
    
    
    72
    
    
    DirectorRobert J. Bradshaw
    
    
    57
    
    
    DirectorE. John (Jack) Finn
    
    
    73
    
    
    DirectorWilliam D. Grace
    
    
    69
    
    
    DirectorSusan E. Hartman
    
    
    54
    
    
    DirectorRobert R. Mesel
    
    
    69
    
    
    DirectorDonald W. Wilson
    
    
    48
    
    
    Vice President & Chief Financial OfficerJeffrey S. Lloyd
    
    
    40
    
    
    Vice President, Secretary & General Counsel
 Directors Ronald Triffohas been associated with Stantec since 1977. He was appointed President in
1983, President and CEO in 1988 and Chairman of the Board in 1998. Mr. Triffo holds a BSc. in
Civil Engineering from the University of Manitoba and a MSc. in Engineering from the University of
Illinois. He is currently a Director of TELUS Corporation and Chairman and Director of ATB
Financial. He is the private sector Co-Chair of the Alberta Economic Development Authority and
serves on the board of the Alberta Ingenuity Fund, Albertas Promise, the Advisory Council of the
Faculty of Medicine and Dentistry at the University of Alberta, and the board of governors of
Junior Achievement of Northern Alberta. Anthony P. Franceschinihas been with Stantec since 1978, where he has provided consulting
services, management, and leadership, becoming Chief Executive Officer in 1998. He has served as a
director of Stantec since Stantec became publicly traded in March 1994. He also serves as a
director of Esterline Technologies Corporation, a leading manufacturer in the aerospace/defence
markets and is a director of privately held CCI Thermal Technologies Inc., an Edmonton-based
manufacturer of industrial heating products and custom-engineered process heating equipment. Neilson A. Dutch Bertholf, Jr.has been a member of Stantecs board of directors since 1998
and serves on the Corporate Governance and Compensation Committee. He is retired from a 40-year
career in aviation. Mr. Bertholf, Jr. is a lifetime board member of the Arizona Sports Foundation
Inc. (Fiesta Bowl) and is a member on the executive committee and a vice president of the Grand
Canyon Council, Boy Scouts of America. He is also a member of the board of directors for the
Airline Training Center, Arizona, a Division of Lufthansa Flight Training, Lufthansa Airlines,
Germany. Robert J. Bradshawhas been a member of Stantecs board of directors since 1993. He is a
professional engineer with a diverse background in the manufacturing, oil, consulting engineering,
and nuclear industries, as well as in power generation and government service. Mr. Bradshaw is
currently Chairman of Contor Industries Limited, which acquires mature manufacturing companies
requiring significant turn-around activities. The business of the Contor companies ranges from
nuclear and aerospace to hydro electric; gold mining; food processing; aircraft leasing and waste
disposal. Mr. Bradshaw acts as Chairman for Zircatec Precision Industries, Inc. and Bradcohill
Inc., and is also a director of Configuresoft, Inc. 50




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E. John (Jack) Finnhas been a member of Stantecs board of directors since 1995. He is the
retired Chairman of Dorr-Oliver, Inc., a process engineering and equipment firm. An electrical
engineering graduate of Carnegie Mellon University, Mr. Finns business experience has focused on
operations and general management. He held various executive positions with The Carborundum
Company, Kennecott Corporation and The Standard Oil Company. In addition to Stantec, he is
currently a director of Vodium of Washington, DC and Delicious Milk Company of New York, NY. He
also is a Member of the National Association of Corporate Directors. William D. Gracehas been a member of Stantecs board of directors since 1994. Mr. Grace is a
graduate of the University of Alberta and a Fellow Chartered Accountant (FCA). During his business
career, he served as the chief financial officer with several Alberta corporations including
Chieftain Development Co. Ltd., R. Angus (Alberta) Limited and Canadian Utilities Limited. From
1988 to 1994, he was a managing partner in the Edmonton office of Price Waterhouse. Mr. Grace is
the recipient of several awards including the Alberta Achievement Award from the Province of
Alberta, the Lifetime Achievement Award from the Alberta Institute of Chartered Accountants and the
University of Alberta Alumni Award of Excellence. He currently holds a number of corporate
directorships in addition to Stantec, including the Forzani Group, Melcor Developments and several
private companies. He is also the independent Chairman of the Edmonton Pipe Industry Pension Trust
and Health & Welfare Funds, a director of the Mutual Fund Dealers Association of Canada, and a
public Council member of the Association of Professional Engineers, Geologists and Geophysicists of
Alberta. Mr. Grace has been active over the past twenty-five years in numerous community and
professional activities. Susan E. Hartmanhas been a member of Stantecs board of directors since 2004. Ms. Hartman
holds a bachelor of science degree in chemistry and has diverse experience in strategic planning,
business management, mergers and acquisitions, operations, and international business development.
In 1993 she started her own management consulting firm, The Hartman Group. Ms. Hartman continues
as president and owner of The Hartman Group, leading the companys consulting services in the area
of strategic and operational planning, overall business assessment, process optimization, and
project management. She currently serves as a board member on QED Technologies and the SCORE
Foundation. Robert R. Meselhas been a member of Stantecs board of directors since 2004. Mr. Mesel is an
experienced business professional with expertise in business development, administration,
accounting, and finance. Prior to his retirement in 1997, Mr. Mesel was a director and/or trustee
for many prestigious organizations, including the Financial Executive Institute (Northeast Ohio
Chapter), Ohio Council for Economic Education, Greater Cleveland Salvation Army, and Canisius
College. Mr. Mesel completed his bachelor of business administration in accounting at Canisius
College, his masters of business administration at State University of New York, and the advanced
management program at Harvard Business School. He is also the past president of BP Chemicals Inc.
and Chase Brass & Copper Company. All directors are re-elected annually. Other Executive Officers Donald W. Wilsonis Stantecs Vice President & Chief Financial Officer. As part of the
Executive Leadership Team, Mr. Wilson is in charge of the Financial Services and Corporate
Development groups. He is responsible for financial services, investor relations, financial
reporting, and Stantecs finances. Mr. Wilson joined Stantec in 1990 as the controller for Stanley
Associates Engineering Ltd. He was appointed Vice President & Chief Financial Officer in 1994. In
that same year, he was instrumental in Stantecs initial public offering, which resulted in Stantec
being listed on the Toronto Stock Exchange under the symbol STN. Mr. Wilson is also actively
involved with Stantecs acquisition program. Mr. Wilson graduated from the University of
Saskatchewan, receiving a bachelor of commerce degree with distinction, majoring in accounting. He
attained his chartered accountant designation in 1979. Mr. Wilsons outside commitments include
membership on the Alberta Provincial Audit Committee. Past commitments have included serving as
president of the Edmonton chapter of Financial Executives International, a former member of the
Edmonton public school boards Business Leaders for Public Education, a past chairman and member
of the board of trustees of North West Regional College, a past director of the North Battleford
Housing Authority, and a past director of Stantec. Jeffrey S. Lloydleads Stantecs Corporate Development group. The Corporate Development group
is responsible for Stantecs acquisition program and legal affairs. Mr. Lloyd has been involved in
each acquisition undertaken by Stantec since its initial public offering in 1994. Mr. Lloyd is a
lawyer by profession, beginning his legal career with Cassels Brock & Blackwell LLP in Toronto
where he practiced corporate law until 1994 with an emphasis on mergers and acquisitions and
corporate finance. In 1994, Mr. Lloyd joined the Stantec organization as 51




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General Counsel at which time he assumed responsibility for the legal affairs of Stantec. In
1998, Mr. Lloyd was appointed a Vice President of Stantec Inc. with responsibility for the
Corporate Development group, in addition to his responsibilities as Corporate Secretary. Mr. Lloyd
holds a bachelor of science degree in business administration with a major in finance and real
estate from the University of Denver and a bachelor of laws degree from Osgoode Hall Law School at
York University. Mr. Lloyd is a member of the Law Society of Upper Canada and the Law Society of
Alberta. In 1995, Mr. Lloyd completed the Canadian Institute of Chartered Accountants In Depth
Tax Course, a two-year detailed income tax program. Mr. Lloyd is a member of the Synergy Network
of Edmonton. Committees of the Board There are two committees of the board: (1) the Audit Committee and (2) the Corporate
Governance and Compensation Committee. Audit Committee The Audit Committee is currently comprised of three members, William D. Grace (Chairman), E.
John Finn and Robert R. Mesel. Stantecs board of directors has determined that each member of the
Audit Committee is independent and financially literate as such terms are defined under the
rules and regulations of the SEC, the New York Stock Exchange and Canadian securities laws. In
addition, the board of directors has determined that Mr. Grace is an Audit Committee Financial
Expert as such term is defined under the rules and regulations of the SEC and the New York Stock
Exchange. The board believes that the composition of the Audit Committee reflects an appropriate
level of financial literacy and expertise. During the financial year ended December 31, 2004,
Stephen D. Lister (an independent director) was a member of this committee until his retirement on
November 4, 2004, when Robert R. Mesel was appointed to fill that vacancy. In summary, the Audit Committee monitors, evaluates, approves and makes recommendations on
matters affecting our external audit, financial reporting and accounting control policies. The
Audit Committees mandate includes:  
    reviewing and recommending for approval to the board, the annual audited financial
statements and other continuous disclosure documents, including:  a)
    the financial content of the annual report,b)
    the annual management information circular and proxy materials,c)
    the annual information form, andd)
    the management discussion and analysis section of the annual report;  
    reviewing and authorizing the release of the quarterly unaudited financial statements
including management discussion and analysis, quarterly interim report to shareholders and
quarterly press release of our earnings;
    reviewing and recommending for approval to the board, all financial statements,
financial reports, and the financial content of prospectuses, and any other reports
requiring board approval prior to being submitted to any regulatory authority;
    reviewing the Chief Executive Officer and Chief Financial Officer certification of
annual and interim disclosure;
    discussing with management our major financial risk exposures and the steps management
has taken to monitor and control such exposures;
    reviewing with management on an annual basis, our obligations pursuant to guarantees
that have been issued and material obligations that have been entered into, and the manner
in which these guarantees and obligations have been, or should be, disclosed in the
financial statements.
    reviewing and assessing, in conjunction with management and the external auditor: 52




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a)
    the appropriateness of our accounting policies and financial reporting
practices, and considering any available alternatives;b)
    any significant proposed changes in financial reporting and accounting
policies and practices to be adopted by us;c)
    any new or pending developments in accounting and reporting standards that
may affect or impact Stantec; andd)
    the key estimates and judgments of management that may be material to our
financial reporting;  
    assessing the performance of the external auditor and considering whether to recommend
its annual appointment to the board for ultimate recommendation to the shareholders;
    reviewing, approving and executing the annual engagement letter with the external
auditor;
    approving the engagement of the external auditor for all non-audit services and the fees
for such services, and considering whether any non-audit service compromises the
independence of the external audit work;
    reviewing all fees paid to the external auditor for audit services and, if appropriate,
recommending the fees for board approval;
    reviewing with the external auditor the results of the annual audit examination;
    reviewing any litigation, claim or other contingency, including tax assessments, that
could have a material effect upon our financial position or operating results;
    reviewing annually, or as required, the appropriateness of the system of internal
controls and approval policies and practices concerning the expenses of our officers;
    reviewing and approving the expense accounts of our board chair and the chief executive officer;
    reviewing the adequacy of our insurance program;
    reviewing and determining the disposition of any complaints received under our Whistle
Blower Policy  Complaint Resolution Process; and
    reviewing and determining the disposition of any complaints received from our
shareholders or any regulatory body. The Audit Committee met six times in 2004. In addition to formal meetings, the members of the
Audit Committee meet informally as required, either in person or by telephone. The Chairman of the
Audit Committee provides regular reports at board meetings. Corporate Governance and Compensation Committee The Corporate Governance and Compensation Committee is comprised of four members: Robert J.
Bradshaw (Chairman), Neilson A. Bertholf, Jr., William D. Grace and Susan E. Hartman. Stantecs
board of directors has determined that each member of the Corporate Governance and Compensation
Committee is independent and unrelated as such terms are defined under the rules and
regulations of the SEC, the New York Stock Exchange and Canadian securities laws. During the
financial year ended December 31, 2004, Robert E. Flynn (an independent director) was a member of
this committee until his retirement on November 4, 2004 when Susan E. Hartman was appointed to the
committee to fill that vacancy. This committee makes recommendations to the board on: Corporate Governance Matters  
    developments in the area of corporate governance generally;
    composition and size of the board; 53




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
    appropriate candidates for nomination to the board;
    providing an orientation and education program for new directors;
    evaluating the performance of the board, any committees, and individual directors;
    considering and approving any requests by an individual director to engage outside
experts at our expense. Compensation Matters  
    compensation policies reflecting the rationale for each element of executive pay,
including the link between compensation and performance and the level of
competitiveness of the total compensation package;
    administration of our Employee Share Option Plan;
    executive management compensation, including bonuses, stock options, pensions and benefits;
    compensation for the Chief Executive Officer;
    senior management performance reviews;
    succession plans for executive management positions. The Corporate Governance and Compensation Committee met once in 2004. In addition to formal
meetings, the members of the committee meet informally as required, either in person or by
telephone. The Chairman of the Corporate Governance and Compensation Committee provides regular
reports at board meetings. Compensation of Directors Mr. Triffo, the Chairman of the Board, receives C$150,000 per year as a director fee retainer
pursuant to an agreement with us. He is not paid any additional amounts for attending board
committee meetings, chairing board meetings, or attending meetings or events in support of the
company. This agreement with Mr. Triffo will end when he ceases to be the Chairman of the Board. The President and CEO, Mr. Franceschini, is not compensated for acting as a director. The remaining six directors are paid according to our director compensation program, which is
intended to (1) encourage the directors to hold a continuing equity interest in us; (2) align the
interests of directors with the interests of shareholders; and (3) attract and retain qualified
Canadian and U.S. directors. The director compensation program includes deferred share units (DSUs), each of which has the
same value as one of our common shares; however, DSUs carry no voting rights and they cannot be
transferred. DSUs cannot be exercised until death or retirement of a director, upon which, the
value of a directors DSUs are paid in cash. Each DSU will be valued at our common share market
price on the last trading day of the month of the death or retirement of the director. DSUs are
granted on the last day of the previous quarter and once granted, the number of DSUs will not be
adjusted even if the director dies or retires in the quarter to which a grant of DSUs relates. The
number of DSUs held by directors and the number of DSUs to which directors are entitled will be
appropriately adjusted for any change in the number of our outstanding common shares that occurs by
reason of any stock split, consolidation, or other corporate change. The directors, other than Mr. Triffo and Mr. Franceschini, receive:  
    1,600 DSUs a year (400 per quarter);
    An additional C$1,500 per quarter if they chair a board committee; and
    C$1,800 for every board meeting or board committee meeting they attend. 54




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During Stantecs financial year ending December 31, 2004, Stantec compensated its directors,
other than Mr. Franceschini, approximately C$522,440. This figure includes the Chairmans
compensation of C$150,000 and compensation paid or issued to outside directors as follows: 
    
    Chairman compensation
    
    C$150,000
    
    Chair and meeting fees
    
    C$114,600
    
    DSUs (valued at date of issue)
    
    C$257,840
 Executive Compensation Summary Compensation Table The following table summarizes the compensation of our Chief Executive Officer, Chief
Financial Officer and the next three most highly compensated executive officers for the years
indicated. Long-TermName and Principal
    
    
    
    
    
    
    
    
    
    
    
    Compensation
    
    All OtherPosition
    
    Year
    
    Annual Compensation
    
    
    Awards
    
    CompensationSecurities underSalary
    
    
    Bonus1
    
    
    Options2A.P. Franceschini
    
    2004
    
    
    C$375,004
    
    
    
    C$844,350
    
    
    nil
    
    
    C$9,000
    3President & CEO
    
    2003
    
    
    C$367,793
    
    
    
    C$717,338
    
    
    150,000
    
    
    C$11,250
    42002
    
    
    C$250,000
    
    
    
    C$748,705
    
    
    nil
    
    
    C$6,500
    3D.W. Wilson
    
    2004
    
    
    C$224,030
    
    
    
    C$250,000
    
    
    5,000
    
    
    C$69,439
    5Vice President & CFO
    
    2003
    
    
    C$196,165
    
    
    
    C$195,000
    
    
    6,500
    
    
    C$5,500
    32002
    
    
    C$183,787
    
    
    
    C$116,212
    
    
    7,000
    
    
    C$5,176
    3R.L. Alarie
    
    2004
    
    
    C$233,649
    
    
    
    C$350,000
    
    
    5,000
    
    
    C$3,750
    3Executive Vice-President
    
    2003
    
    
    C$196,165
    
    
    
    C$230,000
    
    
    6,000
    
    
    C$5,500
    3Stantec Consulting Ltd.
    
    2002
    
    
    C$175,013
    
    
    
    C$200,000
    
    
    9,000
    
    
    C$200,631
    6M.E. Jackson
    
    2004
    
    
    C$218,460
    
    
    
    C$250,000
    
    
    5,000
    
    
    C$5,869
    3Senior Vice President
    
    2003
    
    
    C$176,542
    
    
    
    C$205,000
    
    
    8,000
    
    
    C$5,100
    3Stantec Consulting Ltd.
    
    2002
    
    
    C$165,009
    
    
    
    C$135,000
    
    
    8,000
    
    
    C$200,255
    7W.B. Lester
    
    2004
    
    
    C$230,994
    
    
    
    C$350,000
    
    
    5,000
    
    
    C$6,192
    3Executive Vice President
    
    2003
    
    
    C$220,664
    
    
    
    C$350,000
    
    
    7,000
    
    
    C$6,000
    3Stantec Consulting Ltd.
    
    2002
    
    
    C$225,000
    
    
    
    C$325,000
    
    
    12,000
    
    
    C$5,500
    3
   1
    
    Represents bonuses earned and calculated in respect of the indicated financial year.2
    
    Options to purchase our common shares. See below for further information regarding
option grants and exercises during the most recently completed financial year.3
    
    Represents a payment to the executive officers registered retirement savings/employee
share purchase plan.4
    
    Represents a payment to Mr. Franceschinis registered retirement savings/employee
share purchase plan (C$9,000) and a service award (C$2,250)5
    
    Represents a payment to Mr. Wilsons registered retirement savings/employee share
purchase plan (C$5,980) and a payout of vacation time that Mr. Wilson had accrued but not
taken during his time at Stantec (C$63,459).6
    
    Represents a payment to Mr. Alaries registered retirement savings/employee share
purchase plan (C$5,176) and a performance payment arising in connection with the acquisition
of PEL Group Inc. by Stantec Consulting Ltd. in 1997 (C$195,455).7
    
    Represents a payment to Mr. Jacksons registered retirement savings/employee share
purchase plan (C$4,800) and a performance payment arising in connection with the acquisition
of PEL Group Inc. by Stantec Consulting Ltd. in 1997 (C$195,455). 55




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##### 



Option Grants For Stantec Common Shares in Fiscal Year Ended December 31, 20041 Market Value ofSecurities% of Total
    
    
    
    UnderlyingSecurities
    
    Options Granted
    
    
    
    Options on theunder
    
    to Employees in
    
    
    
    Date of Grant
    
    ExpirationName
    
    Options1
    
    Financial Year
    
    Price (C$/Common Share)
    
    (C$/Security)
    
    DateA.P. Franceschini
    
    Nil
    
    0.00%
    
    N/A
    
    N/A
    
    N/AD.W. Wilson
    
    50002
    
    2.99%
    
    C$24.50
    
    C$24.50
    
    December 14, 2011R.L. Alarie
    
    50002
    
    2.99%
    
    C$24.50
    
    C$24.50
    
    December 14, 2011M.E. Jackson
    
    50002
    
    2.99%
    
    C$24.50
    
    C$24.50
    
    December 14, 2011W.B. Lester
    
    50002
    
    2.99%
    
    C$24.50
    
    C$24.50
    
    December 14, 2011
   1
    
    Options granted under our Employee Share Option Plan to purchase our common shares.2
    
    1,667 options are exercisable on December 14, 2005, 1,667 options are exercisable on
December 14, 2006, and 1,666 options are exercisable on
December 14, 2007. Aggregated Option Exercises During the Most Recently Completed Financial Year and Financial Year-End Option Values
 Value of UnexercisedAggregate
    
    
    Unexercised Options at
    
    In-the-MoneySecurities
    
    
    Value
    
    
    Financial Year End
    
    Options at the FiscalAcquired on
    
    
    Realized
    
    
    (#)
    
    Year End1Name
    
    Exercise (#)
    
    
    (C$)
    
    
    Exercisable/Unexercisable
    
    Exercisable/UnexercisableA.P. Franceschini
    
    
    240,000
    
    
    
    C$4,214,000
    
    
    112,000 / 90,000
    
    C$1,732,060 / C$210,300D.W. Wilson
    
    Nil
    
    nil
    
    26,335 / 11,665
    
    C$493,258 / C$61,582R.L. Alarie
    
    
    4,700
    
    
    
    C$70,560
    
    
    5,000 / 12,000
    
    C$46,900 / C$67,760M.E. Jackson
    
    Nil
    
    nil
    
    8,001 / 12,999
    
    C$78,516 / C$71,064W.B. Lester
    
    
    39,000
    
    
    
    C$690,200
    
    
    2,334 / 13,666
    
    C$12,790 / C$83,390
   1
    
    The closing price of our common shares on the Toronto Stock Exchange on December 31,
2004 was C$26.48. Employee Share Option Plan Our Employee Share Option Plan provides for the granting of options to purchase common shares
to our directors, officers, employees, and consultants. The board of directors believes that
issuing options to key individuals is an effective means of aligning the interests of these
individuals with the interests of our shareholders. At the time of the last amendment to the plan in March of 2002, 1,754,938 shares were reserved
for issuance as options, which, together with certain individual option agreements which existed at
the time, totaled 1,814,938 common shares, representing 10% of our issued and outstanding common
shares at that time. On February 24, 2005, the board of directors resolved to reset the number of shares reserved
for issuance as options. Subject to shareholder approval, the Employee Share Option Plan has been
amended to reserve 1,892,718 common shares, being 10% of the current issued and outstanding common
shares as of March 21, 2005. We do not issue any securities other than common shares. Terms of the Plan Each option granted has a maximum term of 10 years and is exercisable on terms determined by
the board of directors, including vesting and restrictions on sale or other disposition of common
shares acquired upon exercise of an option. The board of directors establishes the exercise price
for options when issued, which in all cases cannot be less than (1) the closing price of our common shares on the Toronto Stock Exchange on the
trading day 56




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##### 



immediately preceding the date of the grant; or (2) such lesser permissible amount
under applicable legislation or the rules and regulations of the Toronto Stock Exchange. Any common shares subject to an option, which is for whatever reason cancelled or terminated
without having been exercised, are again available for grant under the plan. The maximum number of common shares which may be reserved for issuance to insiders under the
plan is 10% of the common shares outstanding at the time of the grant (on a non-diluted basis) less
the aggregate number of common shares reserved for issuance to insiders under any other share
compensation arrangement. In addition, the maximum number of common shares which may be issued to
insiders under the plan within a one-year period is 10% of the common shares outstanding at the
time of the issuance (on a non-diluted basis), excluding common shares issued under the plan or any
other share compensation arrangement over the preceding one year period. The maximum number of
common shares which may be issued to any one insider under the plan within a one year period is 5%
of the common shares outstanding at the time of the issuance (on a non-diluted basis), excluding
common shares issued to the insider in question under the plan or any other share compensation
arrangement over the preceding one year period; however, any entitlement to acquire common shares
granted pursuant to the plan or any other share compensation arrangement prior to the optionholder
becoming an insider shall be excluded for the purposes of the limits set out above. In addition, the maximum number of common shares which may be reserved for issuance to any one
person is 5% of the common shares outstanding at the time of the grant (on a non-diluted basis)
less the aggregate number of common shares reserved for issuance to such person under any other
option to purchase common shares from treasury granted as compensation or incentive mechanism. Should the number of issued and outstanding common shares change due to a stock dividend,
split, consolidation, or other corporate change, the board would, with the approval of the Toronto
Stock Exchange, make an appropriate adjustment to the terms of previously issued options. If an optionholder ceases to be eligible for the plan for any reason other than death, each
option held by that person ceases to be exercisable 30 days after that person becomes ineligible
and any option or portion of an option not vested by the date of becoming ineligible cannot be
exercised under any circumstances. These provisions apply regardless of whether the person is
dismissed with or without cause. Options are only assignable when an option holder dies and only by will or by the laws of
descent and distribution. Following death of an option holder, his or her legal representative may
exercise the options within six months after the date of death, but only to the extent that the
options were by their terms exercisable on the date of death. The board of directors may amend, suspend or terminate the plan or any portion thereof at any
time in accordance with applicable legislation and subject to any required approval. With the
consent of affected optionholders, the board of directors may amend or modify any outstanding
option in any manner to the extent that the board would have the authority to initially grant such
award, including, without limitation, to change the date or dates as of which an option becomes
exercisable, subject to the prior approval of the relevant stock exchange. The board of directors
also has the authority to adopt, amend and rescind administrative guidelines and other rules and
regulations relating to the plan. Shares Reserved and Options Granted The following table shows shares reserved and options granted, exercised and available for
grant: OptionsPlan
    
    
    Options
    
    
    Options
    
    
    Available forMaximum
    
    
    Outstanding
    
    
    Exercised
    
    
    Future GrantBalance as of March
21, 2005 (prior to
proposed change)
    
    
    1,754,938
    
    
    
    1,012,833
    
    
    
    697,365
    
    
    
    44,740Percentage of
common shares
outstanding as of
March 21, 2005
(prior to proposed
change)
    
    
    9.27
    %
    
    
    5.35
    %
    
    
    3.68
    %
    
    
    0.24
    %Balance as of March
21, 2005 (after
proposed change,
based upon number
of issued and
outstanding common
shares as of March
21, 2005)
    
    
    1,892,718
    
    
    
    1,012,833
    
    
    
    0
    
    
    
    879,885Percentage of
common shares
outstanding as of
March 21, 2005
(after proposed
change)
    
    
    10.00
    %
    
    
    5.35
    %
    
    
    0
    %
    
    
    4.65
    %
 57




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##### 



Equity Compensation Plan Information Number of securities remainingavailable for future issuanceNumber of securities to
    
    
    Weighted-average exercise
    
    
    under equity compensationbe issued upon exercise of
    
    
    price of outstanding
    
    
    plans (excluding securitiesoutstanding options
    
    
    options
    
    
    reflected in column (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    1,033,833
    
    
    
    C$13.63
    
    
    
    44,740
    1
   1
    
    This number is equal to the maximum number of options to purchase common shares
authorized to be issued under the Stantec Employee Share Option Plan (1,754,938) less 676,365
options which have been exercised over the life of the Stantec Employee Share Option Plan less
the 1,033,833 options outstanding as at January 31, 2005. Employment Agreements Anthony P. Franceschini. We have an employment contract with Mr. Franceschini, effective January 1, 2003, which
provides that Mr. Franceschini will remain Stantecs President and CEO until December 31, 2008.
The contract provides for (1) an annual base salary of C$375,000, (2) an annual bonus of 1.5% of
our annual income before deductions for employee performance bonuses, executive bonuses and taxes,
and (3) options to purchase our common shares as follows: Number of Options
    
    Strike Price
    
    Vesting Date
    
    Expiry Date30,000
    
    C$16.10
    
    January 3, 2004
    
    January 3, 201030,000
    
    C$18.85
    
    January 3, 2005
    
    January 3, 201130,000
    
    C$21.60
    
    January 3, 2006
    
    January 3, 201230,000
    
    C$24.35
    
    January 3, 2007
    
    January 3, 201330,000
    
    C$27.10
    
    January 3, 2008
    
    January 3, 2013
 If Mr. Franceschini is terminated without cause, he will receive a lump sum payment of
C$750,000. Mr. Franceschini will also receive a C$750,000 lump sum payment if he terminates his
employment within six-months of our undergoing a change in control. A change in control, for this
purpose, is defined as a situation where a person acquires more than 50% of our common shares. A
change in control also occurs when the nominees of a person holding at least 30% of our common
shares are elected as directors and comprise a majority of the board. In all other cases Mr. Franceschini may end his employment after giving three months notice. Mr. Franceschinis contract also restricts Mr. Franceschini from competing with us, soliciting
our employees, and soliciting our clients for a period of two years following termination of his
employment. 58




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##### 



Donald W. Wilson Stantec Consulting Ltd. has an employment contract with Donald W. Wilson effective October 31,
2001. The contract provides Mr. Wilson with a bi-weekly salary and a discretionary annual bonus.
Mr. Wilsons bi-weekly salary was set at C$8,913 effective January 1, 2005. If Stantec Consulting Ltd. terminates Mr. Wilson without cause, it must make a C$200,000 lump
sum payment to him. Mr. Wilson will also receive a C$200,000 lump sum payment if he were to end
his employment within six-months of us undergoing a change in control. A change in control, for
this purpose, would occur where a person acquires more than 50% of our common shares or where the
nominees of a person holding at least 30% of our common shares are elected as directors and
comprise a majority of the board of directors. In all other cases, Mr. Wilson may end his
employment after giving Stantec Consulting Ltd. three months notice. Mr. Wilsons agreement restricts Mr. Wilson from competing with us, soliciting our employees,
and soliciting our clients for a period of two years following termination of his employment. Raymond L. Alarie Stantec Consulting Ltd. also has an employment contract with Mr. Alarie effective January 1,
2005. This contract provides Mr. Alarie with a bi-weekly salary and a discretionary annual bonus.
Mr. Alaries bi-weekly salary was set at C$9,308.25 effective January 1, 2005. If Stantec Consulting Ltd. terminates Mr. Alaries employment without cause, it must pay him
his base salary earned to the termination date, a termination bonus, and a one-year compensation
payment. The termination bonus that would be paid to Mr. Alarie would be equal to the annual bonus
earned by Mr. Alarie in respect of the previous fiscal year, pro-rated for that portion of the
year, which elapses from the end of the previous fiscal year to the date of termination. If no
bonus was paid to Mr. Alarie in respect of the previous fiscal year, the termination bonus will be
based on the bonus paid, if any, to Mr. Alarie in respect of the fiscal year two years prior to the
year the termination occurs. The one-year compensation payment is calculated as twenty-six (26)
times Mr. Alaries bi-weekly salary at the time of termination plus an amount equal to the bonus
paid to Mr. Alarie in respect of the fiscal year prior to the year in which termination occurs or,
if no bonuses have been paid to our Canadian employees generally in that year, an amount equal to

the bonus, if any, paid to Mr. Alarie in respect of the fiscal year two years prior to the year in
which termination occurs. Mr. Alarie would also be paid his base salary earned to the termination date, a termination
bonus, and a one-year compensation payment if he were to end his employment within six-months of us
undergoing a change in control. A change in control, for this purpose, would occur where a person
acquires more than 50% of our common shares or where the nominees of a person holding at least 30%
of our common shares are elected as directors and comprise a majority of the board of directors.
In all other cases, Mr. Alarie may end his employment after giving Stantec Consulting Ltd. three
months notice. Mr. Alaries contract also restricts Mr. Alarie from competing with us, soliciting our
employees, and soliciting our clients for a period of two years following termination of his
employment. Mark E. Jackson Stantec Consulting Ltd. has an employment contract with Mr. Jackson effective October 31,
2001. The contract provides Mr. Jackson with a bi-weekly salary and a discretionary annual bonus.
Mr. Jacksons bi-weekly salary was set at C$8,715 effective January 1, 2005. If Stantec Consulting Ld. terminates Mr. Jackson without cause, it must make a C$100,000 lump
sum payment to him, pay him a bonus equal to 35% of his base salary the previous year if no bonus
has been paid that year, and pay him a bonus of 35% of his base salary in the termination year pro
rated for that portion of the year which has elapsed to the date of termination. Mr. Jackson would
also receive a C$100,000 lump sum payment and his bonuses should he end his employment within
six-months of us undergoing a change in control. A change in control, for this purpose, would
occur where a person acquires more than 50% of our common shares or where the
nominees of a person holding at least 30% of our common shares are elected as directors and
comprise a majority of the board of directors. In all other cases, Mr. Jackson may end his
employment after giving Stantec Consulting Ltd. three months notice. 59




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##### 



Mr. Jacksons contract also restricts Mr. Jackson from competing with us, soliciting our
employees, and soliciting our clients for a period of two years following termination of his
employment. W. Barry Lester Stantec Consulting Ltd. entered into an employment contract with W. Barry Lester effective
December 19, 2002. The contract provides Mr. Lester with a bi-weekly salary and a discretionary
annual bonus. Mr. Lesters bi-weekly salary was set at C$9,308.25 effective January 1, 2005. If Stantec Consulting Ltd. terminates Mr. Lesters employment without cause, Stantec
Consulting Ltd. must pay him his base salary earned to the termination date, a termination bonus,
and a one-year compensation payment. The termination bonus that would be paid to Mr. Lester would
be equal to the bonus earned by Mr. Lester in the previous fiscal year pro-rated for that portion
of the year which elapses from the end of the previous fiscal year to the date of termination. If
no bonus was paid to Mr. Lester in the previous fiscal year, the termination bonus will be based on
the bonus paid, if any, to Mr. Lester in the fiscal year two years prior to the year the
termination occurs. The one-year compensation payment is calculated as twenty-six (26) times Mr.
Lesters bi-weekly salary at the time of termination plus an amount equal to the bonus paid to Mr.
Lester in respect of the fiscal year prior to the year in which termination occurs or, if no
bonuses have been paid to our Canadian employees generally in that year, an amount equal to the
bonus, if any, paid to Mr. Lester in respect of the fiscal year two years prior to the year in
which termination occurs. Mr. Lester would also be paid his base salary earned to the termination date, a termination
bonus, and a one-year compensation payment if he were to end his employment within six-months of us
undergoing a change in control. A change in control, for this purpose, would occur where a person
acquires more than 50% of our common shares or where the nominees of a person holding at least 30%
of our common shares are elected as directors and comprise a majority of the board of directors.
In all other cases, Mr. Lester may end his employment after giving Stantec Consulting Ltd. three
months notice. Mr. Lesters contract also restricts Mr. Lester from competing with us, soliciting our
employees, and soliciting our clients for a period of two years following termination of his
employment. 60




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##### 



Information Concerning the Special Meeting Keith Special Meeting We are furnishing this document to you as part of the solicitation of proxies by Keiths board
of directors for use at the special meeting in connection with the proposed merger. This document
provides you with the information you need to know to be able to vote or instruct your vote to be
cast at the special meeting. Date, Time and Place The special meeting is scheduled to be held at 10:30 a.m. Pacific Time, on [___] at 19
Technology Drive, Irvine, California 92618, unless it is postponed or adjourned. The telephone
number at that address is (949) 923-6001. Purpose of the Special Meeting This proxy statement/prospectus is being provided by, and the enclosed proxy is solicited by
and on behalf of, Keiths board of directors for use at a special meeting of Keith shareholders.
The Keith board of directors:  
    has unanimously determined that the merger is fair to and in the best interests of
Keith and its shareholders;
    has unanimously approved and declared advisable the merger agreement; and
    unanimously recommends that Keith common shareholders vote FOR the approval of the
merger agreement and its terms; The purpose of the special meeting is for the shareholders of Keith to consider and vote upon
the approval of the merger agreement and its terms, and other procedural matters incident to the
conduct of the special meeting, including any adjournment or postponement of the special meeting. Record Date; Voting Power Only holders of shares of Keith common stock as of the close of business on [___], 2005,
which is the record date for the special meeting, will be entitled to receive notice of and to vote
at the special meeting and any adjournments or postponements of the special meeting. Each share of
Keith common stock is entitled to one vote at the special meeting. At the record date, [___]
shares of Keith common stock were issued, outstanding and entitled to vote at the special meeting. Keiths issued and outstanding options do not have voting rights. Accordingly, record holders
of Keith options will not be entitled to vote at the special meeting. Required Vote; Quorum; How to Vote Required Vote.The affirmative vote of the holders of a majority of the outstanding shares of
Keith common stock as of the record date is required to approve the merger agreement. Because the required vote of the shareholders with respect to the merger agreement is based
upon the total number of outstanding shares of Keith common stock, the failure to submit a proxy
card (or to submit a proxy by internet or to vote in person at the special meeting) or the
abstention from voting by a shareholder will have the same effect as a vote against approval of the
merger agreement and against the merger. Brokers holding shares of Keith common stock as nominees
will not have discretionary authority to vote those shares in the absence of instructions from the
beneficial owners of those shares, so the failure to provide voting instructions to your broker
will also have the same effect as a vote against the merger. The obligation of Keith and Stantec to consummate the merger is subject to, among other
things, the condition that the Keith shareholders approve the merger agreement. If Keiths
shareholders fail to approve the merger agreement at the special meeting, each of Keith and Stantec
will have the right to terminate the merger agreement. See The Merger Agreement  Termination. 61




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##### 



Quorum. The holders of a majority of the shares of Keith common stock outstanding on the
record date must be present, either in person or by proxy, at the special meeting to constitute a
quorum. In general, abstentions and broker non-votes are counted as present or represented at the
special meeting for the purpose of determining a quorum for the special meeting. How to Vote. A shareholder may vote in person at the special meeting or by proxy without
attending the special meeting. To vote by proxy, a shareholder will have to do one of the
following: (a) submit a proxy over the internet or (b) complete the enclosed proxy card, sign and
date it and return it in the enclosed postage prepaid envelope. If you are a registered shareholder (that is you own Keith common stock in your own name and
not through a broker, nominee or in some other street name capacity), you may submit a proxy over
the internet by visiting [] and following the instructions provided (please see the
accompanying proxy card for instructions on how to access the internet voting systems). If you are
a shareholder holding shares as of the record date, you may vote by proxy by using the accompanying
proxy card. When you return a proxy card that is properly signed and completed, the shares of
Keith common stock represented by the proxy will be voted as you specify in the proxy card. If your shares are held in street name, your broker will vote your shares for you only if you
provide instructions to your broker on how to vote your shares. You should follow the directions
provided by your broker regarding how to instruct your broker to vote your shares. If you do not
give your broker voting instructions, under the rules of the NASD, your broker may not vote your
shares on the merger proposal or the adjournment proposal. If you do not give your broker voting
instructions and the broker does not vote your shares, this is referred to as a broker non-vote.
Broker non-votes have the same effect as a vote against the approval of the merger agreement and
against the merger. If your shares are held in street name and you wish to vote those shares in person at the
special meeting, you must obtain from your broker holding your Keith common stock a properly
executed legal proxy identifying you as a Keith shareholder, authorizing you to act on behalf of
the broker at the special meeting and identifying the number of shares with respect to which the
authorization is granted. All properly submitted proxies that are not revoked will be voted at the special meeting as
instructed on those proxies. Submitted proxies containing no instructions will be voted in favor
of approval of the merger agreement and its terms. Revocation of Proxy A shareholder who submits a proxy may revoke it at any time before it is voted by:  
    sending a written notice to [] stating that the earlier proxy is revoked;
    submitting a proxy bearing a later date (using a new proxy card, by internet, in
each case, following the instructions provided on the proxy card); or
    attending the special meeting, revoking your proxy and voting in person. If you hold your shares through a broker, you must give new instructions to your broker prior
to the special meeting or obtain a properly executed legal proxy from your broker to revoke your
prior instructions and vote in person at the special meeting. Expenses of Solicitation Keith and Stantec have agreed to share equally the costs of filing, printing and mailing
Stantecs registration statement on Form F-4 and this proxy statement/prospectus. In addition to
soliciting proxies by mail, directors, officers and employees of Keith or Stantec, without
receiving additional compensation, may solicit proxies by telephone, by facsimile or in person.
Arrangements may also be made with brokerage firms and other custodians, nominees and fiduciaries
to forward solicitation materials to the beneficial owners of shares of Keith common stock held of
record by these persons, and Keith will reimburse these brokerage firms, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred by them in connection therewith. In
addition, [] has been retained by Keith to assist in the
solicitation of proxies and Keith may also retain 62




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##### 



an additional solicitor. [] may contact holders of shares of Keith
common stock by mail, telephone, facsimile, telegraph and personal interviews and may request
brokers, dealers and other nominee shareholders to forward materials to beneficial owners of shares
of Keith common stock. [] will receive reasonable and customary
compensation for its services and will be reimbursed for certain customary out-of-pocket expenses. Exchange of Share Certificates You should not send stock certificates with your proxies. Transmittal documents for the surrender of Keith common stock certificates in
exchange for the merger consideration will be mailed to the holders of Keith common stock as soon
as practicable after the effective time of the merger. Questions About Voting Your Shares If you have any questions about how to vote or direct a vote in respect of your Keith common
stock, you may call: The Keith Companies, Inc.
19 Technology Drive
Irvine, California, USA 92618-2334
Phone: (949) 923-6001 Fax: (949) 923-6026
Attention: Investor Relations
    
    
    [Name and Address of Proxy Solicitor]
 Miscellaneous The grant of a proxy will confer discretionary authority on the persons named in the proxy as
proxy appointees to vote in accordance with their best judgment on procedural matters incident to
the conduct of the special meeting, such as a motion to adjourn in the absence of a quorum or a
motion to adjourn for other reasons, including to solicit additional votes in favor of approval of
the merger agreement. Proxies which specify a vote against approval of the merger agreement will
not be voted in favor of any adjournment of the special meeting for the purpose of soliciting
additional votes in favor of the approval of the merger agreement. 63




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The Merger Background of The Merger As part of Keiths long-term strategy to grow its business, diversify its operations and
increase shareholder value, the Keith board of directors and senior management have, from time to
time, considered a variety of potential strategic alternatives, which have included potential
transactions with other companies as well as remaining an independent public company and
consummating acquisitions or mergers with other companies. Beginning in March of 2003, Keith engaged in periodic discussions with Stantec regarding a
potential acquisition of Keith by Stantec. On April 22, 2003, members of the Keith senior
management met with members of Stantecs senior management at Keiths principal executive offices
in Irvine, California. Periodic discussions between Keiths Chairman and Chief Executive Officer,
Aram Keith, and Stantecs President and Chief Executive Officer, Anthony Franceschini, continued
intermittently during the period between April 2003 and December 2003. Although there were general
discussions on valuation approaches, no formal proposals were made with respect to potential
financial terms for a combination. In May 2003, Keith contacted Bear Stearns to discuss a possible
engagement to assist Keith in evaluating the suitability of Stantec as an acquiror and to act as
Keiths financial advisor with respect to a potential sale of Keith. In December 2003, discussions
between Stantec and Keith were suspended after the parties were unable to agree on valuation. Following the suspension of discussions with Stantec, the Keith board of directors and senior
management examined Keiths strategic direction and positioning in the market. Although the
results of operations of Keith had improved over the three years ended December 31, 2003, Keith
common stock had traded as high as $25.63 per share in March 2001 and as low as $7.60 in October
2001 and was trading at $13.62 at the end of 2003. Keith continued to be highly reliant on the
residential real estate services sector in California, which made it vulnerable to cyclical changes
in that sector or geographic region. Keith had planned to be able to diversify its business
through the implementation of an acquisition program; however, its last acquisition had occurred in
March 2002. Further, the relatively small size of Keith made it difficult to attract an
institutional following in the financial markets. The board of directors and senior management
concluded that it would be unlikely to maximize shareholder value unless it was able to
successfully execute on an aggressive acquisition program that would allow it to materially grow
its business and diversify its operations. An alternative would be to seek an acquiror of the
company. In early 2004, senior management of Keith developed a list of potential acquirors of Keith.
Included on that list was Stantec. During 2004, Mr. Keith contacted the entities on the list of
potential acquirors or their financial advisors to assess their interest in a strategic
transaction. While most of the entities that Keith contacted indicated that they had limited
interest in pursuing a transaction, one such company entered into a confidentiality agreement and
conducted preliminary investigations into effecting a transaction. These preliminary discussions
terminated when the company could not meet Keiths managements valuation expectations. Mr. Keith
periodically reported to the Keith board of directors regarding these contacts. No formal proposal
to acquire Keith resulted from these discussions. Up through the first quarter of 2005, Keith continued to evaluate potential acquisition
targets. As part of this process, in August 2003, Keith engaged Houlihan Lokey Howard & Zukin to
assist it in its search for candidates. During this period, Keith was presented with over 100
potential acquisition candidates. Although Keith conducted formal due diligence on the most
promising candidates and, in some instances, negotiation of the terms of a potential transaction,
none of the candidates ultimately met Keiths acquisition and valuation criteria. During the period from January 2004 to January 2005, Mr. Keith and Mr. Franceschini maintained
informal contacts with one another, but did not discuss further plans for a combination. In early
January 2005, during one of these informal contacts, Mr. Franceschini informed Mr. Keith that
Stantec might be interested in renewing discussions. Mr. Keith informed the Keith board of
directors of this expression of possible interest at its regular meeting on February 8, 2005 and
indicated he expected further contacts with Stantec following Keiths earnings announcement,
scheduled for February 10, 2005. The board of directors of Keith authorized management to take
appropriate steps to evaluate the interest level of Stantec, including its expectations regarding
valuation. The board of directors directed management to assess the interest level on a relatively
expedited basis and avoid extended discussions of the type that had occurred in 2003. On February
10, 2005, Mr. Franceschini contacted Mr. Keith and informed him that Stantec was prepared to
propose the terms of a potential transaction, subject to board approval and customary due
diligence. Mr. Keith requested that any proposal be approved by the Stantec board of directors
prior to presentation to Keith. 64




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On February 18, 2005, Keith and Stantec entered into a confidentiality agreement. On February
25, 2005, Mr. Franceschini informed Mr. Keith in a telephone conversation that the board of
directors of Stantec had authorized him to discuss the financial terms of a proposal to acquire all
of the outstanding shares of Keith. The proposal, which was non-binding, contemplated an all stock
transaction where each share of Keith common stock would be exchanged for the right to receive 0.85
of a Stantec common share. Based on the trading price of Stantec common shares on the Toronto
Stock Exchange and the Canadian/U.S. dollar exchange rate on that date, senior management of Keith
estimated that such a transaction would yield a value of approximately US$17.35 per share to the
Keith shareholders. Mr. Franceschini requested a meeting with the senior management of Keith to
review the proposal. On March 3, 2005, Mr. Franceschini visited Keiths principal executive offices in Irvine,
California and met with Mr. Keith, Edward Muller, a member of the Keith board of directors, Eric
Nielsen, President and Chief Operating Officer of Keith, Gary Campanaro, Chief Financial Officer
and a member of the board of directors of Keith and Thomas Braun, Keiths President, Real Estate
Development Services. During this meeting, Mr. Franceschini made a presentation to the Keith
representatives in which he reviewed the non-binding proposal he had discussed with Mr. Keith on
the telephone and discussed Stantecs view of the strategic advantages of a combination of the two
companies and the financial rationale for the Stantec proposal. On March 4, 2005, at a regularly scheduled meeting of the board of directors of Keith, Mr.
Keith discussed the Stantec proposal with the Keith board of directors. Following this discussion,
the board of directors authorized management to engage Bear Stearns to assist Keith in evaluating
Stantecs proposal and the potential combination of the two companies. On March 10, 2005, the board of directors of Keith held a special meeting at the Los Angeles
offices of its legal counsel, Akin Gump Strauss Hauer & Feld LLP. In addition to the members of
the board, the meeting was attended by Mr. Nielsen and Jules Miller, General Counsel of Keith.
During that meeting, Bear Stearns made a presentation to the board of directors concerning various
valuation metrics. Keiths management presented the board of directors with an extensive analysis
of the risks and opportunities facing Keith as a stand-alone entity. Thereafter, the board of
directors reviewed and engaged in a lengthy discussion regarding the proposal from Stantec,
concluding that the valuation inherent in the proposal was unsatisfactory and expressing a
preference for a transaction with a fixed value, consisting of a mix of stock and cash. Akin Gump
led a discussion regarding the applicable fiduciary duties of a board considering a sale of a
company. This discussion included consideration of whether an auction of Keith would maximize
shareholder value. The board of directors of Keith determined in its business judgment based on
information provided by Bear Stearns and management concerning the communications with prospective
acquirors that an auction at that time would likely not be the best means to maximize shareholder
value. The board of directors instructed management to continue with negotiations to determine if
a higher value and more favorable terms were achievable with Stantec. At this meeting, the Keith board of directors, senior management of Keith and the
representatives of Bear Stearns and Akin Gump also discussed other material transactional issues,
such as flexibility for the board to consider superior proposals, break-up fees, representation on
the Stantec board following a merger, due diligence and timing. The Keith board of directors
approved the terms of the engagement of Bear Stearns as Keiths financial advisor. On March 11,
2005, Bear Stearns and Keith executed an engagement letter in which Keith engaged Bear Stearns as
its financial advisor. On March 17, 2005, Mr. Franceschini met with representatives of Keith senior management and
Bear Stearns at Keiths principal executive offices in Irvine, California. Following a
presentation made by representatives of Bear Stearns analyzing the financial impact of the merger
on the two companies, representatives of Keith made a non-binding proposal for a merger with a
fixed value of US$23.00 per share, comprised of US$11.50 in cash and US$11.50 in Stantec common
shares, computed based on the trading value of the Stantec common shares at the closing of the
merger. On March 21, 2005, Mr. Franceschini informed Mr. Keith in a telephone conversation that
Stantec was willing to increase the price it was willing to offer and agree to terms consisting of
half cash and half Stantec common stock, but consisting of a fixed number of shares rather than the
fixed value proposed by Keith. Mr. Keith indicated that the revised price and terms were still not
satisfactory. A number of conversations between representatives of Stantec and Keith took place
over the course of the next several days regarding valuation issues and terms. 65




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On March 24, 2005, Mr. Franceschini informed Mr. Keith that Stantec was willing to increase
the price it was willing to pay to US$22.00 per share but would not consider a change in terms.
The terms proposed were US$11.00 and 0.46 of a Stantec common share. At a special meeting of the
board of directors of Keith held on that date, attended by the members of the board, Mr. Nielsen,
Mr. Miller and representatives of Bear Stearns and Akin Gump, the board directed Mr. Keith to
inform Stantec that the price and terms were still not satisfactory. During the morning of March
28, 2005, Mr. Keith and Mr. Franceschini held a telephone conversation in which Mr. Keith indicated
that he would recommend the Stantec offer to the Keith board of directors if it were modified to
provide for US$11.00 cash and US$11.00 of Stantec common shares, computed by reference to the
average trading price of the Stantec common shares at the time of a closing. On March 29, 2005,
Mr. Franceschini countered with US$11.00 cash, US$5.50 of Stantec common shares computed by
reference to the average trading price of the Stantec common stock at the time of the closing of
the merger and 0.23 of a Stantec common share. Mr. Keith agreed to consult with the Keith board of
directors and respond to Mr. Franceschini by the following day. During the period from March 25, 2005 to March 30, 2005, Akin Gump and Jeff Lloyd, General
Counsel to Stantec, exchanged drafts of a summary of non-binding terms for the acquisition of Keith
by Stantec and held several telephone conversations during which the summary of non-binding terms
were finalized. On the morning of March 30, 2005, the Keith board of directors held a telephonic meeting
during which Keith management presented its analysis of the proposal. Akin Gump summarized the
terms of the proposal and discussed the fiduciary duties of the board of directors.
Representatives of Bear Stearns presented their analysis of the proposal and the proposed purchase
price. The Keith board of directors engaged in a lengthy discussion regarding the proposal, which
included consideration of whether any other alternatives were reasonably available that would
provide greater value to the Keith shareholders, including continuation as an independent entity or
sale to another potential buyer. The board of directors also considered whether conducting an
auction would likely result in the maximization of shareholder value. The board of directors
reviewed the efforts by management to generate interest among numerous potential acquirors and the
results of those efforts. The board of directors determined in its business judgment that an
auction was unlikely to result in a superior offer to the Stantec proposal, and that the Stantec
proposal was the best alternative reasonably available to Keith shareholders in the near term. The
board of directors directed management to once again request Stantec to fix the value of the
Stantec common stock to be paid in the merger and the meeting was adjourned until such time as Mr.
Keith could conclude those discussions. Later that afternoon, the special meeting reconvened and
Mr. Keith reported to the Keith board of directors that Stantec was unwilling to modify its
proposal. After a discussion, the board of directors of Keith authorized management of Keith to
proceed to conduct due diligence and negotiate definitive agreements substantially in accord with
the summary of non-binding terms, subject to approval by the board of directors prior to the
execution of a definitive merger agreement. During the weeks of April 3, 2005 and April 10, 2005, each of Stantec and Keith conducted a
comprehensive due diligence investigation of the other party. On April 3, 2005, Shearman & Sterling LLP, legal counsel for Stantec, distributed the first
draft of the definitive merger agreement to Akin Gump. Over the course of the next eleven days,
the parties negotiated the terms of the definitive merger agreement as well as the form of
stockholders support agreement. On April 5, 2005, the Keith board of directors held a telephonic meeting attended by
representatives of Akin Gump and Bear Stearns to discuss the initial draft of the merger agreement.
Prior to the meeting, copies of the draft merger agreement and a summary of the terms of the
merger agreement and other supporting materials prepared by Akin Gump were distributed to the board
of directors. During the meeting, the board expressed the view that the shareholders of Keith
should be able to elect to receive cash or stock as merger consideration, with any excess elections
to be prorated. With respect to the merger agreement, Akin Gump indicated that it had concerns
regarding several terms of the proposed merger agreement, including, among others:  
    the significant number of conditions to Stantecs performance of its obligations at
closing;
    the absence of a requirement that Keith receive a tax opinion from its counsel as a
condition to Keiths performance of its obligations at closing;
    the requirement that the Stantec common stock be listed on the New York Stock
Exchange or the Nasdaq National Market as a condition to Stantecs performance of its
obligations at closing; 66




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
    the requirement that key members of Keith management execute employment agreements
as a condition to Stantecs performance of its obligations at closing;
    the treatment of the outstanding stock options and restricted shares of Keith;
    a requirement that Keith have a minimum cash balance at closing of at least US$48 million;
    the limitation on Keiths ability to terminate the agreement in response to an
unsolicited acquisition proposal with superior terms; and
    the obligation to pay Stantecs expenses in addition to a break-up fee in the event
the agreement was terminated in certain circumstances by Keith. At the conclusion of the meeting, the board of directors directed Akin Gump to submit its
proposed changes to the merger agreement, including the request that the Keith shareholders have a
right to elect between the forms of merger consideration, to Shearman & Sterling LLP. Between April 5, 2005 and April 11, 2005, Akin Gump and Shearman & Sterling LLP continued to
negotiate the terms and conditions of the definitive transaction documents. On April 11, 2005, the
Keith board of directors convened a telephonic board meeting to discuss the status of the
negotiations. Also present at this meeting were representatives of Akin Gump, Bear Stearns, Mr.
Nielsen and Mr. Miller. Prior to the meeting there had been distributed to each of the members of
the board revised drafts of the transaction documents and a summary of the status of the
negotiations prepared by Akin Gump. Akin Gump reported that during the course of its discussions
with Shearman & Sterling LLP between April 7, 2005 and April 10, 2005, Akin Gump, in consultation
with senior management of Keith, had managed to resolve a substantial number of issues that had
been of concern to the board of directors at its last meeting. Although the Keith board of
directors was pleased with the progress made during the prior days with respect to closing
conditions and merger consideration, they remained concerned that the merger agreement still
included conditions to Stantecs obligations at closing tied to Keith having a minimum cash balance
of US$48 million at closing and the execution of employment agreements by key members of Keith
management; the merger agreement did not provide the Keith board of directors the right to
terminate the merger agreement in the event that Keith received a superior offer from a third
party; and the merger agreement continued to provide for the payment of Stantecs expenses in
addition to a break up fee. After consultation with Akin Gump, the Keith board of directors
determined that it needed to continue to press for the elimination of the execution of employment
agreements by the managers as a condition, the elimination of the payment of expenses and the
inclusion of a right to terminate the merger agreement in the event of receipt of a superior offer
from a third party. The Keith board of directors considered the latter term particularly important
so as to afford it the opportunity to continue to exercise its fiduciary duties following a signing
of a merger agreement. With respect to the condition that Keith have a minimum cash balance of $48
million at closing, Bear Stearns advised the board that such a condition was reasonable in light of
the context of the earlier negotiations on the amount of the merger consideration, but that the
level should be set at an amount that management was comfortable could be achieved. At this
meeting, representatives of Bear Stearns, Akin Gump and the Keith management also presented the
Keith board of directors with a report on their due diligence investigation. Discussions
between Akin Gump and Shearman & Sterling LLP continued during the period from
April 11, 2005 to April 13, 2005 in an effort to resolve remaining open issues in the merger
agreement. During this period, Keith and Stantec substantially finalized the merger agreement and
the other transaction documents and completed their respective due diligence investigations. On
the evening of April 13, 2005, the Keith board of directors held a special telephonic meeting.
Also participating in this telephonic meeting were Mr. Nielsen and Mr. Miller of Keith and
representatives of Akin Gump and Bear Stearns. Prior to that meeting, there had been distributed
to the Keith board of directors copies of the merger agreement and other transaction documents in
substantially the form they were subsequently executed. Akin Gump also distributed to the Keith
board of directors a legal memorandum. At the meeting, Akin Gump summarized the resolution of
issues that had previously been considered by the Keith board of directors. Akin Gump reported
that Stantec had agreed to Keiths request for a right of termination in the event of a superior
third party offer if Keith agreed to pay Stantecs expenses in addition to a break-up fee. Stantec
also agreed to eliminate the execution of the employment agreements as a condition to closing.
After discussion with senior management of Keith, Stantec agreed to fix Keiths minimum cash
balance at closing at US$40 million. The Keith board of directors expressed concern that the
merger agreement continued to obligate Keith to pay Stantecs expenses in addition to a break-up
fee in the event of termination in certain circumstances. Akin Gump informed the board that
Stantec was insistent on this provision but the aggregate of the 67




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break up fee and expenses reasonably likely in this circumstance were within the range of
break-up fees allowed by the courts in the exercise of a boards fiduciary duties. At the meeting,
Bear Stearns reported that it was prepared to issue its fairness opinion, if requested. During the morning of April 14, 2005, the board of directors of Keith convened a special
meeting at the principal executive offices of Keith in Irvine, California. The meeting was
attended by all members of Keiths board of directors, Mr. Nielsen, Mr. Miller and representatives
of Akin Gump and Bear Stearns. Prior to the meeting, copies of the draft merger agreement, draft
stockholders support agreement and letter between Stantec and Mr. Keith (each in substantially the
form subsequently executed), and legal memoranda were distributed to the board of directors. During
the meeting, Akin Gump presented the board of directors with a detailed analysis of the terms of
the transaction and reviewed the board of directors fiduciary duties. Members of management
provided its recommendations to the board of directors. Bear Stearns then orally presented the
opinion of Bear Stearns, confirmed in writing by Bear Stearns in a letter delivered to Keiths
board of directors at the meeting, that as of April 14, 2005, based on the qualifications,
assumptions, limitations and other matters set forth in the letter, the consideration per share to
be received by Keiths public shareholders in the merger of (i) US$11.00 per share, (ii) 0.23 of a
Stantec common share and (iii) an amount of Stantec common shares equal to US$5.50 divided by the
20 day simple average of the daily weighted average trading
price of Stantec common shares, was fair
to the Keith public shareholders from a financial point of view. Following a further discussion,
the Keith board of directors unanimously approved the merger and the merger agreement and the other
transaction documents and unanimously resolved to recommend that Keiths shareholders vote their
shares in favor of the merger agreement and its terms. At approximately 1:45 pm California time on April 14, 2005, Keith and Stantec executed and
delivered the merger agreement and shortly afterwards issued a joint press release announcing the
execution of the merger agreement. Recommendation of the Keith Board of Directors KEITHS BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER AGREEMENT AND THE MERGER ARE FAIR
TO, AND IN THE BEST INTERESTS OF, THE KEITH PUBLIC SHAREHOLDERS AND HAS APPROVED AND DECLARED
ADVISABLE THE MERGER AGREEMENT, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT, AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF APPROVAL OF THE MERGER AGREEMENT
AND ITS TERMS. In considering the recommendation of the Keith board of directors with respect to the merger,
you should be aware that certain directors and officers of Keith have interests in the merger that
are different from, or are in addition to, the interests of Keith shareholders generally. See 
Interests of Keith and Stantec Executive Officers and Directors in the Merger. Reasons for Keiths Board Recommendation The following discussion of the information and factors considered by the Keith board of
directors is not, and is not intended to be, exhaustive. In light of the variety of factors
considered in connection with its evaluation of the merger and the complexity of these matters, the
Keith board of directors did not find it practicable to, and did not, quantify or otherwise attempt
to assign relative weights to the various factors considered in reaching its determination. In
addition, the Keith board of directors did not undertake to make any specific determination as to
whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable
to the ultimate determination of the Keith board of directors, but rather, the Keith board of
directors conducted an overall analysis of the factors described below, including discussions with
and questioning of members of the Keith senior management and legal and financial advisors. The
Keith board of directors viewed its position and recommendation as being based on the totality of
the information presented. In the course of reaching its decision to approve the merger agreement
and the merger, the Keith board of directors consulted with members of the Keith senior management,
legal counsel and its financial advisor, reviewed a significant amount of information and
considered a number of factors, including, among others, the following factors:  
    the current state of Keiths business, including its operations, technology,
management and competitive position, and its results of operations as a stand-alone
company; 68




