STELCO INC. NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS. 3. to appoint auditors and to authorize the directors to fix their remuneration;

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1 STELCO INC. NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS NOTICE IS HEREBY GIVEN that the annual and special meeting (the Meeting ) of the shareholders of Stelco Inc. (the Corporation ) will be held in Room 202, North Building, Metro Toronto Convention Centre, 255 Front Street West, Toronto, Ontario, at 10:30 a.m., Toronto time, on Wednesday, June 6, 2007 for the following purposes: 1. to receive the consolidated financial statements of the Corporation for the year ended December 31, and the report of the auditors thereon; 2. to elect directors; 3. to appoint auditors and to authorize the directors to fix their remuneration; 4. to consider and, if deemed advisable, to pass a resolution approving certain amendments to the Corporation s incentive stock option plan; and 5. to transact such other business as may properly come before the Meeting or any adjournment thereof. The accompanying management proxy circular provides information relating to the above matters and is incorporated into and forms part of this notice of the Meeting. Only shareholders of record at the close of business on May 7, 2007 are entitled to notice of and to vote at the Meeting or any adjournment thereof. If you are not planning to be present at the Meeting in person, you may vote your shares in any one of the following ways: (i) by completing, signing and returning the accompanying form of proxy in the enclosed envelope to the Corporation s transfer agent, CIBC Mellon Trust Company, or otherwise by mail to CIBC Mellon Trust Company, P.O. Box 721, Agincourt, Ontario M1S 0A1 or in person to CIBC Mellon Trust Company, Banking Hall, 320 Bay Street, Toronto, Ontario M5H 4A6; or (ii) by following the instructions included in the accompanying management proxy circular for telephone, fax or internet voting. Proxies to be used at the Meeting must be deposited not later than 4:00 p.m., Toronto time, on Tuesday, June 5, 2007 or, in the case of any adjournment of the Meeting, by no later than 4:00 p.m., Toronto time, on the business day preceding the adjourned Meeting. DATED at Hamilton, Ontario this 7 th day of May, BY ORDER OF THE BOARD D. Chad Hutchison General Counsel and Corporate Secretary

2 MANAGEMENT PROXY CIRCULAR GENERAL PROXY INFORMATION This management proxy circular (this Circular ) is furnished in connection with the solicitation of proxies by the management of Stelco Inc. (the Corporation ) for use at the annual and special meeting of the shareholders of the Corporation to be held at 10:30 a.m., Toronto time, on Wednesday, June 6, 2007 (the Meeting ) and at any adjournment thereof. Solicitation will be primarily by mail but proxies may also be solicited by telephone, or personally by officers or employees of the Corporation. In addition, the Corporation will provide proxy materials to brokers, custodians, nominees and fiduciaries ( Intermediaries ), and request that such materials be properly forwarded to the beneficial owners of shares registered in the names of such Intermediaries. All solicitation costs will be borne by the Corporation. Record Date The board of directors of the Corporation has fixed the close of business on Monday, May 7, 2007 as the record date for the purpose of determining shareholders entitled to receive notice of the Meeting (the Shareholders ). Each Shareholder is entitled to one vote for each common share of the Corporation held and shown as registered in such holder s name on the list of Shareholders prepared as of the close of business on the record date. Beneficial Shareholders For the purposes of the Circular, reference to Shareholders or Registered Shareholders means Shareholders who hold their shares directly and are registered as Shareholders of the Corporation and Beneficial Shareholders means beneficial owners of shares whose shares are registered in the name of an Intermediary such as an investment dealer or broker or trust company or depository. Beneficial Shareholders are sometimes referred to as nonregistered shareholders in the marketplace. Beneficial Shareholders can expect to receive either: (i) a form of proxy from the Intermediary that is signed by the Intermediary (typically by a facsimile stamped signature) and which sets forth the number of shares beneficially owned by the Beneficial Shareholder, but which is otherwise uncompleted. The Beneficial Shareholder may complete the form of proxy and deposit it with CIBC Mellon Trust Company ( CIBC Mellon ) as described; or (ii) a voting instruction form from the Intermediary s agent, requesting voting instructions which must be completed and signed, or otherwise dealt with, by the Beneficial Shareholder in accordance with the instructions on the voting instruction form. The majority of Intermediaries delegate responsibility for obtaining voting instructions from Beneficial Shareholders to a service company called Broadridge Investor Communications ( Broadridge ) (formerly ADP Investor Communications). Broadridge typically mails a voting instruction form to Beneficial Shareholders requesting that the Beneficial Shareholders return the form to Broadridge. The Broadridge form also allows completion of the voting instruction form by telephone and by internet. Broadridge then tabulates the results of all instructions received from Beneficial Shareholders and provides appropriate instructions respecting the voting of shares to the Corporation s transfer agent, CIBC Mellon. A Beneficial Shareholder receiving a voting instruction form from Broadridge cannot use the form to vote the shares directly at the Meeting. The voting instruction form must be returned to Broadridge in advance of the Meeting in order to have the shares to which it relates voted.

