STELCO INC. NOTICE OF SPECIAL MEETING AND MANAGEMENT PROXY CIRCULAR FOR A SPECIAL MEETING OF SHAREHOLDERS OF STELCO INC.

Transcription

1 STELCO INC. NOTICE OF SPECIAL MEETING AND MANAGEMENT PROXY CIRCULAR FOR A SPECIAL MEETING OF SHAREHOLDERS OF STELCO INC. TO BE HELD ON OCTOBER 26, 2007 ARRANGEMENT OF STELCO INC. INVOLVING THE ACQUISITION OF ALL THE COMMON SHARES OF STELCO INC. BY ALBERTA ULC (AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF UNITED STATES STEEL CORPORATION) These materials are important and require your immediate attention. They require Shareholders to make an important decision. If you are in doubt as to how to make this decision, please contact your tax, financial, legal or other professional advisors. If you have any questions or require more information with regard to voting your Common Shares, please contact Georgeson Shareholder Communications Canada Inc., the Corporation s proxy solicitation agent, toll-free at September 24, 2007

2

3 September 24, 2007 Dear Shareholder: The Board of Directors invites you to attend the special meeting of Shareholders of Stelco Inc. ( Stelco or the Corporation ) to be held at 10:00 a.m. (Toronto time) on Friday, October 26, 2007 in Room 203 AB, North Building, at the Metro Toronto Convention Centre, 255 Front Street West, Toronto, Ontario, Canada. At the meeting, Shareholders will be asked to approve an arrangement of the Corporation under section 192 of the Canada Business Corporations Act pursuant to which Shareholders will receive $38.50 in cash for each Common Share of Stelco held (the Arrangement ). In addition, pursuant to the Arrangement, holders of warrants to purchase Common Shares of Stelco will receive $27.50 for each warrant held, being the difference between $38.50 and the exercise price for each warrant, and holders of stock options of Stelco will receive the difference between $38.50 and the applicable exercise price for each option held. The Special Committee of the Board of Directors, and the Board of Directors, have determined that the Arrangement is fair to Shareholders and is in the best interests of Stelco and the Shareholders. The determination of the Special Committee and the Board of Directors is based on various factors described more fully in the accompanying Management Proxy Circular. The Board of Directors recommends that Shareholders vote IN FAVOUR of the special resolution approving the Arrangement. To be effective, the Arrangement must be approved by a special resolution passed by at least two-thirds of the votes cast by holders of outstanding Common Shares present in person or represented by proxy at the Meeting. Holders of Common Shares are entitled to one vote for each Common Share held. Shareholders representing approximately 77% of the outstanding Common Shares, including Tricap Management Limited, Sunrise Partners Limited Partnership, Appaloosa Investment L.P. I, Palomino Fund Ltd. and Rodney Mott, the President and CEO of Stelco, have entered into support agreements with United States Steel Corporation irrevocably committing to support the Arrangement. The Arrangement is also subject to approval by the Ontario Superior Court of Justice, as well as the satisfaction of certain other conditions. The accompanying Notice of Meeting and Management Proxy Circular provide a full description of the Arrangement and include certain additional information to assist you in considering how to vote on the special resolution. You are urged to read this information carefully and, if you require assistance, to consult your tax, financial, legal or other professional advisor. We encourage you to complete, sign, date and return the accompanying form of proxy, or voting instruction form, in accordance with the instructions set out therein and in the accompanying Management Proxy Circular so that your Common Shares can be voted at the meeting in accordance with your instructions. We also encourage registered Shareholders to complete, sign, date and return the enclosed letter of transmittal in accordance with the instructions set out therein and in the accompanying Management Proxy Circular so that if the Arrangement is completed, payment for your Common Shares and/or Warrants, as applicable, can be sent to you as soon as possible following completion of the Arrangement. Completion of the Arrangement is dependent on many factors and it is not possible at this time to determine precisely when or if the Arrangement will become effective. Subject to obtaining the approvals of Shareholders of Stelco and the Ontario Superior Court of Justice, and to satisfying certain other conditions, the earliest date by which completion of the Arrangement is expected to occur is on or about October 31, If you have any questions or require any assistance regarding voting your Common Shares, please contact the Corporation s proxy solicitation agent, Georgeson Shareholder Communications Canada Inc., toll-free at Yours very truly, Courtney Pratt Chairman of the Board of Directors

4

5 STELCO INC. NOTICE OF SPECIAL MEETING OF SHAREHOLDERS NOTICE IS HEREBY GIVEN that a special meeting (the Meeting ) of the holders (the Shareholders ) of common shares (the Common Shares ) of Stelco Inc. (the Corporation ) will be held at 10:00 a.m. (Toronto time) on Friday, October 26, 2007 in Room 203 AB, North Building, at the Metro Toronto Convention Centre, 255 Front Street West, Toronto, Ontario, Canada, for the following purposes: 1. to consider, pursuant to an interim order of the Ontario Superior Court of Justice dated September 24, 2007 (the Interim Order ) and, if thought advisable, to pass, with or without variation, a special resolution of the Shareholders (the Special Resolution ) approving an arrangement (the Arrangement ) under section 192 of the Canada Business Corporations Act (the CBCA ) of the Corporation, whereby, among other things, Alberta ULC ( Acquireco ), an indirect wholly-owned subsidiary of United States Steel Corporation, will acquire all the outstanding Common Shares for $38.50 in cash for each Common Share, all as more particularly described in the accompanying management proxy circular (the Circular ); and 2. to transact such other business as may properly come before the Meeting or at any adjournment or postponement thereof. The Arrangement and the Special Resolution are described in the Circular and the full text of the Special Resolution is included as Appendix A to the Circular. The Board of Directors of the Corporation, as confirmed by the Interim Order, has fixed the close of business on September 21, 2007 as the record date for determining Shareholders who are entitled to receive notice of and to vote at the Meeting or any adjournment or postponement thereof. Registered Shareholders of the Corporation unable to attend the Meeting in person may vote their Common 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 Circular for telephone, fax or internet voting. Proxies to be used at the Meeting must be deposited not later than 5:00 p.m. (Toronto time) on Wednesday, October 24, 2007 or, in the case of any adjournment or postponement of the Meeting, by 5:00 p.m. (Toronto time) on the second business day immediately preceding the day of the adjourned or postponed Meeting. Information with respect to voting by non-registered beneficial Shareholders is included in the Circular, and non-registered beneficial Shareholders may wish to seek instructions on how to vote their Common Shares from their broker, investment dealer, bank, trust company, trustee or other nominee. Pursuant to the Interim Order, registered Shareholders have a right to dissent in respect of the Special Resolution and to be paid an amount equal to the fair value of their Common Shares. This dissent right and the dissent procedures are described in the Circular. The dissent procedures require that a registered Shareholder who wishes to dissent send a written notice of objection to the Special Resolution to the Corporation (i) at 386 Wilcox Street, Hamilton, Ontario L8N 3T1 (Attention: Corporate Secretary) or (ii) by facsimile transmission to (Attention: Corporate Secretary), to be received in either case by 5:00 p.m. (Toronto time) on the business day that is two business days prior to the day of the Meeting or, in the case of any adjournment or postponement of the Meeting, by 5:00 p.m. (Toronto time) on the business day that is two business days preceding the day of the adjourned or postponed Meeting, and must otherwise strictly comply with the dissent procedures described in the Circular. These dissent procedures are different than the statutory dissent procedures of the CBCA, which would permit a notice of objection to be provided at or prior to the Meeting. In addition, unlike the statutory dissent procedures of the CBCA, these dissent procedures

6 provide for Acquireco, rather than the Corporation, to be the party obliged to pay the fair value for the Common Shares (if the dissenting Shareholder is ultimately determined to be entitled to be paid the fair value thereof), and for Acquireco, rather than the Corporation, to be the party obliged to take certain steps and be entitled to exercise certain rights that are attributable to the Corporation under the statutory dissent procedures of the CBCA as amended by the Interim Order. Failure to strictly comply with the dissent procedures will result in loss of the right to dissent. See the section entitled Dissenting Shareholders Rights in the Circular. Only registered Shareholders are entitled to dissent and, accordingly, non-registered beneficial Shareholders should contact their broker, investment dealer, bank, trust company, trustee or other nominee in order to exercise dissent rights. DATED at Hamilton, Ontario, this 24 th day of September, By Order of the Board of Directors D. Chad Hutchison General Counsel and Corporate Secretary

7 TABLE OF CONTENTS Page No. NOTICE TO SHAREHOLDERS IN THE UNITED STATES...1 REPORTING CURRENCY...1 CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS...1 INFORMATION CONTAINED IN THIS CIRCULAR...2 GLOSSARY OF TERMS...3 SUMMARY...10 Date, Time and Place of Meeting...10 Record Date...10 Purpose of the Meeting...10 The Arrangement...10 Recommendation of the Special Committee...11 Recommendation of the Board...11 Reasons for the Arrangement...11 Fairness Opinions of the Financial Advisors...13 Interests of Directors and Senior Management in the Arrangement...14 Non-Solicitation Covenant...14 Dissenting Shareholders Rights...14 Required Shareholder Approval...14 Support Agreements from Supporting Shareholders...15 Conditions to the Completion of the Arrangement...15 Timing...16 Principal Legal Matters...16 Certain Canadian Federal Income Tax Considerations..16 Certain United States Federal Income Tax Considerations...17 THE MEETING AND SOLICITATION OF PROXIES...18 Record Date...18 Purpose of the Meeting...18 Appointment of Proxies...18 Form of Proxy...19 Attendance and Voting...19 Non-Registered Holders...19 Revocation of Proxies...19 VOTING OF PROXIES...20 OUTSTANDING SHARES...20 THE ARRANGEMENT...20 Background to the Arrangement Agreement...20 Recommendation of the Special Committee...25 Recommendation of the Board...25 Reasons for the Arrangement...26 Fairness Opinions of the Financial Advisors...27 Required Shareholder Approval...28 Arrangement Mechanics...28 Interests of Directors and Senior Management in the Arrangement...31 Pension and Other Arrangements...34 Support Agreements from Supporting Shareholders...35 Sources of Funds for the Arrangement...36 OTHER TERMS OF THE ARRANGEMENT AGREEMENT...36 Arrangement Agreement...36 Implementation of the Arrangement...36 Representations and Warranties of the Corporation...37 i Page No. Representations and Warranties of U.S. Steel Company Material Adverse Effect Definition Covenants by the Corporation No Solicitation of Third Parties by Stelco Indemnification and Insurance Other Covenants Conditions to the Completion of the Arrangement Termination of the Arrangement Agreement Termination Fee Amendment PRINCIPAL LEGAL MATTERS Steps to Implementing the Arrangement and Timing Court Approval Regulatory Matters Stock Exchange Delisting and Reporting Issuer Status. 46 DISSENTING SHAREHOLDERS RIGHTS INFORMATION CONCERNING STELCO Capitalization of Stelco Voting Securities and Principal Holders Market Price and Trading Volume Common Shares Warrants Floating Rate Notes Auditors Transfer Agent and Registrar Interest of Insiders in Material Transactions INFORMATION REGARDING U.S. STEEL AND ACQUIRECO U.S. Steel Acquireco CERTAIN TAX CONSIDERATIONS Certain Canadian Federal Income Tax Considerations.. 52 Certain U.S. Federal Income Tax Considerations LEGAL MATTERS ADDITIONAL INFORMATION QUESTIONS AND FURTHER ASSISTANCE APPROVAL OF STELCO CONSENT OF CIBC WORLD MARKETS INC CONSENT OF UBS SECURITIES CANADA INC CONSENT OF MCCARTHY TÉTRAULT LLP CONSENT OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP APPENDIX A SPECIAL RESOLUTION OF STELCO INC.... A-1 APPENDIX B PLAN OF ARRANGEMENT... B-1 APPENDIX C FAIRNESS OPINION OF CIBC WORLD MARKETS INC.... C-1 APPENDIX D FAIRNESS OPINION OF UBS SECURITIES CANADA INC... D-1 APPENDIX E INTERIM ORDER...E-1 APPENDIX F NOTICE OF APPLICATION FOR THE FINAL ORDER...F-1 APPENDIX G SECTION 190 OF THE CANADA BUSINESS CORPORATIONS ACT... G-1

8

9 STELCO INC. MANAGEMENT PROXY CIRCULAR This Circular is furnished in connection with the solicitation of proxies by and on behalf of the management of Stelco Inc. (the Corporation or Stelco ). The accompanying form of proxy is for use at the Meeting and at any adjournment or postponement thereof and for the purposes set forth in the accompanying Notice of Meeting. A glossary of certain terms used in this Circular can be found on pages 3 to 9 of this Circular. NOTICE TO SHAREHOLDERS IN THE UNITED STATES Stelco is a corporation incorporated under the CBCA. The solicitation of proxies in connection with the Meeting to consider the Special Resolution approving the Arrangement described in this Circular involves securities of a Canadian issuer and is being effected in accordance with Canadian corporate and securities laws. The proxy solicitation rules under the United States Securities Exchange Act of 1934, as amended, are not applicable to Stelco nor this solicitation and therefore this solicitation of proxies is not being effected in accordance with U.S. securities laws. Shareholders should be aware that disclosure requirements under Canadian law may be different from disclosure requirements under United States law. Shareholders should also be aware that requirements under Canadian corporate and securities law may differ from requirements under United States corporate and securities laws relating to U.S. corporations. The enforcement by Shareholders of civil liabilities under U.S. securities laws may be affected adversely by the fact that Stelco and Acquireco exist under the laws of Canada and the Province of Alberta, respectively, that some or all of their respective officers and directors are not residents of the United States and that all or a substantial portion of their respective assets may be located outside the United States. Shareholders may not be able to sue a Canadian company or its officers or directors in a Canadian court for violations of U.S. securities laws. It may be difficult to compel a Canadian company and its Affiliates to subject themselves to a judgment by a U.S. court. Certain information concerning tax consequences of the Arrangement for Shareholders who are United States taxpayers is set forth under Certain Tax Considerations Certain Canadian Federal Income Tax Considerations Non-Residents of Canada and Certain Tax Considerations Certain U.S. Federal Income Tax Considerations. Shareholders, Warrantholders and Optionholders should be aware that the Arrangement described in this Circular may have tax consequences both in Canada and in the United States. Such consequences may not be described fully herein. Shareholders, Warrantholders and Optionholders should consult with their tax, financial, legal or other professional advisors to determine the particular tax consequences to them of the transactions contemplated by the Arrangement. REPORTING CURRENCY All currency amounts referred to in this Circular, unless otherwise stated, are expressed in Canadian dollars. CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS Certain statements included herein constitute forward-looking statements. All statements, other than statements of historical fact, included in this Circular that address future activities, events, developments or financial performance, are forward-looking statements. These forward-looking statements can be identified by the use of forward-looking words such as may, should, will, could, expect, intend, plan, estimate, anticipate, believe, future or continue or the negative thereof or similar variations. Other examples of such statements include (i) the expected date of the closing of the Arrangement and (ii) the ability or desire of the parties to the transaction agreements to fulfill their obligations thereunder. The forward-looking statements are based on certain assumptions and analyses made by Stelco and its management in light of their experiences and their perception of historical trends, current conditions and expected future developments, as well as other factors they believe are appropriate in the circumstances. Stelco believes the following factors could cause actual results to differ materially from those discussed in the forward-looking statements: failure to satisfy the conditions to complete the Arrangement, including failure to receive required Shareholder, court, regulatory or third party approvals; the occurrence of any event, change or other circumstance that could give rise to the termination of the Arrangement Agreement; the retention of customers, suppliers and personnel being adversely affected by the proposed Arrangement; the failure of the Arrangement to be completed for any other reason; and the amount of costs incurred in connection with the Arrangement. Although Stelco has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking 1

10 statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The factors identified above are not intended to represent a complete list of the factors that could affect Stelco. Furthermore, the forward-looking statements contained in this Circular are made as of September 24, In light of these risks, which are inherent in forward-looking statements, readers are cautioned not to place undue reliance on those forward-looking statements. The Corporation undertakes no obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise. INFORMATION CONTAINED IN THIS CIRCULAR No person has been authorized to give information or to make any representations in connection with the Arrangement other than those contained in this Circular, and if given or made, any such information or representations should not be relied upon in making a decision as to how to vote on the Special Resolution or be considered to have been authorized by Stelco. This Circular does not constitute an offer to buy, or a solicitation of an offer to sell, any securities, or the solicitation of a proxy, by any person in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such an offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such an offer or solicitation. Shareholders should not construe the contents of this Circular as tax, financial or legal advice and should consult with their own tax, financial, legal or other professional advisors as to the relevant tax, financial, legal or other matters in connection herewith. THIS CIRCULAR AND THE TRANSACTIONS CONTEMPLATED BY THE ARRANGEMENT AGREEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY SECURITIES REGULATORY AUTHORITY, NOR HAS ANY SECURITIES REGULATORY AUTHORITY PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTIONS OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE. The information contained in this Circular is given as at September 24, 2007, except where otherwise noted. 2

11 GLOSSARY OF TERMS The following glossary of terms used in this Circular, including the Summary, but not including the Appendices, is provided for ease of reference: 2006 CCAA Plan means the Third Amended and Restated Plan of Arrangement and Reorganization pursuant to the CCAA involving, among others, the Corporation, dated as of December 9, 2005 and implemented on March 31, 2006, as amended Final Order means the final order of the Court dated February 14, 2006 approving the 2006 Plan of Arrangement Plan of Arrangement means the plan of arrangement attached to the certificate and articles of arrangement of the Corporation issued by the Director on March 31, ABCA means the Business Corporations Act (Alberta). Acquireco means Alberta ULC, a corporation incorporated under the laws of Alberta and a wholly-owned indirect subsidiary of U.S. Steel. Acquisition Transaction means (a) any sale, lease or other disposition, direct or indirect (and however structured), of any business or assets of the Corporation and/or any of its Subsidiaries (which business or assets represent 15% or more of the consolidated revenues, net income or assets of the Corporation and its Subsidiaries, taken as a whole), (b) any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in a third party beneficially owning 15% or more of any class of securities of the Corporation, (c) a merger, amalgamation, arrangement, consolidation, share exchange, business combination, reorganization, joint venture, recapitalization, liquidation, dissolution or other similar transaction involving the Corporation and/or any of its Subsidiaries (which Subsidiaries represent 15% or more of the consolidated revenues, net income or assets of the Corporation and its Subsidiaries, taken as a whole), (d) the issuance, sale or other disposition, direct or indirect (and however structured), of securities (or securities or other rights convertible into, or exercisable or exchangeable for, such securities) representing 15% or more of the voting power or capital stock of the Corporation and/or any of its Subsidiaries (which Subsidiaries represent 15% or more of the consolidated revenues, net income or assets of the Corporation and its Subsidiaries, taken as a whole), or (e) any combination of the foregoing (other than the Arrangement or any other transaction by or on behalf of U.S. Steel or Acquireco). Affiliates means, with respect to any specified Person, any other Person directly or indirectly controlling, controlled by or under common control with such specified Person. For this purpose, control (including, with correlative meanings, controlled by and under common control with ) means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise. Aggregate Option Consideration means the cash required for the payment of the aggregate Option Consideration. Aggregate Share Consideration means the cash required for the payment of the aggregate Share Consideration. Aggregate Warrant Consideration means the cash required for the payment of the aggregate Warrant Consideration. Alternative Transaction means any alternative transaction structure that (a) does not have negative financial consequences to Stelco and its Subsidiaries in any material respect, would provide Shareholders, Warrantholders and Optionholders with cash consideration not less than the cash consideration per security receivable under the Plan of Arrangement and would provide for the acquisition of all of the outstanding Common Shares, Options and Warrants, (b) would reasonably be expected to be completed prior to the Outside Date, and (c) is otherwise on terms and conditions no more onerous in any material respect than the Arrangement and the Arrangement Agreement. Appaloosa means Appaloosa Investment L.P. I. Appendices means, collectively, Appendix A to Appendix G, inclusive, attached to and forming part of this Circular. Applicable Executives means Rodney B. Mott, J. Kenneth Rutherford, William J. McKenzie, Jerome V. Nelson, Karen A. Smith, Peter K. Knocke, Gordon C. Spelich, D. Chad Hutchison, Michael A. McQuade and Gary R. Seichter. 3

12 Applicable Law means, with respect to any Person, any domestic, foreign, national, federal, provincial, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, policy or other similar requirement enacted, adopted, promulgated or applied by a Governmental Entity that is binding upon or applicable to such Person, as amended unless expressly specified otherwise. Arrangement means the arrangement involving Acquireco, U.S. Steel, and Stelco under the provisions of section 192 of the CBCA on the terms and conditions set forth in the Arrangement Agreement resulting, among other things, in the direct acquisition by Acquireco of all the outstanding Common Shares or any successor thereof, all on such terms and subject to the conditions set out in the Arrangement Agreement and as more particularly described in the Plan of Arrangement, subject to any amendments or variations thereto made in accordance with the Arrangement Agreement or the Plan of Arrangement or made at the direction of the Court. Arrangement Agreement means the arrangement agreement dated as of August 26, 2007 among Stelco, Acquireco and U.S. Steel, providing for, among other things, the Arrangement, as amended September 19, 2007, as same may be further amended, supplemented or restated in accordance with its terms. Articles of Arrangement means the articles of arrangement of the Corporation, to be filed with the Director in connection with the Arrangement. Board means the Board of Directors of the Corporation. Bonus Plan means the executive bonus plan adopted by the Corporation effective July 31, 2006 in which the Applicable Executives participate. Business Day means a day other than a Saturday, Sunday or other day on which the OSC or banks located in Toronto or New York City are authorized or required by law to close. CBCA means the Canada Business Corporations Act as now enacted or as the same may from time to time be amended, re-enacted or replaced up to and including the Effective Date. CCAA means the Companies Creditors Arrangement Act (Canada). CDS means CDS Clearing and Depository Services Inc. Change of Recommendation means the withdrawal, amendment, change, modification or qualification in a manner adverse to U.S. Steel or Acquireco, of the approval, recommendation or declaration of advisability by the Board or any committee of the Board, of the Arrangement Agreement or the Arrangement, or the recommendation, or proposal publicly to recommend, the approval or adoption of any Third Party Proposal, or resolution or agreement to take any such action. CIBC means CIBC World Markets Inc. CIBC Fairness Opinion means the written fairness opinion of CIBC dated August 26, 2007 addressed to the Board and described under The Arrangement Fairness Opinions of the Financial Advisors, a copy of which is attached as Appendix C to this Circular. Circular means this management proxy circular of the Corporation, including the Appendices. Closing Date means the second Business Day following the satisfaction or waiver of the conditions specified in Article 7 of the Arrangement Agreement, or such other date as U.S. Steel and Stelco may mutually agree. Common Shares means the common shares of the Corporation. Company Material Adverse Effect means any state of facts, development, event, circumstance, condition, occurrence or effect that, individually or taken collectively with all other events, circumstances, conditions, occurrences or effects, is materially adverse to (a) the business, assets, financial condition or results of operations of the Corporation and its Subsidiaries taken as a whole, or (b) the ability of the Corporation to perform its obligations hereunder and consummate the transactions contemplated hereby; provided, however, for purposes of clause (a) above, in no event will any of the following be deemed to constitute, nor will any of the following be taken into 4