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
    Keiths prospects and strategic objectives to expand its market share and diversify
its service offerings, which are limited by a shortage of attractive acquisition
targets meeting Keiths acquisition criteria, expansion opportunities and qualified
employees;
    Keiths dependence on the residential real estate market in California and the fact
that a decline in demand in this market sector could have a disproportionate effect on
its net revenues and profitability;
    the range of possible benefits to Keith shareholders of continuing to operate
independently and the timing and the likelihood of accomplishing growth and
diversification of Keiths service offerings by operating independently, and the Keith
board of directors assessment that the merger with Stantec presented a superior
alternative to continuing to operate independently; and
    the limited attention of the public market to small capitalization stocks outside
the technology sector, such as Keith. In the course of its deliberations, the Keith board of directors also considered, among other
things, the following positive factors regarding the proposed merger with Stantec:  
    the value of the merger consideration to be received by Keith shareholders in the
merger pursuant to the merger agreement;
    managements review of the companies which might be expected to be interested in
acquiring Keith and managements discussion with several companies regarding their
interest in an acquisition and the preliminary discussion by members of the Keith
senior management with certain of these potential acquirors and the lack of any offers
to acquire Keith, all of which led the board to believe that the likelihood of
obtaining a superior offer, either through an auction or otherwise, was outweighed by
the benefits to the Keith shareholders of the merger;
    the fact that as of April 13, 2005, the trading day prior to approval of the merger
by the Keith board of directors, the value of the merger consideration represented a
premium of approximately US$4.87, or 28.6% over the US$17.00 closing sale price for
Keith common stock as reported on the Nasdaq National Market on
April 13, 2005;
    geographic and sector diversification achieved by a combination with Stantec would
reduce Keiths exposure to cyclicality within the residential real estate service
sector;
    the financial presentation and written opinion of Bear Stearns to the Keith board of
directors to the effect that, as of April 14, 2005, and based on the qualifications,
assumptions, limitations and other matters set forth in its written opinion, the
consideration to be received by the public shareholders of Keith pursuant to the merger
agreement is fair, from a financial point of view, to those holders (the full text of
this opinion, which sets forth the assumptions made, procedures followed, matters
considered and limitations on the review undertaken by Bear Stearns in connection with
the opinion, is attached as Appendix B to this proxy statement/prospectus);
    the likelihood that the proposed acquisition would be consummated, in light of the
conditions to the parties obligations to complete the merger and the reputation and
financial capabilities of Stantec;
    the extensive arms-length negotiations between Stantec and Keith, leading the board
to believe that the merger consideration offered by Stantec represented the highest
amount Stantec would agree to pay and that the terms of the merger agreement and
related documents, including the parties representations, warranties and covenants,
and the conditions to their respective obligations, were as favorable to Keith as
Stantec would be willing to accept;
    the potential for synergies between Stantec and Keith that could lead to improved
prospects for growth and revenue generation at Stantec, which would benefit former
Keith shareholders;
    the fact that pursuant to the merger agreement, Keith is not prohibited from
responding in the manner provided in the merger agreement to certain alternative
proposals which the Keith board of directors determines may constitute a superior offer
and where Keiths board of directors determines in good 69




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faith, after consultation with independent legal counsel, that failure to respond would
cause the members of the Keith board of directors to breach their fiduciary duties under
applicable law; and  
    the fact that the provisions of the merger agreement allow Keiths board of
directors, under certain circumstances to withdraw its recommendation for the approval
of the merger or terminate the merger agreement if it is presented with a superior
proposal. In the course of its deliberations, the Keith board of directors also considered, among other
things, the following negative factors regarding the proposed merger:  
    risks and contingencies related to the announcement and pendency of the merger, the
possibility that the merger will not be consummated and Keiths payment of a
termination fee in certain circumstances if the merger is not consummated, and the
potential negative effect of the public announcement of the merger on Keiths
relationship with its customers, operating results and ability to retain key management
and personnel;
    the condition to each of Keiths and Stantecs obligation to complete the merger
that they each receive a tax opinion from their respective legal counsel;
    the condition to Keiths obligation to complete the
merger that Stantec common shares to be issued in the merger be listed on either the New York Stock
Exchange or the Nasdaq National Market;
    the other conditions to Stantecs obligation to complete the merger and the right of
Stantec to terminate the merger agreement under certain circumstances;
    the fact that the restrictions contained in the merger agreement on Keiths rights
to solicit superior proposals, as well as the US$3.0 million termination fee plus
reimbursement of certain Stantec expenses under certain circumstances, presents an
additional cost to any other potential acquiror which might be interested in acquiring
Keith; and
    the interests that certain of Keith directors and executive officers may have with
respect to the merger in addition to their interests as Keith shareholders generally,
as described in The MergerInterests of Keiths and Stantecs Executive Officers and
Directors in the Merger. Opinion of Keiths Financial Advisor In connection with the proposed merger, Keith engaged Bear, Stearns & Co. Inc. to provide
financial advisory services. Bear Stearns was selected to act as the financial advisor based on
its qualifications, expertise and reputation. On April 14, 2005, Bear Stearns delivered its written
opinion to Keiths board of directors that, as of the date of the opinion and subject to and based
on the factors considered in its opinion, the merger consideration was fair from a financial point
of view to the holders of shares of Keiths common stock. The full text of Bear Stearns written opinion, dated as of April 14, 2005, which sets forth,
among other things, the assumptions made, procedures followed, matters considered and limitations
on the review undertaken by Bear Stearns in rendering its opinion, is attached as Appendix B to
this proxy statement/prospectus. Holders of Keiths common stock are urged to, and should, read
this opinion carefully and in its entirety. The opinion of Bear Stearns was necessarily based upon the economic, monetary, market and
other conditions as they were in effect on, and the information made available to Bear Stearns as
of, the date of its opinion. Bear Stearns did not assume any responsibility for updating or
revising its opinion based on circumstances or events occurring after the date of its opinion. The
opinion of Bear Stearns is directed to Keiths board of directors, addresses only the fairness of
the merger consideration from a financial point of view to the holders of Keiths common stock as
of the date of the opinion and does not address any other aspect of the merger or constitute a
recommendation to Keiths board of directors or to any of Keiths shareholders as to how to vote at
the special meeting. The summary of the opinion set forth in this proxy statement/prospectus is
qualified in its entirety by reference to the full text of the opinion, which is attached to and
incorporated by reference into this proxy statement/prospectus. 70




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In arriving at its opinion, Bear Stearns:  
    reviewed certain publicly available historical financial statements and other
business and financial information of Keith and Stantec;
    reviewed certain operating and financial data concerning Keith and Stantecs
business and prospects prepared by the managements of Keith and Stantec, respectively;
    discussed Keiths business, operations, historical financial results, a range of
projected financial results and future prospects with senior executives of Keith;
    reviewed certain projections for Stantec for the year ended December 31, 2005
published by certain equity research analysts;
    discussed Stantecs business, operations, historical and projected financial results
and future prospects with senior executives of Stantec and Keith;
    reviewed the historical prices, trading multiples and trading volumes for Keiths
common stock and Stantecs common stock;
    reviewed publicly available financial data, stock market performance data and
trading multiples of companies generally comparable to Keith and Stantec;
    reviewed the financial terms, to the extent publicly available, of certain mergers
and acquisitions transactions involving companies generally comparable to Keith;
    performed discounted cash flow sensitivity analyses based on the range of projected
financial results for Keith furnished to it by senior executives of Keith;
    reviewed the potential pro forma impact of the merger on Stantecs financial
results, financial condition and capitalization;
    reviewed the financial terms and conditions of the merger agreement; and
    performed such other studies, analyses, inquiries and investigations as it deemed appropriate. Bear Stearns assumed and relied upon, without independent verification, the accuracy and
completeness of the information supplied or otherwise made available to it by Keith and Stantec for
the purposes of its opinion. Bear Stearns did not make any independent valuation or appraisal of
the assets or liabilities of Keith or Stantec and was not furnished with any such appraisals. Bear
Stearns did not solicit, nor was it asked to solicit, third party acquisition interest in Keith. With respect to the range of projected financial results discussed with the senior management
of Keith, Bear Stearns assumed that they had been reasonably prepared on bases reflecting the best
currently available estimates and judgments of senior management of Keith as to the expected future
financial performance of Keith. Bear Stearns did not assume any responsibility for the independent
verification of any information provided to it or the range of projected financial results Keiths
management discussed with it. Bear Stearns relied on the assurances of senior executives of Keith
and Stantec that they were unaware of any facts that would make the information provided to Bear
Stearns or the range of projected financial results furnished to it incomplete or misleading. In
rendering its opinion, Bear Stearns assumed that the merger would be consummated in a timely manner
on the terms described in the merger agreement, including, among other things, that the merger will
qualify as a reorganization within the meaning of Section 368(a) of the Code. In addition, Bear
Stearns assumed that obtaining the necessary regulatory and third party approvals for the merger
will not have material effect on Keith or Stantec. Bear Stearns did not express any opinion as to the price at which Keiths common stock or
Stantecs common shares would trade subsequent to the announcement of the execution of the merger
agreement or as to the price at which Stantecs common shares may trade subsequent to the
consummation of the merger. The opinion of Bear Stearns did not address the relative merits of the
merger as compared to other transactions or business 71




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strategies that might exist for Keith, the financing of the merger, the effects of any other
transaction in which Keith might engage or its underlying business decision to enter into the
merger agreement. The following is a summary of the material financial analyses performed by Bear Stearns in
preparing its opinion, which is qualified in its entirety by reference to the full text of the
opinion attached as Appendix B to this proxy statement/prospectus. This summary does not purport
to be a complete description of the financial analyses performed by Bear Stearns or its
presentations to Keiths board of directors. The order of analyses described does not represent
relative importance or weight given to the analyses performed by Bear Stearns. Some of the
summaries of the financial analyses include information presented in a tabular format. These tables
must be read together with the full text of each summary and alone are not a complete description
of Bear Stearns financial analyses. Except as otherwise noted, the following quantitative
information is based on market and financial data as it existed on or before April 14, 2005 and is
not necessarily indicative of current market conditions. Comparable Company Analysis Bear Stearns compared financial information and valuation ratios relating to Keith to
corresponding data and ratios from a group of publicly traded companies that Bear Stearns deemed
comparable to Keith, referred to as the Public E&C Companies Peer Group. The Public E&C Companies Peer Group consisted of the following nine publicly traded companies
that Bear Stearns deemed comparable to Keith: Name
    
    Location
    
    Trading SymbolChicago Bridge & Iron Company N.V.
    
    The Netherlands
    
    NYSE: CBIGranite Construction Incorporated
    
    Westonville, California
    
    NYSE: GVAJacobs Engineering Group Inc.
    
    Pasadena, California
    
    NYSE: JECMichael Baker Corporation
    
    Moon Township, Pennsylvania
    
    AMEX: BKRShaw Group, Inc.
    
    Baton Rouge, Louisiana
    
    NYSE: SGRTetra Tech, Inc.
    
    Pasadena, California
    
    NASDAQ: TTEKTRC Companies, Inc.
    
    Windsor, CT
    
    NYSE: TRRURS Corporation
    
    San Francisco, California
    
    NYSE: URSWashington Group International, Inc.
    
    Boise, Idaho
    
    NASDAQ: WGII
 This analysis produced multiples of selected valuation data as follows: Keith1
    
    
    Mean
    
    
    Median
    
    
    Harmonic MeanPrice to 2005 estimated earnings per share
    
    
    18.9
    
    
    
    17.9
    
    
    
    16.6
    
    
    
    16.9Price to 2006 estimated earnings per share
    
    
    17.1
    
    
    
    16.0
    
    
    
    15.3
    
    
    
    15.6Price to 2005 estimated enterprise value/EBITDA per share
    
    
    8.0
    
    
    
    7.4
    
    
    
    6.8
    
    
    
    7.1Price to 2006 estimated enterprise value/EBITDA per share
    
    
    7.1
    
    
    
    6.6
    
    
    
    6.2
    
    
    
    6.3
   1
    
    Based on merger consideration of US$21.87 per share, which in turn was based on the
closing price of the Stantec common stock on April 13, 2005 assuming an exchange rate of Canadian
dollars to U.S. dollars of $1 to $0.808. Bear Stearns chose these companies based on a review of publicly traded engineering and
construction (E&C) companies that possessed general business, operating and financial
characteristics representative of companies in the industry in which Keith operates. Bear Stearns
noted that none of the companies reviewed is identical to Keith and that, accordingly, the analysis
of such companies necessarily involves complex considerations and judgments concerning differences
in the business, operating and financial characteristics of each company and other factors that
affect the public market values of such companies. Precedent Transaction Analysis Bear Stearns reviewed a group of merger and acquisition transactions involving companies that
it deemed relevant to Keith. The group consisted of the following eight precedent transactions
announced and completed since May 1999, with transaction equity values ranging between US$56.3
million and US$323.8 million. Bear Stearns selected these transactions by searching filings made
with the Securities and Exchange Commission, public company disclosures, press releases, industry
and press reports, databases and other sources. 72




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Announcement Date
    
    Acquiror
    
    Target12/10/2003
    
    CH2M Hill Companies, Ltd.
    
    Lockwood Greene Engineers, Inc.12/19/2002
    
    EMCOR Group, Inc.
    
    Consolidated Engineering Services Inc.11/20/2001
    
    MACTEC, Inc.
    
    Law Companies Group, Inc.03/31/2001
    
    American Capital Strategies Ltd.
    
    Weston Solutions, Inc.03/24/2000
    
    MACTEC, Inc.
    
    Harding Lawson Associates Group, Inc.05/10/1999
    
    IT Group, Inc.
    
    EMCON05/05/1999
    
    URS Corporation
    
    Dames & Moore Group05/03/1999
    
    Investor Group
    
    Isolux-Wat SA
 Bear Stearns compared the resulting multiples of selected valuation data to multiples for
Keith derived from the estimated consideration payable in the merger. Keith1
    
    
    Mean
    
    
    Median
    
    
    Harmonic MeanPrice to Premium, One Week Prior
    
    
    27.1
    %
    
    
    29.1
    %
    
    
    33.3
    %
    
    NMEnterprise Value to LTM Revenue
    
    
    1.42
    x
    
    
    0.42
    
    
    
    0.40
    
    
    
    0.32Enterprise Value to LTM EBITDA
    
    
    9.0
    x
    
    
    5.6
    
    
    
    4.2
    
    
    
    4.5Equity Value to LTM Net Income
    
    
    21.9
    x
    
    
    22.8
    
    
    
    15.6
    
    
    
    15.3
   1
    
    Based on merger consideration of US$21.87 per share Bear Stearns chose these acquisition transactions based on a review of completed acquisition
transactions involving target companies that possessed general business, operating and financial
characteristics representative of companies in the industry in which Keith operates. Bear Stearns
noted that none of these acquisition transactions or subject target companies reviewed is identical
to the merger or to Keith and that, accordingly, the analysis of such acquisition transactions
necessarily involves complex considerations and judgments concerning differences in the business,
operating and financial characteristics of each subject target company and each acquisition
transaction and other factors that affect the values implied in such acquisition transactions. Discounted Cash Flow Sensitivity Analysis Bear Stearns performed a discounted cash flow sensitivity analysis of Keith for the purpose of
estimating the equity values per share of Keith common stock based on the free cash flow for the
period consisting of fiscal years 2006, 2007 and 2008, with a terminal value based on an assumed
perpetual growth rate of Keiths free cash flow thereafter. Insofar as Keith does not provide
forecasted financial information, Bear Stearns applied the discounted cash flow sensitivity
analysis across this period using a variety of assumed revenue growth rates and operating margins
based on Keiths historic and budgeted revenue growth rates and operating margins and
industry-average revenue growth rates and operating margins. Bear Stearns also used a range of
discount rates corresponding to Keiths estimated weighted average cost of capital during the
period. This estimated weighted average cost of capital was calculated utilizing an unlevered beta
of 0.91, the average unlevered beta of the Public E&C Companies Peer Group. Based on the foregoing, the equity values per share of Keith common stock were estimated to be
as follows: 2006-2008 Revenue Growth Rate2006-2008 Operating Margin1,2
    
    
    8.0
    %
    
    
    10.0
    %
    
    
    12.0
    %
    
    
    14.0
    %10.0%
    
    $
    15.52
    
    
    $
    15.90
    
    
    $
    16.31
    
    
    $
    16.7212.0%
    
    $
    17.42
    
    
    $
    17.90
    
    
    $
    18.41
    
    
    $
    18.9314.0%
    
    $
    19.32
    
    
    $
    19.90
    
    
    $
    20.51
    
    
    $
    21.14Perpetual Growth Rate2, 3
    
    
    8.0
    %
    
    
    10.0
    %
    
    
    12.0
    %
    
    
    14.0
    %3.00%
    
    $
    16.96
    
    
    $
    17.42
    
    
    $
    17.90
    
    
    $
    18.393.25%
    
    $
    17.18
    
    
    $
    17.66
    
    
    $
    18.15
    
    
    $
    18.653.50%
    
    $
    17.42
    
    
    $
    17.90
    
    
    $
    18.41
    
    
    $
    18.933.75%
    
    $
    17.66
    
    
    $
    18.16
    
    
    $
    18.68
    
    
    $
    19.224.00%
    
    $
    17.92
    
    
    $
    18.44
    
    
    $
    18.97
    
    
    $
    19.52
 73




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2006-2008 Revenue Growth RateDiscount Rate1,3
    
    
    8.0
    %
    
    
    10.0
    %
    
    
    12.0
    %
    
    
    14.0
    %14.5%
    
    $
    16.36
    
    
    $
    16.78
    
    
    $
    17.23
    
    
    $
    17.6914.0%
    
    $
    16.86
    
    
    $
    17.32
    
    
    $
    17.79
    
    
    $
    18.2813.5%
    
    $
    17.42
    
    
    $
    17.90
    
    
    $
    18.41
    
    
    $
    18.9313.0%
    
    $
    18.03
    
    
    $
    18.55
    
    
    $
    19.09
    
    
    $
    19.6512.5%
    
    $
    18.72
    
    
    $
    19.28
    
    
    $
    19.85
    
    
    $
    20.45
   1
    
    Assumes a perpetual growth rate of 3.5%2
    
    Assumes a discount rate of 13.5%3
    
    Assumes an operating margin of 12.0% Relative Contribution Analysis Bear Stearns calculated the implied equity splits based on the relative contributions of Keith
and Stantec to certain income statement categories of the pro forma combined company, including
2004 net income, analyst estimates for 2005 net income and equity value at market, in each case
before the effect of any synergies resulting from the merger. Bear Stearns then compared these
implied equity splits to the proportion of the implied equity value that Keiths shareholders would
receive based on the merger consideration of US$21.87 per share. For purposes of this analysis and
calculating Keiths pro forma ownership percentage, Bear Stearns treated the cash portion of the
merger consideration as if it were Stantec common shares and observed that Keiths ownership
percentage of the pro forma combined equity value (based on the total merger consideration and the
treatment of the cash portion of the merger consideration as if it were common stock of Stantec)
would be 29.0%. Bear Stearns noted that Keiths pro forma ownership percentage would be greater
than Keiths implied equity split based on each of 2004 net income, analyst estimates for 2005 net
income and equity value at market of 25.9%, 24.1% and 23.9%, respectively. Bear Stearns also calculated the implied enterprise value splits based on the relative
contributions of Keith and Stantec to certain income statement and balance sheet categories of the
pro forma combined company, including net revenues, gross profit, EBITDA, operating income, total
assets, total assets excluding cash and enterprise value at market, in each case before the effect
of any synergies resulting from the merger. Bear Stearns then compared these implied enterprise
value splits to the proportion of the implied enterprise value that Keiths shareholders would
receive based on the merger consideration of US$21.87 per share. For purposes of this analysis and
calculating Keiths pro forma ownership percentage, Bear Stearns treated the cash portion of the
merger consideration as if it were Stantec common shares and observed that Keiths ownership
percentage of the pro forma combined enterprise value (based on the total merger consideration and
the treatment of the cash portion of the merger consideration as if it were common stock of
Stantec) would be 23.4%. Bear Stearns noted Keiths pro forma ownership percentage would be
greater than Keiths implied enterprise value split based on each of net revenues, gross profit,
total assets excluding cash and enterprise value at market of 21.1%, 15.6%, 17.6% and 18.3%,
respectively, and that Keiths implied enterprise value split based on each of EBITDA, operating
income and total assets of 24.1%, 26.1% and 25.1%, respectively, would be greater than Keiths pro
forma ownership percentage. Pro Forma Transaction Analysis Bear Stearns performed a pro forma transaction analysis to determine the accretive/dilutive
effect of the merger on the earnings per share of Stantec common stock based on merger
consideration of US$21.87 per share. This pro forma transaction analysis was performed on a cash
basis, without taking into account the amortization of intangibles resulting from the merger, and
was designed to illustrate the financial impact of the merger on Keith shareholders and Stantec
shareholders alike by calculating the percentage change in the anticipated earnings per share of
Stantec common shares following the issuance of Stantec common shares pursuant to the
merger. Bear Stearns conducted this analysis both under the assumption that no synergies would
result from the merger and under the assumption that approximately US$4.9 million in potential pre-tax synergies
estimated by Keiths management could result from the merger. Based on its analysis, Bear Stearns determined that the merger would result in immediate
accretion to the earnings per Stantec common share regardless of whether the potential
pre-tax synergies estimated by Keiths management were included in the analysis. For instance,
assuming that no synergies result from the merger, the pro forma earnings per Stantec
common share will reflect accretion of 5.9% or $0.09 per share. Likewise, assuming that the approximately US$4.9
million in potential pre-tax synergies estimated by Keiths management result 74




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from the merger, the pro
forma earnings per Stantec common share will reflect
accretion of 15.5% or $0.22 per Stantec common share. *  *  * In connection with rendering its opinion to Keiths board of directors, Bear Stearns performed
a variety of financial and comparative valuation analyses, and did not rely on any single analysis
or factor described above, assign relative weights to the analyses or factors considered by it, or
make any conclusion as to how the results of any given analysis, taken alone, supported its
opinion. The preparation of a fairness opinion is a complex process that involves various
determinations as to the most relevant methods of financial analysis and the application of these
methods to the particular circumstances and is not susceptible to a partial analysis or summary
description. Bear Stearns believes that its analyses must be considered as a whole and that
selection of portions of its analyses and of the factors considered by it, without considering all
the factors and analyses in the aggregate, could create a different view of the processes
underlying its opinion. In addition, Bear Stearns may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be its view of the actual value of Keith. The results of any analyses performed by Bear Stearns are not necessarily indicative of future
results or actual values, which may be significantly more or less favorable than those suggested by
these analyses. Analyses relating to the value of companies do not purport to be appraisals or
valuations or to necessarily reflect the price at which companies may actually be sold. No company
or transaction used in any analysis for purposes of comparison is identical to Keith or the merger.
Accordingly, an analysis of the results of the comparisons is not mathematical; rather it involves
complex considerations and judgments about differences in the companies and transactions to which
Keith and the merger were compared and other factors that could affect the public trading values of
the companies involved. The analyses summarized above were prepared solely as a part of Bear
Stearns analysis of the fairness of the merger consideration from a financial point of view to the
holders of shares of Keiths common stock and were provided to Keiths board of directors in
connection with the delivery of Bear Stearns opinion. The analyses do not purport to be appraisals
of value or to reflect the prices at which Keiths common stock or Stantecs common shares might
actually trade. In addition, as described above, Bear Stearns opinion was one of the many factors
taken into consideration by Keiths board of directors in making its determination to approve the
merger agreement. The merger consideration was determined through negotiations between Keiths
board of directors and Stantec and was approved by and recommended by Keiths board of directors. Keith has agreed to pay Bear Stearns customary fees for its financial advisory services in
connection with the merger, a substantial portion of which is contingent on successful completion
of the merger. Keith also has agreed to reimburse Bear Stearns for its reasonable out-of-pocket
expenses, including reasonable fees and out-of pocket expenses of legal counsel, and to indemnify
Bear Stearns and related parties against liabilities, including liabilities under the federal
securities laws, arising out of its engagement. Bear Stearns is an internationally recognized investment banking and advisory firm and, as a
customary part of its investment banking business, is continuously engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions, spin-offs, split-offs
and other corporate restructurings, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements, leveraged buyouts and
valuations for corporate, estate and other purposes. In the ordinary course of its business, Bear
Stearns and its affiliates may actively trade the equity and debt securities and/or bank debt of
Keith or Stantec for its own account or for the account of its customers and, accordingly, may at
any time hold a long or short position in such securities or bank debt. Reasons for Stantecs Board Recommendation The Stantec board of directors believes that the merger is in the best interests of Stantec
and its shareholders. In approving the merger and the merger agreement, the Stantec board of
directors considered a number of material factors, including the factors described below. In view
of the variety of factors considered in connection with its evaluation of the merger, the Stantec
board did not find it practicable to, and did not quantify or otherwise assign relative weights to
the specific factors considered in reaching its determination and recommendation. In addition,
individual directors may have given differing weights to different factors:  
    the combination of Stantec and Keith will make up one of the most diversified
design firms in North America and represents a significant step toward Stantecs
goal to become a top 10 global design firm; 75




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
    Stantec and Keith are complementary in terms of services and geography and
have similar corporate cultures;
    the acquisition serves Stantecs objective of being a top tier service provider
in each market it serves;
    the combination of Stantecs and Keiths urban land groups will create a leading
service provider for the land development market in North America, with a
significant presence in California, Nevada, Arizona, Alberta and Ontario, each a
fast growing region with strong land development markets;
    the addition of Keith will increase Stantecs U.S. operations by about 70% and
will provide a solid foundation in California, one of the largest markets in North
America;
    Keiths strong presence in California will provide a significant opportunity to
cross-sell Stantecs public sector services in transportation and environment
market segments and position Stantec for further growth in California;
    Keith has a history of profitability; and
    the acquisition of Keith is expected to be accretive to Stantecs earnings. The foregoing discussion of the factors considered by the Stantec board of directors is not
intended to be exhaustive, but includes the material factors considered by the Stantec board.
After weighing all of the different factors, the Stantec board of directors unanimously approved
the merger agreement. Interests of Keiths and Stantecs Executive Officers and Directors in the Merger When you consider the Keith board of directors recommendation to vote in favor of approval of
the merger, you should be aware that Keiths executive officers and directors may have interests in
the merger that may be different from, or in addition to, the interests of the other Keith
shareholders. Keiths board of directors was aware that these interests existed when it approved
and declared advisable the merger agreement and determined that the merger agreement and the merger
are fair to, and in the best interests of, Keiths public shareholders. Stockholders Support Agreement. Aram H. Keith, the Chairman and Chief Executive Officer of
Keith and Keiths largest beneficial shareholder, has granted a proxy to Stantec to vote his Keith
common stock in favor of the merger. See Other AgreementsStockholders Support Agreement. Letter Agreement. Mr. Keith has also entered into a letter agreement with Stantec pursuant to
which, upon the satisfaction of certain conditions, he will become Vice Chairman of Stantec
following the consummation of the merger. In addition, upon satisfaction of certain conditions,
which includes the payment to Mr. Keith of US$525,000, Mr. Keiths change in control agreement with
Keith will terminate at the effective time of the merger. See Other AgreementsLetter Agreement. Change in Control Agreements.Mr. Keith as well as Eric C. Nielsen, Keiths President and
Chief Operating Officer, and Gary C. Campanaro, Keiths Chief Financial Officer, Secretary and a
director of Keith are each a party to a change in control agreement with Keith, which provide for
severance payments to these executive officers in certain circumstances following a change in
control of Keith. The change in control agreements provide certain benefits to the named officers
if the executive officers employment with Keith terminates as a result of an involuntary or
constructive termination (as these terms are defined in the agreements) at any time within two
years following a change in control. The merger will constitute a change in control under the
change in control agreements. Pursuant to the agreements, each executive officer will receive a
one-time payment, equal to two times his highest annual level of total cash compensation (including
any and all bonus amounts) paid by Keith to him during any one of the three consecutive calendar
years (inclusive of the year of termination) immediately prior to termination. The level of annual
cash compensation for the year in which a termination occurs will include any bonus amounts that
the executive officer is eligible to receive during the year of termination, whether or not the
bonus was earned by him. In addition, any unvested options previously granted to the executive
officer will immediately vest and become exercisable as of the date of exercise until their
respective expiration date. Furthermore, if the executive officers employment with Keith
terminates as a result of an involuntary or 76




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constructive termination at any time within two years following a change in control, any
unvested restricted shares granted to these executive officers become immediately vested. Under
these change in control agreements, for a two-year period following the termination, the executive
officer is also entitled to receive continuing health coverage at a level commensurate to the
coverage provided by Keith to the executive officer immediately prior to the change in control; all
other benefits under welfare benefit plans, practices, policies and programs provided or offered by
Keith, including medical, dental, prescription, disability, employee life, group life, accidental
death and travel accident insurance plans and programs; fringe benefits, including, without
limitation, tax and financial planning services, payment of club dues and an automobile allowance;
and a reasonable level of outplacement services selected by the executive officer. Under the change
in control agreements, the executive officer also is entitled to receive a payment by Keith to
offset any excise tax under the excess parachute payment provisions of Section 4999 of the Code
that has been levied against the executive officer for payments that Keith has made to, or for the
benefit of, that executive officer (whether or not those payments are made pursuant to the
executive officers change in control agreement). The payment by Keith will be grossed up so that
after the executive officer pays all taxes (including any interest or penalties with respect to
those taxes) on the payment, the executive officer will receive an additional payment equal to the
excise tax imposed. Vested Stock Options.Upon closing of the merger, each vested option to acquire shares of
Keith common stock pursuant to Keiths Amended and Restated 1994 Stock Incentive Plan, including
those held by an executive officer or director, will be cancelled with no further rights. Prior to
closing, holders of vested options to acquire Keith common stock, including executive officers and
directors, may exercise their options by paying the exercise price in cash or surrendering a
portion of their options in lieu of cash. Unvested Stock Options.Upon closing of the merger, each unvested option to acquire shares of
Keith common stock pursuant to Keiths Amended and Restated 1994 Stock Incentive Plan, including
those held by an executive officer or director, will be cancelled with no further rights. Prior to
closing, Keith will offer to purchase all unvested options to acquire Keith common stock, including
those held by an executive officer or director, subject to the closing of the merger, at a price
equal to US$16.50 in cash plus the cash value of 0.23 Stantec common shares, based on the 20-day
average trading price prior to the merger, less the exercise price of such option. Unvested Restricted Stock.Upon closing of the merger, each share of unvested Keith
restricted common stock that remains subject to forfeiture and other restrictions under Keiths
Amended and Restated 1994 Stock Incentive Plan, including shares held by an executive officer or
director, will be substituted with 0.23 Stantec common shares per share of Keith common stock plus
a variable amount of Stantec common shares equal to US$16.50 per share of Keith common stock, based
on the 20-day average trading price of Stantec common shares. The Stantec common shares
substituted for the unvested Keith restricted shares will be subject to similar restrictions to
that which the unvested Keith restricted stock are currently subject. Representation on Stantecs Board of Directors.The Stantec directors immediately prior to
the merger will remain directors immediately following consummation of the merger. The merger
agreement provides that Stantec shall cause Aram H. Keith, Chairman and Chief Executive Officer of
Keith, to be appointed to the Stantec board of directors following consummation of the merger. Officers of Stantec.The existing officers of Stantec will remain in such positions as
described under Management of Stantec immediately following consummation of the merger. In
addition, the letter agreement entered into between Stantec and Mr. Keith provides, subject to
satisfaction of certain conditions, that Mr. Keith will become Vice Chairman of Stantec following
consummation of the merger. Representation on the Surviving Corporations Board of Directors.The merger agreement
provides that the directors of Stantec Consulting will remain as the directors of the surviving
corporation immediately following the merger. The directors of Stantec Consulting are Anthony P.
Franceschini and Jeffrey S. Lloyd. Upon consummation of the merger, the current members of the
board of directors of Keith will no longer be directors of Keith or the surviving corporation. Officers of the Surviving Corporation.The merger agreement provides that the current
officers of Stantec Consulting will remain officers of the surviving corporation immediately
following the merger. The officers of Stantec Consulting are Anthony P. Franceschini, Donald W.
Wilson and Michael Slocombe. Upon consummation of the merger, the current officers of Keith will
no longer be officers of Keith or the surviving corporation. 77




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##### 



Stantecs Directors and Executive Officers.For a list of the current directors and executive
officers of Stantec see Management of Stantec. Following the merger, these directors and
executive officers will remain the directors and executive officers of Stantec and Stantec will
appoint Aram H. Keith as a director. Indemnification and Insurance.The merger agreement provides that the bylaws of the surviving
corporation will contain provisions no less favorable than the current provisions in Keiths bylaws
with respect to the indemnification of present and former officers and directors of Keith. The
merger agreement also provides that Stantec will maintain in effect for six years the directors
and officers liability insurance maintained by Keith at the effective time of the merger (provided
that Stantec may substitute policies that are materially no less favorable) with respect to matters
that occurred prior to the effective time of the merger and that Stantec will not be required to
expend more than an amount per year equal to 175% of current annual premiums paid by Keith for such
insurance. Material U.S. Federal Income Tax Consequences of the Merger The following discussion sets forth the material U.S. federal income tax consequences of the
merger to U.S. Holders, as defined below, of Keith common stock who will exchange their Keith
common stock for Stantec common shares, a combination of Stantec common shares and cash, or solely
cash in the merger, and the consequences of the ownership and disposition of the Stantec common
shares, if any, received by such U.S. Holders. This discussion is based on provisions of the Code,
Treasury regulations promulgated thereunder, and administrative and judicial interpretations
thereof, all as in effect as of the date hereof and all of which are subject to change, possibly
with retroactive effect. This discussion applies only to holders of Keith common stock and holders of Stantec common
shares who received such stock in the merger who are U.S. Holders. For purposes of this
discussion, a U.S. Holder is:  
    an individual who is a citizen or resident of the United States for U.S. federal income
tax purposes;
    a corporation, or any entity treated as a corporation for U.S. federal income tax
purposes, created or organized under the laws of the United States, any state thereof or
the District of Columbia;
    an estate that is subject to U.S. federal income tax regardless of its source; or
    a trust if (1) a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the authority to control all
substantial decisions of the trust, or (2) the trust has a valid election in effect to be
treated as a U.S. person for U.S. federal income tax purposes. If a partnership holds Keith common stock, the U.S. federal income tax treatment of a partner
in the partnership generally will depend on the status of the partner and the activities of the
partnership. Partners of partnerships that hold Keith common stock should consult their tax
advisors regarding the U.S. federal income tax consequences to them of the merger. This discussion is not a comprehensive description of all the tax consequences that may be
relevant to holders of Keith common stock. It applies only to holders of Keith common stock that
hold their Keith common stock, and will hold the Stantec common shares that they receive in the
merger, as capital assets within the meaning of Section 1221 of the Code. No attempt has been made
to address all aspects of U.S. federal income taxation that may be relevant to a particular holder
of Keith common stock in light of its particular circumstances or to holders of Keith common stock
subject to special treatment under the U.S. federal income tax laws, including:  
    banks, insurance companies and financial institutions;
    tax-exempt organizations;
    mutual funds;
    persons that have a functional currency other than the U.S. dollar;
    traders in securities who elect to apply a mark-to-market method of accounting;
    dealers in securities or foreign currency; 78




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
    holders of Keith common stock who acquired their Keith common stock in connection with
Keiths stock option plans or in other compensatory transactions;
    holders of Keith common stock who hold their common stock as part of a hedge, straddle,
constructive sale, conversion transaction or other integrated investment;
    Except to the extent discussed below, U.S. Holders of Keith common stock who will hold
5% or more of either the total voting power or the total value of the outstanding stock of
Stantec after the merger, determined after taking into account ownership under the
applicable attribution rules of the Code and Treasury regulations (referred to in this
proxy statement/prospectus as 5% transferee shareholders); and
    holders who will hold 10% or more of Stantec equity either directly, indirectly through
one or more entities, or as a result of certain constructive ownership rules of the Code,
following the merger; In addition, this discussion does not address any alternative minimum tax, U.S. federal estate
and gift tax, or any state, local or foreign tax consequences of the merger. No assurance can be
given that the Internal Revenue Service (the IRS) would not assert, or that a court would not
sustain, a position contrary to any of the tax consequences set forth below. In addition, neither
Stantec, Stantec Consulting or Keith will request advance rulings from the IRS dealing with the tax
consequences of the merger. EACH HOLDER OF KEITH COMMON STOCK SHOULD CONSULT THEIR TAX ADVISOR WITH RESPECT TO THE
PARTICULAR TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER. The Merger For U.S. federal income tax purposes, the merger has been structured to qualify as a
reorganization under the provisions of Section 368(a) of the Code in which each of Stantec, Keith,
and Stantec Consulting will be a party to the reorganization within the meaning of Section 368(b)
of the Code. Assuming the merger so qualifies, the exchange of Keith common stock for Stantec
common shares in the merger generally will not result in the recognition of gain by U.S. Holders
(except as described below in the case of a 5% transferee shareholder who does not enter into a
gain recognition agreement in accordance with applicable Treasury regulations). It is a
condition to the closing that Stantec and Keith shall have each received opinions to such effect
from Shearman & Sterling LLP and Akin Gump Strauss Hauer & Feld LLP, respectively, which opinions
shall not have been withdrawn or modified in any material respect. These opinions rely upon
certain factual representations made by Stantec, Keith and Stantec Consulting as of the date of
this registration statement. The issuance of such opinions is conditioned upon the receipt by each
of Shearman & Sterling LLP and Akin Gump Strauss Hauer & Feld LLP of certain additional factual
representations to be made by Stantec, Keith, and Stantec Consulting, which representations shall
be dated on or before the date of such opinions and shall not have been withdrawn or modified in
any material respects. Such opinions will neither bind the IRS nor preclude the IRS from adopting
a contrary position. We have been advised by counsel that whether the reorganization qualifies as
a tax-free reorganization, and whether counsel is able to provide the above referenced opinion,
depends, in part, upon the market price of Stantec common shares. If the market price of Stantec
common shares drops significantly, it is possible that the reorganization may not qualify as a
tax-free reorganization, and counsel may not be able to render such opinions. Pursuant to the merger agreement, if Stantec or Keith receives written notice from its counsel
to the effect that such counsel is unlikely to be able to deliver the tax opinion described in the
preceding paragraph, Stantec shall have the right, at its sole and absolute discretion, to effect a
reverse-subsidiary merger so that Stantec Consulting will merge with and into Keith, such that the
separate corporate existence of Stantec Consulting will cease and Keith shall continue as a
subsidiary of Stantec, which is referred to as the reverse-subsidiary merger. The
reverse-subsidiary merger would not be intended to constitute a reorganization within the meaning
of Section 368(a) of the Code, and its potential tax consequences are described separately below
under The Reverse-Subsidiary Merger. If the merger does not qualify as a tax-free
reorganization and Stantec does not exercise its option to effect a reverse-subsidiary merger,
Keith will not be obligated to consummate the merger. The U.S. federal income tax consequences of the merger to a particular U.S. Holder of Keith
common stock will depend on the form of consideration received by the U.S. Holder in exchange for
its Keith common stock. In general, provided that the merger qualifies as a reorganization under
the provisions of Section 368(a) of the Code, 79




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and subject to the assumptions and qualifications set forth herein, the U.S. federal income
tax consequences of the merger are summarized below. Exchange of Keith Common Stock Solely for Stantec Common Shares. A U.S. Holder who exchanges
Keith common stock solely for Stantec common shares will not recognize any gain or loss on the
exchange except to the extent the U.S. Holder receives cash in lieu of fractional Stantec common
shares (as discussed below). In the case of a 5% transferee shareholder who exchanges Keith common
stock solely for Stantec common shares, this treatment will apply provided that the 5% transferee
shareholder enters into a gain recognition agreement in accordance with applicable Treasury
regulations. In addition, such 5% transferee shareholders will be required to file certain annual
information statements with their income tax returns for each of the first five full taxable years
following the taxable year of the merger. Such 5% transferee shareholders should consult their tax
advisors as to the U.S. federal income tax consequences of the merger to them. The aggregate
adjusted tax basis of the Stantec common shares received by a U.S. Holder of Keith common stock
(including fractional Stantec common shares deemed received and redeemed as described below) will
equal the U.S. Holders aggregate adjusted tax basis in the Keith common stock surrendered in the
merger. The holding period of the Stantec common shares received pursuant to the merger (including
fractional Stantec common shares deemed received and redeemed as described below) will include the
holding period of the Keith common stock surrendered in the merger. Exchange of Keith Common Stock for Cash and Stantec Common Shares. If a U.S. Holder exchanges
Keith common stock for a combination of Stantec common shares and cash and the U.S. Holders
adjusted tax basis in the Keith common stock surrendered in the merger is less than the sum of the
fair market value, as of the date of the merger, of the Stantec common shares and the amount of
cash received by the U.S. Holder, the U.S. Holder will recognize gain equal to the lesser of:  
    the sum of the amount of cash and the fair market value, as of the date of the merger,
of the Stantec common shares received by the U.S. Holder, minus the adjusted tax basis of
the Keith common stock surrendered in exchange therefor, or
    the amount of cash received by the U.S. Holder in the merger (excluding cash received in
lieu of fractional Stantec common shares, which is discussed below). In the case of a 5% transferee shareholder who exchanges Keith common stock for a combination of
Stantec common shares and cash, this treatment will apply provided that the 5% transferee
shareholder enters into a gain recognition agreement in accordance with applicable Treasury
regulations. In addition, such 5% transferee shareholders will be required to file certain annual
information statements with their income tax returns for each of the first five full taxable years
following the taxable year of the merger. Such 5% transferee shareholders should consult their tax
advisors as to the U.S. federal income tax consequences of the merger to them. If a U.S. Holders
adjusted tax basis in the Keith common stock surrendered in the merger is greater than the sum of
the amount of cash and the fair market value of the Stantec common shares received in the merger,
the U.S. Holder will realize a loss that is not currently allowed or recognized for U.S. federal
income tax purposes. U.S. Holders of Keith common stock who bought shares of Keith common stock at
different prices, or otherwise own shares with unequal bases, must make the above calculations
separately for each share of Keith common stock surrendered in the merger, taking into account the
U.S. Holders adjusted tax basis in each share and a pro rata portion of the aggregate
consideration received by the U.S. Holder. A loss realized on one share of Keith common stock may
not be used to offset a gain realized on another share of Keith common stock. Any gain that a U.S. Holder recognizes will generally be long-term capital gain if the U.S.
Holders holding period with respect to the Keith common stock surrendered is more than one year as
of the date of the merger. Long-term capital gains of non-corporate U.S. Holders, including
individuals, generally are eligible for reduced rates of taxation. If, however, the cash received
has the effect of the distribution of a dividend, the gain will be treated as dividend to the
extent of the U.S. Holders ratable share of earnings and profits, as determined for U.S. federal
income tax purposes. For purposes of determining whether the receipt of cash by the U.S. Holder
has the effect of a distribution of a dividend, a U.S. Holder of Keith common stock will be treated
as if the U.S. Holder first exchanged all of its Keith common stock solely for Stantec common
shares and then had a portion of such stock immediately redeemed by Stantec for the cash that such
U.S. Holder actually received pursuant to the merger. The IRS has indicated in rulings that any
reduction in the interest of a minority shareholder that owns a small number of shares in a
publicly and widely held corporation and that exercises no control over corporate affairs would
receive capital gain rather than dividend treatment. In determining the amount of reduction in
interest, certain constructive ownership rules are taken into account. Because the determination
of whether a payment will be treated as having the effect of a distribution of a dividend generally
will depend on the facts and circumstances specific to each U.S. 80




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Holder of Keith common stock, U.S. Holders should consult their own tax advisors regarding the
tax treatment of cash received in the merger. In the case of a U.S. Holder of Keith common stock who receives cash and Stantec common shares
in the merger, such U.S. Holders aggregate basis in the Stantec common shares received (including
fractional Stantec common shares deemed received and redeemed as described below) will equal the
exchanging U.S. Holders aggregate adjusted tax basis in the Keith common stock surrendered in the
merger, increased by any gain recognized as a result of the merger (including any portion of the
gain that is treated as a dividend as described above but excluding any gain or loss from the
deemed receipt and redemption of fractional shares) and reduced by the amount of cash received in
the merger (excluding any cash received with respect to a fractional share of Stantec common shares
deemed received and redeemed). The holding period of the Stantec common shares received (including
fractional Stantec common shares deemed received and redeemed as described below) will include the
holding period of the Keith common stock surrendered in the merger. Exchange of Keith Common Stock Solely for Cash. A U.S. Holder of Keith common stock who
exchanges Keith common stock solely for cash in the merger will recognize gain or loss in an amount
equal to the difference between the amount of cash received in the merger and the U.S. Holders
adjusted tax basis in the Keith common stock surrendered in the merger. The gain or loss
recognized by the U.S. Holder will be long-term capital gain or loss if the U.S. Holders holding
period for the Keith common stock surrendered is more than one year as of the date of the merger.
Long-term capital gains of non-corporate U.S. Holders, including individuals, generally are
eligible for reduced rates of taxation. The deductibility of capital losses is subject to
limitations. Vested Stock Options.Upon closing of the merger, each vested option to acquire shares of
Keith common stock under Keiths Amended and Restated 1994 Stock Incentive Plan will be cancelled
with no further rights. Prior to closing, holders of vested options to acquire Keith common stock
may exercise their options by paying the exercise price in cash. Keith anticipates that it also
may offer optionholders the opportunity to exercise their options by surrendering a portion of
their stock options in lieu of cash. Neither the Amended and Restated 1994 Stock Incentive Plan or
the forms of Option Agreements used for awards under the Plan specifically permit the exercise of
options by surrendering a portion of the options in lieu of cash. The addition of this exercise
alternative in connection with the merger transaction may be considered a modification of the
outstanding nonqualified stock options and, to the extent any such offer is accepted, incentive
stock options. Under new U.S. tax rules governing nonqualified deferred compensation (Section 409A of the
Code, effective January 1, 2005), the modification of an outstanding stock option may be treated as
the grant of a new option. Preliminary IRS guidance interpreting Section 409A provides that the
grant of a stock option at less than fair market value may be treated as nonqualified deferred
compensation subject to the requirements of Section 409A. Section 409A provides certain
requirements governing the timing of distributions that the modified options may not satisfy.
Failure to satisfy the Section 409A distribution requirements with respect to nonqualified deferred
compensation will result in immediate taxation, the potential imposition of interest on any late
payment of tax and the imposition of an additional 20% tax over and above the regular ordinary
income tax amount. However, the preliminary IRS guidance interpreting Section 409A provides that
short-term deferrals, where the amount is received by the service provider by the later of 2-1/2
months after the end of either the optionees or Keiths first taxable year in which the amount is
no longer subject to a substantial risk of forfeiture, will not be considered nonqualified deferred
compensation. Although the proposed modification will occur at a time when the exercise price of
the option is less than the fair market value of the underlying Keith common stock, the
modification should not cause the options to be treated as nonqualified deferred compensation where
the merger consideration is paid within 2-1/2 months of the end of the taxable year in which the
option is modified, although this conclusion is not entirely clear. Incentive stock options that
are modified at a time when the exercise price is less than the fair market value of the underlying
Keith stock will be treated as nonqualified stock options. U.S. optionholders will recognize ordinary income on exercise of nonqualified stock options in
an amount equal to the excess of the fair market value of Keith common stock received upon exercise
over the exercise price paid, referred to in this proxy statement/prospectus as the spread. To the
extent nonqualified options are exercised by surrendering a portion of the options in lieu of cash,
the surrendered options will be taxed as if they were exercised for cash. U.S. optionholders who
hold incentive stock options will not recognize ordinary income on exercise, but the option spread
is an adjustment item for alternative minimum tax purposes. To the extent incentive stock option
shares are disposed of within two years of the initial option grant date or one year of option
exercise, referred to in this proxy statement/prospectus as statutory holding periods, the optionee
generally will have a disqualifying disposition. Upon a disqualifying disposition, the optionee
will recognize ordinary income equal to the lesser of (1) the spread on the date of exercise of the
disposed shares, and (2) the gain realized on the 81




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disqualifying disposition (reflecting basis adjustments as a result of the merger). For these
purposes, the receipt of merger consideration, including any cash in lieu of Stantec common stock,
should not constitute a disqualifying disposition, although this conclusion is not entirely clear.
With respect to shares previously acquired upon option exercise, including incentive stock option
shares, the general tax consequences of the merger discussed herein should apply. Thus, (1) any
cash merger consideration should be taxed as either short-term or long-term capital gain, depending
on the holding period of the shares acquired by the exercise of options; and (2) any subsequent
disposition of Stantec common stock received as merger consideration in connection with incentive
stock option shares will be taxed as a disqualifying disposition if such shares are disposed of
prior to the end of the statutory holding periods. Unvested Stock Options.Upon closing of the merger, each unvested option to acquire shares of
Keith common stock under Keiths Amended and Restated 1994 Stock Incentive Plan will be cancelled
with no further rights. Prior to closing, Keith will offer to purchase all unvested options to
acquire Keith common stock, subject to the closing of the merger, at a price equal to US$16.50 plus
the cash value of 0.23 Stantec common shares, based on the 20-day average trading price prior to
the merger, less the exercise price of such option. For U.S. tax purposes, an optionee recognizes
as ordinary income the amount paid by Keith to purchase the optionees unvested options to acquire
Keith common stock. Unvested Restricted Stock.Upon closing of the merger, each share of unvested Keith
restricted common stock that remains subject to forfeiture and other restrictions under Keiths
Amended and Restated 1994 Stock Incentive Plan will be substituted with 0.23 Stantec common shares
per share of Keith common stock plus a variable amount of Stantec common shares equal to US$16.50
per share of Keith common stock, based on the 20-day average trading price of Stantec common
shares. The Stantec common shares substituted for the unvested Keith restricted stock will be
subject to similar restrictions to that which the unvested Keith restricted stock are currently
subject. If the holder of Keith restricted common stock filed a valid Section 83(b) election with
the U.S. Internal Revenue Service within thirty days of purchasing the shares, the tax consequences
to the holder generally will be the same as that of Keith shareholders as discussed below. If the
holder did not file a valid Section 83(b) election, the merger is of no consequence and the U.S.
tax implications are unchanged. This means that the holder will recognize ordinary income on each
vesting day equal to the fair market value of the Stantec common shares that vest, and any
subsequent gain on later disposition will be short-term or long-term capital gain, depending upon
the period of time the shares are held after they vest. Cash Received in Lieu of Fractional Shares. A U.S. Holder of Keith common stock who receives
cash in lieu of a fractional share of Stantec common shares will be treated as if the U.S. Holder
first received such fractional share in the merger and then as having received cash in redemption
of the fractional share. Thus, such a U.S. Holder generally will recognize gain or loss in an
amount equal to the difference between the amount of cash received in lieu of the fractional share
and the portion of the U.S. Holders aggregate adjusted tax basis in its Keith common stock
surrendered that is allocable to the fractional share. Cash Received Pursuant to the Exercise of Dissenters Rights. A U.S. Holder of Keith common
stock who receives cash for all of its Keith common stock pursuant to the exercise of dissenters
rights in connection with the merger generally will recognize gain or loss equal to the difference
between the tax basis of the Keith common stock surrendered and the amount of cash received. Gain
or loss will be capital gain or loss and any such capital gain or loss will be long-term capital
gain or loss if the U.S. Holders holding period for the Keith common stock surrendered is more
than one year as of the date of the disposition. Reporting Requirements and Backup Withholding.Each U.S. Holder of Keith common stock that
receives Stantec common shares in the merger will be required to file a statement with its U.S.
federal income tax return providing its basis in the Keith common stock surrendered and the fair
market value of the Stantec common shares and any cash received in the merger, and to retain
permanent records of this information relating to the merger. Five percent transferee shareholders
who intend to enter into gain recognition agreements in accordance with applicable Treasury
regulations must file such agreements with their U.S. federal income tax returns for the year of
the merger, and will be required to file certain annual information statements with their income
tax returns for each of the first five full taxable years following the taxable year of the merger.
Such 5% transferee shareholders should consult their tax advisors regarding the requirements
applicable to them. In general, backup withholding may apply to the amount of cash, if any, received by a U.S.
Holder of Keith common stock in the merger, including cash received in lieu of fractional shares,
unless the U.S. Holder is an exempt recipient, such as a corporation. Backup withholding at a rate
of 28% will apply to those payments if a U.S. Holder fails to provide a taxpayer identification
number and fails to comply with certain certification procedures or 82




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otherwise fails to establish an exemption from backup withholding. Any amount withheld under
the backup withholding rules will be allowed as a refund or credit against a U.S. Holders U.S.
federal income tax liability, provided the required information is furnished to the IRS in a timely
manner. Under Section 6043A of the Code, Stantec, Stantec Consulting or Keith may be required, under
regulations and forms to be promulgated by the U.S. Treasury and the IRS to report certain
information to the IRS and to Keith shareholders regarding the merger, the consideration and the
shareholders receiving non-stock consideration. Under Section 1.368-3 of the Treasury regulations,
Stantec, Stantec Consulting, and Keith will be required to report certain information about the
merger with their U.S. federal income tax returns for the taxable year of the merger. The Reverse-Subsidiary Merger In the event that Stantec exercises its right to effect the reverse-subsidiary merger, the
merger would not be intended to constitute a reorganization within the meaning of Section 368(a) of
the Code. As such, a U.S. Holder of Keith common stock that exchanges Keith common stock solely
for cash in the reverse-subsidiary merger generally will recognize gain or loss in an amount equal
to the difference between the amount of cash received and the U.S. Holders adjusted tax basis in
the Keith common stock surrendered in the reverse-subsidiary merger. The gain or loss recognized
by a U.S. Holder will be long-term capital gain or loss if the U.S. Holders holding period for the
Keith common stock surrendered is more than one year as of the date of the reverse-subsidiary
merger. Long-term capital gains of non-corporate taxpayers, including individuals, generally are
eligible for reduced rates of taxation. The deductibility of capital losses is subject to
limitations. Ownership of Stantec Common Shares Distributions on Stantec Common Shares.Subject to the passive foreign investment company
(PFIC) rules discussed below, distributions with respect to Stantec common shares (before
reduction for Canadian withholding taxes) paid out of Stantecs current or accumulated earnings and
profits, as determined for U.S. federal income tax purposes, will be dividends and will be
includable in the U.S. Holders income when received. Subject to certain limitations, dividends
paid to non-corporate U.S. Holders, including individuals, may be eligible for a reduced rate of
taxation if Stantec is deemed to be a qualified foreign corporation for U.S. federal income tax
purposes and certain holding requirements are met. A qualified foreign corporation includes a
foreign corporation that is eligible for the benefits of an income tax treaty with the United
States and that includes an exchange of information provision that the U.S. Treasury Department has
determined to be satisfactory for purposes of the qualified dividend provisions of the Code, but
does not include an otherwise qualified foreign corporation that is a PFIC. The U.S. Treasury
Department issued a notice determining that the Convention is satisfactory for such purposes. In
addition, a foreign corporation is treated as a qualified foreign corporation with respect to
dividends received from that corporation on shares that are readily tradable on an established
securities market in the United States. In general, there are substantial requirements that must
be met for dividends paid to non-corporate U.S. Holders to be taxed at the reduced rate, including
additional requirements applicable to foreign corporations. Non-corporate U.S. Holders of Stantec
common shares should consult their tax advisors regarding the application of these requirements
given their particular circumstances. Stantec believes that it is eligible for the benefits of the
Convention, and that Stantec will continue to be a qualified foreign corporation for so long as it
is not a PFIC and it continues to be eligible for benefits of the Convention. Dividends on Stantec
common shares will not be eligible for the dividends-received deduction generally allowed to U.S.
corporations. The amount of any dividend paid in Canadian dollars will equal the U.S. dollar value of the
Canadian dollars received calculated by reference to the exchange rate in effect on the date the
dividend is received by a U.S. Holder regardless of whether the Canadian dollars are converted into
U.S. dollars. If the Canadian dollars received as a dividend are not converted into U.S. dollars
at the date of receipt, a U.S. Holder will have a basis in the Canadian dollars equal to the U.S.
dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other
disposition of the Canadian dollars will be treated as ordinary income or loss, and generally will
be income or loss from sources within the United States for U.S. foreign tax credit purposes. A U.S. Holder may be entitled to claim a U.S. foreign tax credit for, or deduct, Canadian
taxes that are withheld on dividends received by the U.S. Holder, subject to applicable limitations
in the Code. Dividends will be income from sources outside the United States, and for tax years
beginning before January 1, 2007, generally will be passive income or financial services
income, and for tax years beginning after December 31, 2006, generally will be passive category
income or general category income for purposes of computing the U.S. foreign tax credit
allowable to a U.S. Holder. The rules governing the U.S. foreign tax credit are complex, and U.S.
Holders are 83