3 2 Methods of Providing Voting Instructions Registered Shareholders or Beneficial Shareholders are requested to provide voting instructions for the Meeting. Registered Shareholders and Beneficial Shareholders may provide their voting instructions in one of four ways: (i) by returning by mail or delivery the proxy form or the voting instruction form accompanying this Circular; (ii) by returning by fax the proxy form or the voting instruction form accompanying this Circular; (iii) by following the telephone voting procedures referred to in the materials delivered to the Registered Shareholders or the Beneficial Shareholders; or (iv) by using internet voting procedures referred to in the materials delivered to the Registered Shareholders or the Beneficial Shareholders. Shareholders wishing to appoint a person as a proxy other than the management representatives named on the proxy form or the voting instruction form will not be able to do so using telephone voting procedures. Voting by Mail Completed, signed and dated proxy forms may be returned in the postage paid envelopes accompanying them or delivered by mail to the Corporation s transfer agent, CIBC Mellon, at P.O. Box 721, Agincourt, Ontario M1S 0A1 or in person to CIBC Mellon at the Banking Hall, 320 Bay Street, Toronto, Ontario M5H 4A6. Registered Shareholders and Beneficial Shareholders who mail or deliver their proxies must ensure that their proxies are received by the Corporation s transfer agent by 4:00 p.m., Toronto time, on Tuesday, June 5, 2007 (or 4:00 p.m., Toronto time, on the business day preceding any adjournment of the Meeting date). Beneficial Shareholders who receive voting instruction forms may return them in the postage paid envelopes accompanying them or in accordance with the instructions contained in the voting instruction forms. Voting by Fax Completed, signed and dated proxy forms may be returned by fax to the Corporation s transfer agent at Registered Shareholders and Beneficial Shareholders who fax their proxies must ensure that their proxies are received by the Corporation s transfer agent by 4:00 p.m., Toronto time, on Tuesday, June 5, 2007 (or 4:00 p.m., Toronto time, on the business day preceding any adjournment of the Meeting date). Beneficial Shareholders who receive voting instruction forms may return them by fax in accordance with the instructions contained in the voting instruction forms. Voting by Telephone Registered Shareholders may vote by telephone using a touchtone telephone and using the following tollfree number: Registered Shareholders may vote by telephone up to 4:00 p.m., Toronto time, on Tuesday, June 5, 2007 (or 4:00 p.m., Toronto time, on the business day preceding any adjournment of the Meeting date). Beneficial Shareholders should follow instructions for telephone voting conveyed to them by their Intermediaries or their service companies such as Broadridge. Shareholders will be asked to provide a 12 or 13digit Control Number in order to verify their identity (see Control Numbers below for more details). Voting instructions are then conveyed by use of touchtone selections over the telephone. Voting by Internet Registered Shareholders may vote by internet by accessing the following website: Registered Shareholders may vote by internet up to 4:00 p.m., Toronto time, on Tuesday, June 5, 2007 (or 4:00 p.m., Toronto time, on the business day preceding any adjournment of the Meeting date). Beneficial Shareholders should follow instructions for internet voting conveyed to them by their Intermediaries or their service companies such as Broadridge. Shareholders will be asked to provide a 12 or 13digit Control Number in order to verify their identity (see Control Numbers below for more details). Voting instructions are then conveyed electronically over the internet. Control Numbers In order to vote by telephone or the internet, Shareholders will be required to enter a 12 or 13digit Control Number. Registered Shareholders who have received a form of proxy will find a 13 digit Control Number printed below their preprinted name and address on their proxy. Beneficial Shareholders will find written instructions from their Intermediaries or service companies on their form of proxy or voting instruction form which contain a 12digit Control Number.

4 3 Appointment of Proxies Shareholders will find a form of proxy accompanying this Circular. The persons named in the enclosed form of proxy are officers of the Corporation. A Shareholder has a right to appoint a person, who need not be a Shareholder of the Corporation, other than the management representative designated in the accompanying proxy, to attend and act on behalf of the Shareholder at the Meeting. To exercise this right, a Shareholder may either strike out the names of the persons designated in the proxy and insert such other person s name in the blank space provided or complete another appropriate form of proxy, and deliver the completed proxy as set out in the Notice of Meeting. Revocation of Proxies Unless otherwise specified in such forms, proxy forms and voting instruction forms which are undated are deemed to bear the date upon which they were sent to the Shareholder. Proxies given by Shareholders may be revoked pursuant to subsection 148(4) of the Canada Business Corporations Act, the corporate law under which the Corporation is organized, at any time prior to their use, by an instrument in writing executed by the Shareholder who has executed the proxy or proxies or by his or her attorney authorized in writing, as well as in any other manner permitted by law. If the instrument of revocation is deposited with the Chair on the date of the Meeting or any adjournment thereof, the instrument will not be effective with respect to any matter on which a vote may have already been cast pursuant to the proxy. Voting instructions conveyed by mail or by fax by a laterdated instrument in writing or by telephone or the internet will revoke prior voting instructions. A Beneficial Shareholder who wishes to revoke previously given voting instructions must contact his or her Intermediary or related service company to determine whether arrangements may be made to revoke the previously conveyed voting instructions. Voting of Proxies in Favour of Management Shares represented by properly executed proxies in favour of the management representatives named therein will be voted or withheld from voting in accordance with the instructions on the form of proxy on any ballot that may be called for. If no voting instructions are given, proxies will be voted (i) FOR the election of the directors, (ii) FOR the appointment of auditors, and (iii) FOR the resolution approving certain amendments to the Corporation s incentive stock option plan. Discretionary Authority and Related Matters The enclosed form of proxy confers discretionary authority upon the persons named in the proxy with respect to voting on amendments to, or variations of, matters identified in the Notice of Meeting and on other matters that may properly come before the Meeting or any adjournment thereof. At the time of the printing of this Circular, the Corporation knows of no such amendment, variation, or other matter expected to come before the Meeting. If any other matter should properly come before the Meeting, the management representatives named in the enclosed form of proxy will vote on them in accordance with their best judgment. Common Shares Outstanding and Principal Holders Thereof As at May 7, 2007, 27,124,181 common shares of the Corporation ( Common Shares ) were outstanding. Each Common Share entitles the holder thereof to one vote at all meetings of the shareholders of the Corporation. The articles of the Corporation provide that directors of the Corporation are to be elected by cumulative voting, in the manner described below under Business of the Meeting Election of Directors.

