Marsulex Inc.

Headnote

Clause 104(2)(c) - indirect issuer bids resulting from a reorganization involving issuer and a significant shareholder - purpose of reorganization is to provide the issuer with various tax losses accumulated by the shareholder that the shareholder is unlikely to be able to use in full, and to enable the shareholders of the significant shareholder to achieve certain tax planning objectives relating to the ownership of the issuer's shares -- after reorganization, the issuer will have the same number of shares issued and outstanding, and each shareholder will have the same number of shares and same relative ownership that they owned prior to the reorganization - shareholder to indemnify and reimburse issuer for costs and liabilities associated with reorganization - no adverse economic impact on or prejudice to issuer or public shareholders - issuer exempt from requirements of sections 95, 96, 97, 98 and 100 of the Act.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 95, 96, 97, 98, 100, 102(4)(c).

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5,

AS AMENDED

AND

IN THE MATTER OF

MARSULEX INC.

("Marsulex")

ORDER

UPON the application (the "Application") of Marsulex to the Ontario Securities Commission (the "Commission") for an order pursuant to clause 104(2)(c) of the Securities Act (Ontario) (the "Act") that certain acquisitions by Marsulex of its common shares ("Common Shares") pursuant to a proposed reorganization (the "Reorganization"), described below, are exempt from the requirements of sections 95, 96, 97, 98 and 100 of the Act.

AND UPON considering the Application and the recommendation of the staff of the Commission;

AND UPON Marsulex having represented to the Commission as follows:

1. Marsulex was formed pursuant to articles of amalgamation filed under the laws of Canada on June 16, 1989 and is a reporting issuer under the Act. Marsulex is not in default of any requirements of the Act or the regulations thereunder.

2. The authorized capital of Marsulex consists of an unlimited number of common shares without par value, an unlimited number of senior preference shares without par value, an unlimited number of junior preference shares without par value, and an unlimited number of non-voting convertible shares without par value. As of December 20, 2007, 33,097,498 Common Shares were issued and outstanding.

3. The Common Shares are listed on the Toronto Stock Exchange (the "TSX").

4. Harrowston Holdings Limited ("HHL") is a corporation continued under the laws of Canada and is not a reporting issuer under the Act. HHL is an investment holding company and does not carry on any active business.

5. As of December 20, 2007, HHL directly owned 18,364,279 Common Shares, representing approximately 55% of Marsulex's issued and outstanding Common Shares (the "HHL Marsulex Shares").

6. The authorized share capital of HHL consists of an unlimited number of common shares, an unlimited number of Class 2 common shares and one special voting share. TD Capital Group Limited and Birch Hill Equity Partners II (QLP) L.P., Birch Hill Equity Partners II (Barbados) L.P. and Birch Hill Equity Partners II (Entrepreneurs) L.P. (collectively, the "Current HHL Shareholders") hold all of the issued and outstanding shares of HHL. A corporation ("TD Newco") to be formed by The Toronto-Dominion Bank and Birch Hill Equity Partners II Ltd. will become a shareholder of HHL pursuant to an internal reorganization that HHL will be completed prior to the Reorganization. The Current HHL Shareholders and TD Newco are collectively referred to herein as the "HHL Shareholders".

7. The purpose of the Reorganization is to provide Marsulex with various tax losses accumulated by HHL that HHL is unlikely to be able to use in full, and to enable the HHL Shareholders to achieve certain tax planning objectives relating to the ownership of the HHL Marsulex Shares. The effect of the Reorganization will be that upon completion, the HHL Shareholders will hold 18,364,279 Common Shares directly, rather than indirectly through HHL.