13 account in determining whether there has been or will be a Company Material Adverse Effect: (i) any changes affecting the industry in which the Corporation and its Subsidiaries operate or sell principal product lines, including changes relating to the price of raw materials or changes relating to selling prices or market demand, that do not have a disproportionate impact on the Corporation and its Subsidiaries, taken as a whole, (ii) any changes in the economy or the financial or capital markets, including changes in interest or exchange rates that do not have a disproportionate impact on the Corporation and its Subsidiaries, taken as a whole, (iii) changes in law or in generally accepted accounting principles or in accounting standards, or changes in general legal, regulatory or political conditions that do not have a disproportionate impact on the Corporation and its Subsidiaries, taken as a whole, (iv) acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism that do not have a disproportionate impact on the Corporation and its Subsidiaries, taken as a whole, (v) the execution, announcement or performance of the Arrangement Agreement or consummation of the transactions contemplated hereby, (vi) any change in the market price or trading volume of any securities of the Corporation, provided that the exception in this clause (vi) will not prevent or otherwise affect a determination that any fact, development, event, circumstance, condition, occurrence or effect underlying such failure has resulted in, or contributed to, a Company Material Adverse Effect, (vii) any actions taken upon the written request of U.S. Steel, (viii) any failure to complete the sale of Wabush Mines, and (ix) any failure to meet any internal or external projections, provided that the exception in this clause (ix) will not prevent or otherwise affect a determination that any fact, development, event, circumstance, condition, occurrence or effect underlying such failure has resulted in, or contributed to, a Company Material Adverse Effect. Competition Act means the Competition Act (Canada). Competition Act Approval means the Commissioner of Competition appointed under the Competition Act will have: (a) issued an advance ruling certificate under section 102 of the Competition Act; or (b) advised U.S. Steel in writing that the Commissioner has determined not to file an application for an Order under Part VIII of the Competition Act and any terms and conditions attached to such advice are acceptable to U.S. Steel, in accordance with the Arrangement Agreement. Confidentiality Agreement means the confidentiality agreement dated February 1, 2007 between the Corporation and U.S. Steel. Contract means any agreement, contract, license, lease, commitment, arrangement or understanding, written or oral, including any sales order and purchase order. Corporation means Stelco Inc., a corporation existing under the CBCA. Court means the Ontario Superior Court of Justice (Commercial List). Demand for Payment means a written notice of a Registered Shareholder containing his or her name and address, the number and class of Dissenting Shares and a demand for payment of the fair value of such Common Shares, submitted to the Corporation. Depositary means CIBC Mellon Trust Company at its principal office in Toronto, Ontario. Director means the Director appointed under section 260 of the CBCA. Dissent Notice means the written objection of a Registered Shareholder to the Special Resolution, submitted to the Corporation in accordance with the Dissent Procedures. Dissent Procedures means the dissent procedures, as set forth in the Plan of Arrangement, the Interim Order and section 190 of the CBCA, as the same may be modified by any interim order of the Court and the Final Order, and as described under Dissenting Shareholders Rights. Dissent Rights means the rights of dissent in favour of Registered Shareholders in respect of the Arrangement as described in the Interim Order and the Plan of Arrangement, and as described under Dissenting Shareholders Rights. Dissenting Shareholder means a Registered Shareholder who dissents from the Special Resolution in compliance with the Dissent Rights and who has not withdrawn its notice of dissent at the relevant time. Dissenting Shares means the Common Shares in respect of which a Dissenting Shareholder dissents. 5

14 Effective Date means the date upon which the Arrangement becomes effective as established by the date shown on the certificate of arrangement issued by the Director pursuant to the CBCA. Effective Time means the time at which Articles of Arrangement are filed with the Director on the Effective Date. Final Order means the order of the Court approving the Arrangement as such order may be amended by the Court (with the consent of Stelco and U.S. Steel, each acting reasonably) at any time prior to the Effective Date or, if appealed, then unless such appeal is withdrawn or denied, as affirmed or amended (provided that any such amendment is acceptable to U.S. Steel and Stelco, each acting reasonably) on appeal. Georgeson means Georgeson Shareholder Communications Canada Inc. Governmental Entity means any government, regulatory authority, governmental department, agency, commission, bureau, official, minister, Crown corporation, court, body, board, tribunal or dispute settlement panel or other law, rule or regulation-making organization or entity: (a) having or purporting to have jurisdiction on behalf of any nation, province, territory or state or any other geographic or political subdivision of any of them, or (b) exercising, or entitled or purporting to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power. HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of Interim Order means the interim order of the Court dated September 24, 2007, as the same may be amended by the Court (with the consent of Stelco and U.S. Steel, each acting reasonably) pursuant to section 192(4) of the CBCA, made in connection with the Arrangement following the application therefor contemplated by the Arrangement Agreement, a copy of which is attached as Appendix E to this Circular. Investment Canada Act means the Investment Canada Act (Canada). Investment Canada Act Approval means the approval or deemed approval of the Minister responsible for the Investment Canada Act. Letter of Transmittal means, (a) in respect of the Common Shares, the letter of transmittal printed on blue paper mailed by the Corporation to Shareholders and to be delivered by Shareholders to the Depositary to effect the tender of such Common Shares, and (b) in respect of the Warrants, the letter of transmittal printed on yellow paper mailed by the Corporation to Warrantholders and to be delivered by Warrantholders to the Depositary to effect the tender of such Warrants, each in the form accompanying the Circular and Letters of Transmittal means, collectively, both the Letter of Transmittal for Common Shares and the Letter of Transmittal for Warrants. Lien means, with respect to any property or asset, any mortgage, lien, pledge, hypothec, charge, security interest, encumbrance, claim, infringement, interference, right of first refusal, pre-emptive right, community property right or other adverse claim of any kind in respect of such property or asset. For purposes of the Arrangement Agreement, a Person is deemed to own subject to a Lien, any property or asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset. Meeting means the special meeting of Shareholders (including any adjournments or postponements thereof) to be held to consider, among other things, the Special Resolution. Meeting Materials means, collectively, the Notice of Meeting, this Circular and the form of proxy. Non-Registered Holder has the meaning ascribed thereto under The Meeting and Solicitation of Proxies Non-Registered Holders. Non-Resident Dissenting Shareholder means a Non-Resident Shareholder who is a Registered Shareholder and who exercises Dissent Rights and is ultimately entitled to be paid fair value for his or her Common Shares. 6

15 Non-Resident Optionholder means an Optionholder who, for the purposes of the application of the Tax Act and at all relevant times, has not been and is not resident or deemed to be resident in Canada. Non-Resident Shareholder means a Shareholder who, for the purposes of the application of the Tax Act and at all relevant times, has not been and is not resident or deemed to be resident in Canada. Non-Resident Warrantholder means a Warrantholder who, for the purposes of the application of the Tax Act and at all relevant times, has not been and is not resident or deemed to be resident in Canada. Notice of Meeting means the notice dated September 24, 2007 of the Meeting accompanying this Circular. Offer to Pay means the written offer of Acquireco to each Dissenting Shareholder who has sent a Demand for Payment to pay for its Common Shares in an amount considered by Acquireco to be the fair value of the Common Shares, all in compliance with the Dissent Procedures. Option means an outstanding option to purchase Common Shares issued pursuant to the Stock Option Plan. Option Consideration means a cash payment from Stelco in an amount equal to the difference between (A) the product of the number of Common Shares underlying such Option held by such Optionholder and $38.50, less (B) the aggregate exercise price payable under such Option by such Optionholder to acquire the number of Common Shares underlying such Option (with the aggregate amount rounded down to the nearest cent). Option Loan means the loan provided by U.S. Steel (or one of its Affiliates) to the Corporation equal to the Aggregate Option Consideration. Optionholder means a holder of Options. OSC means the Ontario Securities Commission. Outside Date means January 31, 2008, provided, however, that if all of the conditions set forth in Article 7 of the Arrangement Agreement have been satisfied or waived on that date, with the exception of the Regulatory Conditions, then the Outside Date will be extended to the earlier of two Business Days after the Regulatory Conditions have been satisfied or waived, and April 30, Palomino means Palomino Fund Ltd. Person means an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated association, a Governmental Entity or any agency, instrumentality or political subdivision of a Governmental Entity, or any other entity or body. PFIC means passive foreign investment company. Plan of Arrangement means, in relation to the Arrangement, the plan of arrangement in the form and having the content of Appendix B attached hereto and any amendments or variations thereto made in accordance with the provisions thereof or made at the direction of the Court in the Final Order. Proposed Amendments means all specific proposals to amend the Tax Act and the regulations thereunder publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof. Province means the Province of Ontario. Province Note Loan Agreement means the province note loan agreement dated March 31, 2006 between the Corporation and Her Majesty the Queen in Right of the Province of Ontario entered into in connection with the pension plan funding arrangements as contemplated by the 2006 CCAA Plan. Record Date means the close of business on September 21,

16 Registered Shareholder means a Shareholder whose name is set out in the Corporation s shareholder register maintained by the Transfer Agent. Regulatory Conditions means, collectively, the regulatory conditions described under Principal Legal Matters Regulatory Matters. Resident Dissenting Shareholder means a Resident Shareholder who is a Registered Shareholder and who exercises Dissent Rights and is ultimately entitled to be paid fair value for his or her Common Shares. Resident Optionholder means an Optionholder who at all relevant times for purposes of the Tax Act and any applicable tax treaty, is or is deemed to be resident in Canada. Resident Shareholder means a Shareholder who at all relevant times for purposes of the Tax Act and any applicable tax treaty, is or is deemed to be resident in Canada. Resident Warrantholder means a Warrantholder who at all relevant times for purposes of the Tax Act and any applicable tax treaty, is or is deemed to be resident in Canada. Rule means Ontario Securities Commission Rule Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions. SEDAR means the System for Electronic Document Analysis and Retrieval of the Canadian Securities Administrators. Severance Plan means the executive severance plan adopted by the Corporation effective July 31, 2006 in which the Applicable Executives participate. Share Consideration means $38.50 cash per Common Share, subject to adjustment in accordance with the Plan of Arrangement. Shareholder means a holder of Common Shares. Special Committee means the special committee of the Board, initially consisting of Messrs. Laurie Bennett, Cyrus Madon (chair) and Courtney Pratt and after August 25, 2007 consisting of Messrs. Bennett and Pratt (chair), formed to make recommendations to the Board with respect to the strategic options for Stelco. Special Resolution means the special resolution of the Shareholders to approve the Arrangement to be considered at the Meeting, substantially in the form attached as Appendix A hereto, and any amendments or variations thereto made in accordance with the provisions of the Arrangement Agreement or made at the direction of the Court in the Interim Order or otherwise. Specified Third Party Debt means indebtedness or borrowed money owed by the Corporation or any Subsidiary that is specified by U.S. Steel to be repaid on the Effective Date in accordance with the Arrangement Agreement. Stelco means Stelco Inc., a corporation existing under the CBCA. Stock Option Plan means the incentive stock option plan of the Corporation, established on May 10, Subsidiary or Subsidiaries means, with respect to any party, any Person, of which (a) such party or any Subsidiary of such party is a general partner (excluding partnerships, the general partnership interests of which held by such party or any Subsidiary of such party do not have a majority of the voting interest in such partnership) or (b) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board or others performing similar functions with respect to such Person is directly or indirectly owned or controlled by such party and/or by any one or more of its Subsidiaries. Sunrise means Sunrise Partners Limited Partnership. Superior Proposal means an unsolicited written bona fide Third Party Proposal pursuant to which a Person or Persons (or their stockholders) would own, if consummated, all of the outstanding capital stock of the Corporation (or of the surviving entity in a merger 8

17 or the direct or indirect parent of the surviving entity in a merger) or all or substantially all of the assets of the Corporation and its Subsidiaries taken as a whole on terms that the Board determines, in its good faith judgment, after consultation with its financial advisors, that such Third Party Proposal (a) is not subject to any financing conditions or, if any financing is required, financing satisfactory to the Corporation is committed, (b) is more favourable to the Shareholders from a financial point of view than the terms of the Arrangement, and (c) without regard to any support agreement between U.S. Steel and any Shareholder, is reasonably likely to be completed on the terms proposed. Support Agreements means, collectively, the support agreements entered into on August 26, 2007 between each of the Supporting Shareholders and U.S. Steel and Acquireco, whereby the Supporting Shareholders agreed, among other things, to vote all of their Common Shares in favour of the Special Resolution. Supporting Securities means the Supporting Shares and the Options and Warrants held by the Supporting Shareholders. Supporting Shareholders means Appaloosa, Rodney B. Mott, Palomino, Sunrise, and Tricap. Supporting Shares means the Common Shares held by the Supporting Shareholders. Tax Act means the Income Tax Act (Canada). Third Party Debt Payoff Loans means one or more loans provided by U.S. Steel (or one of its Affiliates) to the Corporation in an aggregate amount equal to the aggregate of all amounts required to repay Specified Third Party Debt. Third Party Proposal means any Contract, proposal or offer (including any proposal or offer to the Shareholders) with respect to a proposed or potential Acquisition Transaction. Transfer Agent means CIBC Mellon Trust Company, as registrar and transfer agent for the Common Shares. Tricap means Tricap Management Limited. TSX means the Toronto Stock Exchange. UBS means UBS Securities Canada Inc. UBS Fairness Opinion means the written fairness opinion of UBS dated August 26, 2007 and delivered to the Board and described under The Arrangement Fairness Opinions of the Financial Advisors, a copy of which is attached as Appendix D to this Circular. U.S. Steel means United States Steel Corporation, a Delaware corporation. Warrant Consideration means a cash payment from Stelco in an amount equal to the difference between (A) the product of the number of Common Shares underlying such Warrant held by such Warrantholder and $38.50, less (B) the aggregate exercise price payable under such Warrant by such Warrantholder to acquire the number of Common Shares underlying such Warrant (with the aggregate amount rounded down to the nearest cent). Warrant Indenture means the warrant indenture dated as of March 31, 2006 between the Corporation and CIBC Mellon Trust Company, as trustee. Warrant Loan means a loan provided by U.S. Steel (or one of its Affiliates) to the Corporation equal to the Aggregate Warrant Consideration. Warrantholder means a holder of Warrants. Warrants means the warrants to purchase an aggregate of 2,213,904 Common Shares issued pursuant to the terms of the Warrant Indenture and outstanding as of September 21,

18 SUMMARY The following is a summary of certain significant information contained elsewhere in this Circular. This summary is provided for convenience only and should be read in conjunction with, and is qualified in its entirety by, the more detailed information appearing or referred to elsewhere in this Circular, including the Appendices and documents that are incorporated by reference. Certain capitalized words and terms used in this summary and the Circular are defined in the Glossary of Terms found on pages 3 to 9. Date, Time and Place of Meeting The Meeting will be held at 10:00 a.m. (Toronto time) on Friday, October 26, 2007 in Room 203 AB, North Building, at the Metro Toronto Convention Centre, 255 Front Street West, Toronto, Ontario, Canada. Record Date The Board, as confirmed by the Interim Order, has fixed the close of business on September 21, 2007 as the record date for determining the Shareholders who are entitled to receive notice of and to vote at the Meeting or any adjournment or postponement thereof. The failure of any Shareholder to receive notice of the Meeting does not deprive the Shareholder of the right to vote at the Meeting. Purpose of the Meeting At the Meeting, Shareholders will be asked to consider and, if thought advisable, to pass, with or without variation, the Special Resolution approving the Arrangement. The Arrangement The following summary of the Arrangement is qualified in its entirety by reference to the full text of the Plan of Arrangement, which is attached as Appendix B to this Circular. The Arrangement will occur on the Effective Date, which is currently expected to be on or about October 31, 2007, subject to the approval of the Special Resolution and the receipt of the Final Order and subject to the satisfaction or waiver of certain other conditions. See Other Terms of the Arrangement Agreement Conditions to the Completion of the Arrangement. Commencing at the Effective Time, the following actions will occur: Amendment of 2006 Documents: The terms of the 2006 Plan of Arrangement and 2006 Final Order (as defined in the Plan of Arrangement) will be amended to delete the restrictions on dividends or distributions by Stelco to its Shareholders. Loans and Debt Repayment: U.S. Steel (or an Affiliate) will provide loans to Stelco to repay third party debt of Stelco or its Affiliates that U.S. Steel has specified be repaid and Stelco or such Affiliates will repay this debt. U.S. Steel (or an Affiliate) will also provide loans to Stelco to pay the Aggregate Option Consideration and the Aggregate Warrant Consideration. To date, U.S. Steel has specified that the following third party debt is to be repaid (i) the secured floating rate notes in the principal amount of U.S. $235,070,000, issued by Stelco pursuant to a trust indenture dated March 31, 2006 between Stelco, BNY Trust Company of Canada, as Canadian Trustee and The Bank of New York, as U.S. trustee, as supplemented by a first supplemental indenture dated March 31, 2006 among such parties; (ii) the secured term loan in the principal amount of U.S. $270 million pursuant to a credit agreement dated as of May 7, 2007 among, inter alia, GE Canada Finance Holding Company and Stelco; (iii) the secured revolving credit facility in the maximum principal amount of $600 million pursuant to an amended and restated exit facility credit agreement dated March 23, 2007 among, inter alia, CIT Business Credit Canada Inc., GE Canada Finance Holding Company and Stelco, as amended by an amending agreement dated as of May 7, 2007; and (iv) the loan in the principal amount of $110,000,000 pursuant to a credit agreement between the Bank of Tokyo-Mitsubishi (Canada) and Lake Erie Slab Company Inc. dated March 14, 1997, each together with all related documents including all subsidiary guarantees. Reorganization: Immediately following repayment of the third party debt, Stelco will effect any reorganizations that are to be effected in accordance with Section 4.4 of the Arrangement Agreement. 10

19 Effect on Warrants: Each Warrant outstanding immediately prior to the Effective Time will be transferred to Stelco in exchange for a cash payment from Stelco equal to the Warrant Consideration, and each Warrant and the Warrant Indenture will be terminated. Effect on Options: Each Option outstanding immediately prior to the Effective Time will be transferred to Stelco in exchange for a cash payment from Stelco equal to the Option Consideration, and each Option and the Stock Option Plan will be terminated. Effect on Common Shares: Each Common Share held by a Dissenting Shareholder immediately prior to the Effective Time will be transferred to Acquireco in return for a debt claim against Acquireco. See Dissenting Shareholders Rights. Each remaining Common Share outstanding immediately prior to the Effective Time (other than Common Shares held by Acquireco and its Affiliates) will be transferred to Acquireco in return for a cash payment equal to the Share Consideration. All cash payments will be less any applicable withholdings. In order to receive the Share Consideration for the Common Shares, each Registered Shareholder must complete, sign and return the blue Letter of Transmittal in accordance with the instructions set out therein and in this Circular. In order to receive the Warrant Consideration for the Warrants, each registered Warrantholder must complete, sign and return the yellow Letter of Transmittal in accordance with the instructions set out therein and in this Circular. Optionholders do not have to take any action to receive the Option Consideration. See The Arrangement Arrangement Mechanics Steps. Recommendation of the Special Committee The Special Committee, consisting of Messrs. Bennett and Pratt, has unanimously determined that the Arrangement is fair to Shareholders and is in the best interests of Stelco and the Shareholders. Accordingly, the Special Committee recommended to the Board that the Board approve the Arrangement Agreement and recommend to Shareholders that they vote IN FAVOUR of the Special Resolution. See The Arrangement Recommendation of the Special Committee. Recommendation of the Board The Board has unanimously determined that the Arrangement is fair to Shareholders and is in the best interests of Stelco and the Shareholders. Accordingly, the Board approved the Arrangement Agreement and unanimously recommends that Shareholders vote IN FAVOUR of the Special Resolution. References to the unanimous determination of the Board exclude Messrs. Douglas, Lacey, Madon, Mott and Panell, who disclosed a conflict of interest and did not participate in discussions at the Board or vote on the approval of the Arrangement on the approval date of the transaction. See The Arrangement Recommendation of the Board. Reasons for the Arrangement In making their respective determinations as to the Arrangement and its fairness and in support of the Special Committee s recommendation to the Board and the Board s recommendation to Shareholders to vote in favour of the Special Resolution, the Special Committee and the Board considered a number of factors in support of the Arrangement, including that: (a) (b) the consideration of $38.50 per Common Share being offered to Shareholders under the Arrangement represents a premium of approximately 43% over the closing price of $26.93 for the Common Shares on the TSX on August 24, 2007, the trading day immediately prior to the announcement of the transaction, and a premium of approximately 44% over the 20 day volume weighted average trading price of $26.67 for the Common Shares on the TSX ended on that date; the consideration to be paid under the Arrangement was achieved through an active and extensive process to solicit proposals to acquire the Corporation from a number of potentially interested third parties, which process was 11

20 supervised by the Special Committee with the assistance of CIBC and UBS as financial advisors and McCarthy Tétrault LLP as counsel; (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) the consideration by the Special Committee of other alternatives to maximize Shareholder value and the conclusion that the Arrangement is the most favourable alternative available; the CIBC Fairness Opinion and UBS Fairness Opinion, which were provided to the Board, to the effect that as of August 26, 2007, and based upon and subject to the assumptions, matters considered, limitations and qualifications described in such opinions, the consideration to be received by Shareholders under the Arrangement is fair, from a financial point of view, to Shareholders (other than U.S. Steel); the consideration under the Arrangement is all cash, which provides certainty of value to the security holders of the Corporation compared to a transaction in which security holders would receive all or part of the consideration in securities; the obligations of U.S. Steel and Acquireco are not subject to a financing condition and the Special Committee s and the Board s comfort with U.S. Steel s and Acquireco s commitment and ability to complete the Arrangement; the risks to the Corporation of the likely continued consolidation in the steel industry; Shareholders holding approximately 77% of the Common Shares have independently agreed to vote in favour of the approval of the Special Resolution and to support the Arrangement and no other transaction, and have entered into the Support Agreements with U.S. Steel and Acquireco to that effect; the Arrangement must be approved by the Court, which will consider, among other things, the fairness and reasonableness of the Arrangement; the availability of Dissent Rights for Registered Shareholders; the Special Committee recommended to the Board that the Board approve the Arrangement and the execution and delivery on behalf of the Corporation of the Arrangement Agreement and recommend that the Shareholders vote in favour of the Special Resolution; management of the Corporation advised that they did not expect there to be material developments in the business in the near future that might significantly increase the market price of the Common Shares; the terms and conditions of the Arrangement Agreement, including Stelco s, U.S. Steel s and Acquireco s respective representations, warranties and covenants, and the conditions to their respective obligations, are, in the judgment of Stelco and its advisors, reasonable and were the product of extensive negotiations between the Corporation and its advisors and U.S. Steel and Acquireco and their advisors; Warrantholders and Optionholders will be entitled to receive cash in an amount per Warrant and Option equal to the in-the-money amount of their Warrants and Options; the business reputation of U.S. Steel and its knowledge of the business of Stelco; and the guarantee by U.S. Steel of Stelco s pension funding obligations under a pension agreement entered into by Stelco and the Province in 2006 and U.S. Steel s agreement to arrange for Stelco to make a voluntary contribution of $32.5 million to Stelco s main pension plans at the Closing Date. The Special Committee and the Board also considered a number of other matters relating to the Arrangement, including: (a) following completion of the Arrangement, the Corporation will no longer exist as an independent public company and Shareholders will not participate in any future earnings or growth of the Corporation; 12

21 (b) (c) (d) (e) (f) the requirement that certain conditions to the completion of the Arrangement must be satisfied, including regulatory and governmental approvals, and the right of U.S. Steel to terminate the Arrangement Agreement if they are not satisfied; the costs to the Corporation of the Arrangement if it is not completed, including the diversion of management attention away from the conduct of the Corporation s business in the ordinary course; an all-cash transaction will generally be taxable to non-exempt Shareholders for U.S. and Canadian federal income tax purposes; the provisions in the Arrangement Agreement restricting the Corporation from soliciting other Third Party Proposals, cancelling the Meeting or terminating the Arrangement Agreement to accept another offer, which combined with the existence of the Support Agreements with the Supporting Shareholders, negates the likelihood of a successful Superior Proposal if the Arrangement is completed before the Outside Date; and the limitations in the Arrangement Agreement on the conduct of the businesses of the Corporation in the ordinary course consistent with past practice and, in certain circumstances, requiring the prior written consent of U.S. Steel, which may delay or prevent the Corporation from pursuing business opportunities that would be advisable if the Corporation were to remain an independent public company. See The Arrangement and Other Terms of the Arrangement Agreement. Fairness Opinions of the Financial Advisors CIBC has delivered the CIBC Fairness Opinion to the Board concluding that, as of the date of such opinion, and based upon and subject to the assumptions, matters considered, limitations and qualifications described in its opinion, the consideration to be received by Shareholders (other than U.S. Steel) under the Arrangement is fair, from a financial point of view, to the Shareholders (other than U.S. Steel). The full text of the CIBC Fairness Opinion, which sets forth, among other things, assumptions made, information reviewed, matters considered, limitations and qualifications on the scope of the review undertaken by CIBC in rendering its opinion, is attached as Appendix C to this Circular. Shareholders are urged to read the CIBC Fairness Opinion in its entirety. The summary of the CIBC Fairness Opinion in this Circular is qualified in its entirety by reference to the full text of the CIBC Fairness Opinion. The CIBC Fairness Opinion is not a recommendation as to how Shareholders should vote at the Meeting. See The Arrangement Fairness Opinions of the Financial Advisors. UBS has delivered the UBS Fairness Opinion to the Board concluding that, as of the date of such opinion, and based upon and subject to the various assumptions, matters considered and limitations described in its opinion, the consideration to be paid to Shareholders (other than U.S. Steel and Acquireco) under the Arrangement is fair, from a financial point of view, to such Shareholders. The full text of the UBS Fairness Opinion, which sets forth, among other things, the assumptions made, information reviewed, matters considered and limitations on the scope of the review undertaken by UBS in rendering its opinion, is attached as Appendix D to this Circular. Shareholders are urged to read the UBS Fairness Opinion in its entirety. The summary of the UBS Fairness Opinion in this Circular is qualified in its entirety by reference to the full text of the UBS Fairness Opinion. The UBS Fairness Opinion is not a recommendation as to how Shareholders should vote at the Meeting. See The Arrangement Fairness Opinions of the Financial Advisors. Interests of Directors and Senior Management in the Arrangement Certain directors and officers of Stelco have interests in the Arrangement under related transactions that may be perceived as conflicts of interest with respect to the Arrangement. The Special Committee and the Board are aware of these interests and considered them when making their recommendations. 13

