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Court File No. CV-15-000011169-00CL ONTARIO SUPERIOR COURT OF JUSTICE COMMERCIAL LIST IN THE MA1 1ER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF ESSAR STEEL ALGOMA INC., ESSAR TECH ALGOMA INC., ALGOMA HOLDINGS B.V., ESSAR STEEL ALGOMA (ALBERTA) ULC, CANNELTON IRON ORE COMPANY, AND ESSAR STEEL ALGOMA INC. USA Applicants MOTION RECORD (Re: Approval of Sale Transaction) (Returnable on a date to be deteiiiiined) une 17, 2016 STIKEMAN ELLIOTT LLP Barristers & Solicitors 5300 Commerce Court West 199 Bay Street Toronto, Canada M5L 1B9 Ashley Taylor LSUC#: 39932E Tel: (416) 869-5236 Email. [email protected] Kathryn Esaw LSUC#: 58264F Tel: (416) 869-6820 Email: [email protected] Lee Nicholson LSUC#: 664121 Tel: (416) 869-5604 Fax: (416) 947-0866 Email: [email protected] Lawyers for the Applicants 6574940 vi

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  • Court File No. CV-15-000011169-00CL

    ONTARIO SUPERIOR COURT OF JUSTICE

    COMMERCIAL LIST

    IN THE MA1 1ER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED

    AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF ESSAR STEEL ALGOMA INC., ESSAR TECH ALGOMA INC.,

    ALGOMA HOLDINGS B.V., ESSAR STEEL ALGOMA (ALBERTA) ULC, CANNELTON IRON ORE COMPANY, AND ESSAR STEEL ALGOMA INC. USA

    Applicants

    MOTION RECORD (Re: Approval of Sale Transaction)

    (Returnable on a date to be deteiiiiined)

    une 17, 2016

    STIKEMAN ELLIOTT LLP Barristers & Solicitors 5300 Commerce Court West 199 Bay Street Toronto, Canada M5L 1B9

    Ashley Taylor LSUC#: 39932E Tel: (416) 869-5236 Email. [email protected]

    Kathryn Esaw LSUC#: 58264F Tel: (416) 869-6820 Email: [email protected]

    Lee Nicholson LSUC#: 664121 Tel: (416) 869-5604 Fax: (416) 947-0866 Email: [email protected]

    Lawyers for the Applicants

    6574940 vi

  • INDEX

  • Court File No. CV-15-000011169-00CL

    ONTARIO SUPERIOR COURT OF JUSTICE

    COMMERCIAL LIST

    IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED

    AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF ESSAR STEEL ALGOMA INC., ESSAR TECH ALGOMA INC.,

    ALGOMA HOLDINGS B.V., ESSAR STEEL ALGOMA (ALBERTA) ULC, CANNELTON IRON ORE COMPANY, AND ESSAR STEEL ALGOMA INC. USA

    Applicants

    INDEX

    TAB , DOCUMENT

    1. Notice of Motion

    2. Affidavit of John Strek, to be sworn

    A. Exhibit "A" - Redacted copy of the Asset Purchase Agreement

    B. Exhibit "B" - SISP Order, February 10, 2016

    C. Exhibit "C" - Affidavit of John Strek, sworn May 11, 2016 (without exhibits)

    3. Form of Order

    6574940 vl

  • TAB 1

  • Court File No. CV-15-000011169-00CL

    ONTARIO SUPERIOR COURT OF JUSTICE

    COMMERCIAL LIST

    IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED

    AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF ESSAR STEEL ALGOMA INC., ESSAR TECH ALGOMA INC.,

    ALGOMA HOLDINGS B.V., ESSAR STEEL ALGOMA (ALBERTA) ULC, CANNELTON IRON ORE COMPANY AND ESSAR STEEL ALGOMA INC. USA.

    Applicants

    NOTICE OF MOTION (Returnable on a date to be determined)

    Essar Steel Algoma Inc. ("Algoma"), Essar Tech Algoma Inc., Algoma Holdings B.V.,

    Essar Steel Algoma (Alberta) ULC, Cannelton Iron Ore Company and Essar Steel Algoma

    Inc. USA ("Algoma USA" and collectively, the "Applicants") will make a motion to a judge

    presiding over the Commercial List on a date to be determined by the Court, at 330

    University Avenue, Toronto, Ontario.

    PROPOSED METHOD OF HEARING:

    The motion is to be heard orally.

    THE MOTION IS FOR:

    1. An Order (the "Approval and Vesting Order") substantially in the form contained at

    Tab 3 of the Applicants' Motion Record, inter alia:

    (a) approving the asset purchase agreement (the "APA") among Algoma and

    Algoma USA (the "Sellers"), and 1076318 B.C. Ltd. (the "Buyer"), and the

    transaction contemplated therein (the "Sale Transaction"); and

    (b) vesting all of the Purchased Assets free and clear of any security, charge or

    other restriction other than the Permitted Encumbrances (as such terms are

    defined in the APA).

    6575330 v4

  • 2

    2. Such further and other relief as counsel may request and this Honourable Court

    deems just.

    THE GROUNDS FOR THE MOTION ARE:

    BACKGROUND

    3. Algoma is one of the largest integrated steel producers in Canada, producing steel

    and steel products for customers throughout North America.

    4. On November 9, 2015, the Applicants sought and obtained protection from their

    creditors under the Companies' Creditors Arrangement Act (the "CCAA") pursuant to the

    Initial Order of the Ontario Superior Court of Justice dated November 9, 2015 (as amended

    and restated, the "Initial Order").

    5. Ernst & Young Inc. was appointed as monitor of the Applicants (the "Monitor")

    the CCAA proceedings (the "CCAA Proceedings").

    6. The Applicants have four tranches of pre-filing secured debt:

    (a) A revolving credit agreement (the "ABL Facility");

    (b) A term loan credit agreement (the "Term Loan");

    (c) Senior secured notes (the "Senior Secured Notes"); and

    (d) Junior secured notes (the "Junior Secured Notes").

    7. To fund their ongoing operations during the CCAA Proceedings, the Applicants

    obtained a US$200 debtor-in-possession facility pursuant to a credit agreement dated

    November 9, 2015 (the "DIP Credit Agreement"). The DIP Credit Agreement was approved

    by the Court and amounts owing under the DIP Credit Agreement have a Court-ordered

    first ranking super-priority charge over all of the Applicants' property and assets, subject to

    certain other Court-ordered charges.

    THE SALE AND INVESTMENT SOLICITATION PROCESS

    8. The Initial Order authorized the Applicants to pursue all avenues of sale or

    refinancing of their business or property, in whole or part.

    6575330 v4

  • 3

    9. The DIP Credit Agreement milestones require the Applicants to conclude a sale or

    investment transaction, or plan of compromise or arrangement, by August 31, 2016 (subject

    to a maximum extension to September 30, 2016).

    10. The Applicants, in consultation with their advisors and certain key stakeholders,

    developed the sale and investment solicitation process (the "SISP") to solicit interest in and

    opportunities for a sale, restructuring or recapitalization of the Applicants' business. The

    SISP contemplated that the process would include consultation with certain of the

    Applicants' key stakeholders (the "Consultation Parties"), the Applicants' financial advisor,

    Evercore LLC ("Evercore"), and the Chief Restructuring Advisor (the "CRA"), with

    oversight by the Monitor. The SISP was approved by the Court on February 10, 2016.

    11. The SISP contemplated ongoing consultation with the Consultation Parties, unless a

    Consultation Party gave notice of its intention to participate in the SISP as a bidder.

    12. After a broad solicitation for bids by Evercore, the Applicants received seven phase I

    bids (the "Phase I Bids"), including a credit bid from the lenders under the Term Loan (the

    "Term Lenders") and a bid from KPS Capital Partners, LP ("KPS").

    13. At the phase II deadline under the SISP, the Applicants only received one bid (the

    "Joint Bid") submitted jointly by KPS and the Term Lenders (the "Joint Bidders").

    14. Pursuant to the SISP, the Applicants went back to the Joint Bidders and the parties

    engaged in significant negotiations, with oversight by the Monitor, regarding the terms of

    the Sale Transaction, which culminated in the APA.

    15. After receipt of the Joint Bid and again after the APA was finalized, the Applicants

    consulted with the Consultation Parties. Subsequently, in accordance with the SISP, the

    Applicants declared the Joint Bid to be the successful bid under the SISP.

    EFFORTS TO FIND ALTERNATIVE RESTRUCTURING OPPORTUNITIES

    16. During the CCAA Proceedings, the Applicants also undertook an extensive review of

    alternative restructuring options. To date the Joint Bid is the only option that address the

    critical restructuring needs of Algoma and represents the only option for Algoma's long-

    term survival.

    6575330 v4

  • 4

    17. By consent order dated June 13, 2016, the Applicants, the Monitor, the ad hoc

    committee of the Senior Secured Notes and the Term Lenders will engage in a mediation

    with respect to inter-creditor issues and other restructuring matters. The Applicants will

    continue evaluating viable restructuring alternatives arising from the mediation.

    THE ASSET PURCHASE AGREEMENT

    18. The APA contemplates the sale of substantially all of the assets of the Sellers for a

    combination of cash, a credit bid and the assumption of certain liabilities.

    19. The APA also provides for the continued employment of all or substantially all of

    Algoma's employees, both unionized and non-unionized.

    20. The Buyer under the APA is a special purpose entity established by the Joint Bidders

    pursuant to a consortium agreement dated May 21, 2016.