5 4 To the knowledge of the directors and executive officers of the Corporation, the only persons or companies that beneficially own, directly or indirectly, or control or direct, Common Shares carrying 10 per cent or more of the voting rights attaching to the Common Shares, are as follows: Shareholder Number of Common Shares Held (includes direct or indirect ownership or control) Percentage of Common Shares Outstanding Tricap Management Limited 9,928,243 (1) 36.6% Sunrise Partners Limited Partnership 5,030, % Appaloosa Management L.P. 5,002,849 (2) 18.4% (1) Of the 9,928,243 Common Shares controlled by Tricap Management Limited ( Tricap Management ), (i) 6,174,014 Common Shares are beneficially owned by Brookfield Asset Management Inc. ( Brookfield ), but are under the control and direction of Tricap Management, and 11,931 Common Shares are beneficially owned by Mr. John Lacey, but are under the control and direction of Tricap Management. Brookfield is a public company the shares of which are listed on the Toronto and New York Stock Exchanges. Messrs. Steve Douglas, John Lacey, Cyrus Madon and Derek Pannell, directors of the Corporation, are directors and/or officers of Brookfield and/or certain of its affiliates and related entities. (2) The Common Shares are held by Appaloosa Management L.P. through two of its funds, Appaloosa Investment L.P. I and Palomino Fund Ltd. In connection with the proceedings involving the Corporation under the Companies Creditors Arrangement Act (the CCAA ), which proceedings concluded on March 31,, the Corporation entered into a plan sponsor agreement dated December 9, 2005, as amended (the Plan Sponsor Agreement ), with Tricap Management, Sunrise Partners Limited Partnership ( Sunrise ) and Appaloosa Management L.P. ( Appaloosa and, together with Tricap Management and Sunrise, the Plan Sponsors ). The Plan Sponsor Agreement provided, among other things, that at the effective time of the Corporation s emergence under the CCAA, four of the directors of the Corporation would be those identified by Tricap Management, one of the directors of the Corporation would be an individual identified by Sunrise and one of the directors of the Corporation would be an individual identified by Appaloosa, with the remaining directors of the Corporation being mutually satisfactory to the Plan Sponsors. Currently, the foregoing director nominees are Messrs. Douglas, Lacey, Madon and Pannell, in the case of Tricap Management, Mr. Bennett, in the case of Sunrise, and Mr. Cohn, in the case of Appaloosa. See Interest of Management and Others in Material Transactions below. For additional information regarding the CCAA proceedings involving the Corporation, please refer to a copy of the annual information form dated March 30, 2007 of the Corporation, a copy of which can be can be viewed on the Canadian security administrator s System of Electronic Document Analysis and Retrieval ( SEDAR ) database at SECURITIES AUTHORIZED FOR ISSUE UNDER EQUITY COMPENSATION PLANS The Corporation has an incentive stock option plan (the Option Plan ), a copy of which has been filed publicly and can be viewed on SEDAR at The purpose of the Option Plan is principally to enable the Corporation to attract and retain superior directors, officers and employees, to provide an incentive for such persons to put forth maximum effort for the continued success and growth of the Corporation, and in combination with these goals, to encourage their equity participation in the Corporation. The maximum aggregate number of Common Shares that may be issued upon the exercise of options granted under the Option Plan ( Options ) is 2,610,000 Common Shares, subject to adjustment as provided in the Option Plan. The total number of Common Shares that may be reserved for issue to any one person pursuant to Options cannot exceed 5% of the number of outstanding Common Shares. In addition, the Option Plan also contains the following limits with respect to Insiders, as defined in the Option Plan: (i) the number of Common Shares that may be issued to Insiders pursuant to Options and all other share compensation arrangements of the Corporation in the aggregate must not exceed 10% of the number of outstanding Common Shares; and (ii) the number of Common Shares that may be issued to Insiders under the Option Plan and all other share compensation arrangements of the Corporation within a oneyear period in the aggregate must not exceed 10% of the number of Common Shares outstanding.