22 See The Arrangement Interests of Directors and Senior Management in the Arrangement. Non-Solicitation Covenant In the Arrangement Agreement, Stelco agreed not to initiate, solicit, encourage or seek, directly or indirectly, any Third Party Proposal. If Stelco receives, prior to the date of the Meeting, an unsolicited written Third Party Proposal that its Board determines is a Superior Proposal, Stelco must notify U.S. Steel of the terms of the Superior Proposal and give U.S. Steel five Business Days to make an offer at least as favourable to Stelco and the Shareholders as the Superior Proposal. If U.S. Steel does not make such an offer, the Board may make a Change of Recommendation. However, unless U.S. Steel terminates the Arrangement Agreement due to the Change of Recommendation, the Arrangement Agreement remains in effect and Stelco must hold the Meeting. As the Supporting Shareholders have agreed to vote in favour of the passage of the Special Resolution at the Meeting, the Arrangement with U.S. Steel will be approved. If U.S. Steel decides, at its option, to terminate the Arrangement Agreement due to the Change of Recommendation, Stelco must pay U.S. Steel a termination fee of $26 million. Dissenting Shareholders Rights Pursuant to the Interim Order, Registered Shareholders have a right to dissent in respect of the Special Resolution and to be paid an amount equal to the fair value of their Common Shares. The dissent procedures require that a Registered Shareholder who wishes to dissent must send a written notice of objection to the Special Resolution to the Corporation (i) at 386 Wilcox Street, Hamilton, Ontario L8N 3T1 (Attention: Corporate Secretary) or (ii) by facsimile transmission to (Attention: Corporate Secretary) in either case, to be received by 5:00 p.m. (Toronto time) on the Business Day that is two Business Days prior to the date of the Meeting, or, in the case of any adjournment or postponement of the Meeting, by 5:00 p.m. (Toronto time) on the Business Day that is two Business Days preceding the day of the adjourned or postponed Meeting, and must otherwise strictly comply with the dissent procedures described in the Circular. These dissent procedures are different than the statutory dissent procedures of the CBCA that would permit a notice of objection to be provided at or prior to the Meeting. In addition, unlike the statutory dissent procedures of the CBCA, these dissent procedures provide for Acquireco, rather than the Corporation, to be the party obliged to pay the fair value for the Common Shares (if the Dissenting Shareholder is ultimately determined to be entitled to be paid the fair value thereof), and for Acquireco, rather than the Corporation, to be the party obliged to take certain steps and be entitled to exercise certain rights that are attributable to the Corporation under the statutory dissent procedures of the CBCA as amended by the Interim Order. Failure to strictly comply with the dissent procedures will result in loss of the right to dissent. Any Registered Shareholder who dissents from the Special Resolution in compliance with the Dissent Procedures, will be entitled, in the event the Arrangement becomes effective, to be paid by Acquireco the fair value of the Common Shares held by such Dissenting Shareholder determined as of the close of business on the day before the Special Resolution is adopted. Beneficial owners of Common Shares registered in the name of a broker, investment dealer, bank, trust company, trustee or other nominee who wish to dissent should be aware that only Registered Shareholders are entitled to dissent and, accordingly, they should contact such nominee to exercise dissent rights. See Dissenting Shareholders Rights. Required Shareholder Approval At the Meeting, Shareholders will be asked to consider and, if thought advisable, to pass, with or without variation, the Special Resolution approving the Arrangement. The Special Resolution must be passed by at least two-thirds of the votes cast by holders of Common Shares present in person or represented by proxy at the Meeting. The Special Resolution must be passed in order for Stelco to seek the Final Order and, subject to satisfaction or waiver of other conditions, to implement the Arrangement. The Supporting Shareholders collectively own approximately 77% of the Common Shares as at August 26, Accordingly, votes sufficient to pass the Special Resolution have been committed in favour of the Arrangement. See The Arrangement Required Shareholder Approval. Support Agreements from Supporting Shareholders Appaloosa, Palomino, Sunrise, Tricap and Rodney B. Mott (President and Chief Executive Officer of Stelco) collectively own or control approximately 77% of the Common Shares as at August 26, Each of them has entered into a Support Agreement, whereby 14

23 they irrevocably agreed, among other things, to vote all of their respective Supporting Shares in favour of the Special Resolution. Such Shareholders will continue to be bound by such Support Agreements even if the Board makes a Change of Recommendation, and the Corporation is required to proceed with the Meeting notwithstanding any Change of Recommendation. As a result, approval of the Special Resolution is assured. See The Arrangement Support Agreements from Supporting Shareholders. Conditions to the Completion of the Arrangement The obligations of each of U.S. Steel, Acquireco and Stelco to implement the Arrangement are subject to the satisfaction (or, to the extent permissible, waiver) of certain mutual conditions, including the following: the passage of the Special Resolution at the Meeting in accordance with the Interim Order; the Interim Order and the Final Order will have been obtained on terms consistent with the Arrangement Agreement and will not have been set aside; receipt of Competition Act Approval and Investment Canada Act Approval; expiration or early termination of any applicable waiting periods under the antitrust and competition laws of all relevant jurisdictions other than Canada and the United States, which counsel to the parties agree are necessary or required; and no Applicable Law or order will prohibit the consummation of the Arrangement. In addition, U.S. Steel and Acquireco are not obliged to implement the Arrangement if certain conditions are not satisfied or waived by U.S. Steel, including the following: the representations and warranties of Stelco set out in the Arrangement Agreement (without any materiality qualifiers) will be true and correct (except where, in certain circumstances, the failure to be so would not have a Company Material Adverse Effect) and Stelco will have performed its obligations under the Arrangement Agreement in all material respects; there will not have occurred any event, occurrence or change after August 26, 2007 that has had, or would reasonably be expected to have, a Company Material Adverse Effect; no Governmental Entity will have acted to prevent the implementation of the Arrangement or to limit U.S. Steel s right to control Stelco or to own or operate its businesses or to compel Stelco or U.S. Steel or their respective Affiliates to dispose of or hold separate businesses or assets; the Interim Order and the Final Order will not have been modified or set aside in a manner unacceptable to U.S. Steel, acting reasonably; the restrictions on distributions by Stelco to its Shareholders will have been terminated; and all requisite approvals from a Governmental Entity that are legally necessary to implement the Plan of Arrangement will have been obtained on terms satisfactory to U.S. Steel, acting reasonably. In addition, Stelco is not obliged to implement the Arrangement if the representations and warranties of U.S. Steel set out in the Arrangement Agreement are not true and correct in all material respects or U.S. Steel and Acquireco have not performed their obligations under the Arrangement Agreement in all material respects. See Other Terms of the Arrangement Agreement Conditions to the Completion of the Arrangement for a more detailed description of the above conditions. 15

24 Timing Completion of the Arrangement is dependent on many factors and it is not possible at this time to determine precisely when or if the Arrangement will become effective. The earliest date by which completion of the Arrangement is expected to occur is October 31, 2007 and cannot be later than January 31, 2008 unless extended in accordance with the terms of the Arrangement Agreement. Either Acquireco or Stelco may terminate the Arrangement Agreement if the Arrangement has not been completed by January 31, 2008 (or April 30, 2008 if the Outside Date is extended in accordance with the terms of the Arrangement Agreement). See Principal Legal Matters Steps to Implementing the Arrangement and Timing and Other Terms of the Arrangement Agreement Termination of the Arrangement Agreement. Principal Legal Matters Court Approval The Arrangement requires Court approval. Prior to mailing this Circular, the Corporation obtained the Interim Order, which provides for the calling and holding of the Meeting, the Dissent Rights and other procedural matters. A copy of the Interim Order is attached as Appendix E to this Circular. Subject to the approval of the Special Resolution by Shareholders at the Meeting, the hearing in respect of the Final Order is currently scheduled to take place before the Court on October 30, At the hearing, the Court will consider, among other things, the fairness and reasonableness of the Arrangement. The Court may approve the Arrangement in any manner the Court may direct, subject to compliance with the terms and conditions, if any, as the Court deems fit. See Principal Legal Matters Court Approval. Regulatory Matters The Arrangement is subject to approvals and/or the expiration or termination of waiting periods pursuant to the competition laws of various jurisdictions, including Canada. The Arrangement is also subject to approval under the Investment Canada Act. See Principal Legal Matters Regulatory Matters. Certain Canadian Federal Income Tax Considerations Residents of Canada. Generally, a Resident Shareholder who holds Common Shares as capital property will realize a capital gain (or capital loss) on the disposition of such Common Shares to Acquireco equal to the amount, if any, by which the Share Consideration received by such Shareholder, exceeds (or is less than) the aggregate of the adjusted cost base to the Shareholder of such Common Shares and any reasonable costs of disposition. Generally, a Resident Warrantholder who holds Warrants as capital property will realize a capital gain (or capital loss) on the disposition of such Warrants to Stelco equal to the amount, if any, by which the Warrant Consideration, exceeds (or is less than) the aggregate of the adjusted cost base to the Warrantholder of such Warrants and any reasonable costs of disposition. Generally, a Resident Optionholder will be required to include in income in the taxation year of the disposition the Option Consideration received by such Optionholder on the disposition of such Options to Stelco. A Resident Optionholder may be entitled to a deduction equal to 50% of the amount of such income inclusion, provided certain conditions imposed in the Tax Act are met. Generally, a Resident Optionholder who exercises an Option and acquires Common Shares must include in income in the taxation year of the exercise of the Option the amount by which the fair market value of the Common Shares acquired on the exercise of such Option at such time exceeds the exercise price thereunder. 16

25 Non-Residents of Canada. Generally, a Non-Resident Shareholder who holds Common Shares as capital property will not be subject to tax under the Tax Act on any capital gain realized on the disposition of such Common Shares under the Arrangement, provided such Common Shares do not constitute taxable Canadian property for purposes of the Tax Act. Generally, a Non-Resident Warrantholder who holds Warrants as capital property will not be subject to tax under the Tax Act on any capital gain realized on the disposition of a Warrant under the Arrangement, provided such Warrant does not constitute taxable Canadian property under the Tax Act. Generally, a Non-Resident Optionholder who was granted an Option in connection with employment duties performed in Canada who disposes of such Option to Stelco will be taxed in the same manner as described above for Resident Optionholders, subject to the provisions of any applicable tax treaty. Similarly, such a Non-Resident Optionholder who exercises an Option and acquires Common Shares pursuant to such Option will be taxed in the same manner as described above for Resident Optionholders, again, subject to the provisions of any applicable tax treaty. Other Non-Resident Optionholders should refer to the heading Certain Tax Considerations Certain Canadian Federal Income Tax Considerations Non-Residents of Canada Options. The foregoing is a brief summary of Canadian federal income tax consequences only. Shareholders, Warrantholders and Optionholders should read carefully the information in the Circular under the heading Certain Tax Considerations Certain Canadian Federal Income Tax Considerations, which qualifies the summary set forth above. Shareholders, Warrantholders and Optionholders are urged to consult their own tax advisors to determine the particular tax consequences to them of the Arrangement. Certain United States Federal Income Tax Considerations U.S. Holders. The Arrangement will be a taxable transaction for U.S. federal income tax purposes. As a result, a U.S. holder (as defined under the heading Certain Tax Considerations for Shareholders Certain U.S. Federal Income Tax Considerations below) of Common Shares or Warrants will generally recognize a gain or loss in an amount equal to the difference between the U.S. dollar value of the Canadian dollars received by the U.S. holder and the U.S. holder s adjusted tax basis in the Common Shares or Warrants transferred in the Arrangement (determined in U.S. dollars). This gain or loss will generally be treated as a capital gain or loss if the U.S. holder held the Common Shares or Warrants as capital assets and will be long-term capital gain or loss if the U.S. holder held the Common Shares or Warrants for more than one year on the Effective Date. Non-U.S. Holders. A non-u.s. holder (as defined under the heading Certain Tax Considerations for Shareholders Certain U.S. Federal Income Tax Considerations below) of Common Shares or Warrants will generally not be subject to U.S. federal income tax as a result of the Arrangement unless a gain attributable to the Common Shares or Warrants is effectively connected with the conduct of a trade or business in the United States by the non-u.s. holder, or the non-u.s. holder is an individual that is present in the United States for 183 days or more in the taxable year in which the Arrangement is implemented and certain other conditions are satisfied. The foregoing is a brief summary of U.S. federal income tax consequences only. Shareholders should read carefully the information in the Circular under the heading Certain Tax Considerations for Shareholders Certain U.S. Federal Income Tax Considerations, which qualifies the summary set forth above. Shareholders are urged to consult their own tax advisors to determine the particular tax consequences to them of the Arrangement. 17

26 THE MEETING AND SOLICITATION OF PROXIES The information contained in this Circular is furnished in connection with the solicitation of proxies to be used at the Meeting to be held at 10:00 a.m. (Toronto time) on Friday, October 26, 2007 in Room 203 AB, North Building, at the Metro Toronto Convention Centre, 255 Front Street West, Toronto, Ontario, Canada, and at any adjournment or postponement of the Meeting, for the purposes set forth in the accompanying notice of meeting. The solicitation of proxies by this Circular is being made by or on behalf of management of the Corporation. In addition, pursuant to the terms of the Arrangement Agreement, Stelco has agreed to take all reasonable steps necessary to allow U.S. Steel, directly or through representatives, to solicit, in accordance with Applicable Law, from Shareholders proxies in favour of the approval of the Special Resolution, provided that any such solicitation is in a manner approved by the Corporation acting reasonably and, if there is a Change of Recommendation, as is permitted by Applicable Law. The solicitation by the Corporation will be made by mail, but proxies may also be solicited personally or by telephone or other communication by directors, officers and employees of Stelco without special compensation. As well, Georgeson has been engaged as Stelco s proxy solicitation agent. Georgeson will be paid a fee of $40,000, as well as a $6 per call fee for calls to and from retail Shareholders and out-of-pocket expenses. The total cost of the solicitation will be borne by Stelco. Record Date The Board, as confirmed by the Interim Order, has fixed the close of business on September 21, 2007 as the record date for determining Shareholders who are entitled to receive notice of and to vote at the Meeting. The failure of any Shareholder to receive notice of the Meeting does not deprive the Shareholder of the right to vote at the Meeting. Purpose of the Meeting At the Meeting, Shareholders will be asked to consider and, if thought advisable, to pass, with or without variation, the Special Resolution approving the Arrangement. Appointment of Proxies If you do not wish or are unable to attend the Meeting, you should complete, sign, date and return the enclosed form of proxy. The persons named in the enclosed form of proxy are representatives of management of the Corporation and are directors and/or officers of the Corporation. You have the right to appoint someone else to represent you at the Meeting. Shareholders who wish to appoint some other person to represent them at the Meeting may do so by inserting such person s name in the blank space provided in the form of proxy. Such other person need not be a Shareholder of the Corporation. Note that a Shareholder may only appoint a person as proxyholder, other than the management nominees named on the form of proxy, by voting by mail or by internet (as described below). Registered Shareholders of the Corporation who do not wish or are unable to attend the Meeting in person may vote their Common Shares 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. Proxies to be used at the Meeting must be deposited not later than 5:00 p.m. (Toronto time) on Wednesday, October 24, 2007 or, in the case of any adjournment or postponement of the Meeting, by 5:00 p.m. (Toronto time) on the second Business Day immediately preceding the day of the adjourned or postponed Meeting. A Registered Shareholder may also vote by telephone or by internet 24 hours a day, 7 days a week using the control number included on the form of proxy. To vote by telephone call from a touch tone phone. To vote using the internet, a Registered Shareholder should access For further information on voting by telephone or by internet, see the form of proxy accompanying this Circular. If you have any questions with respect to your proxy, you may contact Georgeson toll-free at The execution or exercise of a proxy does not constitute a written objection for purposes of the Dissent Procedures. Only Registered Shareholders are entitled to dissent. For information on Dissent Rights, see Dissenting Shareholders Rights. 18

27 Form of Proxy The form of proxy accompanying this Circular gives a Registered Shareholder the opportunity to specify whether the Common Shares registered in the Shareholder s name will be voted for or against the Special Resolution. Attendance and Voting Only Registered Shareholders, or the Persons they appoint as their proxies, are entitled to attend and vote on all matters that may properly come before the Meeting. Each Common Share entitles a Registered Shareholder to one vote for each Common Share held. The Special Resolution must be passed by at least two-thirds of the votes cast by the holders of outstanding Common Shares present in person or represented by proxy at the Meeting. The Supporting Shareholders, holding approximately 77% of the outstanding Common Shares, have committed to vote their Supporting Shares in favour of the Special Resolution. See The Arrangement Support Agreements from Supporting Shareholders. Non-Registered Holders In many cases, Common Shares beneficially owned by a holder (a Non-Registered Holder ) are registered either: (a) (b) in the name of an intermediary (the Intermediary ) that the Non-Registered Holder deals with in respect of the Common Shares, such as, among others, brokers, investment dealers, banks or trust companies, and trustees or administrators of self-administered registered retirement savings plans, registered retirement income funds, registered education savings plans and similar plans; or in the name of a depository (such as CDS) of which the Intermediary is a participant. In accordance with the requirements of the CBCA and Canadian securities law, the Corporation has distributed copies of the Meeting Materials to the Intermediaries for onward distribution to Non-Registered Holders. Intermediaries are required to forward the Meeting Materials to Non-Registered Holders unless a Non-Registered Holder has waived the right to receive them. Typically, Intermediaries will use a service company (such as Broadridge Financial Solutions, Inc. (formerly ADP Investor Communications Corporation)) to forward the Meeting Materials to Non-Registered Holders. Generally, Non-Registered Holders will either: (a) (b) be given a proxy which has already been signed by the Intermediary (typically by a facsimile, stamped signature) which is restricted as to the number of Common Shares beneficially owned by the Non-Registered Holder but which is otherwise not completed. This form of proxy need not be signed by the Non-Registered Holder. In this case, the Non-Registered Holder who wishes to submit a proxy should otherwise properly complete, date and return the form of proxy to CIBC Mellon Trust Company at 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, Canada, as described above; or more typically, be given a voting instruction form which must be completed and signed by the Non-Registered Holder in accordance with the directions on the voting instruction form (which may in some cases permit the completion of the voting instruction form by telephone or internet). The purpose of these procedures is to permit Non-Registered Holders to direct the voting of the Common Shares they beneficially own. Should a Non-Registered Holder who receives either a proxy or a voting instruction form wish to attend and vote at the Meeting in person (or have another Person attend and vote on behalf of the Non-Registered Holder), the Non-Registered Holder should strike out the names of the Persons named in the proxy and insert the Non-Registered Holder s (or such other Person s) name in the blank space provided or, in the case of a voting instruction form, follow the corresponding instructions on the form. In either case, Non-Registered Holders should carefully follow the instructions of their Intermediaries and their service companies. Revocation of Proxies A Registered Shareholder who has given a proxy may revoke the proxy at any time prior to the exercise thereof at the Meeting: 19

28 (a) (b) (c) by completing and signing a proxy bearing a later date and depositing it with CIBC Mellon Trust Company as described above, so it is received on or before 5:00 p.m. (Toronto time) on October 24, 2007; or by depositing an instrument in writing executed by the Shareholder or by the Shareholder s attorney authorized in writing at the registered office of the Corporation at 386 Wilcox Street, Hamilton, Ontario L8N 3T1 (Attention: Corporate Secretary) at any time up to and including the last Business Day immediately preceding the day of the Meeting or any adjournment thereof or with the Chairman of the Meeting on the day of the Meeting or any adjournment thereof; or in any other manner permitted by law. A Non-Registered Holder may revoke a voting instruction form or a waiver of the right to receive Meeting Materials and to vote given to an Intermediary at any time by written notice to that Intermediary, except that an Intermediary may not be able to act on a revocation of a voting instruction form or of a waiver of the right to receive Meeting Materials and to vote that is not received by the Intermediary at least seven days prior to the Meeting. VOTING OF PROXIES The management representatives designated in a valid proxy will vote the Common Shares in respect of which they are appointed by proxy on any ballot that may be called for in accordance with the instructions of the Shareholder as indicated on the proxy. In the absence of such instructions, such Common Shares will be voted by the management representatives FOR the approval of the Special Resolution. The enclosed form of proxy confers discretionary authority upon the management representatives designated in the proxy with respect to variations to matters identified in the Notice of Meeting and with respect to other matters that may properly come before the Meeting. As at the date of this Circular, management of the Corporation knows of no such variations or other matters. OUTSTANDING SHARES Each Shareholder of record at the close of business on September 21, 2007, the Record Date established for notice of and voting at the Meeting, will be entitled to one vote for each Common Share held on all matters proposed to come before the Meeting. On the Record Date, the Corporation had outstanding 27,174,446 Common Shares. The Special Resolution must be passed by at least two-thirds of the votes cast by the holders of outstanding Common Shares present in person or represented by proxy at the Meeting. Background to the Arrangement Agreement THE ARRANGEMENT The Arrangement Agreement is the result of an arm s-length negotiation between representatives of Stelco, U.S. Steel and Acquireco and their respective advisors. The following is a summary of the events that preceded the execution and public announcement of the Arrangement Agreement. In August 2003, Stelco initiated a thorough review of its business and operations. Stelco incurred significant operating losses in 2003 and significant negative cash flow. By early 2004, Stelco concluded that it had a serious viability issue and that it would not have the liquidity needed to operate without a Court supervised restructuring. Accordingly, on January 29, 2004 Stelco and certain of its subsidiaries obtained an order from the Court granting them creditor protection under the CCAA. The restructuring process continued until March 31, 2006 when the 2006 CCAA Plan pursuant to the CCAA and the 2006 Plan of Arrangement pursuant to the CBCA were implemented. Under the 2006 CCAA Plan, secured creditors received secured floating rate notes, new Common Shares, cash and Warrants in satisfaction of their claims, the Province received Warrants in connection with the Province Note Loan Agreement and the capital providers (i.e., Tricap, Sunrise and Appaloosa) subscribed for new Common Shares. Under the 2006 Plan of Arrangement, the businesses of Stelco were divided into nine separate limited partnerships wholly-owned, directly and indirectly, by Stelco. For particulars of these plans, refer to the text of each plan and to the Annual Information Form of Stelco dated March 30, 2007, all of which are available on SEDAR at 20

29 Upon completion of the restructuring, Mr. Rodney Mott, a North American steel industry veteran with over 30 years of experience in the business, was appointed as the President and Chief Executive Officer of Stelco. Mr. Mott advised that his objective was to build a stronger, more cost efficient steel company that would become part of the global consolidation in the steel industry. To this end, on exiting from the CCAA process Stelco commenced an operational restructuring plan, the key components of which were productivity improvement initiatives and a reduction in the labour force, the reduction of production and administrative costs, the optimization of capital projects and the reduction of working capital requirements. On February 7, 2007, Stelco announced that it had completed major components of its operational restructuring plan. On March 7, 2007, Stelco further reported on initiatives undertaken pursuant to its operational restructuring plan and Mr. Mott stated that Stelco s long-term competitive position had substantially improved. Subsequently, Stelco announced changes to its credit facilities which were considered to be favourable to Stelco. In January 2007, with the support of the Board of Directors, Mr. Mott began to consider a merger or sale involving Stelco as a means of strengthening Stelco s business and enhancing value for Shareholders. With his knowledge of the steel industry, Mr. Mott initially focused on companies that would have a strategic fit with Stelco and had an interest in growth and expansion as the global steel industry continued its rapid consolidation. On February 1, 2007, Stelco entered into a confidentiality agreement with U.S. Steel to permit U.S. Steel and Stelco to have exploratory discussions and to permit U.S. Steel to have access to certain confidential information to determine its interest in a proposed business combination with Stelco. On March 9, 2007, Stelco entered into a similar agreement with another possible interested party. Subsequently, a number of other confidentiality agreements were entered into with parties potentially interested in a business combination with Stelco or the acquisition of some or all of its businesses or assets, as described below. In February 2007, the Board instructed Mr. Mott to hold discussions with potential investment banking advisors to be hired to assist the Corporation in evaluating business combination opportunities, including a sale. On March 15, 2007, Stelco retained CIBC and UBS to advise Stelco in connection with a review of strategic alternatives including a possible disposition of assets or shares of Stelco. CIBC and UBS communicated with 21 strategic buyers and five financial buyers regarding a possible acquisition of Stelco. Including the two confidentiality agreements entered into in February and March 2007, a total of 16 potential buyers signed confidentiality agreements with Stelco. The management of Stelco, with the assistance of its financial advisors, set up an electronic data room to enable potential interested parties and their advisors to conduct due diligence. In addition, management presentations were made to a number of the interested parties who requested such meetings to assist them in examining combination or sale alternatives, as described below. During this period, the consolidation of the steel industry continued. In April 2007, Algoma Steel Inc. announced that it had agreed to be acquired by Essar Steel Holdings Ltd., and IPSCO Inc. announced that it was in discussions that could lead to a potential transaction which has since been consummated. On April 30, 2007, the Board established the Special Committee. The members of the Special Committee were Mr. Courtney Pratt, the Chairman of the Board of Directors, Mr. Laurie Bennett and Mr. Cyrus Madon, who was asked to act as Chairman of the Special Committee. The Special Committee was charged with considering and evaluating any proposed transaction the Board of Directors might be asked to consider in the interests of the Corporation and to oversee the negotiation of any proposed transaction. The Special Committee was also charged with directing the work of the financial advisors to the Corporation. Since its formation, the Special Committee has met approximately 20 times to fulfill its mandate. On June 1, 2007, Stelco issued a press release confirming that it was reviewing strategic options for Stelco in light of the ongoing consolidation in the steel industry and that it intended to review a number of alternatives including the sale of all or part of Stelco. Mr. Mott stated, We believe it is appropriate to begin the next phase of our business plan and explore all potential alternatives for positioning Stelco to be an integral part of a larger, globally competitive company. At the annual and special meeting of Shareholders of Stelco held on June 6, 2007, Mr. Mott indicated that the preference was to sell all of Stelco s business, but that a sale of parts of Stelco s business could be a possibility. The Special Committee and its advisors met on June 4, 2007 to receive an update on discussions that had been initiated by CIBC and UBS with potential buyers. The Special Committee also determined, after discussion with its financial advisors, that the sale of Stelco s interest in the Wabush mine joint venture was not expected to adversely impact a sale of Stelco or be perceived unfavourably by a potential buyer of Stelco. Of the 16 potential interested parties who signed confidentiality agreements with Stelco, 10 were granted access to the electronic data room set up by Stelco. They also were permitted to have site visits and received presentations from management of Stelco during the period from May to August During this period, a number of potential buyers indicated that they no longer intended to pursue a 21