    21. The Sale Transaction is subject to a number of conditions set out in the APA.

    22. The conditions for the exclusive benefit of the Buyer set in the APA, include among

    others:

    (a) Amendments to the agreements with the Port of Algoma Inc. and Essar Power

    Canada Ltd. required by the Buyer, acting in a commercially reasonable

    manner;

    (b) Entry by the Buyer into satisfactory long-term iron ore contracts and coal

    supply contracts at prices and on other terms satisfactory to the Buyer, acting

    in a commercially reasonable mariner;

    (c) Agreements with applicable governmental authority regarding the reduction

    in the property tax assessments from the City of Sault Ste. Marie satisfactory

    to the Buyer, acting in a commercially reasonable manner;

    (d) Approval of regulations that relieve the Buyer of all obligations related to

    Algoma's pension plans except for specified fixed and variable amounts; and

    the replacement of the current collective agreements with new collective

    agreements ratified by the membership and effective upon closing of the Sale

    Transaction; and

    6575330 v4

  • - 5 -

    (e) Agreements with applicable governmental authority providing relief from or

    exempting, releasing and/or indemnifying the Buyer and the current and

    former directors and officers of the Sellers from any pre-closing

    environmental liabilities related to the business of the Sellers.

    23. The APA contemplates that the Sale Transaction will close no later than five business

    days after the conditions to closing are satisfied and in any event, no later than August 31,

    2016.

    APPROVAL OF THE SALE TRANSACTION

    24. The SISP undertaken by the Applicants was approved by the Court and was

    conducted with assistance from the Applicants' advisors and under the supervision of the

    Monitor.

    25. The Applicants evaluated alternative restructuring options but were unable to find an

    actionable alternative restructuring plan.

    26. The purchase price under the APA represents the highest price realizable for the

    assets being purchased by the Buyer.

    27. The Applicants' key stakeholders not participating as bidders under the SISP,

    including the ad hoc committee of Senior Secured Notes, the ad hoc committee of Junior

    Secured Notes, the USW together with its Local 2724 and its Local 2251 and representative

    counsel for the retired and former Algoma employees who are members of the USW (or their

    surviving spouses), were consulted during the SISP.

    28. The APA was subject to extensive arm's length negotiations between the Sellers and

    the Buyer.

    29. The Buyer and the Applicants are not related persons as that term is defined in

    section 36 of the CCAA.

    GENERAL

    30. The provisions of the CCAA and specifically, s. 36 of the CCAA.

    31. The inherent and equitable jurisdiction of the Court.

    6575330 v4

  • -6

    32. Rules 2.03, 3.02 and 37 of the Ontario Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as

    amended.

    33. Sections 100 and 137(2) of the Ontario Courts of Justice Act, R.S.O. 1990, c. C.43, as

    amended.

    34. Such further and other grounds as counsel may advise and this court may permit.

    THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of the motion:

    35. The affidavit of John Strek, to be sworn;

    36. A report of the Monitor to be filed; and

    37. Such further and other materials as counsel may advise and this Court may permit.

    June 17, 2016 STIKEMAN ELLIO IT LLP Barristers & Solicitors 5300 Commerce Court West 199 Bay Street Toronto, Canada M5L 1B9

    Ashley John Taylor LSUC#: 39932E Tel: (416) 869-5236 E-mail: [email protected]

    Kathryn Esaw LSUC#: 58264F Tel: (416) 869-6820 Email: [email protected]

    Lee Nicholson LSUC#: 664121 Tel: (416) 869-5604 Email: [email protected] Fax: (416) 947-0866

    Lawyers for the Applicants

    6575330 v4

  • Court File No. CV-15-000011166-00CL IN THE MA!! ER OF THE COMPANIES CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED

    AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF ESSAR STEEL ALGOMA INC., ET AL

    ONTARIO SUPERIOR COURT OF JUSTICE

    (COMMERCIAL LIST)

    Proceeding commenced at Toronto

    NOTICE OF MOTION (RETURNABLE ON A DATE TO BE

    DETERMINED)

    STIKEMAN ELLIOTT LLP Barristers & Solicitors 5300 Commerce Court West 199 Bay Street Toronto, Canada M5L 1B9

    Ashley John Taylor LSUC#: 39932E Tel: (416) 869-5236 E-mail: [email protected]

    Kathryn Esaw LSUC#: 58264F Tel: (416) 869.6820 Email: [email protected]

    Lee Nicholson LSUC#: 664121 Tel: (416) 869-5604 Email: [email protected] Fax: (416) 947-0866

    6575330 v4

  • TAB 2

  • Court File No. CV-15-000011169-00CL

    ONTARIO SUPERIOR COURT OF JUSTICE

    COMMERCIAL LIST

    IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED

    AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF ESSAR STEEL ALGOMA INC., ESSAR TECH ALGOMA INC., ALGOMA HOLDINGS B.V., ESSAR STEEL ALGOMA (ALBERTA) ULC, CANNELTON IRON ORE COMPANY

    AND ESSAR STEEL ALGOMA INC. USA

    (Applicants)

    AFFIDAVIT OF JOHN STREK (Sworn June 20, 2016 re Approval of Sale Transaction

    I, JOHN STREK, of the City of Scarsdale, in the State of New York, MAKE OATH AND

    SAY:

    1. I am a Senior Managing Director of CDG Group, LLC, the Court-appointed Chief

    Restructuring Advisor (the "CRA") to Essar Steel Algoma Inc. ("Algoma"), Essar Tech

    Algoma, Algoma Holdings B.V., Essar Steel Algoma (Alberta) ULC, Cannelton Iron Ore

    Company and Essar Steel Algoma Inc. USA ("Algoma USA" and, collectively, the

    "Applicants"). As such, I have knowledge of the matters to which I hereinafter depose,

    except where otherwise stated.

    2. This affidavit is sworn in support'of a motion brought by the Applicants seeking an

    order (the "Approval and Vesting Order"), substantially in the form attached at Tab 3 to

    the Motion Record, inter alia:

    (a) Approving the asset purchase agreement (the "APA") among Algoma and

    Algoma USA (the "Sellers"), and 1076318 B.C. Ltd. (the "Buyer"), a redacted

    copy of which is attached hereto as Exhibit "A", and the transaction

    contemplated therein (the "Sale Transaction"); and

    6569147 v8

  • - 2 -

    (b) Vesting all of the Purchased Assets (as defined below) in the Buyer free and

    clear of any security, charge or other restriction other than the Permitted

    Encumbrances (as defined in the APA).

    3. Capitalized terms used herein but not otherwise defined have the meaning

    attributed to them in the APA. All monetary amounts are expressed in US currency unless

    otherwise indicated.

    BACKGROUND AND STATUS OF THE CCAA PROCEEDINGS

    4. Founded in Sault Ste. Marie in 1901, Algoma is one of the largest integrated steel

    producers in Canada, producing steel and steel products for customers throughout North

    America.

    5. Due to a number of significant issues, including an over-leveraged balance sheet,

    limited liquidity, depressed steel prices and a cyclical industry, the Applicants were unable

    to meet their ongoing payment obligations and therefore sought and obtained protection

    from their creditors under the Companies' Creditors Arrangement Act (the "CCAA") pursuant

    to the Initial Order of the Ontario Superior Court of Justice dated November 9, 2015 (the

    "Filing Date"). 1 Ernst & Young Inc. was appointed as monitor of the Applicants (the

    "Monitor") in the CCAA proceedings.

    6. Subsequently, and also on the Filing Date, Algoma, on behalf of the Applicants,

    commenced cases under chapter 15 of title 11 of the United States Code (the "Bankruptcy

    Code") seeking recognition of the CCAA proceedings in the United States Bankruptcy

    Court for the District of Delaware (the "U.S. Bankruptcy Court"). 2

    7. Algoma is Sault Ste. Marie's single largest employer. Algoma directly employs

    nearly 3,000 people. Adding household members and retirees, a significant percentage of

    Sault Ste. Marie's population directly or indirectly depends on Algoma.

    1 Algoma, Essar Tech Algoma Inc., Essar Steel Algoma (Alberta) ULC, Cannelton Iron Ore Company and Essar Steel Algoma Inc. USA were granted CCAA protection on November 9, 2015 and Algoma Holdings B.V. was added as an Applicant by order dated November 19, 2015. 2 Algoma Holdings B.V. filed a voluntary petition under chapter 15 of the Bankruptcy Code on November 20, 2015.

    6569147 v8

  • -3-

    8. Algoma has undergone two prior proceedings under the CCAA in the last 24 years

    because of similar issues faced in the current CCAA proceedings, as well as a plan of

    arrangement under the Canada Business Corporations Act in 2014. Despite the 2014

    restructuring, the Applicants continued to experience financial difficulties which ultimately

    led to the present proceedings. The current CCAA Proceedings represent the fourth court-

    supervised restructuring of Algoma.

    The Applicants' Debt Structure

    9. The Applicants have four tranches of pre-filing secured debt:

    (a) A US$42.5 million (as of October 2015) asset based loan (the "ABL Facility")

    provided by lenders who are parties to the associated credit agreement.

    Subject to the Court-ordered charges, the ABL Facility has first-ranking

    priority on the working capital assets of Algoma and second-ranking priority

    on Algoma's fixed assets;

    (b) A US$371 million (as of October 2015) term loan (the "Term Loan Facility")

    provided by certain lenders that are parties to a term loan credit agreement

    (the "Term Lenders" and, together with the lenders under the ABL Facility,

    the "Prepetition Lenders"). Subject to the Court-ordered charges, the Term

    Loan Facility has second-ranking priority on Algoma's working capital assets

    and first-ranking priority on Algoma's fixed assets, shared pari passu with the

    Senior Secured Noteholders (defined below);

    (c) US$375 million of issued senior secured notes bearing interest at a rate of

    9.5% (the "Senior Secured Notes") outstanding to various noteholders (the

    "Senior Secured Noteholders"). Subject to the Court-ordered charges, the

    Senior Secured Notes have third-ranking priority on Algoma's working

    capital assets and first-ranking priority on Algoma's fixed assets, shared pari

    passu with the Term Lenders; and

    (d) US$252.1 million of issued junior notes bearing interest at a rate of 14%

    outstanding to various noteholders (the "Junior Secured Noteholders"),

    6569147 v8

  • -4-

    which have fourth-ranking priority on Algoma's working capital assets and

    third-ranking priority on Algoma's fixed assets.