8. The Reorganization entails a series of consecutive transactions which, for the purposes of this Application, may be summarized as follows:

(a) prior to the Reorganization, HHL will complete an internal reorganization whereby:

(i) HHL will transfer all of its assets (other than the HHL Marsulex Shares) to its shareholders; and

(ii) the HHL Shareholders or an affiliate thereof will assume all of HHL's liabilities including the liability for any taxes resulting from the transfer of its assets to them;

(b) following the completion of the internal reorganization of HHL referred to in paragraph (a) above, Marsulex will incorporate a wholly-owned subsidiary ("Subco"). Subco will have no material assets and no liabilities. The authorized capital of Subco will consist of an unlimited number of common shares;

(c) HHL and Subco will then amalgamate to form Amalco by way of an amalgamation (the "Amalgamation") under the Canada Business Corporations Act (the "CBCA");

(d) on the Amalgamation:

(i) Marsulex will issue that number of Common Shares to the HHL Shareholders which will equal, in the aggregate, the number of Common Shares owned by HHL immediately prior to the Amalgamation; and

(ii) Amalco will remain wholly-owned by Marsulex and will acquire the HHL Marsulex Shares; and

(e) immediately following the Amalgamation, Amalco will distribute the HHL Marsulex Shares, its only remaining assets, to Marsulex in connection with a voluntary winding up of Amalco pursuant to the provisions of Part XVIII of the CBCA (the "Voluntary Winding Up") and immediately thereafter, Marsulex will cancel the HHL Marsulex Shares.

9. The Reorganization is subject to:

(i) approval by the board of directors of Marsulex (with those directors who are also directors, significant shareholders or employees of HHL and/or the HHL Shareholders declaring their interest and abstaining from voting); and

(ii) acceptance of notice of the Reorganization by the TSX.

10. The Reorganization, after taking into account the Indemnity (defined below), does not and will not have any adverse economic effect on or adverse tax consequences to, and will not in any way prejudice, Marsulex, Subco, Amalco, or the public shareholders of Marsulex (the "Public Shareholders").

11. No material actual or contingent liability of HHL will be assumed by Marsulex, Subco or Amalco in connection with the Reorganization.

12. Pursuant to an indemnity agreement (the "Indemnity") to be entered into between the HHL Shareholders and Marsulex, the HHL Shareholders will agree to indemnify Marsulex, its subsidiaries, including Subco and Amalco, against any liabilities, which may be incurred by any of them as a result of the Reorganization, beyond the amount of the benefit Marsulex realizes from the Reorganization. The terms of the Indemnity, which will be consistent with terms of indemnities for arm's length third party transactions, will be approved by the independent directors of Marsulex.

13. The Reorganization will not change the number of Common Shares issued and outstanding, as Marsulex will have the same aggregate number of Common Shares outstanding following the Reorganization as it did immediately prior to the Reorganization.

14. Following the Reorganization, each of the HHL Shareholders and the Public Shareholders will beneficially own the same aggregate number and same relative percentages of Common Shares that they owned immediately prior to the Reorganization and will have the same rights and benefits in respect of such shares that they currently have.

15. All costs and expenses incurred by Marsulex and its subsidiaries in connection with the Reorganization will be paid for by the HHL Shareholders.

16. The Reorganization constitutes a related party transaction under Commission Rule 61-501 Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions ("Rule 61-501"). However, Marsulex will be exempt from the independent valuation and shareholder approval requirements of Rule 61-501 by virtue of the Reorganization satisfying all the conditions set out in paragraph 9 of section 5.5 and paragraph 4 of subsection 5.7(1) of Rule 61-501, respectively.

17. The issuance of Common Shares to the HHL Shareholders by Marsulex in connection with the Amalgamation and Voluntary Winding Up will be exempt from the registration and prospectus requirements of sections 25 and 53 of the Act by virtue of section 2.11 of National Instrument 45-106 Prospectus and Registration Exemptions.

18. The acquisition of HHL Marsulex Shares by Amalco in connection with the Amalgamation will constitute an indirect issuer bid under subsection 89(1) and section 92 of the Act. Further, the subsequent acquisition of HHL Marsulex Shares by Marsulex in connection with the Voluntary Winding Up will constitute an issuer bid under subsection 89(1) of the Act. Both such issuer bids will not be exempt issuer bids under the Act.

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

IT IS ORDERED pursuant to subsection 104(2)(c) of the Act that acquisitions by Marsulex of its Common Shares pursuant to the Reorganization be exempt from the requirements of sections 95, 96, 97, 98 and 100 of the Act.

DATED December 28th, 2007.