30 possible transaction. By the end of July 2007, five potential interested parties were still performing due diligence to determine their interest in acquiring Stelco. In July 2007, U.S. Steel requested a meeting with representatives of the Province to discuss certain aspects of the Stelco pension plans including certain agreements entered into with the Province at the time of completion of the Stelco restructuring in early Such meeting occurred on July 17, U.S. Steel concluded that, were it to acquire Stelco, it would only do so with certain changes to the pension agreement between Stelco and the Province dated March 31, 2006 and the related Province Note Loan Agreement. On July 23, 2007, Mr. Mott and Mr. Michael McQuade of Stelco and representatives of CIBC delivered a management presentation to members of management of U.S. Steel and its advisors, JP Morgan, in Pittsburgh. At the conclusion of the meeting, the representatives of Stelco in attendance were advised that any transaction which U.S. Steel would propose would involve irrevocable shareholder commitments and would be required to be structured in a manner so as to provide U.S. Steel with deal certainty. On July 26, 2007, the Special Committee and its advisors met to review the status of the discussions with each interested potential party. Due in part to the advice received on July 23, 2007 from U.S. Steel regarding its requirement for firm deal provisions, the Special Committee concluded, with the advice of its financial and legal advisors, that it would be appropriate to take additional steps to formally solicit indications of interest from other potential buyers. It was determined that the financial advisors would request that such potential buyers submit an indication of interest and value by the end of day on August 6, 2007 and that Stelco would consider other steps, including the circulation of a process letter, which it viewed as appropriate to actively solicit indications of interest. On July 27, 2007, Mr. John Connelly of U.S. Steel telephoned Mr. Mott to discuss a possible transaction between U.S. Steel and Stelco at a specified indicative price per Common Share. Mr. Connelly reiterated U.S. Steel s position that certain changes to Stelco s pension and loan agreements with the Province would be required in order for U.S. Steel to proceed with a transaction, and advised that U.S. Steel would only propose to acquire Stelco if it had the clear and irrevocable support of the major shareholders, who in the aggregate held approximately 77% of the undiluted Common Shares. On August 2, 2007, the Special Committee and its advisors met to review the status of the discussions with each interested potential party and to discuss the U.S. Steel proposal, including the requested changes to Stelco s pension and loan agreements with the Province and irrevocable support agreements from the major shareholders. At the meeting, UBS confirmed that the remaining potential buyers had been asked to submit an indication of interest and value by the end of day on August 6, On August 3, 2007, one of the remaining potential interested parties submitted a proposal to acquire one part of Stelco s businesses. Stelco determined that this proposal was inadequate and advised the potential buyer of this determination. On August 7, 2007, the Special Committee and its advisors met to review the status of the discussions with the potential buyers. The financial advisors reviewed U.S. Steel s indicated interest in acquiring the shares of Stelco at a specific price per share subject to the satisfaction of a number of conditions, including the entering into of an agreement with the Province relating to the amendment of certain provisions of Stelco s pension and loan agreements with the Province and irrevocable support agreements with the major shareholders. The financial advisors further reported that the remaining potential interested parties other than U.S. Steel had advised that they were not in a position to give an indication of value by the August 6, 2007 end-of-business deadline. The Special Committee asked its counsel to draft a form of acquisition agreement for distribution to all potential interested parties so that the Special Committee could evaluate various offers on an equal footing. It was noted that U.S. Steel had also instructed its counsel to prepare a form of acquisition agreement. The Special Committee instructed its counsel, McCarthy Tétrault LLP, to use a statutory arrangement structure for the form of acquisition agreement as it seemed likely that any business combination would best be achieved through a court-supervised arrangement process. On August 10, 2007, the Special Committee and its advisors met to review the status of the discussions with the potential buyers and to review a draft of the acquisition agreement circulated by its counsel. UBS advised that potential buyers were continuing to consider whether they would propose transactions with Stelco and, in certain cases, had requested additional time to complete their due diligence. The Special Committee asked that the draft acquisition agreement be sent to the remaining interested parties with a process letter notifying such parties of a deadline for each party to advise as to the value and type of consideration proposed and any requested changes to the form of acquisition agreement. The Special Committee meeting was followed by a meeting of the Board to brief the directors of Stelco on the status of the discussions. 22

31 On August 13, 2007, counsel for U.S. Steel delivered to Stelco a draft of a form of acquisition agreement which contemplated an arrangement and a form of irrevocable shareholder voting support agreement. The draft U.S. Steel acquisition agreement provided that the contemplated meeting of Shareholders of Stelco to approve the U.S. Steel proposal would be held even if the Board were to make a Change of Recommendation, including recommending a Superior Proposal made by a third party after the execution of the agreement with U.S. Steel. On the same day, UBS sent to three remaining potential interested parties the draft acquisition agreement prepared by McCarthy Tétrault LLP as counsel to the Special Committee and notice of a deadline of August 20, 2007 at 5:00 p.m. to provide details of the consideration proposed to be paid for the Common Shares and the changes to the acquisition agreement required by the potential buyer. The same draft acquisition agreement was delivered to another potential buyer and to counsel for U.S. Steel on August 16, On August 14, 2007, U.S. Steel, Stelco, the Province and their advisors met to discuss proposed changes to the pension agreement between Stelco and the Province and the Province Note Loan Agreement. Later on the same day Messrs. Mott and Hutchison and counsel to the Special Committee met with officers of U.S. Steel and counsel to U.S. Steel to discuss, among other things, the proposed structure of the transaction contemplated by the draft acquisition agreement. During the meeting, U.S. Steel was encouraged to modify the indicative pricing for the transaction and the transaction structure, due in part to concerns expressed by Stelco as to the firmness of the proposed arrangements. U.S. Steel advised that the proposed structure as to the mandatory vote provisions and the irrevocable nature of the proposed support agreements from the major shareholders was not negotiable and that it did not propose to increase its indicative pricing for the transaction. Negotiations continued over the next three days, with revised drafts of the acquisition agreement being exchanged. On August 17, 2007, the Special Committee and its advisors met to review the current status of the discussions with potential buyers. Mr. Mott advised that U.S. Steel required (a) an executed agreement with the Province, (b) an executed acquisition agreement with Stelco and (c) signed irrevocable voting support agreements with the major shareholders before proceeding with executing an acquisition agreement. The Committee s financial advisors provided an update on other interested parties. The Special Committee was advised by its financial advisors that none of the other interested parties would likely be prepared to provide mark-ups of the draft form of the acquisition agreement circulated at the direction of the Special Committee by the August 20, 2007 end-of-business deadline together with indicative pricing information. UBS advised that (a) one interested party, referred to herein as Company A, was however expected to provide a mark-up of the draft acquisition agreement by the August 20, 2007 end-of-business deadline without pricing information, (b) it was also expected that another interested party would provide a letter to Stelco on August 20, 2007, and (c) it was doubtful that the other remaining potential interested parties would respond. The Special Committee meeting was followed by a meeting of the Board to brief the directors on the status of the discussions. On August 20, 2007, the Special Committee and its advisors met to review the current status of the discussions with potential buyers and the negotiations with U.S. Steel. UBS advised the Special Committee that Company A had promised to deliver a mark-up of the draft acquisition agreement later that day but was still not in a position to provide an indication of pricing. Although the other potential buyers had been advised of the deadline, none of them had submitted any proposal. Later that day, and after the deadline, counsel to Company A did deliver a mark-up of the draft acquisition agreement. The Special Committee requested that its counsel review the response of Company A to the draft acquisition agreement. On August 22, 2007, the Special Committee and its advisors met to review the current status of the discussions with respect to the pension and loan agreement amendments being requested by U.S. Steel and the proposed irrevocable voting support agreements being requested by U.S. Steel with the major shareholders of Stelco. Meetings between U.S. Steel and counsel to four of the major shareholders occurred (and also occurred on subsequent days). At the end of the day, it appeared doubtful that any of the other potential parties, with the possible exception of Company A, would make a proposal. The Special Committee directed its financial advisors to give all remaining potential buyers a final deadline of 4:00 p.m. on August 23, 2007 to submit a proposal and to inform all remaining potential buyers that Stelco was considering a proposed transaction which would involve irrevocable support agreements with the major shareholders and other provisions that would prevent such other potential buyers from being able to consummate a transaction with Stelco. On August 23, 2007, the Board met at noon to review the current status of the discussions with potential buyers. The Board was advised that the terms of the proposed agreement with U.S. Steel were substantially settled. The Board was further advised that Company A had requested one more day to provide an indication of price, and that the other potential buyers advised that they were not in a position to make a bid at that time. The Board deferred any decision on a transaction until a Board meeting which was scheduled for 6:00 p.m. on Sunday, August 26, The Special Committee met on August 23, 2007 to review with its advisors the process for making its recommendation to the Board. 23

32 At about noon on August 24, 2007, counsel to Company A delivered a revised draft of the proposed acquisition agreement between Company A and Stelco with a proposed acquisition price for all Common Shares slightly above indicative pricing from U.S. Steel in cash per Common Share. The Special Committee met at 1:00 p.m. to review financial fairness considerations with the financial advisors. The Special Committee directed its counsel to review the revised draft of the proposed acquisition agreement from Company A and report to the Special Committee at 5:00 p.m. that evening. The Special Committee and its advisors met again at 5:30 p.m. to review the terms of the draft agreement with Company A. The Special Committee received a favourable report and directed its counsel to meet with Company A s counsel to negotiate all outstanding issues so that the Special Committee and Board could examine two fully negotiated and complete proposals during the weekend. On Saturday, August 25, 2007, counsel for Company A delivered another revised draft of its proposed acquisition agreement. The Special Committee and its advisors met at 5:00 p.m. At the meeting the Special Committee discussed whether negotiations should be re-opened with U.S. Steel because there was another bidder proposing a transaction at a price above the indicative price suggested by U.S. Steel, and whether, given the non-financial circumstances of each bid, the price indicated by Company A was sufficiently higher to be deemed the most attractive offer. At the beginning of the meeting, Mr. Cyrus Madon retired as a member and Chair of the Special Committee and Mr. Courtney Pratt agreed to assume the responsibilities of the Chair for all subsequent meetings due to the prospect that any transaction Stelco would agree to would require irrevocable voting support agreements from the major shareholders including Tricap where Mr. Madon serves in an executive capacity. At the Special Committee meeting, the Special Committee reviewed a comparison of the terms of the proposed agreements with U.S. Steel and Company A and, together with its advisors, discussed the attributes of the transactions being proposed by Company A and U.S. Steel. Counsel advised that Company A had again confirmed it would require irrevocable shareholder voting support agreements from the major shareholders as well as all directors and officers, but was not requesting other provisions, including a mandatory shareholder vote provision, which were required by U.S. Steel. Counsel to the Special Committee advised that the form of agreement proposed by Company A was to be preferred to that proposed by U.S. Steel but it contained a condition to closing that was not acceptable. Due to this condition and the work done by U.S. Steel regarding the pension plans with the Province and unions, and the relatively small difference in offer price, the Special Committee concluded that the U.S. Steel offer continued to be in the best interests of Stelco and the Shareholders having regard to certainty of execution and price. Accordingly, UBS was directed to contact Company A and inform them that their bid was not high enough to differentiate themselves on value and that they were not the leading bidder in the view of the Special Committee. During the days leading up to and including August 25, 2007, negotiations between Stelco and U.S. Steel continued and U.S. Steel participated in direct discussions with the Province to finalize arrangements with the Province. On August 25, 2007, an agreement was reached between the major shareholders and U.S. Steel on the terms of the irrevocable voting support agreements. By the end of the day on August 25, 2007, while all the provisions of its acquisition agreement and related agreements had been settled, U.S. Steel had not increased its indicative transaction price. By the end of the day on August 25, 2007, the contractual terms with Company A had been substantially settled and its price remained slightly above that proposed by U.S. Steel. Negotiations with Company A continued that evening to finalize remaining outstanding issues with Stelco and the major shareholders whose shares were to become the subject of irrevocable voting support agreements. Counsel for Company A delivered a revised draft of its proposed acquisition agreement to Stelco just before midnight. The Special Committee and its advisors met at 10:30 a.m. on Sunday, August 26, 2007 to discuss Company A s proposal and progress on the remaining key unsettled issues. The Special Committee was advised that the objectionable condition had been removed from Company A s proposal. The Special Committee directed its counsel to settle the remaining issues in the draft acquisition agreement in a manner favourable to the Corporation. As the meeting was ending, counsel for Company A sent an to the financial advisors notifying them that Company A was withdrawing its earlier offer which included a price modestly above U.S. Steel for all of Stelco s Common Shares, and related securities but would offer $1 million aggregate above any other bona fide written offer up to a specified dollar amount per share. The offer was expressed to be open until 5 p.m. that night. Counsel to the Special Committee and to Company A continued to negotiate remaining unsettled terms of the proposed acquisition agreement during the afternoon of August 26, Counsel to Company A was also negotiating the terms of the irrevocable voting support agreements with Davies Ward Phillips & Vineberg LLP, counsel to Tricap, and McMillan Binch Mendelsohn LLP, counsel to Appaloosa, Palomino and Sunrise, during this time. The Special Committee and its advisors met again on Sunday at 2:30 p.m. The Special Committee determined that Company A s $1 million formula bid was not acceptable and that Company A should be told that it must make an offer with a specified price. It was also agreed that U.S. Steel would be told at an appropriate time when Stelco had further clarity with respect to Company A s pricing that there was another bidder above its price. 24

33 The Special Committee, together with Mr. Madon and Mr. Mott and its advisors, met again at 4:00 p.m. on Sunday. The Special Committee asked Mr. Madon if Tricap would sign irrevocable voting support agreements with either U.S. Steel or Company A if required to enable a transaction to be completed. Mr. Madon expressed the view that Tricap would be prepared to work with either bidder subject to an assessment of pricing and transaction certainty. At 4:20 p.m., Stelco s financial advisors were notified that Company A was now offering a firm price considerably above the indicative pricing from U.S. Steel per Common Share. Messrs. Madon and Mott were then excused. Mr. Pratt, as Chairman of the Special Committee, received independent confirmation of the improved Company A offer. The Special Committee instructed Mr. Mott to advise U.S. Steel that another potential buyer had made a higher bid prior to a meeting of the board of directors of U.S. Steel scheduled for 5:00 p.m. to consider the draft acquisition agreement with Stelco. Mr. Mott contacted U.S. Steel management and advised U.S. Steel that another potential buyer had made a higher bid to acquire all of the shares of Stelco. After that call, Mr. Pratt then assumed responsibility for any further discussions with the two competing interested bidders. The Board of Directors of Stelco and its advisors met at 6:00 p.m. on August 26, The directors were advised of the current status of the negotiations with U.S. Steel and Company A. By 6:00 p.m., the terms of the form of agreement with each of U.S. Steel and Company A, together with the terms of the support agreements being requested from the major shareholders of Stelco, were finalized. After lengthy discussions, it was agreed that Mr. Pratt would advise both U.S. Steel and Company A that Stelco would determine what it considered to be the best bid as at 9:00 p.m. that evening. The meeting of the Board was then adjourned, and Mr. Pratt placed a call to a senior officer of U.S. Steel and then to a senior officer of Company A and so advised them. He confirmed that negotiations with both bidders were ended and that the highest price would be accepted. The Special Committee reconvened at 9:00 p.m. that evening with its advisors. The Special Committee was advised that, following Mr. Pratt s calls, Company A and its counsel had both confirmed that Company A s previous offer was its best and final offer. U.S. Steel independently made a revised offer of $38.50 per Common Share by the 9:00 p.m. deadline, a price considerably in excess of the price offered by Company A. The Special Committee then met with its advisors to review the Special Committee s recommendation to the Board. After receiving an oral fairness opinion from each of CIBC and UBS, the members of the Special Committee, comprised of Messrs. Bennett and Pratt, unanimously determined that the proposed arrangement transaction with U.S. Steel set forth in the draft acquisition agreement with U.S. Steel was fair to the holders of Common Shares and in the best interests of the Corporation and its Shareholders. The meeting of the Board reconvened at 9:15 p.m. without Messrs. Douglas, Lacey, Madon and Pannell (who had previously declared a conflict of interest due to their association with Tricap and the prospect of Tricap entering into an irrevocable voting support agreement with U.S. Steel) and Mr. Mott who had also agreed to enter into an irrevocable voting support agreement with U.S. Steel. The Board was advised of the bids and the recommendation of the Special Committee in favour of the U.S. Steel proposal and received an oral fairness opinion from each of the financial advisors. After receiving a detailed report from the Special Committee underlying its recommendation that the Board accept the U.S. Steel proposal, the Board, by a unanimous vote of those present and voting, determined that the U.S. Steel arrangement was fair to the holders of Common Shares and is in the best interests of Stelco and its Shareholders. It also authorized the execution and delivery of the U.S. Steel acquisition agreement and determined to recommend that holders of Common Shares vote in favour of the approval of the U.S. Steel transaction. Recommendation of the Special Committee The Special Committee, consisting of Messrs. Bennett and Pratt, has unanimously determined that the Arrangement is fair to Shareholders and is in the best interests of Stelco and the Shareholders. Accordingly, the Special Committee recommended to the Board that the Board approve the Arrangement Agreement and recommend to Shareholders that they vote IN FAVOUR of the Special Resolution. Recommendation of the Board The Board has unanimously determined that the Arrangement is fair to Shareholders and is in the best interests of Stelco and the Shareholders. Accordingly, the Board approved the Arrangement Agreement and unanimously recommends that Shareholders vote IN FAVOUR of the Special Resolution. References to the unanimous determination of the Board exclude Messrs. Douglas, Lacey, Madon, Mott and Panell, who disclosed a conflict of interest and did not participate in discussions at the Board or vote on the approval of the Arrangement on the approval date of the transaction. 25

34 Reasons for the Arrangement In making their respective determinations as to the Arrangement and its fairness and in support of the Special Committee s recommendation to the Board and the Board s recommendation to Shareholders to vote in favour of the Special Resolution, the Special Committee and the Board considered a number of factors in support of the Arrangement, including that: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) the consideration of $38.50 per Common Share being offered to Shareholders under the Arrangement represents a premium of approximately 43% over the closing price of $26.93 for the Common Shares on the TSX on August 24, 2007, the trading day immediately prior to the announcement of the transaction, and a premium of approximately 44% over the 20 day volume weighted average trading price of $26.67 for the Common Shares on the TSX ended on that date; the consideration to be paid under the Arrangement was achieved through an active and extensive process to solicit proposals to acquire the Corporation from a number of potentially interested third parties, which process was supervised by the Special Committee with the assistance of CIBC and UBS as financial advisors and McCarthy Tétrault LLP as counsel; the consideration by the Special Committee of other alternatives to maximize Shareholder value and the conclusion that the Arrangement is the most favourable alternative available; the CIBC Fairness Opinion and UBS Fairness Opinion, which were provided to the Board, to the effect that as of August 26, 2007, and based upon and subject to the assumptions, matters considered, limitations and qualifications described in such opinions, the consideration to be received by Shareholders (other than U.S. Steel) under the Arrangement is fair, from a financial point of view, to Shareholders (other than U.S. Steel); the consideration under the Arrangement is all cash, which provides certainty of value to the security holders of the Corporation compared to a transaction in which security holders would receive all or part of the consideration in securities; the obligations of U.S. Steel and Acquireco are not subject to a financing condition and the Special Committee s comfort with U.S. Steel s and Acquireco s commitment and ability to complete the Arrangement; the risks to the Corporation of the likely continued consolidation in the steel industry; Shareholders holding approximately 77 % of the Common Shares have independently agreed to vote in favour of the approval of the Special Resolution and to support the Arrangement and no other transaction, and have entered into the Support Agreements with U.S. Steel and Acquireco to that effect; the Arrangement must be approved by the Court, which will consider, among other things, the fairness and reasonableness of the Arrangement; the availability of Dissent Rights for Registered Shareholders; the Special Committee recommended to the Board that the Board approve the Arrangement and the execution and delivery on behalf of the Corporation of the Arrangement Agreement and recommend that the Shareholders vote in favour of the Special Resolution; management of the Corporation advised that they did not expect there to be material developments in the business in the near future that might significantly increase the market price of the Common Shares; the terms and conditions of the Arrangement Agreement, including Stelco s, U.S. Steel s and Acquireco s respective representations, warranties and covenants, and the conditions to their respective obligations, are, in the judgment of Stelco and its advisors, reasonable and were the product of extensive negotiations between the Corporation and its advisors and U.S. Steel and Acquireco and their advisors; 26

35 (n) (o) (p) Warrantholders and Optionholders will be entitled to receive cash in an amount per Warrant and Option equal to the in-the-money amount of their Warrants and Options; the business reputation of U.S. Steel and their knowledge of the business of Stelco; and the guarantee by U.S. Steel of Stelco s pension funding obligations under a pension agreement entered into by Stelco and the Province in 2006 and U.S. Steel s agreement to arrange for Stelco to make a voluntary contribution of $32.5 million to Stelco s main pension plans at the Closing Date. The Special Committee and the Board also considered a number of other matters relating to the Arrangement, including: (a) (b) (c) (d) (e) (f) following completion of the Arrangement, the Corporation will no longer exist as an independent public company and Shareholders will not participate in any future earnings or growth of the Corporation; the requirement that certain conditions to the completion of the Arrangement must be satisfied, including regulatory and governmental approvals, and the right of U.S. Steel to terminate the Arrangement Agreement if they are not satisfied; the costs to the Corporation of the Arrangement if it is not completed, including the diversion of management attention away from the conduct of the Corporation s business in the ordinary course; an all-cash transaction will generally be taxable to non-exempt Shareholders for U.S. and Canadian federal income tax purposes; the provisions in the Arrangement Agreement restricting the Corporation from soliciting other Third Party Proposals, cancelling the Meeting or terminating the Arrangement Agreement to accept another offer, which combined with the existence of the Support Agreements with the Supporting Shareholders, negates the likelihood of a successful Superior Proposal if the Arrangement is completed before the Outside Date; and the limitations in the Arrangement Agreement on the conduct of the businesses of the Corporation in the ordinary course consistent with past practice and, in certain circumstances, requiring the prior written consent of U.S. Steel, which may delay or prevent the Corporation from pursuing business opportunities that would be advisable if the Corporation were to remain an independent public company. See Other Terms of the Arrangement Agreement. Fairness Opinions of the Financial Advisors CIBC and UBS were engaged on March 15, 2007 by Stelco to act as financial advisors to the Board and to assist and advise on strategic alternatives, which could include a transaction with a third party in the form of a merger or sale, including providing a fairness opinion to the Board, if requested. CIBC delivered its opinion orally to the Board on August 26, CIBC subsequently confirmed its opinion by delivery of a written opinion to the Board that, as of the date of such opinion, and based upon and subject to the assumptions, matters considered, limitations and qualifications described in such opinion, the consideration to be received by Shareholders (other than U.S. Steel) under the Arrangement is fair, from a financial point of view, to the Shareholders (other than U.S. Steel). UBS delivered its opinion orally to the Board on August 26, UBS subsequently confirmed its opinion by delivery of a written opinion to the Board that, as of the date of such opinion, and based upon and subject to the various assumptions, matters considered and limitations described in its opinion, the consideration to be paid to Shareholders (other than U.S. Steel and Acquireco) under the Arrangement is fair, from a financial point of view, to the Shareholders. The full text of the CIBC Fairness Opinion, which sets forth, among other things, the assumptions made, information reviewed, matters considered, limitations and qualifications, which the CIBC Fairness Opinion is based upon and subject to, is attached as 27