    10. The priorities described above are established by an Intercreditor Agreement

    ("Intercreditor Agreement") between all four groups of pre-filing debt holders and a Pari

    Pasu Intercreditor Agreement (the "Pali Passu Intercreditor Agreement") between the

    Term Lenders and the Senior Secured Noteholders. Both agreements are dated as of

    November 14, 2014.

    DIP Financing

    11. As part of the CCAA proceedings, the Applicants sought and received approval of

    the DIP Credit Agreement in order to fund their operations. The DIP Credit Agreement

    provides a $200 million DIP facility, of which $175 million is in the form of a term loan (the

    "DIP Term Loan Facility") and $25 million is in the form of a revolving loan (the

    "Revolver"). The amounts owing under the DIP Credit Agreement enjoy a Court-ordered

    first ranking super-priority charge over all of Algoma's property and assets, subject to

    certain other Court-ordered charges.

    12. As of the date of this affidavit, Algoma has drawn the entire DIP Term Loan Facility

    portion of the DIP Credit Agreement in three installments, but can only access the funds

    (which otherwise remain in a blocked account) if it can demonstrate the need for such funds

    in its cash flows, which must be approved by the lenders under the DIP Credit Agreement,

    and otherwise satisfies the terms of the DIP Credit Agreement. As of the date of this

    affidavit, approximately $15 million of the DIP Term Loan Facility funds remain in the

    blocked account. The $25 million Revolver remains available but conditions for drawing on

    it are stringent such that practically, only $5 million is available thereunder.

    13. Since the commencement of the CCAA Proceedings, the Applicants have incurred

    negative net cash receipts (disbursements) at an average rate of approximately $5 million

    per week. The Applicants rely entirely on the DIP facility to satisfy the shortfall from its

    negative net cash receipts (disbursements) each month.

    6569147 v8

  • - 5 -

    Operational Results

    14. The Applicants have continued to operate in the ordinary course during their CCAA

    proceedings, but are still facing operational challenges (such as recently experienced

    temporary disruptions with Algoma's blast furnace due to issues with input raw material,

    which negatively impacted the steel production and shipments), a difficult environment to

    grow sales due to being under the CCAA proceeding and the need to fund the next

    inventory build. While steel prices have recently risen, there is no certainty regarding the

    future price of steel.

    THE SALE AND INVESTMENT SOLICITATION PROCESS 3

    The Need for a Sale and Investment Solicitation Process

    15. The Initial Order authorized the Applicants to pursue all avenues of sale or

    refinancing of their business or property, in whole or part, subject to the provisions of the

    CCAA and the DIP Credit Agreement.

    16. The development and implementation of a sale or restructuring of the Applicants'

    business or property is also a condition of the DIP Credit Agreement, which contains a

    number of milestones that must be met in respect of the sale or restructuring process during

    the CCAA proceedings, including obtaining court approval of any sale or investment

    transaction obtained under such process within 30 days of the final deadline for offers

    thereunder and court approval of any plan of compromise or arrangement resulting from

    the sale or restructuring process within 60 days of the final deadline for offers thereunder.

    17. It is also an obligation under the DIP Credit Agreement milestones to conclude a sale

    or investment transaction, or plan of compromise or arrangement resulting from the

    process, by August 31, 2016 (subject to a maximum extension to September 30, 2016, and in

    any case, not past the maturity of the DIP Credit Agreement). This deadline reflects the

    necessity of completing the restructuring of the Applicants' business before the fall build-up

    of inventory required to sustain operations through the winter.

    3 Capitalized terms used in this section but not otherwise defined have the meaning attributed to them in the SISP.

    6569147 v8

  • - 6 -

    Key Terms of the Sale and Investment Solicitation Process

    18. In accordance with the Initial Order and the DIP Credit Agreement, the Applicants

    in good faith developed and conducted the sale and investment solicitation process (the

    "SISP") to solicit interest in and opportunities for a sale, restructuring or recapitalization of

    the Business. The SISP was designed to be as flexible as possible considering the expected

    complexity of the process, the assets at stake, the interests of many different stakeholders,

    and market conditions.

    19. The SISP contemplates a two stage process conducted by the Applicants with

    assistance from Evercore Group L.L.C. (the financial advisor to the applicants ("Evercore")),

    the CRA and the Monitor, followed by an opportunity to select a successful and/or back-up

    bid if appropriate, either on conclusion of Phase II or after further negotiation with Phase II

    Qualified Bidders.

    20. The SISP also contemplates that the Applicants, in consultation with Evercore, the

    CRA, the Consultation Parties (as defined below) and the Monitor, can modify the SISP as

    appropriate.

    Consultation with Stakeholders

    21. In developing the SISP, the Applicants worked extensively with their legal counsel,

    Evercore, the CRA and the Monitor. The Applicants also sought input and review of the

    SISP from certain core stakeholders, being the lenders under the DIP Credit Agreement, the

    Prepetition Lenders, an ad hoc committee of Senior Secured Noteholders (the "Ad Hoc

    Committee of Senior Secured Noteholders"), an ad hoc committee of Junior Secured

    Noteholders (the "Ad Hoc Committee of Junior Secured Noteholders"), the United Steel,

    Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Services Workers

    International Union (the "USW") together with its Local 2724 ("Local 2724") and its local

    United Steelworkers Union Local 2251 ("Local 2251"), and representative counsel for the

    retired and former Algoma employees who are members of the USW (or their surviving

    spouses).

    6569147 v8

  • -7-

    22. Furthermore, the SISP contemplated ongoing consultation with the stakeholders

    listed above (the "Consultation Parties"), unless a Consultation Party gave notice of its

    intention to participate in the SISP as a bidder.

    The SISP Approval Order and Endorsement

    23. This Court approved the SISP by order dated February 10, 2016. A copy of the SISP

    order, which includes a copy of the SISP at Schedule "A" thereto, is attached hereto as

    Exhibit "B".

    24. In the endorsement approving the SISP, Regional Senior Justice Morawetz noted

    that, among other things:

    (a) All stakeholders, including the Ad Hoc Committee of Senior Secured

    Noteholders, were of the view that an approved SISP was a desirable

    outcome; and

    (b) The parties who appeared in respect of the SISP motion undertook significant

    negotiations.

    Phase I

    25. Phase I of the SISP was launched on February 12, 2016. During Phase I, Evercore

    contacted 63 potential buyers or investors. Twenty-two strategic parties (i.e., parties who

    operate in the steel industry) and 41 financial parties were provided with a solicitation letter

    describing the opportunity for a party to invest or purchase the Applicants' Business and/or

    Property, outlining the SISP and inviting recipients to express their interest pursuant to the

    SISP, and a form of non-disclosure agreement (an "NDA").

    26. Upon the return of an executed NDA and an identifying letter outlining its contact

    information and direct and indirect principals, a party was deemed to be a "Phase I Bidder".

    Thirteen parties were deemed to be Phase I Bidders and each was sent a confidential

    information memorandum and Algoma's quarterly financial statements and management

    discussion and analysis, for the period ending September 30, 2015 (the "Phase I

    Documents").

    6569147 v8

  • - 8 -

    27. The Phase I Bidders were given the opportunity to conduct due diligence on the

    Applicants' business based on the Phase I Documents.

    28. A Phase I Bidder who desired to make an offer to acquire all, substantially all or a

    portion of the Applicants' Property or an offer to make an investment in, restructure or

    refinance the Applicants' Business, was required to deliver a non-binding letter of interest (a

    "Phase I Bid") to Evercore by 5:00pm (Eastern Time) on April 1, 2016 (the "Phase I Bid

    Deadline"). Phase I Bids had to satisfy a number of minimum requirements including proof

    of the bidder's financial wherewithal.

    29. KPS Capital Partners, LP ("KPS") submitted a Phase I Bid on March 6, 2016. The

    Applicants consulted with the CRA, Evercore and the Consultation Parties, as well as the

    Monitor, and decided to modify the SISP to allow the bid to be deemed a Qualified Phase I

    Bid prior to the Phase I Bid Deadline in order to allow KPS to commence more detailed due

    diligence.

    30. In addition to the KPS Phase I Bid, four other bids were received by the Phase I Bid

    Deadline. As contemplated in paragraphs 23 and 47 of the SISP, the Term Lenders informed

    the Applicants after the Phase I Bid Deadline that they intended to participate in Phase II of

    the SISP . 4

    31. A seventh, late bid was submitted on April 24, 2016. The Applicants, after

    consultation with the Consultation Parties, and with the approval of the Monitor and the

    CRA, waived compliance with the Phase I Bid Deadline in order to allow the late bid into

    the process.

    32. Other than the Term Lenders, who pursuant to paragraph 22 of the SISP were

    automatically deemed to be Phase II Bidders, Phase I Bidders were required to submit bids

    which met the criteria of a "Qualified Phase I Bid", as set out in the SISP.

    33. As determined by the Monitor in accordance with the SISP, copies of the Phase I Bids

    were offered to the Consultation Parties. The Applicants, in consultation with the CRA,

    4 As a result of declaring the intention to participate in the SISP, the Term Lenders lost all consultation rights under the SISP.

    6569147 v8

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    Evercore, the Consultation Parties and the Monitor, assessed the Phase I Bids to determine

    whether such bids constituted Qualified Phase I Bids.

    34. As a result of this review, four Phase I Bids were determined to be Qualified Phase I

    Bids, including the bids of the Term Lenders and KPS. Three Phase I Bids were deemed to

    be non-compliant with the Phase I Bid requirements.

    35. Each of the non-compliant bids was given the opportunity to address its deficiencies.

    Further information regarding this process was set out in my affidavit sworn May 11, 2016,

    and filed with the Court in connection with the USW's motion seeking to qualify one of the

    non-compliant bidders as a Phase II Bidder, a copy of which is attached as Exhibit "C"

    (without exhibits).