6 5 The Option Plan provides that the price at which a Common Share may be purchased under an Option is determined by the board of directors of the Corporation at the time of grant and may not be less than the Market Value per Common Share at the date of grant, calculated as (i) where the Common Share is not listed on a stock exchange, the fair market value of the Common Share on that day determined by the board of directors of the Corporation in good faith, and (ii) where the Common Share is listed on a stock exchange, the closing board lot sale price per share of Common Shares on the stock exchange on the trading day immediately preceding the date of grant and, if there was not a board lot sale on the stock exchange on such date, then the last board lot sale prior thereto. The period during which any Option may be exercised is determined by the board of directors of the Corporation at the time of the grant of the Option and cannot be later than 10 years from the date of grant of such Option. The board of directors of the Corporation may determine that an Option will be vested and exercisable in instalments and may accelerate the date upon which an instalment of an Option becomes vested and exercisable. The Option Plan provides that, except as otherwise determined by the Board, if a participant s employment or directorship ceases for any reason other than the participant s death, disability or retirement, both unvested and vested Options held by the participant will expire as of the date of termination. If a participant retires, unvested Options will expire, and vested Options will be exercisable until the expiry date of the Option. If a participant dies or becomes disabled, unvested Options will expire, and vested Options will be exercisable until the earlier of the expiry date of the Option and 180 days after the participant s death or disability. The following table sets out, as at December 31,, the number of securities issuable upon the exercise of outstanding Options, the weighted average exercise price of such outstanding Options and the number of securities remaining available for future issue under the Option Plan. Other than the Option Plan, the Corporation does not have any compensation plans under which equity securities of the Corporation ore authorized for issue. Plan Category Equity compensation plans approved by securityholders Equity compensation plans not approved by securityholders Number of securities issuable upon exercise of outstanding options, warrants and rights Weightedaverage exercised price of outstanding options, warrants and rights Number of securities remaining available for future issue under equity compensation plans 1,775,250 Common Shares $ ,000 Common Shares nil nil nil Total 1,775,250 Common Shares $ ,000 Common Shares INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS The only material interests, direct or indirect, of any director or executive officer of the Corporation, any person or company that beneficially owns, directly or indirectly, or who exercises control or direction over more than 10 per cent of the Common Shares or any director or executive officer of any such person or company, any proposed director of the Corporation or any associate or affiliate of any of the foregoing persons or companies, in any transaction since the commencement of the Corporation s most recently completed financial year or in any proposed transaction which have materially affected or are expected to materially affect the Corporation are as follows:

7 6 (i) (ii) (iii) Pursuant to the Plan Sponsor Agreement, on March 31,, Tricap Management, Sunrise and Appaloosa purchased 9,818,000 Common Shares, 4,959,000 Common Shares and 4,959,000 Common Shares, respectively, at a price of $5.50 per Common Share. The proceeds from the purchase of the foregoing Common Shares were used by the Corporation as part of the payment to Affected Creditors under the Third Amended and Restated Plan of Arrangement of the Corporation, Stelwire Ltd., Stelpipe Ltd., Welland Pipe Ltd. and CHT Steel Company Inc. (as amended, the CCAA Plan ). A copy of the Plan Sponsor Agreement has been filed publicly and can be viewed on SEDAR at Tricap Management, Sunrise and Appaloosa also received Common Shares and warrants, as well as secured floating rate notes ( FRN s ), as creditors of the Corporation under the CCAA Plan. According to publicly filed documents, (i) at May 2, 2007 Tricap Management beneficially owned or exercised control or direction over 9,928,243 Common Shares and Warrants to purchase 128,774 Common Shares (ii) at April 4, Sunrise beneficially owned or exercised control or direction over 5,030,781 Common Shares and Warrants to purchase 92,565 Common Shares, and (iii) at April 4,, Appaloosa beneficially owned or exercised control or direction over 5,002,849 Common Shares and Warrants to purchase 56,548 Common Shares. The addresses of Tricap Management, Sunrise and Appaloosa are Suite 300, 181 Bay Street, Toronto, Ontario M5J 2T3, Two American Lane, Greenwich, Connecticut, U.S.A and 26 Main Street, Chatham, New Jersey, U.S.A , respectively. The Plan Sponsor Agreement also provided that, at the effective time of the Corporation s emergence under the CCAA, four of the directors of the Corporation would be those identified by Tricap Management, one of the directors of the Corporation would be an individual identified by Sunrise and one of the directors of the Corporation would be an individual identified by Appaloosa, with the remaining directors of the Corporation being mutually satisfactory to the Plan Sponsors. Currently, the foregoing director nominees are Messrs. Douglas, Lacey, Madon and Pannell, in the case of Tricap Management, Mr. Bennett, in the case of Sunrise, and Mr. Cohn, in the case of Appaloosa. On March 31,, the Corporation entered into a credit agreement (the Term Credit Agreement ) with Ontario Inc., a wholly owned subsidiary of Tricap Management. Pursuant to the Term Credit Agreement, the Corporation was provided with a revolving term credit facility of up to $375 million (the Term Loan ). A copy of the Term Credit Agreement has been filed publicly and can be viewed on SEDAR at As at December 31, there was $215 million outstanding under the Term Loan. The interest on borrowings is calculated in accordance with the provisions of the Term Credit Agreement, yielding approximately 11 per cent as at December 31,. The Term Credit Agreement also requires the payment of certain fees to Ontario Inc., including an annual fee equal to three per cent of the original amount of the commitment under the Term Loan. The Corporation has entered into a commitment letter with GE Corporate Lending Canada relating to a proposed refinancing of the Term Loan. The proposed refinancing would replace the Term Loan with a fully drawn facility in a US dollar amount equivalent to $275 million having a term of six years. The new facility would have a lower interest rate and lower fees compared to the Term Loan. The completion of the refinancing is subject to a number of conditions which must be satisfied no later than May 11, In relation to this refinancing, Stelco has entered into an agreement with Ontario Inc. to defer payment of the annual fee otherwise payable pursuant to the Term Credit Agreement on March 31, 2007 until May 11, Under the agreement, if the existing revolving term credit facility is repaid by May 11, 2007, the deferred fee will be waived. In addition to the foregoing, on April 2,, Mr. Rodney Mott, the President and Chief Executive Officer of the Corporation, purchased 1,000,000 Common Shares for cash consideration of $5.5 million. Mr. Mott was also granted options to purchase a further 1,044,000 Common Shares at a price of $5.50 per Common Share for a term of 10 years.