36 Appendix C to this Circular. Shareholders are urged to read the CIBC Fairness Opinion in its entirety. This summary is qualified in its entirety by reference to the full text of the CIBC Fairness Opinion. The full text of the UBS Fairness Opinion, which sets forth, among other things, the various assumptions, matters considered and limitations, which the UBS Fairness Opinion is based upon and subject to, is attached as Appendix D to this Circular. Shareholders are urged to read the UBS Fairness Opinion in its entirety. This summary is qualified in its entirety by reference to the full text of the UBS Fairness Opinion. Neither CIBC nor UBS is an insider, associate or Affiliate of the Corporation. CIBC provided financial advisory services, in connection with the Corporation s announced sale of its interest in the Wabush mine joint venture. UBS provided financial advisory services to the Corporation in connection with the 2006 CCAA Plan. The CIBC Fairness Opinion and the UBS Fairness Opinion address only the fairness, from a financial point of view, of the consideration to be received by Shareholders under the Arrangement. The CIBC Fairness Opinion and the UBS Fairness Opinion were provided for the use of the Board only and may not be relied upon by any other person. The CIBC Fairness Opinion and UBS Fairness Opinion do not constitute recommendation to the Board to approve the execution of the Arrangement Agreement and do not constitute recommendation to any Shareholder as to how such Shareholder should vote on the Arrangement or any matter related thereto. The CIBC Fairness Opinion and UBS Fairness Opinion do not address Stelco s underlying business decision to pursue the Arrangement, the relative merits of the Arrangement as compared to any alternative business strategies that might exist for Stelco, the financing of the Arrangement or the effects of any other transaction in which Stelco might engage. The CIBC Fairness Opinion and UBS Fairness Opinion were among many other factors taken into consideration by the Special Committee and the Board of Directors in arriving at their respective recommendations. Under the respective engagement letters with CIBC and UBS, Stelco has agreed to pay CIBC and UBS a fee for rendering financial advisory services, a significant portion of which is contingent upon completion of the Arrangement. In addition, the Corporation has agreed to reimburse CIBC and UBS for out-of-pocket expenses and to indemnify CIBC and UBS and certain related persons against certain liabilities in connection with their engagement, including certain liabilities under securities laws. Required Shareholder Approval At the Meeting, Shareholders will be asked to consider and, if thought advisable, to pass, with or without variation, the Special Resolution approving the Arrangement. The Special Resolution must be passed by at least two-thirds of the votes cast by holders of outstanding Common Shares present in person or represented by proxy at the Meeting. The Special Resolution must be passed in order for Stelco to seek the Final Order and, subject to satisfaction or waiver of other conditions, implement the Arrangement. The Supporting Shareholders collectively own or control approximately 77% of the Common Shares as at August 26, Accordingly, votes sufficient to pass the Special Resolution have been committed in favour of the Arrangement. Arrangement Mechanics Steps The following summary of the Arrangement is qualified in its entirety by reference to the full text of the Plan of Arrangement which is attached as Appendix B to the Circular. The Arrangement will occur on the Effective Date, which is currently expected to be on or about October 31, 2007, subject to the approval of the Special Resolution, the receipt of the Final Order and the satisfaction or waiver of certain conditions. See Other Terms of the Arrangement Agreement Conditions to the Completion of the Arrangement. Commencing at the Effective Time, the following actions will occur: Amendment of 2006 Documents: The terms of the 2006 Plan of Arrangement and 2006 Final Order (as defined in the Plan of Arrangement) will be amended to delete the restrictions on dividends and distributions by Stelco to its Shareholders. Loans and Debt Repayment: U.S. Steel (or an Affiliate) will provide loans to Stelco to repay third party debt of Stelco or its Affiliates that U.S. Steel has specified be repaid and Stelco or such Affiliates will repay this debt. U.S. Steel (or 28

37 an Affiliate) will also provide loans to Stelco to pay the Aggregate Option Consideration and the Aggregate Warrant Consideration. To date, U.S. Steel has specified that the following third party debt is to be repaid (i) the secured floating rate notes in the principal amount of U.S. $235,070,000, issued by Stelco pursuant to a trust indenture dated March 31, 2006 between Stelco, BNY Trust Company of Canada, as Canadian Trustee and The Bank of New York, as U.S. trustee, as supplemented by a first supplemental indenture dated March 31, 2006 among such parties; (ii) the secured term loan in the principal amount of U.S. $270 million pursuant to a credit agreement dated as of May 7, 2007 among, inter alia, GE Canada Finance Holding Company and Stelco; (iii) the secured revolving credit facility in the maximum principal amount of $600 million pursuant to an amended and restated exit facility credit agreement dated March 23, 2007 among, inter alia, CIT Business Credit Canada Inc., GE Canada Finance Holding Company and Stelco, as amended by an amending agreement dated as of May 7, 2007; and (iv) the loan in the principal amount of $110,000,000 pursuant to a credit agreement between the Bank of Tokyo-Mitsubishi (Canada) and Lake Erie Slab Company Inc. dated March 14, 1997, each together with all related documents including all subsidiary guarantees. Reorganization: Immediately following repayment of the third party debt, Stelco will effect any reorganizations that are to be effected in accordance with Section 4.4 of the Arrangement Agreement. Effect on Warrants: Each Warrant outstanding immediately prior to the Effective Time will be transferred to Stelco in exchange for a cash payment from Stelco equal to the Warrant Consideration, and each Warrant and the Warrant Indenture will be terminated. Effect on Options: Each Option outstanding immediately prior to the Effective Time will be transferred to Stelco in exchange for a cash payment from Stelco equal to the Option Consideration, and each Option and the Stock Option Plan will be terminated. Effect on Common Shares: Each Common Share held by a Dissenting Shareholder immediately prior to the Effective Time will be transferred to Acquireco in return for a debt claim against Acquireco. See Dissenting Shareholders Rights. Each remaining Common Share outstanding immediately prior to the Effective Time (other than Common Shares) held by Acquireco and its Affiliates) will be transferred to Acquireco in return for a cash payment equal to the Share Consideration. All cash payments will be less any applicable withholdings. Letters of Transmittal Included with this Circular is a Letter of Transmittal for Registered Shareholders and/or a Letter of Transmittal for registered Warrantholders, as applicable. In order to receive the cash consideration for their Common Shares and/or Warrants, a Registered Shareholder and/or registered Warrantholder must complete and sign the applicable Letter of Transmittal and deliver it, together with certificates representing their Common Shares and/or Warrants, as applicable, and the other required documents, to the Depositary in accordance with the instructions contained in the applicable Letter of Transmittal. Copies of the Letters of Transmittal may be obtained by contacting the Depositary. The Letters of Transmittal will also be available on SEDAR at under the Corporation s profile. The Letters of Transmittal contain procedural information relating to the Arrangement and should be reviewed carefully. The deposit of Common Shares and/or Warrants pursuant to the procedures in the applicable Letter of Transmittal will constitute a binding agreement between the depositing Shareholder and Acquireco (in the case of Common Shares) and the Warrantholder and the Corporation (in the case of Warrants) upon the terms and subject to the conditions of the Plan of Arrangement. In all cases, payment for Common Shares and/or Warrants deposited will be made only after timely receipt by the Depositary of certificates representing Common Shares and/or Warrants, together with a properly completed and duly executed applicable Letter of Transmittal, or a manually executed facsimile thereof, relating to such Common Shares and/or Warrants, with signatures guaranteed if so required in accordance with the instructions in the applicable Letter of Transmittal, and any other required documents specified therein. Stelco and Acquireco reserve the right to waive or not to waive any and all errors or other deficiencies in any Letter of Transmittal or other document and any such waiver or non-waiver will be binding upon the affected security holder. The granting of a 29

38 waiver to one or more security holder does not constitute a waiver for any other security holder. Stelco and Acquireco reserve the right to demand strict compliance with the terms of the Letters of Transmittal and Arrangement. The method used to deliver the Letters of Transmittal and any accompanying certificates representing Common Shares and/or Warrants is at the option and risk of the holder surrendering them, and delivery will be deemed effective only when such documents are actually received. The Corporation recommends that the necessary documentation be hand delivered to the Depositary, and a receipt obtained therefor; otherwise the use of registered mail with return receipt requested, and with proper insurance obtained, is recommended. Shareholders and Warrantholders whose Common Shares and Warrants, respectively, are registered in the name of a broker, investment dealer, bank, trust company, trustee or other nominee should contact that nominee for assistance in depositing those Common Shares and/or Warrants. A Shareholder and Warrantholder may withdraw its applicable Letter of Transmittal at any time prior to the Effective Date by notice in writing delivered to the Depositary. Non-Registered Holders and non-registered Warrantholders should carefully follow the instructions from the broker, investment dealer, bank, trust company, trustee or other nominee that holds Common Shares and/or Warrants on their behalf in order to deposit their Common Shares and/or Warrants. Delivery of Consideration At or before the time of issuance of the certificate of arrangement by the Director to give effect to the Arrangement, Acquireco will deliver or arrange to be delivered to the Depositary for the benefit of Shareholders (other than Shareholders exercising Dissent Rights and who have not withdrawn their notice of objection) the cash required (by bank transfer or other means satisfactory to the Depositary) for payment of their Common Shares under the Plan of Arrangement and the Corporation will deposit sufficient cash (by bank transfer or other means satisfactory to the Depositary) with the Depositary for the benefit of Warrantholders entitled to amounts under the Plan of Arrangement. The Depositary will act as the agent and nominees of Persons who have deposited Common Shares in connection with the Arrangement and for Warrantholders for the purpose of receiving payment from Acquireco or the Corporation, as the case may be, and transmitting payment from Acquireco or the Corporation, as the case may be, to such Persons, and receipt of payment by the Depositary will be deemed to constitute receipt of payment by Persons depositing Common Shares and/or Warrants. The Depositary will receive reasonable and customary compensation for its services in connection with the Arrangement, will be reimbursed for certain out of pocket expenses and will be indemnified by Stelco against certain liabilities under applicable securities laws and expenses in connection therewith. Under no circumstances will interest on the consideration payable pursuant to the Plan of Arrangement accrue or be paid by Stelco, Acquireco or the Depositary, to Shareholders, Warrantholders or Optionholders, regardless of any delay in making such payment. Upon surrender to the Depositary for cancellation of a certificate that immediately prior to the Effective Time represented outstanding Common Shares and/or Warrants that were exchanged for cash, together with the applicable duly completed and executed Letter of Transmittal and such additional documents as the Depositary may reasonably require, the holder of such surrendered certificate will be entitled to receive in exchange therefor a cheque issued by the Depositary in Canadian currency payable at any branch in Canada of a Canadian chartered bank or trust company in an amount equal to the cash that such holder has the right to receive pursuant to the Plan of Arrangement for such Common Shares and/or Warrants, less any applicable withholdings, and any certificate so surrendered will forthwith be cancelled. Such cheque will be forwarded as soon as practicable and, in any event, within five Business Days after the Effective Date by the Depositary by first class insured mail, postage prepaid, or, in the case of a postal disruption in Canada, by such other means as the Depositary considers prudent, to the Shareholder or Warrantholder, as applicable, at the address specified in the applicable Letter of Transmittal or, if specified by the Shareholder or Warrantholder, in the applicable Letter of Transmittal, will be held for pick-up at the Depositary s office. If no address is provided, cheques will be forwarded to the address of the Person as shown on the applicable register of the Corporation. Until surrendered as contemplated by the Plan of Arrangement, each certificate that immediately prior to the Effective Time represented Common Shares or Warrants, as applicable, will be deemed, in accordance with the provisions of the Plan of Arrangement, to represent only the right to receive, upon such surrender, a cash payment in lieu of such certificate as contemplated in the Plan of 30

39 Arrangement from the amount deposited by Acquireco or the Corporation with the Depositary and the Shareholder and Warrantholder, as applicable, will have no claim against Acquireco or the Corporation except to the extent the cash deposited by Acquireco or the Corporation is insufficient to satisfy the amount payable to Shareholders and Warrantholders pursuant to the Plan of Arrangement. Any such certificate formerly representing Common Shares or Warrants, as applicable, not duly surrendered on or before the sixth anniversary of the Effective Date will cease to represent a claim by or interest of any former Shareholder or Warrantholder of any kind or nature against or in the Depositary, the Corporation, U.S. Steel or Acquireco, or any of their successors. On such date, all cash to which such former holder was entitled will be deemed to have been surrendered to Acquireco. In the event of a transfer of ownership of Common Shares and/or Warrants prior to the Effective Time that is not registered in the transfer records of the Corporation, a cheque representing the proper amount of cash may be delivered to the transferee if the certificate representing such Common Shares or Warrants, as applicable, is presented to the Depositary, accompanied by all documents required to evidence and effect such transfer prior to the Effective Time. Optionholders will be entitled to receive a payment from Stelco in an amount equal to the cash that Optionholders have the right to receive under the Arrangement for their Options, less any applicable withholdings. Interests of Directors and Senior Management in the Arrangement In considering the recommendations of the Special Committee and the Board with respect to the Arrangement, Shareholders should be aware that certain directors and officers of Stelco have interests discussed below that may be perceived as conflicts of interest with respect to the Arrangement. The Special Committee and the Board are aware of these interests and considered them when making their recommendations. The following discussion refers to compensation of the directors and officers of Stelco, including Options. None of the compensation was granted, nor are the provisions of the Plan of Arrangement designed, for the purpose, in whole or in part, of increasing the value of the consideration paid to any director or officer for his or her securities of the Corporation pursuant to the Arrangement. None of the compensation, nor any of the provisions of the Plan of Arrangement, is conditional upon any director or officer supporting the Arrangement in any manner, except that Mr. Mott was required to be a Supporting Shareholder. To the knowledge of the Corporation, as at September 21, 2007, the directors and executive officers of Stelco beneficially owned, directly or indirectly, or exercised control or direction over, in the aggregate, 1,031,481 Common Shares, representing approximately 3.8% of the Common Shares outstanding. Of these, Mr. Mott owns 1,000,000 Common Shares. The aggregate consideration payable to the directors and executive officers pursuant to the Plan of Arrangement in respect of their Common Shares is $39,712,018 (before applicable withholdings), assuming none of them acquires or disposes of any Common Shares prior to the Effective Time. Stock Option Plan As at September 21, 2007, the executive officers of Stelco beneficially owned, directly or indirectly, or exercised control or direction over, in the aggregate, 1,925,250 Options, being all of the outstanding Options. Of these, Mr. Mott holds Options to purchase 1,044,000 Common Shares. In accordance with their terms, all outstanding unvested Options will vest in connection with the completion of the Arrangement. Pursuant to the Plan of Arrangement, each Option outstanding immediately prior to the Effective Time, whether or not vested, will be deemed to be vested and transferred by the holder thereof to the Corporation and cancelled in exchange for a cash amount equal to the in-the-money amount in respect of such Option (i.e., the amount, if any, by which $38.50 per Common Share exceeds the exercise price payable under such Option) (before applicable withholdings). Based on the number and exercise prices of vested and unvested Options held by the Applicable Executives (including Options that are expected to vest as a result of the Arrangement), as set forth in the following table, the Applicable Executives are expected to receive the following amounts (net of per share exercise price and before applicable withholdings) in settlement of their respective Options, if the Arrangement is completed: 31

40 Applicable Executive Options That Have Vested and Are Exercisable (1) Options That Are Expected to Vest as a Result of the Arrangement Total Shares Payment ($) Shares Payment ($) Shares Payment ($) Rodney B. Mott 391,500 12,919, ,500 21,532,500 1,044,000 34,452,000 J. Kenneth Rutherford 37, , ,500 2,334, ,000 3,112,500 William J. McKenzie 37,500 1,237,500 93,750 3,093, ,250 4,331,250 Jerome V. Nelson 46,875 1,546,875 78,125 2,578, ,000 4,125,000 Karen A. Smith 46,875 1,546,875 78,125 2,578, ,000 4,125,000 Peter K. Knocke 37,500 1,237,500 62,500 2,062, ,000 3,330,000 Gordon C. Spelich 37,500 1,237,500 62,500 2,062, ,000 3,330,000 D. Chad Hutchison 6, ,625 43, ,375 50, ,000 Michael A. McQuade 6, ,625 43, ,375 50, ,000 Gary R. Seichter 6, ,625 43, ,375 50, ,000 Total 654,000 20,805,750 1,140,131 38,355,000 1,925,250 59,160,750 (1) Includes an aggregate of 205,500 options which vest in accordance with their terms on October 1, Bonus Plan and Severance Plan Effective July 31, 2006, the Corporation adopted both the Bonus Plan and the Severance Plan. Pursuant to the Bonus Plan, prior to March 7, 2007, the right to receive a cash bonus was based on a formula relating to the amount of free cash flow generated by the Corporation. On March 7, 2007, the bonus terms for the Applicable Executives under the Bonus Plan were revised by the Human Resources and Compensation Committee of the Board to be based upon the Corporation s EBITDA (being operating earnings before interest, income taxes, depreciation and amortization), a financial measure reported by the Corporation in its interim and annual management discussion and analysis. At its meeting on March 7, 2007, the Human Resources and Compensation Committee also determined that customary annual salary reviews and possible increases would be deferred (with the exception of three individuals whose positions within the Corporation had changed) until a future meeting and, further, that success bonuses would be discussed for members of the executive team at a future meeting. The payment of success bonuses was subsequently addressed at a July 24, 2007 meeting of the Human Resources and Compensation Committee in view of how the then existing change in control provisions of the Severance Plan would be interpreted based on current bonus performance. It was noted that the typical Stelco executive compensation package consisted of relatively low base pay, combined with bonuses expected to augment base pay and thereby provide reasonable compensation. The Human Resources and Compensation Committee considered that the severance payments under the Severance Plan were not consistent with those under comparable plans of other public corporations and that, consistent with the goal of strengthening Stelco s business and positioning the Corporation to be part of a large, globally competitive company, it was appropriate to implement a success based bonus instead of one based on EBITDA. At its meeting on July 24, 2007, the Human Resources and Compensation Committee determined that a success bonus of 100% annual base salary for the recruited restructuring team and 50% for Messrs. Knocke, McQuade and Seichter would be paid if the executive team was successful in completing a merger or acquisition of Stelco. It was agreed that the success bonus would be deemed to be the 2007 earned bonus for calculation purposes under the Severance Plan instead of a bonus based on EBITDA. Pursuant to the Severance Plan, in the case of a qualifying termination of an Applicable Executive, the executive is entitled to a lump sum severance payment equal to (i) where the executive has less than one year of service, his or her current base salary plus any bonus earned by the executive, (ii) where the executive has between one year but less than three years of service, one and one-half times the aggregate of his or her current base salary and the average annual bonus earned by the executive preceding termination, and (iii) where the executive has three years or more of service, two times the aggregate of his or her current base salary and the average bonus earned by the executive in the three years immediately preceding termination, together, in each case, with a payment for any accrued and unused vacation at the time of qualifying termination and a payment for vacation and automobile allowance for the applicable period corresponding to his or her severance entitlement under the Severance Plan. If a qualifying termination occurs within 12 months of an Acquisition of Control transaction (as defined in the Severance Plan), the terminated Applicable Executive is also entitled to an additional severance payment equal to the aggregate of (i) six month s current salary, and (ii) one-half of the average bonus earned by the executive in the current year and the two years immediately preceding termination, with the bonus for the current year being calculated 32

41 for such purpose on an annualized basis. In the case of a qualifying termination, the Corporation will continue to provide health and welfare benefits to the terminated Applicable Executive for the applicable period corresponding to his or her severance entitlement under the Severance Plan and will make available certain outplacement services. In the case of a limited qualifying termination in certain circumstances, the Corporation will continue to pay the terminated Applicable Executive s salary for a period of six months. For the purpose of the Severance Plan, a qualifying termination is an involuntary dismissal without cause or a constructive dismissal of an Applicable Executive, or an involuntary dismissal without cause or constructive dismissal of an Applicable Executive within 12 months of an Acquisition of Control transaction and a limited qualifying termination means the withdrawal from, or loss of, an Applicable Executive s employment with the Corporation due to disability or death. The Arrangement is an Acquisition of Control transaction as defined in the Severance Plan. The following table sets forth the information regarding (i) the success bonuses which are anticipated to be paid to each Applicable Executive pursuant to the Bonus Plan if the Arrangement is completed, and (ii) the severance amounts which would be paid to each Applicable Executive pursuant to the Severance Plan if the employment of the Applicable Executive terminates under the circumstances outlined above. Applicable Executive Anticipated Success Bonus Payment ($) Amount of Potential Cash Severance Payment (1) ($) Rodney B. Mott 500,000 1,796,707 J. Kenneth Rutherford 250, ,745 Jerome V. Nelson 300,000 1,095,938 William J. McKenzie 300,000 1,095,938 D. Chad Hutchison 225, ,149 Karen A. Smith 270, ,822 Gordon C. Spelich 270, ,822 Peter K. Knocke 100, ,053 Michael A. McQuade 85, ,784 Gary R. Seichter 108, ,208 Total $2,408,360 $9,874,166 (1) Does not include an amount for any accrued and unused vacation, in respect of which the applicable individual would also receive payment. U.S. Tax Gross-Up In accordance with Sections 280G and 4999 of the United States Internal Revenue Code (the IRC ), if a company incurs a change in control and certain payments in the nature of compensation are made to a disqualified individual which exceed three times the individual's average compensation (generally an average of the individual s taxable compensation for the five years preceding the year in which the change in control occurs), a special 20 percent excise tax (the Special U.S. Excise Tax ) is imposed on all amounts received in excess of the individual s average compensation. As United States citizens and taxpayers, certain of the Applicable Executives are disqualified individuals that are required to pay the Special U.S. Excise Tax. The Corporation has agreed to reimburse such Applicable Executives the amount of the Special U.S. Excise Tax and to pay them an additional amount (together with the Special U.S. Excise Tax, the Excise Tax Gross-Up Payment ) to compensate them for any additional taxes they will incur as a result of such payments, as well as for additional excise taxes (if any) incurred under the IRC. Accordingly, it is anticipated that Messrs. Mott, Nelson and Spelich and Ms. Smith would also receive Excise Tax Gross-Up Payments of US$2,876,788, US$899,625, US$780,541 and US$654,565, respectively, if their employment terminates in connection with the completion of the Arrangement. Securities Law Considerations Stelco is a reporting issuer (or the equivalent) under Canadian securities legislation in all of the provinces of Canada and is, among other things, subject to the securities laws of Ontario and Quebec, including Rule and Regulation Q-27 Respecting Protection of Minority Securityholders in the Course of Certain Transactions ( Regulation Q-27 ) of the Autorité des marchés-financiers. 33