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urged to consult their tax advisors regarding the availability of the U.S. foreign tax credit
under their particular circumstances. To the extent that the amount of any distribution exceeds Stantecs current or accumulated
earnings and profits for a taxable year, the distribution will first be treated as a tax-free
return of capital to the extent of a U.S. Holders basis, and any excess will be treated as capital
gain. Such an excess distribution would not give rise to income from sources outside the United
States. Disposition of Stantec Common Shares.For U.S. federal income tax purposes, a U.S. Holder
will recognize taxable gain or loss on any sale or other disposition of Stantec common shares in an
amount equal to the difference between the U.S. dollar value of the amount realized for the Stantec
common shares and the U.S. Holders tax basis (determined in U.S. dollars) in the Stantec common
shares. Such gain or loss will be a capital gain or loss and will be long-term capital gain or
loss if the U.S. Holders holding period for the Stantec common shares is more than one year as of
the date of disposition. Long-term capital gains of non-corporate taxpayers, including
individuals, are eligible for reduced rates of taxation. The deductibility of capital losses is
subject to limitations. Such gain or loss will be income or loss from sources within the United
States for U.S. foreign tax credit limitation purposes. Passive Foreign Investment Company Rules. Stantec does not believe that it was, for its most
recently ended taxable year, or will be classified as for its current taxable year, for U.S.
federal income tax purposes, a PFIC, but this conclusion is a factual determination that is made
annually and thus may be subject to change. If Stantec were to be treated as a PFIC for any
taxable year during which a U.S. Holder held Stantec common shares, unless the U.S. Holder elected
to be taxed annually on a mark-to-market basis with respect to the Stantec common shares, gain
realized on the sale or other disposition of the Stantec common shares would in general not be
treated as capital gain. Instead, a U.S. Holder would be treated as if the shareholder had
realized such gain and certain excess distributions ratably over the U.S. Holders holding period
for the common shares and would be taxed at the highest tax rate in effect for each such year to
which the gain was allocated, together with a special interest charge in respect of the tax
attributable to each such year. U.S. Holders should consult their own tax advisors with respect to
how the PFIC rules could affect their tax situation. Information Reporting and Backup Withholding. In general, backup withholding will apply to
dividends on Stantec common shares and the proceeds of the sale or other disposition of Stantec
common shares unless a U.S. Holder is an exempt recipient, such as a corporation. Backup
withholding at a rate of 28% will apply to those payments if a U.S. Holder fails to provide a
taxpayer identification number and fails to comply with certain certification procedures or
otherwise fails to establish an exemption from backup withholding. Any amount withheld under the
backup withholding rules will be allowed as a refund or credit against a shareholders U.S. federal
income tax liability, provided the required information is furnished to the IRS in a timely manner. Material Canadian Federal Income Tax Consequences of the Merger The following discussion is a summary of the material Canadian federal income tax
considerations under the Income Tax Act (Canada) (referred to in this proxy statement/prospectus as
the Canadian Tax Act) of the conversion of Keith common stock into Stantec common shares (and cash
in lieu of a fractional Stantec common share) in the merger and the ownership of Stantec common
shares received pursuant to the merger, generally applicable to holders of Keith common stock who,
for purposes of the Canadian Tax Act and at all relevant times, are not and are not deemed to be
resident in Canada, hold Keith common stock and will hold Stantec common shares as capital
property, deal at arms length with Stantec and Keith and who do not use or hold and are not deemed
to use or hold the Keith common stock or the Stantec common shares in connection with carrying on
business in Canada and for whom neither the Keith common stock nor the Stantec common shares are
designated insurance property (referred to in this proxy statement/prospectus as non-resident
holders). This discussion does not apply to a non-resident insurer that carries on business in
Canada and elsewhere. This summary is based upon the current provisions of the Canadian Tax Act, the regulations
under the Canadian Tax Act, all specific proposals to amend the Canadian Tax Act and the
regulations publicly announced by the Minister of Finance prior to the date of this proxy
statement/prospectus and the current published administrative and assessing practices of the Canada
Revenue Agency. This summary does not otherwise take into account or anticipate any change in law,
whether by legislative, governmental or judicial action, nor does it take into account or consider
any provincial, territorial or foreign income tax legislation or considerations. 84




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This summary is of a general nature only and is not intended to be, nor should it be construed
to be, legal or tax advice to holders of Keith common stock. Accordingly, holders of Keith common
stock should consult their own tax advisors with respect to their particular circumstances. Conversion of Keith Common Stock The conversion of the Keith common stock into Stantec common shares (and cash in lieu of a
fractional common share of Stantec) pursuant to the merger will not give rise to tax for a
non-resident holder under the Canadian Tax Act. Dividends on Stantec Common Shares Dividends paid or credited (or deemed to have been paid or credited) on the Stantec common
shares to a non-resident holder will be subject to non-resident withholding tax under the Canadian
Tax Act of 25% of the gross amount of those dividends (subject to reduction in accordance with an
applicable international tax treaty between Canada and the Non-resident holders country of
residence). Where the non-resident holder is a resident of the United States for purposes of the
Convention, the rate of this withholding tax is generally reduced to 15%. Under the Convention,
dividends paid to certain religious, scientific, literary, educational or charitable organizations
and certain pension organizations that are resident in, and generally exempt from taxation by, the
United States, are generally exempt from Canadian non-resident withholding tax. Provided that
certain administrative procedures are observed by such an organization, Stantec would not be
required to withhold tax from dividends paid or credited to the organization. Disposition of Stantec Common Shares A non-resident holder will not be subject to tax under the Canadian Tax Act in respect of any
capital gain realized by that non-resident holder on a disposition of a Stantec common share,
unless the Stantec common share constitutes taxable Canadian property of the non-resident holder
for purposes of the Canadian Tax Act and the non-resident holder is not entitled to relief under an
applicable tax treaty. Provided that, at the time of disposition, the Stantec common shares are
listed on a prescribed stock exchange (which includes the Toronto Stock Exchange and the New York
Stock Exchange), the Stantec common shares will generally not constitute taxable Canadian property
to a non-resident holder unless, at any time during the 60-month period immediately preceding the
disposition of the Stantec common shares, the holder, persons with whom the holder does not deal at
arms length or the holder together with those persons, owns not less than 25% of the issued shares
of any class or any series of shares of Stantec. Even if the Stantec common shares are taxable Canadian property to a non-resident holder, the
Convention will generally exempt a non-resident holder who is a resident of the United States for
purposes of the Convention from tax under the Canadian Tax Act on any capital gain arising on the
disposition of a Stantec common share unless the value of the shares of Stantec at the time of
disposition is derived principally from real property situated in Canada. Anticipated Accounting Treatment It is expected that the merger will be accounted for as a purchase by Stantec of Keith under
Canadian and U.S. GAAP. Under the purchase method of accounting, the assets and liabilities of the
acquired company are, as of completion of the merger, recorded at their respective fair values and
added to those of the reporting public issuer, including an amount for goodwill representing the
difference between the purchase price and the fair value of the identifiable net assets. Financial
statements of Stantec issued after consummation of the merger will only reflect the operations of
Keith after the merger and will not be restated retroactively to reflect the historical financial
position or results of operations of Keith. All unaudited pro forma condensed consolidated financial information contained in this proxy
statement/prospectus has been prepared using the purchase method to account for the merger. The
allocation of the purchase price will be determined after the merger is completed and after
completion of an analysis to determine the assigned fair values of Keiths tangible and
identifiable intangible assets and liabilities. In addition, estimates related to restructuring
and merger-related charges are subject to final decisions related to combining Stantec and Keith.
Accordingly, the final purchase accounting adjustments and restructuring and merger-related charges
may be materially different from the unaudited pro forma adjustments and changes presented in this
proxy statement/prospectus. Any decrease in the net fair value of the assets and liabilities of
Keith as compared to the 85




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unaudited pro forma information included in this proxy statement/prospectus will have the
effect of increasing the amount of the purchase price allocable to goodwill. Regulatory Matters Related to the Merger Under the HSR Act, acquisitions of a sufficient size may not be consummated unless
notification has been given and information has been furnished to the Antitrust Division of the
U.S. Department of Justice and to the Federal Trade Commission and applicable waiting period
requirements have been satisfied or early termination of the waiting period has been granted. The
consummation of the merger is subject to the expiration or early termination of the waiting period
under the HSR Act. In addition, appropriate authorities of any U.S. state or appropriate U.S. federal authorities
could take actions under state or U.S. federal antitrust laws seeking to stop completion of the
merger, if found appropriate, and in certain circumstances, third parties could seek relief under
U.S. or state antitrust laws. Other than the filings described above, neither Stantec nor Keith is aware of any government
or regulatory approvals to be obtained, or waiting periods to expire, to complete the merger. If
the parties discover that other approvals or waiting periods are necessary, they will seek to
obtain or comply with them. If any additional approval or action is needed, however, there is no
assurance that Stantec and Keith will be able to obtain it or any of the other necessary approvals.
Even if Stantec or Keith could obtain an approval and the merger agreement is adopted by the Keith
shareholders, conditions may be placed on it that could cause Stantec to abandon the merger if
permitted by the terms of the merger agreement. Merger Fees, Costs and Expenses All expenses incurred in connection with the merger agreement and the transactions
contemplated by the merger agreement will be paid by the party incurring those expenses, except
that Stantec and Keith have agreed to share equally the fees, costs and expenses related to
preparing, printing and mailing Stantecs registration statement on Form F-4 and this proxy
statement/prospectus and the filing fees incurred pursuant to the requirements of the HSR Act. The
parties have also agreed that Keith will pay certain other specified costs. See The Merger
Agreement  Covenants and Agreements  Fees and Expenses. Dissenters Rights Dissenters rights may be available to the shareholders of Keith. Shareholders of Keith who
dissent from the merger in accordance with the procedures set forth in Chapter 13 of the CCC may be
entitled to receive an amount equal to the fair market value of their shares as of April 14, 2005,
the last day before the public announcement of the merger. To perfect their statutory dissenters rights, Keith shareholders must vote against the merger
and must follow the required procedures set forth in Chapter 13 of the CCC, a copy of which is
attached hereto as Appendix D to this proxy statement/prospectus. The following summary is not a complete statement of the law pertaining to dissenters rights
and is qualified in its entirety by reference to Chapter 13 of the CCC. Any Keith shareholder
contemplating the exercise of dissenters rights should carefully review the provisions of Chapter
13 of the CCC, particularly those setting out the specific procedural steps required to perfect
dissenters rights. FAILURE TO COMPLY WITH THE PROCEDURAL REQUIREMENTS OF CHAPTER 13 WILL RESULT
IN A WAIVER OF A KEITH SHAREHOLDERS DISSENTERS RIGHTS. In order to be entitled to exercise dissenters rights, Keith shareholders must vote AGAINST
the approval of the merger proposal. Thus, if Keith shareholders wish to dissent and they submit
the proxy, they must specify that their shares are to be voted AGAINST the approval of the merger
proposal. If a Keith shareholder submits a proxy without voting instructions or with instructions
to vote FOR the approval of the merger proposal, their shares will automatically be voted in
favor of the merger proposal and they will lose any dissenters rights. If a Keith shareholder
does not submit a proxy and he or she attends the special meeting, he or she must vote AGAINST
the approval of the merger proposal at the meeting to preserve their dissenters rights. Further,
if a Keith shareholder abstains from voting his or her shares, the shareholder will lose his or her
dissenters rights. 86




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Under Section 1300(b)(1) of the CCC, no shares of Keith common stock will be deemed to be
dissenting shares unless demands for payment are filed with respect to 5% or more of the
outstanding shares of Keith common stock. In addition, Stantecs obligation to consummate the
merger is subject to the condition that the number of dissenting shares is less than 5% of the
outstanding shares of Keith common stock. In order to preserve their dissenters rights, Keith shareholders must also make a written
demand to Keith for the purchase of their shares of Keith common stock and for the payment to them
in cash of the fair market value of the shares. The demand must:  
    state the number of shares of Keith common stock the dissenting shareholder holds of
record;
    contain a statement of what the dissenting shareholder claims to be the fair market
value of the shares as of April 14, 2005, the last trading day before the announcement of
the merger, without giving effect to any appreciation or depreciation due to the merger;
and
    be received by Keith no later than the date of the special meeting to vote on the
merger. The statement of fair market value contained in the demand constitutes an offer by the Keith
shareholder to sell his or her shares to Keith at that price. Once a Keith shareholder has made the
demand, he or she may not withdraw it, unless Keith consents to the withdrawal. A proxy or vote
against the approval of the merger proposal does not in and of itself constitute a demand. If the merger proposal is approved at the special meeting, within ten days, Keith will mail a
notice of approval of the merger proposal to each dissenting shareholder. This notice of approval
will contain:  
    a statement of the price determined by the Keith board of directors to represent the
fair market value of the shares;
    a brief description of the procedure that the shareholder must follow, if the
shareholder desires to exercise dissenters rights; and
    a copy of sections 1300, 1301, 1302, 1303 and 1304 of Chapter 13 of the CCC (which sets
out the procedures that must be followed to perfect a shareholders dissenters rights). This notice of approval will constitute an offer by Keith to purchase the dissenting shares,
assuming the merger is completed. Within thirty days after the date on which Keith mailed this notice of approval, a Keith
shareholder wishing to dissent must submit his or her share certificates to Keith or its transfer
agent to be endorsed as dissenting shares. The certificates will be stamped or endorsed with a
statement that they are dissenting shares. IF A KEITH SHAREHOLDER WISHING TO DISSENT TRANSFERS HIS
OR HER DISSENTING SHARES PRIOR TO SUBMITTING THEM FOR THIS REQUIRED ENDORSEMENT, THE SHARES WILL
LOSE THEIR STATUS AS DISSENTING SHARES. If the dissenting shareholder and Keith (or Stantec, if the merger has been completed) agree
that shares are dissenting shares and agree on the fair market value of the shares, upon surrender
of the dissenting shareholders endorsed certificates, Keith will make payment of that amount on
the later of thirty days after an agreement has been reached on the fair market value, or thirty
days after any statutory or contractual conditions to the merger agreement have been satisfied. Any
agreement between dissenting Keith shareholders and Keith (or after the merger, Stantec) fixing a
fair market value of any dissenting shares must be filed with the secretary or clerk of Keith. If Keith (or after the merger, Stantec) denies that the shares submitted by the dissenting
shareholder qualify as dissenting shares, or if the dissenting shareholder and Keith (or after the
merger, Stantec) fail to agree on the fair market value of those shares, either the dissenting
shareholder or Keith (or after the merger, Stantec) may file a complaint in the superior court of
the proper county in California requesting that the court determine the issue. The complaint must
be filed within six months after the date on which notice of the approval of the merger proposal is
mailed to the dissenting shareholders. The dissenting shareholder may join as a plaintiff in a suit
filed by another dissenting shareholder and may also be joined as a defendant in any action brought
by Keith (or after the merger, 87




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Stantec). If the suit is not brought within six months, the shares of the dissenting
shareholder will lose their status as dissenting shares. In a dissenters rights action, the court must first determine if the shares qualify as
dissenting shares. If the court determines that the shares qualify as dissenting shares, it will
either determine the fair market value or appoint one or more impartial appraisers to do so. The
court will assess and apportion the costs of the action as it considers equitable. However, if the
appraised value of the shares exceeds the price offered by the corporation by more than 25%, the
corporation must pay the costs of the suit, which may include (at the courts discretion),
attorneys fees, expert witness fees, and prejudgment interest. A shareholder who receives a cash payment for dissenting shares will be treated as if those
shares were redeemed for federal income tax purposes. Stock Exchange Listing Stantec is obligated under the merger agreement to use its best efforts to cause the Stantec
common shares, including those issued in connection with the merger, to be approved for listing on
either the New York Stock Exchange or the Nasdaq National Market and the Toronto Stock Exchange.
In addition, it is a condition to the closing of the merger that these shares be approved for
listing on the New York Stock Exchange or the Nasdaq National Market and the Toronto Stock
Exchange, in each case subject to customary conditions and official notice of issuance. Keith, at
its option, may waive the condition that the Stantec common shares be listed on either the New York
Stock Exchange or the Nasdaq National Market and consummate the merger even if Stantec is unable to
list its common shares in the United States. If Stantec is unsuccessful in its listing application
with the New York Stock Exchange or the Nasdaq National Market and Keith waives the listing
condition, the Stantec common shares will only be tradable through the facilities of the Toronto
Stock Exchange. Stantec has filed an original listing application with the New York Stock Exchange and a
supplemental listing application with the Toronto Stock Exchange. A listing remains subject,
however, to Stantec fulfilling all of the listing requirements of the New York Stock Exchange and
the Toronto Stock Exchange. The Keith common stock will be delisted from the Nasdaq National
Market following consummation of the merger. Resale of Stantec Common Shares U.S. Resale Requirements. The Stantec common shares issued in the merger will not be subject
to any restrictions on transfer arising under the Securities Act, except for shares issued to any
Keith shareholder who may be deemed to be an affiliate of Stantec or Keith for purposes of Rule
144 or Rule 145 under the Securities Act. Each affiliate has entered into an agreement with Keith
providing that the affiliate will not transfer any Stantec common shares received in the merger
except in compliance with the Securities Act. This document does not constitute a registration statement covering resales of shares by
persons who are otherwise restricted from selling their shares pursuant to Rules 144 and 145 of the
Securities Act. Canadian Resale Requirements. Assuming Stantec is in compliance with its reporting and
disclosure obligations under applicable Canadian securities legislation and the rules of the
Toronto Stock Exchange, and except in the case of control persons, insiders (as those terms are
defined in the Securities Act(Ontario) and equivalent legislation in other Canadian jurisdictions)
and persons possessing material undisclosed information relating to Stantec or its securities, the
Stantec common shares issued pursuant to the merger agreement will not be subject to any
substantial restrictions on transfer under applicable Canadian securities legislation. 88




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The Merger Agreement The following is a summary of selected provisions of the merger agreement. While Keith and
Stantec believe this description covers the material terms of the merger agreement, it may not
contain all the information that is important to you, and it is qualified in its entirety by
reference to the merger agreement, which is incorporated by reference in its entirety and attached
to this proxy statement/prospectus as Appendix A. We urge you to read the merger agreement in its
entirety. In the event of any discrepancy between the terms of the merger agreement and the
following summary, the merger agreement will control. Structure of the Merger If the holders of a majority of the outstanding shares of Keith common stock, referred to as
Keith common stock, approve the merger agreement and all other conditions to the merger are
satisfied or waived, Keith will be merged with and into Stantec Consulting. After the merger,
Stantec Consulting will be the surviving corporation. The merger is intended to qualify as a reorganization within the meaning of Section 368(a) of
the Code. Effective Time and Closing of the Merger The merger will become effective when the merger agreement and the certificate of merger are
filed with the California Secretary of State. Immediately prior to such filing, referred to as the
effective time, a closing will be held at the offices of Keith, or such other place as the parties
agree, for the purpose of confirming the satisfaction or waiver of the closing conditions set forth
in the merger agreement. Surviving Corporation Governing Documents, Officers and Directors Surviving Corporation Governing Documents. The articles of incorporation of Stantec
Consulting, as in effect immediately prior to the merger, will be the articles of incorporation of
the surviving corporation. The bylaws of Stantec Consulting, as in effect immediately prior to the
merger, will be the bylaws of the surviving corporation until amended. Surviving Corporation Officers and Directors. The directors and officers of Stantec
Consulting immediately prior to the merger will be the initial directors and officers of the
surviving corporation. Merger Consideration Conversion of Keith Common Stock. The merger agreement provides that at the effective time,
each share of Keith common stock issued and outstanding immediately prior to the effective time,
referred to as the Keith Shares (other than any Keith Shares to be cancelled in the manner
described below and any dissenting Keith Shares), will be cancelled and automatically converted
into the right to receive the equivalent of:  (i)
    US$11.00 cash, 0.23 Stantec common shares, referred to as the
fixed ratio stock, and that number of Stantec common shares equal to US$5.50
divided by the 20-day average trading price of Stantec common shares on the
Toronto Stock Exchange; or(ii)
    the fixed ratio stock, and that number of Stantec common shares
equal to US$16.50 divided by the average 20-day trading price of Stantec common
 shares on the Toronto Stock Exchange; or(iii)
    cash equal to the sum of (A) US$16.50 and (B) the product of
0.23 and the average 20-day trading price of Stantec common shares, referred to
as the cash payment. The 20-day average Stantec trading price will be calculated based upon the simple average of
the daily weighted average sales price of Stantec common shares on the Toronto Stock Exchange as
reported by Bloomberg L.P. for each of the 20 consecutive trading days ending on and including the
second trading day prior to the effective date of the merger. The weighted average sales price for
each trading day will be converted from Canadian dollars to U.S. dollars at the inverse of the noon
buying rate quoted by the Federal Reserve Bank of New York. 89




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Holders of Keith common stock will have the right to elect to receive their merger
consideration in the form of (A) a mixture of cash and Stantec common shares, as described above in
clause (i), (B) all Stantec common shares, as described in clause (ii) above or (C) all cash, as
described in clause (iii) above, subject in the case of (B) and (C) to pro rata adjustment if the
amount of Stantec common shares or cash is oversubscribed. Reverse-Subsidiary Merger. If, for some reason, the merger would not qualify as a tax-free
reorganization under the provisions of Section 368(a) of the Code, Stantec has the option, at its
sole discretion, to effect the merger by merging Stantec Consulting with and into Keith, with Keith
as the surviving corporation, provided that, instead of paying the merger consideration described
above, Stantec would pay cash merger consideration of US$22.00 per share of Keith common stock. Fractional Shares. Stantec will not issue fractional Stantec common shares in the merger.
Instead, each holder of a fractional share interest will be paid cash in an amount equal to the
product obtained by multiplying (1) such fractional share interest, by (2) the average 20-day
trading price of Stantec common shares on the Toronto Stock Exchange calculated in the manner
described above. Stock Options. At the effective time, all options to purchase Keith common stock, referred to
as Keith stock options, will be cancelled with no further rights. Prior to the effective time,
Keith will offer to purchase all unvested stock options and will deposit with the exchange agent,
for the benefit of holders of unvested options, cash equal to the cash payment less the exercise
price of the unvested options. Keiths offer to purchase will be conditioned upon the approval of
the merger agreement by Keiths shareholders and the satisfaction or waiver of all of the
conditions under the merger agreement. Restricted Stock. All unvested restricted stock of Keith will be substituted with fixed ratio
stock and that number of Stantec common shares equal to US$16.50 divided by the average 20-day
trading price of Stantec common shares on the Toronto Stock Exchange. Such Stantec common shares
will be subject to the same restrictions, including vesting conditions, as such Keith restricted
stock. Representations and Warranties The merger agreement contains representations and warranties made by Keith to Stantec and
Stantec Consulting relating to a number of matters, including the following:  
    incorporation, valid existence and qualification to do business of Keith and each of
its subsidiaries;
    corporate authorization and validity of the merger agreement and the inapplicability
of takeover statutes to the merger;
    capitalization of Keith;
    the absence of any conflict of the merger agreement with Keiths articles of
incorporation or bylaws, with applicable laws or with any material agreement to which
Keith or any of its subsidiaries is a party and, subject to certain exceptions set
forth in the merger agreement, the absence of governmental consents, filings and
approvals necessary to complete the merger;
    the approval by Keiths board of directors of the merger agreement and the
recommendation of the merger agreement by Keiths board of directors to Keiths
shareholders and the vote required by the shareholders of Keith to complete the merger;
    the proper filing of documents with the Securities and Exchange Commission, referred
to as the SEC;
    the general accuracy of financial statements and the absence of undisclosed
liabilities;
    accounts receivable, accounts payable, work in progress, accrued project liabilities
and revenue recognition;
    the adequacy of internal control over financial reporting; 90




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
    the receipt of the opinion of the financial advisor as to the fairness, from a
financial point of view, of the merger consideration to Keiths shareholders;
    the absence of material changes or events in the business of Keith since December
31, 2004;
    the absence of material pending or threatened litigation outstanding against Keith
or any of its subsidiaries;
    employee benefit plans;
    labor and employment matters;
    title to leased real property and to assets;
    ownership and validity of intellectual property rights;
    tax matters and the payment of taxes;
    various environmental matters, including compliance with environmental laws;
    validity and effect of, and absence of defaults under, material contracts;
    adequacy of insurance;
    customers and suppliers;
    interested party transactions; and
    brokers and finders fees related to the merger. The merger agreement also contains representations and warranties by Stantec and Stantec
Consulting to Keith relating to a number of matters, including the following:  
    incorporation, valid existence and qualification to do business of Stantec and Stantec Consulting;
    corporate authorization and validity of the merger agreement;
    Stantecs capitalization;
    the absence of any conflict of the merger agreement with Stantecs or Stantec
Consultings articles of incorporation or bylaws, with applicable laws or with any
agreement to which Stantec or Stantec Consulting is a party and, subject to certain
exceptions set forth in the merger agreement, the absence of governmental consents,
filings and approvals necessary to complete the merger;
    Stantecs and Stantec Consultings possession of all permits and regulatory
approvals required to conduct its business, and compliance by Stantec and Stantec
Consulting with all applicable foreign, federal, state and local laws;
    the proper filing of documents with the Alberta Securities Commission;
    the general accuracy of financial statements and the absence of undisclosed liabilities;
    accounts receivable, accounts payable, work in progress, accrued project liabilities
and revenue recognition;
    the adequacy of internal control over financial reporting; 91




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
    the absence of material pending or threatened litigation outstanding against Stantec
or Stantec Consulting;
    approval of the merger agreement by the sole shareholder of Stantec Consulting and
the absence of any requisite vote of Stantecs shareholders to consummate the
transactions contemplated by the merger agreement;
    Stantec Consultings operations;
    tax matters;
    approval of the merger and the merger agreement by the board of directors of each of
Stantec and Stantec Consulting and approval by the board of directors of Stantec of the
registration and listing of Stantec common shares to be issued in connection with the
merger;
    the absence of material changes or events in the business of Stantec;
    absence of ownership of Keith shares by Stantec or any of its subsidiaries;
    brokers and finders fees related to the merger;
    ownership and validity of intellectual property rights; and
    various environmental matters, including compliance with environmental laws. Certain of Keiths and Stantecs representations and warranties are qualified as to
materiality or material adverse effect. When used with respect to Keith, Stantec or the
surviving corporation, material adverse effect means any material adverse change or effect on the
business, prospects, condition (financial or otherwise), assets, liabilities or results of
operations of that entity, taken as a whole, or the ability of that entity and its subsidiaries to
consummate the merger, other than any change or effect relating to:  
    general economic, political or regulatory conditions or securities markets in
general that do not have a disproportionate effect on Keith or Stantec, as applicable;
    the industry in which Stantec and Keith operate that does not have a
disproportionate effect on Keith or Stantec, as applicable; or
    the public announcement or consummation of the transactions contemplated by the
merger agreement. Conduct of Business Pending the Merger Conduct of Keiths Business Pending Merger. Keith has agreed that until the termination of
the merger agreement or the effective time, except as expressly contemplated by the merger
agreement, it will not do any of the following without the written consent of Stantec (which
Stantec will not unreasonably withhold or delay):  
    operate other than in the ordinary course of business and consistent with past practice;
    change or amend its articles of incorporation or bylaws;
    (1) issue any shares of capital stock, or any options, warrants, convertible
securities or rights to acquire any shares of such capital stock or any other ownership
interest (except for issuances of Keith common stock issuable pursuant to Keiths stock
awards outstanding on the date of the merger agreement) or (2) sell, pledge, dispose
of, grant or encumber any material assets of Keith or any subsidiary;
    split, combine or reclassify any of its capital stock or purchase or otherwise
acquire any of its capital stock (other than in connection with the cashless exercise
of Keith stock options outstanding on the date of the merger agreement); 92




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
    declare, set aside, make or pay any dividend or other distribution, payable in cash,
stock, property or otherwise, with respect to any of its capital stock, except for
dividends by any direct or indirect wholly-owned subsidiary to Keith or any other
wholly-owned subsidiary;
    hire any additional employees other than in the ordinary course of business or
increase the compensation payable or to become payable or the benefits provided to its
directors, officers or employees, except for increases in the ordinary course of
business in salaries or wages of employees of Keith or any subsidiary who are not
directors or officers of Keith or any subsidiary, or grant any severance or termination
pay to, or enter into any employment or severance agreement with, any director, officer
or other employee of Keith or of any subsidiary, or establish or amend any arrangement
for the benefit of any current or former director, officer, employee or consultant;
    (1) acquire any corporation or other business organization or any material amount of
assets; (2) incur any indebtedness for borrowed money or issue any debt securities or
become responsible for the obligations of any person, or make any loans or advances, or
grant any security interest in any of its assets except in the ordinary course of
business and consistent with past practice; (3) enter into any material contract; (4)
authorize certain capital expenditures; or (5) enter into or amend any contract,
agreement, commitment or arrangement with respect to any matter set forth in this
paragraph;
    implement or adopt any change in its accounting principles, practices or methods,
other than as is consistent with or as may be required by law, GAAP or regulatory
guidelines;
    make any tax election or settle or compromise any material United States federal,
state, local or non-United States income tax liability;
    discharge any obligation other than the discharge of liabilities (1) reflected or
reserved against on the consolidated balance sheet of Keith and its subsidiaries as of
March 31, 2005; (2) subsequently incurred in the ordinary course of business and
consistent with past practice, or (3) subsequently incurred not in the ordinary course
of business which will not exceed US$100,000;
    amend or consent to the termination of any material contract, or amend, waive,
modify or consent to the termination of Keiths or any subsidiarys rights thereunder;
    commence or settle any material litigation; or
    announce an intention, enter into any formal or informal agreement or otherwise make
a commitment, to do any of the foregoing. Keith has agreed to use its reasonable best efforts to preserve substantially intact the
business organization of Keith and its subsidiaries, to keep available the services of the current
officers, key employees and key consultants of Keith and its subsidiaries and to preserve the
current advantageous relationships of Keith and its subsidiaries with customers, suppliers and
other persons with which Keith or any subsidiary has significant business relations. Conduct of Stantecs Business Pending Merger. Except as expressly contemplated by any
provision of the merger agreement, Stantec has agreed that until the termination of the merger
agreement or the effective time, Stantec will not, without the prior written consent of Keith,
engage in any action that could reasonably be expected to cause the merger to fail to qualify as a
reorganization within the meaning of Section 368(a) of the Code, take any action to cause Stantecs
representations and warranties or agreements and covenants required by the merger agreement to be
untrue in any material respect or take any action that would reasonably be likely to materially
delay the merger. Additional Agreements Registration Statement; Proxy Statement. Stantec and Keith have agreed that as promptly as
practicable after the execution of the merger agreement they will prepare and file with the SEC (1)
the proxy statement to be sent to Keiths shareholders relating to the meeting of Keiths
shareholders, referred to as the special meeting, and (2) a registration statement on Form F-4 in
connection with the registration under the Securities Act of the Stantec common shares to be issued
pursuant to the merger. Stantec and Keith have agreed to use their reasonable best 93




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efforts to cause the registration statement to become effective as promptly as practicable and
to mail this proxy statement/prospectus to Keiths shareholders. Keith has also agreed that neither Keiths board of directors nor any committee will withdraw
or modify, or propose to withdraw or modify, in a manner adverse to Stantec or Stantec Consulting,
its approval or recommendation of the merger agreement and the merger unless the board of directors
determines in its good faith judgment and after consultation with independent legal counsel that
the failure to so withdraw or modify its approval and recommendation of the merger agreement and
the merger would be inconsistent with its fiduciary duties to Keith and its shareholders. The parties have further agreed that at (1) the time the registration statement is declared
effective, (2) the time this proxy statement/prospectus is first mailed, (3) the time of the
special meeting and (4) the effective time, the information such party provided for inclusion in
this proxy statement/prospectus will not contain any untrue statement of a material fact or fail to
state any material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading. Shareholder Meeting. The merger agreement requires Keith to call a meeting of its
shareholders to approve the merger agreement. Keith will use its reasonable best efforts to
solicit from its shareholders proxies in favor of approval and adoption of the merger agreement.
Keith, however, is not required to encourage the adoption of the merger agreement or secure the
vote of shareholders if the board of directors of Keith withdraws its recommendation. See
Termination, Amendment and WaiverTermination below. Employee Benefit Matters. After the effective time, Stantec will cause the surviving
corporation and its subsidiaries to honor all agreements of Keith and its subsidiaries that are
applicable to any current or former employees or directors of Keith or any subsidiary. Stantec
will use reasonable best efforts to provide that employees of Keith or any subsidiary receive
credit under any employee benefit plan, program or arrangement established or maintained by the
surviving corporation or any of its subsidiaries for service accrued or deemed accrued prior to the
effective time; provided, however, that such crediting of service will not duplicate any benefit or
the funding of any such benefit. In addition, Stantec will use reasonable best efforts to waive
any limitations on benefits relating to any pre-existing conditions to the same extent such
limitations are waived under any comparable plan of Stantec or its subsidiaries and recognize, for
purposes of annual deductible and out-of-pocket limits under its medical and dental plans,
deductible and out-of-pocket expenses paid by employees of Keith and its subsidiaries in the
calendar year in which the effective time occurs. Indemnification and Directors and Officers Insurance. The merger agreement provides that
the bylaws of the surviving corporation will contain provisions no less favorable than the current
provisions in Keiths bylaws with respect to the indemnification of present and former officers and
directors of Keith. The merger agreement also provides that Stantec will maintain in effect for
six years the directors and officers liability insurance maintained by Keith at the effective
time of the merger (provided that Stantec may substitute policies that are materially no less
favorable) with respect to matters that occurred prior to the effective time of the merger and that
Stantec will not be required to expend more than an amount per year equal to 175% of current annual
premiums paid by Keith for such insurance. Obligations of Stantec Consulting.Stantec has agreed to take all action necessary to cause
Stantec Consulting to perform its obligations under the merger agreement and to consummate the
merger on the terms and subject to the conditions set forth in the merger agreement. Consents of Accountants.Keith and Stantec have agreed to use all reasonable efforts to
deliver to each other consents from their respective independent auditors with respect to the
inclusion of reports by such auditors in the registration statement. Listing. Stantec has agreed to promptly prepare and submit to the New York Stock Exchange or
the Nasdaq National Market, referred to together as the U.S. exchange, and the Toronto Stock
Exchange, listing applications covering the Stantec common shares to be issued in the merger and
will use its reasonable efforts to obtain, prior to the effective time, approval for the listing or
quotation of such Stantec common shares by the U.S. Exchange and the Toronto Stock Exchange. Stantecs Board of Directors. Stantec has agreed to take all such action as may be necessary
to cause the chief executive officer of Keith to be appointed to the board of directors of Stantec. 94




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No Solicitation of Transactions. Keith has agreed that neither it nor any subsidiary nor any
of the directors, officers or employees of it or any subsidiary will, and that it will not
authorize its and its subsidiaries representatives, to (1) facilitate any inquiries or the making
of any proposal or offer that constitutes, or may reasonably be expected to lead to, any competing
transaction, or (2) enter into or maintain or continue discussions or negotiations with any person
or entity in furtherance of such inquiries or to obtain a proposal or offer for a competing
transaction, or (3) agree to or recommend any competing transaction or enter into any letter of
intent or other agreement contemplating any competing transaction; however, the board of directors
of Keith may furnish information to, and enter into discussions with, a person who has made an
unsolicited, written, bona fide proposal or offer regarding a competing transaction, referred to as
a superior proposal, if the board of directors of Keith has determined, in its good faith judgment,
after having received the advice of a financial advisor and after having consulted with independent
legal counsel, that the furnishing of such information or entering into discussions is required to
comply with its fiduciary obligations to Keith and its shareholders. If Keith receives a superior
proposal that Keiths board of directors has decided to recommend or pursue by terminating the
merger agreement, Keith will provide Stantec with three days to match the superior proposal. Plan of Reorganization. Each party has agreed to use its reasonable best efforts to cause the
merger to qualify as a reorganization within the meaning of Section 368(a) of the Code. Keith Contribution. Prior to the effective time, at Stantecs request, Keith will deposit
with the exchange agent for the benefit of the holders of Keith shares, the lesser of (a)
US$18,000,000 and (b) the maximum amount of cash that would not preclude the merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code. Restricted Stock. Keith has agreed to cooperate to amend agreements with each holder of
Keiths unvested restricted stock. Conditions to the Merger The respective obligations of Keith, Stantec and Stantec Consulting to complete the merger are
subject to the satisfaction or waiver, where permissible, of certain conditions. Conditions to Each Partys Obligation to Effect the Merger. The obligations of Keith, Stantec
and Stantec Consulting to complete the merger are conditioned upon the following conditions being
satisfied or waived, where permissible:  
    the registration statement having been declared effective under the Securities Act
and no stop order or proceeding seeking a stop order being pending by or before the
SEC;
    Keiths shareholders having affirmatively voted to approve the merger agreement by
the requisite vote;
    no order preventing the consummation of the merger being in effect;
    any waiting period applicable to the consummation of the merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, referred to as the
HSR Act, having expired or having been terminated; and
    the Stantec common shares to be issued in the merger having been authorized for
listing on the Toronto Stock Exchange. Conditions to Obligations of Stantec and Stantec Consulting. The obligations of Stantec and
Stantec Consulting to consummate the merger depend upon the following additional conditions being
satisfied or waived, where permissible:  
    the representations and warranties of Keith being true and correct when made and as
of the effective time;
    Keith having performed in all material respects all of its obligations under the
merger agreement; 95




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
    all consents, approvals and authorizations legally required to be obtained to
consummate the merger having been obtained from all governmental authorities;
    no material adverse effect as defined in the merger agreement having occurred with
respect to Keith;
    Keith having deposited with the exchange agent for the benefit of the holders of
Keith shares the lesser of (a) US$18,000,000 and (b) the maximum amount of cash that
would not preclude the merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code;
    Keith having at least US$40,000,000 of cash or cash equivalents on deposit (less the
amount of cash deposited with the exchange agent);
    the number of dissenting shares being less than 5% of the issued and outstanding
Keith shares;
    prior to the effective time, the termination and cancellation of Keiths plan
qualified under Section 401(k) of the Code; however, the board of directors of Keith
will not terminate and cancel the 401(k) plan if Stantec provides written notice to
that effect to Keith at least two (2) days prior to the effective time; and
    Stantec having received the opinion of Shearman & Sterling LLP, counsel to Stantec,
to the effect that, for U.S. federal income tax purposes, the merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code and each of Stantec,
Stantec Consulting and Keith will be a party to the reorganization within the meaning
of Section 368(b) of the Code. Conditions to Obligations of Keith. The obligations of Keith to consummate the merger depend
on the following additional conditions being satisfied or waived, where permissible:  
    the representations and warranties of Stantec and Stantec Consulting being true and
correct when made and as of the effective time;
    Stantec and Stantec Consulting having performed in all material respects all of
their obligations under the merger agreement;
    No material adverse effect as defined in the merger agreement having occurred with
respect to Stantec;
    Keith having received the opinion of Akin Gump Strauss Hauer & Feld, counsel to
Keith, to the effect that, for U.S. federal income tax purposes, the merger will
qualify as a reorganization within the meaning of Section 368(a) of the Code and that
each of Stantec, Stantec Consulting and Keith will be a party to the reorganization
within the meaning of Section 368(b) of the Code;
    the Stantec common shares to be issued in the merger having been authorized for
listing or quotation on the U.S. exchange. Termination, Amendment and Waiver Termination. The merger agreement may be terminated at any time prior to the effective time
by action taken or authorized by the board of directors of the terminating party, notwithstanding
any requisite approval and adoption of the merger agreement by the shareholders of Keith, as
follows:  
    by mutual written consent of Stantec and Keith; or
    by either Stantec or Keith if:  
    the effective time has not occurred on or before December 31, 2005;
    Keiths shareholders fail to approve and adopt the merger agreement at the special meeting; or 96




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
    the other party breaches any representation, warranty, covenant or agreement
such that the terminating partys closing conditions are not satisfied and the
breach is either not reasonably capable of being cured or has not been cured within
15 days after notice of the breach;  
    by Stantec if:  
    (1) Keiths board of directors withdraws, modifies or changes in a manner
adverse to Stantec its recommendation of the approval and adoption of the merger
agreement, (2) the board of directors of Keith recommends to the shareholders of
Keith a competing transaction or enters into any letter of intent or any agreement
accepting any competing transaction, (3) Keith fails to include in the proxy
statement the recommendation of Keiths board of directors in favor of the approval
and adoption of the merger agreement and the merger, (4) the board of directors of
Keith fails to reaffirm its recommendation in favor of the approval and adoption of
the merger agreement and the approval of the merger within five business days after
Stantec requests in writing that such recommendation be reaffirmed, (5) through the
fault of Keith, the merger is not, prior to December 15, 2005, submitted for the
approval of the holders of Keith common stock at the special meeting, (6) Keith
intentionally breaches its obligations under Additional AgreementsNo Solicitation
of Transactions, or (7) a tender offer or exchange offer for 15% or more of the
outstanding shares of capital stock of Keith is commenced, and Keiths board of
directors fails to recommend against acceptance of such tender offer or exchange
offer by its shareholders within 10 days (each of the foregoing being referred to
as a triggering event);  
    by Keith in order to accept a superior proposal of a third party. Effect of Termination. If the merger agreement is terminated as described above, the merger
agreement will be void, and there will be no liability or obligation of any party except as to
prior breaches of the merger agreement, confidentiality, and fees and expenses (including brokers
and finders fees) described below. Fees and Expenses. All expenses incurred in connection with the merger agreement and the
transactions contemplated by the merger agreement will be paid by the party incurring such
expenses, whether or not the merger or any other transaction is consummated, except that Keith and
Stantec will each pay one-half of all expenses relating to printing, filing and mailing the
registration statement and the proxy statement and all SEC and other regulatory filing fees
incurred in connection with the registration statement and the proxy statement and the filing fee
for the forms filed under the HSR Act. Keith has agreed that if Stantec terminates the merger
agreement as a result of a triggering event or if Keith terminates the merger agreement in order to
accept a superior proposal, then Keith will pay to Stantec, no later than one business day after
the first of such events has occurred, a fee of US$3.0 million plus Stantecs expenses. General Provisions Non-Survival of Representations and Warranties. The representations, warranties and
agreements in the merger agreement and in any certificate delivered pursuant to the merger
agreement will terminate at the effective time, except that the agreements set forth in Articles I,
II, and IX and Sections 6.03(b), 6.06, 6.10 and 8.03 of the merger agreement will survive the
effective time. Governing Law. The merger agreement is governed by the laws of the State of New York and the
parties agree to submit to the jurisdiction of any New York state or federal court. 97




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Other Agreements Stockholders Support Agreement The following is a summary of certain provisions of the Stockholders Support Agreement, dated
as of April 14, 2005, among Stantec, Stantec Consulting and the stockholders listed below. This
summary is qualified in its entirety by reference to the Stockholders Support Agreement, a copy of
which is attached as Appendix B to this proxy statement/prospectus. In the stockholders support agreement, Aram H. Keith and Margie R. Keith Revocable Trust, Aram
H. Keith and Margie R. Keith granted an irrevocable proxy to Stantec to vote at any meeting of the
shareholders of Keith all of such stockholders shares of Keith: (1) in favor of the approval and
adoption of the merger agreement and approval of the merger; (2) against any action, agreement or
transaction or proposal that would result in a breach of any covenant, representation or warranty
or any other obligation or agreement of Keith under the merger agreement or that could result in
any of the conditions to Keiths obligations under the merger agreement not being fulfilled; and
(3) in favor of any other matter necessary to the consummation of the merger. Each stockholder further agreed not to sell, dispose or otherwise encumber its shares of Keith
or take any action that would make any representation or warranty in the stockholders support
agreement untrue or incorrect. Subject to the fulfillment of fiduciary obligations, each stockholder also agreed not to
solicit, discuss or otherwise facilitate any competing transaction or unsolicited proposal that
constitutes, or could lead to, a superior proposal; however, nothing in the agreement prohibits
Aram H. Keith, in his capacity as director and executive officer of Keith, from engaging in any
activity permitted pursuant to the merger agreement. The stockholders obligations under the stockholders support agreement will terminate when the
merger becomes effective or the merger agreement is terminated, whichever is earlier. As
of March 31, 2005, the stockholders owned (either beneficially or of record) 1,374,217 shares of Keith common stock, constituting approximately 17.2% of the outstanding shares of Keith
common stock (or approximately 16.8% of the outstanding shares of Keith common stock on a fully
diluted basis). Letter Agreement On April 14, 2005, Stantec and Aram H. Keith entered into a letter agreement. Pursuant to the
terms of the letter agreement, Stantec agreed to cause Stantec Consulting to extend to Mr. Keith a
formal employment offer, which would supercede all of Mr. Keiths existing employment agreements,
including the change in control letter agreement, dated as of March 22, 2001. Upon the close of
the merger, the delivery of the formal employment offer and the payment of US$525,000 by Stantec to
Mr. Keith, the existing change in control letter agreement will terminate. Confidentiality Agreement The following is a summary of certain provisions of the confidentiality agreement, dated as of
February 18, 2005, between Keith and Stantec. Pursuant to the confidentiality agreement, each of
Keith and Stantec agreed, except as required by law, to keep confidential and not to disclose or
reveal any confidential information of the other party to any person other than certain of its
representatives, and not to use such confidential information for any purpose other than in
connection with the evaluation or consummation of the merger. Confidential information does not
include, however, information which (1) is or becomes generally available to the public (other than
as a result of a wrongful disclosure), (2) was already available to the party receiving such
information on a non-confidential basis, (3) becomes available to a party on a non-confidential
basis from a person who is not prohibited from disclosing such information to such Party or (4) was
independently acquired by the party receiving such information without violating its obligations
under the confidentiality agreement. If a party is required by law to disclose any confidential
information, such party must notify the party that provided the information and, if the receiving
party is unable to obtain a protective order or waive compliance with the terms of the
confidentiality agreement, such receiving party may disclose confidential information without
liability provided that it seeks to obtain confidential treatment of the confidential information. 98




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Beneficial Ownership of Securities The following table sets forth information with respect to the beneficial ownership of Stantec
common shares, as of March 21, 2005, by each director, each executive officer and all directors and
executive officers as a group. Beneficial ownership is determined under rules issued by the SEC. Under these rules,
beneficial ownership includes any Stantec common shares as to which the individual or entity has
sole or shared voting power or investment power and includes any shares as to which the individual
or entity has the right to acquire beneficial ownership within 60 days through the exercise of any
warrant, option or other right. The inclusion in this proxy statement/prospectus of such Stantec
common shares, however, does not constitute an admission that the named individual is a direct or
indirect beneficial owner of such Stantec common shares. Stantec common shares that a person has
the right to acquire within 60 days of March 21, 2005 are deemed outstanding for the purpose of
calculating the percentage ownership of such person, but are not deemed outstanding for the purpose
of calculating the percentage owned by any other person listed. The applicable percentage of
beneficial ownership after the merger is based upon 18,937,019 Stantec common shares outstanding
before the merger as of April 13, 2005, as adjusted to reflect
approximately 3,898,193 Stantec
common shares to be issued pursuant to the merger. Before the Merger
    
    
    After the MergerNumber of
    
    
    Percentage of
    
    
    Number of
    
    
    Percentage ofShares
    
    
    Class
    
    
    Shares
    
    
    ClassBeneficially
    
    
    Beneficially
    
    
    Beneficially
    
    
    BeneficiallyName of Beneficial Owner(1) (2)
    
    Owned
    
    
    Owned
    
    
    Owned
    
    
    OwnedRonald Triffo
    
    
    617,091
    
    
    
    3.2
    %
    
    
    617,091
    
    
    
    2.7
    %Anthony P. Franceschini
    
    
    332,025
    
    
    
    1.7
    %
    
    
    332,025
    
    
    
    1.4
    %Aram H. Keith (3)
    
    
    
    
    
    
    
    
    
    
    640,385
    
    
    
    2.8
    %Neilson A. Dutch Bertholf, Jr.
    
    
    10,000
    
    
    
    *
    
    
    
    10,000
    
    
    
    *Robert J. Bradshaw
    
    
    55,000
    
    
    
    *
    
    
    
    55,000
    
    
    
    *E. John (Jack) Finn
    
    
    29,000
    
    
    
    *
    
    
    
    29,000
    
    
    
    *William D. Grace
    
    
    18,000
    
    
    
    *
    
    
    
    18,000
    
    
    
    *Susan E. Hartman
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Robert R. Mesel
    
    
    2,500
    
    
    
    *
    
    
    
    2,500
    
    
    
    *Donald W. Wilson
    
    
    79,783
    
    
    
    *
    
    
    
    79,783
    
    
    
    *Jeffrey S. Lloyd
    
    
    23,683
    
    
    
    *
    
    
    
    23,683
    
    
    
    *Raymond L. Alarie
    
    
    14,248
    
    
    
    *
    
    
    
    14,248
    
    
    
    *Mark E. Jackson
    
    
    23,194
    
    
    
    *
    
    
    
    23,194
    
    
    
    *W. Barry Lester
    
    
    15,709
    
    
    
    *
    
    
    
    15,709
    
    
    
    *All directors and executive
officers as a group
    
    
    1,220,233
    
    
    
    6.4
    %
    
    
    1,860,618
    
    
    
    8.1
    %
   *
    
    Indicates less than 1%.(1)
    
    Unless otherwise provided, the address for each Beneficial Owner is 10160  112 Street,
Edmonton, Alberta, Canada T5K 2L6.(2)
    
    Unless otherwise noted, each person has sole voting and investment power over the shares
listed opposite his or her name.(3)
    
    Stantec has agreed that, upon consummation of the merger, it will appoint Aram H. Keith,
currently Chairman and Chief Executive Officer of Keith, to the Stantec board of directors.
Mr. Keith has indicated that he intends to elect to receive a mix of cash and Stantec common
shares as merger consideration in exchange for the 1,374,217 shares of Keith common stock he
beneficially owns. Based on the closing sale price of Stantec common shares on the Toronto
Stock Exchange on May 6, 2005, it is estimated that the Aram H. Keith and Margie R. Keith
Revocable Trust, of which Aram H. Keith is a trustee, will receive US$15,116,387 and 640,385 Stantec common shares as merger consideration. 99




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Description Of Stantec Share Capital The following is a summary description of the share capital of Stantec, which does not purport
to be complete and is qualified in its entirety by reference to the detailed provisions of the
Certificate of Incorporation and Bylaws of Stantec. The authorized share capital of Stantec consists of an unlimited number of preferred shares,
issuable in series, and an unlimited number of common shares of which, as at April 13, 2005, no
preferred shares and 18,937,019 common shares have been issued and are outstanding. The material
rights, privileges, restrictions and conditions attached to the preferred shares and the common
shares are summarized below. Preferred Shares The preferred shares may be issued in one or more series, each series to consist of such
number of shares and to have such rights, privileges, restrictions and conditions as may, before
the issue thereof, be determined by the board of directors of Stantec. The holders of the
preferred shares as a class are not entitled to receive notice of or to attend any meeting of the
shareholders of Stantec and are not entitled to vote at any such meeting, except to approve
amendments to the terms of the preferred shares as a class or as required by law. Each series of
preferred shares will rank pari passuwith each other series of preferred shares with respect to
the entitlement to dividends or distribution of assets in the event of the liquidation, dissolution
or winding-up of Stantec. The preferred shares as a class rank ahead of the common shares with
respect to entitlement to dividends and distribution of assets in the event of the liquidation,
dissolution or winding-up of Stantec. Common Shares The holders of common shares are entitled to receive, as and when declared by the board of
directors of Stantec, dividends in such amount and in such form as the board of directors of
Stantec may from time to time determine. The holders of the common shares are entitled to receive
notice of and to attend all meetings of shareholders of Stantec and have one vote for each common
share held at all such meetings, except for meetings at which only holders of another specified
class or series of shares of Stantec are entitled to vote separately as a class or series. The
common shares rank behind the preferred shares with respect to entitlement to dividends and
distribution of assets in the event of liquidation, dissolution or winding-up of Stantec. 100




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Comparison of Shareholders Rights General The rights and privileges of holders of Keith common stock are currently governed principally
by:  
    the laws of California, particularly the California Corporations Code, referred to
in this proxy statement/prospectus as the CCC;
    Keiths Amended and Restated Articles of Incorporation, referred to in this proxy
statement/prospectus as Keiths charter; and
    Keiths Amended and Restated bylaws, referred to in this proxy statement/prospectus
as Keiths bylaws. As a result of the merger, holders of Keith common stock who receive Stantec common shares
will have the rights and privileges of those shares governed principally by:  
    the Canada Business Corporations Act, referred to in this proxy statement/prospectus
as the CBCA;
    Stantecs Restated Articles of Incorporation, which are referred to in this proxy
statement/prospectus as Stantecs charter; and
    Stantecs bylaws, which are referred to in this proxy statement/prospectus as
Stantecs bylaws. While the rights and privileges of shareholders of a corporation amalgamated under the CBCA
such as Stantec are, in many instances, comparable to those of shareholders of a California
corporation such as Keith, there are material differences. The following is a summary of the
material differences between the rights of holders of Keith common stock and the rights of holders
of Stantec common shares as of the date of this proxy statement/prospectus. These differences
arise principally from differences between the CCC and the CBCA and between Keiths charter and
bylaws and Stantecs charter and bylaws. This summary does not purport to be complete and is qualified in its entirety by reference to
the CCC and the CBCA and the charter and bylaws of Keith and the charter and bylaws of Stantec. Classes and Series of Capital Stock Keith Under Keiths charter, Keith may issue up to 100,000,000 shares of common stock and 5,000,000
shares of preferred stock. As of April 2, 2005, 7,985,085 shares of Keith common stock were
outstanding and no shares of Keith preferred stock were outstanding. Stantec Under Stantecs charter, Stantec is authorized to issue an unlimited number of common shares
and an unlimited number of preferred shares, issuable in series. As
of April 13, 2005, 18,937,019
common shares were outstanding and no preferred shares were issued and outstanding. For a
description of the different classes of shares Stantec may issue, see Description of Stantec Share
Capital. Annual Meetings of Shareholders Keith Under the CCC, if a corporation fails to hold an annual meeting for the election of directors
for a period of 60 days after the date designated in the corporations bylaws or, if no date has
been designated, for a period of 15 months after the organization of the corporation or after its
last annual meeting, the superior court of the proper county may order a meeting to be held upon
the application of any shareholder after notice to the corporation giving it an opportunity to be
heard. The shares represented at a meeting called by the superior court either in person or by
proxy and entitled to vote at the meeting constitute a quorum for the purposes of the meeting, even
if the corporations articles of incorporation or bylaws provide for a different quorum
requirement. Keiths bylaws provide that the annual meeting will be held on such date and at such
time as may be fixed by the board of directors. 101




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Stantec Under the CBCA, the directors of Stantec must call an annual meeting of shareholders not later
than 15 months after the last preceding annual meeting and not later than six months after the end
of Stantecs preceding financial year. Subject to certain provisions of the CBCA, the holders of
not less than 5% of the issued and outstanding shares of Stantec that carry the right to vote at
the meeting sought to be held may request that the directors call an annual meeting. If the
directors do not call the meeting within 21 days after receiving the requisition, any shareholder
who signed such requisition may call the meeting. The CBCA gives holders a similar right to call a
special meeting of shareholders, as described under the caption Special Meetings of Shareholders
below. If for any reason it is impracticable to call a meeting or to conduct a meeting in the
manner in which it is otherwise to be called or as prescribed by Stantecs bylaws or the CBCA, any
director or shareholder entitled to vote at that meeting may apply to a court for an order calling
the meeting and setting forth the manner to hold and conduct the meeting. The CBCA requires
meetings of shareholders to be held in Canada unless the charter specifies a place outside of
Canada where such meetings may be held. Stantecs charter does not permit shareholders meetings to
be held outside Canada. Special Meetings of Shareholders Keith Under the CCC, special meetings of shareholders may be called by the board of directors, the
chairman of the board, the president or the holders of shares entitled to cast not less than 10% of
the votes at the meeting or such additional persons as may be provided in the articles of
incorporation or bylaws. Neither Keiths charter nor bylaws permit any additional persons to call
a special meeting. Stantec Under the CBCA, special meetings of shareholders may be called at any time by the board of
directors. Stantecs bylaws provide that meetings of shareholders may be called by any two
directors upon not less than 21 days notice. In addition, subject to certain provisions of the
CBCA, the holders of not less than 5% of the issued and outstanding shares of Stantec that carry
the right to vote at the meeting sought to be held may request that the directors call a meeting of
shareholders for any purpose. If the directors do not call the meeting within 21 days after
receiving such a requisition, any shareholder who signed the requisition requesting the directors
to call the meeting may call the meeting. The CBCA also requires meetings of shareholders to be
held in Canada, unless the charter specifies a place outside of Canada where such meeting may be
held. Stantecs charter does not permit shareholders meetings to be held outside Canada. Quorum of Shareholders Keith Under the CCC, a quorum consists of a majority of the shares entitled to vote present in
person or represented by proxy, unless the articles of incorporation provide otherwise, but in no
event will a quorum consist of less than one-third of the shares entitled to vote at the meeting or
of more than a majority of the shares entitled to vote at the meeting. Keiths charter does not
specify any requirements for a quorum of shareholders and Keiths bylaws are consistent with the
CCC. Stantec Under the CBCA, unless the corporations bylaws otherwise provide, a quorum of shareholders is
present at a meeting of shareholders, irrespective of the number of persons actually present at the
meeting, if the holders of a majority of the shares who are entitled to vote are represented in
person or by proxy at the meeting. Stantecs bylaws provide that a quorum for a meeting of
shareholders will be at least 2 persons each holding or representing by valid proxy outstanding
fully voting preferred shares or common shares. 102




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Shareholder Action Without a Meeting Keith Under the CCC, unless otherwise provided in the articles of incorporation, any action that may
be taken at any annual or special meeting of shareholders may be taken without a meeting and
without prior notice if a consent in writing, setting forth the action so taken, is signed by the
holders of outstanding shares having not less than the minimum number of votes that would be
necessary to authorize or take that action at a meeting at which all shares entitled to vote
thereon were present and voted. However, directors may be elected without a meeting only by
unanimous written consent of all shares entitled to vote for the election of directors; provided
that the shareholders may elect a director to fill a vacancy, other than a vacancy created by
removal, by the written consent of a majority of the outstanding shares entitled to vote. Stantec Under the CBCA, shareholder action may be taken without a meeting of shareholders by written
resolution signed by all shareholders who would be entitled to vote on the matter at a meeting of
shareholders except with respect to a meeting called for the purpose of (1) removing a director or
the auditor from office or (2) electing or appointing a director or auditor following the
resignation, removal or expiry of term of office of the director or auditor where, in either case,
the director or auditor has submitted a written statement giving the reasons why he opposes the
proposed action or resolution. Stantecs bylaws provide that, except where a written statement is
submitted by a director or auditor under the CBCA, a resolution in writing signed by all
shareholders entitled to vote on that resolution at a shareholders meeting is as valid as if it had
been passed at a shareholders meeting. Shareholder Nominations and Proposals Keith Neither the CCC nor Keiths articles or bylaws contain provisions governing shareholder
nominations of persons for election as directors or shareholder proposals to be considered at an
annual or special meeting. However, pursuant to Rule 14a-8 under the Exchange Act, a shareholder
can have its proposal disclosed in a companys proxy materials and presented to shareholders for a
vote, provided the shareholder follows the procedures and is not substantively excludable under the
SECs shareholder proposal rule. Stantec Under the CBCA, shareholder proposals may be submitted only at annual meetings of
shareholders. A shareholder entitled to vote at an annual meeting of shareholders and who holds
(1) at least 1% of the total number of outstanding voting shares of Stantec or (2) shares having a
fair market value of at least C$2,000, may submit to Stantec notice of any matter that the
shareholder proposes to raise at the meeting and discuss at the meeting any matter in respect of
which the person would have been entitled to submit a proposal. Stantec is not required to set out
the proposal in its management proxy circular if, among other things, the proposal is not submitted
to Stantec at least 90 days before the anniversary date of the notice sent to shareholders in
connection with Stantecs previous annual meeting of shareholders. A shareholder proposal may
include nominations for the election of directors if the proposal is signed by the holders of not
less than 5% of the issued and outstanding shares that carry the right to vote at the meeting to
which the proposal is to be presented, but this requirement does not preclude nominations made at a
meeting of shareholders. As a foreign private issuer, Rule 14a-8 will not apply to Stantec. Access to Corporate Records, Financial Statements and Related Matters Keith The CCC and Keiths bylaws permit a shareholder holding at least 5% in the aggregate of the
outstanding voting shares of a corporation or who holds at least 1% of those voting shares and has
filed a Schedule 14A with the SEC has the right to (1) inspect and copy the record of shareholders
names and addresses and shareholdings during usual business hours upon five business days prior
written demand upon the corporation, and (2) obtain from the transfer agent for the corporation,
upon written demand and the tender of its usual charges for such a list, a list of the names and
addresses of the shareholders who are entitled to vote for the election of directors and their
shareholdings. The list shall be made available on or before the later of five business days after
the demand is received or the date specified therein as the date as of which the list is to be
compiled. Any delay by the corporation or the transfer agent in complying with such a shareholder
demand beyond the time limits specified therein will give the shareholder a right to obtain from
the superior court an order postponing any shareholders meeting previously noticed for a period
equal to the period of such delay. In addition, the record of shareholders shall be open to
inspection and copying by any shareholder or holder of a voting trust certificate at any time
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hours upon written demand on the corporation for a purpose reasonably related to such holders
interests as a shareholder or holder of a voting trust certificate. Finally, the accounting books
and records and minutes of proceedings of the shareholders and the board of directors and
committees thereof will be open to inspection upon the written demand on the corporation of any
shareholder at any reasonable time during usual business hours for a purpose reasonably related to
such holders interests as a shareholder. Stantec Under the CBCA, a corporation is required to make available to its shareholders and creditors
and their personal representatives, specified books and records during usual business hours of the
corporation. These persons may take extracts from these books and records free of charge. Stantec
shareholders or creditors and their personal representatives may also access Stantecs securities
register by submitting a request and an affidavit certifying, among other things, that the list
will only be used for the purposes set out in the CBCA. An extract of the securities register may
be taken upon payment of a reasonable fee. Charter Amendments Keith Under the CCC, amendments to a corporations articles of incorporation generally require the
approval of the board of directors and the approval of holders of a majority of the outstanding
shares entitled to vote, either before or after the approval by the board of directors. In
addition, certain amendments must also be approved by the holders of a majority of the outstanding
shares of a class, whether or not such class is entitled to vote thereon by the articles of
incorporation. These amendments include:  
    Certain increases or decreases in the aggregate number of authorized shares of such
class;
    An exchange, reclassification, or cancellation of all or part of the shares of such
class, including a reverse stock split but excluding a stock split;
    An exchange, or right of exchange, of all or part of the shares of another class
into the shares of such class;
    A change in the rights, preferences, privileges or restrictions of the shares of
such class;
    Creation of a new class of shares having rights, preferences or privileges prior to
the shares of such class, or an increase in the rights, preferences or privileges or
the number of authorized shares of any class having rights, preferences or privileges
prior to the shares of such class;
    In the case of preferred shares, the division of the shares of any class into series
having different rights, preferences, privileges or restrictions or the authorization
of the board of directors to do so; and
    Cancellation of dividends on the shares of such class which have accrued but have
not been paid. Stantec Under the CBCA, any amendment to a corporations charter generally requires approval by
special resolution. Generally speaking, such special resolution must be passed by a vote of not
less than two-thirds of the votes cast by shareholders who voted in respect of the resolution or
signed by all the shareholders entitled to vote on the resolution. In addition, if an amendment
affects certain rights of holders of a particular class or series of shares, the approval of
two-thirds of the outstanding shares of that class or series is required. Bylaw Amendments Keith Under the CCC and Keiths bylaws, bylaws may be adopted, amended or repealed either by
approval of a majority of the outstanding shares entitled to vote or by the approval of the board;
provided, however, that after the issuance of shares, a bylaw specifying or changing a fixed number
of directors or the maximum or minimum number or changing from a fixed to a variable board of
directors or vice versa may only be adopted by approval of a majority of the outstanding shares
entitled to vote. 104