8 Financial Statements 7 BUSINESS OF THE MEETING The Corporation s consolidated financial statements for the year ended December 31,, and the report of the auditors thereon, will be placed before the Shareholders at the Meeting. These consolidated financial statements form part of the Corporation s annual report, a copy of which can be viewed on SEDAR at Election of Directors The number of directors to be elected at the Meeting is ten. Directors of the Corporation are elected annually and, unless reelected, retire from office at the end of the next annual meeting of shareholders. The articles of the Corporation provide that directors of the Corporation are to be elected by cumulative voting, with each holder of Common Shares (i) having the right to cast a number of votes equal to the number of votes attached to the Common Shares held by such holder multiplied by the number of directors to be elected and (ii) being entitled to cast all such votes in favour of a single candidate for election as a director or to distribute such votes among the candidates for election as directors in any manner such holder thinks fit. The articles of the Corporation further provide that if a holder of Common Shares has voted for more than one candidate without specifying the distribution of its votes among the candidates, the holder will be deemed to have distributed its votes equally among the candidates for whom it voted. If a Shareholder withholds his or her vote from one or more candidates, but does not vote for any other candidates, the votes will be distributed equally among the other candidates for whom the Shareholder does not withhold his or her vote. Unless the Shareholder specifies that the proxy be withheld from voting on the election of all or any of the directors, and, if applicable, specifies how he or she wishes to distribute the votes among the candidates, the persons named in the enclosed form of proxy intend to vote for the election as directors of the Corporation the nominees whose names are set forth below, and to distribute the votes equally among such nominees. Management does not contemplate that any of the nominees will be unable to serve as a director, but if that should occur for any reason prior to the Meeting, the persons named in the enclosed form of proxy reserve the right to vote for another nominee in their discretion. The following table sets forth, for each nominee for election as a director of the Corporation, the individual s name, province or state and country of residence, principal occupation during the five preceding years, the period during which the individual has served as a director of the Corporation and the number of Common Shares beneficially owned, directly or indirectly, or over which control or direction is exercised by the individual. The information as to Common Shares beneficially owned, directly or indirectly, or over which control or direction is exercised, not being within the knowledge of the Corporation, has been furnished by the respective nominees individually. All nominees for election as directors of the Corporation are currently directors of the Corporation. Name and Province or State and Country of Residence Principal Occupation Director Since Number of Common Shares Held Courtney Pratt Ontario, Canada Chairman of the Corporation since April. From January 2004 to March, Mr. Pratt was President and Chief Executive Officer of the Corporation. From April 2001 to December 2003, Mr. Pratt was President and Chief Executive Officer of Toronto Hydro Corporation. January 31, 2002 nil (1) (2) Dennis Belcher Ontario, Canada Prior to retiring in 2002, Mr. Belcher was Executive Vice President, Credit and Risk Management of The Bank of Nova Scotia. March 31, 500

9 8 Name and Province or State and Country of Residence Principal Occupation Director Since Number of Common Shares Held (1) (2) Laurie Bennett Ontario, Canada Prior to retiring in 2004, Mr. Bennett was an audit partner of Ernst & Young LLP, Chartered Accountants. March 31, nil Steven J. Cohn (1) New Jersey, U.S.A. Business consultant, and Managing Director, Alvarez & Marsal, LLC, a professional services consulting firm. March 31, 300 (2) (3) Steve Douglas Ontario, Canada Managing Partner, Brookfield Asset Management Inc., an asset management company. From June 2005 to September, Mr. Douglas was Executive Vice President and Chief Financial Officer of Falconbridge Limited, a mining company. From November 2003 to the time of its merger with Falconbridge Limited in June 2005, Mr. Douglas was Executive VicePresident and Chief Financial Officer of Noranda Inc., a mining company. Prior to joining Noranda Inc., Mr. Douglas was Executive VicePresident and Chief Financial Officer of Brookfield Properties Corporation, a commercial real estate company. May 10, nil (3) (4) (5) Pierre Dupuis Quebec, Canada Prior to retiring in 2005, Mr. Dupuis was Chief Operating Officer of Dorel Industries Inc., a global consumer products company. Mr. Dupuis currently serves as a director of Norbord Inc. and a trustee of Great Lakes Hydro Income Fund. March 31, nil (4) (5) John Lacey Ontario, Canada Chairman, Advisory Board of Tricap Restructuring Fund, an investment fund. Prior to November, Mr. Lacey was Chairman of The Alderwoods Group Inc., an organization operating funeral homes and cemeteries within North America. March 31, 11,931 (6) (4) (5) Cyrus Madon Ontario, Canada Managing Partner, Brookfield Asset Management Inc. Mr. Madon has been engaged in the merchant banking business with Brookfield Asset Management Inc. and it predecessor companies since January March 31, nil Rodney B. Mott South Carolina, U.S.A. President and Chief Executive Officer of the Corporation since April. From March 2002 to April 2005, Mr. Mott was President and Chief Executive Officer of International Steel Group Inc., a steel company. From January 2000 to September 2001, Mr. Mott was President and Chief Executive Officer of Pechiney Rolled Products, LLC, an aluminum casting and rolling company. March 31, 1,000,000 Derek G. Pannell (3) Ontario, Canada Managing Partner, Brookfield Asset Management Inc., and a director of Teck Cominco Ltd., a mining company. From June 2005 to October, Mr. Pannell was the Chief Executive Officer of Falconbridge Limited. From June 2002 to the time of its merger with Falconbridge Limited in June 2005, Mr. Pannell was Chief Executive Officer of Noranda Inc. and, prior thereto, was Chief Operating Officer of Noranda Inc. March 7, 2007 nil (1) Member of the Audit Committee. (2) Member of the Pension Committee. (3) Member of the Health, Safety and Environment Committee. (4) Member of the Corporate Governance Committee. (5) Member of the Human Resources and Compensation Committee. (6) Of the 9,928,243 Common Shares controlled by Tricap Management, 11,931 Common Shares are beneficially owned by Mr. Lacey. However, Tricap Management has the right to control and direct those Common Shares, including the right to vote or dispose of them.