42 Rule and Regulation Q-27 are intended to regulate insider bids, issuer bids, business combinations, going private transactions and related party transactions to ensure that all security holders are treated in a manner that is fair and perceived to be fair by requiring, among other things, enhanced disclosure, valuation, review and approval processes. Certain of the compensation arrangements described above could, absent the determination of the independent directors of the Corporation referred to below, be considered a collateral benefit to certain directors and senior officers within the meaning of Rule and thereby render the Arrangement a business combination within the meaning of Rule Rule excludes from the meaning of collateral benefit a benefit to a director or senior officer where (i) the benefit is not conferred for the purpose, in whole or in part, of increasing the value of the consideration paid to the director or senior officer for securities relinquished under the transaction; (ii) the benefit is not, by its terms, conditional on the director or senior officer supporting the transaction in any manner; (iii) full particulars of the benefit are disclosed in the disclosure document for the transaction; and (iv) either (A) the director or senior officer and his or her associated entities beneficially own, or exercise control or direction over, less than 1% of each class of the outstanding securities of the issuer outstanding or (B) the director or senior officer discloses to an independent committee of the issuer the amount of consideration that he or she expects to be beneficially entitled to receive, under the terms of the transaction, in exchange for the equity securities he or she beneficially owns, an independent committee acting in good faith determines that the value of the benefit, net of any offsetting costs to the director or senior officer, is less than 5% of the value of the consideration the director or senior officer will receive pursuant to the terms of the transaction for the equity securities he or she beneficially owns, and the independent committee s determination is disclosed in the disclosure document for the transaction. To the knowledge of the Corporation, the only director or senior officer who, together with his associated entities, beneficially owned or exercised control or direction over more than 1% of the Common Shares outstanding as at August 26, 2007, being the date the Arrangement Agreement was entered into, is Mr. Mott. It is expected that Mr. Mott will receive the amounts set out above under the Bonus Plan and, if applicable, the Severance Plan. On September 13, 2007, Messrs. Pratt and Bennett, the members of the Special Committee and independent directors of the Corporation, reviewed these payments in accordance with Rule In accordance with Rule , Mr. Mott disclosed to Messrs. Pratt and Bennett the aggregate consideration that he will or may beneficially be entitled to receive pursuant to the Plan of Arrangement. Messrs. Pratt and Bennett determined that the value of these payments, net of respective offsetting costs, is less than 5% of the consideration that he will receive pursuant to the Arrangement for the Common Shares held by him. Consequently, if these payments were considered benefits under Rule , they are not collateral benefits within the meaning of that Rule. Insurance The Corporation provides liability insurance for its directors and officers. The current policy has been in place since April 1, 2007 and has policy limits of $130 million. The annual premium for the policy is $1,580,350 and is paid by the Corporation. The insurance carries a deductible of $1,000,000 per securities claim and $500,000 per any other claim in the case of claims for which indemnification is provided by the Corporation. During 2006, the Corporation purchased a run-off liability insurance for its former directors and officers prior to the Corporation s emergence from CCAA proceedings. The run-off policy, which is in effect until March 31, 2012, has a limit of $120 million and carries a deductible of $1,000,000 per securities claim and $500,000 per any other claim in the case of claims for which indemnification is provided by the Corporation. The cost of the run-off policy was $6,684,000. Under the Arrangement Agreement, U.S. Steel has covenanted to obtain, prior to the Effective Time, a prepaid tail insurance policy with a claims period of six years from the Effective Time with respect to directors' and officers' liability or fiduciary liability insurance covering each person covered by the Corporation s directors and officers liability or fiduciary liability insurance policy in amount and scope no less favourable than those of such existing policies of the Corporation for claims arising from facts or events that occurred on or prior to the Effective Time, up to a maximum annual premium rate equal to 200% of the current rate. Pension and Other Arrangements In connection with the entering into of the Arrangement Agreement, U.S. Steel has also made commitments to the Province with regard to Stelco's main pension plans and operations in the Province. U.S. Steel has announced that it plans to make significant capital expenditures and to endow a Priority Chair in the Department of Materials Science and Engineering at McMaster University to facilitate the continuing development of steelmaking technology in Ontario. In connection with the Arrangement, U.S. Steel will also guarantee Stelco's pension funding obligations under a pension agreement entered into by Stelco and the Province in 2006, and will also arrange for 34

43 Stelco to make a voluntary contribution of $32.5 million in the aggregate to Stelco s main pension plans at the closing of the proposed transaction. In connection with these commitments, Stelco s 2006 pension agreement is being amended to reflect the proposed acquisition of Stelco by U.S. Steel. Support Agreements from Supporting Shareholders Mr. Mott has voting and dispositive power over 1,000,000 Common Shares and 1,044,000 Options. Appaloosa has voting and dispositive power over 2,658,616 Common Shares and 17,855 Warrants. Palomino has voting and dispositive power over 2,329,410 Common Shares and 19,576 Warrants. Sunrise has voting and dispositive power over 4,971,279 Common Shares and 15,834 Warrants. Tricap has voting and dispositive power over 9,928,243 Common Shares and 128,774 Warrants. The Supporting Shares owned or controlled by the Supporting Shareholders represented approximately 77% of the Common Shares outstanding as at August 26, On August 26, 2007, U.S. Steel and Acquireco entered into Support Agreements with each of the Supporting Shareholders, whereby the Supporting Shareholders irrevocably agreed, among other things, to vote all of their respective Supporting Shares in favour of the Special Resolution. These Supporting Shareholders will continue to be bound by such Support Agreements even if the Board makes a Change of Recommendation, and the Corporation is required to proceed with the Meeting notwithstanding any Change of Recommendation. As a result, approval of the Special Resolution is assured. The following is a summary of the principal terms of the Support Agreements. This summary is qualified in its entirety by reference to the full text of the Support Agreements filed by the Corporation on SEDAR at under the Corporation s profile. Agreement to Vote Each of the Supporting Shareholders agreed with Acquireco and U.S. Steel to vote in favour of the approval, consent, ratification and adoption of the Arrangement (and any actions required in furtherance thereof), regardless of whether a Third Party Proposal is made or whether the Board effects a Change of Recommendation. They also agreed to vote against (i) any action that is intended or would reasonably be expected to impede, interfere with, delay, postpone or discourage the Arrangement (including for greater certainty, against (1) any Third Party Proposal; or (2) any change in the capitalization of Stelco or the corporate structure or charter of Stelco) that has not been approved by U.S. Steel and Acquireco; and (ii) any action that would result in any breach of any representation, warranty, covenant or agreement or any other obligation of Stelco in the Arrangement Agreement. Non-Solicitation Covenant of the Supporting Shareholders The Supporting Shareholders agreed not to, directly or indirectly, (i) initiate, solicit, encourage or seek, any inquiries relating to or the making or implementation of any Third Party Proposal; (ii) engage in any negotiations concerning, or provide any information or data to, or have any substantive discussions with, any person relating to a Third Party Proposal; (iii) otherwise cooperate in or knowingly facilitate any effort or attempt to make, implement or accept any proposal or offer that constitutes, or may reasonably be expected to lead to, any Third Party Proposal; or (iv) enter into a Contract with any person relating to a Third Party Proposal. Additional Covenants of the Supporting Shareholders Each Supporting Shareholder further agreed not to sell, transfer, gift, assign, pledge, hypothecate, encumber, convert or otherwise dispose of any of their Supporting Securities, other than the exercise of Warrants or Options in accordance with their terms for Common Shares that then become subject to the applicable Support Agreement. They also agreed that if they acquire any additional Common Shares, Warrants or Options, such securities will be subject to the Support Agreements. Each Supporting Shareholder agreed not to do anything to frustrate or hinder the consummation of the Arrangement and agreed not to exercise any Dissent Rights and to waive any rights of appraisal, or rights to dissent from the Arrangement that they would otherwise have at law. The Supporting Shareholders also agreed that if U.S. Steel concludes after the date of the applicable Support Agreement that it is necessary or desirable to proceed with an Alternative Transaction, and the Alternative Transaction is made available to each Shareholder on economic terms and conditions equivalent to or better than those contemplated by the Arrangement Agreement, the Supporting Shareholders will agree to support the completion of the Alternative Transaction in the same manner as the Arrangement. 35

44 Termination of the Support Agreements The Support Agreements terminate upon the earliest of (i) the termination of the Arrangement Agreement in accordance with its terms; (ii) the Effective Time of the Arrangement; or (iii) the Outside Date, which, for the avoidance of doubt, cannot be later than April 30, Sources of Funds for the Arrangement Pursuant to the terms of the Plan of Arrangement, an aggregate amount of approximately $1.1 billion is expected to be paid by Acquireco to acquire all outstanding Common Shares (assuming no Shareholders exercise their Dissent Rights) and to pay related fees and expenses. Pursuant to the terms of the Plan of Arrangement, an aggregate amount of approximately $59.2 million is expected to be paid by the Corporation in respect of all outstanding Options (assuming no holders of Options exercise Options prior to the Effective Date). Pursuant to the terms of the Plan of Arrangement, an aggregate amount of approximately $60.9 million is expected to be paid by the Corporation in respect of all outstanding Warrants (assuming no Warrants are exercised prior to the Effective Date). Pursuant to the terms of the Plan of Arrangement, U.S. Steel (or one of its Affiliates) will provide (i) the Third Party Debt Payoff Loans in an aggregate amount equal to the aggregate of all amounts to the Corporation required to repay such Specified Third Party Debt; (ii) the Warrant Loan; and (iii) the Option Loan. The Third Party Debt Payoff Loans, the Warrant Loan and the Option Loan will be evidenced by demand promissory notes issued by the Corporation to U.S. Steel (or the applicable Affiliate of U.S. Steel). As of June 30, 2007, Stelco had approximately US$760 million of net debt on its balance sheet. U.S. Steel has advised that it intends to pay for the acquisition of the Common Shares, Warrants and Options and retire the majority of Stelco s existing debt (including the Specified Third Party Debt) through a combination of cash on hand, utilization of existing liquidity facilities and proceeds under two new fully committed senior credit facilities totalling US$900 million that were underwritten by J. P. Morgan Securities Inc. and Scotia Capital. U.S. Steel has advised Stelco that it does not intend to repay the debt under the Province Note Loan Agreement. See also Principal Legal Matters Steps to Implementing the Arrangement and Timing. Arrangement Agreement OTHER TERMS OF THE ARRANGEMENT AGREEMENT On August 26, 2007, the Corporation, Acquireco and U.S. Steel entered into the Arrangement Agreement. The Arrangement Agreement was amended on September 19, 2007 to amend certain provisions of the Plan of Arrangement. The following is a summary of the principal terms of the Arrangement Agreement. This summary is qualified in its entirety by reference to the full text of the Arrangement Agreement filed by the Corporation on SEDAR at Implementation of the Arrangement The Corporation has covenanted to (i) apply to the Court for the Interim Order and to diligently pursue obtaining the Interim Order; (ii) call and hold the Meeting regardless of whether the Board determines at any time that the Arrangement is no longer advisable or recommends that the Shareholders reject the Special Resolution or any other Change of Recommendation has occurred; (iii) use reasonable efforts to solicit from the Shareholders proxies in favour of the Special Resolution; (iv) subject to obtaining certain approvals, apply to the Court for the Final Order; and (v) subject to obtaining the Final Order and the satisfaction or waiver of certain conditions in the Corporation s, U.S. Steel s and Acquireco s favour, on the Closing Date send to the Director for endorsement and filing the Articles of Arrangement. Acquireco has covenanted to deposit at or before the time of issuance of the certificate of arrangement by the Director to give effect to the Arrangement, sufficient cash with the Depositary for the benefit of Shareholders in order to make the payments to Shareholders entitled to payment for their Common Shares under the Plan of Arrangement. The Corporation has covenanted to deposit, at or before such time, sufficient cash with the Depositary for the benefit of Warrantholders and Optionholders in order to make the payments to Warrantholders and Optionholders entitled to amounts under the Plan of Arrangement. 36

45 Representations and Warranties of the Corporation The Corporation has represented to U.S. Steel that the members of the Board eligible to do so, after receiving the recommendation of the Special Committee and consultation with its financial advisors, unanimously determined that the Arrangement is fair to the Shareholders and is in the best interests of the Corporation and the Shareholders and unanimously resolved to recommend that the Shareholders vote in favour of the Arrangement. The Corporation also made, subject to certain limited exceptions, other representations and warranties in the Arrangement Agreement, including those in respect of the following matters: (i) its organization and good standing; (ii) its authority relative to the Arrangement Agreement and enforceability of the Arrangement Agreement; (iii) the authorizations required to consummate the transactions contemplated by the Arrangement Agreement; (iv) the absence of conflict with or breach of its constating documents, Applicable Law or orders and certain of its contracts as a result of its entering into the Arrangement Agreement; (v) its capitalization; (vi) its Subsidiaries and principal joint ventures; (vii) its securities laws filings; (viii) its financial statements; (ix) there being no undisclosed liabilities other than those incurred in the ordinary course and other limited exceptions; (x) compliance of the Circular with Applicable Law and that the Circular will not contain any untrue statement of a material fact or omit to state any material fact; (xi) the absence of certain changes or events ; (xii) its compliance with laws; (xiii) litigation; (xiv) its Contracts and the absence of default under such Contracts; (xv) taxes; (xvi) employee benefits; (xvii) title to its properties and assets; (xviii) intellectual property matters; (xix) labour and employment matters; (xx) environmental matters; (xxi) the absence of related party transactions; (xxii) the absence of unlawful contributions or payments; (xxiii) insurance matters; (xxiv) the absence of product warranties; (xxv) the absence of brokers or finders other than CIBC and UBS; (xxvi) supplier and customer matters; (xxvii) the absence of a shareholders rights plan; (xxviii) its books and records and those of its Subsidiaries; and (xxix) to the knowledge of the Corporation, that no related party of the Corporation will receive a collateral benefit (within the meaning of Rule ). Certain of Stelco s representations and warranties are qualified by a Company Material Adverse Effect standard, which is defined in the section labelled Company Material Adverse Effect Definition below. The representations and warranties of each of the parties will expire upon completion of the Arrangement. Certain representations of the Corporation are qualified by certain information that it filed with the OSC prior to the date of the Arrangement Agreement, as well as by information contained in the disclosure letter delivered by the Corporation to U.S. Steel and as contemplated by the Arrangement Agreement. Representations and Warranties of U.S. Steel U.S. Steel has made customary representations and warranties in the Arrangement Agreement including those in respect of the following matters: (i) its organization and good standing; (ii) its authority relative to the Arrangement Agreement and the enforceability of the Arrangement Agreement; (iii) the authorizations required to consummate the transactions contemplated by the Arrangement Agreement; (iv) the absence of conflict with or breach of its and Acquireco s constating documents and Applicable Law or orders and the absence of any required consents under any agreements as a result of its entering into the Arrangement Agreement (except those that would not reasonably be expected to prevent, materially delay or materially impair U.S. Steel s or Acquireco s ability to consummate the transactions contemplated by the Arrangement Agreement); (v) that any Circular disclosure specifically provided in writing by U.S. Steel for use in the Circular will not contain any untrue statement of a material fact; (vi) that it has sufficient cash, available lines of credit or other sources of immediately available funds to pay the Aggregate Share Consideration; (vii) the absence of any broker or finder except for J. P. Morgan Securities; and (viii) to the knowledge of U.S. Steel, that no related party of the Corporation will receive a collateral benefit (within the meaning of Rule ). Company Material Adverse Effect Definition A Company Material Adverse Effect means any state of facts, development, event, circumstance, condition, occurrence or effect that, individually or taken collectively with all other events, circumstances, conditions, occurrences or effects, is materially adverse to (i) the business, assets, financial condition or results of operations of the Corporation and its Subsidiaries taken as a whole, or (ii) the ability of the Corporation to perform its obligations under the Arrangement Agreement and consummate the transactions contemplated by the Arrangement Agreement. 37

46 The following events, circumstances, conditions, occurrences and effects are not to be taken into account in determining whether there is a Company Material Adverse Effect to the business assets, financial condition or results of operations of the Corporation and its Subsidiaries: any changes affecting the industry in which the Corporation and its Subsidiaries operate or sell principal product lines, including changes relating to the price of raw materials or changes relating to selling prices or market demand, that do not have a disproportionate impact on the Corporation and its Subsidiaries, taken as a whole; any changes in the economy or the financial or capital markets, including changes in interest or exchange rates that do not have a disproportionate impact on the Corporation and its Subsidiaries, taken as a whole; changes in law or in generally accepted accounting principles or in accounting standards, or changes in general legal, regulatory or political conditions that do not have a disproportionate impact on the Corporation and its Subsidiaries, taken as a whole; acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism that do not have a disproportionate impact on the Corporation and its Subsidiaries, taken as a whole; the execution, announcement or performance of the Arrangement Agreement or consummation of the transactions contemplated by the Arrangement Agreement; any change in the market price or trading volume of any securities of the Corporation (provided that this exception will not prevent or otherwise affect a determination that any fact, development, event, circumstance, condition, occurrence or effect underlying such failure has resulted in, or contributed to, a Company Material Adverse Effect); any actions taken upon the written request of U.S. Steel; any failure to complete the sale of Wabush Mines; and any failure to meet any internal or external projections (provided that this exception will not prevent or otherwise affect a determination that any fact, development, event, circumstance, condition, occurrence or effect underlying such failure has resulted in, or contributed to, a Company Material Adverse Effect). Covenants by the Corporation From the date of the Arrangement Agreement through the Effective Time of the Arrangement, Stelco has agreed, and has agreed to cause each of its Subsidiaries to, conduct its business in the ordinary course consistent with past practice and in compliance with Applicable Law and use commercially reasonable efforts to (i) preserve intact its assets and business organization, (ii) maintain in effect all of its material governmental authorizations, (iii) keep available the services of its directors, officers and employees, and (iv) maintain satisfactory relationships with its customers, partners, suppliers, distributors and others having material business relationships with Stelco. In addition, Stelco has agreed to various specific restrictions on the conduct of its business and operations and the business and operations of its Subsidiaries. With certain specified exceptions, prior to the Effective Time of the Arrangement, Stelco agreed it would not, nor would it permit any of its Subsidiaries, without the prior written approval of U.S. Steel (in certain cases not to be unreasonably withheld, conditioned or delayed) to, among other things: amend its articles of incorporation, bylaws or other constating documents or reduce its stated capital; declare, set aside or pay any dividends (other than dividends in the ordinary course consistent with past practice) on, or make other distributions (whether in cash, stock, property or otherwise) in respect of any of its shares or shares of any Subsidiary, other than dividends and distributions by a direct or indirect Subsidiary of Stelco to its security holders; split, combine or reclassify any shares of the Corporation or any of its Subsidiaries; 38

47 purchase, redeem or otherwise acquire (other than upon the exercise of any Warrant or Option) any securities of the Corporation or any of its Subsidiaries; issue, deliver, sell, grant, pledge, transfer, subject to any Lien or otherwise encumber or dispose of any of its securities or securities of any of its Subsidiaries, other than the issuance of Common Shares upon the exercise of Options or Warrants that are outstanding on the date of the Agreement, or amend any term of any security of the Corporation or any security of any Subsidiary; adopt a plan or agreement of, or resolutions providing for or authorizing, complete or partial liquidation, dissolution, arrangement, amalgamation, consolidation, restructuring, recapitalization or other reorganization; incur any capital expenditures or any obligations or liabilities in respect thereof in excess of $5,000,000, other than as contemplated in the Corporation s capital budget, or other expenditures; acquire (including by merger, arrangement, amalgamation, consolidation or acquisition of stock or assets) any interest in any corporation, partnership, or other business organization or division thereof in excess of $1,000,000; sell, lease, license, pledge, transfer, assign, subject to any Lien (other than certain permitted liens) or otherwise dispose of, or create, incur, assume or subject any Lien on any of the assets, securities, properties, interests, businesses or rights of the Corporation or any of its Subsidiaries, with certain exceptions; increase the compensation, bonus or other benefits of any directors, officers or employees, other than in accordance with the terms of the Corporation s collective agreements as specified in the Arrangement Agreement and other increases to non-executive employees; increase any severance, change of control or termination pay or benefits, other than in respect of non-executive employees in the ordinary course of business, consistent with past practice; enter into or amend any employment, deferred compensation or other similar agreement with any director, officer or employee, other than in respect of non-executive employees in the ordinary course of business, consistent with past practice; establish, adopt or enter into any benefit plan of the Corporation, or any plan that would be considered a benefit plan of the Corporation if it currently existed, or collective agreement, or, subject to certain exceptions, amend any benefit plan of the Corporation or collective agreement; take any action to accelerate any rights or benefits under, or take any action to fund or in any other way secure the payment of compensation or benefits under any benefit plan of the Corporation; make any Person a beneficiary of any retention or severance plan under which such Person is not as of the date of the Arrangement Agreement a beneficiary which would entitle such Person to payments, vesting, acceleration or any other right as a consequence of consummation of the transactions contemplated by the Arrangement Agreement and/or termination of employment; make any change in any method of accounting principles, method or practices, except for any such change required by reason of a concurrent change in, or implemented to comply with, generally accepted accounting principles or Applicable Law (as agreed to by the Corporation s independent auditor) and except for any changes in accounting practices that are recommended by the Corporation s independent auditor; make any loans, advances or capital contributions to, or investments in, any other Person, other than (i) to the Corporation or any of its Subsidiaries or any associated business entities in the ordinary course of business consistent with past practice, (ii) investments required pursuant to the terms of material Contracts as in effect on the date of the Arrangement Agreement and (iii) trade credit in the ordinary course of business consistent with past practice; 39

48 create, incur, assume or otherwise be liable with respect to any indebtedness in excess of specified amounts; enter into any material contract or terminate, renew, amend or modify in any material respect or fail to enforce any material term of any material contract, subject to certain exceptions; pay, discharge, settle or satisfy any material claims, liabilities or obligations, subject to certain exceptions; waive, relinquish, release, grant, transfer or assign any right of material value; make or change any material tax election, change any annual tax accounting period, adopt or change any method of tax accounting, amend any material tax returns or file claims for tax refunds, enter into any closing agreement, enter into (or offer to enter into) any agreement (including any waiver) with any Governmental Entity relating to taxes, settle (or offer to settle) any tax claim, audit or assessment, or surrender any right to claim a tax refund, offset or other reduction in tax liability or take any action or enter into any transaction, subject to certain exceptions, that would have the effect of reducing, or eliminating the amount of the increase in tax cost that may otherwise be available; institute, settle, or agree to settle any material litigation, investigation, arbitration, proceeding, or other material claim pending or threatened before any arbitrator, court or other Governmental Entity; take any action or fail to take any action that is intended to, or would reasonably be expected to, individually or in the aggregate, prevent, delay or impede the ability of the Corporation to consummate the Arrangement or the other transactions contemplated by the Arrangement Agreement; enter into any interest rate, currency swaps, hedges, caps, collars, forward sales or other similar financial instruments; or authorize, resolve, commit or agree to take any of the foregoing actions. No Solicitation of Third Parties by Stelco The Arrangement Agreement provides that neither the Corporation nor any of its Subsidiaries, nor any of their respective representatives, will: initiate, solicit, encourage or seek, directly or indirectly, any inquiries relating to, or the making or implementation of, any Third Party Proposal; engage in any negotiations concerning, or provide any information or data to, or have any substantive discussions with, any Person relating to any Third Party Proposal; otherwise cooperate in or knowingly facilitate any effort or attempt to make, implement or accept any proposal or offer that constitutes, or may reasonably be expected to lead to, any Third Party Proposal; enter into a Contract with any Person relating to a Third Party Proposal; or release any third party from, or waive any provision of, any confidentiality or standstill agreement to which it is a party. Notwithstanding this restriction, prior to the approval of the Special Resolution by the Shareholders, in response to an unsolicited bona fide written Third Party Proposal made after the date of the Arrangement Agreement that the Board determines in good faith (after receiving the advice of its financial advisors and outside legal counsel) constitutes or is reasonably likely to lead to a Superior Proposal, the Corporation may, after giving U.S. Steel prompt notice of such determination: furnish information with respect to the Corporation and its Subsidiaries to the Person making such Third Party Proposal (and its representatives) pursuant to a confidentiality and standstill agreement on terms no less favourable to 40

49 the Corporation than those contained in the Confidentiality Agreement and containing additional provisions that expressly permit the Corporation to comply with the terms of the Arrangement Agreement relating, among other things, to the response of the Corporation to unsolicited Third Party Proposals; provided, that the Corporation promptly notify U.S. Steel of any inquiry, proposal or offer, any information requested, any discussions or negotiations sought to be initiated or continued, the material terms and conditions of the Third Party Proposal and the identity of the Person making such Third Party Proposal and provide U.S. Steel with a copy of any Third Party Proposal and all information, subject to Applicable Law, provided to that Person to the extent the information has not been previously provided or made available to U.S. Steel; and participate in discussions or negotiations with the Person making such Third Party Proposal (and its representatives) regarding such Third Party Proposal; provided, that the Corporation keep U.S. Steel reasonably informed, on a prompt basis, of the status and material terms of any proposals or offers and the status of any discussions or negotiations and notify U.S. Steel promptly of any determination by the Board that a Superior Proposal has been made. The Corporation has agreed that neither its Board nor any committee thereof will fail to make or withdraw, amend, change, modify or qualify, in a manner adverse to U.S. Steel or Acquireco, or propose publicly to withdraw, amend, change, modify or qualify in a manner adverse to U.S. Steel or Acquireco, the approval of the Arrangement Agreement or its recommendation that the Shareholders vote in favour of the Arrangement Agreement nor may the Board approve, recommend or cause the Corporation to enter into any agreement with respect to any Third Party Proposal or propose to do any of the foregoing, except in connection with a Superior Proposal if the Board determines in good faith after consultation with outside legal counsel, that its failure to do so would be inconsistent with its fiduciary duties under Applicable Law and provided that the Meeting has not yet occurred. In such an instance, the Corporation must give U.S. Steel at least five Business Days' prior written notice which provides (i) that a Superior Proposal has been received; (ii) the terms and conditions of the Superior Proposal and the identity of the Person making such Superior Proposal; and (iii) that it intends to effect a Change of Recommendation. During this notice period, U.S. Steel may make an offer that the Board determines to be at least as favourable to Stelco as the Superior Proposal. If U.S. Steel does not change its offer, the Board may make a Change of Recommendation. However, unless U.S. Steel terminates the Arrangement Agreement, the Corporation must hold the Meeting to consider the Special Resolution. As the Supporting Shareholders have agreed to vote in favour of the Special Resolution, the Arrangement with U.S. Steel will be approved at the Meeting. If U.S. Steel decides, at its option, to terminate the Arrangement Agreement, the Corporation must pay U.S. Steel a termination fee of $26 million. Indemnification and Insurance The Arrangement Agreement provides that U.S. Steel and Acquireco will cause Stelco to, to the fullest extent permitted by Applicable Law, indemnify, defend and hold harmless, and provide advancement of expenses to, each Person who is now or who becomes prior to the Effective Time, an officer, director or employee of the Corporation or any of its Subsidiaries against all losses, claims, damages, costs, expenses, liabilities or judgments or amounts paid in settlement of any claim or action that is based in whole or in part on, or arising out of, their role as director, officer or employee of the Corporation or any of its Subsidiaries at or prior to the Effective Time, whether asserted or claimed prior to, or at or after, the Effective Time to the same extent that such Persons were entitled to be indemnified or had the right to advancement of expenses as of the date of the Arrangement Agreement by the Corporation or any of its Subsidiaries pursuant to the applicable articles of incorporation, bylaws and indemnification agreements. Under the Arrangement Agreement, U.S. Steel has covenanted to obtain, prior to the Effective Time, a prepaid tail insurance policy with a claims period of six years from the Effective Time with respect to directors' and officers' liability or fiduciary liability insurance covering each person covered by the Corporation s directors and officers liability or fiduciary liability insurance policy in amount and scope no less favourable than those of such existing policies of the Corporation for claims arising from facts or events that occurred on or prior to the Effective Time, up to a maximum annual premium rate equal to 200% of the current rate. Other Covenants The Arrangement Agreement contains additional agreements between the Corporation and U.S. Steel relating to, among other things: the Meeting, the Special Resolution, and the recommendation of the Board; 41