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Stantec The CBCA provides that unless a corporations charter or bylaws otherwise provide, the
directors may, by resolution, make, amend or repeal any bylaws that regulate the business or
affairs of the corporation. Where the directors make, amend or repeal a bylaw, they are required
under the CBCA to submit the bylaw, amendment or repeal to the shareholders at the next meeting of
shareholders, and the shareholders may confirm, reject or amend the bylaw, amendment or repeal by
an ordinary resolution. An ordinary resolution is a resolution passed by a majority of the votes
cast by shareholders who voted in respect of the resolution. A bylaw, or an amendment or a repeal
of a bylaw, is effective from the date of the resolution of the directors until it is confirmed,
amended or rejected by the shareholders or until the next meeting of shareholders if the bylaw,
amendment or repeal is not submitted to the shareholders at that time. Vote on Sale or Lease of Assets Keith Under the CCC, a corporation may sell, lease, convey, exchange, transfer, or otherwise dispose
of all or substantially all of its assets when approved by the board, and, unless the transaction
is in the usual and regular course of its business, approved by a majority of the outstanding
shares entitled to vote, either before or after approval by the board and before or after the
transaction. Stantec Under the CBCA, the sale, lease or exchange of all or substantially all the assets of a
corporation other than in the ordinary course of business requires the approval of the shareholders
by special resolution. This resolution must be passed by a vote of not less than two-thirds of the
votes cast by shareholders who voted in respect of the resolution, each share carrying the right to
vote whether or not it otherwise carries the right to vote. The holders of each class or series of
shares that is affected differently by the transaction from the shares of any other class or series
are entitled to vote separately as a class or series. Dissent rights, described further below, are
applicable to such a transaction. Vote on Extraordinary Corporate Actions Keith Under the CCC, a reorganization, which includes a merger, an exchange reorganization and a
sale-of-assets reorganization, must be approved by a majority of the outstanding shares entitled to
vote of each class of each corporation the approval of whose board of directors is required.
However, unless provided in the articles or bylaws, no approval of any class of outstanding
preferred shares is required if the rights, preferences, privileges and restrictions granted to or
imposed upon that class of shares remain unchanged. Approval of the outstanding shares entitled to vote is not required in the case of any
corporation if that corporation, its shareholders immediately before the reorganization, or both
will own, immediately after the reorganization, equity securities of the surviving or acquiring
corporation possessing more than five-sixths of the voting power of the surviving or acquiring
corporation. A merger must be approved by a majority of the outstanding shares entitled to vote of
the surviving corporation if any amendment is made to its articles of incorporation which would
otherwise require such approval. Furthermore, a merger or sale-of-assets reorganization must be
approved by a majority of the outstanding shares entitled to vote of any class of a corporation if
holders of shares of that class receive shares of the surviving or acquiring corporation having
different rights, preferences, privileges or restrictions than those surrendered. Finally, if the
terms of a merger or sale-of-assets reorganization provide that a class or series of preferred
shares is to have distributed to it a lesser amount than would be required by the articles of
incorporation, then the reorganization must be approved by the same percentage of outstanding
shares of that class or series which would be required to approve an amendment of the articles of
incorporation to provide for the distribution of that lesser amount. Notwithstanding the foregoing, a reorganization must be approved by all shareholders of any
class or series if, as a result of the reorganization, the holders of that class or series become
personally liable for any obligations of a party to the reorganization, unless all holders of that
class or series have dissenters rights. Moreover, a merger 105




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must be approved by all of the outstanding shares entitled to vote of a corporation if the
merger agreement provides for cancellation without consideration of all the outstanding shares of
that corporation. Stantec Under the CBCA, certain extraordinary corporate actions, such as certain amalgamations,
continuances, and sales, leases or exchanges of all or substantially all the property of a
corporation other than in the ordinary course of business, and other extraordinary corporate
actions such as liquidations, dissolutions and (if not ordered by a court) arrangements, are
required to be approved by special resolution. A special resolution is a resolution passed at a
meeting by not less than two-thirds of the votes cast by the shareholders who voted in respect of
the resolution. In certain cases, a special resolution to approve an extraordinary corporate
action is also required to be approved separately by the holders of a class or series of shares,
including in certain cases a class or series of shares not otherwise carrying voting rights.
Dissent rights, described further below, are applicable to such transactions. Preemptive Rights Keith The CCC provides that shareholders may have a preemptive right if such a right is specifically
provided in the corporations articles of incorporation. Keiths charter does not provide for
preemptive rights. Stantec The CBCA provides that shareholders may have a preemptive right if such a right is
specifically provided in the corporations articles of incorporation. Stantecs charter does not
provide for preemptive rights. Dissent Rights Keith Shareholders of a California corporation who dissent from a merger or reorganization and hold
dissenting shares are entitled to be paid the fair market value for their shares. Dissenters
rights entitle the holder to require the corporation to purchase their dissenting shares for cash
at their fair market value determined as of the day before the first announcement of the
reorganization. Dissenting shares are generally shares which:  
    were not, immediately prior to the reorganization, listed on a national securities
exchange or designated as a Nasdaq National Market security (not including any shares
with respect to which there exists any restriction on transfer imposed by the
corporation or by any law or regulation);
    were outstanding on the date for determination of shareholders entitled to vote on
the reorganization and were not voted in favor of the reorganization;
    the dissenting shareholder has demanded that the corporation purchase at their fair
market value; and
    the dissenting shareholder has submitted to be endorsed with a statement that the
 shares are dissenting shares. Stantec The CBCA provides that shareholders of a corporation are entitled to vote on certain matters,
to exercise dissent rights and to be paid the fair value of their shares in connection therewith.
The matters giving rights to dissent rights include:  
    any amalgamation with another corporation (other than with certain affiliated
corporations);
    an amendment to a corporations charter to add, change or remove any provisions
restricting or constraining the issue, transfer or ownership of shares;
    an amendment to a corporations charter to add, change or remove any restriction
upon the business or businesses that such corporation may carry on;
    a continuance under the laws of another jurisdiction; 106




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
    a sale, lease or exchange of all or substantially all the property of a corporation
other than in the ordinary course of business;
    a going-private transaction or a squeeze-out transaction;
    a court order permitting a shareholder to dissent in connection with an application
to the court for an order approving an arrangement proposed by a corporation; or
    certain amendments to a corporations charter that require a separate class or
series vote, provided that a shareholder is not entitled to dissent if an amendment to
a corporations charter is effected by a court order approving a reorganization or by a
court order made in connection with an action for an oppression remedy, unless dissent
rights are granted or ordered by the court. Under the CBCA, a shareholder may, in addition to exercising dissent rights, seek an
oppression remedy (as discussed further below) for any act or omission of a corporation which is
oppressive, unfairly prejudicial to or that unfairly disregards a shareholders interests. Stock Repurchases Keith Under the CCC, a corporation may redeem any or all shares which are redeemable at its option
by giving notice of redemption and by payment or deposit of the redemption price. When a
corporation reacquires its own shares, those shares are restored to the status of authorized but
unissued shares, unless the articles of incorporation prohibit them from being reissued. Keiths
charter does not contain any such prohibition on reissuance. Stantec Under the CBCA, except in certain specified circumstances, a corporation may acquire its own
shares unless there are reasonable grounds for believing that the corporation is or would be, after
payment for such shares, unable to pay its liabilities as they become due or if the realizable
value of the corporations assets would, as a result of the payment for such shares, be less than
the aggregate of its liabilities and stated capital. Under the CBCA, a corporation that acquires
its own shares must cancel such shares and must deduct from its stated capital account an amount
equal to the stated capital attributable to the repurchased shares. Number and Qualification of Directors Keith The CCC provides that the minimum number of directors shall be three, provided that as long as
there is only one shareholder, the minimum number of directors is one. The bylaws shall set forth
the number of directors of the corporation; or that the number of directors shall be not less than
a stated minimum nor more than a stated maximum (unless such provision is contained in the
articles, in which case it may only be changed by an amendment of the articles). Under the CCC, a
corporations articles of incorporation may provide for the election of one or more directors by
the holders of the shares of any class or series. Keiths bylaws provide that the number of
directors will be authorized by resolution of the board of directors or the shareholders, provided
that such number will not be less than five or greater than nine. Stantec The CBCA requires that a corporation whose securities are publicly traded have at least three
directors, at least two of whom are not officers or employees of such corporation or any of its
affiliates. In addition, the CBCA requires that at least 25% of the directors of a corporation be
resident Canadians. Stantecs bylaws require that at least 50% of the directors be resident
Canadians, provided that if the corporation has less than four directors, at least two must be
resident Canadians. Under Stantecs charter, the minimum number of directors is three and the maximum number of
directors is twenty. Stantecs bylaws provide that a directors term of office is from the date of
the meeting at which he is elected until the next annual meeting following the election, provided
that if an election of directors is not held at that meeting, the incumbent directors continue in
office until their successors are elected. 107




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Filling Vacancies on the Board of Directors Keith The CCC provides that, unless otherwise provided in the articles of incorporation or bylaws
and except for a vacancy created by the removal of a director, vacancies on the board of directors
may be filled by approval of the board of directors or, if the number of directors then in office
is less than a quorum, by (1) the unanimous written consent of the directors then in office, (2)
the affirmative vote of a majority of the directors then in office at a meeting, or (3) the sole
remaining director. Unless the articles or a bylaw adopted by the shareholders provide that the
board may fill vacancies occurring in the board by reason of the removal of directors, such
vacancies may be filled only by approval of the shareholders. In addition, shareholders may elect
a director at any time to fill any vacancy not filled by directors. Any such election by written
consent, other than to fill a vacancy created by removal (which requires the unanimous consent of
all shares entitled to vote), requires the consent of a majority of the outstanding shares entitled
to vote. If, after filling any vacancy, the directors then in office constitute less than a
majority of the entire board, then (1) any holders of 5% or more of the outstanding shares having
the right to vote for those directors may call a special meeting of shareholders, or (2) the
superior court may, upon application of shareholders holding at least 5% of the outstanding shares
having the right to vote for these directors, order a special meeting for the election of the
entire board of directors. Keiths bylaws provide that vacancies, except those existing as a result of a removal of a
director, may be filled by a majority of the remaining directors, even though less than a quorum,
or by a sole remaining director, and each director so elected will hold office until the next
annual meeting and until such directors successor has been elected and qualified. In addition,
shareholders may elect a director at any time to fill any vacancy not filled by directors. Any
such election by written consent, other than to fill a vacancy created by removal, requires the
consent of a majority of the outstanding shares entitled to vote. Stantec Under the CBCA, a quorum of directors may appoint one or more directors to fill a vacancy
among the directors (except a vacancy resulting from an increase in the number or the minimum or
maximum number of directors or a failure to elect the number or minimum number of directors
provided for in the articles) and any director so appointed will hold office for the unexpired term
of the directors predecessor in office. Under Stantecs bylaws, the shareholders may, by ordinary
resolution, fill any vacancy on the board of directors. In the case of a vacancy resulting
otherwise than from an increase in the number or minimum number of directors or from a failure to
elect the number or minimum number of directors required by the articles of incorporation, a quorum
of directors may fill a vacancy by resolution. Removal of Directors Keith Under the CCC, directors generally may be removed, with or without cause, by a majority of the
outstanding shareholders entitled to vote at an election of directors, subject to certain
exceptions. Stantec Under the CBCA and Stantecs bylaws, the shareholders of Stantec may by ordinary resolution at
a special meeting remove any director or directors from office. This resolution must be passed by
a vote of not less than a majority of the votes cast by shareholders who voted in respect of the
resolution. Transactions with Directors and Officers Keith Under the CCC, no contract or transaction between a corporation and one or more of its
directors, or between a corporation and any corporation, firm or association in which one or more
of its directors has a material financial interest, is void or voidable solely because of that
relationship or because that director is present at the meeting which authorizes the contract or
transaction, if the material facts of the transaction and such directors interest are fully
disclosed and approved by the shareholders or the directors of the corporation. 108




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As to contracts or transactions not approved as provided above, the person asserting the
validity of the contract or transaction sustains the burden of proving that the contract or
transaction was just and reasonable to the corporation at the time it was authorized, approved or
ratified. Stantec Under the CBCA, no material contract or transaction between Stantec and one or more of its
directors or officers or between Stantec and another entity of which a director or officer of
Stantec is a director or officer or in which one or more of its directors or officers has a
material interest, is void or voidable as a result of that relationship or because that director is
present at or is counted to determine the presence of a quorum at a meeting of directors or a
committee of directors that authorized the material contract or transaction if:  
    the director or officer disclosed his interest in accordance with the CBCA;
    the contract or transaction was approved by the directors; and
    the contract or transaction was reasonable and fair to Stantec at the time it was approved. Additionally, Stantecs bylaws require a director who is a party to, or who is a director or
officer of or has a material interest in any person who is a party to a material contract with the
corporation, to disclose such interest to the corporation. Such director is prohibited from voting
on any resolution to approve the contract, except as permitted by the CBCA. Director and Officer Liability and Indemnification Keith The CCC allows a corporation to include a provision in its articles limiting or eliminating
the liability of directors for monetary damages in an action brought by or in the right of the
corporation for breach of a directors fiduciary duties to the corporation and its shareholders,
except where such breaches include, but are not limited to, (1) acts or omissions that involve
intentional misconduct or knowing violations of the law, (2) the receipt by the director of an
improper personal benefit, (3) the payment of unlawful dividends, the making of unlawful asset
distributions or the unlawful creation or guarantee of financial obligations and (4) for acts or
omissions that a director believes or should reasonably believe to be contrary to the best
interests of the corporation or its shareholders or that involve the absence of good faith on the
part of the director. Keiths charter eliminates the liability of directors for monetary damages to
the fullest extent permitted under the CCC. Keiths charter permits indemnification of directors
and officers. The CCC allows a corporation to indemnify directors, officers, employees and agents. Under
the CCC, a corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any proceeding by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, against expenses, judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection with the proceeding
if that person acted in good faith and in a manner the person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to
believe the conduct of the person was unlawful. In the context of a derivative action in the name
of or by the corporation to procure a judgment in its favor, the corporation may provide
indemnification of expenses only. However, under the CCC and Keiths bylaws, no indemnification is permitted for any of the
following:  
    In respect of any claim as to which the person is adjudged to be liable to the
corporation in the performance of that persons duty to the corporation and its
shareholders, unless the court determines that the person is entitled to indemnity for
expenses;
    Amounts paid in settling or otherwise disposing of a pending action without court
approval;
    Expenses incurred in defending a pending action which is settled or otherwise
disposed of without court approval;
    Where it appears that indemnification would be inconsistent with a provision of the
articles, bylaws, a resolution of the shareholders, or an agreement in effect at the
time of the accrual of the alleged cause of action asserted in the proceeding in which
the expenses were incurred or other amounts were paid, which prohibits or otherwise
limits indemnification; or 109




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
    Where it appears that indemnification would be inconsistent with any condition
expressly imposed by a court in approving a settlement. Any indemnification must be authorized by any of the following:  
    A majority vote of a quorum consisting of directors who are not parties to the proceeding;
    If such a quorum of directors is not obtainable, by independent legal counsel in a written opinion;
    Approval of the shareholders with the shares owned by the person to be indemnified
not being entitled to vote; or
    The court in which the proceeding is or was pending upon application made by the
corporation, the agent, the attorney or other person rendering services in connection
with the defense. Notwithstanding the foregoing, if an agent of the corporation has been successful on the
merits in defense of any proceeding, the agent will be indemnified against expenses reasonably
incurred in connection with the proceeding. The CCC and Keiths bylaws expressly authorize Keith to purchase and maintain insurance
against liability for any agent of the corporation whether or not the corporation would have the
power to indemnify the agent. The CCC and Keiths bylaws also allow for the advance payment of an
agents expenses prior to the final disposition of an action, provided that the agent undertakes to
repay any such amount advanced if it is later determined that the agent is not entitled to
indemnification. Stantec Under the CBCA, a corporation may not, by contract, resolution, bylaw or its charter, limit
the liability of its directors for breaches of their fiduciary duties or their duty to act in
accordance with the CBCA. However, the corporation may indemnify a director or officer, a former
director or officer or a person who acts or acted at the corporations request as a director or
officer of another entity, against all costs, charges and expenses, including an amount paid to
settle an action or satisfy a judgment, reasonably incurred by him or her because of any civil,
criminal or administrative action or proceeding to which he or she is made a party by reason of
that association with the corporation or the other entity, if: (1) that person acted honestly and in good faith with a view to the best interests of
the corporation; and (2) in the case of a criminal or administrative action or proceeding that is enforced by
a monetary penalty, that person had reasonable grounds for believing that his or her conduct
was lawful. These individuals are entitled to indemnity from the corporation if the individual was not
judged by the court or other competent authority to have committed any fault or omitted to do
anything that the individual ought to have done and fulfilled the conditions set out in (1) and (2)
above. A corporation, an individual or another entity referred to above may apply to a court for
an order approving an indemnity made pursuant to the CBCA and the court may so order and make any
further order that it sees fit if the individual fulfills the conditions set out in (1) and (2)
above. Stantecs bylaws provide for indemnification of directors and officers to the fullest extent
authorized by the CBCA. In addition, Stantecs bylaws permit the indemnification of employees and
agents and give employees and agents who achieve success as a defendant in an action an entitlement
to indemnification. Finally, Stantecs bylaws provide that the corporation may purchase and
maintain insurance for directors and officers. The CBCA does not expressly provide for advance payment of an indemnified persons expenses.
However, such advance payment is permitted provided that the individual must repay the money
received if it does not fulfill the conditions set out in (1) and (2) above. Insofar as indemnification for liabilities arising under the Securities Act may be permitted
to directors, officers or persons controlling the registrant pursuant to the foregoing provisions,
the registrant has been informed that, in the opinion of the U.S. Securities and Exchange
Commission, such indemnification is against public policy as expressed in the Securities Act and is
therefore unenforceable. 110




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Fiduciary Duties of Directors Keith Directors of corporations incorporated under the CCC have fiduciary obligations to the
corporation and its shareholders. Pursuant to these fiduciary obligations, the directors must act
in good faith in the best interests of the corporation and its shareholders and with such care,
including reasonable inquiry, as an ordinarily prudent person in a like position would use under
similar circumstances. Stantec Directors of corporations governed by the CBCA have fiduciary obligations to the corporation.
Under the CBCA, directors of a corporation must act honestly and in good faith with a view to the
best interests of the corporation, and must exercise the care, diligence and skill that a
reasonably prudent person would exercise in comparable circumstances. Derivative Action Keith A shareholder may bring a derivative action in California on behalf of the corporation only if
it satisfies both of the following two conditions: 1) The plaintiff was a shareholder of the corporation at the time of the transaction of which
he or she complains. The CCC provides that any shareholder who does not meet this requirement may
nevertheless be allowed, in the discretion of the court, to maintain the action if:  
    there is a strong prima facie case in favor of the claim asserted on behalf of the corporation;
    no other similar action has been or is likely to be instituted;
    the plaintiff acquired the shares before there was disclosure to the public or to
the plaintiff of the wrongdoing of which plaintiff complains;
    unless the action can be maintained the defendant may retain a gain derived from
defendants willful breach of a fiduciary duty;
    the requested relief will not result in unjust enrichment of the corporation or any
shareholder of the corporation; and 2) The plaintiff alleges in the complaint with particularity plaintiffs efforts to secure
from the board the action plaintiff desires, or the reasons for not making such effort, and alleges
further that plaintiff has either informed the corporation or the board in writing of the ultimate
facts of each cause of action against each defendant or delivered to the corporation or the board a
true copy of the complaint which plaintiff proposes to file. Stantec Under the CBCA, a complainant (as defined below under Oppression Remedy) may apply to the
applicable court for leave to bring an action in the name of and on behalf of a corporation or any
subsidiary, or to intervene in an existing action to which the corporation or a subsidiary is a
party, for the purpose of prosecuting, defending or discontinuing the action on behalf of the
corporation or the subsidiary. Under the CBCA, no action may be brought and no intervention in an
action may be made unless the court is satisfied that:  
    the complainant has given reasonable notice to the directors of the corporation or
its subsidiary of the persons intention to apply to the court if the directors of the
corporation or its subsidiary do not bring, diligently prosecute or defend or
discontinue the action;
    the person is acting in good faith; and
    it appears to be in the interests of the corporation or its subsidiary that the
action be brought, prosecuted, defended or discontinued. 111




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Under the CBCA, in connection with a derivative action, the court may make any order it thinks
fit, including an order requiring a corporation or its subsidiary to pay reasonable legal fees
incurred by the person in connection with the action. Oppression Remedy Keith The CCC does not provide an oppression remedy. Stantec The CBCA provides an oppression remedy that enables the court to make any order, both interim
and final, to rectify the matters complained of if the court is satisfied upon application by a
complainant, as defined below, that:  
    any act or omission of a corporation or an affiliate effects a result;
    the business or affairs of a corporation or an affiliate are or have been carried on
or conducted in a manner; or
    the powers of the directors of a corporation or an affiliate are or have been
exercised in a manner, that is oppressive or unfairly prejudicial to or that unfairly disregards the interest of any
security holder, creditor, director or officer of such corporation. A complainant who may apply to a court for an order granting an oppression remedy is:  
    a present or former registered holder or beneficial owner of securities of a
corporation or any of its affiliates;
    a present or former officer or director of a corporation or any of its affiliates;
    the Director under the CBCA; and
    any other person who in the discretion of the court is a proper person to make such application. The oppression remedy provides the court with an extremely broad and flexible jurisdiction to
intervene in corporate affairs to protect reasonable expectations of shareholders and other
complainants. While conduct which is in breach of fiduciary duties of directors or that is
contrary to the legal right of a complainant will normally trigger the courts jurisdiction under
the oppression remedy, the exercise of that jurisdiction does not depend on a finding of a breach
of such legal and equitable rights. Furthermore, the court may order a company to pay the interim
expenses of a complainant seeking an oppression remedy, but the complainant may be held accountable
for such interim costs on final disposition of the complaint, as in the case of a derivative
action. Anti-Takeover and Ownership Provisions Keith The CCC does not contain provisions regarding the ability of an interested shareholder of a
corporation to merge with or into other business combinations with the corporation. Stantec The CBCA does not contain provisions regarding the ability of an interested shareholder of a
corporation to merge with or enter into other business combinations with the corporation. However,
rules and policies of certain Canadian securities regulatory authorities, including Rule 61-501 of
the Ontario Securities Commission, contain requirements in connection with related party
transactions. A related party transaction means, generally, any transaction by which an issuer
directly or indirectly: 112




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##### 




    acquires, sells, leases, transfers or disposes of an asset;
    acquires or issues treasury securities;
    assumes or transfers a liability; or
    borrows money from or lends money; from or to, as the case may be, a related party by any means in any one or any combination of
transactions. Related party is defined in Rule 61-501 and includes directors, senior officers and holders
of more than 10% of the voting securities of the issuer or holders of a sufficient number of any
securities of the issuer to materially affect control of the issuer. Rule 61-501 requires, subject
to certain exceptions:  
    more detailed disclosure in the proxy material sent to security holders in
connection with a related party transaction;
    the preparation of a formal valuation of the subject matter of the related party
transaction and any non-cash consideration offered for the subject matter; and
    the inclusion of a summary of the valuation in the proxy material. Rule 61-501 also requires, subject to certain exceptions, that an issuer not engage in a
related party transaction unless the shareholders of the issuer, other than the related parties,
approve the transaction by a simple majority of the votes cast and, in certain circumstances, that
a formal valuation for the related party transaction be prepared and filed with the appropriate
securities regulator and included in any required disclosure document provided to shareholders of
the issuer. Voluntary Dissolution Keith Under the CCC, any corporation may elect voluntarily to wind up and dissolve by the vote of
shareholders holding shares representing 50% or more of the voting power. In addition, any
corporation which comes within one of the following descriptions may elect by approval by the board
to wind up and dissolve:  
    A corporation as to which an order for relief has been entered under Chapter 7 of
the federal bankruptcy law;
    A corporation which has disposed of all of its assets and has not conducted any
business for a period of five years immediately preceding the adoption of the
resolution electing to dissolve the corporation; or
    A corporation which has issued no shares. A voluntary election to wind up and dissolve may be revoked prior to distribution of any
assets by the vote of shareholders holding shares representing a majority of the voting power, or
by approval by the board if the election was by the board. Stantec Under the CBCA, the directors may propose, or a shareholder who is entitled to vote at an
annual meeting of shareholders of Stantec may make a proposal in accordance with the shareholder
proposal requirements of the CBCA for, the voluntary liquidation and dissolution of Stantec. A
voluntary dissolution of Stantec would require approval by special resolution of the holders of
each class of shares of Stantec, whether or not they are otherwise entitled to vote. A special
resolution is a resolution passed at a meeting by not less than two-thirds of the votes cast by the
shareholders who voted in respect of the resolution. 113




---



##### 



Experts The consolidated financial statements of Stantec Inc. as of December 31, 2004 and 2003, and
for each of the years in the three-year period ended December 31, 2004, included in this proxy
statement/prospectus, have been audited by Ernst & Young LLP, independent registered public
accounting firm, as set forth in their report appearing elsewhere herein, and are included in this
proxy statement/prospectus in reliance upon such report given on the authority of such firm as
experts in accounting and auditing. The consolidated financial statements of The Keith Companies, Inc. as of December 31, 2004 and
2003, and for each of the years in the three-year period ended December 31, 2004, and managements
assessment of the effectiveness of internal control over financial reporting as of December 31,
2004 have been incorporated by reference herein in reliance upon the reports of KPMG LLP,
independent registered public accounting firm, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. Legal Matters Stantecs counsel, Shearman & Sterling LLP, will deliver an opinion to Stantec concerning the
U.S. federal income tax consequences of the merger. The validity of the Stantec common shares
offered hereby will be passed upon by Stantecs Canadian counsel, Fraser Milner Casgrain LLP. Akin
Gump Strauss Hauer & Feld LLP, counsel to Keith, will deliver to Keith an opinion concerning the
U.S. federal income tax consequences of the merger. Shareholder Proposals In order to have been considered for inclusion in Keiths proxy statement for the meeting,
shareholder proposals must have been received at Keiths principal executive offices at 19
Technology Drive, Irvine, CA 92618, by [___], 2005 and otherwise comply with the requirements
of Rule 14a-8 under the Exchange Act. In addition, for business to be properly brought before
Keiths 2005 annual meeting of shareholders (other than shareholder proposals submitted pursuant to
Rule 14a-8 of the Exchange Act), should such a meeting take place, shareholders must give notice of
the proposed business to the Secretary of Keith at Keiths principal executive offices not less
than 90 days nor more than 120 days prior to the date of the first anniversary date of the this
years annual meeting. If the date of Keiths annual meeting is advanced or delayed by more than
30 days, shareholders must give notice of the proposed business to the Secretary of Keith at
Keiths principal executive offices not earlier than 120 days prior to the annual meeting and not
later than the close of business on the later of the ninetieth day prior to the annual meeting or
the tenth day following the first public announcement of the date of the annual meeting. Such
notice must include a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any material interest in such business
of such shareholder, the shareholders name and address and the class and the number of shares of
Keith which are owned beneficially and of record by such shareholder. 114




---



##### 



Enforceability of Civil Liabilities Stantec is a corporation governed by the Canada Business Corporation Act. A substantial
portion of Stantecs assets and operations are located outside the United States, and some of
Stantecs directors and officers and the experts named in this proxy statement/prospectus are
residents outside of the United States. As a result, it may be difficult for investors to effect
service within the United States upon Stantec and those directors, officers and experts, or to
realize in the United States upon judgments of courts of the United States predicated upon civil
liability of Stantec and such directors, officers or experts under the United States federal
securities laws. There is uncertainty as to the enforceability in Canada by a court in original
actions, or in actions to enforce judgments of United States courts, of the civil liabilities
predicated upon the United States federal securities laws. 115




---



##### 



Where You Can Find More Information Keith files annual, quarterly and current reports, proxy statements and other information with
the SEC under the Exchange Act. You may read and copy any reports, statements or other information filed by Keith at the SECs
public reference room, located at 450 Fifth Street, N.W. Room 1024 Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. You may also obtain copies of this information by mail from the Public Reference
Section of the SEC at the above address, at prescribed rates. The SEC also maintains a web site
that contains reports, proxy statements and other information about issuers, like Keith, who file
electronically with the SEC. The address of that site is http://www.sec.gov. Stantec has a registration statement on Form F-4 to register with the SEC the Stantec common
shares to be issued pursuant to the merger. This prospectus is a part of that registration
statement in addition to being a proxy statement for Keiths shareholders. This proxy statement/prospectus does not contain all the information you can find in the
registration statement or the exhibits to the registration statement. Please refer to the
registration statement for further information with respect to Keith, Stantec and Stantec common
shares. This proxy statement/prospectus incorporates documents by reference information, which means
that we disclose important information to you by referring you to another document filed separately
with the SEC. These documents contain important information about Keith and its financial
condition. The information incorporated by reference is deemed to be part of this prospectus,
except for any information superseded by information contained directly in this prospectus. This
proxy statement/prospectus incorporates by reference the documents set forth below that Keith has
previously filed with the SEC. The Keith Companies, Inc. SEC Filings
    
    DateAnnual Report on Form 10-K
    
    Year ended December 31, 2004, as filed on March 10, 2005Current Report on Form 8-K
    
    Filed on February 14, 2005, April 18, 2005 and May 5, 2005Schedule 14A Definitive Proxy Statement
    
    Filed on April 12, 2005
 All documents filed by Keith pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
from the date of this prospectus to the date that shares are accepted for exchange pursuant to our
offer (or the date that our offer is terminated) shall also be deemed to be incorporated into this
prospectus by reference. Documents incorporated by reference are available from us without charge upon request to: The Keith Companies, Inc.
19 Technology Drive
Irvine, California, USA
92618-2334
Phone: (949) 923-6001
Attention: Investor Relations
    
    Stantec Inc.
10160-112 Street
Edmonton, Canada, T5K 2L6
Phone: (780) 917-7000
Attention: Investor Relations
    
    [Name and Address
of Proxy Solicitor]
 In order to ensure timely delivery, any request should be submitted no later than [___
], 2005. If you request any incorporated documents from us, we will mail them to you by first
class mail, or another equally prompt means, within one business day after we receive your request. We have not authorized anyone to give any information or make any representation about our
offer that is different from, or in addition to, that contained in this proxy statement/prospectus
or in any of the materials that we have incorporated by reference into this proxy/statement
prospectus. Therefore, if anyone does give you information of this sort, you should not rely on
it. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to
exchange or purchase, the securities offered by this document are unlawful, or if you are a person
to whom it is unlawful to direct these types of activities, then the offer presented in this
document does not extend to you. The information contained in this document speaks only as of the
date of this document unless the information specifically indicates that another date applies. 116




---



##### 



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS STANTEC INC. Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets as at December 31, 2004 and December 31, 2003
    
    F-3Consolidated Statements of Income and Retained Earnings for
the Years Ended December 31, 2004, 2003 and 2002
    
    F-4Consolidated Statements of Cash Flows for
the Years Ended December 31, 2004, 2003 and 2002
    
    F-5Notes to Consolidated Financial Statements
    
    F-6Unaudited Pro Forma Condensed Consolidated Financial Statements
    
    F-25Unaudited Pro forma Condensed Consolidated Balance Sheet as at December 31, 2004
    
    F-26Unaudited Pro forma Condensed Consolidated Statement of Income for the Year
Ended December 31, 2004
    
    F-27Notes to Unaudited Pro forma Condensed Consolidated Financial Statements
    
    F-28
 F-1




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM












|                  |                      
|----------------- | ---------------------
|Edmonton, Canada, | /s/ Ernst & Young LLP
|February 11, 2005 | Chartered Accountants





F-2



---



##### 



STANTEC INC.


(Incorporated under the laws of Canada)


CONSOLIDATED BALANCE SHEETS


|                                                                                                        |  |                           |         |   |              |  |         |  
|------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ------------ |  | ------- | -
|                                                                                                        |  | As at                     |         |   | As at        | 
|                                                                                                        |  | December 31,              |         |   | December 31, | 
|                                                                                                        |  | 2004                      |         |   | 2003         | 
|                                                                                                        |  | $                         |         |   | $            | 
|                                                                                                        |  |                           |         |   |              | 
|                                                                                                        |  | (In thousands of Canadian |        
|                                                                                                        |  | dollars)                  |        
|ASSETS[note 7]                                                                                         
|Current                                                                                                 |  |                           |         |   |              |  |         |  
|Cash and cash equivalents                                                                               |  |                           | 37,890  |   |              |  | 7,343   |  
|Accounts receivable, net of allowance for doubtful accounts of
    $21,095 in 2004
    ($16,952  2003) |  |                           | 112,476 |   |              |  | 87,101  |  
|Costs and estimated earnings in excess of billings                                                      |  |                           | 40,861  |   |              |  | 67,094  |  
|Income taxes recoverable                                                                                |  |                           |        |   |              |  | 6,921   |  
|Prepaid expenses                                                                                        |  |                           | 4,165   |   |              |  | 3,246   |  
|Future income tax assets [note 14]                                                                      |  |                           | 8,532   |   |              |  | 5,924   |  
|Other assets [note 6]                                                                                   |  |                           | 4,831   |   |              |  |        |  
|                                                                                                        |  |                           |         |   |              | 
|                                                                                                        |  |                           | 208,755 |   |              |  | 177,629 |  
|Property and equipment [note 3]                                                                         |  |                           | 48,262  |   |              |  | 67,670  |  
|Goodwill [note 4]                                                                                       |  |                           | 84,694  |   |              |  | 69,696  |  
|Intangible assets [note 5]                                                                              |  |                           | 6,278   |   |              |  | 5,112   |  
|Future income tax assets [note 14]                                                                      |  |                           | 6,357   |   |              |  | 3,487   |  
|Other assets [note 6]                                                                                   |  |                           | 7,754   |   |              |  | 2,981   |  
|                                                                                                        |  |                           |         |   |              | 
|                                                                                                        |  |                           | 362,100 |   |              |  | 326,575 |  
|                                                                                                        |  |                           |         |   |              | 
|                                                                                                       
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                   
|Current                                                                                                 |  |                           |         |   |              |  |         |  
|Bank indebtedness [note 7]                                                                              |  |                           |        |   |              |  | 17,151  |  
|Accounts payable and accrued liabilities                                                                |  |                           | 78,718  |   |              |  | 68,796  |  
|Billings in excess of costs and estimated earnings                                                      |  |                           | 18,832  |   |              |  | 16,882  |  
|Income taxes payable                                                                                    |  |                           | 5,732   |   |              |  |        |  
|Current portion of long-term debt [note 8]                                                              |  |                           | 12,820  |   |              |  | 13,416  |  
|Future income tax liabilities [note 14]                                                                 |  |                           | 10,653  |   |              |  | 10,802  |  
|                                                                                                        |  |                           |         |   |              | 
|                                                                                                        |  |                           | 126,755 |   |              |  | 127,047 |  
|Long-term debt [note 8]                                                                                 |  |                           | 21,155  |   |              |  | 31,159  |  
|Other liabilities [note 9]                                                                              |  |                           | 16,818  |   |              |  | 1,459   |  
|Future income tax liabilities [note 14]                                                                 |  |                           | 8,316   |   |              |  | 6,382   |  
|                                                                                                        |  |                           |         |   |              | 
|                                                                                                        |  |                           | 173,044 |   |              |  | 166,047 |  
|                                                                                                        |  |                           |         |   |              | 
|Commitments and contingencies [notes 10 and 11]                                                         |  |                           |         |   |              |  |         |  
|                                                                                                       
|Shareholders equity                                                                                    |  |                           |         |   |              |  |         |  
|Share capital [note 12]                                                                                 |  |                           | 87,656  |   |              |  | 84,281  |  
|Contributed surplus [note 12]                                                                           |  |                           | 2,544   |   |              |  | 1,842   |  
|Cumulative translation account [note 13]                                                                |  |                           | (19,018 | ) |              |  | (13,861 | )
|Retained earnings                                                                                       |  |                           | 117,874 |   |              |  | 88,266  |  
|                                                                                                        |  |                           |         |   |              | 
|                                                                                                        |  |                           | 189,056 |   |              |  | 160,528 |  
|                                                                                                        |  |                           |         |   |              | 
|                                                                                                        |  |                           | 362,100 |   |              |  | 326,575 |  
|                                                                                                        |  |                           |         |   |              | 

See accompanying notes


F-3



---



##### 



STANTEC INC.


CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS


|                                             |  |                                   |         |   |          |  |         |          |  |  |         |  
|-------------------------------------------- |  | --------------------------------- | ------- | - | -------- |  | ------- | -------- |  |  | ------- | -
|                                             |  | Year                              |         |   | Year     |  |         | Year     | 
|                                             |  | Ended                             |         |   | Ended    |  |         | Ended    | 
|                                             |  | Dec. 31,                          |         |   | Dec. 31, |  |         | Dec. 31, | 
|                                             |  | 2004                              |         |   | 2003     |  |         | 2002     | 
|                                             |  | $                                 |         |   | $        |  |         | $        | 
|                                             |  |                                   |         |   |          |  |         |          | 
|                                             |  | (In thousands of Canadian dollars |        
|                                             |  | except per share amounts)         |        
|Income                                       |  |                                   |         |   |          |  |         |          |  |  |         |  
|Gross revenue                                |  |                                   | 520,879 |   |          |  | 459,942 |          |  |  | 428,456 |  
|Less subconsultant and other direct expenses |  |                                   | 71,728  |   |          |  | 68,546  |          |  |  | 63,308  |  
|                                             |  |                                   |         |   |          |  |         |          | 
|                                            
|Net revenue                                  |  |                                   | 449,151 |   |          |  | 391,396 |          |  |  | 365,148 |  
|Direct payroll costs                         |  |                                   | 205,513 |   |          |  | 183,471 |          |  |  | 173,609 |  
|                                             |  |                                   |         |   |          |  |         |          | 
|Gross margin                                 |  |                                   | 243,638 |   |          |  | 207,925 |          |  |  | 191,539 |  
|                                            
|Administrative and marketing expenses        |  |                                   | 183,739 |   |          |  | 154,788 |          |  |  | 145,515 |  
|Depreciation of property and equipment       |  |                                   | 11,986  |   |          |  | 9,912   |          |  |  | 9,502   |  
|Amortization of intangible assets            |  |                                   | 927     |   |          |  | 925     |          |  |  | 1,079   |  
|Net interest expense [note 8]                |  |                                   | 2,805   |   |          |  | 2,637   |          |  |  | 2,630   |  
|Foreign exchange (gains) losses              |  |                                   | (94     | ) |          |  | 615     |          |  |  | 73      |  
|Share of income from associated companies    |  |                                   | (385    | ) |          |  | (580    | )        |  |  | (355    | )
|                                             |  |                                   |         |   |          |  |         |          | 
|Income before income taxes                   |  |                                   | 44,660  |   |          |  | 39,628  |          |  |  | 33,095  |  
|                                             |  |                                   |         |   |          |  |         |          | 
|                                            
|Income taxes[note 14]                        |  |                                   |         |   |          |  |         |          |  |  |         |  
|Current                                      |  |                                   | 18,065  |   |          |  | 10,050  |          |  |  | 12,949  |  
|Future                                       |  |                                   | (3,595  | ) |          |  | 4,508   |          |  |  | (46     | )
|                                             |  |                                   |         |   |          |  |         |          | 
|                                             |  |                                   | 14,470  |   |          |  | 14,558  |          |  |  | 12,903  |  
|                                             |  |                                   |         |   |          |  |         |          | 
|                                            
|Net income for the year                      |  |                                   | 30,190  |   |          |  | 25,070  |          |  |  | 20,192  |  
|Retained earnings, beginning of the year     |  |                                   | 88,266  |   |          |  | 64,240  |          |  |  | 44,690  |  
|Shares repurchased [note 12]                 |  |                                   | (582    | ) |          |  | (1,044  | )        |  |  | (642    | )
|                                             |  |                                   |         |   |          |  |         |          | 
|Retained earnings, end of the year           |  |                                   | 117,874 |   |          |  | 88,266  |          |  |  | 64,240  |  
|                                             |  |                                   |         |   |          |  |         |          | 
|                                            
|Earnings per share[note 15]                  |  |                                   |         |   |          |  |         |          |  |  |         |  
|Basic                                        |  |                                   | 1.63    |   |          |  | 1.37    |          |  |  | 1.12    |  
|Diluted                                      |  |                                   | 1.59    |   |          |  | 1.31    |          |  |  | 1.07    |  

See accompanying notes


F-4



---



##### 



STANTEC INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                      |  |                                    |          |   |          |  |          |          |  |  |          |  
|------------------------------------------------------------------------------------- |  | ---------------------------------- | -------- | - | -------- |  | -------- | -------- |  |  | -------- | -
|                                                                                      |  | Year                               |          |   | Year     |  |          | Year     | 
|                                                                                      |  | Ended                              |          |   | Ended    |  |          | Ended    | 
|                                                                                      |  | Dec. 31,                           |          |   | Dec. 31, |  |          | Dec. 31, | 
|                                                                                      |  | 2004                               |          |   | 2003     |  |          | 2002     | 
|                                                                                      |  | $                                  |          |   | $        |  |          | $        | 
|                                                                                      |  |                                    |          |   |          |  |          |          | 
|                                                                                      |  | (In thousands of Canadian dollars) |         
|CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES                                        |  |                                    |          |   |          |  |          |          |  |  |          |  
|Cash receipts from clients                                                            |  |                                    | 568,897  |   |          |  | 465,114  |          |  |  | 437,354  |  
|Cash paid to suppliers                                                                |  |                                    | (169,573 | ) |          |  | (156,460 | )        |  |  | (128,148 | )
|Cash paid to employees                                                                |  |                                    | (313,321 | ) |          |  | (274,444 | )        |  |  | (257,667 | )
|Dividends from equity investments                                                     |  |                                    | 300      |   |          |  |         |          |  |  | 175      |  
|Interest received                                                                     |  |                                    | 6,426    |   |          |  | 2,710    |          |  |  | 3,970    |  
|Interest paid                                                                         |  |                                    | (8,639   | ) |          |  | (4,462   | )        |  |  | (6,122   | )
|Income taxes paid, net                                                                |  |                                    | (6,739   | ) |          |  | (15,565  | )        |  |  | (13,453  | )
|                                                                                      |  |                                    |          |   |          |  |          |          | 
|Cash flows from operating activities[note 16]                                         |  |                                    | 77,351   |   |          |  | 16,893   |          |  |  | 36,109   |  
|                                                                                      |  |                                    |          |   |          |  |          |          | 
|                                                                                     
|CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES                                        |  |                                    |          |   |          |  |          |          |  |  |          |  
|Business acquisitions, including cash acquired
and bank indebtedness assumed [note 2] |  |                                    | (18,845  | ) |          |  | (6,046   | )        |  |  | (17,409  | )
|Cash of joint venture held for sale                                                   |  |                                    |         |   |          |  | (369     | )        |  |  |         |  
|Purchase of investments held for self-insured liabilities                             |  |                                    | (9,562   | ) |          |  |         |          |  |  |         |  
|Proceeds on disposition of investments                                                |  |                                    | 55       |   |          |  | 195      |          |  |  | 2,158    |  
|Proceeds on disposition of Technology segment                                         |  |                                    | 1,014    |   |          |  |         |          |  |  |         |  
|Proceeds on disposition of subsidiary                                                 |  |                                    |         |   |          |  |         |          |  |  | 1,856    |  
|Purchase of property and equipment                                                    |  |                                    | (17,488  | ) |          |  | (28,713  | )        |  |  | (17,444  | )
|Proceeds on disposition of property and equipment                                     |  |                                    | 34,672   |   |          |  | 1,444    |          |  |  | 1,612    |  
|                                                                                      |  |                                    |          |   |          |  |          |          | 
|Cash flows used in investing activities                                               |  |                                    | (10,154  | ) |          |  | (33,489  | )        |  |  | (29,227  | )
|                                                                                      |  |                                    |          |   |          |  |          |          | 
|                                                                                     
|CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES                                        |  |                                    |          |   |          |  |          |          |  |  |          |  
|Repayment of long-term debt                                                           |  |                                    | (35,546  | ) |          |  | (20,592  | )        |  |  | (18,619  | )
|Proceeds from long-term borrowings                                                    |  |                                    | 13,960   |   |          |  |         |          |  |  | 30,540   |  
|Net change in bank indebtedness financing                                             |  |                                    | (17,151  | ) |          |  | 17,151   |          |  |  | (14,671  | )
|Repurchase of shares for cancellation [note 12]                                       |  |                                    | (720     | ) |          |  | (1,392   | )        |  |  | (880     | )
|Proceeds from issue of share capital [note 12]                                        |  |                                    | 3,490    |   |          |  | 651      |          |  |  | 18,484   |  
|                                                                                      |  |                                    |          |   |          |  |          |          | 
|Cash flows from (used in) financing activities                                        |  |                                    | (35,967  | ) |          |  | (4,182   | )        |  |  | 14,854   |  
|                                                                                      |  |                                    |          |   |          |  |          |          | 
|                                                                                     
|Foreign exchange loss on cash held in foreign currency                                |  |                                    | (683     | ) |          |  | (1,081   | )        |  |  | (60      | )
|                                                                                      |  |                                    |          |   |          |  |          |          | 
|                                                                                     
|Net increase (decrease) in cash and cash equivalents                                  |  |                                    | 30,547   |   |          |  | (21,859  | )        |  |  | 21,676   |  
|Cash and cash equivalents, beginning of the year                                      |  |                                    | 7,343    |   |          |  | 29,202   |          |  |  | 7,526    |  
|                                                                                      |  |                                    |          |   |          |  |          |          | 
|Cash and cash equivalents, end of the year                                            |  |                                    | 37,890   |   |          |  | 7,343    |          |  |  | 29,202   |  
|                                                                                      |  |                                    |          |   |          |  |          |          | 

See accompanying notes


F-5



---



##### 



STANTEC INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                           
|-- | ------------------------------------------
|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Generally Accepted Accounting Principles






Principles of consolidation






Cash and cash equivalents




Investments




F-6



---



##### 





Property and equipment




|                             |  |  |       |     |  |                                                                                      
|---------------------------- |  |  | ----- | --- |  | -------------------------------------------------------------------------------------
|Engineering equipment        |  |  | 20% - | 30% |  | declining balance                                                                    
|Business information systems |  |  |       |     |  | straight-line over 3 to 5 years                                                      
|Office equipment             |  |  | 20% - | 30% |  | declining balance                                                                    
|Automotive equipment         |  |  | 30%   |     |  | declining balance                                                                    
|Leasehold improvements       |  |  |       |     |  | straight-line over term of lease plus one renewal period to a
    maximum of 15 years
|Buildings                    |  |  | 4% -  | 5%  |  | declining balance                                                                    

Leases






Goodwill and intangible assets




Long-lived assets




Accrual and investments held for self-insured liabilities






F-7



---



##### 



Forward contracts




Non-interest bearing debt




Fair value of financial instruments




Credit risk




Interest rate risk




Revenue recognition






F-8



---



##### 



Employee benefit plans




Foreign currency translation






Stock-based compensation and other stock-based payments




Income taxes




Earnings per share




Allowance for doubtful accounts




F-9



---



##### 





|   |                      
|-- | ---------------------
|2. | BUSINESS ACQUISITIONS









|                                               |  |        |        |   |        |  |        |  
|---------------------------------------------- |  | ------ | ------ | - | ------ |  | ------ | -
|                                               |  | 2004   |        |   | 2003   | 
|                                               |  | $000s |        |   | $000s | 
|                                               |  |        |        |   |        | 
|Cash consideration                             |  |        | 12,432 |   |        |  | 4,300  |  
|Promissory notes                               |  |        | 1,487  |   |        |  | 3,375  |  
|                                               |  |        |        |   |        | 
|Purchase price                                 |  |        | 13,919 |   |        |  | 7,675  |  
|                                               |  |        |        |   |        | 
|Assets and liabilities acquired at fair values |  |        |        |   |        |  |        |  
|Bank indebtedness assumed                      |  |        | (6,413 | ) |        |  | (1,746 | )
|Non-cash working capital                       |  |        | 6,057  |   |        |  | 3,578  |  
|Property and equipment                         |  |        | 3,211  |   |        |  | 1,337  |  
|Investments  other                            |  |        | 87     |   |        |  | 44     |  
|Goodwill                                       |  |        | 18,425 |   |        |  | 3,848  |  
|Intangible assets                              |  |        | 2,158  |   |        |  | 1,344  |  
|Other liabilities                              |  |        | (1,642 | ) |        |  | -      |  
|Long-term debt                                 |  |        | (8,414 | ) |        |  | (646   | )
|Future income taxes                            |  |        | 450    |   |        |  | (84    | )
|                                               |  |        |        |   |        | 
|Net assets acquired                            |  |        | 13,919 |   |        |  | 7,675  |  
|                                               |  |        |        |   |        | 



F-10



---



##### 





|   |                       
|-- | ----------------------
|3. | PROPERTY AND EQUIPMENT

|                             |  |                   |        |             |                   |        |              |  |             |        |  |  |        |  |              |        |  |  |        | 
|---------------------------- |  | ----------------- | ------ | ----------- | ----------------- | ------ | ------------ |  | ----------- | ------ |  |  | ------ |  | ------------ | ------ |  |  | ------ | 
|                             |  | December 31, 2004 |        |             | December 31, 2003 |       
|                             |  |                   |        |             |                   |       
|                             |  |                   |        | Accumulated |                   |        |              |  | Accumulated |       
|                             |  | Cost              |        |             |                   |        | Depreciation |  |             | Cost   |  |  |        |  | Depreciation |       
|                             |  | $000s            |        |             |                   |        | $000s       |  |             | $000s |  |  |        |  | $000s       |       
|                             |  |                   |        |             |                   |        |              |  |             |        |  |  |        |  |              |       
|Engineering equipment        |  |                   | 33,622 |             |                   |        |              |  | 19,058      |        |  |  | 27,261 |  |              |        |  |  | 12,257 | 
|Business information systems |  |                   | 9,681  |             |                   |        |              |  | 1,796       |        |  |  | 7,223  |  |              |        |  |  | 328    | 
|Office equipment             |  |                   | 19,953 |             |                   |        |              |  | 7,519       |        |  |  | 17,654 |  |              |        |  |  | 6,017  | 
|Automotive equipment         |  |                   | 4,254  |             |                   |        |              |  | 2,578       |        |  |  | 3,406  |  |              |        |  |  | 1,850  | 
|Leasehold improvements       |  |                   | 11,994 |             |                   |        |              |  | 2,031       |        |  |  | 6,570  |  |              |        |  |  | 1,386  | 
|Buildings                    |  |                   | 1,901  |             |                   |        |              |  | 594         |        |  |  | 27,191 |  |              |        |  |  | 1,553  | 
|Land                         |  |                   | 433    |             |                   |        |              |  |            |        |  |  | 1,756  |  |              |        |  |  |       | 
|                             |  |                   |        |             |                   |        |              |  |             |        |  |  |        |  |              |       
|                             |  |                   | 81,838 |             |                   |        |              |  | 33,576      |        |  |  | 91,061 |  |              |        |  |  | 23,391 | 
|                             |  |                   |        |             |                   |        |              |  |             |        |  |  |        |  |              |       
|Net book value               |  |                   |        |             |                   | 48,262 |              |  |             |        |  |  |        |  |              | 67,670 |  |  |        | 
|                             |  |                   |        |             |                   |        |              |  |             |        |  |  |        |  |              |       

[note 9].






|   |         
|-- | --------
|4. | GOODWILL

|                                                |  |              |        |   |              |  |        |  
|----------------------------------------------- |  | ------------ | ------ | - | ------------ |  | ------ | -
|                                                |  | December 31, |        |   | December 31, | 
|                                                |  | 2004         |        |   | 2003         | 
|                                                |  | $000s       |        |   | $000s       | 
|                                                |  |              |        |   |              | 
|Goodwill, beginning of year                     |  |              | 69,696 |   |              |  | 72,423 |  
|Current year acquisitions                       |  |              | 18,006 |   |              |  | 5,047  |  
|Additional purchase price payments              |  |              |       |   |              |  | 925    |  
|Other purchase price adjustments                |  |              | 419    |   |              |  | (2,124 | )
|Impact of foreign exchange on goodwill balances |  |              | (3,427 | ) |              |  | (6,575 | )
|                                                |  |              |        |   |              | 
|Goodwill, end of year                           |  |              | 84,694 |   |              |  | 69,696 |  
|                                                |  |              |        |   |              | 



|   |                  
|-- | -----------------
|5. | INTANGIBLE ASSETS

|                        |  |                   |       |  |                   |  |              |  |  |          |       |  |  |  |              |  |  |  |       |  |  |  |       | 
|----------------------- |  | ----------------- | ----- |  | ----------------- |  | ------------ |  |  | -------- | ----- |  |  |  | ------------ |  |  |  | ----- |  |  |  | ----- | 
|                        |  | December 31, 2004 |       |  | December 31, 2003 | 
|                        |  |                   |       |  |                   | 
|                        |  | Gross             |       |  |                   |  | Gross        |  |  |         
|                        |  | Carrying          |       |  |                   |  | Accumulated  |  |  | Carrying |       |  |  |  | Accumulated  | 
|                        |  | Amount            |       |  |                   |  | Amortization |  |  | Amount   |       |  |  |  | Amortization | 
|                        |  | $000s            |       |  |                   |  | $000s       |  |  | $000s   |       |  |  |  | $000s       | 
|                        |  |                   |       |  |                   |  |              |  |  |          |       |  |  |  |              | 
|Client relationships    |  |                   | 6,859 |  |                   |  |              |  |  |          | 1,195 |  |  |  | 5,626        |  |  |  |       |  |  |  | 691   | 
|Contract backlog        |  |                   | 339   |  |                   |  |              |  |  |          | 290   |  |  |  | 905          |  |  |  |       |  |  |  | 901   | 
|Other intangible assets |  |                   | 750   |  |                   |  |              |  |  |          | 185   |  |  |  | 266          |  |  |  |       |  |  |  | 93    | 
|                        |  |                   |       |  |                   |  |              |  |  |          |       |  |  |  |              |  |  | 
|                        |  |                   | 7,948 |  |                   |  |              |  |  |          | 1,670 |  |  |  | 6,797        |  |  |  |       |  |  |  | 1,685 | 
|                        |  |                   |       |  |                   |  |              |  |  |          |       |  |  |  |              |  |  | 
|Carrying amount         |  |                   |       |  |                   |  | 6,278        |  |  |          |       |  |  |  |              |  |  |  | 5,112 |  |  |  |       | 
|                        |  |                   |       |  |                   |  |              |  |  |          |       |  |  |  |              |  |  | 



F-11



---



##### 





|   |             
|-- | ------------
|6. | OTHER ASSETS

|                                                                          |  |              |        |  |              |  |       | 
|------------------------------------------------------------------------- |  | ------------ | ------ |  | ------------ |  | ----- | 
|                                                                          |  | December 31, |        |  | December 31, | 
|                                                                          |  | 2004         |        |  | 2003         | 
|                                                                          |  | $000s       |        |  | $000s       | 
|                                                                          |  |              |        |  |              | 
|Investments held for self-insured liabilities                             |  |              | 9,562  |  |              |  |      | 
|Investment in associated companies                                        |  |              | 1,909  |  |              |  | 1,844 | 
|Investments  other                                                       |  |              | 1,114  |  |              |  | 1,137 | 
|                                                                          |  |              |        |  |              | 
|                                                                          |  |              | 12,585 |  |              |  | 2,981 | 
|Less current portion of investments held for self-insured
    liabilities |  |              | 4,831  |  |              |  |      | 
|                                                                          |  |              |        |  |              | 
|                                                                          |  |              | 7,754  |  |              |  | 2,981 | 
|                                                                          |  |              |        |  |              | 





|   |                  
|-- | -----------------
|7. | BANK INDEBTEDNESS

[note 8].






|   |               
|-- | --------------
|8. | LONG-TERM DEBT

|                                         |  |              |        |  |              |  |        | 
|---------------------------------------- |  | ------------ | ------ |  | ------------ |  | ------ | 
|                                         |  | December 31, |        |  | December 31, | 
|                                         |  | 2004         |        |  | 2003         | 
|                                         |  | $000s       |        |  | $000s       | 
|                                         |  |              |        |  |              | 
|Non-interest bearing note payable        |  |              | 111    |  |              |  | 102    | 
|Other non-interest bearing notes payable |  |              | 7,862  |  |              |  | 14,436 | 
|Bank loan                                |  |              | 23,997 |  |              |  | 19,186 | 
|Mortgages payable                        |  |              | 1,765  |  |              |  | 10,609 | 
|Other                                    |  |              | 240    |  |              |  | 242    | 
|                                         |  |              |        |  |              | 
|                                         |  |              | 33,975 |  |              |  | 44,575 | 
|Less current portion                     |  |              | 12,820 |  |              |  | 13,416 | 
|                                         |  |              |        |  |              | 
|                                         |  |              | 21,155 |  |              |  | 31,159 | 
|                                         |  |              |        |  |              | 



F-12



---



##### 













|           |  |        |        | 
|---------- |  | ------ | ------ | 
|           |  | $000s |       
|           |  |        |       
|2005       |  |        | 12,820 | 
|2006       |  |        | 10,968 | 
|2007       |  |        | 8,617  | 
|2008       |  |        | 1,459  | 
|2009       |  |        |       | 
|Thereafter |  |        | 111    | 
|           |  |        |       
|           |  |        | 33,975 | 
|           |  |        |       





|   |                  
|-- | -----------------
|9. | OTHER LIABILITIES

|                                                     |  |              |        |  |              |  |       | 
|---------------------------------------------------- |  | ------------ | ------ |  | ------------ |  | ----- | 
|                                                     |  | December 31, |        |  | December 31, | 
|                                                     |  | 2004         |        |  | 2003         | 
|                                                     |  | $000s       |        |  | $000s       | 
|                                                     |  |              |        |  |              | 
|Provision for self-insured liabilities               |  |              | 5,236  |  |              |  | 2,410 | 
|Deferred gain on sale leaseback                      |  |              | 7,073  |  |              |  |      | 
|Lease inducement benefits                            |  |              | 4,742  |  |              |  | 1,902 | 
|Lease liabilities on exit activity                   |  |              | 2,817  |  |              |  |      | 
|                                                     |  |              |        |  |              | 
|                                                     |  |              | 19,868 |  |              |  | 4,312 | 
|Less current portion included in accrued liabilities |  |              | 3,050  |  |              |  | 2,853 | 
|                                                     |  |              |        |  |              | 
|                                                     |  |              | 16,818 |  |              |  | 1,459 | 
|                                                     |  |              |        |  |              | 

[note 11].