    Phase II

    36. Based on the Applicants' determination above, four bidders were permitted to enter

    Phase II of the SISP. The deadline to submit a Phase II Bid was originally set for May 16,

    2016, but was subsequently extended until May 23, 2016.

    37. The Phase II Bidders were provided with additional resources to assess the SISP

    opportunity, including (a) access to a data room set up by the Applicants and Evercore and

    due diligence materials, which contained detailed information about the Applicants, the

    Business and the Property; (b) access to a detailed financial model; (c) management

    presentations; and (d) on-site tours and inspections.

    38. KPS's Phase I Bid did not originally provide for a sufficient cash component to

    satisfy the DIP, the ABL and the Term Loan Facility, as required under the DIP Credit

    Agreement. ICPS was advised that it needed to increase its purchase price or reach

    agreement with those lenders. KPS was also encouraged to engage with the Senior Secured

    Noteholders and was given consent to contact those parties. KPS did engage with the Term

    Lenders and the Monitor was present at the initial discussions between K.Ps and the Term

    Lenders and was provided with periodic updates and draft materials thereafter. The other

    Phase II Bidders were also suggested to contact the Term Lenders in association with their

    bids. In addition to KPS, one other Phase II Bidder did have a discussion with the Term

    6569'147 v8

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    Lenders regarding its bid, at which I was present. The other Phase II Bidder declined to

    contact the Term Lenders.

    39. On May 6, 2016, one of the Phase II Bidders notified the Applicants that it was

    withdrawing from the SISP. On May 10, 2016, a second Phase II Bidder notified the

    Applicants that it was withdrawing from the SISP.

    40. At the Phase II Bid Deadline only one bid was received by the Applicants. The bid

    (the "Joint Bid") was submitted jointly by KPS and the Term Lenders (the "Joint Bidders").

    The Joint Bid contemplates a combination of cash and credit bid for the operating assets of

    the Applicants, with KPS acting as the equity sponsor for the company acquiring the assets

    of the Applicants.

    41. In accordance with the SISP, following the Phase II Bid Deadline, the Applicants,

    after consultation with their legal counsel, Evercore, the CRA and the Monitor, assessed the

    Joint Bid and determined that it was a "Qualified Phase II Bid".

    42. Pursuant to the SISP, the Applicants went back to the Joint Bidders and the parties

    engaged in significant negotiations regarding the terms of the sale agreement, which

    culminated in the APA. In negotiating the terms of the APA, the Applicants were assisted

    by their legal counsel, Evercore and the CRA, with oversight by the Monitor.

    43. After receipt of the Joint Bid and again after the APA was finalized, the Applicants

    consulted with the Consultation Parties. In accordance with the SISP, following consultation

    with the Consultation Parties, the Applicants declared the Joint Bid to be the Successful Bid.

    Efforts to Find Alternative Restructuring Opportunities

    44. During the CCAA proceedings, the Applicants undertook a review of alternative

    restructuring prospects, including the following:

    (a) I am advised by Mr. Daniel Aronson of Evercore that shortly after the

    commencement of the CCAA proceedings, Evercore contacted the

    Applicants' secured creditors seeking an investor or group of investors to

    provide a new investment in connection with a restructuring or

    6569147 v8

  • recapitalization transaction. None of the creditors indicated any interest in

    making a new investment in connection with a standalone restructuring plan.

    Without a plan sponsor who was willing to invest additional cash equity to

    fund the restructuring, ongoing operations and capital expenditures, a

    restructuring of the Applicants was not a viable option;

    (b) Under the SISP, inves 'tent bids were solicited, but none were received at

    any phase of the process;

    (c) The Applicants, through Evercore, asked the lenders under the DIP Credit

    Agreement (the "DIP Lenders") if they would be willing to extend the term

    of the DIP facility. The DIP Lenders stated that they were unwilling to do so;

    (d) The Applicants, through Evercore, asked the Term Lenders if they were

    interested in providing a new investment in connection with a restructuring

    or recapitalization transaction. The Term Lenders stated they were focused

    on the SISP.

    (e) The Ad Hoc Committee of Senior Secured Noteholders have expressed an

    interest in a standalone restructuring or recapitalization transaction. As a

    result, the Applicants, through Evercore and the CRA, have had discussions

    with the Ad Hoc Committee of Senior Secured Noteholders to gauge their

    interest in providing a new investment in connection with a restructuring or

    recapitalization transaction. The Ad Hoc Committee of Senior Secured

    Noteholders expressed a desire to refinance the existing DIP facility and

    potentially provide a new investment to fund a restructuring of the

    Applicants. Since the beginning of May 2016, the Applicants, Evercore,

    and/or the CRA, have held numerous in-person or telephonic due diligence

    meetings with certain members of the Ad Hoc Committee of Senior Secured

    Noteholders or third-party lenders that were in discussions with the Ad Hoc

    Committee of Senior Secured Noteholders. In addition, the Applicants,

    Evercore, and/or the CRA have also held numerous discussions and due

    diligence sessions with the financial advisor to the Ad Hoc Committee of

    6569147 v8

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    Senior Secured Noteholders. To date, the Ad Hoc Committee of Senior

    Secured Noteholders has not presented the Applicants with a proposal that is

    capable of being implemented or that provides the company with a

    sustainable business plan going forward; and

    The Applicants, through Evercore, contacted ten parties to solicit term sheets

    for a replacement debtor-in-possession facility that could extend the

    Applicants "runway" to develop a restructuring plan. The Applicants have

    received one preliminary term sheet indicating an interest in providing a

    replacement DIP facility from the Ad Hoc Group of Senior Noteholders and

    none from potential third-party lenders or investors. The preliminary term

    sheet from the Ad Hoc Group of Senior Noteholders had a number of

    deficiencies, including that it was non-binding, was highly conditional, and

    did not indicate the method for obtaining support of the Term Lenders.

    Evercore and the CRA, on behalf of the Applicants, communicated concerns

    regarding these and other deficiencies, which to date remain unresolved by

    the Ad Hoc Group of Senior Noteholders.

    45. A restructuring alternative must provide for a timely exit from the CCAA

    proceeding and a plan sponsor willing to support Algoma with a cash equity investment

    and a capital structure that will sustain the Business during the cycles of steel pricing.

    46. In order for Algoma to be viable long-term in a cyclical and capital intensive

    industry, I am of the view that a restructuring solution must involve: (a) new financing with

    adequate borrowing availability and a new cash equity investment that will sufficiently

    capitalize Algoma to fund ongoing operations and capital expenditures during various

    industry cycles; (b) a deleveraged capital structure to endure the cyclical nature of the

    industry; (c) changes to the Applicants' collective bargaining agreements; (d) relief related to

    the Applicants' pension plans, and (e) relief related to certain environmental issues, to

    reduce the fixed cost structure of Algoma's operations.

    6569147 v8

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    47. As described below, the Joint Bid addresses these issues and represents the only

    option for Algoma's long-term survival that has been received by the Applicants in

    connection with the SISP.

    48. By consent order dated June 13, 2016, the Applicants, the Monitor, the Ad Hoc

    Committee of Algoma Noteholders and the Term Lenders have agreed to engage in

    mediation (the "Consent Mediation") together with such other parties that the Monitor

    determines shall engage in the Consent Mediation with respect to issues arising from the

    Intercreditor Agreement and the Pari Passu Intercreditor Agreement and other restructuring

    matters. The Consent Mediation is scheduled to be conducted June 20 and 21, 2016.

    THE ASSET PURCHASE AGREEMENT

    49. The APA contemplates the sale of substantially all of the assets of the Sellers for a

    combination of cash, a credit bid and the assumption of certain liabilities. The APA also

    provides for the continued employment of all or substantially all of Algoma's employees,

    both unionized and non-unionized. The Sale Transaction will be effected through the

    Buyer, a special purpose entity established by the Joint Bidders pursuant to the terms of a

    consortium agreement between the parties dated May 21, 2016 (the "Consortium

    Agreement"). The Consortium Agreement sets out the terms of ownership of the Purchased

    Assets, cost sharing and other terms and conditions of the Joint Bid and the APA. Due to the

    commercially sensitive terms of the Consortium Agreement, the Applicants have not

    included a copy of same as an exhibit to this affidavit, but will file a copy with the Court

    over which the Applicants will seek a sealing order.

    50. The APA was negotiated in good faith and between arm's-length parties.

    51. The APA includes a Disclosure Letter which contains certain disclosures with

    respect to the Sellers' representation and warranties and lists of certain other items such as

    the Material Contracts list, a copy of which, due to its commercially sensitive nature, is also

    not included as an exhibit to this affidavit, but a copy will be filed with the Court over

    which the Applicants will seek a sealing order.

    52. The following is a summary of the material elements of the APA.

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    Purchase Price

    53. The Purchase Price under the APA consists of three components (as detailed in

    section 3.1):

    (a) A credit bid of the Term Loan debt on the Closing Date, solely with respect to

    the Sellers' working capital assets (the assets listed at Sections 2.1(a)-(c) of the

    APA, namely: Cash and Accounts Receivable, Prepaid Expenses and

    Inventory), at the Closing Time (the "Credit Bid");

    (b) The amount of cash that is sufficient to pay the outstanding liabilities under

    the DIP facility in full, including exit fees, on the Closing Date (the "Cash

    Purchase Price") which shall be paid at the Closing Date; and

    (c) The assumption of the Assumed Liabilities, which shall be assumed at the

    Closing Time.

    Allocation of the Purchase Price

    54. Pursuant to section 3.2 of the APA, the Purchase Price is to be allocated among the

    Sellers and the Purchased Assets, in a manner to be determined by the Buyer acting

    commercially reasonably, in consultation with the Sellers, prior to the Closing Date.