50 U.S. Steel's access to the Corporation s employees, real property, properties, assets, records, Contracts and other information between the date of the Arrangement Agreement and the Closing Date (subject to all applicable legal obligations and restrictions); the delisting of the Common Shares from the TSX after the Effective Date; coordination of press releases and other public announcements or filings relating to the Arrangement; notification of certain matters; and using reasonable best efforts to do all things necessary, proper or advisable under Applicable Law to consummate the transactions contemplated by the Arrangement Agreement as soon as practicable, and execute the documents and other instruments along with any further actions reasonably required to carry out the provisions of the Agreement and consummate the Arrangement and the transactions contemplated thereby. Conditions to the Completion of the Arrangement The obligations of each of U.S. Steel, Acquireco and Stelco to implement the Arrangement are subject to the satisfaction (or, to the extent permissible, waiver) of the following mutual conditions on or prior to the Closing Date: the passage of the Special Resolution at the Meeting in accordance with the Interim Order; the Interim Order and the Final Order will each have been obtained on terms consistent with the Arrangement Agreement and will not have been set aside; receipt of Competition Act Approval and receipt of Investment Canada Act Approval; expiration or early termination of any applicable waiting periods under the antitrust and competition laws of all relevant jurisdictions other than those of Canada and the United States, which counsel to the parties agree are necessary or required; and no Applicable Law or order will prohibit the consummation of the Arrangement. In addition, U.S. Steel and Acquireco are not obligated to implement the Arrangement if all of the following conditions are not satisfied or waived by U.S. Steel: the representations and warranties made by the Corporation in the Arrangement Agreement (without regard to materiality or Company Material Adverse Effect qualifiers) being true and correct at and as of the date of the Arrangement Agreement and the Closing Date of the Arrangement as if made at and as of such date (except to the extent such representations and warranties refer to an earlier date, then as of that earlier date), except where the failure of the representations and warranties to be true and correct, individually or in the aggregate has not had and would not reasonably be expected to have a Company Material Adverse Effect; the representations and warranties that Stelco made with regard to its organization, good standing, authority, enforceability and capitalization being true and correct in all material respects at and as of the date of the Arrangement Agreement and the Closing Date of the Arrangement as if made as of the Closing Date; the performance, in all material respects, by the Corporation of the obligations required to be performed by the Corporation in the Arrangement Agreement; the receipt of a certificate signed on behalf of the Corporation by the chief executive officer or chief financial officer of the Corporation stating that the above conditions have been satisfied; 42

51 the absence of any event, occurrence or change that has had, or would reasonably be expected to have, a Company Material Adverse Effect; the absence of any pending action by a Governmental Entity seeking to prevent consummation of the Arrangement, to impose any limitation on the right of U.S. Steel to control the Corporation and its Subsidiaries or any other Affiliate of U.S. Steel, or to restrain or prohibit the Corporation s or U.S. Steel's ownership or operation of any portion of the business or assets of the Corporation or U.S. Steel or any of their respective Subsidiaries or Affiliates; the Interim Order and the Final Order will not have been set aside or modified in a manner unacceptable to U.S. Steel; the Final Order will vary the 2006 Final Order by deleting paragraph 17 of the 2006 Final Order, and will order the deletion of section 2.03 and the deletion of the reference to section 2.03 in section 5.01 of the 2006 Plan of Arrangement; and the attainment of all requisite consents, waivers, permits, exceptions, orders and approvals from a Governmental Entity that are legally necessary to implement the Plan of Arrangement. In addition, the obligation of the Corporation to complete the Arrangement is subject to the satisfaction or waiver of the following conditions: the representations and warranties that U.S. Steel made in the Arrangement Agreement being true and correct in all material respects at and as of the date of the Arrangement Agreement and the Closing Date of the Arrangement as if made at and as of such date (except to the extent such representations and warranties refer to an earlier date, then as of that earlier date); U.S. Steel and Acquireco will have performed, in all material respects, all of the obligations required to be performed by them in the Arrangement Agreement at or prior to the Closing Date; and the receipt of a certificate signed by the chief executive officer or chief financial officer of U.S. Steel stating that the above conditions have been satisfied. Although the parties have the right to waive conditions to the Arrangement (other than as required by law), the Corporation is not aware of any circumstance in which U.S. Steel, Acquireco or the Corporation would waive any of the closing conditions described above. Termination of the Arrangement Agreement The Corporation and U.S. Steel may agree in writing to terminate the Arrangement Agreement at any time prior to the Effective Time of the Arrangement. The Arrangement Agreement may also be terminated at any time prior to the Effective Time of the Arrangement under specified circumstances, including: by either the Corporation or U.S. Steel if: the Arrangement has not been consummated on or before the Outside Date provided that if all the conditions to the Arrangement have been satisfied or waived, with the exception of the Regulatory Conditions, then the Outside Date will be extended to the earlier of two Business Days after said satisfaction or waiver and April 30, 2008; a Governmental Entity has issued a final and non-appealable order or took any other action having the effect of making illegal or permanently restraining, enjoining or otherwise prohibiting the consummation of the Arrangement; or the Special Resolution has failed to receive the requisite vote for approval at the Meeting; 43

52 by U.S. Steel, on behalf of itself and Acquireco, if: the Corporation has breached or failed to perform any of its representations, warranties, covenants or agreements contained in the Arrangement Agreement, which breach or failure would cause the conditions in favour of U.S. Steel and Acquireco not to be satisfied and which cannot be cured or, if curable, are not cured within 30 days after written notice to the Corporation of such breach; or the Board effects a Change of Recommendation; or by the Corporation if: U.S. Steel or Acquireco has breached or failed to perform any of its representations, warranties, covenants or agreements contained in the Arrangement Agreement, which breach or failure to perform would cause the conditions contained in the Arrangement Agreement that are in favour of Stelco not to be satisfied and which cannot be cured or, if curable, are not cured within 30 days after written notice to U.S. Steel or Acquireco of such breach. Upon termination, the Arrangement Agreement becomes void and there will be no liability or obligation on the part of U.S. Steel or the Corporation or their respective officers, directors, stockholders, security holders or Affiliates except to the extent expressly stipulated in the Arrangement Agreement. The stipulated matters extend to such things as termination fee obligations and remedies. With respect to remedies, the Arrangement Agreement provides that any material breach by a party of any of its representations, warranties, covenants or agreements set forth in the Arrangement Agreement that is wilful or intentional is a not affected by termination of the Arrangement Agreement or by payment of any termination fees that may be payable under the Arrangement Agreement. In such circumstances the parties would be able to pursue their respective rights at law for damages or other remedies. Termination Fee The Corporation must pay to U.S. Steel a fee of $26 million if the Arrangement Agreement is terminated in the following circumstances: Amendment if the Board effects a Change of Recommendation, or publicly proposes to do so, and U.S. Steel terminates the Arrangement Agreement, unless the Special Resolution has been approved and the Final Order has been obtained; if: the Arrangement Agreement is terminated due to the Arrangement not having been consummated by the Outside Date or the Shareholders not having approved the Special Resolution at the Meeting, an Acquisition Transaction was publicly announced or disclosed after the execution of the Arrangement Agreement but before the date the Arrangement Agreement is terminated, and within 12 months after the date the Arrangement Agreement is terminated (i) the Corporation enters into an agreement with respect to an Acquisition Transaction and such Acquisition Transaction is subsequently completed; or (ii) the Corporation consummates an Acquisition Transaction, then, in any such case, the Corporation will promptly on the date of execution of such Agreement with respect to such Acquisition Transaction, pay U.S. Steel the termination fee. Subject to the Interim Order and Applicable Law, any provision of the Arrangement Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to the Arrangement Agreement, or in the case of a waiver, by the party against which the waiver is to be effective. 44

53 Steps to Implementing the Arrangement and Timing PRINCIPAL LEGAL MATTERS Completion of the Arrangement is dependent on many factors and it is not possible at this time to determine precisely when or if the Arrangement will become effective. The Arrangement Agreement provides that the Closing Date of the Arrangement will be no later than two Business Days after satisfaction or waiver of the conditions set forth in the Arrangement Agreement (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at the Closing), or on such other date or at such other place as U.S. Steel and the Corporation may mutually agree. The earliest date by which completion of the Arrangement is expected to occur is October 31, 2007 and cannot be later than January 31, 2008, unless the Outside Date is extended in accordance with the Arrangement Agreement. The Arrangement Agreement may be terminated if the Arrangement has not been completed by January 31, 2008 (or April 30, 2008 if the Outside Date is extended in accordance with the terms of the Arrangement Agreement). See Other Terms of the Arrangement Agreement Termination of the Arrangement Agreement. Court Approval An arrangement under the CBCA requires Court approval. Prior to mailing this Circular, the Corporation obtained the Interim Order, which provides for the calling and holding of the Meeting, the Dissent Rights and other procedural matters. A copy of the Interim Order is attached as Appendix E to this Circular. Subject to the approval of the Special Resolution by Shareholders at the Meeting, the hearing in respect of the Final Order is currently scheduled to take place before the Court on October 30, 2007 in the Court at 330 University Avenue, 8th Floor, Toronto, Ontario. Any Shareholder or other Person (including any Warrantholder, Optionholder or holder of Specified Third Party Debt) who wishes to appear, or to be represented, and to present evidence or arguments, must serve and file a Notice of Appearance as set out in the Notice of Application for the Final Order attached as Appendix F to this Circular in accordance with the Interim Order and the Rules of Civil Procedure (Ontario), and satisfy any other requirements of the Court. The Court will consider, among other things, the fairness and reasonableness of the Arrangement. The Court may approve the Arrangement in any manner the Court may direct, subject to compliance with any terms and conditions, if any, as the Court deems fit. Warrantholders, Optionholders and holders of Specified Third Party Debt are parties to the Court proceedings and will be bound by the Final Order. In the event that the hearing is postponed, adjourned or rescheduled then, subject to further order of the Court, only those Persons having previously served a Notice of Appearance in compliance with the Notice of Application for the Final Order and the Interim Order will be given notice of the postponement, adjournment or rescheduled date. Assuming the Final Order is granted and the other conditions to closing contained in the Arrangement Agreement are satisfied or waived, then the Articles of Arrangement will be filed with the Director to give effect to the Arrangement. Regulatory Matters The obligations of the Corporation, U.S. Steel and Acquireco to complete the Arrangement are subject to certain regulatory approvals being obtained prior to the Outside Date, as briefly described below. Investment Canada Act Under the Investment Canada Act, certain acquisitions by a non-canadian of control of a Canadian business, the value of which exceeds certain monetary thresholds, are reviewable and subject to approval by the federal Minister responsible for the Investment Canada Act. For approval to be granted, the Minister must be satisfied that the acquisition is likely to be of net benefit to Canada. Consummation of the Arrangement is subject to review under the Investment Canada Act. U.S. Steel has filed an application for review under the Investment Canada Act seeking the approval of the Minister for the acquisition of control of Stelco. U.S. Steel cannot acquire Stelco unless it has first received Investment Canada Act Approval. The Minister is required to take into account a variety of factors set out in the Investment Canada Act and any written undertakings that may have been given by U.S. Steel. The Minister has 45 days from the date of receipt by the Investment Review Division of a completed application to decide whether the investment is likely to be of net 45

54 benefit to Canada. This 45 day period may be unilaterally extended by the Minister for a further 30 days and for such longer period(s) as may be agreed upon between U.S. Steel and the Minister. If no notice is sent to the applicant within the 45 day period or the extended period, as the case may be, the Arrangement is deemed to be approved. Canadian Competition Approval Pursuant to Part IX of the Competition Act, parties to certain proposed transactions that exceed specified financial thresholds are required to provide prior notification to the Commissioner of Competition under the Competition Act with regard to such proposed transactions. Under the Competition Act, a notifiable transaction may not be completed until the expiry, waiver or termination of a statutory waiting period. The Commissioner s review of a notifiable transaction may take longer than the statutory waiting period. Upon completion of the review of a proposed transaction, the Commissioner may (i) challenge the proposed transaction by bringing an application to the Competition Tribunal if the Commissioner is of the opinion that the transaction would be likely to substantially prevent or lessen competition; (ii) issue a no-action letter stating that subject to any conditions the Commissioner does not have any intention to challenge the proposed transaction before the Competition Tribunal, but that the Commissioner reserves the right to do so for three years after the completion of the transaction; or (iii) issue an advance ruling certificate with respect to the proposed transaction. The Arrangement is a notifiable transaction for the purposes of Part IX of the Competition Act. On September 17, 2007, Stelco filed a long-form notification with the Commissioner in respect of the Arrangement pursuant to the Competition Act. The 42 day waiting period therefore will expire at 11:59 p.m. on October 29, U.S. Steel submitted its long-form notification the prior week, together with a request to the Commissioner to issue a no-action letter in respect of the Arrangement. Completion of the Arrangement is subject to receipt of Competition Act Approval. U.S. Competition Approval U.S. Steel's acquisition of Stelco fits within exemptions under the HSR Act applicable to certain acquisitions of the voting securities of non-u.s. issuers. Accordingly, Stelco and U.S. Steel will not be required to file a premerger notification with the U.S. antitrust authorities, and the HSR Act waiting period is inapplicable to this transaction. Nevertheless, the fact that the transaction is not subject to the HSR Act does not prevent the Antitrust Division of the U.S. Department of Justice or the U.S. Federal Trade Commission from commencing an investigation or from seeking to block the acquisition if they were to conclude that the transaction would cause a substantial lessening of competition in violation of the substantive provisions of U.S. antitrust law. U.S. Steel and the Corporation have been informed that the U.S. Department of Justice is reviewing this transaction and has requested the voluntary production of material from each party. U.S. Steel and the Corporation are cooperating with the U.S. Department of Justice. Other Competition Approvals Completion of the Arrangement is also subject to the condition that any applicable waiting periods under the antitrust and competitions laws of all relevant jurisdictions other than Canada and the United States, which counsel to U.S. Steel and Stelco agree are necessary or required, will have expired or been terminated. Stock Exchange Delisting and Reporting Issuer Status Following the completion of the Arrangement, Stelco expects that the Common Shares, the Warrants and its listed debt in the form of floating rate notes will be de-listed from the TSX and that application will be made for Stelco to cease to be a reporting issuer under the securities legislation of each of the provinces in Canada under which it is currently a reporting issuer (or equivalent). DISSENTING SHAREHOLDERS RIGHTS Section 190 of the CBCA provides registered shareholders of a corporation with the right to dissent from certain resolutions that effect extraordinary corporate transactions or fundamental corporate changes. The Interim Order expressly provides Registered Shareholders with the right to dissent from the Special Resolution pursuant to section 190 of the CBCA, as modified by the Plan of Arrangement and the Interim Order. Any Registered Shareholder who dissents from the Special Resolution in compliance with section 190 of the CBCA, as modified by the Plan of Arrangement and the Interim Order, will be entitled, in the event the Arrangement becomes effective, to have a debt claim against Acquireco to be paid the fair value of the Common Shares held by such Dissenting Shareholder 46

55 determined as of the close of business on the day before the Special Resolution is adopted. Shareholders are cautioned that fair value could be determined to be less than the $38.50 payable pursuant to the terms of the Arrangement. Section 190 of the CBCA provides that a dissenting shareholder may only make a claim under that section with respect to all of the shares of a class held by the dissenting shareholder on behalf of any one beneficial owner and registered in the dissenting shareholder s name. One consequence of this provision is that only a Registered Shareholder may exercise the Dissent Rights in respect of Common Shares that are registered in that Shareholder s name. In many cases, shares beneficially owned by a Non-Registered Holder are registered either: (i) (ii) in the name of an intermediary (the Intermediary ) that the Non-Registered Holder deals with in respect of the Common Shares, such as, among others, banks, trust companies, securities dealers or brokers and trustees or administrators of self-administered registered retirement savings plans, registered retirement income funds, registered education savings plans and similar plans; or in the name of a depository (such as CDS) of which the Intermediary is a participant. Accordingly, a Non-Registered Holder will not be entitled to exercise its Dissent Rights directly (unless the Common Shares are re-registered in the Non-Registered Holder s name). A Non-Registered Holder who wishes to exercise Dissent Rights should immediately contact the Intermediary with whom the Non-Registered Holder deals in respect of its Common Shares and either (i) instruct the Intermediary to exercise the Dissent Rights on the Non-Registered Holder s behalf (which, if the Common Shares are registered in the name of CDS or other clearing agency, may require that such Common Shares first be re-registered in the name of the Intermediary), or (ii) instruct the Intermediary to re-register such Common Shares in the name of the Non-Registered Holder, in which case the Non-Registered Holder would be able to exercise the Dissent Rights directly. A Registered Shareholder who wishes to dissent must send a Dissent Notice to the Corporation objecting to the Special Resolution (i) to Stelco s registered office, 386 Wilcox Street, Hamilton, Ontario L8N 3T1 (Attention: Corporate Secretary) or (ii) by facsimile transmission to (Attention: Corporate Secretary), to be received by 5:00 p.m. (Toronto time) on the Business Day that is two Business Days prior to the date of the Meeting, or, in the case of any adjournment or postponement of the Meeting, by 5:00 p.m. (Toronto time) on the Business Day that is two Business Days preceding the day of the adjourned or postponed Meeting, the Dissent Notice must strictly comply with the dissent procedures described in the Circular. In addition, unlike the statutory dissent procedures of the CBCA, these dissent procedures provide for Acquireco, rather than the Corporation, to be the party obliged to pay the fair value for the Common Shares (if the Dissenting Shareholder is ultimately determined to be entitled to be paid the fair value thereof), and for Acquireco, rather than the Corporation, to be the party obliged to take certain steps and be entitled to exercise certain rights that are attributable to the Corporation under the statutory dissent procedures of the CBCA as amended by the Interim Order. Failure to strictly comply with the dissent procedures will result in loss of the right to dissent. The filing of a Dissent Notice does not deprive a Registered Shareholder of the right to vote at the Meeting. However, the CBCA provides, in effect, that a Registered Shareholder who has submitted a Dissent Notice and who votes in favour of the Special Resolution will no longer be considered a Dissenting Shareholder. The CBCA does not provide, and the Corporation will not assume, that a proxy submitted instructing the proxyholder to vote against the Special Resolution, a vote against the Special Resolution or an abstention constitutes a Dissent Notice, but a Registered Shareholder need not vote its Common Shares against the Special Resolution in order to dissent. Similarly, the revocation of a proxy conferring authority on the proxyholder to vote in favour of the Special Resolution does not constitute a Dissent Notice. However, any proxy granted by a Registered Shareholder who intends to dissent, other than a proxy that instructs the proxyholder to vote against the Special Resolution, should be validly revoked in order to prevent the proxyholder from voting such Common Shares in favour of the Special Resolution and thereby causing the registered Shareholder to forfeit its Dissent Rights. See The Meeting and Solicitation of Proxies. The Corporation (or its successor) is required within 10 days after the Shareholders adopt the Special Resolution to notify each Dissenting Shareholder that the Special Resolution has been adopted. Such notice is not required to be sent to any Shareholder who voted in favour of the Special Resolution or who has withdrawn his or her Dissent Notice. A Dissenting Shareholder who has not withdrawn its Dissent Notice prior to the Meeting must, within 20 days after receipt of notice that the Special Resolution has been adopted, or if the Dissenting Shareholder does not receive such notice, within 20 days after learning that the Special Resolution has been adopted, send to the Corporation a Demand for Payment. Within 30 days after sending the Demand 47

56 for Payment, the Dissenting Shareholder must send to the Corporation or the Transfer Agent certificates representing Common Shares in respect of which he or she dissents. The Corporation or the Transfer Agent will endorse on share certificates received from a Dissenting Shareholder a notice that the holder is a Dissenting Shareholder and will forthwith return the share certificates to the Dissenting Shareholder. A Dissenting Shareholder who fails to make a Demand for Payment in the time required, or to send certificates representing Dissenting Shares in the time required, has no right to make a claim under section 190 of the CBCA. Under section 190 of the CBCA, as modified by the Plan of Arrangement and the Interim Order, after sending a Demand for Payment, a Dissenting Shareholder ceases to have any rights as a Shareholder in respect of its Dissenting Shares other than the right to be paid the fair value of the Dissenting Shares by Acquireco as determined pursuant to the Interim Order, unless (i) the Dissenting Shareholder withdraws its Dissent Notice before Acquireco makes an Offer to Pay; or (ii) Acquireco fails to make an Offer to Pay in accordance with subsection 190(12) of the CBCA and the Dissenting Shareholder withdraws the Demand for Payment, in which case the Dissenting Shareholder s rights as a Shareholder will be reinstated. Pursuant to the Plan of Arrangement, in no case will the Corporation or any other person be required to recognize any Dissenting Shareholder as a Shareholder, in accordance with the provisions of the Plan of Arrangement. Pursuant to the Plan of Arrangement, Dissenting Shareholders who are ultimately determined to be entitled to be paid the fair value for their Dissenting Shares will be deemed to have transferred such Dissenting Shares to Acquireco, in accordance with the provisions of the Plan of Arrangement. Pursuant to the Plan of Arrangement, Dissenting Shareholders who are ultimately determined not to be entitled, for any reason, to be paid the fair value for their Dissenting Shares, will be deemed to have participated in the Arrangement on the same basis as any non-dissenting Shareholder, in accordance with the provisions of the Plan of Arrangement, and such Dissenting Shareholder will thereafter cease to be a Shareholder in return for a debt claim for fair value against Acquireco. Acquireco is required, not later than seven days after the later of the Effective Date and the date on which a Demand for Payment is received from a Dissenting Shareholder, to send to each Dissenting Shareholder who has sent a Demand for Payment an Offer to Pay for its Dissenting Shares in an amount considered by Acquireco to be the fair value of the Common Shares, accompanied by a statement showing the manner in which the fair value was determined. Every Offer to Pay for Dissenting Shares must be on the same terms. Acquireco must pay for the Dissenting Shares of a Dissenting Shareholder within 10 days after an Offer to Pay has been accepted by a Dissenting Shareholder, but any such offer lapses if Acquireco does not receive an acceptance within 30 days after the Offer to Pay has been made. If Acquireco fails to make an Offer to Pay for a Dissenting Shareholder s Common Shares, or if a Dissenting Shareholder fails to accept an Offer to Pay that has been made, Acquireco may, within 50 days after the Effective Date or within such further period as a court may allow, apply to a court to fix a fair value for the Common Shares of Dissenting Shareholders. If Acquireco fails to apply to a court, a Dissenting Shareholder may apply to a court for the same purpose within a further period of 20 days or within such further period as a court may allow. A Dissenting Shareholder is not required to give security for costs in such an application. Any such application by Acquireco or a Dissenting Shareholder must be made to a court in Ontario or a court having jurisdiction in the place where the Dissenting Shareholder resides if the Corporation carries on business in that province. On making any such application to a court itself after receiving a notice that a Dissenting Shareholder has made an application to a court, Acquireco will be required to notify each affected Dissenting Shareholder of the date, place and consequences of the application and of a Dissenting Shareholder s right to appear and be heard in person or by counsel. Upon an application to a court, all Dissenting Shareholders whose Common Shares have not been purchased by Acquireco will be joined as parties and be bound by the decision of the court. Upon any such application to a court, the court may determine whether any other person is a Dissenting Shareholder who should be joined as a party, and the court will then fix a fair value for the Dissenting Shares of all Dissenting Shareholders. The final order of a court will be rendered against Acquireco in favour of each Dissenting Shareholder for the amount of the fair value of its Dissenting Shares as fixed by the court. The court may, in its discretion, allow a reasonable rate of interest on the amount payable to each Dissenting Shareholder from the Effective Date until the date of payment. Registered Shareholders who are considering exercising Dissent Rights should be aware that there can be no assurance that the fair value of their Common Shares as determined under the applicable provisions of the CBCA (as modified by the Plan of Arrangement and the Interim Order or any other interim order of the Court) will be more than or equal to the consideration payable under the Arrangement. In addition, any judicial determination of fair value will result in delay of receipt by a Dissenting Shareholder of consideration for such Dissenting Shareholder s Dissenting Shares. 48