F-13



---



##### 







|    |            
|--- | -----------
|10. | COMMITMENTS



|           |  |        |         | 
|---------- |  | ------ | ------- | 
|           |  | $000s |        
|           |  |        |        
|2005       |  |        | 29,509  | 
|2006       |  |        | 26,551  | 
|2007       |  |        | 23,750  | 
|2008       |  |        | 17,952  | 
|2009       |  |        | 16,259  | 
|Thereafter |  |        | 93,645  | 
|           |  |        |        
|           |  |        | 207,666 | 
|           |  |        |        



|    |              
|--- | -------------
|11. | CONTINGENCIES





|    |              
|--- | -------------
|12. | SHARE CAPITAL

Authorized


|                                                                                                        |  | 
|------------------------------------------------------------------------------------------------------- |  | 
|Unlimited common shares, with no par value.                                                             |  | 
|Unlimited preferred shares issuable in series with attributes
    designated by the Board of Directors. |  | 

F-14



---



##### 



Common shares issued and outstanding


|                                                                        |  |               |            |   |                     |  |        |             |  |  |            |   |  |             |        |   |      |  |            |   |  |  |        |   |  |   |       |   |  |  |       |   |  |  |       |  
|----------------------------------------------------------------------- |  | ------------- | ---------- | - | ------------------- |  | ------ | ----------- |  |  | ---------- | - |  | ----------- | ------ | - | ---- |  | ---------- | - |  |  | ------ | - |  | - | ----- | - |  |  | ----- | - |  |  | ----- | -
|                                                                        |  | Capital Stock |            |   | Contributed Surplus | 
|                                                                        |  |               |            |   |                     | 
|                                                                        |  | 2004          |            |   | 2003                |  |        | 2002        |  |  | 2004       |   |  | 2003        |        |   | 2002 | 
|                                                                        |  |               |            |   |                     |  |        |             |  |  |            |   |  |             |        |   |      | 
|                                                                        |  | # of Shares   |            |   | $                   |  |        | # of Shares |  |  | $          |   |  | # of Shares |        |   | $    |  |            | $ |  |  | $      |   |  | $ |      
|(in thousands of dollars except share amounts)                          |  |               |            |   |                     |  |        |             |  |  |            |   |  |             |        |   |      |  |            |   |  |  |        |   |  |   |      
|Balance, beginning of the year                                          |  |               | 18,327,284 |   |                     |  | 84,281 |             |  |  | 18,282,720 |   |  |             | 83,973 |   |      |  | 16,846,340 |   |  |  | 61,555 |   |  |   | 1,842 |   |  |  | 1,247 |   |  |  | 1,205 |  
|Share options exercised for cash                                        |  |               | 573,101    |   |                     |  | 3,490  |             |  |  | 119,264    |   |  |             | 651    |   |      |  | 29,300     |   |  |  | 148    |   |  |   |       |   |  |  |       |   |  |  |       |  
|Shares repurchased under normal course issuer bid                       |  |               | (29,300    | ) |                     |  | (134   | )           |  |  | (74,700    | ) |  |             | (343   | ) |      |  | (54,600    | ) |  |  | (235   | ) |  |   | (4    | ) |  |  | (5    | ) |  |  | (3    | )
|Shares issued on acquisitions                                           |  |               |           |   |                     |  |       |             |  |  |           |   |  |             |       |   |      |  | 261,680    |   |  |  | 3,712  |   |  |   |       |   |  |  |       |   |  |  |       |  
|Shares issued under public offering, net of share issue costs           |  |               |           |   |                     |  |       |             |  |  |           |   |  |             |       |   |      |  | 1,200,000  |   |  |  | 18,793 |   |  |   |       |   |  |  |       |   |  |  |       |  
|Reclassification of fair value of stock options previously
    expensed |  |               |            |   |                     |  | 19     |             |  |  |            |   |  |             |       |   |      |  |            |   |  |  |       |   |  |   | (19   | ) |  |  |      |   |  |  |      |  
|Stock-based compensation expense                                        |  |               |            |   |                     |  |        |             |  |  |            |   |  |             |        |   |      |  |            |   |  |  |        |   |  |   | 725   |   |  |  | 600   |   |  |  | 45    |  
|                                                                        |  |               |            |   |                     |  |        |             |  |  |            |   |  |             |        |   |      |  |            |   |  |  |        |   |  |   |      
|Balance, end of the year                                                |  |               | 18,871,085 |   |                     |  | 87,656 |             |  |  | 18,327,284 |   |  |             | 84,281 |   |      |  | 18,282,720 |   |  |  | 83,973 |   |  |   | 2,544 |   |  |  | 1,842 |   |  |  | 1,247 |  
|                                                                        |  |               |            |   |                     |  |        |             |  |  |            |   |  |             |        |   |      |  |            |   |  |  |        |   |  |   |      





Share options




F-15



---



##### 





|                                 |  |             |           |          |      |  |       |             |          |  |           |   |  |             |       |  |   |  |           |   |  |  |       | 
|-------------------------------- |  | ----------- | --------- | -------- | ---- |  | ----- | ----------- | -------- |  | --------- | - |  | ----------- | ----- |  | - |  | --------- | - |  |  | ----- | 
|                                 |  | 2004        |           |          | 2003 |  |       | 2002        |         
|                                 |  |             |           |          |      |  |       |             |         
|                                 |  |             |           | Weighted |      |  |       |             | Weighted |  |           |   |  | Weighted    |      
|                                 |  |             |           | Average  |      |  |       |             | Average  |  |           |   |  | Average     |      
|                                 |  |             |           | Exercise |      |  |       |             | Exercise |  |           |   |  | Exercise    |      
|                                 |  |             |           | Price    |      |  |       |             | Price    |  |           |   |  | Price       |      
|                                 |  | # of Shares |           |          | $    |  |       | # of Shares |          |  | $         |   |  | # of Shares |       |  | $ | 
|                                 |  |             |           |          |      |  |       |             |          |  |           |   |  |             |       |  |   | 
|Share options, beginning of year |  |             | 1,479,100 |          |      |  | 9.28  |             |          |  | 1,296,200 |   |  |             | 6.09  |  |   |  | 1,188,500 |   |  |  | 5.10  | 
|Granted                          |  |             | 167,000   |          |      |  | 24.50 |             |          |  | 307,500   |   |  |             | 21.29 |  |   |  | 137,000   |   |  |  | 14.50 | 
|Exercised                        |  |             | (573,101  | )        |      |  | 6.09  |             |          |  | (119,264  | ) |  |             | 5.46  |  |   |  | (29,300   | ) |  |  | 5.04  | 
|Cancelled                        |  |             | (1,666    | )        |      |  | 18.40 |             |          |  | (5,336    | ) |  |             | 12.62 |  |   |  |          |   |  |  |      | 
|                                 |  |             |           |          |      |  |       |             |          |  |           |   |  |             |       |  |   | 
|Share options, end of the year   |  |             | 1,071,333 |          |      |  | 13.34 |             |          |  | 1,479,100 |   |  |             | 9.28  |  |   |  | 1,296,200 |   |  |  | 6.09  | 
|                                 |  |             |           |          |      |  |       |             |          |  |           |   |  |             |       |  |   | 



|                    |               |  |                     |          |             |         |          |          |       |  |        |             |         |          |       |  |         |  |  |  |       | 
|------------------- | ------------- |  | ------------------- | -------- | ----------- | ------- | -------- | -------- | ----- |  | ------ | ----------- | ------- | -------- | ----- |  | ------- |  |  |  | ----- | 
|Options Outstanding |               |  | Options Exercisable |         
|                    |               |  |                     |         
|                    |               |  |                     | Weighted |             |         |          |          |      
|                    |               |  |                     | Average  |             |         | Weighted |          |       |  |        | Weighted    |        
|Range of            |               |  |                     |          | Remaining   |         |          | Average  |       |  |        |             | Average |         
|Exercise            |               |  |                     |          | Contractual |         |          | Exercise |       |  | Shares |             |         | Exercise |      
|Prices              |               |  | Outstanding         |          |             | Life in |          |          | Price |  |        | Exercisable |         |          | Price | 
|$                   |               |  | #                   |          |             | Years   |          |          | $     |  |        | #           |         |          | $     | 
|                    |               |  |                     |          |             |         |          |          |       |  |        |             |         |          |       | 
|                    | 3.50 -  3.60  |  |                     |          | 373,000     |         |          |          | 1.8   |  |        |             | 3.56    |          |       |  | 373,000 |  |  |  | 3.56  | 
|                    | 5.20 -  7.00  |  |                     |          | 108,100     |         |          |          | 1.1   |  |        |             | 6.07    |          |       |  | 108,100 |  |  |  | 6.07  | 
|                    | 14.50 - 18.85 |  |                     |          | 176,733     |         |          |          | 7.6   |  |        |             | 15.51   |          |       |  | 107,822 |  |  |  | 14.95 | 
|                    | 21.00 - 27.10 |  |                     |          | 413,500     |         |          |          | 6.8   |  |        |             | 23.14   |          |       |  | 52,167  |  |  |  | 21.00 | 
|                    |               |  |                     |          |             |         |          |          |       |  |        |             |         |          |       | 
|                    | 3.50 - 27.10  |  |                     |          | 1,071,333   |         |          |          | 4.2   |  |        |             | 13.34   |          |       |  | 641,089 |  |  |  | 7.32  | 
|                    |               |  |                     |          |             |         |          |          |       |  |        |             |         |          |       | 





|                                                    |  |            |      |  |            |  |      |                  |  |  |            |  |  |  |      | 
|--------------------------------------------------- |  | ---------- | ---- |  | ---------- |  | ---- | ---------------- |  |  | ---------- |  |  |  | ---- | 
|                                                    |  | 2004       |      |  | 2003       |  |      | 2002             | 
|                                                    |  |            |      |  |            |  |      |                  | 
|                                                    |  | Granted at |      |  | Granted at |  |      | Granted in       |  |  | Granted at | 
|                                                    |  | market     |      |  | market     |  |      | excess of market |  |  | market     | 
|                                                    |  |            |      |  |            |  |      |                  |  |  |            | 
|Risk-free interest rate (%)                         |  |            | 4.07 |  |            |  | 4.48 |                  |  |  | 5.04       |  |  |  | 4.35 | 
|Expected hold period to exercise (years)            |  |            | 6.0  |  |            |  | 6.2  |                  |  |  | 9.1        |  |  |  | 6.0  | 
|Volatility in the price of the Companys shares (%) |  |            | 26.1 |  |            |  | 27.4 |                  |  |  | 28.5       |  |  |  | 17.5 | 
|Dividend yield                                      |  |            | 0.0  |  |            |  | 0.0  |                  |  |  | 0.0        |  |  |  | 0.0  | 
|Weighted average fair value per option              |  |            | 8.46 |  |            |  | 7.40 |                  |  |  | 6.04       |  |  |  | 4.19 | 

F-16



---



##### 





|    |                               
|--- | ------------------------------
|13. | CUMULATIVE TRANSLATION ACCOUNT



|                                                  |  |        |         |   |        |  |         |        |  |  |       |  
|------------------------------------------------- |  | ------ | ------- | - | ------ |  | ------- | ------ |  |  | ----- | -
|                                                  |  | 2004   |         |   | 2003   |  |         | 2002   | 
|                                                  |  | $000s |         |   | $000s |  |         | $000s | 
|                                                  |  |        |         |   |        |  |         |        | 
|Cumulative translation account, beginning of year |  |        | (13,861 | ) |        |  | 1,966   |        |  |  | 2,807 |  
|Current year deferred translation adjustment      |  |        | (5,157  | ) |        |  | (15,827 | )      |  |  | (841  | )
|                                                  |  |        |         |   |        |  |         |        | 
|Cumulative translation account, end of year       |  |        | (19,018 | ) |        |  | (13,861 | )      |  |  | 1,966 |  
|                                                  |  |        |         |   |        |  |         |        | 



|    |             
|--- | ------------
|14. | INCOME TAXES



|                                               |                                                                               |                         |      |      |      |  |      |      |     |  |      |      |     | 
|---------------------------------------------- | ----------------------------------------------------------------------------- | ----------------------- | ---- | ---- | ---- |  | ---- | ---- | --- |  | ---- | ---- | --- | 
|                                               |                                                                               | 2004                    |      |      | 2003 |  |      | 2002 |    
|                                               |                                                                               | %                       |      |      | %    |  |      | %    |    
|                                               |                                                                               |                         |      |      |      |  |      |      |    
|Income tax expense at statutory Canadian rates |                                                                               |                         | 34.7 |      |      |  | 36.8 |      |     |  | 39.3 |     
|Increase (decrease) resulting from:            |                                                                               |                         |      |      |      |  |      |      |     |  |      |     
|                                               | Loss (income) from associated companies accounted for on the
    equity basis |                         |      | (0.3 | )    |  |      | (0.6 | )   |  |      | (0.3 | )  
|                                               | Rate differential on foreign income                                           |                         |      | (2.0 | )    |  |      | 0.6  |     |  |      | (0.1 | )  
|                                               | Non-deductible expenses:                                                      |                         |      |      |      |  |      |      |     |  |      |      |    
|                                               |                                                                               | Meals and entertainment |      |      | 1.4  |  |      |      | 1.4 |  |      |      | 1.8 | 
|                                               |                                                                               | Stock compensation      |      |      | 0.6  |  |      |      | 0.6 |  |      |      |    | 
|                                               | Non-taxable foreign income net of non-creditable withholding
    taxes        |                         |      | (1.3 | )    |  |      | (1.6 | )   |  |      | (2.4 | )  
|                                               | Other                                                                         |                         |      | (0.7 | )    |  |      | (0.5 | )   |  |      | 0.7  |    
|                                               |                                                                               |                         |      |      |      |  |      |      |    
|                                               |                                                                               |                         | 32.4 |      |      |  | 36.7 |      |     |  | 39.0 |     
|                                               |                                                                               |                         |      |      |      |  |      |      |    



|                                                               |  |              |        |  |              |  |       | 
|-------------------------------------------------------------- |  | ------------ | ------ |  | ------------ |  | ----- | 
|                                                               |  | December 31, |        |  | December 31, | 
|                                                               |  | 2004         |        |  | 2003         | 
|                                                               |  | $000s       |        |  | $000s       | 
|                                                               |  |              |        |  |              | 
|Future income tax assets                                       |  |              |        |  |              |  |       | 
|Differences in timing of deductibility of expenses             |  |              | 9,434  |  |              |  | 6,060 | 
|Loss carryforwards                                             |  |              | 2,316  |  |              |  | 2,051 | 
|Share issue and other financing costs                          |  |              | 237    |  |              |  | 431   | 
|Tax cost of property and equipment in excess of carrying value |  |              | 684    |  |              |  | 645   | 
|Deferred gain on sale of building                              |  |              | 1,518  |  |              |  |      | 
|Other                                                          |  |              | 700    |  |              |  | 224   | 
|                                                               |  |              |        |  |              | 
|                                                               |  |              | 14,889 |  |              |  | 9,411 | 
|Less current portion                                           |  |              | 8,532  |  |              |  | 5,924 | 
|                                                               |  |              |        |  |              | 
|                                                               |  |              | 6,357  |  |              |  | 3,487 | 
|                                                               |  |              |        |  |              | 

F-17



---



##### 



|                                                               |  |              |        |  |              |  |        | 
|-------------------------------------------------------------- |  | ------------ | ------ |  | ------------ |  | ------ | 
|                                                               |  | December 31, |        |  | December 31, | 
|                                                               |  | 2004         |        |  | 2003         | 
|                                                               |  | $000s       |        |  | $000s       | 
|                                                               |  |              |        |  |              | 
|Future income tax liabilities                                  |  |              |        |  |              |  |        | 
|Cash to accrual adjustments on acquisition of US subsidiaries  |  |              | 2,091  |  |              |  | 508    | 
|Differences in timing of taxability of revenues                |  |              | 7,702  |  |              |  | 9,955  | 
|Carrying value of property and equipment in excess of tax cost |  |              | 5,025  |  |              |  | 2,970  | 
|Carrying value of intangible assets in excess of tax cost      |  |              | 2,016  |  |              |  | 1,996  | 
|Other                                                          |  |              | 2,135  |  |              |  | 1,755  | 
|                                                               |  |              |        |  |              | 
|                                                               |  |              | 18,969 |  |              |  | 17,184 | 
|Less current portion                                           |  |              | 10,653 |  |              |  | 10,802 | 
|                                                               |  |              |        |  |              | 
|                                                               |  |              | 8,316  |  |              |  | 6,382  | 
|                                                               |  |              |        |  |              | 



|     |  |        |       | 
|---- |  | ------ | ----- | 
|     |  | $000s |      
|     |  |        |      
|2006 |  |        | 22    | 
|2007 |  |        | 325   | 
|2008 |  |        | 1,454 | 
|2009 |  |        | 66    | 
|2010 |  |        | 636   | 
|2014 |  |        | 1,013 | 
|     |  |        |      
|     |  |        | 3,516 | 
|     |  |        |      







|    |                   
|--- | ------------------
|15. | EARNINGS PER SHARE



|                                                                                             |  |              |            |  |              |  |            |              |  |  |            | 
|-------------------------------------------------------------------------------------------- |  | ------------ | ---------- |  | ------------ |  | ---------- | ------------ |  |  | ---------- | 
|                                                                                             |  | December 31, |            |  | December 31, |  |            | December 31, | 
|                                                                                             |  | 2004         |            |  | 2003         |  |            | 2002         | 
|                                                                                             |  | #            |            |  | #            |  |            | #            | 
|                                                                                             |  |              |            |  |              |  |            |              | 
|Basic shares outstanding                                                                     |  |              | 18,499,598 |  |              |  | 18,329,960 |              |  |  | 17,987,358 | 
|Share options (dilutive effect of 1,041,333 options;
    2003  1,419,100; 2002  1,296,200) |  |              | 507,691    |  |              |  | 788,056    |              |  |  | 812,126    | 
|                                                                                             |  |              |            |  |              |  |            |              | 
|Diluted shares outstanding                                                                   |  |              | 19,007,289 |  |              |  | 19,118,016 |              |  |  | 18,799,484 | 
|                                                                                             |  |              |            |  |              |  |            |              | 

F-18



---



##### 





|    |                                               
|--- | ----------------------------------------------
|16. | CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES



|                                                             |                                                                |        |        |        |        |  |         |         |   |  |        |        |  
|------------------------------------------------------------ | -------------------------------------------------------------- | ------ | ------ | ------ | ------ |  | ------- | ------- | - |  | ------ | ------ | -
|                                                             |                                                                | 2004   |        |        | 2003   |  |         | 2002    |  
|                                                             |                                                                | $000s |        |        | $000s |  |         | $000s  |  
|                                                             |                                                                |        |        |        |        |  |         |         |  
|CASH FLOWS FROM OPERATING ACTIVITIES                         |                                                                |        |        |        |        |  |         |         |   |  |        |       
|Net income for the year                                      |                                                                |        | 30,190 |        |        |  | 25,070  |         |   |  | 20,192 |       
|Add (deduct) items not affecting cash:                       |                                                                |        |        |        |        |  |         |         |   |  |        |       
|                                                             | Depreciation of property and equipment                         |        |        | 11,986 |        |  |         | 9,912   |   |  |        | 9,502  |  
|                                                             | Amortization of intangible assets                              |        |        | 927    |        |  |         | 925     |   |  |        | 1,079  |  
|                                                             | Future income tax                                              |        |        | (3,595 | )      |  |         | 4,508   |   |  |        | (46    | )
|                                                             | Loss on dispositions of investments and property and equipment |        |        | (504   | )      |  |         | 57      |   |  |        | 89     |  
|                                                             | Stock-based compensation expense                               |        |        | 894    |        |  |         | 706     |   |  |        | 45     |  
|                                                             | Share of income from equity investments                        |        |        | (385   | )      |  |         | (580    | ) |  |        | (355   | )
|Dividends from equity investments                            |                                                                |        | 300    |        |        |  |        |         |   |  | 175    |       
|                                                             |                                                                |        |        |        |        |  |         |         |  
|                                                             |                                                                |        | 39,813 |        |        |  | 40,598  |         |   |  | 30,681 |       
|                                                             |                                                                |        |        |        |        |  |         |         |  
|Change in non-cash working capital accounts:                 |                                                                |        |        |        |        |  |         |         |   |  |        |       
|                                                             | Accounts receivable                                            |        |        | (1,542 | )      |  |         | (1,252  | ) |  |        | 8,174  |  
|                                                             | Costs and estimated earnings in excess of billings             |        |        | 30,218 |        |  |         | (35,239 | ) |  |        | (4,673 | )
|                                                             | Prepaid expenses                                               |        |        | 496    |        |  |         | 113     |   |  |        | 29     |  
|                                                             | Accounts payable and accrued liabilities                       |        |        | (4,589 | )      |  |         | 13,944  |   |  |        | 4,576  |  
|                                                             | Billings in excess of costs and estimated earnings             |        |        | 1,600  |        |  |         | 4,951   |   |  |        | (2,147 | )
|                                                             | Income taxes payable/recoverable                               |        |        | 11,355 |        |  |         | (6,222  | ) |  |        | (531   | )
|                                                             |                                                                |        |        |        |        |  |         |         |  
|                                                             |                                                                |        | 37,538 |        |        |  | (23,705 | )       |   |  | 5,428  |       
|                                                             |                                                                |        |        |        |        |  |         |         |  
|Cash flows from operating activities                         |                                                                |        | 77,351 |        |        |  | 16,893  |         |   |  | 36,109 |       
|                                                             |                                                                |        |        |        |        |  |         |         |  
|                                                             |                                                                |        |        |        |        |  |         |         |   |  |        |       
|Income taxes paid during the year in accordance with US GAAP |                                                                |        | 10,530 |        |        |  | 18,142  |         |   |  | 14,143 |       
|                                                             |                                                                |        |        |        |        |  |         |         |  



|    |               
|--- | --------------
|17. | JOINT VENTURES



|                                              |  |                  |       |  |              |  |     |              |  |  |     | 
|--------------------------------------------- |  | ---------------- | ----- |  | ------------ |  | --- | ------------ |  |  | --- | 
|                                              |  | Percentage Owned |      
|                                              |  |                  |      
|                                              |  | December 31,     |       |  | December 31, |  |     | December 31, | 
|                                              |  | 2004             |       |  | 2003         |  |     | 2002         | 
|                                              |  | %                |       |  | %            |  |     | %            | 
|                                              |  |                  |       |  |              |  |     |              | 
|yyC.T. Joint Venture                          |  |                  | 20    |  |              |  | 20  |              |  |  | 20  | 
|Lockerbie Stanley Inc.                        |  |                  | n/a   |  |              |  | n/a |              |  |  | 50  | 
|Stantec  S&L Partnership                     |  |                  | 50    |  |              |  | 50  |              |  |  | 50  | 
|Colt Stantec Joint Venture                    |  |                  | 50    |  |              |  | 50  |              |  |  | 50  | 
|Edmonton International Airports Joint Venture |  |                  | 33    |  |              |  | 33  |              |  |  | n/a | 
|Pine Creek Consultants Joint Venture          |  |                  | 33    |  |              |  | 33  |              |  |  | n/a | 
|Dunlop Joint Ventures                         |  |                  | 33-80 |  |              |  | n/a |              |  |  | n/a | 



F-19



---



##### 





|                                        |  |        |       |   |        |  |        |        |  |  |        |  
|--------------------------------------- |  | ------ | ----- | - | ------ |  | ------ | ------ |  |  | ------ | -
|                                        |  | 2004   |       |   | 2003   |  |        | 2002   | 
|                                        |  | $000s |       |   | $000s |  |        | $000s | 
|                                        |  |        |       |   |        |  |        |        | 
|Statements of income:                   |  |        |       |   |        |  |        |        |  |  |        |  
|Gross revenue                           |  |        | 1,186 |   |        |  | 11,949 |        |  |  | 11,174 |  
|Subconsultant and other direct expenses |  |        | 894   |   |        |  | 9,611  |        |  |  | 12,529 |  
|Administrative and marketing expenses   |  |        | 217   |   |        |  | 776    |        |  |  | 277    |  
|                                        |  |        |       |   |        |  |        |        | 
|Net income for the year                 |  |        | 75    |   |        |  | 1,562  |        |  |  | (1,632 | )
|                                        |  |        |       |   |        |  |        |        | 
|Balance sheets:                         |  |        |       |   |        |  |        |        |  |  |        |  
|Current assets                          |  |        | 3,445 |   |        |  | 1,547  |        |  |  | 4,374  |  
|                                        |  |        |       |   |        |  |        |        | 
|Current liabilities                     |  |        | 2,822 |   |        |  | 1,583  |        |  |  | 5,516  |  
|                                        |  |        |       |   |        |  |        |        | 
|Statements of cash flows:               |  |        |       |   |        |  |        |        |  |  |        |  
|Cash flows used in operating activities |  |        | (274  | ) |        |  | (86    | )      |  |  | (425   | )
|                                        |  |        |       |   |        |  |        |        | 



|    |                      
|--- | ---------------------
|18. | SEGMENTED INFORMATION









F-20



---



##### 



Geographic information


|              |  |          |         |              |            |  |         |          |              |  |            |  |  |              |         |  |            |  |         |  |  |  |         | 
|------------- |  | -------- | ------- | ------------ | ---------- |  | ------- | -------- | ------------ |  | ---------- |  |  | ------------ | ------- |  | ---------- |  | ------- |  |  |  | ------- | 
|              |  |          |         | Property and |            |  |         |          | Property and |  |            |  |  | Property and |        
|              |  |          |         | Equipment,   |            |  |         |          | Equipment,   |  |            |  |  | Equipment,   |        
|              |  |          |         | Goodwill,    |            |  |         |          | Goodwill,    |  |            |  |  | Goodwill,    |        
|              |  | Gross    |         |              | Intangible |  |         | Gross    |              |  | Intangible |  |  | Gross        |         |  | Intangible | 
|              |  | Revenues |         |              | Assets     |  |         | Revenues |              |  | Assets     |  |  | Revenues     |         |  | Assets     | 
|              |  | 2004     |         |              | 2004       |  |         | 2003     |              |  | 2003       |  |  | 2002         |         |  | 2002       | 
|              |  | $000s   |         |              | $000s     |  |         | $000s   |              |  | $000s     |  |  | $000s       |         |  | $000s     | 
|              |  |          |         |              |            |  |         |          |              |  |            |  |  |              |         |  |            | 
|Canada        |  |          | 325,844 |              |            |  | 86,731  |          |              |  | 290,413    |  |  |              | 104,088 |  |            |  | 238,774 |  |  |  | 76,882  | 
|United States |  |          | 190,362 |              |            |  | 52,032  |          |              |  | 161,655    |  |  |              | 37,815  |  |            |  | 180,296 |  |  |  | 51,509  | 
|International |  |          | 4,673   |              |            |  | 471     |          |              |  | 7,874      |  |  |              | 575     |  |            |  | 9,386   |  |  |  | 596     | 
|              |  |          |         |              |            |  |         |          |              |  |            |  |  |              |         |  |            | 
|              |  |          | 520,879 |              |            |  | 139,234 |          |              |  | 459,942    |  |  |              | 142,478 |  |            |  | 428,456 |  |  |  | 128,987 | 
|              |  |          |         |              |            |  |         |          |              |  |            |  |  |              |         |  |            | 



Customers






|    |                  
|--- | -----------------
|19. | FORWARD CONTRACTS





|    |                  
|--- | -----------------
|20. | SUBSEQUENT EVENTS





|    |                                                       
|--- | ------------------------------------------------------
|21. | UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES



F-21



---



##### 





|   |                                    
|-- | -----------------------------------
|a. | Net income and comprehensive income





Statement of Comprehensive Income


|                                                                                          |                                                                                           |        |         |        |        |  |         |         |   |  |        |      |  
|----------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ------ | ------- | ------ | ------ |  | ------- | ------- | - |  | ------ | ---- | -
|                                                                                          |                                                                                           | 2004   |         |        | 2003   |  |         | 2002    |  
|                                                                                          |                                                                                           | $000s |         |        | $000s |  |         | $000s  |  
|                                                                                          |                                                                                           |        |         |        |        |  |         |         |  
|Net income under Canadian and US GAAP                                                     |                                                                                           |        | 30,190  |        |        |  | 25,070  |         |   |  | 20,192 |     
|Other comprehensive income, net of tax:                                                   |                                                                                           |        |         |        |        |  |         |         |   |  |        |     
|                                                                                          | Unrealized foreign exchange loss on translation of
    self-sustaining foreign operations |        |         | (5,157 | )      |  |         | (15,827 | ) |  |        | (841 | )
|                                                                                          |                                                                                           |        |         |        |        |  |         |         |  
|Comprehensive income                                                                      |                                                                                           |        | 25,033  |        |        |  | 9,243   |         |   |  | 19,351 |     
|                                                                                          |                                                                                           |        |         |        |        |  |         |         |  
|                                                                                         
|Accumulated other comprehensive income, beginning of year                                 |                                                                                           |        | (13,861 | )      |        |  | 1,966   |         |   |  | 2,807  |     
|Unrealized foreign exchange loss on translation of
    self-sustaining foreign operations |                                                                                           |        | (5,157  | )      |        |  | (15,827 | )       |   |  | (841   | )   
|                                                                                          |                                                                                           |        |         |        |        |  |         |         |  
|Accumulated other comprehensive income, end of year                                       |                                                                                           |        | (19,018 | )      |        |  | (13,861 | )       |   |  | 1,966  |     
|                                                                                          |                                                                                           |        |         |        |        |  |         |         |  



|   |                           
|-- | --------------------------
|b. | Other disclosures required



| |                                            
| | -------------------------------------------
| | i) Accounts payable and accrued liabilities

|                                 |  |              |        |  |              |  |        | 
|-------------------------------- |  | ------------ | ------ |  | ------------ |  | ------ | 
|                                 |  | December 31, |        |  | December 31, | 
|                                 |  | 2004         |        |  | 2003         | 
|                                 |  | $000s       |        |  | $000s       | 
|                                 |  |              |        |  |              | 
|Trade accounts payable           |  |              | 21,651 |  |              |  | 17,806 | 
|Employee and payroll liabilities |  |              | 37,188 |  |              |  | 31,276 | 
|Accrued liabilities              |  |              | 19,879 |  |              |  | 19,714 | 
|                                 |  |              |        |  |              | 
|                                 |  |              | 78,718 |  |              |  | 68,796 | 
|                                 |  |              |        |  |              | 



| |                                    
| | -----------------------------------
| | ii) Allowance for doubtful accounts

|                                |  |        |        |   |        |  |        |        |  |  |        |  
|------------------------------- |  | ------ | ------ | - | ------ |  | ------ | ------ |  |  | ------ | -
|                                |  | 2004   |        |   | 2003   |  |        | 2002   | 
|                                |  | $000s |        |   | $000s |  |        | $000s | 
|                                |  |        |        |   |        |  |        |        | 
|Balance, beginning of year      |  |        | 16,952 |   |        |  | 17,316 |        |  |  | 15,755 |  
|Acquired balances               |  |        | 5,294  |   |        |  | 651    |        |  |  | 2,616  |  
|Provision for doubtful accounts |  |        | 6,632  |   |        |  | 4,544  |        |  |  | 3,512  |  
|Deductions                      |  |        | (7,152 | ) |        |  | (4,221 | )      |  |  | (4,453 | )
|Impact of foreign exchange      |  |        | (631   | ) |        |  | (1,338 | )      |  |  | (114   | )
|                                |  |        |        |   |        |  |        |        | 
|Balance, end of year            |  |        | 21,095 |   |        |  | 16,952 |        |  |  | 17,316 |  
|                                |  |        |        |   |        |  |        |        | 

F-22



---



##### 





| |                                       
| | --------------------------------------
| | iii) Income (loss) before income taxes

|         |  |        |        |   |        |  |        |        |  |  |        |  
|-------- |  | ------ | ------ | - | ------ |  | ------ | ------ |  |  | ------ | -
|         |  | 2004   |        |   | 2003   |  |        | 2002   | 
|         |  | $000s |        |   | $000s |  |        | $000s | 
|         |  |        |        |   |        |  |        |        | 
|Domestic |  |        | 48,111 |   |        |  | 36,583 |        |  |  | 37,548 |  
|Foreign  |  |        | (3,451 | ) |        |  | 3,045  |        |  |  | (4,453 | )
|         |  |        |        |   |        |  |        |        | 
|Total    |  |        | 44,660 |   |        |  | 39,628 |        |  |  | 33,095 |  
|         |  |        |        |   |        |  |        |        | 



| |                       
| | ----------------------
| | iv) Income tax expense

|                    |  |        |        |   |        |  |        |        |  |  |        |  
|------------------- |  | ------ | ------ | - | ------ |  | ------ | ------ |  |  | ------ | -
|                    |  | 2004   |        |   | 2003   |  |        | 2002   | 
|                    |  | $000s |        |   | $000s |  |        | $000s | 
|                    |  |        |        |   |        |  |        |        | 
|Current tax expense |  |        |        |   |        |  |        |        |  |  |        |  
|Domestic            |  |        | 17,724 |   |        |  | 9,474  |        |  |  | 13,968 |  
|Foreign             |  |        | 341    |   |        |  | 576    |        |  |  | (1,019 | )
|                    |  |        |        |   |        |  |        |        | 
|Total               |  |        | 18,065 |   |        |  | 10,050 |        |  |  | 12,949 |  
|                    |  |        |        |   |        |  |        |        | 
|Future tax expense  |  |        |        |   |        |  |        |        |  |  |        |  
|Domestic            |  |        | (566   | ) |        |  | 3,532  |        |  |  | 470    |  
|Foreign             |  |        | (3,029 | ) |        |  | 976    |        |  |  | (516   | )
|                    |  |        |        |   |        |  |        |        | 
|Total               |  |        | (3,595 | ) |        |  | 4,508  |        |  |  | (46    | )
|                    |  |        |        |   |        |  |        |        | 
|Total tax expense   |  |        |        |   |        |  |        |        |  |  |        |  
|Domestic            |  |        | 17,158 |   |        |  | 13,006 |        |  |  | 14,438 |  
|Foreign             |  |        | (2,688 | ) |        |  | 1,552  |        |  |  | (1,535 | )
|                    |  |        |        |   |        |  |        |        | 
|Total               |  |        | 14,470 |   |        |  | 14,558 |        |  |  | 12,903 |  
|                    |  |        |        |   |        |  |        |        | 



| |                       
| | ----------------------
| | v) Long term contracts





|   |                                         
|-- | ----------------------------------------
|c. | Effects of new accounting pronouncements







| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | i) Comprehensive Income  New section 1530
    becomes effective for the Companys fiscal 2007 year end and
    establishes standards for the reporting and display of
    comprehensive income. Unrealized gains on the translation of self-sustaining foreign operations will be included in
    comprehensive income. Currently these items are reflected in the cumulative translation account.                                                                                                                                                                                                                                                                                                                                                                    
|
| | ii) Financial Instruments  Recognition and
    Measurement  New section 3855 becomes effective
    for the Companys fiscal 2007 year end and provides standards for the
    classification of financial instruments and the related
    interest, dividends, gains and losses. This section will impact
    the classification of the Companys investments held for
    self-insured liabilities and will require the company to revalue
    certain investments to fair value with the resulting unrealized
    gains or losses being reflected through other comprehensive
    income until realized when the gains or losses will be
    recognized in net income. This new standard is not expected to
    have a material effect on the results of operations.

F-23



---



##### 





| |                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | iii) Variable Interest Entities  Accounting
    Guideline 15 is effective for the Companys interim period ending
    March 31, 2005. As the Company currently consolidates its
    interests in variable entities, there will be no impact on the
    financial reporting of the Company other than to amend a policy
    note  principles of consolidation to include the
    consolidation of variable interest entities.



|    |                    
|--- | -------------------
|22. | COMPARATIVE FIGURES



F-24



---



##### 



STANTEC INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated financial statements are presented in
Canadian dollars and have been prepared in accordance with U.S. GAAP, based on the historical
financial statements of Stantec and Keith, as at and for the year ended December 31, 2004, adjusted
to give effect to the acquisition of Keith by Stantec. The unaudited pro forma condensed consolidated financial statements were prepared to
illustrate the estimated effects of the acquisition. The unaudited pro forma condensed consolidated
balance sheet gives effect to the acquisition as if the acquisition had occurred as of December 31,
2004. The unaudited pro forma condensed consolidated statement of income for the year ended
December 31, 2004 gives effect to the acquisition as if the acquisition had occurred as of January
1, 2004. The pro forma adjustments are described in the accompanying notes. The unaudited pro
forma adjustments are based upon available information and certain assumptions that management of
Stantec believes are reasonable. The unaudited pro forma condensed consolidated financial
statements do not purport to represent Stantecs results of operations or financial condition for
any future period or as of any date. The unaudited pro forma condensed consolidated financial
statements should be read in conjunction with Stantecs consolidated financial statements and
Managements Discussion and Analysis of Financial Condition and Results of Operations which are
included elsewhere in this proxy statement/prospectus. The acquisition will be accounted for using the purchase method. Under the purchase method,
the total purchase price will be allocated to the tangible and intangible assets and liabilities of
Keith based upon their respective fair values as of the closing of the acquisition based on
valuations which are not yet available. A preliminary allocation of the purchase price has been
made to the major categories of assets and liabilities in the accompanying unaudited pro forma
condensed consolidated financial information based on estimates. The actual allocation of purchase
price and the resulting effect on income from continuing operations may differ materially from the unaudited
pro forma amounts included herein. F-25




---



##### 



STANTEC INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
As at December 31, 2004 Pro FormaStantec
    
    
    Keith
    
    
    
    
    
    
    
    
    
    ConsolidatedUS GAAP
    
    
    US GAAP
    
    
    
    
    US GAAP$
    
    
    $
    
    

Pro Forma Adjustments
    
    $(in thousands of Canadian dollars)
    
    (note 2)
    
    
    (note 3)
    
    
    $
    
    
    
    (note 4
    )ASSETSCurrentCash and cash equivalents
    
    
    37,890
    
    
    
    9,398
    
    
    
    (3,202
    )
    
    
    (b
    )
    
    
    
    
    
    
    
    70,732
    
    
    
    (c
    )
    
    
    
    
    
    
    
    (108,622
    )
    
    
    (d
    )
    
    
    6,196Available for sale securities
    
    
    4,831
    
    
    
    41,259
    
    
    
    
    
    
    
    
    
    
    
    46,090Accounts receivable
    
    
    112,476
    
    
    
    19,775
    
    
    
    
    
    
    
    
    
    
    
    132,251Costs and estimated earnings in excess of billings
    
    
    40,861
    
    
    
    12,585
    
    
    
    
    
    
    
    
    
    
    
    53,446Other current assets
    
    
    12,697
    
    
    
    1,115
    
    
    
    
    
    
    
    
    
    
    
    13,812Total current assets
    
    
    208,755
    
    
    
    84,132
    
    
    
    (41,092
    )
    
    
    
    
    
    
    251,795Property and equipment
    
    
    48,262
    
    
    
    5,581
    
    
    
    (679
    )
    
    
    (d
    )
    
    
    53,164Goodwill
    
    
    84,694
    
    
    
    27,717
    
    
    
    (27,717
    )
    
    
    (d
    )
    
    
    
    
    
    
    
    149,211
    
    
    
    (d
    )
    
    
    233,905Intangible assets
    
    
    6,278
    
    
    
    
    
    
    
    13,194
    
    
    
    (d
    )
    
    
    19,472Other long-term assets
    
    
    14,111
    
    
    
    328
    
    
    
    581
    
    
    
    (e
    )
    
    
    15,020Total assets
    
    
    362,100
    
    
    
    117,758
    
    
    
    93,498
    
    
    
    
    
    
    
    573,356LIABILITIES AND SHAREHOLDERS EQUITYCurrentBank indebtedness
    
    
    
    
    
    
    
    
    
    
    70,732
    
    
    
    (c
    )
    
    
    70,732Accounts payable and accrued liabilities
    
    
    78,718
    
    
    
    13,147
    
    
    
    751
    
    
    
    (d
    )
    
    
    
    
    
    
    
    7,808
    
    
    
    (d
    )
    
    
    
    
    
    
    
    1,659
    
    
    
    (e
    )
    
    
    102,083Other current liabilities
    
    
    48,037
    
    
    
    4,307
    
    
    
    
    
    
    
    
    
    
    
    52,344Total current liabilities
    
    
    126,755
    
    
    
    17,454
    
    
    
    80,950
    
    
    
    
    
    
    
    225,159Long-term debt
    
    
    21,155
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,155Other long-term liabilities
    
    
    25,134
    
    
    
    1,834
    
    
    
    4,493
    
    
    
    (d
    )
    
    
    31,461Total liabilities
    
    
    173,044
    
    
    
    19,288
    
    
    
    85,443
    
    
    
    
    
    
    
    277,775Shareholders equityShare capital
    
    
    87,656
    
    
    
    10
    
    
    
    (10
    )
    
    
    (d
    )
    
    
    
    
    
    
    
    (1,078
    )
    
    
    (e
    )
    
    
    
    
    
    
    
    109,954
    
    
    
    (d
    )
    
    
    196,532Additional paid in capital
    
    
    2,544
    
    
    
    57,833
    
    
    
    (57,833
    )
    
    
    (d
    )
    
    
    2,544Deferred stock compensation
    
    
    
    
    
    
    (1,042
    )
    
    
    (1,309
    )
    
    
    (d
    )
    
    
    (2,351
    )Retained earnings
    
    
    117,874
    
    
    
    41,669
    
    
    
    (3,202
    )
    
    
    (b
    )
    
    
    
    
    
    
    
    (38,467
    )
    
    
    (d
    )
    
    
    117,874Accumulated other comprehensive income
    
    
    (19,018
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,018
    )Total shareholders equity
    
    
    189,056
    
    
    
    98,470
    
    
    
    8,055
    
    
    
    
    
    
    
    295,581Total
liabilities and shareholders equity
    
    
    362,100
    
    
    
    117,758
    
    
    
    93,498
    
    
    
    
    
    
    
    573,356
 See accompanying notes to unaudited pro forma condensed consolidated financial statements. F-26




---



##### 



STANTEC INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
For the year ended December 31, 2004 Pro FormaStantec
    
    
    Keith
    
    
    
    
    
    
    
    
    
    ConsolidatedUS GAAP
    
    
    US GAAP
    
    
    
    
    US GAAP$
    
    
    $
    
    
    Pro Forma Adjustments
    
    $(in thousands of Canadian dollars except per share amounts)
    
    (note 2)
    
    
    (note 3)
    
    
    $
    
    
    
(note 4
    )INCOMEGross revenue
    
    
    520,879
    
    
    
    137,740
    
    
    
    
    
    
    
    
    
    
    
    658,619Less subconsultant and other direct expenses
    
    
    71,728
    
    
    
    11,234
    
    
    
    
    
    
    
    
    
    
    
    82,962Net revenue
    
    
    449,151
    
    
    
    126,506
    
    
    
    
    
    
    
    
    
    
    
    575,657Costs of revenue
    
    
    
    
    
    
    78,925
    
    
    
    (78,925
    )
    
    
    (g
    )
    
    
    Direct payroll costs
    
    
    205,513
    
    
    
    
    
    
    
    58,989
    
    
    
    (g
    )
    
    
    264,502Gross margin
    
    
    243,638
    
    
    
    47,581
    
    
    
    19,936
    
    
    
    
    
    
    
    311,155Administrative and marketing expenses
    
    
    183,739
    
    
    
    30,089
    
    
    
    17,350
    
    
    
    (g
    )580
    
    
    
    (i
    )
    
    
    231,758Depreciation of property and equipment
    
    
    11,986
    
    
    
    
    
    
    
    2,586
    
    
    
    (g
    )
    
    
    14,572Amortization
of intangible assets
    
    
    927
    
    
    
    
    
    
    
    3,874
    
    
    
    (f
    )
    
    
    4,801Net interest expense (income)
    
    
    2,805
    
    
    
    (629
    )
    
    
    2,900
    
    
    
    (h
    )
    
    
    5,076Other income
    
    
    (479
    )
    
    
    (60
    )
    
    
    
    
    
    
    
    
    
    
    (539
    )Income before income taxes
    
    
    44,660
    
    
    
    18,181
    
    
    
    (7,354
    )
    
    
    
    
    
    
    55,487Income tax expense
    
    
    14,470
    
    
    
    7,149
    
    
    
    (2,752
    )
    
    
    (j
    )
    
    
    18,867Net income
    
    
    30,190
    
    
    
    11,032
    
    
    
    (4,602
    )
    
    
    
    
    
    
    36,620Earnings per shareBasic earnings per share
    
    
    1.63
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.64Diluted earnings per share
    
    
    1.59
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.60Weighted average number of common shares
outstandingBasic
    
    
    18,500
    
    
    
    
    
    
    
    3,815
    
    
    
    (k
    )
    
    
    22,315Diluted
    
    
    19,007
    
    
    
    
    
    
    
    3,898
    
    
    
    (k
    )
    
    
    22,905
 See accompanying notes to unaudited pro forma condensed consolidated financial statements. F-27




---



##### 



STANTEC INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS  1.

Basis of PresentationThe accompanying unaudited pro forma condensed consolidated financial statements give effect
to the acquisition of The Keith Companies, Inc. (Keith) by Stantec Inc. (Stantec) and are
prepared in accordance with U.S. GAAP and have been presented in Canadian dollars. The
unaudited pro forma condensed consolidated balance sheet gives effect to the acquisition as if
the acquisition had occurred as of December 31, 2004. The unaudited pro forma condensed
consolidated statement of income for the year ended December 31, 2004 gives effect to the
acquisition as if the acquisition had occurred as of January 1, 2004.On April 14, 2005, Stantec Inc. and The Keith Companies, Inc. entered into an Agreement and
Plan of Merger, which is referred to as the merger agreement, under which Stantec is to
acquire all of the outstanding shares of Keith common stock. This acquisition is to be
accounted for as a purchase by Stantec. Pursuant to the merger agreement, a Keith shareholder
will be entitled to receive for each share of Keith common stock a) US$11.00 in cash; b) 0.23
Stantec common stock; and c) US$5.50 worth of Stantec common stock to be calculated by
dividing US$5.50 by the simple average of the weighted average sales price of the Stantec
common stock on the Toronto Stock Exchange (TSX) for each of the 20 trading days ending on the
second trading day prior to the closing of the merger, converted to US dollars for each
trading day at the noon buying rate quoted by the Federal Reserve Bank of New York on such
trading day. At the date of merger, all of Keiths stock options will be cancelled with no
further rights. Prior to closing, Keith will offer to purchase all unvested stock options.
All unvested restricted stock issued under the Keith stock option plan will be substituted
with 0.23 common shares of Stantec common shares and that number of shares of Stantec common
shares equal to US$16.50 divided by the average 20-day trading price of Stantec common stock
ending on the second trading day prior to the closing of the merger, converted to US dollars
for each trading day at the noon buying rate quoted by the Federal Reserve Bank of New York on
such trading day. These Stantec common shares exchanged for the unvested Keith restricted
stock will be subject to similar restrictions to that which the unvested restricted stock are
currently subject.The accounting policies used in the preparation of the unaudited pro forma condensed
consolidated financial statements are those described in Stantecs audited consolidated
financial statements for the year ended December 31, 2004 (note 2). These unaudited pro forma
condensed consolidated financial statements should be read in conjunction with the merger
agreement and the audited consolidated financial statements of Stantec as at December 31,
2004, including the notes thereto, which are included elsewhere in this proxy
statement/prospectus and the audited consolidated financial statements of Keith as at December
31, 2004, including the notes thereto, which are incorporated by reference in this proxy
statement/prospectus. (note 3)2.

Conversion of Stantecs Historical Financial Statements to US GAAPThe unaudited pro forma condensed consolidated financial statements are presented in Canadian
dollars and in accordance with U.S. GAAP. In order to present Stantecs historical financial
statements in accordance with U.S. GAAP, the cumulative translation account was recorded in
and reflected as accumulated other comprehensive income. A detailed description of additional
disclosures required under US GAAP is included in note 21 to Stantecs consolidated financial
statements for the year ended December 31, 2004, which are included elsewhere in this proxy
statement/ prospectus. F-28




---



##### 



STANTEC INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  3.

Conversion of Keiths Historical Financial Statements to Canadian DollarsThe unaudited pro forma condensed consolidated financial statements are presented in Canadian
dollars and in accordance with U.S. GAAP. Keiths consolidated statement of income
data for the year ended December 31, 2004 was converted from US dollars to Canadian dollars using
the average exchange rate for the period (CDN $1.3075 per US $1.0000). Keiths consolidated
balance sheet data at December 31, 2004 was converted to Canadian dollars using the exchange rate
on that date (CDN $1.2020 per US $1.0000). The following schedule presents the conversion of
Keiths financial statement data from US dollars to Canadian dollars. THE KEITH COMPANIES, INC. CONSOLIDATED BALANCE SHEET
DATA
As at December 31, 2004 U.S. GAAP
    
    
    U.S. GAAPUS$
    
    
    CDN$(in thousands of dollars)ASSETSCurrent
assetsCash and cash equivalents
    
    
    7,819
    
    
    
    9,398Available-for-sale securities, at fair value
    
    
    34,325
    
    
    
    41,259Contracts
and trade receivables, net of allowance for doubtful accounts of
US $1,069
    
    
    16,452
    
    
    
    19,775Costs and estimated earnings in excess of billings
    
    
    10,470
    
    
    
    12,585Prepaid expenses and other current assets
    
    
    928
    
    
    
    1,115Total current assets
    
    
    69,994
    
    
    
    84,132Equipment and leasehold improvements, net
    
    
    4,643
    
    
    
    5,581Goodwill
    
    
    23,059
    
    
    
    27,717Other assets
    
    
    273
    
    
    
    328Total assets
    
    
    97,969
    
    
    
    117,758LIABILITIES AND SHAREHOLDERS EQUITYCurrent
liabilitiesTrade accounts payable
    
    
    1,685
    
    
    
    2,025Accrued employee compensation
    
    
    5,445
    
    
    
    6,544Current portion of deferred tax liabilities
    
    
    1,661
    
    
    
    1,997Other accrued liabilities
    
    
    3,809
    
    
    
    4,578Billings in excess of costs and estimated earnings
    
    
    1,922
    
    
    
    2,310Total current liabilities
    
    
    14,522
    
    
    
    17,454Deferred tax liabilities
    
    
    1,125
    
    
    
    1,352Accrued rent
    
    
    401
    
    
    
    482Total liabilities
    
    
    16,048
    
    
    
    19,288Shareholders equityCommon stock
    
    
    8
    
    
    
    10Additional paid-in-capital
    
    
    48,114
    
    
    
    57,833Deferred stock compensation
    
    
    (867
    )
    
    
    (1,042
    )Retained earnings
    
    
    34,666
    
    
    
    41,669Total shareholders equity
    
    
    81,921
    
    
    
    98,470Total
liabilities and shareholders equity
    
    
    97,969
    
    
    
    117,758
 F-29




---



##### 



STANTEC INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS  (Continued) THE KEITH COMPANIES, INC. CONSOLIDATED STATEMENT OF
INCOME DATA
For the Year Ended December 31, 2004 U.S. GAAP
    
    
    U.S. GAAPUS$
    
    
    CDN$(in thousands of dollars)INCOMEGross revenue
    
    
    105,346
    
    
    
    137,740Subcontractor costs
    
    
    8,592
    
    
    
    11,234Net revenue
    
    
    96,754
    
    
    
    126,506Costs of revenue
    
    
    60,363
    
    
    
    78,925Gross profit
    
    
    36,391
    
    
    
    47,581Selling, general and administrative expenses
    
    
    23,013
    
    
    
    30,089Income from operations
    
    
    13,378
    
    
    
    17,492Interest income, net
    
    
    481
    
    
    
    629Other income, net
    
    
    46
    
    
    
    60Income before provision for income taxes
    
    
    13,905
    
    
    
    18,181Provision for income taxes
    
    
    5,468
    
    
    
    7,149Income from continuing operations
    
    
    8,437
    
    
    
    11,032
  4.