    Administrative Reserve

    55. Section 10.5 of the APA provides for the funding of a reserve (the "Administrative

    Reserve") to satisfy certain post-closing and legacy obligations of the Applicants, being (a)

    administrative or other claims and costs outstanding on the Closing Date with respect to

    amounts secured by charges created by the CCAA Court, including by the Initial CCAA

    Order; (b) certain amounts payable by any Seller or any current or former director or officer

    of any Seller to Governmental Authorities in order to settle outstanding Environmental

    Claims; and (c) Cure Costs in an amount not to exceed $6 million.

    6569147 v8

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    56. The Monitor will establish the Administrative Reserve out of the Sellers available

    cash, and to the extent such funds are below $47 million, the Buyer will top up the

    Administrative Reserve upon Closing.

    57. The APA requires that an Administrative Reserve Order be granted by this Court

    which will set out the process for the administration of the Administrative Reserve by the

    Monitor.

    58. The APA contemplates that, following payment of the Administrative Reserve Costs,

    any remaining balance of the Administrative Reserve shall be an asset of, and owned by the

    Term Lenders, and distributed pro rata amongst same.

    Purchased Assets

    59. The Buyer has agreed to purchase all of the Sellers' right, title and interest in and to,

    intern//o, the following assets comprising substantially all of the Seller's business (as set out

    more particularly in APA s. 2.1, the "Purchased Assets"):

    (a) Cash and Accounts Receivable, except to the extent used to fund the

    Administrative Reserve;

    (b) Inventory;

    (c) Fixed Assets and Equipment;

    (d) Assumed Contracts (detailed further starting at paragraph 75 below);

    (e) Real Property used in or required for the Business, including the Sellers'

    main facility located at 105 West St., Sault Ste. Marie, Ontario (the "Sault Ste.

    Marie Property"); and

    (f) Personal Property Leases, Real Property Leases and Real Property Landlord

    Leases.

    6569147 v8

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    60. The Sellers own and have good and marketable title to, or the right to use, the

    Purchased Assets subject to the caveats described in the APA, including the list of Permitted

    Encumbrances described below.

    61. Substantially all of the Purchased Assets are located in Canada. I am advised by

    U.S. Counsel to the Applicants that a portion of the Purchased Assets are located in the

    United States (the "U.S. Assets"), including (a) certain warehoused spare equipment to be

    used in the steel production process; and (b) steel inventory located in certain storage and

    processing facilities located in third-party locations. I am further advised by U.S. Counsel to

    the Applicants that that, as of May 31, 2016, approximately 15,000 net tonnes of steel was

    located within the United States, all of which, along with the spare equipment noted herein,

    is proposed to be transferred to the Buyer pursuant to the APA. The Sellers will seek the

    issuance of a Recognition Order and U.S. Sale Order approving the transfer of the U.S.

    Assets.

    Excluded Assets

    62. The APA lists the assets which are to be excluded from the sale (the "Excluded

    Assets") which includes, inter alia and as described in greater details at section 2.2 of the

    APA:

    (a) The Excluded Real Estate Properties, including certain legacy mining

    properties located near Wawa, Ontario and the Goudreau region Ontario, as

    well as any other real property other than the Sault Ste. Marie Property

    designated by the Buyer to be excluded at least ten business days prior to

    Closing; and

    (b) Contracts of the Sellers that are not Assigned Contracts.

    Assumed Liabilities

    63. The APA contemplates that the Buyer will assume certain liabilities of the Sellers (as

    defined more particularly in Section 2.3 of the APA, the "Assumed Liabilities") including,

    inter alia,

    6569147 v8

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    (a) Post-Closing Date obligations under the Assigned Contracts and any Cure

    Costs in excess of those provided for in the Administrative Reserve;

    (b) Post-Filing Date trade payables relating to the Business incurred prior to the

    Closing Time;

    (c) Liabilities arising out of the operation of the Purchased Assets for the periods

    on and after the Closing Time;

    (d) Employee obligations, as set out in sections 2.3 and 7.7 of the APA and

    described more fully below;

    (e) Environmental liabilities relating to post-Closing acts or omissions of the

    Buyer, excluding pre-existing conditions, events, acts or omissions except to

    the extent such pre-existing matters are compromised, modified or

    eliminated pursuant to any agreement entered into pursuant to APA Section

    6.2(g)(ii), described more fully below;

    (f) Real and personal property taxes accruing on or after the Closing Date and

    certain other tax obligations, including obligations for which the Sellers'

    directors and officers may be liable;

    (g) Claims for which a former or current director or officer of the Sellers would

    be liable under section 13 of the Construction Lien Act or section 110 of the

    Pension Benefits Act;

    (h) Pre-Filing Date obligations under the ABL Facility; and

    (i) Any liability or obligation that ranks in priority to the obligations of the

    Sellers under the Term Loan Facility.

    Excluded Liabilities

    64. Other than the Assumed Liabilities, the Buyer will not assume and will not be liable

    or otherwise responsible for any debts, liabilities or other obligations of the Sellers or their

    6569147 v8

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    affiliates (as defined in Section 2.4 of the APA, the "Excluded Liabilities"), which consist

    mainly of Pre-Filing Date obligations. The Excluded Liabilities include, inter alia:

    (a) Except as expressly included in Assumed Liabilities, all liabilities to the

    extent arising out of the operation of Business or the Purchased Assets for

    periods prior to the Closing Time (including intercompany liabilities);

    (b) All liabilities of the Sellers under the Assigned Contracts, excluding the Cure

    Costs and any trade payables or other liabilities which, in each case, are

    Assumed Liabilities, incurred prior to the Closing Time;

    (c) As it relates to Employees, (i) all liabilities arising out of the existing

    Collective Agreements, except for those obligations and liabilities under the

    new Collective Agreements entered into as a condition of closing pursuant to

    Section 6.2(f) (ii) of the APA; (ii) all Employee liabilities arising prior to or as

    of the Closing Time except those specifically assumed in Section 2.3(d) or

    section 7.7 of the APA which include vacation pay or wage liability

    (including under grievances) for which any present of former director or

    officer of a Seller or an affiliate thereof would be liable; and (iii) all liabilities

    related to Employee benefit plans sponsored or maintained by the Sellers;

    and

    (d) Environmental liabilities arising pre-Closing, or any other matters that

    become subject to investigation from an applicable government body due to

    acts or omissions of the Sellers, including all liabilities arising pursuant to the

    Director's Order dated November 9, 2015 issued by the Ontario Ministry of

    the Environment and Climate Change, as amended November 16, 2015.

    Permitted Encumbrances

    65. The APA lists certain Encumbrances (the "Permitted Encumbrances", as listed in

    section 1.1(1jijj) of the APA) that will remain attached to the Purchased Assets following

    Closing. The Permitted Encumbrances include:

    6569147 v8

  • - 19 -

    (a) Statutory liens for current Taxes (and in the case of the City of Sault Ste.

    Marie, agreed upon Taxes), assessments or other governmental charges not

    yet due and payable provided that an appropriate reserve has been

    established therefor on the books of the Business;

    (b) Undetermined or inchoate liens which shall not at the time have been

    registered against the Real Property or of which notice in writing shall not at

    the time have been given to the Sellers pursuant to the Construction Lien Act

    (Ontario) and in respect of any of the foregoing, the Sellers have, where

    applicable, complied with the holdback or other similar provisions or

    requirements of the relevant construction contracts;

    (c) those Encumbrances registered on title to the Real Property subject to

    revisions in the Approval and Vesting Order;

    (d) Encumbrances associated with the DIP Credit Agreement; and

    (e) Encumbrances associated with the ABL Facility.

    Conditions to Closing

    66. The APA contains certain conditions for Closing for the mutual benefit of the Buyer

    and the Sellers at section 6.1 of the APA (the "Mutual Closing Conditions"), including

    obtaining the Approval and Vesting Order sought herein, the U.S. Sale Order and

    Recognition Order from the U.S. Bankruptcy Court, and necessary Regulatory Approvals,

    being Competition Act Approval, U.S. HSR Approval, and Investment Canada Approval,

    each of which the parties have agreed to make and use their reasonable best efforts to obtain

    if such approvals are required.

    67. The APA contains certain conditions to Closing for the exclusive benefit of the Buyer

    (the "Buyer Conditions") at section 6.2 of the APA, which may be waived by the Buyer in

    whole or in part. The Buyer Conditions include, inter alia:

    (a) Amendments to the PortCo and Cogen Agreements required by the Buyer,

    acting in a commercially reasonable manner;

    6569147 v8

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    (b) Entry by the Buyer into satisfactory long-term iron ore contracts and coal

    supply contracts at prices and on other terms satisfactory to the Buyer, acting

    in a commercially reasonable manner;

    (c) Agreements with the applicable Governmental Authorities regarding a

    reduction in property tax assessments from the City of Sault Ste. Marie for

    the Sault Ste. Marie Property satisfactory to the Buyer, acting in a

    commercially reasonable manner;

    (d) Transfer to the Buyer of the requirements for continued participation in the

    Northern Industrial Electricity Rate (NIER) program;

    (e) Establishment of financial and other support including capital projects and

    employee training programs granted by appropriate Governmental

    Authorities to the Buyer on terms satisfactory to the Buyer, acting in a

    commercially reasonable manner;

    (f) Approval of regulations that relieve the Buyer of all Pension Plan obligations

    except for specified fixed and variable amounts; and the replacement of the

    Collective Agreements with new collective agreements ratified by the

    membership and effective upon Closing, which shall result in the

    extinguishment, to the commercially reasonable satisfaction of the Buyer, of

    any liability to the Buyer under the current Collective Agreements unless

    such liability is expressly assumed under the APA;

    (g) Agreements with applicable Governmental Authorities providing relief from

    or exempting, releasing and/ or indemnifying the Buyer and the current and

    former directors and officers of the Sellers from any pre-Closing

    environmental liabilities related to the Business;

    (h) Establishment of financial and other support, relief, extensions and

    exemptions related to (a) any Environmental Law currently in force, or

    introduced post-Closing, and (b) Environmental Compliance Approval

    6569147 v8

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    (Landfill) Number A560101; and a stay of any further action pursuant to the

    Director's Order for a period of five years;

    (i)

    That no Material Adverse Effect shall have occurred; and

    That the Required Consent Contracts shall have been assigned at Closing.