10 9 Cease Trade Orders and Bankruptcies To the knowledge of the Corporation, in the last 10 years, none of the proposed directors is or has been a director or executive officer of any company that, while that person was acting in that capacity, (a) was the subject of a cease trade order or similar order, or an order that denied the company access to any exemptions under securities legislation, for a period of more than 30 consecutive days, (b) was the subject of an event that resulted, after that person ceased to be a director or executive officer, in the company being the subject of a cease trade order or similar order or an order that denied the company access to an exemption under securities legislation, for a period of more than 30 consecutive days or (c) or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets except for the following: (i) (ii) (iii) (iv) Mr. Dennis Belcher was retained to act as director and Chairman of the Independent Committee of Slater Steel Inc., which filed for protection under the CCAA on June 2, Mr. Belcher was also a director of Consumers Packaging Inc. at the time it filed for protection under the CCAA on May 23, On January 20, 2003, various provincial securities commissions issued orders ceasing the trading of Consumers Packaging Inc. s shares as a result of a failure to file financial statements within the prescribed filing periods. The cease trade orders remain in effect. In addition, Mr. Belcher was a director of White Rose Crafts and Nursery Sales Ltd. immediately prior to its voluntary assignment into bankruptcy under the Bankruptcy and Insolvency Act (the BIA ) on June 20, Mr. Belcher was a director of Richtree Inc. which was subject to a cease trade order in 2003 as a result of a failure to file financial statements within the prescribed filing periods. On February 26, 2004, the cease trade order was lifted. This company filed for protection under the CCAA on October 18, The proceedings were converted to proposal proceedings under the BIA and restructuring proceedings were successfully completed on January 23,. Finally, Mr. Belcher was a director of Foamex International Inc. which filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware in September Mr. Steven Cohn was Chief Financial Officer of Physician Computer Network, Inc. ( PCN ) at the time that it voluntarily filed a petition under Chapter 11 of the Bankruptcy Code in the US in December In March 2000, PCN's assets were acquired in accordance with a plan of reorganization filed by PCN in the Chapter 11 bankruptcy proceedings. Mr. Cohn was also Chief Restructuring Officer and Interim Chief Financial Officer of Kasper A.S.L., Ltd. at the time that it filed Chapter 11 protection in February 2002 with the U.S. Bankruptcy Court in the Southern District of New York. Finally, Mr. Cohn was Chief Restructuring Officer of Donnkenny Apparel, Inc. at the time that it filed Chapter 11 protection in February 2005 with the U.S. Bankruptcy Court in the Southern District of New York. Mr. John Lacey was asked by a group of shareholders to lead a restructuring of The Loewen Group Inc. and was acting as Chairman of the Board of The Loewen Group Inc. when it filed a petition for creditor protection under Chapter 11 of the U.S. Bankruptcy Code and the CCAA in June In 2002, various provincial securities commissions issued orders ceasing the trading of The Loewen Group Inc. s shares as a result of a failure to file financial statements within the prescribed filing periods. The cease trade orders remain in effect. In January 2002, Loewen successfully emerged from Chapter 11 and CCAA proceedings as The Alderwoods Group Inc. where Mr. Lacey remains as Chairman of the Board. Mr. Courtney Pratt was President and Chief Executive Officer and director of the Corporation on January 29, 2004, when the Corporation and certain related entities filed for protection under the CCAA and obtained an order (the Initial Order ) from the Ontario Superior Court of Justice granting it creditor protection. On the same date, the Corporation made a concurrent petition for recognition of the Initial Order and ancillary relief under Section 304 of the U.S. Bankruptcy Code. At the last

11 10 moment in time on March 31,, the Corporation implemented the CCAA Plan and emerged from CCAA protection. Appointment of Auditors The auditors of the Corporation are KPMG LLP, Chartered Accountants. It is proposed that KPMG LLP be appointed as auditors of the Corporation for the ensuing financial year of the Corporation. For information regarding fees paid to KPMG LLP, please refer to the section entitled Audit Committee External Auditor Service Fees contained in the annual information form dated March 30, 2007 of the Corporation, a copy of which has been filed publicly and can be viewed on SEDAR at Amendments to the Option Plan The board of directors of the Corporation has approved certain amendments to the Option Plan relating to (i) the expiry of Options where such expiry occurs during a BlackOut Period (as defined below), and (ii) procedures for amending the Option Plan (together the Proposed Amendments ). Pursuant to the rules of the Toronto Stock Exchange (the TSX ), the Proposed Amendments are required to be approved by the shareholders of the Corporation. The form of the Proposed Amendments has been conditionally approved by the TSX, subject to the approval of the Proposed Amendments by the Shareholders at the Meeting. The following is a summary of the Proposed Amendments: (i) (ii) The Corporation has imposed a policy pursuant to which insiders of the Corporation and restricted employees are required to limit their trading activity to trading windows fixed from time to time by the Corporation s Disclosure Committee. These trading windows generally are open for the 30 calendar days following the second