Pro Forma Assumptions and AdjustmentsAs of December 31, 2004, there were 7,920,903 shares of Keith common stock outstanding. Prior
to the acquisition, Keith will offer to purchase all unvested Keith stock options for a cash
payment equal to US$16.50 plus the cash value of 0.23 Stantec common shares, based on the
average trading price prior to the acquisition, less the exercise price of the options. It is
anticipated that prior to the effective date of the acquisition, outstanding vested Keith
stock options will be exercised with a portion of the stock options being surrendered in lieu
of a cash payment for the exercise price. This will result in estimated Keith common stock
outstanding at the acquisition date of 8,215,239. In addition, it is anticipated that 89,333
unvested Keith restricted common stock will be exchanged for Stantec shares which will be
subject to similar restrictions to that which the Keith restricted stock are currently
subject.As described in note 1, a portion of the purchase price consideration will be based on the
average sales price of the Stantec common stock on the Toronto Stock Exchange (TSX) for each
of the 20 trading days ending on the second trading day prior to the closing of the merger,
converted in US dollars for each trading day at the noon buying rate quoted by the Federal
Reserve Bank of New York on such trading day. The estimated Stantec share price and US dollar
exchange rate used in these unaudited pro forma condensed consolidated financial statements in
determining the number of shares is $28.84 and 1.2290, respectively using a notional merger
date of April 26, 2005. F-30




---



##### 



STANTEC INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  The purchase consideration is estimated as follows using an
estimated fair value for the Stantec shares issued of US$23.47 and is translated into Canadian
dollars using the exchange rate in effect at December 31, 2004 of 1.2020: In US
    
    
    In CDN$000s
    
    
    $000sCash consideration
    
    
    90,368
    
    
    
    108,622Share consideration (3,898,000 of Stantec common shares)
    
    
    91,476
    
    
    
    109,954Estimated transaction costs
    
    
    625
    
    
    
    751Total purchase consideration
    
    
    182,469
    
    
    
    219,327
  The purchase price has been allocated to the fair value of Keiths identified assets and
liabilities in accordance with the purchase method as follows: In US
    
    
    In CDN$000s
    
    
    $000sAssets and liabilities acquired:Cash and cash equivalents
    
    
    5,155
    
    
    
    6,196Available for sale securities
    
    
    34,325
    
    
    
    41,259Accounts receivable
    
    
    16,452
    
    
    
    19,775Costs and estimated earnings in excess of billings
    
    
    10,470
    
    
    
    12,585Other current assets
    
    
    928
    
    
    
    1,115Property and equipment
    
    
    4,078
    
    
    
    4,902Other long-term assets
    
    
    273
    
    
    
    328Goodwill
    
    
    124,135
    
    
    
    149,211Intangible assets
    
    
    10,977
    
    
    
    13,194Accounts payable and accrued liabilities
    
    
    (17,434
    )
    
    
    (20,955
    )Other current liabilities including deferred income tax
    
    
    (3,583
    )
    
    
    (4,307
    )Other long-term liabilities including deferred income tax
    
    
    (5,263
    )
    
    
    (6,327
    )Deferred stock compensation
    
    
    1,956
    
    
    
    2,351Net assets acquired
    
    
    182,469
    
    
    
    219,327
  The above purchase price allocation is preliminary and has been allocated based on a
preliminary estimate of the fair value of the assets and liabilities of Keith as of December
31, 2004. The final determination of the allocation of the purchase price will be determined
based on the fair value of assets acquired, including the fair value
of intangible assets, and
the fair value of liabilities assumed as of the date the acquisition is completed. The
purchase price allocation will remain preliminary until Stantec is able to (i) complete a
third party valuation of significant intangible assets acquired and (ii) evaluate the fair
value of other assets and liabilities acquired. The final determination of the purchase price
is expected to be completed shortly after the completion of the acquisition. The actual
amounts allocated to assets and liabilities could differ significantly from the amounts
presented in the unaudited pro forma condensed consolidated financial statements.For purposes of the unaudited pro forma condensed consolidated balance sheet as at December
31, 2004, $13,194,000 of the purchase price has been allocated to identifiable intangible
assets as follows:  

Client relationships  $8,714,000 (US$7,250,000)

Contract backlog  $3,760,000 (US$3,128,000); and

Value of favorable premise leases  $720,000 (US$599,000).  The above purchase price allocation recognizes liabilities assumed for restructuring costs and
legal costs incurred by Keith related to the acquisition in the amount of $7,808,000
(US$6,495,000). F-31




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STANTEC INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)  The following adjustments have been made in the unaudited pro forma condensed consolidated
financial statements to reflect the transaction described above:  (a)

Prior to the acquisition, the outstanding vested Keith stock options will be
exercised with a portion of the stock options being surrendered in lieu of a cash
payment for the exercise price. The effect of this is an increase in the number of
Keiths outstanding shares at the acquisition date by 319,487 shares.(b)

Prior to the acquisition, Keith will offer to purchase all unvested Keith stock
options at a price equal to US$16.50 plus the cash value of 0.23 Stantec common shares,
based on the average trading price prior to the acquisition, less the exercise price of
the options. The effect of this is a reduction of Keiths cash and cash equivalents
and retained earnings of $3,202,000 (US$2,664,000) at the acquisition date.(c)

To reflect the additional bank financing of $70,732,000 as at December 31, 2004
required to satisfy the cash consideration component of the purchase price. Stantec
will access its currently unused credit facilities and obtain short term financing at
an expected interest rate of approximately 4.1%.(d)

To reflect the acquisition of Keiths net assets, in exchange for the issuance
of Stantec common shares and cash and to eliminate the share capital and other equity
accounts of Keith.(e)

To reflect the estimated costs associated with the US listing registration that
will be reflected as a reduction of share capital in the amount of $1,078,000, which is
net of future taxes receivable of $581,000, and an increase in accounts payable and
accrued liabilities of $1,659,000 at the date of acquisition.(f)

To record the amortization of intangible assets to be acquired from Keith based
on their estimated fair market value and estimated useful lives in the amount of
$3,874,000. For purposes of these unaudited pro forma condensed consolidated financial
statements, the client relationships are being amortized over a period of 10 years, the
contract backlog is being amortized over 18 months and the favorable premise leases are
being amortized over 47 months. These are managements best estimate of the expected
useful life of these intangible assets. The amortization expense has been reflected in
the unaudited pro forma condensed consolidated income statement using the average
exchange rate for the period of 1.3075. The actual expected useful life of these
intangible assets could differ when the purchase price allocation is completed.(g)

To reclassify Keiths non direct payroll costs and depreciation expense to
conform to Stantecs historical presentation.(h)

To reflect additional financing costs of $2,900,000 as a result of the
additional bank indebtedness financing of $70,732,000 arising on the acquisition at an
expected interest rate of 4.1%.(i)

To reflect the additional compensation expense that would have been recorded in
2004 for the vesting of restricted shares issued as part of the acquisition.(j)

To reflect the decrease in tax expense associated with the additional interest
costs, compensation cost and the amortization of intangible assets. The net decrease
in taxes is $2,752,000.(k)

The unaudited pro forma earnings per share, both basic and diluted, is computed
by dividing the pro forma income by the pro forma weighted average number of common
shares outstanding on a basic and diluted basis. The pro forma weighted average number
of shares outstanding has been computed by adding the unrestricted common shares to be
issued in the acquisition of 3,815,000 to the weighted average number of common shares
used in the computation of Stantecs historical basic earnings per share and 3,898,000 unrestricted and restricted shares to the weighted average number
of shares used in the computation of Stantecs historical diluted earnings per share of
the period presented. F-32




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Appendix A Agreement and Plan of Merger and Reorganization  NOTICE The merger agreement has been included to provide you with information regarding its terms. It is not intended to provide any other factual information about Stantec or Keith. Such information can be found elsewhere in this proxy statement/prospectus and in the other public filings Keith makes with the Securities and Exchange Commission, which are available without charge at www.sec.gov. The merger agreement contains representations and warranties Stantec and Keith made to each other. The assertions embodied in those representations and warranties are qualified by information in confidential disclosure schedules that Stantec and Keith have exchanged in connection with signing the merger agreement. While Stantec and Keith do not believe that the disclosure schedules contain information securities laws require them to publicly disclose other than information that has already been disclosed, the disclosure schedules do contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the attached merger agreement. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts, since they are modified in important part by the underlying disclosure schedules. These disclosure schedules contain potential non-public information. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the agreement, which subsequent information may or may not be fully reflected in the companies public disclosure.
 A-1




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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION among STANTEC INC., STANTEC CONSULTING CALIFORNIA INC. and THE KEITH COMPANIES, INC. Dated as of April 14, 2005




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TABLE OF CONTENTS PageARTICLE ITHE MERGERSECTION 1.01. The Merger
    
    
    1SECTION 1.02. Effective Time; Closing
    
    
    1SECTION 1.03. Effect of the Merger
    
    
    2SECTION 1.04. Articles of Incorporation; By-laws
    
    
    2SECTION 1.05. Directors and Officers
    
    
    2ARTICLE IICONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATESSECTION 2.01. Conversion of Securities
    
    
    3SECTION 2.02. Exchange of Certificates
    
    
    7SECTION 2.03. Stock Transfer Books
    
    
    9SECTION 2.04. Company Stock Options
    
    
    9SECTION 2.05. Company Restricted Stock
    
    
    10SECTION 2.06. [Reserved]
    
    
    10SECTION 2.07. Dissenting Shares
    
    
    10SECTION 2.08. [Reserved]
    
    
    11SECTION 2.09. Affiliates
    
    
    11ARTICLE IIIREPRESENTATIONS AND WARRANTIES OF THE COMPANYSECTION 3.01. Organization and Qualification; Subsidiaries
    
    
    11SECTION 3.02. Articles of Incorporation and By-laws
    
    
    12SECTION 3.03. Capitalization
    
    
    12SECTION 3.04. Authority Relative to This Agreement
    
    
    13SECTION 3.05. No Conflict; Required Filings and Consents
    
    
    13SECTION 3.06. Permits; Compliance
    
    
    14SECTION 3.07. SEC Filings; Financial Statements
    
    
    14SECTION 3.08. Absence of Certain Changes or Events
    
    
    16SECTION 3.09. Absence of Litigation
    
    
    16SECTION 3.10. Employee Benefit Plans
    
    
    16SECTION 3.11. Labor and Employment Matters
    
    
    18SECTION 3.12. Real Property; Title to Assets
    
    
    19SECTION 3.13. Intellectual Property
    
    
    20SECTION 3.14. Taxes
    
    
    20SECTION 3.15. Environmental Matters
    
    
    21SECTION 3.16. [Reserved]
    
    
    21
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PageSECTION 3.17. Material Contracts
    
    
    21SECTION 3.18. Insurance
    
    
    22SECTION 3.19. Board Approval; Vote Required
    
    
    23SECTION 3.20. Customers and Suppliers
    
    
    23SECTION 3.21. [Reserved]
    
    
    23SECTION 3.22. Interested Party Transactions
    
    
    23SECTION 3.23. Opinion of Financial Advisor
    
    
    24SECTION 3.24. Brokers
    
    
    24ARTICLE IVREPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSECTION 4.01. Corporate Organization
    
    
    24SECTION 4.02. Articles of Incorporation and By-Laws
    
    
    24SECTION 4.03. Capitalization
    
    
    24SECTION 4.04. Authority Relative to This Agreement
    
    
    25SECTION 4.05. No Conflict; Required Filings and Consents
    
    
    26SECTION 4.06. Permits; Compliance
    
    
    26SECTION 4.07. ASC Filings; Financial Statements
    
    
    27SECTION 4.08. Absence of Certain Changes or Events
    
    
    28SECTION 4.09. Absence of Litigation
    
    
    28SECTION 4.10. Stockholder Vote
    
    
    29SECTION 4.11. Operations of Merger Sub
    
    
    29SECTION 4.12. Taxes
    
    
    29SECTION 4.13. Board Approval
    
    
    29SECTION 4.14. [Reserved]
    
    
    30SECTION 4.15. Ownership of Company Common Stock
    
    
    30SECTION 4.16. Brokers
    
    
    30SECTION 4.17. Intellectual Property
    
    
    30SECTION 4.18. Environmental Matters
    
    
    30ARTICLE VCONDUCT OF BUSINESS PENDING THE MERGERSECTION 5.01. Conduct of Business by the Company Pending the Merger
    
    
    31SECTION 5.02. Conduct of Business by Parent Pending the Merger
    
    
    33ARTICLE VIADDITIONAL AGREEMENTSSECTION 6.01. Registration Statement; Proxy Statement
    
    
    33SECTION 6.02. Company Stockholders Meeting
    
    
    35SECTION 6.03. Access to Information; Confidentiality
    
    
    35SECTION 6.04. No Solicitation of Transactions
    
    
    35SECTION 6.05. Employee Benefit Matters
    
    
    38SECTION 6.06. Directors and Officers Indemnification and Insurance
    
    
    38
 ii




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PageSECTION 6.07. Notification of Certain Matters
    
    
    39SECTION 6.08. Company Affiliates
    
    
    39SECTION 6.09. Further Action; Reasonable Best Efforts
    
    
    39SECTION 6.10. Plan of Reorganization
    
    
    40SECTION 6.11. Obligations of Merger Sub
    
    
    40SECTION 6.12. Consents of Accountants
    
    
    41SECTION 6.13. Listing
    
    
    41SECTION 6.14. Subsequent Financial Statements
    
    
    41SECTION 6.15. Public Announcements
    
    
    41SECTION 6.16. Board of Directors of Parent
    
    
    41SECTION 6.17. Company Contribution
    
    
    41SECTION 6.18. Unvested Company Restricted Stock
    
    
    41ARTICLE VIICONDITIONS TO THE MERGERSECTION 7.01. Conditions to the Obligations of Each Party
    
    
    42SECTION 7.02. Conditions to the Obligations of Parent and Merger Sub
    
    
    42SECTION 7.03. Conditions to the Obligations of the Company
    
    
    44ARTICLE VIIITERMINATION, AMENDMENT AND WAIVERSECTION 8.01. Termination
    
    
    45SECTION 8.02. Effect of Termination
    
    
    46SECTION 8.03. Fees and Expenses
    
    
    46SECTION 8.04. Amendment
    
    
    47SECTION 8.05. Waiver
    
    
    47ARTICLE IXGENERAL PROVISIONSSECTION 9.01. Non Survival of Representations, Warranties and Agreements
    
    
    47SECTION 9.02. Notices
    
    
    48SECTION 9.03. Certain Definitions
    
    
    49SECTION 9.04. Severability
    
    
    54SECTION 9.05. Entire Agreement; Assignment
    
    
    54SECTION 9.06. Parties in Interest
    
    
    54SECTION 9.07. Specific Performance
    
    
    55SECTION 9.08. Governing Law
    
    
    55SECTION 9.09. Headings
    
    
    55SECTION 9.10. Counterparts
    
    
    55SECTION 9.11. Waiver of Jury Trial
    
    
    55
 iii




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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of April 14, 2005 (this
Agreement), among Stantec Inc., a Canadian corporation (Parent), Stantec
Consulting California Inc., a California corporation and a wholly owned subsidiary of Parent
(Merger Sub), and The Keith Companies, Inc., a California corporation (the
Company). WHEREAS, upon the terms and subject to the conditions of this Agreement and in accordance with
the California Corporations Code (the CCC), Parent and the Company will enter into a
business combination transaction pursuant to which the Company will merge with and into Merger Sub
(the Merger); WHEREAS, the Board of Directors of the Company (the Company Board) has (i)
determined that the Merger is consistent with and in furtherance of the long-term business strategy
of the Company and fair to, and in the best interests of, the Company and its stockholders and has
approved and adopted this Agreement and declared its advisability and approved the Merger and the
other transactions contemplated by this Agreement (the Transactions) and (ii) has
recommended the approval and adoption of this Agreement by the stockholders of the Company; WHEREAS, the Board of Directors of Parent (the Parent Board) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy of Parent and fair
to, and in the best interests of, Parent and its stockholders and has approved and adopted this
Agreement, the Merger and the other Transactions; WHEREAS, Parent and Company CEO (Stockholder) have entered into a Support Agreement,
dated as of the date hereof (the Support Agreement), in connection with this Agreement,
the Merger and the other Transactions; and WHEREAS, for United States federal income tax purposes, the Merger is intended to qualify as a
reorganization under the provisions of Section 368(a) of the United States Internal Revenue Code of
1986, as amended (the Code); NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
herein contained, and intending to be legally bound hereby, Parent, Merger Sub and the Company
hereby agree as follows ARTICLE I THE MERGER SECTION 1.01. The Merger. Upon the terms and subject to the conditions set forth
in Article VII, and in accordance with the CCC, at the Effective Time (as defined in Section 1.02),
the Company will be merged with and into the Merger Sub. As a result of the Merger, the separate
corporate existence of the Company shall cease and the Merger Sub shall continue as the surviving
corporation of the Merger (the Surviving Corporation). SECTION 1.02. Effective Time; Closing. On the second Business Day immediately
following the satisfaction or, if permissible, waiver of the last conditions set forth in




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Article
VII, the parties hereto shall cause the Merger to be consummated by filing this Agreement (or an
Agreement of Merger that includes only the information required by the CCC), an officers
certificate of the Company and an officers certificate of Merger Sub (together, the
Certificate of Merger) with the Secretary of State of the State of California, in such
form as is required by, and executed in accordance with, the relevant provisions of the CCC (the
date and time of such filing of the Certificate of Merger (or such later time as may be agreed by
each of the parties hereto and specified in the Certificate of Merger) being the Effective
Time). Immediately prior to such filing of the Certificate of Merger, a closing (the
Closing) shall be held at the offices of the Company, 19 Technology Drive, Irvine,
California 92618, or such other place as the parties shall agree, for the purpose of confirming the
satisfaction or waiver, as the case may be, of the conditions set forth in Article VII. SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the CCC. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities, obligations, restrictions, disabilities and duties of each of the Company
and Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Corporation. SECTION 1.04. Articles of Incorporation; By-laws. (a) At the Effective Time, subject
to Section 6.06, the Articles of Incorporation of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Articles of Incorporation. (b) Unless otherwise determined by Parent prior to the Effective Time, and subject to Section
6.06, at the Effective Time, the By-laws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until thereafter amended as
provided by law, the Articles of Incorporation of the Surviving Corporation and such By-laws. SECTION 1.05. Directors and Officers. The directors of Merger Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation and By-laws of the Surviving Corporation,
and the officers of Merger Sub immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified or until the earlier of their death, resignation or removal. 2




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ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES SECTION 2.01. Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the holders of any of the
following securities: (a) each share of common stock, par value US$0.001 per share, of the Company (Company
Common Stock, all issued and outstanding shares of Company Common Stock being hereinafter
collectively referred to as the Shares) issued and outstanding immediately prior to the
Effective Time (other than any Shares to be cancelled pursuant to Section 2.01(i), substituted for
pursuant to Section 2.05 and any Dissenting Shares (as hereinafter defined)) shall be cancelled and
shall be converted automatically, subject to Section 2.01 (h) and Section 2.02, into the right to
receive:  (i)

(A) 0.23 common shares, without par value, of Parent (Parent Common
Stock) (the Fixed Ratio Stock) and (B) that number of shares of Parent
Common Stock equal to US$16.50 divided by the Average Stock Price (the Floating
Ratio Stock and, together with the Fixed Ratio Stock, the Exchange
Stock); or(ii)

cash equal the sum of (A) US$16.50 and (B) the product of (x) 0.23 and (y)
Average Stock Price (the Cash Payment); or(iii)

(A) US$11.00, (B) the Fixed Ratio Stock and (C) that number of Parent Common
Stock equal to US$5.50 divided by the Average Stock Price (the US$5.50 Stock
and, together with the Fixed Ratio Stock, the Mixed Election Stock); or(iv)

such other combination of shares of Parent Common Stock and cash determined in
accordance with Section 2.01(e) or Section 2.01(f) (the Merger Consideration, which when used herein shall be deemed to include cash in lieu
of any fractional shares of Parent Common Stock to which a holder is entitled pursuant to Section
2.02(e)), in each case upon surrender by the holder of such share of Company Common Stock of the
Certificate representing such share in accordance with Section 2.02. Average Stock Price
means the simple average of the daily weighted average sales price of Parent Common Stock on the
Toronto Stock Exchange (TSX), as reported by Bloomberg L.P., for each of the 20
consecutive trading days ending on (and including) the second trading day prior to the Effective
Time. The weighted average sales price for each trading day shall be converted from Canadian
dollars to U.S. dollars at the noon buying rate quoted by the Federal Reserve Bank of New York on
such trading day; (b) The aggregate number of shares of Parent Common Stock (the Aggregate Stock
Amount) to be issued as Merger Consideration shall be equal to the product of (i) the Mixed
Election Stock and (ii) the difference of (A) the number of Shares outstanding immediately prior to
the Effective Time minus (B) the sum of (x) the number of Shares held by any Subsidiary of the
Company or Parent or any Subsidiary of Parent, (y) the number of Shares of unvested Company
Restricted Stock and (z) the number of Dissenting Shares. The aggregate 3




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amount of cash to be paid
by Parent as Merger Consideration (the Aggregate Cash Amount) shall be equal to the
product of (i) US$11.00 and (ii) the difference of (A) the number of Shares outstanding immediately
prior to the Effective Time minus (B) the sum of (x) the number of Shares held by any Subsidiary of
the Company or Parent or any Subsidiary of Parent, (y) the number of Shares of unvested Company
Restricted Stock and (z) the number of Dissenting Shares. Any right to receive cash as all or part
of the Merger Consideration shall be without interest. (c) Subject to the allocation and election procedures set forth in this Section 2.01, each
record holder of Shares immediately prior to the Effective Time (other than Shares held by the
Company or any Subsidiary of the Company or Parent or any Subsidiary of Parent and Dissenting
Shares) will be entitled to elect to receive:  (i)

cash per Share equal the Cash Payment (a Cash Election); or(ii)

the number of shares, or fraction thereof, of Parent Common Stock per Share
equal to the Exchange Stock (a Stock Election); or(iii)

the Mixed Consideration per Share, which consists of US$11.00 in
cash and the Mixed Election Stock (a Mixed Election, and together with the
Cash Election and the Stock Election, the Elections); Each holder shall make the same Election with respect to all of such holders Shares. All such
Elections shall be made on a form in compliance with the terms of Section 2.02 (a Form of
Election). Holders of record of Shares who hold such shares as nominees, trustees or in other
representative capacities (a Holder Representative) may submit multiple Forms of
Election, provided that such Holder Representative certifies that each such Form of
Election covers all the Shares held by such Holder Representative for a particular beneficial
owner. For purposes hereof, a holder of Company Common Stock who does not make a valid Election
prior to the Election Deadline, including by failure to return the Form of Election to the Exchange
Agent prior to the Election Deadline and as a result of revocation, shall be deemed to have made a
Mixed Election. If Parent or the Exchange Agent shall determine that any purported Cash Election
or Stock Election was not properly made, such purported Cash Election or Stock Election shall be
deemed to be of no force and effect and the stockholder making such purported Cash Election or
Stock Election shall for purposes hereof be deemed to have made a Mixed Election. (d) At the Effective Time, each Share covered by a Mixed Election (a Mixed Election
Share) shall be converted into and exchanged for the right to receive from Parent the Mixed
Consideration; (e) At the Effective Time, each Share covered by a Stock Election (a Stock Election
Share) shall be converted into the right to receive the Exchange Stock; provided,
however, if after taking into account the Elections made and deemed made pursuant to
Section 2.01(c), the number of shares of Parent Common Stock to be issued as Merger Consideration
would exceed the Aggregate Stock Amount, then, at the Effective Time, each Stock Election Share
shall be converted into the right to receive: 4




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(i)

a number of shares (the Pro Rata Number of Shares) of Parent Common
Stock equal to the quotient determined by (A) the difference of the Aggregate Stock
Amount minus the number of shares of Parent Common Stock to be issued in exchange for
Mixed Election Shares, divided by (B) the number of Stock Election Shares; and(ii)

an amount in cash equal to the product of (A) the difference of (x) the
Exchange Stock, minus (y) the Pro Rata Number of Shares, multiplied by (B) the Average
Stock Price; (f)  At the Effective Time, each Share covered by a Cash Election (a Cash Election
Share) shall be converted into the right to receive the Cash Payment; provided,
however, if, taking into account the Elections made and deemed made pursuant to Section
2.01(c), the amount of cash to be paid by Parent as Merger Consideration would exceed the Aggregate
Cash Amount, then, at the Effective Time, each Cash Election Share shall be converted into the
right to receive:  (i)

an amount in cash (the Pro Rata Amount of Cash) equal to the quotient
determined by (A) the difference of the Aggregate Cash Amount minus the amount of cash
to be paid in exchange for Mixed Election Shares, divided by (B) the number of Cash
Election Shares; and(ii)

a number of shares of Parent Common Stock equal to the quotient of (A) the
difference of (x) the Cash Payment, minus (y) the Pro Rata Amount of Cash, divided by
(B) the Average Stock Price; (g)  The Company shall mail the Form of Election to each person who is a holder of record of
Company Common Stock on the record date for the Company Stockholders Meeting contemplated by
Section 6.02 and shall use its reasonable best efforts to make the Form of Election available to
all persons who become holders of Company Common Stock during the period between such record date
and the Election Deadline; (h)  To be effective, a Form of Election must be properly completed and signed by a record
holder of Company Common Stock and submitted to the Exchange Agent and accompanied by the
Certificates as to which the Election is being made. All Certificates so surrendered shall be
subject to the exchange procedures set forth in Section 2.02. The Exchange Agent will have the
discretion to determine whether Forms of Election have been properly completed, signed and
submitted or revoked and to disregard immaterial defects in Forms of Election. The decision of the
Exchange Agent in such matters shall be conclusive and binding. Neither Parent nor the Exchange
Agent will be under any obligation to notify any person of any
defect in a Form of Election submitted to the Exchange Agent. The Exchange Agent shall also
make all computations contemplated by this Section 2.01 and all such computations shall be
conclusive and binding on the holders of Company Common Stock absent manifest error. The Form of
Election and the Certificates must be received by the Exchange Agent by the close of business on
the last business day prior to the date on which the vote with respect to the adoption and approval
of this Agreement and the approval of the Merger at the Company Stockholders Meeting contemplated
by Section 6.02 hereof is held (the Election Deadline) in order to be 5




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effective. The
Exchange Agent shall not accept guarantee of delivery of Certificates in lieu of physical delivery
of Certificates. An Election may be revoked, but only by written notice received by the Exchange
Agent prior to the Election Deadline. Upon any such revocation, unless a duly completed Form of
Election, accompanied by a Certificate, is thereafter submitted in accordance with this Section
2.01(i), such shares shall be deemed to be Mixed Election Shares. In the event that this Agreement
is terminated pursuant to the provisions hereof and any Certificates have been transmitted to the
Exchange Agent pursuant to the provisions hereof, such Certificates shall be promptly be returned
without charge to the person submitting same; (i)  each Share held in the treasury of the Company and each Share owned by Merger Sub, Parent
or any direct or indirect wholly owned subsidiary of Parent or of the Company immediately prior to
the Effective Time shall be cancelled without any conversion thereof and no payment or distribution
shall be made with respect thereto; and (j)  each share of common stock, par value US$0.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be one validly issued, fully paid and
nonassessable share of common stock, par value US$0.01 per share, of the Surviving Corporation; (k)  Notwithstanding anything to the contrary contained in this Agreement, if:  (i)

Parent or the Company receives written notice from its counsel specified in
Article VII to the effect that such counsel is unlikely to be able to deliver a tax
opinion required pursuant to Section 7.02(l) or Section 7.03(e), as the case may be, on
the date of the Effective Time; and(ii)

instead of depositing the Aggregate Cash Amount and the Aggregate Stock Amount
in accordance with Section 2.02(a), Parent deposits, or causes to be deposited
(including as contemplated by Section 7.02(f)), with the Exchange Agent (as defined
below), for the benefit of the holders of Shares, for exchange in accordance with this
Article II through the Exchange Agent, cash in an amount equal to US$22.00 per Share, Parent shall have the right, at its sole and absolute discretion, to reverse the Merger so that
Merger Sub will merge with and into the Company, such that the separate corporate existence of
Merger Sub shall cease and the Company shall continue as the Surviving Corporation of the Merger (a
Reverse-Subsidiary Merger). A Reverse-Subsidiary Merger would not be intended to
constitute a plan of reorganization within the meaning of section 1.368-2(g) of the income tax
regulations promulgated under the Code. In the event Parent effects the acquisition of the Company
pursuant to a Reverse Subsidiary Merger in accordance with this Section 2.01(k), (x)
all references to the Merger in this Agreement and all other related agreements, documents and
instruments, shall be deemed to be to the Reverse-Subsidiary Merger, all references to the
Surviving Corporation shall be deemed to be to the Company, all references to Merger
Consideration shall be deemed to mean US$22.00 per Share, and this Agreement and (y) the conditions
in Section 7.02(l) and Section 7.03(e) shall be deemed to be waived. 6




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SECTION 2.02. Exchange of Certificates. (a) Exchange Agent. Immediately
prior to the Effective Time, Parent shall deposit, or shall cause to be deposited (including as
contemplated by Section 7.02(f)), with such bank or trust company that may be designated by Parent
and is reasonably satisfactory to the Company (the Exchange Agent), for the benefit of
the holders of Shares, for exchange in accordance with this Article II through the Exchange Agent,
cash equal to the Aggregate Cash Amount and certificates representing the Aggregate Stock Amount,
and cash, from time to time as required to make payments in lieu of any fractional shares pursuant
to Section 2.02(e) (such cash and certificates for shares of Parent Common Stock, together with any
dividends or distributions with respect thereto, being hereinafter referred to as the Exchange
Fund). The Exchange Agent shall, pursuant to irrevocable instructions, deliver the cash and
shares of Parent Common Stock contemplated to be issued pursuant to Section 2.01. Except as
contemplated by Section 2.02(g) hereof, the Exchange Fund shall not be used for any other purpose. (b) Exchange Procedures. As promptly as practicable after the Effective Time, Parent
shall cause the Exchange Agent to mail to each person who was, at the Effective Time, a holder of
record of Shares entitled to receive the Merger Consideration pursuant to Section 2.01(a): (i) a
letter of transmittal (which shall be in customary form and shall specify that delivery shall be
effected, and risk of loss and title to the certificates evidencing such Shares (the
Certificates) shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) and (ii) instructions for use in effecting the surrender of the Certificates pursuant to
such letter of transmittal. Upon surrender to the Exchange Agent of a Certificate for
cancellation, together with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor
the Merger Consideration, and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.02(c), and the Certificate so surrendered shall forthwith be cancelled. In
the event of a transfer of ownership of Shares that is not registered in the transfer records of
the Company the Merger Consideration and any dividends or other distributions to which such holder
is entitled pursuant to Section 2.02(c) may be issued to a transferee if the Certificate
representing such Shares is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have
been paid. Until surrendered as contemplated by this Section 2.02, each Certificate shall be
deemed at all times after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration, and any dividends or other distributions to which such holder
is entitled pursuant to Section 2.02(c). The Merger Consideration (plus any dividends or other
distributions to which such holder is entitled pursuant to Section 2.02(c)) shall be delivered to
each former stockholder of the Company by the Exchange Agent as promptly as practicable following
surrender of a Certificate and a duly executed letter of transmittal. (c) Distributions with Respect to Unexchanged Shares of Parent Common Stock. No
dividends or other distributions declared or made after the Effective Time with respect to the
Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock represented thereby,
and no cash payment shall be paid to any such holder pursuant to Section 2.01(a) or 2.02(e), until
the holder of such Certificate shall surrender such Certificate. Subject to the effect of escheat,
tax or other applicable Laws (as defined in Section 3.05(a)), following 7




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surrender of any such
Certificate, there shall be paid to the holder of the certificates representing whole shares of
Parent Common Stock issued as part of the Merger Consideration in exchange therefor, (i) promptly,
the amount of any cash payable with respect to a fractional share of Parent Common Stock to which
such holder is entitled pursuant to Section 2.02(e) and the amount of dividends or other
distributions with a record date after the Effective Time and theretofore paid with respect to such
whole shares of Parent Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to such whole shares
of Parent Common Stock. (d) No Further Rights in Company Common Stock. The Merger Consideration issued upon
surrender of a Certificate in accordance with the terms of this Article II (including, with respect
to Shares, any cash paid pursuant to Section 2.02(c) or (e)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to the Shares formerly represented by such Certificate. (e) No Fractional Shares. No certificates or scrip representing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of Certificates, and such
fractional share interests will not entitle the owner thereof to vote or to any other rights of a
shareholder of Parent. Each holder of a fractional share interest shall be paid an amount in cash
(without interest and subject to the amount of any withholding taxes as contemplated in Section
2.02(i)) equal to the product obtained by multiplying (i) such fractional share interest to which
such holder (after taking into account all fractional share interests then held by such holder)
would otherwise be entitled by (ii) the simple average of the daily weighted average sales price
of Parent Common Stock on the TSX, as reported by Bloomberg L.P., for each of the 20 consecutive
trading days ending on (and including) the second trading day prior to the Effective Time (the
weighted average sales price for each trading day shall be converted from Canadian dollars to U.S.
dollars at the noon buying rate quoted by the Federal Reserve Bank of New York on such trading
day). As promptly as practicable after the determination of the amount of cash, if any, to be paid
to holders of fractional share interests, the Exchange Agent shall so notify Parent, and Parent
shall deposit such amount with the Exchange Agent and shall cause the Exchange Agent to forward
payments to such holders of fractional share interests subject to and in accordance with the terms
of Sections 2.02(b) and (c). (f) Adjustments to Merger Consideration. The Merger Consideration shall be adjusted to
reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including
any dividend or distribution of securities convertible into Parent Common Stock or Company Common
Stock), extraordinary cash dividends, reorganization, recapitalization, reclassification,
combination, exchange of shares or other like change with respect to Parent
Common Stock or Company Common Stock occurring on or after the date hereof and prior to the
Effective Time. (g) Termination of Exchange Fund. Any portion of the Exchange Fund that remains
undistributed to the holders of the Company Common Stock for twelve months after the Effective Time
shall be delivered to Parent, upon demand, and any holders of the Shares who have not theretofore
complied with this Article II shall thereafter look only to Parent for the Merger Consideration,
and any dividends or other distributions with respect to the Parent 8




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Common Stock to which they are
entitled pursuant to Section 2.02(c). Any portion of the Exchange Fund remaining unclaimed by
holders of Shares as of a date which is immediately prior to such time as such amounts would
otherwise escheat to or become property of any government entity shall, to the extent permitted by
applicable Law, become the property of Parent free and clear of any claims or interest of any
person previously entitled thereto. (h) No Liability. None of the Exchange Agent, Parent or the Surviving Corporation
shall be liable to any holder of Shares for any such Shares (or dividends or distributions with
respect thereto), or cash delivered to a public official pursuant to any abandoned property,
escheat or similar Law. (i) Withholding Rights. Each of the Surviving Corporation and Parent shall be
entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of Shares such amounts as it is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by the Surviving Corporation or Parent, as the case may be,
such withheld amounts shall be treated for all purposes of this Agreement as having been paid to
the holder of the Shares in respect of which such deduction and withholding was made by the
Surviving Corporation or Parent, as the case may be. (j) Lost Certificates. If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting by such person of a
bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any
claim that may be made against it with respect to such Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration, and any
dividends or other distributions to which the holders thereof are entitled pursuant to Section
2.02(c), subject to Section 2.02(g). SECTION 2.03. Stock Transfer Books. At the Effective Time, the stock transfer books
of the Company shall be closed and there shall be no further registration of transfers of Shares
thereafter on the records of the Company. From and after the Effective Time, the holders of
Certificates representing Shares outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such Shares, except as otherwise provided in this Agreement or by
Law. On or after the Effective Time, any Certificates presented to the Exchange Agent or Parent
for any reason shall be exchanged for the Merger Consideration, and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section 2.02(c). SECTION 2.04. Company Stock Options. At the Effective Time, all options to purchase
Company Common Stock, whether or not exercisable and whether or not vested (the Company Stock
Options), outstanding under the Companys Amended and Restated 1994 Stock Incentive Plan, in
each case as such may have been amended, supplemented or modified (collectively, the Company
Stock Option Plans) shall be cancelled without further rights. At least 20 days prior to the
Effective Time, the Company shall offer to purchase each Company Stock Option which as of the
Effective Time would be unexercisable and unvested (the Unvested Options), at a price
equal to the Cash Payment less the exercise price of such 9




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Unvested Option ( the Option
Consideration), which offer to purchase shall be conditional upon the approval of this
Agreement by the Stockholders of the Company and the satisfaction or waiver of all of the
conditions hereunder. Prior to the Effective Time, Parent shall have deposited, or shall have
caused to be deposited with the Exchange Agent, for the benefit of holders of the Unvested Options
that surrender such Unvested Options for purchase by the Company for exchange in accordance with
this Section 2.04, cash equal to the aggregate Option Consideration (such cash being hereinafter
referred to as the Option Exchange Fund). The Exchange Agent shall, pursuant to
irrevocable instructions, deliver the cash contemplated to be delivered to the holders of the
Unvested Options pursuant to this Section 2.04 out of the Option Exchange Fund. The Option
Exchange Fund shall not be used for any other purpose. SECTION 2.05. Company Restricted Stock. At the Effective Time, each share of Company
Common Stock outstanding immediately prior to the Effective Time that is unvested or is subject to
a repurchase option, risk of forfeiture or other condition under the Company Stock Option Plans or
any applicable restricted stock purchase agreement or other agreement with the Company
(Company Restricted Stock) shall be substituted with Exchange Stock, which shall be
subject to the same terms and conditions (including, without limitation, vesting conditions) as
such Company Restricted Stock, except that current references to the Company shall, after the
Effective Time, mean Parent. SECTION 2.06. [Reserved]. SECTION 2.07. Dissenting Shares. (a) Notwithstanding anything in this Agreement to
the contrary, any Shares that are issued and outstanding immediately prior to the Effective Time
and held by a holder (a Dissenting Shareholder) who has not voted in favor of the Merger
or consented thereto in writing and who has dissented in accordance with Chapter 13 of the CCC
(Dissenting Shares) as well as any Shares (a Potential Dissenting Shares) held
by a holder (a Potential Dissenting Shareholder) that are not voted in favor of the
Merger but that have not dissented in accordance with Chapter 13 of the CCC, shall not be converted
into a right to receive the Merger Consideration in accordance with Section 2.01, but shall
represent and become the right to receive such consideration as may be determined to be due such
Dissenting Shareholder or Potential Dissenting Shareholder pursuant to the laws of the State of
California, unless and until such holder fails to perfect or withdraws or otherwise loses such
holders right to dissent under Chapter 13 of the CCC. If, after the Effective Time, such holder
fails to perfect or withdraws or
otherwise loses such holders right to dissent, such former Dissenting Shares or Potential
Dissenting Shares held by such holder shall be treated as if they had been converted as of the
Effective Time into a right to receive, upon surrender as provided above, such holders ratable
portion of the Merger Consideration, without any interest or dividends thereon, in accordance with
Section 2.01. In this Agreement, references to Dissenting Shareholders shall be deemed to
include Potential Dissenting Shareholders and references to Dissenting Shares shall be deemed to
include Potential Dissenting Shares. (b) The Company shall give Parent (i) prompt notice of any demands for appraisal received by
the Company, withdrawals of such demands, and any other instruments served pursuant to the CCC and
received by the Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the CCC. The 10




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Company shall not, except with the prior
written consent of Parent, make any payment with respect to any demands for appraisal or offer to
settle or settle any such demands. SECTION 2.08. [Reserved] SECTION 2.09. Affiliates. Notwithstanding anything to the contrary herein, no Merger
Consideration shall be delivered to a person who may be deemed an affiliate of the Company in
accordance with Section 6.08 hereof for purposes of Rule 145 under the Securities Act until such
person has executed and delivered to Parent an executed copy of the affiliate letter contemplated
in Section 6.08 hereof. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY As an inducement to Parent and Merger Sub to enter into this Agreement, the Company hereby
represents and warrants to Parent and Merger Sub that, except as disclosed in the Companys
Disclosure Schedule, which has been prepared by the Company and delivered to Parent and Merger Sub
concurrently with the execution and delivery of this Agreement (the Company Disclosure
Schedule), or in the Companys Annual Report on Form 10-K for the year ended December 31, 2004
(as filed with the SEC on March 10, 2005), Current Reports on Form 8-K (as filed with the SEC on
February 10, 2005 and February 14, 2005) and Definitive Proxy Statement on Schedule 14A (as filed
with the SEC on April 12, 2005), to the Companys knowledge: SECTION 3.01. Organization and Qualification; Subsidiaries. (a) Each of the Company
and each subsidiary of the Company (each a Subsidiary) is a corporation or limited
liability company, as the case may be, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has the requisite corporate or other power and
authority and all necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental approvals would not,
individually or in the aggregate,
have a Company Material Adverse Effect (as defined in Section 9.03(a)). Each of the Company
and each Subsidiary is duly qualified or licensed as a foreign corporation or limited liability
company, as the case may be, to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of its business makes
such qualification or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have a Company Material
Adverse Effect. (b) A true and complete list of all the Subsidiaries, together with the jurisdiction of
incorporation of each Subsidiary and the percentage of the outstanding capital stock of each
Subsidiary owned by the Company and each other Subsidiary, is set forth in Section 3.01(b) of the
Company Disclosure Schedule. Except as disclosed in Section 3.01(b) of the Company Disclosure
Schedule, the Company does not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for any 11




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equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity. SECTION 3.02. Articles of Incorporation and By-laws. The Company has heretofore made
available to Parent a complete and correct copy of the Articles of Incorporation and the By-laws or
equivalent organizational documents, each as amended to date, of the Company. Such Articles of
Incorporation, By-laws or equivalent organizational documents are in full force and effect.
Neither the Company nor any Subsidiary is in violation of any of the provisions of its Articles of
Incorporation, By-laws or equivalent organizational documents. The Company has heretofore provided
to the Parent the minutes of the meetings of the Board of Directors of the Company and any
committee thereof in respect of meetings of the Board of Directors and such committees held since
January 1, 2002 through the date hereof for which minutes have been prepared and approved. SECTION 3.03. Capitalization. (a) The authorized capital stock of the Company
consists of (i) 100,000,000 Shares and (ii) 5,000,000 shares of preferred stock, par value $0.001
per share (Company Preferred Stock). As of April 2, 2005, (i) 7,985,085 Shares were
issued and outstanding, all of which are validly issued, fully paid and nonassessable, (ii) no
Shares are held in the treasury of the Company, (iii) no Shares are held by the Subsidiaries, and
(iv) 230,995 Shares are reserved for future issuance pursuant to outstanding Company Stock Options,
Company Restricted Stock and other purchase rights (the Company Stock Awards) granted
pursuant to the Company Stock Option Plans. As of the date of this Agreement, no shares of Company
Preferred Stock are issued and outstanding. Except as set forth in this Section 3.03 there are no
options, warrants or other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of the Company or any Subsidiary or obligating the
Company or any Subsidiary to issue or sell any shares of capital stock of, or other equity
interests in, the Company or any Subsidiary. As of April 2, 2005, there were (x) 265,510
outstanding Unvested Options exercisable for an aggregate of 265,510 Shares at a weighted average
exercise price of US$12.27 per Share, and (y) 512,026 Company Stock Options (excluding Unvested
Options), exercisable for an aggregate of 512,026 Shares at a weighted average exercise price of
US$8.23 per Share. As of the date of this Agreement, there were 117,668 Shares of unvested Company
Restricted Stock. The Company has made available to Parent accurate and complete copies of all
Company Stock Option Plans pursuant to which Company has granted the Company Stock Awards that are
currently outstanding and the form of all stock award agreements evidencing such Company Stock
Awards. All Shares subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly authorized, validly
issued, fully paid and nonassessable. There are no outstanding contractual obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise acquire any Shares or any capital
stock of any Subsidiary or to provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any Subsidiary or any other person. All outstanding Shares,
all outstanding Company Stock Awards, and all outstanding shares of capital stock of each
subsidiary of the Company have been issued and granted in compliance with (i) all applicable
securities laws and other applicable Laws (as defined below) and (ii) all requirements set forth in
applicable contracts. 12




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(b) Each outstanding share of capital stock of each Subsidiary is duly authorized, validly
issued, fully paid and nonassessable, and each such share is owned by the Company or another
Subsidiary free and clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on the Companys or any Subsidiarys voting rights, charges
and other encumbrances of any nature whatsoever. SECTION 3.04. Authority Relative to This Agreement. The Company has all necessary
corporate power and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the Transactions. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the Transactions have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the Transactions (other than,
with respect to the Merger, the approval and adoption of this Agreement by the holders of a
majority of the then-outstanding Shares and the filing and recordation of appropriate merger
documents as required by the CCC). This Agreement has been duly and validly executed and delivered
by the Company and, assuming the due authorization, execution and delivery by Parent and Merger
Sub, constitutes a legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms (except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors generally and the
availability of equitable remedies). No state takeover statute is applicable to the Merger or the
Transactions. SECTION 3.05. No Conflict; Required Filings and Consents. (a) The execution and
delivery of this Agreement by the Company do not, and the performance of this Agreement by the
Company will not, (i) conflict with or violate the Articles of Incorporation or By-laws or any
equivalent organizational documents of the Company or any Subsidiary, (ii) conflict with or violate
any United States or non-United States statute, law, ordinance, regulation, rule, code, executive
order, injunction, judgment, decree or other order (Law) applicable to the Company or any
Subsidiary or by which any property or
asset of the Company or any Subsidiary is bound or affected, or (iii) result in any breach of
or constitute a default (or an event which, with notice or lapse of time or both, would become a
default) under, or give to others any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any property or asset of the
Company or any Subsidiary pursuant to, any Material Contract (as defined below), except, with
respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences which would not, individually or in the aggregate, have a Company Material Adverse
Effect. (b) The execution and delivery of this Agreement by the Company do not, and the performance of
this Agreement by the Company will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any United States federal, state, county or local or other
foreign government, governmental, regulatory or administrative authority, agency, instrumentality
or commission or any court, tribunal, or judicial or arbitral body (a Governmental
Authority), except (i) for applicable requirements, if any, of the Exchange Act, state
securities or blue sky laws (Blue Sky Laws), the pre-merger notification requirements
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act) and
filing and recordation of appropriate merger documents as required by the CCC, and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to 13




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make such filings or
notifications, would not, individually or in the aggregate, individually or in the aggregate, have
a Company Material Adverse Effect. SECTION 3.06. Permits; Compliance. Each of the Company and the Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any Governmental Authority necessary
for each of the Company or the Subsidiaries to own, lease and operate its properties or to carry on
its business as it is now being conducted (the Company Permits), except where the failure
to have, or the suspension or cancellation of, any of the Company Permits would not, individually
or in the aggregate, have a Company Material Adverse Effect. As of the date of this Agreement, no
suspension or cancellation of any of the Company Permits is pending or threatened, except where the
failure to have, or the suspension or cancellation of, any of the Company Permits would not,
individually or in the aggregate, have a Company Material Adverse Effect. Neither the Company nor
any Subsidiary is in conflict with, or in default, breach or violation of, (a) any Law applicable
to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary
is bound or affected, or (b) any note, bond, mortgage, indenture, contract, agreement, lease,
license, Company Permit, franchise or other instrument or obligation to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any property or asset of the
Company or any Subsidiary is bound, except for any such conflicts, defaults, breaches or violations
that would not, individually or in the aggregate, have a Company Material Adverse Effect. SECTION 3.07. SEC Filings; Financial Statements. (a) The Company has filed all
forms, reports and documents required to be filed by it with the Securities and Exchange Commission
(the SEC) since December 31, 2004, and has heretofore previously made available to Parent, in the form filed with the SEC, (i) its
Annual Reports on Form 10-K for the fiscal years ended December 31, 2002, 2003 and 2004,
respectively, (ii) all proxy statements relating to the Companys meetings of stockholders (whether
annual or special) held since May 20, 2003 and (iii) all other forms, reports and other
registration statements filed by the Company with the SEC since December 31, 2004 (the forms,
reports and other documents referred to in clauses (i), (ii), (iii) and (iv) above being,
collectively, the Company SEC Reports). The Company SEC Reports (i) complied in all
material respects with either the requirements of the Securities Act of 1933, as amended (the
Securities Act), or the Securities Exchange Act of 1934, as amended (the Exchange
Act), as the case may be, and the rules and regulations promulgated thereunder, and (ii) did
not, at the time they were filed, or, if amended, as of the date of such amendment, contain any
untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the circumstances under
which they were made, not misleading, except that to the extent information as of a later date
conflicts with information of an earlier date, the information of such later date shall be deemed
to modify such earlier information. No Subsidiary is required to file any form, report or other
document with the SEC. (b) Each of the consolidated financial statements (including, in each case, any notes thereto)
contained in the Company SEC Reports was prepared in accordance with United States generally
accepted accounting principles (GAAP) applied on a consistent basis (except that
unaudited financial statements are subject to year-end audit adjustments and may not contain notes
in full compliance with GAAP) throughout the periods indicated (except as may be 14




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indicated in the
notes thereto) and each fairly presents, in all material respects, the consolidated financial
position, results of operations and cash flows of the Company and its consolidated Subsidiaries as
at the respective dates thereof and for the respective periods indicated therein. (c) Except as and to the extent set forth on, or reserved against, the consolidated balance
sheet of the Company and the Subsidiaries as at December 31, 2004, including the notes thereto (the
2004 Balance Sheet), neither the Company nor any Subsidiary has any liability or
obligation of any nature (whether accrued, absolute, contingent or otherwise), except for
liabilities and obligations, incurred in the ordinary course of business consistent with past
practice since December 31, 2004, which have not had, individually or in the aggregate, a Company
Material Adverse Effect. (d) The Company has responded to all comments or requests received from the SEC or the staff
of the SEC since January 1, 2002 and the SEC or the staff of the SEC, as the case may be, has not
made any supplemental comments or requests with respect to the matters described therein. (e) The Company has timely filed all certifications and statements required by (x) Rule 13a-14
or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C. Section 1350 (Section 906 of the
Sarbanes-Oxley Act of 2002) with respect to any Company SEC Report. The Company maintains
disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under the Exchange Act;
such controls and procedures are effective to ensure that all material information concerning the
Company and its Subsidiaries is made known on a timely basis to the individuals responsible for the
preparation of the Companys SEC filings. (f) The Company maintains and will continue to maintain books and records in accordance with
GAAP, in all material respects and to the extent that GAAP is applicable to the maintenance of
books and records. The Company and its Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with managements general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP, (iii) access to
assets is permitted only in accordance with managements general or specific authorization and (iv)
the recorded accountability for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences. (g) Accounts receivable, book debts and other debts due or accruing to the Company and its
Subsidiaries, taken as a whole, reflected on the 2004 Balance Sheet or arising thereafter, have
arisen, in all material respects, from bona fide,arms length transactions between
unrelated parties in the ordinary course of business consistent with past practice and, subject to
an allowance for doubtful accounts that has been reflected on the books and records of the Company
and its Subsidiaries, as applicable, in accordance with GAAP and the regulations of the SEC, which
are collectible without setoff or counterclaim, except as would not, individually or in the
aggregate, have a Company Material Adverse Effect. (h) Accounts payable of the Company and its Subsidiaries, taken as a whole, reflected on the
2004 Balance Sheet or arising thereafter are, in all material respects, the result of 15




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bona fide
transactions in the ordinary course of business and have been paid or are not yet due or payable.
Since the date of the 2004 Balance Sheet, the Company and its Subsidiaries have not altered in any
material respects their practices for the payment of such accounts payable, including the timing of
such payment, except as would not, individually or in the aggregate, have a Company Material
Adverse Effect. (i) The work in progress reflected on the 2004 Balance Sheet was owned by the Company and its
Subsidiaries on December 31, 2004. The value of such work in progress at December 31, 2004 has
been recorded appropriately and represents work in progress that can be invoiced and collected in
the ordinary course of business, except as would not, individually or in the aggregate, have a
Company Material Adverse Effect . (j) The Company and its Subsidiaries have appropriately accrued project liabilities on
its financial statements in accordance with GAAP, in all material respects. (k) The Company and its Subsidiaries have appropriately deferred the recognition of revenues
on projects where amounts have been invoiced in advance of the underlying work having been
completed in accordance with GAAP, in all material respects. SECTION 3.08. Absence of Certain Changes or Events. Since December 31, 2004, except
as expressly contemplated by this Agreement (a) the Company and the Subsidiaries have conducted
their businesses in all material respects only in the ordinary course and in a manner consistent
with past practice, and (b) there has not been any Company Material Adverse Effect. SECTION 3.09. Absence of Litigation. Except as set forth in Section 3.09 of the
Company Disclosure Schedule, there is no (i) litigation, suit, claim, action, proceeding or
investigation (an Action) pending or threatened against the Company or any Subsidiary, or
any property or asset of the Company or any Subsidiary, before any Governmental Authority, or (ii)
material property or asset of the Company or any Subsidiary that is subject to any continuing order
of, consent decree, settlement agreement or other similar written agreement with, or continuing
investigation by, any Governmental Authority, or any order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority that, in each case, would, individually or in
the aggregate, have a Company Material Adverse Effect. SECTION 3.10. Employee Benefit Plans. (a) Section 3.10(a) of the Company Disclosure
Schedule lists (i) all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (ERISA)) and all other material
employment benefit agreements or arrangements including, without limitation, all bonus, stock
option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life
insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, and
employment, termination, severance or other contracts or agreements to which the Company or any
Subsidiary is a party, which are maintained, contributed to or sponsored by the Company or any
Subsidiary for the benefit of any current or former employee, officer or director of the Company or
any Subsidiary, (ii) each employee benefit plan for which the Company or any Subsidiary could incur
liability under Section 4069 of ERISA in the event such plan has been or were to be terminated,
(iii) any plan in respect of which the Company or any 16




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Subsidiary could incur liability under
Section 4212(c) of ERISA (collectively, the Plans). Neither the Company nor any
Subsidiary has any express or implied commitment, whether legally enforceable or not, (i) to
create, incur liability with respect to or cause to exist any other Plan, or (ii) to modify, change
or terminate any Plan, other than with respect to a modification, change or termination required by
ERISA, the Code or this Agreement. (b) None of the Plans is a multiemployer plan (within the meaning of Section 3(37) or
4001(a)(3) of ERISA) (a Multiemployer Plan) or a single employer pension plan (within the
meaning of Section 4001(a)(15) of ERISA) for which the Company or any Subsidiary could incur
liability under Section 4063 or 4064 of ERISA (a Multiple Employer Plan). None of the
Plans (i) obligates the Company or any Subsidiary to pay separation, severance, termination or
similar-type benefits solely or partially as a result of any transaction contemplated by this
Agreement, or (ii) obligates the Company or any Subsidiary to make any payment or provide any
benefit as a result of a change in control, within the meaning of such term under Section 280G of
the Code. None of the Plans provides for or promises retiree medical, disability or life insurance
benefits to any current or former employee, officer or director of the Company or any Subsidiary. (c) Each Plan is now and always has been operated in all material respects in accordance with
its terms and the requirements of all applicable Laws including, without limitation, ERISA and the
Code. The Company and the Subsidiaries have performed all
obligations required to be performed by them under, are not in any respect in default under or
in violation of, and have no knowledge of any default or violation by any party to, any Plan. No
Action is pending or threatened with respect to any Plan (other than claims for benefits in the
ordinary course) and no fact or event exists that could reasonably be expected to give rise to any
such Action. The Company and the Subsidiaries are in compliance with the applicable requirements of
Section 4980(B) of the Code, with respect to each Plan that is a group health plan, as such term
is defined in Section 5000(b)(1) of the Code. (d) Each Plan that is intended to be qualified under Section 401(a) of the Code or Section
401(k) of the Code has timely received a favorable determination letter from the Internal Revenue
Service (the IRS) covering all of the provisions applicable to the Plan for which
determination letters are currently available that the Plan is so qualified and each trust
established in connection with any Plan which is intended to be exempt from federal income taxation
under Section 501(a) of the Code has received a determination letter from the IRS that it is so
exempt, and no fact or event has occurred since the date of such determination letter or letters
from the IRS to adversely affect the qualified status of any such Plan or the exempt status of any
such trust. Each Plan that is intended to be qualified under Section 401(a) of the Code has been
submitted to the IRS for a determination that GUST amendments have been appropriately made prior
to the end of the GUST remedial period. Each Plan that is intended to be qualified under Section
401(a) of the Code has adopted good faith amendments designed to comply with the requirements of
the Economic Growth Tax Relief Reconciliation Act, and such amendments were effective prior to the
applicable amendment deadline. (e) There has not been any prohibited transaction (within the meaning of Section 406 of ERISA
or Section 4975 of the Code) with respect to any Plan. Neither the Company nor any Subsidiary has
incurred any liability under, arising out of or by operation of 17




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Title IV of ERISA (other than
liability for premiums to the Pension Benefit Guaranty Corporation arising in the ordinary course),
including, without limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA, or (ii) the withdrawal
from any Multiemployer Plan or Multiple Employer Plan, and no fact or event exists which could
reasonably be expected to give rise to any such liability. (f) All contributions, premiums or payments required to be made with respect to any Plan have
been made on or before their due dates. All such contributions have been fully deducted for income
tax purposes and no such deduction has been challenged or disallowed by any Governmental Authority
and no fact or event exists which could reasonably be expected to give rise to any such challenge
or disallowance. (g) In addition to the foregoing, with respect to each Plan that is not subject to United
States law (a Non-U.S. Benefit Plan):  (i)

all employer and employee contributions to each Non-U.S. Benefit Plan required
by law or by the terms of such Non-U.S. Benefit Plan have been made, or, if applicable,
accrued in accordance with normal accounting practices, and a pro rata contribution for
the period prior to and including the date of this Agreement has been made or accrued;(ii)

the fair market value of the assets of each funded Non-U.S. Benefit Plan, the
liability of each insurer for any Non-U.S. Benefit Plan funded through insurance or the
book reserve established for any Non-U.S. Benefit Plan, together with any accrued
contributions, is sufficient to procure or provide for the benefits determined on any
ongoing basis (actual or contingent) accrued to the date of this Agreement with respect
to all current and former participants under such Non-U.S. Benefit Plan according to
the actuarial assumptions and valuations most recently used to determine employer
contributions to such Non-U.S. Benefit Plan, and no Transaction shall cause such assets
or insurance obligations to be less than such benefit obligations; and(iii)

each Non-U.S. Benefit Plan required to be registered has been registered and
has been maintained in good standing with applicable regulatory authorities. Each
Non-U.S. Benefit Plan has been operated in full compliance with all applicable
non-United States laws. SECTION 3.11. Labor and Employment Matters. (a) Except as set forth in Section
3.11(a) of the Company Disclosure Schedule, (i) there are no material labor controversies, material
labor strikes, material slowdowns, material work stoppages or material lockouts pending or
threatened between the Company or any Subsidiary and any of their respective employees and neither
the Company nor any Subsidiary has experienced any such controversy, strike, slowdown, work
stoppage or lockout within the past three years; (ii) neither the Company nor any Subsidiary is a
party to any collective bargaining agreement or other labor union contract applicable to persons
employed by the Company or any Subsidiary, nor has any union certification or decertification been
filed or threatened that relates to employees of the 18




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Company or any of its Subsidiaries and no
union authorization campaign has been conducted within the 12 months prior to the date of this
Agreement; (iii) neither the Company nor any Subsidiary has breached or otherwise failed to comply
with any provision of any such collective bargaining agreement or labor union contract, and there
are no grievances outstanding against the Company or any Subsidiary under any such collective
bargaining or material labor union agreement or contract; and (iv) there are no unfair labor
practice complaints pending against the Company or any Subsidiary before the National Labor
Relations Board (or similar foreign agency). The consent of each labor union which is a party to
the collective bargaining agreements listed in Section 3.11 of the Company Disclosure Schedule is
not required to consummate the Transactions. (b) The Company and the Subsidiaries are in compliance, in all material respects, with all
applicable laws relating to the employment of labor, including those related to wages, hours,
collective bargaining, worker classification and the payment and withholding of taxes and other
sums as required by the appropriate Governmental Authority and have withheld and paid to the
appropriate Governmental Authority or are holding for payment not yet due to such Governmental
Authority all amounts required to be withheld from employees of the Company or any Subsidiary and
are not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with
any of the foregoing, except in each case those that would not, individually or in the aggregate,
have a Company Material Adverse Effect. The Company and the Subsidiaries have paid in full to all
employees or adequately accrued for in accordance with
GAAP consistently applied all wages, salaries, commissions, bonuses, benefits and other
compensation due to or on behalf of such employees and there is no material claim with respect to
payment of wages, salary, vacation, improper worker classification or overtime pay that has been
asserted or is now pending or threatened before any Governmental Authority with respect to any
persons currently or formerly employed by the Company or any Subsidiary, except in each case those
that would not, individually or in the aggregate, have a Company Material Adverse Effect. Neither
the Company nor any Subsidiary is a party to, or otherwise bound by, any consent decree with, or
citation by, any Governmental Authority relating to employees or employment practices, except those
that would not, individually or in the aggregate, have a Company Material Adverse Effect. There is
no charge or proceeding with respect to a violation of any occupational safety or health standards
that has been asserted or is now pending or threatened with respect to the Company, except in each
case those that would not, individually or in the aggregate, have a Company Material Adverse
Effect. There is no charge of discrimination in employment or employment practices, for any
reason, including, without limitation, age, gender, race, religion or other legally protected
category, which has been asserted or is now pending or threatened before the United States Equal
Employment Opportunity Commission, or any other Governmental Authority in any jurisdiction in which
the Company or any Subsidiary has employed or employ any person. SECTION 3.12. Real Property; Title to Assets. (a) Section 3.12 of the Company
Disclosure Schedule sets forth a complete and accurate list and description of all real property
leased, subleased or otherwise occupied by the Company or its Subsidiaries (the Leased Real
Property). The Company and its subsidiaries do not own and have never owned any real
property. All of the leases or subleases of any Leased Property (the Leases) are valid,
binding and in full force and effect and there is not, under any such Leases, any existing material
default 19




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or event of default (or event which, with notice or lapse of time, or both, would
constitute a default) by the Company or any Subsidiary. (b) There are no material contractual or material legal restrictions that preclude or restrict
the ability to use any real property leased by the Company or any Subsidiary for the purposes for
which it is currently being used. There are no material defects or material adverse physical
conditions affecting the real property, and improvements thereon leased by the Company or any
Subsidiary other than those that would not, individually or in the aggregate, have a Company
Material Adverse Effect. SECTION 3.13. Intellectual Property. Except as would not, individually or in the
aggregate, have a Company Material Adverse Effect, (a) the conduct of the business of the Company
and the Subsidiaries as currently conducted does not infringe upon or misappropriate the
Intellectual Property rights of any third party, and no claim has been asserted to the Company that
the conduct of the business of the Company and the Subsidiaries as currently conducted infringes
upon or may infringe upon or misappropriates the Intellectual Property Rights of any third party;
(b) with respect to each item of Intellectual Property owned by the Company or a Subsidiary and
material to the business, financial condition or results of operations of the Company and the
Subsidiaries taken as a whole (Company Owned Intellectual Property), the Company or a
Subsidiary is the owner of the
entire right, title and interest in and to such Company Owned Intellectual Property and is
entitled to use such Company Owned Intellectual Property in the continued operation of its
respective business; (c) with respect to each item of Intellectual Property licensed to the Company
or a Subsidiary that is material to the business of the Company and the Subsidiaries as currently
conducted (Company Licensed Intellectual Property), the Company or a Subsidiary has the
right to use such Company Licensed Intellectual Property in the continued operation of its
respective business in accordance with the terms of the license agreement governing such Company
Licensed Intellectual Property; (d) the Company Owned Intellectual Property is valid and
enforceable, and has not been adjudged invalid or unenforceable in whole or in part; (e) each
license of the Company Licensed Intellectual Property is valid and enforceable, is binding on all
parties to such license, and is in full force and effect; and (f) neither the execution of this
Agreement nor the consummation of the Merger shall adversely affect any of the Companys rights
with respect to any material Company Owned Intellectual Property or any material Company Licensed
Intellectual Property. SECTION 3.14. Taxes. The Company and the Subsidiaries have filed all United States
federal, state, local and non-United States Tax returns and reports required to be filed by them
and have paid and discharged all Taxes required to be paid or discharged, other than such payments
as are being contested in good faith by appropriate proceedings. All such Tax returns are true,
accurate and complete. Except as set forth in Section 3.14 of the Company Disclosure Schedule,
neither the IRS nor any other United States or non-United States taxing authority or agency is now
asserting or threatening to assert against the Company or any Subsidiary any deficiency or claim
for any Taxes or interest thereon or penalties in connection therewith. Neither the Company nor
any Subsidiary has granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any Tax. The accruals and reserves for Taxes
reflected in the 2004 Balance Sheet are adequate to cover all Taxes accruable through such date
(including interest and penalties, if any, thereon) in accordance with GAAP. There are no Tax
liens upon any property or assets of the Company or any of the Subsidiaries 20