    68. The APA contains certain conditions to Closing for the exclusive benefit of the

    Sellers at Section 6.3 of the APA (the "Sellers' Conditions"), which may be waived by the

    Sellers in whole or in part. The Sellers' Conditions include, inter alia, the issuance of the

    Administrative Reserve Order, the establishment of the Administrative Reserve, and the

    provision of evidence that the funds contemplated by the Equity Commitment Letter are

    available and ready to be funded to Buyer or as it may direct.

    Closing Date and Time

    69. The APA contemplates that Closing shall occur no later than five Business Days after

    the Conditions to Closing set out in Section 6 of the APA have been satisfied or waived (the

    "Closing Date"). In any event, the Closing Date shall be no later August 31, 2016 or such

    later date agreed to by both the Sellers and the Buyer in writing with the consent of the

    Monitor. Closing shall be at 10:00 am Toronto time on the Closing Date or Date or such

    other time on the Closing Date as the Parties agree in writing that the Closing Time shall

    take place.

    Termination

    70. The APA may be terminated at any time prior to Closing as described in Section 9.

    The APA may be terminated pursuant to Section 9 if, inter alia, Closing has not occurred on

    or before August 31, 2016 or such later date agreed to by both the Sellers and the Buyer in

    writing with the consent of the Monitor (the "Sunset Date"); the DIP Credit Agreement has

    been declared or deemed to be due and payable in accordance with its terms prior to the

    stated maturity thereof and such acceleration shall not have been stayed, rescinded or

    annulled within ten days after acceleration thereof; and/or there is a material violation or

    breach by the Sellers or Buyer of any covenant representation or warranty that would

    6569147 v8

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    prevent the satisfaction of the conditions precedent to close by the Sunset Date that has not

    been waived or cured, unless the party seeking to terminate is in material breach of the

    APA.

    71. Additionally, the APA contemplates that certain Court orders shall be granted in

    connection with the APA and Sale Transaction, as set out in Section 8.1. More specifically, if

    the Approval and Vesting Order has not been granted by the CCAA Court by July 15, 2016,

    or such later date agreed to in writing by the Buyer in its sole discretion, and the

    concomitant U.S. Bankruptcy Court orders have not been granted by July 29, 2016, or such

    later date agreed to in writing by the Buyer in its sole discretion, then the Buyer may

    terminate the APA.

    Post-Closing Corporate and Capital Structure

    72. Following consummation of the Sale Transaction, the Purchased Assets will be

    owned by the Buyer or a subsidiary of the Buyer. The Buyer will have an asset-based

    lending revolving credit facility with a minimum of $200 million in available liquidity, and

    no other debt.

    73. KPS will commit an aggregate amount of up to $383 million (and no less than $228

    million) into common equity of the Buyer (the "Equity Financing Commitment"), pursuant

    to an executed commitment letter, among the Buyer and the KPS Entities. Due to the

    commercially sensitive nature of the Equity Financing Commitment, the Applicants have

    not included a copy of same as an exhibit to this affidavit.

    74. The Equity Financing Commitment will be available at Closing for the transactions

    contemplated by the APA and the Consortium Agreement. Assuming the Equity Financing

    is funded in accordance with the Equity Financing Commitment, the net proceeds

    contemplated by the Equity Financing Commitment will be sufficient to enable the Buyer to

    pay the Cash Purchase Price payable by the Buyer pursuant to the APA.

    6569147 v8

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    Assignment of Contracts

    75. The APA contemplates that the Sellers will assign all Assigned Contracts (being the

    contracts listed in the Schedules 2.1(f)-(h) and (j) in the Disclosure Letter) and Permits to the

    Buyer, using commercially reasonable efforts to obtain consents where the Assigned

    Contract has an assignment consent provision.

    76. To the extent that an Assigned Contract is also a Required Consents Contract

    (which list of contracts includes the PortCo Agreements, the Cogen Agreements, any Permit

    that is material to the Business, any Contract which, if terminated, would have a Material

    Adverse Effect, and any contract the Buyer and Sellers agree is material to the Business) and

    has not been assigned with the consent of the counterparty where required, the Sellers are

    required to seek court approval to assign those agreements by way of the Canadian

    Assignment Order and/or the U.S. Assignment Order, as applicable (together, the

    "Assignment Orders") and to the extent the outstanding Required Consent Contracts can

    be assigned under law. Obtaining the Assignment Orders for the outstanding Required

    Consents Contracts is a condition precedent to Closing.

    77. The Administrative Reserve contemplates a $6 million Cure Cost fund, with any

    excess Cure Cost amount to be borne by the Buyer.

    APPROVAL OF THE SALE TRANSACTION

    78. As described above, the SISP undertaken by the Applicants for the sale of their

    assets which culminated in the APA was approved by the Court and was conducted with

    assistance from the Applicants' advisors and under the supervision of the Court-appointed

    Monitor.

    79. In addition to the comprehensive sales process, the Applicants, with assistance from

    their advisors and as overseen by the Monitor, extensively negotiated the terms of the APA

    in order to reach the best possible agreement under the SISP. As noted above, the

    Applicants devoted time and resources to identify alternative restructuring opportunities

    during these CCAA Proceedings but have been unable to secure another actionable

    proposal.

    6569147 v8

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    80. Based on these facts, the Applicants, with the assistance of their legal counsel,

    Evercore, the CRA and with input from the Monitor, have determined that as of the date

    hereof the APA and the Sale Transaction contemplated therein is in the best interest of all

    stakeholders and in the Applicants' buSiness judgment, the Purchase Price represents the

    highest price realizable for the Purchased Assets.

    81. The Sale Transaction should allow the Applicants to complete their restructuring by

    September 2016, which is the ideal time to do so given the nature of the Business.

    Concluding the Sale Transaction prior to autumn will stabilize and de-leverage the

    Applicants' Business prior to the inventory build-up. Failure to successfully stock pile

    inventory prior to winter would have a materially adverse effect on the Business.

    82. The Sale Transaction will allow the Business to operate as a going concern without

    the need for continued DIP Financing, which expires by the end of August 2016 (and in any

    event not later than September 2016). Should the Applicants' restructuring process not be

    complete by the expiry date of the DIP Financing, the Applicants would be forced to extend

    same or enter into a replacement DIP loan agreement, at great cost to the Applicants'

    stakeholders. Considering that the Applicants have conducted a comprehensive and robust

    process to solicit both sale and investment opportunities (including alternative restructuring

    proposals), and given the volatility of steel prices, it is not in the best interest of the

    stakeholders to extend these CCAA Proceedings, especially considering the expense of

    maintaining the CCAA proceedings and the distraction of management from focusing on

    operations.

    83. Furthermore, in the Applicants' business judgement, KPS will be a capable manager

    of the Business. KPS is well-financed, has a track record of acquiring and turning around

    distressed businesses, has experience in the metals industry, and has a successful history of

    working constructively with unions which are a key stakeholder in any steel company.

    84. I am informed by Canadian counsel to the Applicants, and do verily believe, that the

    Applicants and the Buyer are not related persons within the meaning of the CCAA. I am

    further advised by Canadian counsel to the Applicants that the Applicants have obligations

    6569147 v8

  • - 25 -

    under section 36(7) of the CCAA which I am advised can and will be paid as required under

    the CCAA by Mr. Rajat Marwah, the CFO of Algoma.

    85. It is my understanding that the Monitor is supportive of the Applicants filing a

    motion at this time seeking approval of the APA and the Sale Transaction and will be

    providing the Court with a report on the proposed transaction prior to the return of the

    Applicants' motion. The Monitor also advises that its report will be prepared and served

    after the Consent Mediation and after the matters to be considered at such Consent

    Mediation, including restructuring matters between the Term Lenders and the Senior

    Secured Noteholders, have been addressed.

    PLAN OF ARRANGEMENT

    86. The Applicants have contemplated completing the Sale Transaction under a plan of

    compromise or arrangement under the CCAA. If the Applicants pursue this route, I

    understand that a further motion shall be filed in respect of such relief.

    CONCLUSION

    87. For the reasons described above, it is in the best interests of the Applicants and their

    stakeholders for the Court to approve the Approval and Vesting Order.

    SWORN BEFORE ME at the City of Toronto, in the Province of Ontario, on June 20, 2016.

    Commissioner for Taking Affidavits John Strek

    6569147 v8

  • IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED

    Court File No: CV-15-000011169-00CL

    AND IN THE MA 1 I ER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF ESSAR STEEL ALGOMA INC., ESSAR TECH ALGOMA INC., ESSAR STEEL ALGOMA (ALBERTA) ULC, CANNELTON IRON ORE COMPANY AND ESSAR STEEL ALGOMA INC. USA

    ONTARIO SUPERIOR COURT OF JUSTICE - COMMERCIAL

    LIST Proceeding commenced at Toronto

    AFFIDAVIT OF JOHN STREK (SWORN JUNE 20, 2016)

    STIKEMAN ELLIOTT LLP Barristers & Solicitors 5300 Commerce Court West 199 Bay Street Toronto, Canada M5L 1B9

    Ashley John Taylor LSUC#: 39932E Tel: (416) 869-5236 E-mail: [email protected]

    Kathryn Esaw LSUC#: 58264F Tel: (416) 869-6820 Email: [email protected]

    Lee Nicholson LSUC#: 664121 Tel: (416) 869-5604 Fax: (416) 947-0866 Email: [email protected]

    Lawyers for the Applicants

    6569147 v8

  • TAB A

  • EXHIBIT "A"

    referred to in the Affidavit of

    JOHN STREK

    Sworn June , 2016

    Commissioner for Taking Affidavits

  • ASSET PURCHASE AGREEMENT

    ESSAR STEEL ALGOMA INC.