business day after issue of quarterly or annual financial information. The periods of time outside of such trading windows are referred to as BlackOut Periods. Given that BlackOut Periods generally apply throughout the year, subject only to the foregoing trading windows, such BlackOut Periods may operate to prevent the exercise of vested before the expiry date of such Options. Accordingly, it is proposed that the Option Plan be amended to provide that, in the event that the expiry date of any vested Option falls on, or within ten trading days immediately following, a BlackOut Period or other trading restriction imposed by the Corporation, the expiry date of such a vested Option will be the tenth trading day immediately following the BlackOut Period. The amending provisions set out in the Option Plan provide that the board of directors of the Corporation is able to amend, suspend or terminate the Option Plan, and to the extent any such amendment, suspension or termination adversely affects any Options previously granted under the Option Plan to a participant, the consent of that participant is required. It was implicit under the Option Plan that the board of directors of the Corporation could effect these amendments without shareholder approval. However, the TSX now requires that the Option Plan explicitly provide that shareholder approval is not required to implement any amendments, save and except for amendments related to (i) the maximum number of Common Shares reserved for issuance under the Option Plan (and under any other share compensation arrangements of the Corporation); (ii) a reduction in the exercise price for Options held by insiders; (iii) an extension to the term of Options held by insiders; and (iv) an increase in the 10% limits on grants to insiders set out in the Option Plan. In other words, other than these four prescribed items, any other amendment to the Option Plan can be made by the board of directors of the Corporation without shareholder approval. Such amendments may for example include, without limitation, amendments related to (a) the vesting provisions of the Option Plan or any Option granted under the Option Plan, (b) the early termination provisions of the Option Plan or any Option granted under the Option Plan, (c) the addition of any form of financial assistance by the Corporation for the acquisition by all or certain categories of participants, and the subsequent amendment of any such provision which is more favourable to such participants, (d) the addition or modification of a cashless exercise feature, payable in cash or Shares, which provides for a full deduction of the number of underlying Shares from the Option Plan reserve, (e) the suspension or

12 11 termination of the Option Plan, or (f) any other amendment, whether fundamental or otherwise, not requiring shareholder approval under applicable law (including, without limitation, the rules, regulations and policies of the TSX). It is proposed that the Option Plan be amended to comply with the foregoing TSX requirement. At the Meeting, Shareholders will be asked to consider and, if deemed advisable, to pass a resolution in the form set out in Exhibit A to this Circular (the Option Plan Resolution ). To be adopted, the Option Plan Resolution must be passed by a simple majority of the votes cast thereon by Shareholders at the Meeting. If the Option Plan Resolution is not passed by the requisite majority, the Proposed Amendments will not be adopted. In accordance with the Section 613 of the Toronto Stock Exchange Company Manual, insiders of the Corporation are entitled to vote on the Option Plan Resolution. Proxies received in favour of management will be voted for the approval of the Option Plan Resolution unless a Shareholder has specified in the proxy that the Shareholder s Common Shares are to be voted against such resolution. STATEMENT OF EXECUTIVE COMPENSATION The following table sets forth for the periods indicated the compensation paid to each individual who served as Chief Executive Officer or Chief Financial Officer of the Corporation during the financial year ended December 31,, the individuals who were, as at December 31,, the other three most highly compensated executive officers of the Corporation and certain other individuals who served as executive officers of the Corporation during the financial year ended December 31, (collectively the Named Executives ). Summary Compensation Table Annual Compensation Other Annual Compensation Year Salary ($) Bonus (1) (2) ($) ($) LongTerm Compensation Awards Securities Under Options Granted (#) Shares Subject to Resale Restrictions ($) All Other Compensation ($) Current Executive Officers Rodney B. Mott (3) President and Chief Executive Officer , ,250 56,496 (4) 1,044,000 J. Ken Rutherford (5) Chief Financial Officer ,159 36,458 16,919 (6) 150,000 William J. McKenzie (7) Vice President and General Manager, Hamilton Steel ,000 78,750 23,135 (8) 150,000 Jerome V. Nelson (9) Vice President, Sales and Marketing ,000 78,750 23,135 (10) 125,000