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except liens for
current Taxes not yet delinquent. Neither the Company nor any of the Subsidiaries has been
required to include in income any adjustment pursuant to Section 481 of the Code by reason of a
voluntary change in accounting method initiated by the Company or any of the Subsidiaries, and the
IRS has not initiated or proposed any such adjustment or change in accounting method, in either
case which adjustment or change would have a Company Material Adverse Effect. Neither the Company
nor any Subsidiary has been a distributing corporation or a controlled corporation in a
distribution intended to qualify under Section 355(e) of the Code within the past five years.
Neither the Company nor any of its affiliates has taken or agreed to take any action that would
prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the
Code. The Company is not aware of any agreement, plan or other circumstance that would prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. The
Company does not have any interest in any joint venture, partnership or other entity or arrangement
that could be treated as a partnership for United States federal income tax purposes. SECTION 3.15. Environmental Matters. Except as described in Section 3.15 of the Company Disclosure Schedule or as would not,
individually or in the aggregate, have a Company Material Adverse Effect, (a) none of the Company
nor any of the Subsidiaries has violated or is in violation of any Environmental Law; (b) none of
the properties currently or formerly owned, leased or operated by the Company or any Subsidiary
(including, without limitation, soils and surface and ground waters) are contaminated with any
Hazardous Substance; (c) none of the Company or any of the Subsidiaries is actually, potentially or
allegedly liable for any off-site contamination by Hazardous Substances; (d) none of the Company or
any of the Subsidiaries is actually, potentially or allegedly liable under any Environmental Law
(including, without limitation, pending or threatened liens); (e) each of the Company and each
Subsidiary has all permits, licenses and other authorizations required under any Environmental Law
(Environmental Permits); and (f) each of the Company and each Subsidiary is in compliance
with its Environmental Permits; and (g) neither the execution of this Agreement nor the
consummation of the Merger will require any investigation, remediation or other action with respect
to Hazardous Substances, or any notice to or consent of Governmental Authorities or third parties,
pursuant to any applicable Environmental Law or Environmental Permit. SECTION 3.16. [Reserved]. SECTION 3.17. Material Contracts. (a) Subsections (i) through (viii) of Section
3.17(a) of the Company Disclosure Schedule list the following types of contracts and agreements to
which the Company or any Subsidiary is a party (such contracts and agreements as are required to
be set forth in Section 3.17(a) of the Company Disclosure Schedule being the Material
Contracts):  (i)

each material contract (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) with respect to the Company and its Subsidiaries;(ii)

each contract and agreement which is likely to involve consideration of more
than US$5,000,000, in the aggregate, in any 12-month period; 21




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(iii)

any employment or consulting agreement or any other written agreement with any
other officer, employee or consultant with annual compensation in excess of US$100,000
or which includes a change of control provision or provides for severance obligations
upon termination;(iv)

all management contracts (excluding contracts (i) for employment or (ii) which
involve consideration of less than US$100,000 in any 12-month period or (iii) which are
terminable with no more than 90 days notice without payment of a termination fee),
including any contracts involving the payment of royalties or other amounts calculated
based upon the revenues or income of the Company or any Subsidiary or income or
revenues related to any product of the Company or any Subsidiary to which the Company
or any Subsidiary is a party;(v)

all contracts and agreements with any Governmental Authority to which the
Company or any Subsidiary is a party that are not for professional services or not
otherwise in the ordinary course of business;(vi)

all contracts and agreements that limit, or purport to limit, the ability of
the Company or any Subsidiary to compete in any line of business or in any geographic
area;(vii)

all material contracts or arrangements that result in any person or entity
holding a power of attorney from the Company or any Subsidiary that relates to the
Company, any Subsidiary or their respective businesses, excluding any power of attorney
entered into in the ordinary course of business consistent with past practice; and(viii)

all other contracts and agreements, whether or not made in the ordinary course of
business, which the breach, non-performance, amendment, termination or the absence of
would, individually, have a Company Material Adverse Effect. No contract pursuant to which the Company or any Subsidiary performs professional services in the
ordinary course of business shall constitute a Material Contract. (b) Except as would not, individually or in the aggregate, have a Company Material Adverse
Effect, (i) each Material Contract is a valid and binding agreement and neither the Company nor any
Subsidiary is in default of a Material Contract; (ii) no Material Contract has been cancelled by
the other party; (iii) the Company and the Subsidiaries have not received any claim of default by
the Company or the Subsidiaries under any such agreement; and (iv) neither the execution of this
Agreement nor the consummation of any Transaction shall constitute a default under, give rise to
cancellation rights under, any Material Contract. The Company has furnished or made available to
Parent true and complete copies of all Material Contracts, including any amendments thereto through
the date of this Agreement. SECTION 3.18. Insurance. The Company and its Subsidiaries have in effect insurance
coverage with reputable insurers or are self-insured, which in respect of amounts, premiums,
assets, types and risks insured, constitutes reasonably adequate coverage against all risks
customarily insured against by companies in the same or similar lines of business as the 22




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Company and its Subsidiaries and comparable in size and operations to the Company and its Subsidiaries.
The Company has made available to Parent a copy of all material insurance policies and all material
self insurance programs or arrangements relating to the business, assets and operations of the
Company and its subsidiaries (the Insurance Policies). Each of such Insurance Policies
is in full force and effect as of the date of this Agreement. From December 31, 2002 through the
date hereof, none of the Company or any of its Subsidiaries has received any notice or other
communications regarding any actual or possible (a) cancellation of any Insurance Policy that has
not been renewed in the ordinary course of business without lapse of coverage, (b) invalidation of
any Insurance Policy, (c) refusal of any coverage or rejection of any material claim under any
Insurance Policy or (d) any material adjustment in the amount of any of the premiums payable with
respect to any Insurance Policy. SECTION 3.19. Board Approval; Vote Required. (a) The Company Board, by resolutions duly adopted by unanimous vote of those voting at a
meeting duly called and held and not subsequently rescinded or modified in any way, has duly (i)
determined that this Agreement and the Merger are fair to and in the best interests of the Company
and its stockholders, (ii) approved this Agreement and the Merger, and (iii) recommended that the
stockholders of the Company approve and adopt this Agreement and approve the Merger and directed
that this Agreement and the Transactions be submitted for consideration by the Companys
stockholders at the Company Stockholders Meeting (as defined below). (b) The only vote of the holders of any class or series of capital stock of the Company
necessary to approve this Agreement, the Merger and the other Transactions is the affirmative vote
of the holders of a majority of the outstanding Shares in favor of the approval and adoption of
this Agreement. SECTION 3.20. Customers and Suppliers. Section 3.20 of the Company Disclosure
Schedule sets forth a true and complete list of the top ten (10) customers of the Company and its
Subsidiaries (based on the revenue from such customer during the 12-month period ended March 31,
2005). As of the date of this Agreement, the loss of any single customer or supplier of the
Company and its Subsidiaries would not cause a Company Material Adverse Effect. SECTION 3.21. [Reserved]. SECTION 3.22. Interested Party Transactions. Except as set forth in the Company SEC
Reports or employment or other compensation arrangements in the ordinary course, there are no
transactions, agreements, arrangements or understandings between the Company and the Subsidiaries,
on the one hand, and any affiliate (including any officer or director) thereof, (excluding any
Subsidiary of the Company that is an affiliate of the Company solely by virtue of it being a
Subsidiary of the Company). The Company and the Subsidiaries have not, since July 30, 2002, (i)
extended or maintained credit, arranged for the extension of credit or renewed an extension of
credit in the form of a personal loan to or for any director or executive officer (or equivalent
thereof) of the Company, or (ii) materially modified any term of any such extension or maintenance
of credit. 23




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SECTION 3.23. Opinion of Financial Advisor. The Board of Directors of the Company has
received the written opinion of Bear Stearns & Co. Inc., dated the date of this Agreement, to the
effect that, as of the date of this Agreement, the Merger Consideration is fair, from a financial
point of view, to the Companys stockholders, a copy of which opinion will be delivered to Parent
on the date of this Agreement. SECTION 3.24. Brokers. No broker, finder or investment banker (other than Bear
Stearns & Co. Inc.) is entitled to any brokerage, finders or other fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of the Company. The Company has
heretofore furnished to Parent a complete and correct copy of all agreements between the
Company and Bear Stearns & Co. Inc. pursuant to which such firm would be entitled to any payment
relating to the Transactions. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB As an inducement to the Company to enter into this Agreement, Parent and Merger Sub hereby,
jointly and severally, represent and warrant to the Company that, except as disclosed in Parents
(i) Annual Information Form dated as of March 20, 2005; (ii) Management Information Circular; and
(iii) 2004 Annual report (each as filed with the Alberta Securities Commission (the ASC)
on March 31, 2005), to Parent and Merger Subs knowledge: SECTION 4.01. Corporate Organization. Parent is a corporation validly subsisting
under the Canada Business Corporations Act and Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and each of them has the
requisite corporate power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power, authority and
governmental approvals would not, individually or in the aggregate, have a Parent Material Adverse
Effect (as defined in Section 9.03(a)). SECTION 4.02. Articles of Incorporation and By-Laws. Parent has heretofore furnished
to the Company a complete and correct copy of the Articles of Incorporation and the By-Laws of
Parent and Merger Sub, each as amended to date. Such Articles of Incorporation and By-Laws are in
full force and effect. Neither Parent nor Merger Sub is in violation of any of the provisions of
its Articles of Incorporation or By-Laws. Parent has heretofor furnished to the Company the
minutes of the meetings of the Board of Directors of Parent and any committee thereof in respect of
meetings of the Board of Directors and such committees held since January 1, 2001 through the date
hereof for which minutes have been prepared and approved SECTION 4.03. Capitalization. (a) The authorized share capital of Parent consists of
(i) unlimited shares of Parent Common Stock and (ii) unlimited preferred shares, without par value
(Parent Preferred Stock). As of April 13, 2005, (i) 18,937,019 shares of Parent Common
Stock are issued and outstanding, all of which are validly issued, fully paid and 24




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non-assessable,
(ii) no shares of Parent Common Stock are held in the treasury of Parent (excluding shares of
Parent Common Stock purchased pursuant to Parents normal course issuer bid which are to be
cancelled) and (iii) no shares of Parent Common Stock are held by subsidiaries of Parent. As of
the date of this Agreement, no shares of Parent Preferred Stock are issued and outstanding. Except
as set forth in this Section 4.03 and except for stock options granted pursuant to the stock option plans
of Parent (the Parent Stock Option Plans), there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating to the issued or unissued
capital stock of Parent or Merger Sub or obligating Parent or Merger Sub to issue or sell any
shares of capital stock of, or other equity interests in, Parent or Merger Sub. All shares of
Parent Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly authorized, validly
issued, fully paid and non-assessable. There are no outstanding contractual obligations of Parent
or Merger Sub to repurchase, redeem or otherwise acquire any shares of Parent Common Stock or any
capital stock of Merger Sub. There are no outstanding contractual obligations of Parent to provide
funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in,
Merger Sub or any other person excluding Parent or any subsidiary of Parent). (b) The authorized capital stock of Merger Sub consists of 100 shares of common stock, par
value US$0.001 per share, all of which are duly authorized, validly issued, fully paid and
non-assessable and free of any preemptive rights in respect thereof and all of which are owned by
Parent. Each outstanding share of capital stock of Merger Sub is duly authorized, validly issued,
fully paid and non-assessable and each such share is owned by Parent or Merger Sub free and clear
of all security interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on Parents or Merger Subs voting rights, charges and other encumbrances of any nature
whatsoever, except where failure to own such shares free and clear would not, individually or in
the aggregate, have a Parent Material Adverse Effect. (c) The shares of Parent Common Stock to be issued pursuant to the Merger in accordance with
Section 2.01 (i) will be duly authorized, validly issued, fully paid and non-assessable and not
subject to preemptive rights created by statute, Parents Articles of Incorporation or By-Laws or
any agreement to which Parent is a party or is bound and (ii) will, when issued, be registered
under the Securities Act and the Exchange Act and registered or exempt from registration under
applicable Blue Sky Laws. SECTION 4.04. Authority Relative to This Agreement. Each of Parent and Merger Sub has
all necessary corporate power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Transactions. The execution and delivery of this
Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the
Transactions have been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to authorize this Agreement
or to consummate the Transactions (other than, with respect to the Merger, the filing and
recordation of appropriate merger documents as required by the CCC). This Agreement has been duly
and validly executed and delivered by Parent and Merger Sub and, assuming due authorization,
execution and delivery by the Company, constitutes a legal, valid and binding obligation of each of
Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its
terms (except as may 25




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be limited by bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and the availability of equitable remedies). SECTION 4.05. No Conflict; Required Filings and Consents. (a) The execution and delivery of this Agreement by Parent and Merger Sub do not, and the
performance of this Agreement by Parent and Merger Sub will not, (i) conflict with or violate the
Articles of Incorporation or By-laws of either Parent or Merger Sub, (ii) assuming that all
consents, approvals, authorizations and other actions described in Section 4.05(b) have been
obtained and all filings and obligations described in Section 4.05(b) have been made, conflict with
or violate any law, rule, regulation, order, judgment or decree applicable to Parent or Merger Sub
or by which any property or asset of either of them is bound or affected, or (iii) result in any
breach of, or constitute a default (or an event which, with notice or lapse of time or both, would
become a default) under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any property or asset
of Parent or Merger Sub pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which Parent or Merger Sub
is a party or by which Parent or Merger Sub or any property or asset of either of them is bound or
affected, except, with respect to clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences which would not, individually or in the aggregate, have a
Parent Material Adverse Effect. (b) The execution and delivery of this Agreement by Parent and Merger Sub do not, and the
performance of this Agreement by Parent and Merger Sub will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental Authority, except
(i) for applicable requirements, if any, of the Exchange Act, Blue Sky Laws and state takeover
laws, the HSR Act and filing and recordation of appropriate merger documents as required by the
CCC, and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not, individually or in the aggregate, prevent or
materially delay consummation of any of the Transactions or otherwise prevent Parent or Merger Sub
from performing their material obligations under this Agreement. SECTION 4.06. Permits; Compliance. Each of Parent and Merger Sub is in possession of
all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals and orders of any Governmental Entity necessary for Parent or
Merger Sub to own, lease and operate its properties or to carry on its business as it is now being
conducted (the Parent Permits), except where the failure to have, or the suspension or
cancellation of, any of the Parent Permits would not, individually or in the aggregate, have a
Parent Material Adverse Effect. As of the date of this Agreement, no suspension or cancellation of
any of the Parent Permits is pending or threatened, except where the failure to have, or the
suspension or cancellation of, any of the Parent Permits would not, individually or in the
aggregate, have a Parent Material Adverse Effect. Neither Parent nor Merger Sub is in conflict
with, or in default, breach or violation of, (a) any Law applicable to Parent or Merger Sub or by
which any property or asset of Parent or Merger Sub is bound or affected, or (b) any note, bond,
mortgage, indenture, contract, agreement, lease, license, Parent Permit, franchise or other
instrument or obligation to which Parent or Merger Sub is a party or by which Parent or Merger Sub
or any property or asset of Parent or Merger Sub is bound, except for any such conflicts, 26




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defaults,
breaches or violations that would not, individually or in the aggregate, have a Parent Material
Adverse Effect. SECTION 4.07. ASC Filings; Financial Statements. (a) Parent has filed all forms, reports and documents required to be filed by it with the
Alberta Securities Commission (ASC) since December 31, 2004, and has heretofore
previously made available to the Company, in the form filed with the ASC, (i) the Annual
Information Forms, dated as of March 30, 2005, March 31, 2004 and May 15, 2003, (ii) the Management
Information Circular for Annual and Special Meeting, May 10, 2005; and (iii) the 2004, 2003 and
2002 Annual Reports (the form, reports and other documents referred to in clauses (i), (ii) and
(iii) being collectively, the Parent Reports). The Parent Reports (i) complied in all
material respects with the requirements of the Alberta Securities Act and the rules and regulations
promulgated thereunder, and (ii) did not, at the time they were filed, or, if amended, as of the
date of such amendment, contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading, except that to the
extent information as of a later date conflicts with information of an earlier date, the
information of such later date shall be deemed to modify such earlier information. No subsidiary
of Parent is required to file any form, report or other document with the ASC. (b) Each of the consolidated financial statements (including, in each case, any notes thereto)
contained in the Parent Reports was prepared in accordance with Canadian generally accepted
accounting principles (Canadian GAAP) applied on a consistent basis (except that
unaudited financial statements are subject to year-end audit adjustments and may not contain notes
in full compliance with Canadian GAAP) throughout the periods indicated (except as may be indicated
in the notes thereto) and each fairly presents, in all material respects, the consolidated
financial position, results of operations and cash flows of Parent and its consolidated
subsidiaries as at the respective dates thereof and for the respective periods indicated therein. (c) Except as and to the extent set forth on, or reserved against, the consolidated balance
sheet of Parent and its consolidated subsidiaries as at December 31, 2004, including the notes
thereto (the Parent 2004 Balance Sheet), neither the Parent nor any of its Subsidiaries
has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise),
except for liabilities and obligations, incurred in the ordinary course of business consistent with
past practice since December 31, 2004, which have not had, individually or in the aggregate, a
Parent Material Adverse Effect. (d) Parent has responded to all comments or requests received from the ASC or the staff of the
ASC since January 1, 2002 and the ASC or the staff of the ASC, as the case may be, has not made any
supplemental comments or requests with respect to the matters described therein. (e) Parent maintains and will continue to maintain a system of accounting established and
administered in accordance with Canadian GAAP, in all material respects and to the extent Canadian
GAAP is applicable to a system of accounting. Parent and its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that 27




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(i) transactions are
executed in accordance with managements general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in conformity with Canadian
GAAP, (iii) access to assets is permitted only in accordance with managements general or specific authorization and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. (f) Accounts receivable, book debts and other debts due or accruing to Parent and its
subsidiaries, taken as a whole, and reflected on the Parent 2004 Balance Sheet or arising
thereafter, have arisen, in al material respects, from bona fide, arms length
transactions between unrelated parties in the ordinary course of business consistent with past
practice and, subject to an allowance for doubtful accounts that has been reflected on the books
and records of the Parent and its subsidiaries, as applicable, in accordance with Canadian GAAP and
the regulations of the ASC, which are collectible without setoff or counterclaim, except as would
not, individually or in the aggregate, have a Parent Material Adverse Effect. (g) Accounts payable of Parent and its subsidiaries, taken as a whole, reflected on the Parent
2004 Balance Sheet or arising thereafter are, in all material respects, the result of bona
fide transactions in the ordinary course of business and have been paid or are not yet due
or payable. Since the date of the Parent 2004 Balance Sheet, Parent and its subsidiaries have not
altered in any material respects their practices for the payment of such accounts payable,
including the timing of such payment, except as would not, individually or in the aggregate, have a
Parent Material Adverse Effect. (h) The work in progress reflected on the Parent 2004 Balance Sheet was owned by Parent and
its subsidiaries on December 31, 2004. The value of such work in progress at December 31, 2004 has
been recorded appropriately and represents work in progress that can be invoiced and collected in
the ordinary course of business, except as would not, individually or in the aggregate, have a
Parent Material Adverse Effect. (i) Parent and its Subsidiaries have appropriately accrued project liabilities on its
financial statements in accordance with Canadian GAAP, in all material respects. (j) Parent and its Subsidiaries have appropriately deferred the recognition of revenues on
projects where amounts have been invoiced in advance of the underlying work having been completed
in accordance with Canadian GAAP, in all material respects. SECTION 4.08. Absence of Certain Changes or Events. Since December 31, 2004 or as
expressly contemplated by this Agreement, (a) Parent has conducted its business only in the
ordinary course and in a manner consistent with past practice, and (b) there has not been any
Parent Material Adverse Effect. SECTION 4.09. Absence of Litigation. Except as specifically disclosed in any Parent
Report filed prior to the date of this Agreement, there is no Action pending or threatened against
Parent or Merger Sub, or any property or asset of Parent or Merger Sub, before any Governmental
Authority that (a) individually or in the aggregate, has had or would have a Parent Material
Adverse Effect or (b) seeks to materially delay or prevent the consummation of the 28




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Merger. Neither
Parent nor Merger Sub nor any material property or asset of Parent or Merger Sub is subject to any
continuing order of, consent decree, settlement agreement or other similar written agreement with, or
continuing investigation by, any Governmental Authority that would, individually or in the
aggregate, have a Parent Material Adverse Effect. SECTION 4.10. Stockholder Vote. The sole stockholder of Merger Sub has approved this
Agreement and the consummation of the Transactions. No vote of the stockholders of Parent is
required by Law, Parents Articles of Incorporation or Bylaws or otherwise in order for Parent and
Merger Sub to consummate the Transactions. SECTION 4.11. Operations of Merger Sub. Merger Sub is a direct, wholly owned
subsidiary of Parent, was formed solely for the purpose of engaging in the Transactions, has
engaged in no other business activities and has conducted its operations only as contemplated by
this Agreement. SECTION 4.12. Taxes. Parent and its subsidiaries have filed all Canadian federal,
provincial, local and non-Canadian Tax returns and reports required to be filed by them and have
paid and discharged all Taxes required to be paid or discharged, other than such payments as are
being contested in good faith by appropriate proceedings. All such Tax returns are true, accurate
and complete. Neither the Canada Revenue Agency nor any other Canadian or non-Canadian taxing
authority or agency is now asserting or threatening to assert against Parent or any subsidiary any
deficiency or claim for any Taxes or interest thereon or penalties in connection therewith.
Neither Parent nor any subsidiary has granted any waiver of any statute of limitations with respect
to, or any extension of a period for the assessment of, any Tax. The accruals and reserves for
Taxes reflected in the Parent 2004 Balance Sheet are adequate to cover all Taxes accruable through
such date (including interest and penalties, if any, thereon) in accordance with Canadian GAAP.
There are no Tax liens upon any property or assets of Parent or any of the subsidiaries except
liens for current Taxes not yet delinquent. Neither Parent nor any of its affiliates has taken or
agreed to take any action that would prevent the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code. Parent is not aware of any agreement, plan or other
circumstance that would prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code. Neither Parent nor any of its subsidiaries has been required to
include in income any adjustment by reason of a voluntary change in accounting method initiated by
Parent or any of its subsidiaries, and the Canada Revenue Agency has not initiated or proposed any
such adjustment or change in accounting method, in either case, which adjustment or change would
have a Parent Material Adverse Effect. SECTION 4.13. Board Approval. The board of directors of each of Parent and Merger
Sub, by resolutions duly adopted by unanimous vote of those voting at a meeting duly called and
held and not subsequently rescinded or modified in any way, has (i) determined that this Agreement
and the Merger are fair and in the best interests of Parent and Merger Sub and their respective
stockholders, (ii) approved this Agreement and Merger, and (iii) in the case of the board of
directors of the Parent, have approved the registration of the Parent Common Stock to be issued in
connection with the Transactions under the Securities Act and the Exchange Act and the listing of
the Parent Common Stock for trading on the U.S. Exchange. 29




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SECTION 4.14. [Reserved]. SECTION 4.15. Ownership of Company Common Stock. As of the date hereof, neither
Parent nor any of its subsidiaries, owns any Shares. SECTION 4.16. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finders or other fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of Parent or Merger Sub. SECTION 4.17. Intellectual Property. Except as would not, individually or in the
aggregate, have a Parent Material Adverse Effect, (a) the conduct of the business of Parent and its
subsidiaries as currently conducted does not infringe upon or misappropriate the Intellectual
Property rights of any third party, and no claim has been asserted to Parent that the conduct of
the business of Parent and its subsidiaries as currently conducted infringes upon or may infringe
upon or misappropriates the Intellectual Property Rights of any third party; (b) with respect to
each item of Intellectual Property owned by Parent or a subsidiary of Parent and material to the
business, financial condition or results of operations of Parent and its subsidiaries taken as a
whole (Parent Owned Intellectual Property), Parent or a subsidiary of Parent is the owner
of the entire right, title and interest in and to such Parent Owned Intellectual Property and is
entitled to use such Parent Owned Intellectual Property in the continued operation of its
respective business; (c) with respect to each item of Intellectual Property licensed to Parent or a
subsidiary of Parent that is material to the business of Parent and its subsidiaries as currently
conducted (Parent Licensed Intellectual Property), Parent or a subsidiary of Parent has
the right to use such Parent Licensed Intellectual Property in the continued operation of its
business in accordance with the terms of the license agreement governing such Parent Licensed
Intellectual Property; and (d) Parent Owned Intellectual Property is valid and enforceable, and has
not been adjudged invalid or unenforceable in whole or in part. SECTION 4.18. Environmental Matters. Except as would not, individually or in the
aggregate, have a Parent Material Adverse Effect, (a) neither Parent nor any of its subsidiaries
has violated or is in violation of any Environmental Law; (b) none of the properties currently or
formerly owned, leased or operated by Parent or any subsidiary of Parent (including, without
limitation, soils and surface and ground waters) are contaminated with any Hazardous Substance; (c)
neither Parent nor any of its
subsidiaries is actually, potentially or allegedly liable for any off-site contamination by
Hazardous Substances; (d) neither Parent nor any of its subsidiaries is actually, potentially or
allegedly liable under any Environmental Law (including, without limitation, pending or threatened
liens); (e) each of Parent and its subsidiaries has all Environmental Permits; and (f) each of the
Parent and its subsidiaries is in compliance with its Environmental Permits; and (g) neither the
execution of this Agreement nor the consummation of the Merger will require any investigation,
remediation or other action with respect to Hazardous Substances, or any notice to or consent of
Governmental Authorities or third parties, pursuant to any applicable Environmental Law or
Environmental Permit. 30




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ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER SECTION 5.01. Conduct of Business by the Company Pending the Merger. The Company
agrees that, between the date of this Agreement and until the earlier of the termination of this
Agreement or the Effective Time, except as set forth in Section 5.01 of the Company Disclosure
Schedule or as expressly contemplated by any other provision of this Agreement, unless Parent shall
otherwise consent in writing (which consent will not be unreasonably withheld or delayed): (i) the businesses of the Company and the Subsidiaries shall be conducted only in, and
the Company and the Subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice; and (ii) the Company shall use its reasonable best efforts to preserve substantially intact
the business organization of the Company and the Subsidiaries, to keep available the
services of the current officers, key employees and key consultants of the Company and the
Subsidiaries and to preserve the current advantageous relationships of the Company and the
Subsidiaries with customers, suppliers and other persons with which the Company or any
Subsidiary has significant business relations. By way of amplification and not limitation, except as expressly contemplated by any other
provision of this Agreement or as set forth in Section 5.01 of the Company Disclosure Schedule,
neither the Company nor any Subsidiary shall, between the date of this Agreement and until the
earlier of the termination of this Agreement or the Effective Time, do, any of the following
without the prior written consent of Parent (which consent will not be unreasonably withheld or
delayed): (a) amend or otherwise change its Articles of Incorporation or By-laws or equivalent
organizational documents; (b) (i) issue any shares of any class of capital stock of the Company or any
Subsidiary, or any options, warrants, convertible securities or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of the Company or any Subsidiary (except for
issuances of Shares issuable pursuant to Company Stock Awards outstanding on the date
of this Agreement) or (ii) sell, pledge, dispose of, grant or encumber any material
assets of the Company or any Subsidiary, except in the ordinary course of business and in a
manner consistent with past practice or pursuant to contracts in force on the date hereof; (c) declare, set aside, make or pay any dividend or other distribution, payable in
cash, stock, property or otherwise, with respect to any of its capital stock, except for
dividends by any direct or indirect wholly-owned Subsidiary to the Company or any other
wholly-owned Subsidiary; 31




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(d) reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire,
directly or indirectly, any of its capital stock (other than in connection with the cashless
exercise of Company Stock Options outstanding on the date hereof); (e) (i) acquire (including, without limitation, by merger, consolidation, or
acquisition of stock or assets or any other business combination) any corporation,
partnership, other business organization or any division thereof or any material amount of
assets; (ii) incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise become responsible for, the obligations of any
person, or make any loans or advances, or grant any security interest in any of its material
assets except in the ordinary course of business and consistent with past practice; (iii)
enter into any Material Contract; (iv) authorize any capital expenditure if, when added to
all other capital expenditures previously recorded in fiscal 2005, the total of all such
capital expenditures would exceed US$4,500,000; or (v) enter into or amend any contract,
agreement, commitment or arrangement with respect to any matter set forth in this Section
5.01(e); (f) hire any additional employees other than in the ordinary course of business,
increase the compensation payable or to become payable or the benefits provided to its
directors, officers or employees, except for increases in the ordinary course of business in
salaries or wages of employees of the Company or any Subsidiary who are not directors or
officers of the Company or any Subsidiary, or grant any severance or termination pay to, or
enter into any employment or severance agreement with, any director, officer or other
employee of the Company or of any Subsidiary, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit-sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit of any current or
former director, officer, employee or consultant; (g) implement or adopt any change in its accounting principles, practices or methods,
other than as is consistent with or as may be required by law, GAAP or regulatory
guidelines; (h) make any tax election or settle or compromise any material United States federal,
state, local or non-United States income tax liability; (i) pay, discharge or satisfy any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction of liabilities (i) reflected or reserved against on the consolidated balance
sheet of the Company and the Subsidiaries as of March 31, 2005, (ii) subsequently incurred
in the ordinary course of business and consistent with past practice, or (iii) subsequently
incurred not in the ordinary course of business, which shall not in the aggregate exceed
US$100,000; 32




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(j) enter into any material amendment to any Material Contract or consent to the
termination of any Material Contract, or amend, waive, modify or consent to the termination
of the Companys or any Subsidiarys rights thereunder; (k) commence or settle any material Action; or (l) announce an intention to, or enter into any agreement or otherwise make a
commitment, to do any of the foregoing. SECTION 5.02. Conduct of Business by Parent Pending the Merger. Except as expressly
contemplated by any other provision of this Agreement, Parent agrees that from the date of this
Agreement until the earlier of the termination of this Agreement and the Effective Time, Parent
shall not, directly or indirectly, do, or propose to do, any of the following without the prior
written consent of the Company (which consent will not be unreasonably withheld or delayed): (a) engage in any action that could reasonably be expected to cause the Merger to fail
to qualify as a reorganization within the meaning of Section 368(a) of the Code; (b) take any action to cause Parents representations and warranties set forth in
Article IV to be untrue in any material respect or cause any condition set forth in Section
7.03(a) and Section 7.03(b) not to be satisfied; or (c) take any action that would reasonably be likely to materially delay the Merger. ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.01. Registration Statement; Proxy Statement. (a) As promptly as
practicable after the execution of this Agreement, (i) Parent and the Company shall prepare the
proxy statement to be sent to the stockholders of the Company relating to the meeting of the
Companys stockholders (the Company Stockholders Meeting) to be held to consider
approval and adoption of this Agreement or any information statement to be sent to such
stockholders, as appropriate (such proxy statement or information statement, as amended or
supplemented, being referred to herein as the Proxy Statement) and
(ii) Parent shall prepare and file with the SEC a registration statement on Form F-4 (together
with all amendments thereto, the Registration Statement) in which the Proxy Statement
shall be included as a prospectus, in connection with the registration under the Securities Act of
the shares of Parent Common Stock to be issued to the stockholders of the Company pursuant to the
Merger. Parent and the Company each shall use their reasonable best efforts to cause the
Registration Statement to become effective as promptly as practicable, and, prior to the effective
date of the Registration Statement, Parent shall take all or any action required under any
applicable federal or state securities laws in connection with the issuance of shares of Parent
Common Stock pursuant to the Merger. The Company shall furnish all information concerning the
Company as Parent may reasonably request in connection with such actions and the preparation of the
Registration 33




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Statement and Proxy Statement. As promptly as practicable after the Registration
Statement shall have become effective, the Company shall mail the Proxy Statement to its
stockholders. (b) Except as provided in Section 6.04(c) and Section 8.01(g), the Company covenants that none
of the Company Board or any committee thereof shall withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or Merger Sub, the approval or recommendation by the Company
Board or any committee thereof of this Agreement, the Merger or any other Transaction (the
Company Recommendation) and the Proxy Statement shall include the recommendation of the
Company Board to the stockholders of the Company in favor of approval and adoption of this
Agreement and approval of the Merger. (c) No amendment or supplement to the Proxy Statement or the Registration Statement will be
made by Parent or the Company without the approval of the other party (such approval not to be
unreasonably withheld or delayed). Parent and the Company each will advise the other, promptly
after they receive notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop order, of the suspension
of the qualification of the Parent Common Stock issuable in connection with the Merger for offering
or sale in any jurisdiction, or of any request by the SEC for amendment of the Proxy Statement or
the Registration Statement or comments thereon and responses thereto or requests by the SEC for
additional information. (d) Parent represents that the information supplied by Parent for inclusion in the
Registration Statement and the Proxy Statement shall not, at (i) the time the Registration
Statement is declared effective, (ii) the time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to the stockholders of the Company, (iii) the time of the
Company Stockholders Meeting and (iv) the Effective Time, contain any untrue statement of a
material fact or fail to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which they were made, not
misleading. If, at any time prior to the Effective Time, any event or circumstance relating to
Parent or Merger Sub, or their respective officers or directors, should be discovered by Parent
which should be set forth in an amendment or a supplement to the Registration Statement or Proxy
Statement, Parent shall promptly inform the Company. All documents that Parent is responsible for
filing with the SEC in connection with the Merger or the other Transactions will comply as to form
and substance in all material aspects with the applicable requirements of the Securities Act and
the rules and regulations thereunder and the Exchange Act and the rules and regulations thereunder. (e) The Company represents that the information supplied by the Company for inclusion in the
Registration Statement and the Proxy Statement shall not, at (i) the time the Registration
Statement is declared effective, (ii) the time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to the stockholders of the Company, (iii) the time of the
Company Stockholders Meeting and (iv) the Effective Time, contain any untrue statement of a
material fact or fail to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which they were made, not
misleading. If, at any time prior to the Effective Time, any event or circumstance relating to the
Company or any Company Subsidiary, or their respective officers or directors, should be discovered
by the Company which should be set forth in an amendment or a 34




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supplement to the Registration
Statement or Proxy Statement, the Company shall promptly inform Parent. All documents that the
Company is responsible for filing with the SEC in connection with the Merger or the other
Transactions will comply as to form and substance in all material respects with the applicable
requirements of the Securities Act and the rules and regulations thereunder and the Exchange Act
and the rules and regulations thereunder. SECTION 6.02. Company Stockholders Meeting. The Company shall call the Company
Stockholders Meeting as promptly as practicable for the purpose of voting upon the approval of
this Agreement and the Company shall use its reasonable best efforts to hold the Company
Stockholders Meeting as soon as practicable after the date on which the Registration Statement
becomes effective. The Company shall use its reasonable best efforts to solicit from its
stockholders proxies in favor of the approval and adoption of this Agreement and shall use its
reasonable best efforts to take all other action necessary or advisable to secure the required vote
or consent of its stockholders, except in the event and to the extent that the Company Board, in
accordance with Section 6.04(c), withdraws or modifies its recommendation to the stockholders of
the Company in favor of the approval and adoption of this Agreement. SECTION 6.03. Access to Information; Confidentiality. (a) Except pursuant to
applicable Law, from the date of this Agreement until the Effective Time, the Company and Parent
shall (and shall cause their respective subsidiaries to): (i) provide to the other party (and the
other partys officers, directors, employees, accountants, consultants, legal counsel, agents and
other representatives, collectively, Representatives) access at reasonable times upon
prior notice to the officers, employees, agents, properties, offices and other facilities of such
party and its subsidiaries and to the books and records thereof; and (ii) furnish promptly to the
other party such information concerning the business, properties, contracts, assets, liabilities,
personnel and other aspects of such party and its subsidiaries as the other party or its
Representatives may reasonably request. (b) All information obtained by the parties pursuant to this Section 6.03 shall be kept
confidential in accordance with the confidentiality agreement, dated February 18, 2005 (the
Confidentiality Agreement), between Parent and the Company. (c) No investigation pursuant to this Section 6.03 shall affect any representation or warranty
in this Agreement of any party hereto or any condition to the obligations of the parties hereto. (d) The Company hereby waives the provisions of the Confidentiality Agreement as and to the
extent necessary to permit the consummation of each Transaction. SECTION 6.04. No Solicitation of Transactions. (a) The Company agrees that neither
it nor any Subsidiary nor any of the directors, officers or employees of it or any Subsidiary will,
and that it will not authorize or knowingly permit its or its Subsidiaries agents, advisors and
other representatives (including, without limitation, any investment banker, attorney or accountant
retained by it or any Subsidiary) to, directly or indirectly, (i) solicit, initiate or encourage
(including by way of furnishing nonpublic information), or take any other action to facilitate the
making of any proposal or offer (including, without limitation, any proposal or offer to its
stockholders) that constitutes, or may reasonably be expected to lead to, a Competing 35




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Transaction (as defined below), or (ii) enter into or maintain or continue discussions or negotiations with any
person or entity in furtherance of such inquiries or to obtain a proposal or offer for a Competing
Transaction, or (iii) agree to, approve, endorse or recommend any Competing Transaction or enter
into any letter of intent or other contract, agreement or commitment contemplating or otherwise
relating to any Competing Transaction. The Company shall notify Parent as promptly as practicable
(and in any event within two (2) days after any director or executive officer of the Company
attains knowledge thereof), orally and promptly thereafter in writing, if any proposal or offer, or
any inquiry or contact with any person with respect thereto, regarding a Competing Transaction is
made, specifying the material terms and conditions thereof and the identity of the party making
such proposal or offer or inquiry or contact (including material amendments or proposed material
amendments). The Company shall provide Parent with 48 hours prior notice (or such lesser prior
notice as is provided to the members of the Company Board) of any meeting of the Company Board at
which the Company Board is reasonably expected to consider any Competing Transaction. The Company
immediately shall cease and cause to be terminated all existing discussions or negotiations with
any parties conducted heretofore with respect to a Competing Transaction. The Company shall not
release any third party from, or waive any provision of, any confidentiality or standstill
agreement to which it is a party. (b) Notwithstanding anything to the contrary in this Section 6.04, the Company Board may
furnish information to, and enter into discussions with, a person who has made an unsolicited,
written, bona fide proposal or offer regarding a Competing Transaction, if the Company Board has
(i) determined, in its good faith judgment (after having received the advice of a financial advisor
of nationally recognized reputation), that such proposal or offer constitutes a Superior Proposal
(as defined below), (ii) determined, in its good faith judgment after consultation with independent
legal counsel (who may be the Companys regularly engaged independent legal counsel), that, in
light of such Superior Proposal, the failure to furnish such information or enter into discussions
would cause the members of the Company Board of Directors to breach their fiduciary duties to the
Company and its stockholders under applicable Law, (iii) provided written notice to Parent of its
intent to furnish information or enter into discussions with such person at least three (3)
business days prior to taking any such action, and (iv) obtained from such person an executed confidentiality agreement on terms no less
favorable to the Company than those contained in the Confidentiality Agreement (it being understood
that such confidentiality agreement and any related agreements shall not include any provision
calling for any exclusive right to negotiate with such party or having the effect of prohibiting
the Company from satisfying its obligations under this Agreement). (c) Except as set forth in this Section 6.04(c), neither the Company Board nor any committee
thereof shall withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent
or Merger Sub, the Company Recommendation (a Change in the Company Recommendation) or
approve or recommend, or cause or permit the Company to enter into any letter of intent, agreement
or obligation with respect to, any Competing Transaction. Notwithstanding the foregoing, if the
Company Board determines, in its good faith judgment prior to the time of the Company Stockholders
Meeting and after consultation with independent legal counsel (who may be the Companys regularly
engaged independent legal counsel), that a failure to make a Change in the Company Recommendation
would cause the members of the Company Board of Directors to breach their fiduciary duties to the
Company and its stockholders 36




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under applicable Law, the Company Board may (i) recommend a Superior
Proposal or (ii) terminate this Agreement pursuant to Section 8.01(g), but only (A) after providing
written notice to Parent (a Notice of Superior Proposal) advising Parent that the Company
Board has received a Superior Proposal, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal and indicating that the
Company Board intends to effect a Change in the Company Recommendation and the manner in which it
intends (or may intend) to do so, and (B) if Parent does not, within three (3) business days of
Parents receipt of the Notice of Superior Proposal, make an offer that the Company Board
determines, in its good faith judgment (after having received the advice of a financial advisor of
internationally recognized reputation) to be at least as favorable to the Companys stockholders as
such Superior Proposal. Any disclosure that the Company Board may be compelled to make with
respect to the receipt of a proposal or offer for a Competing Transaction or otherwise in order to
comply with its fiduciary duties to the Company and its stockholders under applicable Law or Rule
14d-9 or 14e-2 will not constitute a violation of this Agreement, provided that such disclosure
states that no action will be taken by the Company Board in violation of this Section 6.04(c).
Notwithstanding anything to the contrary contained in this Agreement, the obligation of the Company
to call, give notice of, convene and hold the Company Stockholders Meeting shall not be limited or
otherwise affected by the commencement, disclosure, announcement or submission to it of any
Competing Transaction, or by any Change in the Company Recommendation. The Company shall not
submit to the vote of its stockholders any Competing Transaction, or propose to do so at the
Company Stockholders Meeting. (d) A Competing Transaction means any of the following (other than the
Transactions): (i) any merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or other similar transaction involving the Company or
any Subsidiary; (ii) any sale, lease, exchange, transfer or other disposition of assets or
businesses that constitute or represent 15% or more of the total revenue, operating income, EBITDA
or assets of the Company and its Subsidiaries, taken as a whole; (iii) any sale, exchange, transfer
or other disposition of 15% or more of any class of equity securities of the Company or of any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X under the Securities Act); (iv)
any tender offer or exchange offer that, if consummated, would result in any person beneficially
owning 15% or more of any class of equity securities of the Company or of any Significant
Subsidiary; (v) any solicitation in opposition to approval of this Agreement by the Companys
stockholders; or (vi) any other transaction the consummation of which would reasonably be expected
to prevent or materially delay the Merger. (e) A Superior Proposal means an unsolicited written bona fide offer made by a third
party to consummate any of the following transactions: (i) a merger, consolidation, share
exchange, business combination or other similar transaction involving the Company pursuant to which
the stockholders of the Company immediately preceding such transaction would hold less than 50% of
the equity interest in the surviving or resulting entity of such transaction; or (ii) the
acquisition by any person or group (including by means of a tender offer or an exchange offer or a
two-step transaction involving a tender offer followed with reasonable promptness by a cash-out
merger involving the Company), directly or indirectly, of ownership of 50% of the then outstanding
shares of stock of the Company, in each case on terms (including conditions to consummation of the
contemplated transaction) that the Company Board determines, in its good faith judgment (after
having received the advice of a financial advisor of 37




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nationally recognized reputation), to be more
favorable to the Company stockholders than the Merger and for which financing, to the extent
required, is then committed. SECTION 6.05. Employee Benefit Matters. From and after the Effective Time, Parent
shall cause the Surviving Corporation and its subsidiaries to honor in accordance with their terms,
all contracts, agreements, arrangements, policies, plans and commitments of the Company and the
Subsidiaries as in effect immediately prior to the Effective Time that are applicable to any
current or former employees or directors of the Company or any Subsidiary. Parent shall use
reasonable best efforts to provide that employees of the Company or any Subsidiary receive credit,
for purposes of eligibility to participate and vesting (but not for benefit accruals) under any
employee benefit plan, program or arrangement established or maintained by the Surviving
Corporation or any of its subsidiaries, for service accrued or deemed accrued prior to the
Effective Time with the Company or any Subsidiary; provided, however, that such
crediting of service shall not operate to duplicate any benefit or the funding of any such benefit.
In addition, Parent shall use reasonable best efforts to waive, or cause to be waived, any
limitations on benefits relating to any pre-existing conditions to the same extent such limitations
are waived under any comparable plan of Parent or its subsidiaries and recognize, for purposes of
annual deductible and out-of-pocket limits under its medical and dental plans, deductible and
out-of-pocket expenses paid by employees of the Company and its subsidiaries in the calendar year
in which the Effective Time occurs. SECTION 6.06. Directors and Officers Indemnification and Insurance. (a) The
By-laws of the Surviving Corporation shall contain provisions no less favorable, taken as a whole,
with respect to indemnification than are set forth in Article VI of the By-laws of the Company,
which provisions shall not be amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would affect adversely the rights thereunder of
individuals who, at or prior to the Effective Time, were
directors, officers, employees, fiduciaries or agents of the Company, unless such modification
shall be required by law. (b) The Surviving Corporation shall use its reasonable best efforts to maintain in effect for
six years from the Effective Time, if available, the current directors and officers liability
insurance policies maintained by the Company (provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and conditions that are
not materially less favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that in no event shall the Surviving Corporation be required to
expend pursuant to this Section 6.06(b) more than an amount per year equal to 175% of current
annual premiums paid by the Company for such insurance (which premiums the Company represents and
warrants to be US$131,920 in the aggregate); provided, however, that in the event
of an expiration, termination or cancellation of such current policies, Merger Sub or the Surviving
Corporation shall be required to obtain as much coverage as is possible under substantially similar
policies for aggregate annual premiums which shall not exceed 175% of current annual premiums paid
by the Company for such insurance. (c) In the event the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of
its 38




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properties and assets to any person, then, and in each such case, proper provision shall be
made so that the successors and assigns of the Surviving Corporation or at Parents option, Parent,
shall assume the obligations set forth in this Section 6.06. (d) Parent and Merger Sub acknowledge that the Company is party to indemnification agreements
with each director and executive officer of the Company and that at the Effective Time the
Companys obligations under such indemnification agreements shall become the obligations of the
Surviving Corporation. SECTION 6.07. Notification of Certain Matters. The Company shall give prompt notice
to Parent, and Parent shall give prompt notice to the Company, of (a) the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence, of which could reasonably be
expected to cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect and (b) any failure of the Company, Parent or Merger Sub, as the
case may be, to comply with or satisfy any covenant or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.07 shall not limit or otherwise affect the remedies available hereunder to the party
receiving such notice. SECTION 6.08. Company Affiliates. (a) No later than 30 days after the date of
this Agreement, the Company shall deliver to Parent a list of names and addresses of those persons
who were, in the Companys reasonable judgment, on such date, affiliates (within the meaning of
Rule 145 of the rules and regulations promulgated under the Securities Act (each such person being
a Company Affiliate)) of the Company. The Company shall provide Parent with such
information and
documents as Parent shall reasonably request for purposes of reviewing such list. The Company
shall use its reasonable best efforts to deliver or cause to be delivered to Parent, prior to the
Effective time, an affiliate letter in the form attached hereto as Exhibit 6.08, executed by each
of the Company Affiliates identified in the foregoing list and any person who shall, to the
knowledge of the Company, have become a Company Affiliate subsequent to the delivery of such list. (b) Parent agrees that it shall make available current public information in accordance with
Rule 144(c) under the Securities Act for a period of two years from the Effective Time. Parent
further agrees that it shall cooperate with each Company Affiliate to remove the legend from Parent
Common Stock received by such Company Affiliate as Merger Consideration and sold by such Company
Affiliate in accordance with Rule 145(d) under the Securities Act. SECTION 6.09. Further Action; Reasonable Best Efforts. Upon the terms and subject to
the conditions of this Agreement, each of the parties hereto shall (i) make promptly its respective
filings, and thereafter make any other required submissions, under the HSR Act or other applicable
foreign, federal or state antitrust, competition of fair trade Laws with respect to the
Transactions and (ii) use its reasonable best efforts to take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under
applicable Laws or otherwise to consummate and make effective the Transactions, including, without
limitation, using its reasonable best efforts to obtain all Permits, consents, approvals,
authorizations, qualifications and orders of Governmental Authorities and parties to contracts 39




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with the Company and the Subsidiaries as are necessary for the consummation of the Transactions and to
fulfill the conditions to the Merger; provided that neither Merger Sub nor Parent will be
required by this Section 6.09 to take any action, including entering into any consent decree, hold
separate orders or other arrangements, that (A) requires the divestiture of any assets of any of
Merger Sub, Parent, the Company or any of their respective subsidiaries or (B) limits Parents
freedom of action with respect to, or its ability to retain, the Company and the Subsidiaries or
any portion thereof or any of Parents or its affiliates other assets or businesses. In case, at
any time after the Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party to this Agreement shall
use their reasonable best efforts to take all such action. SECTION 6.10. Plan of Reorganization. (a) Subject to Section 2.01(k), this Agreement
is intended to constitute a plan of reorganization within the meaning of section 1.368-2(g) of
the income tax regulations promulgated under the Code. From and after the date of this Agreement
and until the Effective Time, each party hereto shall use its reasonable best efforts to cause the
Merger to qualify, and will not knowingly take any action, cause any action to be taken, fail to
take any action or cause any action to fail to be taken which action or failure to act could
prevent the Merger from qualifying, as a reorganization within the meaning of Section 368(a) of the
Code. Following the Effective Time, neither the Surviving Corporation, Parent nor any of their
affiliates shall knowingly take any action, cause any action to be taken, fail to take any action
or cause any
action to fail to be taken, which action or failure to act could cause the Merger to fail to
qualify as a reorganization within the meaning of Section 368(a) of the Code. (b) As of the date hereof, the Company does not know of any reason (i) why it would not be
able to deliver to counsel to the Company and Parent at the date of the legal opinions referred to
below, certificates substantially in compliance with IRS published advance ruling guidelines, with
customary exceptions and modifications thereto, to enable such firms to deliver the legal opinions
contemplated by Section 7.02(j) and Section 7.03(e), and the Company hereby agrees, subject to
Section 2.01(k), to deliver such certificates effective as of the date of such opinions or (ii) why
counsel to the Company and Parent would not be able to deliver the opinions required by Section
7.02(j) and Section 7.03(e). Subject to Section 2.01(k), the Company will deliver such
certificates to counsel to the Company and Parent. (c) As of the date hereof, Parent does not know of any reason (i) why it would not be able to
deliver to counsel to the Company or Parent at the date of the legal opinions referred to below,
certificates substantially in compliance with IRS published advance ruling guidelines, with
customary exceptions and modifications thereto, to enable such firms to deliver the legal opinions
contemplated by Section 7.02(j) and Section 7.03(e), and Parent hereby agrees, subject to Section
2.01(k), to deliver such certificates effective as of the date of such opinions or (ii) why counsel
to the Company and Parent would not be able to deliver the opinions required by Section 7.02(j) and
Section 7.03(e). Subject to Section 2.01(k), Parent will deliver such certificates to counsel to
the Company and Parent. SECTION 6.11. Obligations of Merger Sub. Parent shall take all action necessary to
cause Merger Sub to perform its obligations under this Agreement and to consummate the Merger on
the terms and subject to the conditions set forth in this Agreement. 40




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SECTION 6.12. Consents of Accountants. Parent and the Company will each use all
reasonable efforts to cause to be delivered to each other consents from their respective
independent auditors, in form reasonably satisfactory to the recipient and customary in scope and
substance for consents delivered by independent public accountants in connection with registration
statements on Form F-4 under the Securities Act. SECTION 6.13. Listing. Parent shall promptly prepare and submit to (i) either the New
York Stock Exchange (NYSE) or the National Market System of the NASDAQ Stock Market
(Nasdaq and, together with the NYSE, the U.S. Exchange) and (ii) the TSX,
listing applications covering the shares of Parent Common Stock to be issued in the Merger and
shall use its reasonable efforts to obtain, prior to the Effective Time, approval for the listing
or quotation, as the case may be, of such Parent Common Stock by the U.S. Exchange and the TSX,
subject in each case to official notice of issuance, and the Company shall cooperate with Parent
with respect to such listing or quotation, as the case may be. SECTION 6.14. Subsequent Financial Statements. The Company shall, if practicable,
consult with Parent prior to making publicly available its financial results for any period after
the date of this Agreement and prior to filing any report or document with the SEC after the date
of this Agreement, it being understood that Parent shall have no liability by reason of such
consultation. SECTION 6.15. Public Announcements. The initial press release relating to this
Agreement shall be a joint press release the text of which has been agreed to by each of Parent and
the Company. Thereafter, unless otherwise required by applicable Law or the requirements of the
U.S. Exchange or the TSX, each of Parent and the Company shall each use its reasonable best efforts
to consult with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement, the Merger or any of the other Transactions. SECTION 6.16. Board of Directors of Parent. Parent shall take all such action as may
be necessary to cause the Chief Executive Officer of the Company (the Company Designated
Director) to be appointed to the Board of Directors of Parent as of the first meeting of the
Board of Directors of Parent after the Effective Time, to serve until the next annual election of
directors of Parent. SECTION 6.17. Company Contribution. Immediately prior to the Effective Time, at
Parents request, Company shall deposit, or shall cause to be deposited, with the Exchange Agent
for the benefit of the holders of Shares the lesser of (i) $18,000,000 and (ii) the maximum amount
of cash that would not preclude the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code. SECTION 6.18. Unvested Company Restricted Stock. The Company will cooperate to enter
into an agreement with each holder of an unvested Company Restricted Stock to amend the agreement
between the Company and such holder pursuant to which such unvested Company Restricted Stock was
granted and such amendment shall be reasonably satisfactory to Parent. 41




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ARTICLE VII CONDITIONS TO THE MERGER SECTION 7.01. Conditions to the Obligations of Each Party. The obligations of the
Company, Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver
(where permissible) of the following conditions: (a) Registration Statement. The Registration Statement shall have been
declared effective by the SEC under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued by the SEC and no
proceeding for that purpose shall have been initiated by the SEC. (b) Company Stockholder Approval. This Agreement shall have been approved and
adopted by the requisite affirmative vote of the stockholders of the Company in accordance
with the CCC and the Companys Articles of Incorporation. (c) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, judgment, decree, executive
order or award (an Order) which is then in effect and has the effect of making the
Merger illegal or otherwise prohibiting consummation of the Merger. (d) U.S. Antitrust Approvals and Waiting Periods. Any waiting period (and any
extension thereof) applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated. (e) TSX Listing. The shares of Parent Common Stock to be issued in the Merger
shall have been authorized for listing on the TSX, subject to official notice of issuance. SECTION 7.02. Conditions to the Obligations of Parent and Merger Sub. The obligations
of Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver (where
permissible) of the following additional conditions: (a) Representations and Warranties. The representations and warranties of the
Company contained in this Agreement shall have been true and correct when made and shall be
true and correct as of the Effective Time, with the same force and effect as if made as of
the Effective Time (other than such representations and warranties as are made as of another
date which shall be true and correct as of such date), except where the failure to be so
true and correct (without giving effect to any limitations or qualification as to
materially (including the word material) or Company Material Adverse Effect set forth
therein) would not, individually or in the aggregate, have a Company Material Adverse
Effect. (b) Agreements and Covenants. The Company shall have performed or complied in
all material respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Time. 42




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(c) Officer Certificate. The Company shall have delivered to Parent a
certificate, dated the date of the Closing, signed by the Chief Executive Officer of the
Company, certifying as to the satisfaction of the conditions specified in Sections 7.02(a),
7.02(b) and 7.02(e). (d) Consents. All consents, approvals and authorizations legally required to
be obtained to consummate the Merger shall have been obtained from and made with all
Governmental Entities. (e) Material Adverse Effect. No Company Material Adverse Effect shall have
occurred since the date of this Agreement. (f) Company Contribution. The Company shall have deposited, or shall have
caused to be deposited, with the Exchange Agent for the benefit of the holders of the
Company Common Stock the lesser of (i) $18,000,000 and (ii) the maximum amount of cash that
would not preclude the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code. (g) Company Cash Balance. The Company shall have at least $40,000,000 of cash
on deposit in cash or cash equivalents, less the amount of cash deposited with the Exchange
Agent pursuant to Section 2.04 and Section 7.02(f). (h) Dissenting Shares. The number of Dissenting Shares shall be less than 5%
of the issued and outstanding Shares. (i) Cancellation of Company 401(k) Plan. Prior to the Effective Time, the
Company Board shall have duly adopted a resolution providing for the termination and
cancellation, as of the day immediately preceding the date on which the Effective Time
occurs, of the Companys Plan qualified under Section 401(k) of the Code (the 401(k)
Plan) and provided a certified copy of such resolution to Parent, which is reasonably
satisfactory to Parent. Notwithstanding the foregoing, the Board of Directors of the
Company shall not act to terminate and cancel the 401(k) Plan if Parent provides written
notice to that effect to the Company at least two (2) days prior to the Effective Time. (j) Taxes. Subject to Section 2.01(k), Parent shall have received the opinion
of Shearman & Sterling LLP, counsel to Parent, based upon representations of Parent and the
Company, and normal assumptions, to the effect that, for federal income tax purposes, the
Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code and
that each of Parent, Merger Sub and the Company will be a party to the reorganization within
the meaning Section 368(b) of the Code, which opinion shall not have been withdrawn or
modified in any material respect. The issuance of such opinion shall be conditioned on
receipt by Shearman & Sterling LLP of representation letters from each of Parent and Company
contemplated in Section 6.10. Each such representation letter shall be dated on or before
the date of such opinion and shall not have been withdrawn or modified in any material
respect as of the Effective Time. 43




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SECTION 7.03. Conditions to the Obligations of the Company. The obligations of the
Company to consummate the Merger are subject to the satisfaction or waiver (where permissible) of
the following additional conditions: (a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall have been true and correct
when made and shall be true and correct as of the Effective Time, with the same force
and effect as if made as of the Effective Time (other than such representations and
warranties as are made as of another date which shall be true and correct as of such date),
except where the failure to be so true and correct (without giving effect to any limitations
or qualification as to materially (including the word material) or Parent Material
Adverse Effect set forth therein) would not, individually or in the aggregate, have a
Parent Material Adverse Effect. (b) Agreements and Covenants. Parent and Merger Sub shall have performed or
complied in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective Time. (c) Material Adverse Effect. No Parent Material Adverse Effect shall have
occurred since the date of this Agreement. (d) Officer Certificate. Parent shall have delivered to the Company a
certificate, dated the date of the Closing, signed by the President or any Vice President of
Parent, certifying as to the satisfaction of the conditions specified in Sections 7.03(a),
7.03(b) and 7.03(c). (e) Taxes. Subject to Section 2.01(k), the Company shall have received the
opinion of Akin Gump Strauss Hauer & Feld LLP, counsel to the Company, based upon
representations of Parent and the Company, and normal assumptions, to the effect that, for
federal income tax purposes, the Merger will qualify as a reorganization within the meaning
of Section 368(a) of the Code and that each of Parent, Merger Sub and the Company will be a
party to the reorganization within the meaning Section 368(b) of the Code, which opinion
shall not have been withdrawn or modified in any material respect. The issuance of such
opinion shall be conditioned on receipt by Akin Gump Strauss Hauer & Feld LLP of
representation letters from each of Parent and Company contemplated in Section 6.10. Each
such representation letter shall be dated on or before the date of such opinion and shall
not have been withdrawn or modified in any material respect as of the Effective Time. (f) U.S. Exchange Listing. The shares of Parent Common Stock to be issued in
the Merger shall have been authorized for listing or quotation, as the case may be, on the
U.S. Exchange, subject to official notice of issuance. 44




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ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.01. Termination. This Agreement may be terminated and the Merger and the
other Transactions may be abandoned at any time prior to the Effective Time by action taken or
authorized by the Board of Directors of the terminating party, notwithstanding any requisite approval and
adoption of this Agreement and the Transactions by the stockholders of the Company, as follows: (a) by mutual written consent of Parent and the Company duly authorized by the Boards
of Directors of Parent and the Company; or (b) by either Parent or the Company if the Effective Time shall not have occurred on or
before December 31, 2005; provided, however, that the right to terminate
this Agreement under this Section 8.01(b) shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date; or (c) by Parent if a Company Triggering Event (as defined below) shall have occurred; or (d) by either Parent or the Company if this Agreement shall fail to receive the
requisite vote for approval at the Company Stockholders Meeting; or (e) by Parent upon a breach of any representation, warranty, covenant or agreement on
the part of the Company set forth in this Agreement, or if any representation or warranty of
the Company shall have become untrue, in either case such that the conditions set forth in
Section 7.02(a) and Section 7.02(b) would not be satisfied as of the time of such breach or
as of the time such representation or warranty shall have become untrue (Terminating
Company Breach); provided, however, that, if such Terminating Company
Breach is curable by the Company, Parent may not terminate this Agreement under this Section
8.01(e) for so long as the Company continues to exercise its best efforts to cure such
breach, unless such breach is not cured within 15 days after written notice of such breach
is provided by Parent to the Company; or (f) by the Company upon a breach of any representation, warranty, covenant or agreement
on the part of Parent and Merger Sub set forth in this Agreement, or if any representation
or warranty of Parent and Merger Sub shall have become untrue, in either case such that the
conditions set forth in Section 7.03(a) and Section 7.03(b) would not be satisfied as of the
time of such breach or as of the time such representation or warranty shall have become
untrue (Terminating Parent Breach); provided, however, that, if
such Terminating Parent Breach is curable by Parent and Merger Sub, the Company may not
terminate this Agreement under this Section 8.01(f) for so long as Parent and Merger Sub
continue to exercise their best efforts to cure such breach, unless such breach is not cured
within 15 days after written notice of such breach is provided by the Company to Parent. 45