    - and -

    ESSAR STEEL ALGOMA INC. USA

    as Sellers

    - and -

    1076318 B.C. LTD.

    as Buyer

    LEGAL I 39083078 1 5

  • TABLE OF CONTENTS

    Page

    ARTICLE 1 INTERPRETATION 2 1 1 Definitions 1.2 Statutes 19 1.3 Headings and Table olContents I9 1.4 Gender and Number I 9 1.5 Currency 1.6 Invalidity of Provisions 20 1.7 Knowledge 20 1.8 Entire Agreement 70 1.9 Waiver, Amendment 20 1.10 Governing Law; Jurisdiction and Venue 7 I

    1.11 Disclosure Letter 7 I

    1.12 Sellers' Representative

    ARTICLE 2 PURCHASE AND SALE 21 2.1 Agreement to Purchase and Sell Purchased Assets 2.2 Excluded Assets 76 2.3 Assumption of Liabilities 27 2.4 Excluded Liabilities 78

    2.5 Assignment of Purchased Assets 30

    ARTICLE 3 PURCHASE PRICE AND RELATED MATTERS 31 3.1 Purchase Price 31 3.2 Purchase Price Allocation 32

    ARTICLE 4 REPRESENTATIONS AND WARRANTIES BY THE SELLERS 32 4.1 Corporate Existence 32 4.2 Due Authorization and Enforceability of Obligations 32 4.3 Residence of the Sellers 33 4.4 Absence of Certain Changes or Events 33 4.5 Absence of Conflicts 34 4.6 Customers and Suppliers 34 4.7 Approvals and Consents 35 4.8 Taxes 35 4.9 Insurance 35 4.10 Sufficiency of Assets 35 4.11 Title to Assets 36 4.12 Real Property 36 4.13 Real Property Landlord Leases 36 4.14 Real Property Leases 37 4.15 Environmental Matters 37 4.16 Work Orders and Deficiencies 39 4.17 Intellectual Property 39 4.18 Information Techno logy Systems 39 4.19 Conduct of Business 39 4.20 Labour and Employee Benefit Matters 40 4.21 Brokers; Advisor Fees 43

    LEGAL 1 3968307171 15

  • TABLE OF CONTENTS (continued)

    Page

    4.22 Shared Services 43 4.23 No Other Representations, Warranties or Covenants 43

    ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE BUYER 43 5.1 Corporate Existence 43 5.2 Residence of the Buyer 43 5.3 Absence of Conflicts 43 5.4 Due Authorization and Enforceability of Obligations 44 5.5 Approvals and Consents 44 5.6 Credit Bid Commitment Letter 44 5.7 Consortium Agreement 45 5.8 Equity Commitment Letter 45 5.9 GST, HST and QST Registration 46 5.10 As Is, Where Is 46

    ARTICLE 6 CONDITIONS 47 6.1 Conditions for the Benefit ofthe Buyer and the Sellers 47 6.2 Conditions for the Benefit of the Buyer 48 6.3 Conditions for the Benefit of the Sellers 52

    ARTICLE 7 ADDITIONAL AGREEMENTS OF THE PARTIES 53 7.\ Access to Information 53 7.2 Conduct of Business Until Closing Time 53 7.3 Approvals and Consents 54 7.4 Covenants Relating to this Agreement 57 7.5 Release; Acknowledgements; Indemnity 59 7.6 Tax Matters 59 7.7 Employee Matters 62 7.8 Confirmatory Due Diligence 64 7.9 Certain Payments or Instruments Received from Third Persons 64 7.10 Certain Payments Relating to Purchased Assets 64 7.11 Insurance Matters 65 7.12 Intellectual Property Matters 65 7.13 Agreements relating to Environmental Matters 65 7.14 Permits, Surety Bonds or Financial Assurances 65 7.15 Notice of Certain Events 65 7.16 Risk of Loss 66 7.17 Change Names 66 7.18 Amendments to Acquisition Structure 66

    ARTICLE 8 COURT ORDERS 66 8.1 Court Orders 66 8.2 Bankruptcy Process 67 8.3 Additional Bankruptcy Matters 67

    ARTICLE 9 TERMINATION 68 9.1 Termination 68 9.2 Effect of Termination 69

    LEGAL 3%83078 15

  • TABLE OF CONTENTS (continued)

    Page

    ARTICLE 10 CLOSING 69 10.1 Location and Time of the Closing 69 10.2 Sellers' Deliveries at Closing 70 10.3 Buyer's Deliveries at Closing 71 10.4 Possession of Assets 72 10.5 Monitor; Administrative Reserve 72 10.6 Simultaneous Transactions 72

    ARTICLE 11 GENERAL MATTERS 72 1 1.1 Confidentiality 72 11.2 Public Notices 73 11.3 Injunctive Relief 74 11.4 Survival 75 11.5 Expenses 75 11.6 Non-Recourse 75

    11.7 Assignment; Binding Effect 75

    11.8 Notices 75

    11.9 Subdivision Legislation 78 1 1.10 Counterparts; Facsimile Signatures 78 11.11 Language 78

    EXHIBITS

    Exhibit A Form of Certificate ofNon-Foreign Status

    LEGAL 1306830 78 I

  • ASSET PURCHASE AGREEMENT

    THIS AGREEMENT is made as ofJune •, 2016

    AMONG:

    ESSAR STEEL ALGOMA INC., a corporation amalgamated under the laws of

    Canada ("ESAI")

    - and -

    ESSAR STEEL ALGOMA INC. USA, a corporation established under the laws of Delaware ("Algoma USA" and, collectively with ESAI, the "Sellers")

    - and -

    1076318 B.C. LTD., a corporation incorporated under the laws of the Province of British Columbia (the "Buyer")

    RECITALS:

    A. The Sellers carry on the business of integrated steel production, including the production of certain raw steel inputs, steelmaking, and the sale and distribution of steel products (the

    -Business").

    B. On the Filing Date, the Initial Applicants fi led with the CCAA Court an application for protection under the CCAA and were granted certain initial creditor protection pursuant to the Initial CC/\A Order. Holdings was added as an applicant in the CCAA Proceedings on

    November 19, 2015.

    C. On the Filing Date, the Initial Applicants commenced ancillary insolvency proceedings under Chapter 15 of Title 11 of the United States Code (the "U.S. Proceedings") in the U.S. Bankruptcy Court. Holdings was added as a petitioner in the U.S. Proceedings on

    November 20, 2015.

    D. The Sellers wish to sell to the Buyer, and the Buyer wishes to purchase from the Sellers, the Purchased Assets (as defined below), which constitute substantially all of the property and assets owned by the Sellers and used in connection with the Business, and the Buyer further wishes to assume from the Sellers the Assumed Liabilities (as defined below),

    subject to the terms and conditions of this Agreement.

    E. The Buyer will, at the Closing (as defined below), hold all of the indebtedness of the Sellers

    under the Term Loan Facility.

    NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency

    of which are acknowledged), the Parties agree as follows:

    LEGAL 3%83078 15

  • - 2 -

    ARTICLE 1 INTERPRETATION

    1.1 Definitions

    In this Agreement,

    (a) "ABL Credit Agreement" means the revolving credit agreement dated as of November 14, 2014 between ESA1 (as borrower), certain subsidiaries and affiliates of ESAI (as guarantors) and Deutsche Bank AG (acting through its Canada Branch) (as the administrative and collateral agent) and the lenders party thereto.

    (b) "ABL Facility" means the revolving loan facility in the aggregate principal amount of $50,000,000 under the ABL Credit Agreement.

    (c) "Accrued Liabilities" means liabilities relating to the Business incurred as of the Closing Time but which are not yet due and payable as of the Closing Time (excluding reserves and contingent amounts) to the extent they are Assumed Liabilities (for example, accounts payable and accrued wages payable) and, for greater certainty, shall include any liabilities under the ABL Facility.

    (d) "Administrative Reserve" means a cash reserve in the amount of $47,000,000, which reserve shall be established by the Monitor out of the Sellers' cash, and if the Sellers' cash is not sufficient, any deficiency shall be funded by the Buyer on the Closing Date and held in trust by the Monitor in a segregated interest-bearing account for the benefit of Persons entitled to be paid the Administrative Reserve Costs for the purpose of paying the Administrative Reserve Costs in accordance with the Administrative Reserve Order.

    (e) "Administrative Reserve Costs" means, collectively: (i) administrative or other claims and costs outstanding on the Closing Date with respect to amounts secured by charges created by the CCAA Court, including by the Initial CCAA Order; (ii) amounts payable by any Seller or any current or former director or officer of any Seller to Governmental Authorities in order to settle outstanding Environmental Claims which shall not exceed 1111111. (iii) Cure Costs in an amount not to exceed $6,000,000.

    (0 "Administrative Reserve Order" means an order of the CCAA Court, in form and substance satisfactory to the Sellers and the Buyer, each acting in a commercially reasonable manner, to be made in connection with the CCAA Proceedings on or before the Closing Date that will set out the amount of the Administrative Reserve and the process for the administration of the Administrative Reserve by the Monitor.

    (g )

    "affiliate" of any Person means, at the time such determination is being made, any other Person controlling, controlled by or under common control with such first Person, in each case, whether directly or indirectly through one or more intermediaries, and "control" and any derivation thereof means the control by one Person of another Person in accordance with the following: a Person ( -Al controls

    ITCiAl. I 3 , k+/111.17h 15

  • - 3 -

    another Person ("B") where A has the power to determine the management and policies of B by contract or status (for example, the status of A being the general partner of B) or by virtue of beneficial ownership of a majority of the voting interests in B; and, for certainty and without limitation, if A owns shares to which are attached more than 50% of the votes permitted to be cast in the election of directors (or other Persons performing a similar role) of B, then A controls B for this purpose.