13 Year Salary ($) Bonus (1) 12 Annual Compensation ($) Other Annual Compensation (2) ($) LongTerm Compensation Awards Securities Under Options Granted (#) Shares Subject to Resale Restrictions ($) All Other Compensation ($) Karen A. Smith (11) Vice President, Human Resources ,500 70,875 30,052 (12) 125,000 Gordon C. Spelich (13) Vice President, Business Development and Strategic Planning ,500 70,875 23,135 (14) 100,000 Former Executive Officers Courtney Pratt (15) President and Chief Executive Officer , , ,000 1,000,000 (16) 2,025,000 (17) William E. Vaughan (18) Senior Vice President, Finance and Chief Financial Officer , , ,500 74,463 1,085,000 (19) Colin Osborne (20) Vice President, Strategy and Business Development , , , ,600 55,980 (21) 200,000 (22) 2,774,186 (23) Thomas E. Witter (24) Director Marketing , , ,667 42,670 20,525 (25) 50,000 (26) 831,250 (27) Bruce N. Futterer (28) Vice President, General Counsel and Corporate Secretary ,988 20,525 (29) 50,000 (30) 830,463 (31) (1) Bonus amounts are reported in the fiscal year in which they were earned and not in the year in which they were actually paid. They are paid in cash in the year following the fiscal year in which they are earned. (2) Where no disclosure has been made, perquisites and other personal benefits do not exceed the lesser of $50,000 and 10% of the total annual salary and bonus for the applicable Named Executive. (3) Mr. Mott was appointed President and Chief Executive Officer of the Corporation effective April 1,. Amount reflected as salary is the pro rated amount of Mr. Mott s annual base compensation for of $500,000. (4) Of such amount, $49,929 represents an accommodations allowance. (5) Mr. Rutherford was appointed Chief Financial Officer of the Corporation effective June 22,. Amount reflected as salary is the pro rated amount of Mr. Rutherford s annual base compensation for of $250,000. (6) Of such amount, $9,455 represents an accommodations allowance and $7,464 represents a car allowance. (7) Mr. McKenzie was appointed Vice President and General Manager, Hamilton Steel effective April 1,. Amount reflected as salary is the pro rated amount of Mr. McKenzie s annual base compensation for of $300,000. (8) Of such amount, $15,671 represents an accommodations allowance and $7,464 represents a car allowance.

14 13 (9) Mr. Nelson was appointed Vice President, Sales and Marketing effective April 1,. Amount reflected as salary is the pro rated amount of Mr. Nelson s annual base compensation for of $300,000. (10) Of such amount, $15,671 represents an accommodations allowance and $7,464 represents a car allowance. (11) Ms. Smith was appointed Vice President, Human Resources effective April 1,. Amount reflected as salary is the pro rated amount of Ms. Smith s annual base compensation for of $270,000. (12) Of such amount, $24,020 represents an accommodations allowance and $6,032 represents a car allowance. (13) Mr. Spelich was appointed Vice President, Purchasing on April 1, and Vice President, Business Development and Strategic Planning on January 1, Amount reflected as salary is the pro rated amount of Mr. Spelich s annual base compensation for of $270,000. (14) Of such amount, $15,671 represents an accommodations allowance and $7,464 represents a car allowance. (15) Mr. Pratt left his post of President and Chief Executive Officer of the Corporation on March 31,. (16) These options, granted under the former 1991 option plan of the Corporation, were cancelled, unexercised, upon implementation of the CCAA Plan. (17) See Termination of Employment, Change in Responsibilities and Employment Contracts Arrangements Relating to Former Named Executives. (18) Mr. Vaughan departed the Corporation effective May 20,. (19) See Termination of Employment, Change in Responsibilities and Employment Contracts Arrangements Relating to Former Named Executives. (20) Mr. Osborne was appointed Vice President, Business Strategy, in April and resigned effective June 30,. Prior to being appointed as Vice President, Business Strategy, Mr. Osborne was Chief Operating Officer and Executive Vice President, Strategy. (21) Represents a car allowance paid to Mr. Osborne, annualized for a period of 30 months. (22) These options were cancelled. See Termination of Employment, Change in Responsibilities and Employment Contracts Arrangements Relating to Former Named Executives. (23) See Termination of Employment, Change in Responsibilities and Employment Contracts Arrangements Relating to Former Named Executives. This amount includes, among other things, the commuted value of Mr. Osborne s pension and an additional value amount paid pursuant to an agreement between Mr. Osborne and the Corporation. (24) Mr. Witter retired effective December 31,. (25) Represents a car allowance paid to Mr. Witter. (26) These options were cancelled. See Termination of Employment, Change in Responsibilities and Employment Contracts Arrangements Relating to Former Named Executives. (27) See Termination of Employment, Change in Responsibilities and Employment Contracts Arrangements Relating to Former Named Executives. (28) Mr. Futterer was appointed General Counsel in January and Vice President, General Counsel and Corporate Secretary in April. Mr. Futterer resigned effective November 30,. (29) Represents a car allowance paid to Mr. Futterer. (30) These options were cancelled. See Termination of Employment, Change in Responsibilities and Employment Contracts Arrangements Relating to Former Named Executives. (31) See Termination of Employment, Change in Responsibilities and Employment Contracts Arrangements Relating to Former Named Executives. Options The following table sets forth information regarding Options granted to Named Executives during the financial year ended December 31, pursuant to the Option Plan. Information regarding the Option Plan is set out above under Securities Authorized for Issue Under Equity Compensation Plans. Information regarding Options granted to certain Named Executives during the financial year ended December 31, and subsequently cancelled upon such individuals ceasing to be officers of the Corporation is set out below under Termination of Employment, Change in Responsibilities and Employment Contracts Arrangements Relating to Former Named Executives. Securities, Under Options Granted (1) (#) Per cent of Total Options Granted to Employees in Financial Year Exercise or Base Price ($/Security) Market Value of Securities Underlying Options on the Date of Grant ($/Security) Expiration Date Current Executive Officers Rodney B. Mott President and Chief Executive Officer 1,044, March 31, 2016