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(g) by the Company in order to accept a Superior Proposal; provided,
however, in order for the termination of this Agreement pursuant to this paragraph
8.01(g) to be effective, the Company shall have complied with the provisions of Section
6.04(c) and the provisions of Section 8.03(b) (including the payment of the Fee and Parents
Expenses). For purposes of this Agreement, a Company Triggering Event shall be deemed to have
occurred if: (i) the Company Board withdraws, modifies or changes the Company Recommendation in a
manner adverse to Parent or shall have resolved to do so; (ii) the Company Board shall have
recommended to the stockholders of the Company a Competing Transaction or shall have resolved to do
so or shall have entered into any letter of intent or similar document or any agreement, contract
or commitment accepting any Competing Transaction; (iii) the Company shall have failed to include
in the Proxy Statement the recommendation of the Company Board in favor of the approval of this
Agreement; (iv) the Company Board fails to reaffirm its recommendation in favor of the approval of
this Agreement and the approval of the Merger within five business days after Parent requests in
writing that such recommendation be reaffirmed; (v) as a result of the Companys breach of its
obligation hereunder, the Merger is not, prior to December 15, 2005, submitted for the approval of
the holders of Company Common Stock at the Company Stockholders Meeting; (vi) the Company shall
have intentionally breached its obligations under Section 6.04; or (vii) a tender offer or exchange
offer for 15% or more of the outstanding shares of capital stock of the Company is commenced, and
the Company Board fails to recommend against acceptance of such tender offer or exchange offer by
its stockholders (including by taking no position with respect to the acceptance of such tender
offer or exchange offer by its stockholders) within ten (10) business days after such tender offer
or exchange offer is commenced. SECTION 8.02. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.01, this Agreement shall forthwith become void, and there shall be
no liability under this Agreement on the part of any party hereto, except (a) as set forth in
Section 8.03 and (b) nothing herein shall relieve any party from liability for any willful breach
of any of its representations, warranties, covenants or agreements set forth in this Agreement
prior to such termination; provided, however, that the Confidentiality Agreement
shall survive any termination of this Agreement. SECTION 8.03. Fees and Expenses. (a) Except as set forth in this Section 8.03, all
Expenses (as defined below) incurred in connection with this Agreement and the Transactions shall
be paid by the party incurring such expenses, whether or not the Merger or any other transaction is
consummated, except that the Company and Parent shall each pay one-half of all Expenses relating to
(i) printing, filing and mailing the Registration Statement and the Proxy Statement and all SEC and
other regulatory filing fees incurred in connection with the Registration Statement and the Proxy
Statement and (ii) the filing fee for the Notification and Report Forms filed under HSR Act.
Expenses, as used in this Agreement, shall include all reasonable out-of-pocket expenses
(including, without limitation, all fees and expenses of counsel, accountants, investment bankers,
experts and consultants to a party hereto and its affiliates) incurred by a party or on its behalf
in connection with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of the Registration
Statement and the Proxy Statement, the solicitation of 46




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stockholder approvals, the filing of any
required notices under the HSR Act or other similar regulations and all other matters related to
the closing of the Merger and the other Transactions. (b) The Company agrees that: (i) if Parent shall terminate this Agreement pursuant to Section 8.01(c); or (ii) if the Company shall terminate this Agreement pursuant to Section 8.01(g); then the Company shall pay to Parent promptly (but in any event no later than one business day
after the first of such events shall have occurred) a fee of US$3,000,000 (the Fee),
which amount shall be payable in immediately available funds, plus an amount equal to the amount of
Parents Expenses. (c) The Company acknowledges that the agreements contained in this Section 8.03 are an
integral part of the Transactions. In the event that the Company shall fail to pay the Fee or any
Expenses when due, the term Expenses shall be deemed to include the costs and expenses actually
incurred or accrued by Parent (including, without limitation, fees and expenses of counsel) in
connection with the collection under and enforcement of this Section 8.03, together with interest
on such unpaid Fee and Expenses, commencing on the date that the Fee or such Expenses became due,
at a rate equal to the rate of interest publicly announced by Citibank, N.A., from time to time, in
The City of New York, as such banks Prime Rate plus 2.00%. Payment of the fees and expenses
described in this Section 8.03 shall not be in lieu of any damages incurred in the event of willful
or intentional breach of this Agreement. SECTION 8.04. Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time prior to the
Effective Time; provided, however, that, after the approval of this Agreement by
the stockholders of the Company, no amendment may be made that would reduce the amount or change
the type of consideration into which each Share shall be converted upon consummation of the Merger
without the approval of the Stockholders of the Company. This Agreement may not be amended except
by an instrument in writing signed by each of the parties hereto. SECTION 8.05. Waiver. At any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any obligation or other act of any other party hereto,
(b) waive any inaccuracy in the representations and warranties of any other party contained herein
or in any document delivered pursuant hereto and (c) waive compliance with any agreement of any
other party or any condition to its own obligations contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party or parties to be bound
thereby. ARTICLE IX GENERAL PROVISIONS SECTION 9.01. Non Survival of Representations, Warranties and Agreements. The representations, warranties and agreements in this Agreement and in any certificate 47




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delivered pursuant hereto shall terminate at the Effective Time or upon the termination of this
Agreement pursuant to Section 8.01, as the case may be, except that the agreements set forth in
Articles I and II and Sections 6.03(b), 6.06, 6.10, 8.03 and this Article IX shall survive the
Effective Time. SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be deemed to have been
duly given upon receipt) by delivery in person, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in accordance with
this Section 9.02): if to Parent or Merger Sub: Stantec Inc.
10160  112 Street
Edmonton, Alberta T5K 2L6
Canada
Attention: Jeffrey S. Lloyd
Facsimile No: (780) 917-7330
Email: jlloyd@stantec.com with a copy to: Shearman & Sterling LLP
Commerce Court West
Suite 4405, P.O. Box 247
Toronto, Canada M5L 1E8
Attention: Christopher J. Cummings, Esq.
Facsimile No: (416) 360 2958
Email: ccummings@shearman.com if to the Company: The Keith Companies, Inc.
19 Technology Drive
Irvine, CA 92618
U.S.A.
Attention: Aram H. Keith
Facsimile No: (949) 923-6026
Email: aram.keith@keithco.com with a copy to: 48




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Akin Gump Strauss Hauer & Feld LLP
2029 Century Park East
Suite 2400
Los Angeles, CA 90067-3012
Attention: C.N. Franklin Reddick III, Esq.
Facsimile No: (310) 229 1001
Email: freddick@akingump.com SECTION
9.03. Certain Definitions. (a) For purposes of this Agreement: affiliate of a specified person means a person who, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under common control
with, such specified person. beneficial owner, with respect to any Shares, has the meaning ascribed to
such term under Rule 13d-3(a) of the Exchange Act. business day means any day on which the principal offices of the SEC in
Washington, D.C. are open to accept filings, or, in the case of determining a date when any
payment is due, any day on which banks are not required or authorized to close in The City
of New York. Company Material Adverse Effect means any event, circumstance, change or
effect that, individually or in the aggregate with all other events, circumstances, changes
and effects, is or is reasonably likely to be materially adverse to (i) the business,
prospects, condition (financial or otherwise), assets, liabilities or results of operations
of the Company and the Subsidiaries taken as a whole or (ii) the ability of the Company to
consummate the Transactions; provided, however, that Company Material
Adverse Effect (i) shall not include any event, circumstance, change or effect resulting
from (x) changes in general economic, regulatory or political conditions (including, without
limitation, acts of war or terrorism) or changes in securities markets in general that do
not have a materially disproportionate effect (relative to other industry participants) on
the Company or its Subsidiaries, (y) general changes in the industries in which the Company
and the Subsidiaries operate, except those events, circumstances, changes or effects that
adversely affect the Company and its subsidiaries to a materially greater extent than they
affect other entities operating in such industries or (z) the execution, announcement or
consummation of this Agreement and the Transactions, including the impact thereof on
relationships, contractual or otherwise, with customers, suppliers or employees. control (including the terms controlled by and under common
control with) means the possession, directly or indirectly, or as trustee or executor,
of the power to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, as trustee or executor, by contract or
credit arrangement or otherwise. Environmental Laws means any United States federal, state or local or
non-United States laws relating to (i) releases or threatened releases of Hazardous
Substances 49




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##### 



or materials containing Hazardous Substances; (ii) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances or materials
containing Hazardous Substances; or (iii) pollution or protection of the environment,
health, safety or natural resources. Hazardous Substances means (i) those substances defined in or regulated under
the following United States federal statutes and their state counterparts, as each may be
amended from time to time, and all regulations thereunder: the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe
Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and
Rodenticide Act and the Clean Air Act; (ii) petroleum and petroleum products, including
crude oil and any fractions thereof; (iii) natural gas, synthetic gas, and any mixtures
thereof; (iv) polychlorinated biphenyls, asbestos and radon; (v) any other contaminant; and
(vi) any substance, material or waste regulated by any Governmental Authority pursuant to
any Environmental Law. Intellectual Property means (i) United States, non-United States and
international patents, patent applications and statutory invention registrations, (ii)
trademarks, service marks, trade dress, logos, trade names, corporate names and other source
identifiers, and registrations and applications for registration thereof, (iii)
copyrightable works, copyrights, and registrations and applications for registration
thereof, and (iv) confidential and proprietary information, including trade secrets and
know-how. knowledge of the Company means the actual knowledge of any of the Chief
Executive Officer, the Chief Financial Officer, the Chief Operating Officer or the General
Counsel of the Company, after due investigation. knowledge of Parent and Merger Sub means the actual knowledge of any
executive officer of Parent, after due investigation. liens means mortgages, pledges, liens, security interest, conditional and
installment sale agreements, encumbrances, charges or other claims of third parties of any
kind, including, without limitation, any easement, right of way or other encumbrance to
title, or any option, right of first refusal, or right of first offer, other than (A) liens
for current taxes and assessments not yet past due, (B) inchoate mechanics and
materialmens liens arising in the ordinary course of business consistent with past
practice. Parent Material Adverse Effect means any event, circumstance, change or
effect that, individually or in the aggregate with all other events, circumstances, changes
and effects, is or is reasonably likely to be materially adverse to (i) the business,
prospects, condition (financial or otherwise), assets, liabilities or results of operations
of Parent and its subsidiaries taken as a whole or (ii) the ability of Parent to consummate
the Transactions; provided, however, that Parent Material Adverse Effect
clause (i) shall not include any event, circumstance, change or effect resulting from (x)
changes in general 50




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economic, regulatory or political conditions (including without,
limitation, acts of war or terrorism) or changes in securities markets in general that do
not have a materially disproportionate effect (relative to other industry participants) on
Parent or its subsidiaries, (y) general changes in the industries in which Parent and its
subsidiaries operate, except those events, circumstances, changes or effects that adversely
affect Parent and its subsidiaries to a materially greater extent than they affect other
entities operating in such industries or (z) the execution, announcement or consummation of
this Agreement and the Transactions, including the impact thereof on relationships,
contractual or otherwise, with customers, suppliers or employees. person means an individual, corporation, partnership, limited partnership,
limited liability company, syndicate, person (including, without limitation, a person as
defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or
government, political subdivision, agency or instrumentality of a government. subsidiary or subsidiaries of the Company, the Surviving
Corporation, Parent or any other person means an affiliate controlled by such person,
directly or indirectly, through one or more intermediaries. Taxes shall mean any and all taxes, fees, levies, duties, tariffs, imposts
and other charges of any kind (together with any and all interest, penalties, additions to
tax and additional amounts imposed with respect thereto) imposed by any Governmental
Authority or taxing authority, including, without limitation: taxes or other charges on or
with respect to income, franchise, windfall or other profits, gross receipts, property,
sales, use, capital stock, payroll, employment, social security, workers compensation,
unemployment compensation or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value-added or gains taxes; license, registration
and documentation fees; and customers duties, tariffs and similar charges. (b) The following terms have the meaning set forth in the Sections set forth below: Defined Term
    
    Location of DefinitionAction
    
    
    § 3.09affiliate
    
    
    § 2.09Aggregate Cash Amount
    
    
    § 2.01
    (b)Aggregate Stock Amount
    
    
    § 2.01
    (b)ASC
    
    
    § 4.07
    (a)Average Stock Price
    
    
    § 2.01
    (a)Agreement
    
    PreambleBlue Sky Laws
    
    
    § 3.05
    (b)Canadian GAAP
    
    
    § 4.07
    (b)Cash Election
    
    
    § 2.01
    (e)Cash Election Share
    
    
    § 2.01
    (e)Cash Payment
    
    
    § 2.01
    (a)CCC
    
    Recitals
 51




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##### 



Defined Term
    
    Location of DefinitionCertificate of Merger
    
    
    § 1.02Certificates
    
    
    § 2.02
    (b)Change in the Company Recommendation
    
    
    § 6.04
    (c)Closing
    
    
    § 1.02Code
    
    RecitalsCompany
    
    PreambleCompany Affiliate
    
    
    § 6.08Company Board
    
    RecitalsCompany Common Stock
    
    
    § 2.01
    (a)Company Designated Director
    
    
    § 6.16Company Disclosure Schedule
    
    Article IIICompany Licensed Intellectual Property
    
    
    § 3.13
    (a)Company Owned Intellectual Property
    
    
    § 3.13
    (a)Company Permits
    
    
    § 3.06Company Preferred Stock
    
    
    § 3.03
    (a)Company Recommendation
    
    
    § 6.01
    (b)Company Restricted Stock
    
    
    § 2.05Company SEC Reports
    
    
    § 3.07
    (a)Company Stock Awards
    
    
    § 3.03
    (a)Company Stock Options
    
    
    § 2.04
    (a)Company Stock Option Plans
    
    
    § 2.04
    (a)Company Stockholders Meeting
    
    
    § 6.01
    (a)Company Triggering Event
    
    
    § 8.01Competing Transaction
    
    
    § 6.04
    (d)Confidentiality Agreement
    
    
    § 6.03
    (b)Dissenting Shareholder
    
    
    § 2.07
    (a)Dissenting Shares
    
    
    § 2.07
    (a)Effective Time
    
    
    § 1.02Election Deadline
    
    
    § 2.01
    (i)Elections
    
    
    § 2.01
    (c)Environmental Permits
    
    
    § 3.15ERISA
    
    
    § 3.10
    (a)Exchange Act
    
    
    § 3.07
    (a)Exchange Agent
    
    
    § 2.02
    (a)Exchange Fund
    
    
    § 2.02
    (a)Exchange Stock
    
    
    § 2.01
    (a)Expenses
    
    
    § 8.03
    (a)Fee
    
    
    § 8.03
    (b)Fixed Ratio Stock
    
    
    § 2.01
    (a)Floating Ratio Stock
    
    
    § 2.01
    (a)Form of Election
    
    
    § 2.01
    (c)Forward LLC Merger
    
    
    § 2.01
    (l)GAAP
    
    
    § 3.07
    (b)Governmental Authority
    
    
    § 3.05
    (b)
 52




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Defined Term
    
    Location of DefinitionHolder Representative
    
    
    § 2.01
    (c)HSR Act
    
    
    § 3.05
    (b)Insurance Policies
    
    
    § 3.18IRS
    
    
    § 3.10
    (a)Law
    
    
    § 3.05
    (a)Leased Real Property
    
    
    § 3.12
    (a)Leases
    
    
    § 3.12
    (a)Material Contracts
    
    
    § 3.17
    (a)Merger
    
    RecitalsMerger Consideration
    
    
    § 2.01
    (a)Merger LLC
    
    
    § 2.01
    (l)Merger Sub
    
    PreambleMixed Consideration
    
    
    § 2.01
    (c)Mixed Election
    
    
    § 2.01
    (c)Mixed Election Share
    
    
    § 2.01
    (d)Mixed Election Share
    
    
    § 2.01
    (a)Multiemployer Plan
    
    
    § 3.10
    (b)Multiple Employer Plan
    
    
    § 3.10
    (b)Non-U.S. Benefit Plan
    
    
    § 3.10
    (g)Notice of Superior Proposal
    
    
    § 6.04
    (c)Nasdaq
    
    
    § 6.13NYSE
    
    
    § 6.13Option Consideration
    
    
    § 2.04Option Exchange Fund
    
    
    § 2.04Order
    
    
    § 7.01
    (c)Parent
    
    PreambleParent Board
    
    RecitalsParent Common Stock
    
    
    § 2.01
    (a)Parent Licensed Intellectual Property.
    
    
    § 4.17Parent Owned Intellectual Property
    
    
    § 4.17Parent Permits
    
    
    § 4.06Parent Preferred Stock
    
    
    § 4.03
    (a)Parent Reports
    
    
    § 4.07
    (a)Parent Stock Option Plans
    
    
    § 4.03
    (a)Parent 2004 Balance Sheet
    
    
    § 4.07
    (c)Plans
    
    
    § 3.10
    (a)Potential Dissenting Shareholder
    
    
    § 2.07
    (a)Potential Dissenting Shares
    
    
    § 2.07
    (a)Pro Rata Amount of Cash
    
    
    § 2.01
    (f)Pro Rata Number of Shares
    
    
    § 2.01
    (e)Proxy Statement
    
    
    § 6.01
    (a)Registration Statement
    
    
    § 6.01
    (a)Representatives
    
    
    § 6.03
    (a)Reverse-Subsidiary Merger
    
    
    § 2.01
    (k)
 53




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##### 



Defined Term
    
    Location of DefinitionSEC
    
    
    § 3.07
    (a)Securities Act
    
    
    § 3.07
    (a)Significant Subsidiary
    
    
    § 6.04
    (d)Shares
    
    
    § 2.01
    (a)Stock Election
    
    
    § 2.01
    (c)Stock Election Share
    
    
    § 2.01
    (e)Stockholder
    
    RecitalsSubsidiary
    
    
    § 3.01
    (a)Superior Proposal
    
    
    § 6.04
    (e)Support Agreement
    
    RecitalsSurviving Corporation
    
    
    § 1.01Terminating Company Breach
    
    
    § 8.01
    (e)Terminating Parent Breach
    
    
    § 8.01
    (f)Transactions
    
    RecitalsTSX
    
    
    § 2.01
    (a)Unvested Options
    
    
    § 2.04U.S. Exchange
    
    
    § 6.132004 Balance Sheet
    
    
    § 3.07
    (c)401(k) Plan
    
    
    § 7.02
    (i)US$5.50 Stock
    
    
    § 2.01
    (a)
 SECTION 9.04. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the Transactions is not affected in any manner
materially adverse to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as closely as possible
in a mutually acceptable manner in order that the Transactions be consummated as originally
contemplated to the fullest extent possible. SECTION 9.05. Entire Agreement; Assignment. This Agreement and the Support Agreement
constitute the entire agreement among the parties with respect to the subject matter hereof and
supersede, except as set forth in Sections 6.03(b), all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the subject matter hereof.
This Agreement shall not be assigned (whether pursuant to a merger, by operation of law or
otherwise), except that Parent and Merger Sub may assign all or any of their rights and obligations
hereunder to any affiliate of Parent, provided that no such assignment shall relieve the
assigning party of its obligations hereunder if such assignee does not perform such obligations. SECTION 9.06. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement, express or 54




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implied, is
intended to or shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement. SECTION 9.07. Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement were not performed in accordance with the
terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity. SECTION 9.08. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts executed in and to be
performed in that State (other than those provisions set forth herein that are required to be
governed by the CCC). All actions and proceedings arising out of or relating to this Agreement
shall be heard and determined exclusively in any New York state or federal court. The parties
hereto hereby (a) submit to the exclusive jurisdiction of any New York state or federal court for
the purpose of any Action arising out of or relating to this Agreement brought by any party hereto,
and (b) irrevocably waive, and agree not to assert by way of motion, defense, or otherwise, in any
such Action, any claim that it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or execution, that the Action is
brought in an inconvenient forum, that the venue of the Action is improper, or that this Agreement
or the Transactions may not be enforced in or by any of the above-named courts. SECTION 9.09. Headings. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement. SECTION 9.10. Counterparts. This Agreement may be executed and delivered (including
by facsimile transmission) in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement. SECTION 9.11. Waiver of Jury Trial. Each of the parties hereto hereby waives to the
fullest extent permitted by applicable law any right it may have to a trial by jury with respect to
any litigation directly or indirectly arising out of, under or in connection with this Agreement or
the Transactions. Each of the parties hereto (a) certifies that no representative, agent or
attorney of any other party has
represented, expressly or otherwise, that such other party would not, in the event of
litigation, seek to enforce that foregoing waiver and (b) acknowledges that it and the other hereto
have been induced to enter into this Agreement and the Transactions, as applicable, by, among other
things, the mutual waivers and certifications in this Section 9.11. 55




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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be
executed as of the date first written above by their respective officers thereunto duly authorized. STANTEC INC.By

/s/
Anthony P. FranceschiniName:
    Anthony P. FranceschiniTitle:
    President & CEO By
    /s/ Jeffrey S. LloydName:
    Jeffrey S. LloydTitle:
    Vice President, Secretary &
General Counsel STANTEC CONSULTING CALIFORNIA INC.By
    /s/ Anthony P. FranceschiniName:
    Anthony P. FranceschiniTitle:
    President By
    /s/ Michael SlocombeName:
    Michael J. SlocombeTitle:
    Secretary THE KEITH COMPANIES, INC.By
    /s/ Aram H. KeithName:
    Aram H. KeithTitle:
    CEO By
    /s/ Gary CampanaroName:
    Gary CampanaroTitle:
    Secretary 56




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EXHIBIT 6.08 FORM OF AFFILIATE LETTER FOR
AFFILIATES OF THE COMPANY April 14, 2005 Stantec Inc.
10160  112 Street
Edmonton, Alberta T5K 2L6
Canada Ladies and Gentlemen: I have been advised that as of the date of this letter I may be deemed to be an affiliate of
The Keith Companies, Inc., (the Company), as the term affiliate is defined for purposes
of paragraphs (c) and (d) of Rule 145 of the rules and regulations (the Rules and
Regulations) of the Securities and Exchange Commission (the Commission) under the
Securities Act of 1933, as amended (the Act). Pursuant to the terms of the Agreement and
Plan of Merger and Reorganization, dated as of April 14, 2005 (the Merger Agreement),
among Stantec Inc., a Canadian corporation (Parent), Stantec Consulting California Inc. a
California corporation (Merger Sub), and the Company, the Company will be merged with and
into Merger Sub (the Merger). Capitalized terms used in this letter agreement without
definition shall have the meanings assigned to them in the Merger Agreement. As a result of the Merger, I may receive shares of common stock, without par value, of Parent
(the Parent Shares). I would receive such Parent Shares in exchange for shares (or upon
exercise of options for shares) owned by me of common stock, par value US$  per share, of the
Company (the Company Shares). I represent, warrant and covenant to Parent that in the event I receive any Parent Shares as a
result of the Merger: A. I shall not make any sale, transfer or other disposition of the Parent Shares in
violation of the Act or the Rules and Regulations. B. I have carefully read this letter and the Merger Agreement and discussed the
requirements of such documents and other applicable limitations upon my ability to sell,
transfer or otherwise dispose of the Parent Shares, to the extent I felt necessary, with my
counsel or counsel for the Company. C. I have been advised that the issuance of the Parent Shares to me pursuant to the
Merger has been registered with the Commission under the Act on a Registration Statement on
Form F-4. However, I have also been advised that, because at the time the Merger is
submitted for a vote of the shareholders of the Company, (a) I may be deemed to be an
affiliate of the Company and (b) the distribution by me of the Parent Shares has not been
registered under the Act, I may not sell, transfer or otherwise dispose of the Parent Shares
issued to me in the Merger unless (i) such sale, transfer or other disposition




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is made in conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, (ii) such sale, transfer or other disposition has been
registered under the Act or (iii) in the opinion of counsel reasonably acceptable to Parent,
such sale, transfer or other disposition is otherwise exempt from registration under the
Act. D. I understand that Parent is under no obligation to register the sale, transfer or
other disposition of the Parent Shares by me or on my behalf under the Act or, except as
provided in paragraph 2(A) below, to take any other action necessary in order to make
compliance with an exemption from such registration available. E. I understand that there will be placed on the certificates for the Parent Shares
issued to me, or any substitutions therefor, a legend stating in substance: THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS
OF AN AGREEMENT DATED APRIL 14, 2005 BETWEEN THE REGISTERED HOLDER HEREOF AND
PARENT, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF PARENT. F. I understand that unless a sale or transfer is made in conformity with the
provisions of Rule 145, or pursuant to a registration statement, Parent reserves the right
to put the following legend on the certificates issued to my transferee: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933. G. Execution of this letter should not be considered an admission on my part that I am
an affiliate of the Company as described in the first paragraph of this letter, nor as a
waiver of any rights I may have to object to any claim that I am such an affiliate on or
after the date of this letter. 2




---



##### 



Very truly yours,   Agreed and accepted this 14th day
of April, 2005, by
STANTEC INC. By:Name:Title: 3




---



##### 



AMENDMENT AGREEMENT AMENDMENT (this Amendment), dated as of May 9, 2005, to the Agreement And Plan Of
Merger And Reorganization (the Agreement), dated as of April 14, 2005, among Stantec
Inc., a Canadian corporation (Parent), Stantec Consulting California Inc., a California
corporation and a wholly owned subsidiary of Parent (Merger Sub), and The Keith
Companies, Inc., a California corporation (the Company). Capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Agreement (as defined below). WITNESSETH: WHEREAS, the parties have entered into the Agreement; WHEREAS, pursuant to the Agreement, Parent and the Company will enter into a business
combination transaction pursuant to which the Company will merge with and into Merger Sub; WHEREAS, pursuant to and in accordance with Section 8.04 of the Agreement, the parties wish to
amend the Agreement as set forth in this Amendment; NOW, THEREFORE, in consideration of the rights and obligations contained herein, and for other
good and valuable consideration, the adequacy of which is hereby acknowledged, the parties agree as
follows: Section 1. Amendment to Section 2.7(a) of the Agreement. Section 2.07(a) of the Agreement is
amended and restated in its entirety to read as follows: (a) Notwithstanding any provision of this Agreement to the contrary, Shares that are
outstanding immediately prior to the Effective Time which qualify as dissenting shares in
accordance with Chapter 13 of the CCC and are held by stockholders who have duly demanded, exercised
and perfected (and not withdrawn or forfeited) such stockholdersdissenters rights for such Shares
in accordance with the CCC (collectively, the Dissenting Shares) shall not be converted
into or represent the right to receive the Merger Consideration. Such stockholders shall be
entitled to receive payment for such Shares held by them in accordance with the provisions of the
CCC, except that all Dissenting Shares held by stockholders who shall have failed to perfect or
take such other actions as are required by the CCC or who effectively shall have withdrawn or
forfeited their dissenters rights with respect to such Shares under the CCC shall thereupon be
deemed to have been converted into and to have become exchangeable for, as of the Effective Time,
the right to receive the Merger Consideration, without any interest thereon, upon surrender, in the
manner provided in Section 2.02, of the certificates that formerly evidenced such Shares. Section 2. Entire Agreement. This Amendment constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, among the parties with respect to the subject




---



##### 



matter hereof. Except as amended by this Amendment, the Agreement shall continue in full
force and effect. Section 3. Severability. If any term or other provision of this Amendment is invalid,
illegal or incapable of being enforced by any Law or public policy, all other terms and provisions
of this Amendment shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated by this Amendment is not affected in any manner
materially adverse to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Amendment so as to effect the original intent of the parties as closely as possible
in an acceptable manner in order that the transactions contemplated by this Amendment are
consummated as originally contemplated to the greatest extent possible. Section 4. Counterparts. This Amendment may be executed and delivered (including by
facsimile transmission) in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement. Section 5. Governing Law. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts executed in and to be
performed in that State (other than those provisions set forth herein that are required to be
governed by the CCC). 2




---



##### 



IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Amendment to be
executed as of the date first written above by their respective officers thereunto duly authorized. STANTEC INC.By
    /s/
Anthony P. FranceschiniName:
    Anthony P. FranceschiniTitle:
    President & CEOBy
    /s/ Jeffrey S. LloydName:
    Jeffrey S. LloydTitle:
    Secretary, Vice President & General CounselSTANTEC CONSULTING CALIFORNIA INC.By

/s/
Anthony P. FranceschiniName:
    Anthony P. FranceschiniTitle:
    PresidentBy
    /s/ Michael SlocombeName:
    Michael SlocombeTitle:
    SecretaryTHE KEITH COMPANIES, INC.By
    /s/
Aram H. KeithName:
    Aram H. KeithTitle:
    Chief Executive
OfficerBy
    /s/ Gary CampanaroName:
    Gary CampanaroTitle:
    Secretary 3




---



##### 



Appendix B Opinion of Bear, Stearns & Co. Inc. B-1




---



##### 





















| |   |                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | § | reviewed the Merger Agreement;                                                                                                                                                                                                                                                                          
|
| | § | reviewed the Companys Annual Reports to Shareholders and
    Annual Reports on Form 10-K for the years ended
    December 31, 2002, 2003 and 2004, its preliminary results
    for the quarter ended March, 31, 2005 and its Current Reports on
    Form 8-K for the three years ended the date hereof;
|
| | § | reviewed Stantecs Proxy Circular, Annual Information Form
    and Annual Reports to Shareholders for the years ended
    December 31, 2002, 2003 and 2004 and its interim financial
    reports for the three years ended the date hereof;                                                             
|
| | § | reviewed certain operating and financial information relating to
    the Companys business and prospects, including an
    operating budget for the year ended December 31, 2005, as
    prepared and provided to us by the Companys management;                                                      

B-2



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##### 













| |   |                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | § | met with certain members of the Companys senior management
    to discuss the Companys business, operations, historical
    financial results, a range of projected financial results and
    future prospects;
|
| | § | reviewed certain operating and financial information relating to
    Stantecs business and prospects, as prepared and provided
    to us by Stantecs management;                                               
|
| | § | reviewed certain projections for Stantec for the year ended
    December 31, 2005, published by certain equity research
    analysts, selected by us following discussions with
    Stantecs senior management; 
|
| | § | met with certain members of senior management of Stantec and the
    Company to discuss Stantecs business, operations,
    historical and projected financial results and future prospects;                     
|
| | § | reviewed the historical prices, trading multiples and trading
    volumes of the shares of Company Common Stock and Stantec Common
    Stock;                                                                    
|
| | § | reviewed publicly available financial data, stock market
    performance data and trading multiples of companies which we
    deemed generally comparable to the Company and Stantec;                            
|
| | § | reviewed the terms of recent mergers and acquisitions of
    companies which we deemed generally comparable to the Company;                                                                                      
|
| | § | performed discounted cash flow sensitivity analyses based on the
    ranges of projected financial results for the Company furnished
    to us by the Companys senior management;                               
|
| | § | reviewed the pro forma financial results, financial condition
    and capitalization of Stantec giving effect to the Merger; and                                                                                 
|
| | § | conducted such other studies, analyses, inquiries and
    investigations as we deemed appropriate.                                                                                                               







Form of Fairness Opinion Letter


B-3



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##### 























|                             | 
|---------------------------- | 
|Very truly yours,            | 
|                            
|Bear, Stearns &
    Co. Inc. | 



|    |                          | 
|--- | ------------------------ | 
|By: | /s/ Neil B. Morganbesser | 

|                         | 
|------------------------ | 
|                         | 
|Senior Managing Director | 



Form of Fairness Opinion Letter


B-4



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##### 



Appendix C Stockholders Support Agreement C-1




---



##### 



EXECUTION COPY


STOCKHOLDERS SUPPORT AGREEMENT


Agreement Parent Purchaser Stockholder Stockholders


Trust








| |    |                                                                                                                                                                        
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Representations and Warranties of the Stockholders. Each
    Stockholder hereby, jointly and severally, represents and
    warrants to Parent and Purchaser as follows:



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | The Trust is a trust duly organized, validly existing and in
    good standing under the laws of the State of California. The
    Trust has all necessary power and authority to execute and
    deliver this Agreement and to perform its obligations hereunder.
    The execution and delivery of this Agreement by the Trust and
    the performance by the Trust of its obligations hereunder have
    been duly and validly authorized by all necessary action, and no
    other proceedings on the part of the Trust are necessary to
    authorize this Agreement or to perform its obligations
    hereunder. This Agreement has been duly executed and delivered
    by the Trust and, assuming the due authorization, execution and
    delivery by Parent and Purchaser, constitutes the legal, valid
    and binding obligation of the Trust, enforceable against the
    Trust in accordance with its terms, except as such
    enforceability may be limited by applicable bankruptcy
    insolvency and similar laws affecting creditors rights
    generally and general principles of equity (whether considered
    in a proceeding at law or equity).



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | The execution and delivery of this Agreement by the Trust do
    not, and the performance of this Agreement by the Trust will
    not, (A) conflict with or violate the organizational
    documents of the Trust, (B) assuming that all consents,
    approvals, authorizations and other actions described in
    subsection (c) have been obtained and all filings and
    obligations described in subsection (c) have been made,
    conflict with or violate any Law applicable to the Trust or by
    which any property or asset of the Trust is bound or affected,
    or (C) result in any breach of or constitute a default (or
    an event which, with notice or lapse of time or both, would
    become a default) under, or give to others any right of
    termination, amendment, acceleration or cancellation of, or
    result in the creation of a Lien or other encumbrance on any
    property or asset of the Trust pursuant to,

C-2



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##### 



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | any note, bond, mortgage, indenture, contract, agreement, lease,
    license, permit, franchise or other instrument or obligation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (c) | The execution and delivery of this Agreement by each Stockholder
    does not, and the performance of this Agreement by each
    Stockholder will not, require any consent, approval,
    authorization or permit of, or filing with or notification to,
    any Governmental Authority, except for applicable requirements,
    if any, of the Securities Act of 1933, as amended, the Exchange
    Act and the HSR Act.                                                                                                                                                                                                                          
|
| | (d) | With respect to Aram H. Keith and Margie R. Keith (each an
    Individual), this Agreement has been duly
    executed and delivered by each Individual and, assuming the due
    authorization, execution and delivery by Parent and Purchaser,
    constitutes the legal, valid and binding obligation of each
    Individual, enforceable against each Individual in accordance
    with its terms, except as such enforceability may be limited by
    applicable bankruptcy insolvency and similar laws affecting
    creditors rights generally and general principles of
    equity (whether considered in a proceeding at law or equity).
|
| | (e) | Except for shares of Company Common Stock held directly by the
    Trust, the Individuals do not own, either directly or
    beneficially, any shares of Company Common Stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Grant of Proxy. Each Stockholder, by this Agreement, with
    respect to his, her or its Shares, hereby agrees, and to secure
    such agreement, grants an irrevocable proxy to Parent (and
    agrees to execute such documents or certificates evidencing such
    proxy as Parent may reasonably request) to vote, at any meeting
    of the stockholders of the Company, and in any action by written
    consent of the stockholders of the Company, all of such
    Stockholders Shares (i) in favor of the approval and
    adoption of the Merger Agreement and approval of the Merger,
    (ii) against any action, agreement or transaction (other
    than the Merger Agreement or the Merger) or proposal (including
    any Superior Proposal) that would result in a breach of any
    covenant, representation or warranty or any other obligation or
    agreement of the Company under the Merger Agreement or that
    could result in any of the conditions to the Companys
    obligations under the Merger Agreement not being fulfilled, and
    (iii) in favor of any other matter necessary to the
    consummation of the Merger and considered and voted upon by the
    stockholders of the Company. Each Stockholder further agrees to
    cause such Stockholders Shares to be voted in accordance
    with the foregoing. THIS PROXY IS IRREVOCABLE AND SECURES THE
    PERFORMANCE BY THE STOCKHOLDERS OF THE DUTIES SET FORTH HEREIN.
    Each Stockholder acknowledges receipt and review of a copy of
    the Merger Agreement.
|
| | 3. | Transfer of Shares. Each Stockholder agrees that he, she
    or it shall not, directly or indirectly, (a) sell, assign,
    transfer (including by operation of law), lien, pledge, dispose
    of or otherwise encumber any of the Shares or otherwise agree to
    do any of the foregoing, (b) deposit any Shares into a
    voting trust or enter into a voting agreement or arrangement or
    grant any proxy or power of attorney with respect thereto that
    is inconsistent with this Agreement, (c) enter into any
    contract, option or other arrangement or undertaking with
    respect to the direct or indirect acquisition or sale,
    assignment, transfer (including by operation of law) or other
    disposition of any Shares or (d) take any action that would
    make any representation or warranty of such Stockholder herein
    untrue or incorrect in any material respect or have the effect
    of preventing or disabling the Stockholder from performing his,
    her or its obligations hereunder.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | 4. | No Solicitation of Transactions. None of the Stockholders
    shall, directly or indirectly, (a) solicit, initiate or
    encourage the submission of, any Competing Transaction or
    (b) participate in any discussions or negotiations
    regarding, or furnish to any person, any information with
    respect to, or otherwise cooperate in any way with respect to,
    or assist or participate in, facilitate or encourage, any
    unsolicited proposal that constitutes, or may reasonably be
    expected to lead to, a Superior Proposal; provided, however,
    that nothing in this Section 3 shall prevent Aram H.
    Keith, in his capacity as a director and executive officer of
    the Company from, engaging in any activity permitted pursuant to
    Section 6.04 of the Merger Agreement. Each Stockholder
    shall, and shall direct his, her or its                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

C-3



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##### 



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | representatives and agents to, immediately cease and terminate
    any discussions or negotiations with any parties that may be
    ongoing with respect to any Competing Transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | 5. | Information for Proxy Statement/ Prospectus; Disclosure.
    Each Stockholder authorizes and agrees to permit Parent and
    Purchaser to publish and disclose in the Proxy Statement/
    Prospectus and related filings under the securities laws such
    Stockholders identity and ownership of Shares and the
    nature of his, her or its commitments, arrangements and
    understandings under this Agreement and any other information
    required by applicable Law.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | 6. | Termination. The obligations of the Stockholders under
    this Agreement shall terminate upon the earlier of (i) the
    Effective Time and (ii) upon the termination of the Merger
    Agreement. Nothing in this Section 7 shall relieve any
    party of liability for any breach of this Agreement occurring
    prior to the time of such termination.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | 7. | Miscellaneous. Notwithstanding anything to the contrary
    contained herein, no action of a Stockholder in his, her or its
    capacity as a director or executive officer of the Company shall
    constitute a breach of this Agreement. Except as otherwise
    provided herein, all costs and expenses incurred in connection
    with this Agreement and the transactions contemplated hereby
    shall be paid by the party incurring such costs and expenses,
    whether or not the transactions contemplated hereby are
    consummated; all notices, requests, claims, demands and other
    communications hereunder shall be in writing and shall be given
    (and shall be deemed to have been duly given upon receipt) by
    delivery in person, by telecopy, e-mail or by registered or
    certified mail (postage prepaid, return receipt requested) to
    the respective parties at their addresses as specified on the
    signature page(s) of this Agreement; if any term or other
    provision of this Agreement is invalid, illegal or incapable of
    being enforced by any rule of law or public policy, all other
    conditions and provisions of this Agreement shall nevertheless
    remain in full force and effect so long as the economic or legal
    substance of the transactions contemplated hereby is not
    affected in any manner materially adverse to any party; this
    Agreement and the Merger Agreement constitute the entire
    agreement among the parties with respect to the subject matter
    hereof and supersede all prior agreements and undertakings, both
    written and oral, among the parties, or any of them, with
    respect to the subject matter hereof; this Agreement shall not
    be assigned (whether pursuant to a merger, by operation of law
    or otherwise), except that Parent may assign all or any of its
    rights and obligations hereunder to any affiliate of Parent,
    provided, however, that no such assignment shall
    relieve the assigning party of its obligations hereunder if such
    assignee does not perform such obligations; this Agreement shall
    be binding upon and inure solely to the benefit of each party
    hereto, and nothing in this Agreement, express or implied, is
    intended to or shall confer upon any other person any right,
    benefit or remedy of any nature whatsoever under or by reason of
    this Agreement; the parties hereto agree that irreparable damage
    would occur in the event any provision of this Agreement was not
    performed in accordance with the terms hereof and that the
    parties shall be entitled to specific performance of the terms
    hereof, in addition to any other remedy at law or in equity;
    this Agreement shall be governed by, and construed in accordance
    with, the laws of the State of California applicable to
    contracts executed in and to be performed in that State; this
    Agreement may be executed and delivered (including by facsimile
    transmission) in one or more counterparts, and by the different
    parties hereto in separate counterparts, each of which when
    executed shall be deemed to be an original but all of which
    taken together shall constitute one and the same agreement; from
    time to time, at the request of Parent, in the case of any
    Stockholder, or at the request of the Stockholders, in the case
    of Parent and Purchaser, and without further consideration, each
    party shall execute and deliver or cause to be executed and
    delivered such additional documents and instruments and take all
    such further action as may be reasonably necessary or desirable
    to give effect to the rights, duties and obligations of the
    parties set forth in this Agreement; each of the parties
    hereto hereby waives to the fullest extent permitted by
    applicable law any right it may have to a trial by jury with
    respect to any litigation directly or indirectly arising out of,
    under or in connection with this agreement.

C-4



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##### 







| |             
| | ------------
| | Stantec Inc.



| |     |                                
| | --- | -------------------------------
| | By: | /s/ Anthony P.
    Franceschini

| |                                  
| | ---------------------------------
| |                                  
| | Name:     Anthony P. Franceschini

| |        |                
| | ------ | ---------------
| | Title: | President & CEO



| |     |                     
| | --- | --------------------
| | By: | /s/ Jeffrey S. Lloyd

| |                           
| | --------------------------
| |                           
| | Name:     Jeffrey S. Lloyd

| |        |                                            
| | ------ | -------------------------------------------
| | Title: | Vice President, Secretary & General Counsel



| |                                       
| | --------------------------------------
| | Stantec Consulting
    California Inc.



| |     |                                
| | --- | -------------------------------
| | By: | /s/ Anthony P.
    Franceschini

| |                                  
| | ---------------------------------
| |                                  
| | Name:     Anthony P. Franceschini

| |        |          
| | ------ | ---------
| | Title: | President



| |     |                            
| | --- | ---------------------------
| | By: | /s/ Michael J.
    Slocombe

| |                              
| | -----------------------------
| |                              
| | Name:     Michael J. Slocombe

| |        |          
| | ------ | ---------
| | Title: | Secretary



| |                                                      
| | -----------------------------------------------------
| | Aram H. Keith and
    Margie R. Keith Revocable Trust



| |     |                  
| | --- | -----------------
| | By: | /s/ Aram H. Keith

| |                          
| | -------------------------
| |                          
| | Aram H. Keith, as Trustee



| |     |                                  
| | --- | ---------------------------------
| | By: | /s/ Margie R.
    Keith  Trustee

| |                            
| | ---------------------------
| |                            
| | Margie R. Keith, as Trustee
|
| | /s/ Aram H. Keith          
| |                            
| | Aram H. Keith              
|
| | /s/ Margie R. Keith        
| |                            
| | Margie R. Keith            

C-5



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##### 



EXHIBIT A


LIST OF STOCKHOLDERS


|                                                                              |  |                             |           | 
|----------------------------------------------------------------------------- |  | --------------------------- | --------- | 
|                                                                              |  | Number of Shares of Company |          
|                                                                              |  | Common Stock Owned          |          
|Name of Stockholder                                                           |  | Beneficially                |          
|                                                                              |  |                             |          
|ARAM H. KEITH AND MARGIE R. KEITH REVOCABLE TRUST DATED
    OCTOBER 23, 1989. |  |                             | 1,366,217 | 
|ARAM H. KEITH                                                                 |  |                             | 1,366,217 | 
|MARGIE R. KEITH                                                               |  |                             | 1,366,217 | 

C-6



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##### 



Appendix D Dissenters Rights and Procedures D-1




---



##### 















| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Which were not immediately prior to the reorganization or
    short-form merger either (A) listed on any national
    securities exchange certified by the Commissioner of
    Corporations under subdivision (o) of Section 25100 or
    (B) listed on the National Market System of the NASDAQ Stock
    Market, and the notice of meeting of shareholders to act upon
    the reorganization summarizes this section and
    Sections 1301, 1302, 1303 and 1304; provided, however, that
    this provision does not apply to any shares with respect to
    which there exists any restriction on transfer imposed by the
    corporation or by any law or regulation; and provided, further,
    that this provision does not apply to any class of shares
    described in subparagraph (A) or (B) if demands for
    payment are filed with respect to 5 percent or more of the
    outstanding shares of that class.
|
| | (2) | Which were outstanding on the date for the determination of
    shareholders entitled to vote on the reorganization and
    (A) were not voted in favor of the reorganization or,
    (B) if described in subparagraph (A) or (B) of
    paragraph (1) (without regard to the provisos in that
    paragraph), were voted against the reorganization, or which were
    held of record on the effective date of a short-form merger;
    provided, however, that subparagraph (A) rather than
    subparagraph (B) of this paragraph applies in any case
    where the approval required by Section 1201 is sought by
    written consent rather than at a meeting.                                                                                                                                                                                                                                                         
|
| | (3) | Which the dissenting shareholder has demanded that the
    corporation purchase at their fair market value, in accordance
    with Section 1301.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (4) | Which the dissenting shareholder has submitted for endorsement,
    in accordance with Section 1302.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        







D-2



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D-3



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##### 





















| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | The corporation abandons the reorganization. Upon abandonment of
    the reorganization, the corporation shall pay on demand to any
    dissenting shareholder who has initiated proceedings in good
    faith under this chapter all necessary expenses incurred in such
    proceedings and reasonable attorneys fees.                                                                                                                                    
|
| | (b) | The shares are transferred prior to their submission for
    endorsement in accordance with Section 1302 or are
    surrendered for conversion into shares of another class in
    accordance with the articles.                                                                                                                                                                                                                                             
|
| | (c) | The dissenting shareholder and the corporation do not agree upon
    the status of the shares as dissenting shares or upon the
    purchase price of the shares, and neither files a complaint or
    intervenes in a pending action as provided in Section 1304,
    within six months after the date on which notice of the approval
    by the outstanding shares or notice pursuant to subdivision
    (i) of Section 1110 was mailed to the shareholder.
|
| | (d) | The dissenting shareholder, with the consent of the corporation,
    withdraws the shareholders demand for purchase of the
    dissenting shares.                                                                                                                                                                                                                                                                                                           





D-4



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D-5



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[BACK COVER] Who Can Help Answer Your Questions If you have more questions about the merger or if you would like copies of any documents
incorporated by reference into this proxy statement/prospectus, which include important business
and financial information about Keith that is not included in or delivered with this document, you
may write or call the following persons: The Keith Companies, Inc.
19 Technology Drive
Irvine, California, USA 92618-2334
Phone: (949) 923-6001 Fax: (949) 923-6026
Attention: Investor Relations or [Name and Address of Proxy Solicitor] Upon request, we will provide the documents you ask for at no cost to you. To ensure timely
delivery prior to the Keith special meeting, any request for documents should be received by [     ],
2005.Please note that copies of these documents will not include exhibits to the documents,
unless the exhibits are specifically incorporated by reference into the documents or this proxy
statement/prospectus. Until [     ], 2005, all dealers that effect transactions in Stantec common shares, whether or not
participating in the offering of Stantec common shares pursuant to the merger, may be required to
deliver a proxy statement/prospectus.




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##### 



PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. Indemnification of Officers and Directors Under the Canada Business Corporations Act(the CBCA), a corporation may indemnify a present
or former director or officer of such corporation or another individual who acts or acted at the
corporations request as a director or officer, or an individual acting in a similar capacity, of
another entity, against all costs, charges and expenses, including an amount paid to settle an
action or satisfy a judgment, reasonably incurred by the individual in respect of any civil,
criminal, administrative, investigative or other proceeding in which the individual is involved
because of that association with the corporation or other entity. The corporation may advance
moneys to the director, officer or other individual for the costs, charges and expenses of any such
proceeding. The corporation may not indemnify an individual unless the individual acted honestly
and in good faith with a view to the best interests of the corporation, or, as the case may be, to
the best interests of the other entity for which the individual acted as director or officer or in
a similar capacity at the corporations request and, in the case of a criminal or administrative
action or proceeding that is enforced by a monetary penalty, the individual had reasonable grounds
for believing that the individuals conduct was lawful. The individual shall repay any moneys
advanced to him or her if he or she does not fulfill the above conditions. Such indemnification
and advances may be made in connection with a derivative action only with court approval. Such
individual is entitled to indemnification or advances from the corporation as a matter of right in
respect of all costs, charges and expenses reasonably incurred by him in connection with the
defence of any civil, criminal, administrative, investigative or other proceeding to which he is
subject by reason of being or having been a director or officer of the corporation or another
entity as described above if the individual was not judged by the court or other competent
authority to have committed any fault or omitted to do anything that the individual ought to have
done and if the individual fulfils the conditions set forth above. The bylaws of Stantec Inc. (the Registrant) provide that, subject to the CBCA, the
Registrant shall indemnify a director or officer of the Registrant, a former director or officer of
the Registrant, or another individual who acts or acted at the Registrants request as a director
or officer, or an individual acting in a similar capacity, of another entity against all costs,
charges and expenses, including an amount paid to settle an action or satisfy a judgment,
reasonably incurred by the individual in respect of any civil, criminal, administrative,
investigative or other proceeding in which the individual is involved because of that association
with the Registrant or other entity if: (a) the individual acted honestly and in good faith with a
view to the best interests of the Registrant or, as the case may be, to the best interests of the
other entity for with the individual acted as a director or officer or in a similar capacity at the
Registrants request; and (b) in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, the individual had reasonable grounds for believing that his or
her conduct was lawful. The Registrant shall advance the necessary moneys to a director, officer
or other individual for the costs, charges and expenses of a proceeding referred to previously.
The individual shall repay the moneys if the individual does not fulfill the previously named

conditions. The Registrant shall also indemnify such person in such other circumstances as the
CBCA permits or requires. The Registrant maintains directors and officers liability insurance which insures the
directors and officers of the Registrant and its subsidiaries against certain losses resulting from
any wrongful act committed in their official capacities for which they become obligated to pay to
the extent permitted by applicable law. Insofar as indemnification for liabilities arising under the Securities Act may be permitted
to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions,
the Registrant has been informed that, in the opinion of the U.S. Securities and Exchange
Commission, such indemnification is against public policy as expressed in the Securities Act and is
therefore unenforceable. The exhibits listed in the exhibits index, appearing elsewhere in this registration statement,
have been filed as part of this registration statement.




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ITEM 21. Exhibits and Financial Statement Schedules [To be updated based on discussions with SI] (a) The following documents are exhibits to the registration statement. ExhibitNumber
    
    Description of Document2.1*
    
    Agreement and Plan of Merger and Reorganization, dated as of April 14, 2005, as amended
May 9, 2005, among Stantec Inc., The Keith Companies, Inc. and Stantec Consulting
California Inc., a wholly-owned subsidiary of Stantec Inc. (attached as Appendix A to
the proxy statement/prospectus which is part of this Registration Statement).3.1*
    
    Articles of Incorporation of Stantec Inc.3.2*
    
    Bylaws of Stantec Inc.4.1*
    
    Form of Stantec Inc. common share certificate.5.1**
    
    Opinion of Fraser Milner Casgrain LLP as to the legality of the securities being
registered.8.1**
    
    Opinion of Shearman & Sterling LLP as to certain U.S. federal income tax matters.8.2**
    
    Opinion of Akin Gump Strauss Hauer & Feld LLP as to certain U.S. federal income tax
matters.10.1*
    
    Employment Agreement, dated as of
January 31, 2005, between Stantec Consulting Ltd. and
Raymond L. Alarie.10.2*
    
    Contract Amending Agreement, dated
as of February 27, 2003, between Stantec Inc. and
Anthony P. Franceschini.10.3*
    
    Employment Agreement, dated as of
January 1, 2003, between Stantec Inc. and Anthony P.
Franceschini.10.4*
    
    Employment Agreement, dated as of
December 19, 2002, between Stantec Consulting Ltd. and
W. Barry Lester.10.5*
    
    Employment Agreement, dated as of
October 31, 2001, between Stantec Consulting Ltd. and Mark
Jackson.10.6*
    
    Employment Agreement, dated as of
October 31, 2001, between Stantec Consulting Ltd. and
Jeffrey S. Lloyd.10.7*
    
    Employment Agreement, dated as of
October 31, 2001, between Stantec Consulting Ltd. and
Donald W. Wilson10.8**
    
    Credit Agreement, dated
June 21, 2004, between Stantec Inc. and Canadian Imperial Bank of
Commerce21.1*
    
    Subsidiaries of Stantec Inc.23.1*
    
    Consent of Ernst & Young LLP  Independent Registered Public Accounting Firm.23.2*
    
    Consent of KPMG LLP  Independent Registered Public Accounting Firm.23.3**
    
    Consent of Fraser Milner Casgrain LLP (included in Exhibit 5.1).23.4**
    
    Consent of Shearman & Sterling LLP (included in Exhibit 8.1).23.5**
    
    Consent of Akin Gump Strauss Hauer & Feld LLP (included in Exhibit 8.2).23.6*
    
    Consent of Bear, Stearns & Co. Inc. (included in Exhibit 99.4).24.1*
    
    Powers of Attorney (included on the signature page of this Registration Statement).99.1*
    
    Form of proxy card for the special meeting of shareholders of The Keith Companies, Inc.99.2*
    
    Form of Letter to the shareholders of The Keith Companies, Inc. (included in the proxy
statement/prospectus which is part of this Registration Statement).99.3*
    
    Form of Notice of Special Meeting of shareholders of The Keith Companies, Inc.
(included in the proxy statement/prospectus which is part of this Registration
Statement).
   *
    
    Filed herewith.**
    
    To be filed by amendment. (b) Financial statement schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements of Stantec Inc. and the notes
thereto. (c) The opinion of Bear, Stearns & Co. Inc. is incorporated as Appendix B to the proxy
statement/prospectus which is part of this Registration Statement. II - 2




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ITEM 22. Undertakings The undersigned registrant hereby undertakes as follows: that prior to any public reoffering
of the securities registered hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the other Items of the
applicable form. The registrant undertakes that every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the
Securities Act of 1933 and is used in connection with an offering of securities subject to Rule
415, will be filed as part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fideoffering thereof. Insofar as indemnification for liabilities under the Securities Act of 1933 may be permitted
to directors, officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses incurred or paid by
a director, officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes: (i) to respond to requests for information that
is incorporated by reference into the proxy statement/prospectus pursuant to Item 4, 10(b), 11, or
13 of this form, within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means; and (ii) to arrange or provide for a
facility in the U.S. for the purpose of responding to such requests. The undertaking in
subparagraph (i) above includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding to the request. The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired involved therein, that was not
the subject of and included in the registration statement when it became effective. II - 3




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##### 



SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Edmonton, Province of Alberta, Canada, on May 9, 2005. STANTEC INC.
(Registrant)By:
    
    /s/   Jeffrey S. LloydName:
    
    Jeffrey S. LloydTitle:
    
    Vice President, Secretary and
General Counsel




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##### 



KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints Anthony P. Franceschini, Donald W. Wilson and Jeffrey S. Lloyd, and each of them, as
his or her true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked
in writing), to sign any and all amendments, including post-effective amendments, and supplements
to this registration statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his
or her substitute may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates indicated. /s/   Anthony P. Franceschini
Anthony P. Franceschini
    
    President, Chief Executive Officer and
Director
(principal executive officer)
    
    May 9, 2005/s/   Donald W. Wilson
Donald W. Wilson
    
    Vice President and Chief Financial Officer
(principal financial and accounting officer)
    
    May 9, 2005/s/   Ronald Triffo
Ronald Triffo
    
    Chairman of the Board of Directors
    
    May 9, 2005/s/   Neilson A. Bertholf, Jr. 
Neilson A. Bertholf, Jr.
    
    Director
    
    May 9, 2005/s/   Robert J. Bradshaw 
Robert J. Bradshaw
    
    Director
    
    May 9, 2005/s/   E. John Finn 
E. John Finn
    
    Director
    
    May 9, 2005/s/   William D. Grace
William D. Grace
    
    Director
    
    May 9, 2005/s/   Susan Hartman
Susan E. Hartman
    
    Director
    
    May 9, 2005/s/   Robert R. Mesel
Robert R. Mesel
    
    Director
    
    May 9, 2005




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##### 



AUTHORIZED REPRESENTATIVE Pursuant to the requirements of Section 6(a) of the Securities Act of 1933, the Authorized
Representative has signed this Registration Statement, solely in its capacity as the duly
authorized representative of Stantec Inc. on May 9, 2005. STANTEC CONSULTING INC.By:
    
    /s/   Jeffrey S. LloydName:
    
    Jeffrey S. LloydTitle: Vice President




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##### 



EXHIBIT INDEX ExhibitNumber
    
    Description of Document2.1*
    
    Agreement and Plan of Merger and Reorganization, dated as of April 14, 2005, as amended
May 9, 2005, among Stantec Inc., The Keith Companies, Inc. and Stantec Consulting
California Inc., a wholly-owned subsidiary of Stantec Inc. (attached as Appendix A to
the proxy statement/prospectus which is part of this Registration Statement).3.1*
    
    Articles of Incorporation of Stantec Inc.3.2*
    
    Bylaws of Stantec Inc.4.1*
    
    Form of Stantec Inc. common share certificate.5.1**
    
    Opinion of Fraser Milner Casgrain LLP as to the legality of the securities being
registered.8.1**
    
    Opinion of Shearman & Sterling LLP as to certain U.S. federal income tax matters.8.2**
    
    Opinion of Akin Gump Strauss Hauer & Feld LLP as to certain U.S. federal income tax
matters.10.1*
    
    Employment Agreement, dated as of January, 2005, between Stantec Consulting Ltd. and
Raymond L. Alarie.10.2*
    
    Contract Amending Agreement, dated as of February 27, 2003, between Stantec Inc. and
Anthony P. Franceschini.10.3*
    
    Employment Agreement, dated as of January 1, 2003, between Stantec Inc. and Anthony P.
Franceschini.10.4*
    
    Employment Agreement, dated as of December 19, 2002, between Stantec Consulting Ltd.
and W. Barry Lester.10.5*
    
    Employment Agreement, dated as of
October 31, 2001, between Stantec Consulting Ltd. and
Mark Jackson.10.6*
    
    Employment Agreement, dated as of
October 31, 2001, between Stantec Consulting Ltd. and
Jeffrey S. Lloyd.10.7*
    
    Employment Agreement, dated as of October 31, 2001, between Stantec Consulting Ltd. and
Donald W. Wilson.10.8**
    
    Credit Agreement, dated as of June 21, 2004 between Stantec Inc. and Canadian Imperial
Bank of Commerce.21.1*
    
    Subsidiaries of Stantec Inc.23.1*
    
    Consent of Ernst & Young LLP  Independent Registered Public Accounting Firm.23.2*
    
    Consent of KPMG LLP  Independent Registered Public Accounting Firm.23.3**
    
    Consent of Fraser Milner Casgrain LLP (included in Exhibit 5.1).23.4**
    
    Consent of Shearman & Sterling LLP (included in Exhibit 8.1).23.5**
    
    Consent of Akin Gump Strauss Hauer & Feld LLP (included in Exhibit 8.2).23.6*
    
    Consent of Bear, Stearns & Co. Inc.24.1*
    
    Powers of Attorney (included on the signature page of this Registration Statement).99.1*
    
    Form of proxy card for the special meeting of shareholders of The Keith Companies, Inc.99.2*
    
    Form of Letter to the shareholders of The Keith Companies, Inc. (included in the proxy
statement/prospectus which is part of this Registration Statement).99.3*
    
    Form of Notice of Special Meeting of shareholders of The Keith Companies, Inc.
(included in the proxy statement/prospectus which is part of this Registration
Statement).
   *
    
    Filed herewith.**
    
    To be filed by amendment.