    (h) "Agent" has the meaning given to such term in Section 5.6.

    "Agreement" means this Asset Purchase Agreement and all attached Exhibits, in each case as the same may be supplemented, amended, restated or replaced from time to time, and the expressions "hereof', "herein", "hereto", "hereunder", "hereby" and similar expressions refer to this Asset Purchase Agreement and all attached Exhibits, and unless otherwise indicated, references to Articles, Sections and Exhibits are to Articles, Sections and Exhibits in this Asset Purchase Agreement.

    "Alberta ULC" means Essar Steel Algoma (Alberta) ULC (formerly known as 1839688 Alberta ULC), an unlimited liability corporation established under the laws of Alberta.

    (k) "Algoma USA" has the meaning given to such term in the preamble to this Agreement.

    (0 "Allocation Statement" has the meaning given to such term in Section 3.2.

    (m) "Applicable Law" means any transnational, domestic or foreign, federal, provincial, territorial, state, local or municipal (or any subdivision of any of them) law (including without limitation the common law), statute, ordinance, rule, regulation, restriction, standard, by-law (zoning or otherwise), judgment, order, direction or any consent, exemption, Governmental Authorizations. or any other legal requirements of, or agreements with, any Governmental Authority, that applies in whole or in part to the transactions contemplated by this Agreement, the Sellers, the Buyer, the Business, or any of the Purchased Assets or the Assumed Liabilities.

    (n) -Approval and Vesting Order - means an order granted by the CCAA Court. in form and substance satisfactory to the Sellers and the Buyer. each acting in a commercially reasonable manner, and served on those Persons identified by the Sellers and the Buyer, which will, among other things:

    authorize and approve this Agreement and the execution and delivery thereof by the Sellers;

    (ii) authorize and direct the Sellers to complete the transactions contemplated by this Agreement, including the option of implementing the transaction in conjunction with a plan of compromise or arrangement pursuant to the CCAA;

    LEGAL 3%8307S 15

  • -4

    (iii) provide for the vesting of title to the Purchased Assets in the Buyer in accordance with the terms and conditions of this Agreement, free and clear of all claims against the Purchased Assets of every nature or kind whatsoever and howsoever arising, including all Encumbrances, save for Permitted Encumbrances, upon the delivery of the Monitor's Certificate to the Buyer indicating that the conditions precedent to the consummation of the transactions contemplated by this Agreement have been satisfied or waived (where permissible); and

    (iv) exempt the transactions contemplated by this Agreement from compliance with applicable bulk sales legislation.

    (o) "Assigned Contracts" means, collectively, the Personal Property Leases set out on Schedule 2.1(f) of the Disclosure Letter, the Real Property Leases set out on Schedule 2.1(h) of the Disclosure Letter, the Real Property Landlord Leases set out on Schedule 2.1(g) of the Disclosure Letter, the Assumed Contracts set out on Schedule 2.I(j) of the Disclosure Letter and the Permits.

    (p) "Assigned U.S. Contract" means any Assigned Contract governed by the laws of the United States or a jurisdiction located within the territory of the United States.

    (q) "Assumed Contracts" has the meaning given to such term in Section 2.1(j).

    (r) "Assumed Employee Plans" has the meaning given to such term in Section 7.7(g).

    (s) "Assumed Employees has the meaning given to such term in Section 7.7(c).

    (t) "Assumed Liabilities" has the meaning given to such term in Section 2.3.

    (u) "Business" has the meaning given to such term in Recital A.

    (v) "Business Day" means any day, other than a Saturday or Sunday, on which the principal commercial banks in Toronto, Ontario are open for commercial banking business during normal banking hours.

    (w) "Buyer" has the meaning given to such term in the preamble to this Agreement.

    (x) "Canadian Assignment Order" means an order or orders of the CCAA Court pursuant to applicable provisions of the CCAA, in form and substance acceptable to the Sellers and the Buyer, each acting in a commercially reasonable manner, authorizing and approving the assignment of any Assigned Contract for which a consent has not been obtained and preventing any counterparty to the Assigned Contract from exercising any right or remedy under the Assigned Contract by reason of any default(s), including those arising from the CCAA Proceedings or the insolvency of the Sellers.

    (y) "Cannelton- means Cannelton Iron Ore Company, a corporation established under the laws of Delaware.

    (z) "Cash Purchase Price" has the meaning given to such term in Section 3.1(a).

    LEGAL 13`681078 IS

  • 5

    (aa) "CCAA" means the Companies' Creditors Arrangement Act (Canada).

    (bb) "CCAA Court" means the Ontario Superior Court ofJustice (Commercial List).

    (cc) "CCAA Proceedings" means the proceedings commenced under the CCAA by the Sellers pursuant to the Initial CCAA Order (Court File No. CV-00001 1 169-00CL).

    (dd) "Claims" includes claims, demands, complaints, grievances, actions, applications, suits, causes of action, Orders, diarges, indictments, prosecutions, informations or other similar processes, assessments or reassessments, judgments, debts, liabilities, expenses, costs, damages or losses, contingent or otherwise, whether liquidated or unliquidated, matured or unmatured, disputed or undisputed, contractual, legal or equitable, including loss of value, professional tees, including fees and disbursements of legal counsel on a full indemnity basis, and all costs incurred in investigating or pursuing any of the foregoing or any proceeding relating to any of

    the foregoing.

    (ee) "Closing" means the completion of the sale and purchase of the Purchased Assets pursuant to this Agreement at the Closing Time, and all other transactions contemplated by this Agreement that are to occur contemporaneously with the sale and purchase of the Purchased Assets.

    "Closing Date" means a date no later than five (5) Business Days after the conditions set forth in Article 6 have been satisfied (or such other date agreed to by the Parties in writing), other than the conditions set forth in Article 6 that by their terms are to be satisfied or waived at the Closing; provided that, the Closing Date shall be no later than the Sunset Date.

    (gg) "Closing Documents" means all contracts, agreements and instruments required by this Agreement to be delivered at or before the Closing.

    (hh) "Closing Time" means I 0:00 a.m. (Toronto time) on the Closing Date or such other time on the Closing Date as the Parties agree in writing that the Closing Time shall take place.

    (ii) "'Code" means the U.S. Internal Revenue Code of 1986, as amended.

    (jj) -Cogen Agreements" means, collectively: (i) the land lease between ESAI and EPC dated December 21, 2009; (ii) the energy supply agreement between ESAI and EPC dated December 21, 2009; and (iii) the shared services agreement between ESAI and EPC dated December 21, 2009; in each case, as amended, restated, supplemented and/or modified in accordance with the terms of this Agreement.

    (kk) "Collective Agreements" means all of the collective bargaining agreements (including all letters of understanding and agreement) to which the Sellers are a party, or to which the Sellers are otherwise bound, each of which is listed on Schedule 1.1(kk) of the Disclosure Letter.

    (ft)

    FGA1, 1 3968.10 7 8 15

  • 6

    (II) "Commissioner" means the Commissioner of Competition appointed under the Competition Act.

    (mm) "Competition Act" means the Competition Act (Canada).

    (nn) "Competition Act Approval" means either:

    (i) the Commissioner shall have issued an advance ruling certificate under Section 102 of the Competition Act with respect to the transactions contemplated by this Agreement; or

    (ii) each of the Parties shall have filed all notices and information required under Part IX of the Competition Act and the applicable waiting periods shall have expired or been terminated; or

    (iii) the obligation to give the requisite notice has been waived pursuant to subsection 113(c) of the Competition Act;

    and, in the case of (ii) or (iii), the Commissioner or his delegate shall have advised the Buyer in writing that he does not, at that time, intend to make an application under Section 92 ofthe Competition Act in respect ofthe transactions contemplated herein.

    (oo) "Confidential Information" means non-public, confidential, personal or proprietary information which is furnished to the Buyer in writing by the Sellers or any of the Sellers' representatives, including, without limitation, information about identifiable individuals, any information relating to the Sellers and their affiliates, or any customer or supplier of the Sellers, but does not include information that is or becomes generally available to the public other than as a result of disclosure by the Buyer or its representatives in breach of this Agreement or that is received by the Buyer from an independent third party that, to the knowledge of the Buyer, obtained it lawfully and was under no duty of confidentiality (except to the extent that applicable privacy laws do not exclude such information from the definition of personal information) or that is independently developed by the Buyer or its representatives without reference to any Confidential Information.

    (PP) "Confirmatory Due Diligence Materials" means the materials satisfying the due diligence requests listed on Schedule 1.1(pp) of the Disclosure Letter.

    (qq) "Consortium Agreement- has the meaning given to such term in Section 5.7.

    (rr)

    "Contracts" means contracts, licenses, leases, agreements, obligations, promises. undertakings, understandings, arrangements, documents, commitments. entitlements or engagements to which any of the Sellers is a party or by which any of the Sellers are bound or under which any of the Sellers has, or will have, any right or any liability or contingent right or liability (in each case, whether written or oral, express or implied) relating to the Business or the Purchased Assets and includes quotations, orders, proposals or tenders which remain open for acceptance

    and warranties and guarantees.

    LEGAL 13968307815

  • - 7 -

    (as) "Contracts Assignment and Assumption Agreements" means the assignment and assumption agreements for the Assumed Contracts, in a form reasonably satisfactory to each of the Sellers and the Buyer.

    (tt) "Credit Bid Commitment Letter" has the meaning given to such term in Section 5.6.

    (uu) "Credit Bid Documents" has the meaning given to such term in Section 5.6.

    (vv) "Cure Costs" means all amounts necessary to cure any monetary defaults as a condition to assuming the Assigned Contracts.

    "DIP Credit Agreement" means the senior secured, priming and superpriority debtor-in-possession amended and restated credit agreement among ESAI (as borr