Securities Law & Instruments

Headnote

MutualReliance Review System - relief from the registration and prospectusrequirements in connection with a distribution of securities tocreditors under a Companies' Creditors Arrangement Act plan ofarrangement and reorganization - first trade relief granted, subjectto certain conditions - relief from the prospectus requirementfor control persons, subject to certain conditions.

ApplicableOntario Statutory Provisions

SecuritiesAct, R.S.O. 1990, c.S.5, as am., s. 25, 35(1)15.i, 53, 72(1)(i),74(1).

ApplicableMultilateral Instrument

MultilateralInstrument 45-102 - Resale of Securities.

INTHE MATTER OF

THESECURITIES LEGISLATION

OFBRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA,ONTARIO AND QUÉBEC


AND


INTHE MATTER OF

THEMUTUAL RELIANCE REVIEW SYSTEM

FOREXEMPTIVE RELIEF APPLICATIONS


AND


INTHE MATTER OF

ALGOMASTEEL INC.

MRRSDECISION DOCUMENT


WHEREASthe local securities regulatory authority or regulator (the"Decision Maker") in each of British Columbia, Alberta, Saskatchewan,Manitoba, Ontario and Québec (the "Jurisdictions") hasreceived an application from Algoma Steel Inc. ("Algoma") fora decision under the securities legislation of the Jurisdictions(the "Legislation") that the requirement contained in the Legislationto be registered to trade in a security (the "Registration Requirement")and to file and obtain a receipt for a preliminary prospectusand a prospectus (the "Prospectus Requirement") shall not applyto certain trades in connection with a plan of arrangement andreorganization (the "Reorganization") under the Companies' CreditorsArrangement Act (the "CCAA") and section 186 of the BusinessCorporations Act (Ontario) ("BCA");

ANDWHEREAS under the Mutual Reliance Review System forExemptive Relief Applications (the "System") the British ColumbiaSecurities Commission is the principal regulator for this application;

ANDWHEREAS Algoma has represented to the Decision Makersthat:

1.Algoma is organized under the laws of Ontario and is a verticallyintegrated steel producer located in Sault Ste. Marie, Ontario;

2.Algoma is and has been a reporting issuer (or equivalent) inthe Jurisdictions for over 12 months, and is not in defaultof its requirements under the Legislation;

3.Algoma has a current annual information form for the purposesof National Instrument 44-101 Short Form Prospectus Distributions;

4.the authorized capital of Algoma consists of an unlimited numberof common shares (the "Old Common Shares") and 20,000 employeevoting shares, issuable in series of which 53,647,656 Old CommonShares and 20,000 employee voting shares were issued and outstandingas at November 27, 2001;

5.the Old Common Shares are listed on The Toronto Stock Exchangebut are currently suspended from trading;

6.Algoma is not currently a qualified issuer as defined underMultilateral Instrument 45-102 Resale of Securities ("45-102"),but is an electronic filer under National Instrument 13-101System for Electronic Document Analysis and Retrieval (SEDAR);

7.on April 23, 2001, Algoma obtained an initial order under theCCAA in respect of the Reorganization, which granted protectionfrom its creditors;

8.the plan relating to the Reorganization was filed with the OntarioSuperior Court of Justice on November 9, 2001 and was amendedand restated on November 30, 2001, December 5, 2001 and December10, 2001;

9.the holders (the "Noteholders") of Algoma's 12 3/8% First MortgageNotes due 2005 (the "Algoma Notes") and Algoma's unsecured creditors(the "Unsecured Creditors"), among others, approved the Reorganizationand the amended and restated plan;

10.an information circular, containing prospectus level disclosurerelating to Algoma and the particulars of the Reorganization,was provided to the Noteholders and a summary version of theinformation circular was provided to the Unsecured Creditorsalong with instructions on how to obtain a complete versionif desired;

11.notice was provided to creditors by way of advertisements inthe Globe and Mail (National Edition), Algoma News, Sault Starand the Wall Street Journal;

12.shareholder approval of the Reorganization is not required underthe CCAA or the BCA;

13.under the Reorganization, the following trades (the "Trades")will occur:

(a) the Old Common Shares and employee voting shares of Algomawill be cancelled and a new class of common shares of Algoma(the "New Common Shares") will be created;

(b) existing holders of Old Common Shares will not be entitledto receive New Common Shares;

(c) the Algoma Notes will be cancelled and the Noteholders willreceive a pro rata share of U.S. $125 million in aggregate principalamount of 11% Notes due 2009 (the "11% Notes") and U.S. $62.5million in aggregate principal amount of 1% Notes due 2030 (the"1% Notes") and 15,000,000 New Common Shares;

(d) the 1% Notes will be convertible at the option of Algomaor the holder into New Common Shares;

(e) Unsecured Creditors (except those with Claims aggregating$2,500 or less or that value their Claims at $2,500) will receivea pro rata share of 1,000,000 New Common Shares;

(e) Algoma employees will receive either an aggregate of 4,000,000New Common Shares or options to acquire, in the aggregate, 4,000,000New Common Shares, for nominal consideration, which securitieswill either be provided to a trustee or to the employees directly(collectively, the "Employees");

14.in certain Jurisdictions, not all of the Trades are exempt fromthe Registration Requirement and the Prospectus Requirement;

15.Algoma has received conditional listing approval for the NewCommon Shares from the TSE, subject to certain conditions;

16.based on holdings of Algoma Notes prior to the completion ofthe Reorganization, it is likely that one or more parties willbe control persons (as defined in the Legislation) of Algomaafter completion of the Reorganization; and

17.Algoma has been advised that the Reorganization is necessaryfor it to continue as a going concern and to provide a morefavourable result for creditors than liquidation under bankruptcylegislation.

ANDWHEREAS under the System this MRRS Decision Documentevidences the decision of each Decision Maker (the "Decision");

ANDWHEREAS each of the Decision Makers is satisfied thatthe test contained in the Legislation that provides the DecisionMaker with the jurisdiction to make the Decision has been met;

THEDECISION of the Decision Makers under the Legislationis that:

1.the Registration Requirement and the Prospectus Requirementshall not apply to the Trades provided that the first tradein any New Common Shares, the 11% Notes or the 1% Notes acquiredunder this Decision in a Jurisdiction is deemed to be a distributionor a primary distribution to the public under the Legislationof such Jurisdiction unless:

(a) except in Québec, the conditions in subsections (3)or (4) of section 2.6 of 45-102 are satisfied; and

(b) in Québec,

(i) the issuer is and has been a reporting issuer in Québecfor the 12 months immediately preceding the trade,

(ii) no unusual effort is made to prepare the market or to createa demand for the securities that are the subject of the trade,

(iii) no extraordinary commission or consideration is paid toa person or company in respect of the trade, and

(iv) if the selling shareholder is an insider or officer ofthe issuer, the selling shareholder has no reasonable groundsto believe that the issuer is in default of securities legislation;

2.except in Quebec, the Prospectus Requirement shall not applyto a distribution by a control person (as defined in the Legislation)provided that the conditions in section 2.8 of 45-102 are met,except that the hold periods in section 2.8(2)(2) and 2.8(3)(2)of 45-102 for the New Common Shares, the 11% Notes or the 1%Notes acquired under this Decision may be satisfied by includingthe period of time that the control person held the Algoma Notes.

January21, 2002.

"BrendaLeong"