57 The foregoing is only a summary of the dissenting shareholder provisions of the CBCA (as modified by the Plan of Arrangement and the Interim Order or any other interim order of the Court), which are technical and complex. A copy of section 190 of the CBCA is attached as Appendix G to this Circular and a copy of the Interim Order is attached as Appendix E to this Circular. It is recommended that any Registered Shareholder wishing to avail himself, herself or itself of the Dissent Rights seek legal advice, as failure to strictly comply with the provisions of the CBCA (as modified by the Plan of Arrangement and the Interim Order) may prejudice his, her or its Dissent Rights. INFORMATION CONCERNING STELCO The following information about Stelco is a general summary only and is not intended to be comprehensive. Stelco is one of Canada s largest steel companies. It is focused on its two Ontario-based integrated steel businesses located in Hamilton and in Nanticoke. These operations produce high quality value-added hot rolled, cold rolled, coated sheet and bar products. In 2006, Stelco s integrated steelmaking facilities produced approximately 3,630,000 tons of semi-finished steel. The registered and principal office of Stelco is located at 386 Wilcox Street, Hamilton, Ontario, Canada L8N 3T1. The Common Shares are listed for trading on the TSX under the symbol STE. Stelco is a reporting issuer or the equivalent in each province in Canada. Additional information about Stelco can be found on SEDAR at Capitalization of Stelco As at the close of business on September 21, 2007, there were outstanding 27,174,446 Common Shares, Options to purchase an aggregate of 1,925,250 Common Shares, and Warrants to purchase an aggregate of 2,213,904 Common Shares. Voting Securities and Principal Holders Each holder of Common Shares is entitled to one vote for each share registered in the Shareholder s name on the list of Shareholders prepared as of the Record Date, being September 21, 2007, with respect to all matters to be voted on at the Meeting. As at September 21, 2007, to the knowledge of the directors and executive officers of the Corporation, the only persons or corporations who beneficially own, directly or indirectly, or exercise control or direction over, shares of the Corporation carrying more than 10% of the voting rights attached to any class of outstanding shares of the Corporation entitled to vote in connection with any matters being proposed for consideration at the Meeting are indicated below. The number and class of Common Shares indicated have been provided by the holders thereof and have not been independently verified by the Corporation. Name Aggregate Number of Common Shares Percentage of Outstanding Common Shares Tricap (1)... 9,928, % Sunrise... 4,971, % Appaloosa (2)... 4,988, % Notes: (1) Of the 9,928,243 Common Shares controlled by Tricap, (i) 6,174,014 Common Shares are beneficially owned by Brookfield Asset Management Inc., but are under the control and direction of Tricap, and (ii) 11,931 Common Shares are beneficially owned by Mr. John Lacey, but are under the control and direction of Tricap. Brookfield Asset Management Inc. 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 Asset Management Inc. 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 and Palomino. See The Arrangement Support Agreements from Supporting Shareholders for a description of the Support Agreements pursuant to which, Appaloosa, Palomino, Sunrise, Tricap and Mr. Mott, have agreed, among other things, to vote all of their Common Shares in favour of the Special Resolution. 49

58 Market Price and Trading Volume The following table summarizes the market prices and trading volumes for the Common Shares on the TSX for the previous 12 months. Common Shares (STE) Price Range High Low Volume ($) ($) 2006 October ,550 November ,049 December , January ,287 February ,417 March ,227 April ,563 May ,670 June ,504,647 July ,304,252 August ,265,938 September ,136,402 On August 24, 2007, the last trading day before the execution of the Arrangement Agreement, the closing price of the Common Shares on the TSX was $26.93 per Common Share. The volume weighted average trading price of the Common Shares on the TSX for the 20 trading days ended on August 24, 2007 was $26.67 per Common Share. The following table summarizes the market prices and trading volumes for the Warrants on the TSX for the previous 12 months. Warrants (STE.WT) Price Range High Low Volume ($) ($) 2006 October ,867 November ,507 December , January ,711 February ,078 March ,933 April ,105 May ,624 June ,941 July ,151 August ,135 September ,587 On August 24, 2007, the last trading day before the execution of the Arrangement Agreement, the closing price of the Warrants on the TSX was $15.76 per Warrant. The volume weighted average trading price of the Warrants on the TSX for the 20 trading days ended on August 24, 2007 was $14.26 per Warrant. The following table summarizes the market prices and trading volumes for the floating rate notes on the TSX for the previous 12 months. 50

59 Floating Rate Notes (STE.NT.U) Price Range High Low Volume (US$) (US$) 2006 October November ,680 December , January ,810 February ,770 March ,770 April May ,540 June ,270 July August ,160 September ,000 On August 24, 2007, the last trading day before the execution of the Arrangement Agreement, the closing price of the floating rate notes on the TSX was US$ per floating rate note. The volume weighted average trading price of the floating rate notes on the TSX for the 20 trading days ended on August 24, 2007 was US$99.76 per floating rate note. Auditors The auditors of Stelco are KPMG LLP. Transfer Agent and Registrar The transfer agent and registrar of Stelco is CIBC Mellon Trust Company at its principal office in Toronto, Ontario. Interest of Insiders in Material Transactions To the knowledge of the Corporation, other than as disclosed elsewhere in this Circular, as at September 21, 2007, no director or officer of the Corporation, any subsidiary or any insider, any shareholder owning more than 10% of the voting shares of the Corporation, or any associate or Affiliate of any of the foregoing, has had any interest in any transaction since the commencement of the Corporation s last financial year or in any proposed transaction which has materially affected or would materially affect the Corporation or any of its subsidiaries. 51

60 INFORMATION REGARDING U.S. STEEL AND ACQUIRECO The following information about U.S. Steel and Acquireco has been provided to Stelco by U.S. Steel and is not intended to be comprehensive. U.S. Steel U.S. Steel is a Delaware corporation that is an integrated steel producer with major production operations in the United States and Central Europe. An integrated producer uses iron ore and coke as primary raw materials for steel production. U.S. Steel has annual raw steel production capability of 19.4 million tons in the United States and 7.4 million tons in Central Europe. U.S. Steel manufactures a wide range of value-added steel products for the automotive, appliance, container, industrial machinery, construction and oil and gas industries. For the year ended December 31, 2006 and the six months ended June 30, 2007, U.S. Steel reported total net sales of US$15,715,000,000 and US$7,984,000,000, respectively, and net income of US$1,374,000,000 and US$575,000,000, respectively. Acquireco Acquireco is incorporated under the ABCA and is an indirect wholly-owned subsidiary of U.S. Steel. Acquireco was formed solely for the purpose of entering into the Arrangement Agreement and completing the Arrangement. Acquireco has not carried on any activities to date other than activities incident to its formation and in connection with the Arrangement. Its registered office is located at Osler, Hoskin & Harcourt LLP, Box 50, 1 First Canadian Place, Toronto, Ontario, Canada, M5X 1B8. Certain Canadian Federal Income Tax Considerations CERTAIN TAX CONSIDERATIONS In the opinion of McCarthy Tétrault LLP, Canadian counsel to the Corporation, the following summary describes the principal Canadian federal income tax considerations generally applicable to a Shareholder who disposes of its Common Shares, a Warrantholder who disposes of its Warrants and an Optionholder who either exercises its Option and acquires Common Shares or disposes of its Option, all pursuant to the Plan of Arrangement (other than the exercise of Options) and who, for the purposes of the Tax Act and at all relevant times, holds its Common Shares, including those acquired on the exercise of an Option, and Warrants as capital property, deals at arm s length with the Corporation and Acquireco, and is not affiliated with the Corporation or Acquireco. Generally, Common Shares and Warrants will be capital property to a Shareholder or Warrantholder unless the Common Shares or Warrants are held or were acquired in the course of carrying on a business of buying and selling securities or as part of an adventure or concern in the nature of trade. Certain Shareholders who are residents of Canada for purposes of the Tax Act and whose Common Shares might not otherwise be capital property may, in some circumstances, be entitled to make an irrevocable election in accordance with subsection 39(4) of the Tax Act to have such Common Shares and every other Canadian security (as defined in the Tax Act) owned by them deemed to be capital property in the taxation year of the election and in all subsequent taxation years. Such Shareholders should consult their own tax advisors for advice with respect to whether an election under subsection 39(4) of the Tax Act is available or advisable in their particular circumstances. This summary is based upon the current provisions of the Tax Act, the regulations thereunder and counsel s understanding of the current administrative policies and assessing practices of the Canada Revenue Agency made publicly available prior to the date hereof. This summary also takes into account all Proposed Amendments and assumes that all Proposed Amendments will be enacted in the form proposed. However, no assurances can be given that the Proposed Amendments will be enacted as proposed, or at all. This summary does not otherwise take into account or anticipate any changes in law or administrative policies or assessing practices, whether by legislative, regulatory, administrative or judicial action or decision, nor does it take into account provincial, territorial or foreign tax legislation or considerations, which may be different from those discussed in this summary. This summary assumes that the Common Shares will be listed on the TSX at the Effective Time. This summary is not applicable to a Shareholder, Warrantholder or Optionholder (i) that is a specified financial institution (as defined in the Tax Act) or that is a financial institution (as defined in the Tax Act for the purposes of certain rules applicable to securities held by financial institutions) or (ii) an interest in which is a tax shelter investment (as defined in the Tax Act). 52

61 This summary is of a general nature only and is not, and is not intended to be, legal or tax advice to any particular Shareholder, Warrantholder or Optionholder. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, Shareholders, Warrantholders and Optionholders should consult their own tax advisors with respect to the Canadian federal income tax consequences and other relevant tax consequences of the Arrangement having regard to their own particular circumstances. Residents of Canada The following portion of this summary is generally applicable to a Resident Shareholder, a Resident Warrantholder and a Resident Optionholder. DISPOSITION OF COMMON SHARES The disposition of a Common Share to Acquireco will result in a capital gain (or capital loss) to a Resident Shareholder to the extent that the Share Consideration received by the Resident Shareholder under the Arrangement, exceeds (or is less than) the aggregate of the Resident Shareholder s adjusted cost base of the Common Share immediately before the disposition and any reasonable costs of disposition. DISPOSITION OF WARRANTS The disposition of a Warrant to Stelco will result in a capital gain (or capital loss) to the Resident Warrantholder to the extent that the Warrant Consideration received exceeds (or is less than) the aggregate of the Resident Warrantholder s adjusted cost base of the Warrant immediately before the disposition and any reasonable costs of disposition. OPTIONS This summary applies to Resident Optionholders who are individuals who deal at arm s length with Stelco and who received the Options in respect of, in the course of, or by virtue of their position as an employee, officer or director of Stelco or a corporation that does not deal at arm s length with Stelco. Exercise of Option. A Resident Optionholder who exercises an Option and acquires Common Shares will be required to include in income in the taxation year of the exercise of the Option the amount by which the fair market value of the Common Shares acquired on the exercise of the Option at such time exceeds the amount paid by the Resident Optionholder to acquire the Common Shares. The adjusted cost base to a Resident Optionholder of any Common Shares acquired on the exercise of an Option generally will be equal to the fair market value of the Common Shares at the time they are acquired by the Resident Optionholder. Generally, the cost of Common Shares to a Resident Optionholder must be averaged with the adjusted cost base of any other Common Shares held as capital property by the Resident Optionholder. Disposition of Option. A Resident Optionholder who disposes of an Option to Stelco will be required to include in income in the taxation year of the disposition the Option Consideration received. The Resident Optionholder may be entitled to a deduction of 50% of the amount required to be included in income, provided that the amount payable by the Resident Optionholder under the Option to acquire the underlying Common Shares was not less than the fair market value of the Common Shares at the time the Option was granted and the Common Shares are prescribed shares under the Tax Act regulations. TAXATION OF CAPITAL GAINS Generally, a Canadian resident under the Tax Act is required to include in computing its income for a taxation year one-half of the amount of any capital gain (a taxable capital gain ) realized by it in the year and to deduct one-half of the amount of any capital loss (an allowable capital loss ) realized in such taxation year from taxable capital gains realized in the year. Any allowable capital losses in excess of taxable capital gains for the year may be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in any subsequent taxation year against net taxable capital gains realized by the Canadian resident in such years, subject to and in accordance with the provisions of the Tax Act. 53

62 The amount of any capital loss realized on the disposition of a Common Share by a Resident Shareholder that is a corporation may be reduced by the amount of any dividends received (or deemed to be received) by it at or before such time on such Common Share, to the extent and under the circumstances prescribed by the Tax Act. Similar rules may apply where a Common Share is owned by a partnership or trust of which a corporation, partnership or trust is a member or beneficiary. Resident Shareholders to whom these rules may apply should consult their own tax advisors. A Canadian resident that is throughout the year a Canadian-controlled private corporation (as defined in the Tax Act) may be liable for a refundable tax of 6 2/3% on its aggregate investment income, which is defined to include an amount in respect of taxable capital gains. Capital gains realized by an individual or a trust, other than certain trusts, may give rise to alternative minimum tax under the Tax Act. Resident Shareholders and Resident Warrantholders should consult their own tax advisors with respect to the alternative minimum tax provisions. DISSENTING SHAREHOLDERS A Resident Dissenting Shareholder will, pursuant to the Plan of Arrangement, be deemed to transfer such person s Dissenting Shares to Acquireco and will be entitled to be paid the fair value of such Dissenting Shares by Acquireco in cash. In general, a Resident Dissenting Shareholder will realize a capital gain (or capital loss) to the extent that the cash received in respect of the fair value of the holder s Dissenting Shares (other than in respect of interest awarded by a court) exceeds (or is less than) the aggregate of the Resident Dissenting Shareholder s adjusted cost base of the Dissenting Shares immediately before the disposition and any reasonable costs of disposition. See Taxation of Capital Gains above. Interest awarded by a court and received by a Resident Dissenting Shareholder will be included in such person s income for the purposes of the Tax Act. Resident Dissenting Shareholders should consult their own tax advisors. Non-Residents of Canada The following portion of this summary is generally applicable to a Non-Resident Shareholder, Non-Resident Warrantholder and Non-Resident Optionholder. The following summary does not apply to a Non-Resident Shareholder or Non-Resident Warrantholder who uses or holds, or is deemed to use or hold, Common Shares or Warrants, respectively, in connection with carrying on a business in Canada, or to a Non-Resident Shareholder or Non-Resident Warrantholder that is either an insurer carrying on business in Canada and elsewhere or an authorized foreign bank as defined in the Tax Act. Such Non-Resident Shareholders and Non-Resident Warrantholders should consult their own tax advisors. DISPOSITION OF COMMON SHARES AND WARRANTS A Non-Resident Shareholder or Non-Resident Warrantholder will not be subject to tax under the Tax Act on any capital gain realized on the disposition of Common Shares or Warrants under the Arrangement unless the Common Shares or Warrants are taxable Canadian property (within the meaning of the Tax Act) to the Non-Resident Shareholder or Non-Resident Warrantholder at the Effective Time and such gain is not otherwise exempt from tax under the Tax Act pursuant to the provisions of an applicable tax treaty. Generally, a Common Share or Warrant will not be taxable Canadian property to a Non-Resident Shareholder or Non-Resident Warrantholder at the Effective Time provided that the Common Shares are listed on a prescribed stock exchange (which includes the TSX) at that time, and (i) in the case of the Non-Resident Shareholder, the Non-Resident Shareholder, persons with whom the Non-Resident Shareholder did not deal at arm s length, or the Non-Resident Shareholder together with all such persons, have not owned 25% or more of the issued shares of any class or series of the capital stock of Stelco at any time during the 60 month period that ends at the Effective Time, or (ii) in the case of the Non-Resident Warrantholder, the Non-Resident Warrantholder had neither an interest nor an option to acquire property described in (i). Notwithstanding the foregoing, Common Shares and Warrants may be deemed to be taxable Canadian property in certain circumstances specified in the Tax Act. Even if Common Shares or Warrants are considered to be taxable Canadian property of a Non-Resident Shareholder or a Non-Resident Warrantholder at the Effective Time, the Non-Resident Shareholder or Non-Resident Warrantholder may be exempt from tax under the Tax Act pursuant to the terms of an applicable tax treaty. Non-Resident Shareholders and Non-Resident Warrantholders should consult their own tax advisors with respect to the availability of any relief under the terms of any applicable tax treaty in their particular circumstances. 54

63 In the event that the Common Shares or Warrants constitute taxable Canadian property to a Non-Resident Shareholder or Non-Resident Warrantholder and any capital gain realized by the Non-Resident Shareholder or Non-Resident Warrantholder on the disposition of Common Shares or Warrants under the Arrangement is not exempt from tax under the Tax Act by virtue of an applicable tax treaty, then the tax consequences described above under the headings Residents of Canada Disposition of Common Shares and Residents of Canada Disposition of Warrants will generally apply. If the Common Shares or Warrants are taxable Canadian property to a Non-Resident Shareholder or Non-Resident Warrantholder, the Non-Resident Shareholder or Non-Resident Warrantholder will be required to file a Canadian tax return reporting the disposition of the Common Shares or Warrants, even if no gain is realized by the Non-Resident Shareholder or Non-Resident Warrantholder on the disposition or the gain is otherwise exempt from Canadian tax under the terms of an applicable tax treaty. OPTIONS This portion of the summary applies only to a Non-Resident Optionholder who is granted Options in connection with employment duties performed in Canada. In certain circumstances, a Non-Resident Optionholder who is required to include an amount in computing income, as described below, may be entitled to claim an exemption from Canadian tax in respect of such amount under the terms of an applicable tax treaty. Such Non-Resident Optionholders are urged to consult their own tax advisors as to the availability of any such exemption. Exercise of Option. A Non-Resident Optionholder who exercises an Option and acquires Common Shares will be required to include in income in the taxation year of the exercise of the Option the amount by which the fair market value of the Common Shares acquired on the exercise of the Option at such time exceeds the amount paid by the Non-Resident Optionholder to acquire the Common Shares. The adjusted cost base to a Non-Resident Optionholder of any Common Shares acquired on the exercise of an Option generally will be equal to the fair market value of the Common Shares at the time they are acquired by the Non-Resident Optionholder, subject to the adjusted cost base averaging rules described above (see Residents of Canada Options Exercise of Option ). Disposition of Option. A Non-Resident Optionholder who disposes of an Option to Stelco will be required to include in income in the taxation year of the disposition the Option Consideration received. The Non-Resident Optionholder may be entitled to a deduction of 50% of the amount required to be included in income, provided that the amount payable by the Non-Resident Optionholder under the Option to acquire the Common Shares was not less than the fair market value of the Common Shares at the time the Option was granted and the Common Shares are prescribed shares under the Tax Act regulations. This portion of the summary applies only to a Non-Resident Optionholder who was granted Options in connection with employment duties performed outside Canada. Exercise of Option. A Non-Resident Optionholder will generally not be required to include any amount in employment income under the Tax Act as a result of the exercise of an Option to acquire Common Shares. The cost of any Common Shares acquired on the exercise of such an Option will be equal to the amount paid by the Non-Resident Optionholder to acquire such shares, subject to the adjusted cost base averaging rules described above (see Residents of Canada Options Exercise of Option ). Disposition of Option. A disposition of an Option to Stelco will not result in an employment income inclusion or a capital gain (or capital loss) under the Tax Act to such a Non-Resident Optionholder, provided the Option is not taxable Canadian property under the Tax Act. Generally, an Option will not be taxable Canadian property unless the Non-Resident Optionholder, Persons with whom such holder did not deal at arm s length or such Optionholder together with such Persons owned or had a right to acquire 25% or more of the issued shares of any class or series of Stelco at any time during the 60 month period that ends at the Effective Time. DISSENTING SHAREHOLDERS A Non-Resident Dissenting Shareholder will, pursuant to the Plan of Arrangement, be deemed to transfer such person s Dissenting Shares to Acquireco and will be entitled to be paid the fair value of such Dissenting Shares by Acquireco in cash. In general, the tax treatment of a Non-Resident Dissenting Shareholder will be similar to that of a Non-Resident Shareholder who participates in the Arrangement. See Disposition of Common Shares and Warrants above. 55

64 The amount of any interest awarded by a court to a Non-Resident Dissenting Shareholder will be subject to Canadian withholding tax at a rate of 25% unless the rate is reduced under the provisions of an applicable tax treaty. Non-Resident Dissenting Shareholders should consult their own tax advisors with respect to the availability of any relief under the terms of an applicable tax treaty in their particular circumstances. Certain U.S. Federal Income Tax Considerations In the opinion of Fried, Frank, Harris, Shriver & Jacobson LLP, the following is a summary of the material U.S. federal income tax consequences of the Arrangement to beneficial owners of Common Shares and beneficial owners of Warrants, subject to the limitations, qualifications and assumptions set forth below. This discussion does not purport to consider all aspects of U.S. federal income taxation that might be relevant to beneficial owners of Common Shares or Warrants. This discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the Code ), Treasury Regulations, proposed regulations, Internal Revenue Service ( Service ) rulings and pronouncements and judicial decisions all as in effect as of the date hereof. These authorities may at any time be repealed, revoked or modified or subject to differing interpretations, possibly with retroactive effect, which may lead to consequences which are different than those described below. The Corporation has not sought and will not seek any rulings from the Service with respect to the consequences discussed below, and the discussion below is not binding on the Service or the courts. Accordingly, there can be no assurance that the Service will not challenge any of the U.S. federal income tax consequences discussed below or that, if challenged, a court will not agree with the Service. In addition, this discussion assumes that the Arrangement will be completed on the terms and conditions set forth in the Arrangement Agreement and the Plan of Arrangement and as described in this Circular, without waiver or modification of any such terms or conditions. The discussion applies only to beneficial owners of Common Shares and beneficial owners of Warrants that hold their Common Shares and Warrants as capital assets. This discussion does not apply to certain types of beneficial owners of Common Shares or Warrants (including, without limitation, U.S. expatriates, controlled foreign corporations, passive foreign investment companies, insurance companies, tax-exempt organizations, financial institutions, persons who acquired Common Shares pursuant to the exercise of an employee stock option or right or otherwise as compensation, traders, broker-dealers, persons who hold or have held Common Shares and/or Warrants as part of a straddle or a hedge, integrated constructive sale or conversion transaction or other integrated transaction for U.S. federal income tax purposes or persons that own or have owned directly or by attribution, 2% or more by voting power or value of the outstanding equity of the Corporation or U.S. Steel) that may be subject to special rules. This discussion does not address any aspect of U.S. state or local or non-u.s. or other tax laws, or any estate or gift tax considerations, or the alternative minimum tax. For purposes of this discussion, a person is a U.S. holder if such person is not a partnership (or an entity or arrangement treated as a partnership for U.S. federal income tax purposes), is the beneficial owner of Common Shares or Warrants and is treated for U.S. federal income tax purposes as: (i) an individual citizen or resident of the United States, (ii) a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States, any State thereof or the District of Columbia, (iii) a trust, if (a) a U.S. court can exercise primary supervision over the trust s administration and one or more United States persons (as defined in the Code) are authorized to control all substantial decisions of the trust or (b) the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person, or (iv) an estate that is subject to U.S. federal income tax on its income regardless of its source. A non-u.s. holder is a beneficial owner of Common Shares or Warrants that, for U.S. federal income tax purposes, is not a U.S. holder or a partnership (or an entity or arrangement treated as a partnership for U.S. federal income tax purposes). If a partnership (or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of Common Shares or Warrants, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A partner in a partnership that is a beneficial owner of Common Shares or Warrants should consult its own tax advisor. THE U.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE FOR GENERAL INFORMATION PURPOSES ONLY AND ARE NOT INTENDED TO CONSTITUTE A COMPLETE DESCRIPTION OF ALL U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE ARRANGEMENT. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, THE CORPORATION URGES BENEFICIAL OWNERS OF COMMON SHARES OR WARRANTS TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO THEM AND THE PARTICULAR TAX EFFECTS TO THEM OF THE ARRANGEMENT, INCLUDING THE APPLICATION OF U.S. STATE AND LOCAL AND NON-U.S. TAX LAWS. PURSUANT TO U.S. TREASURY DEPARTMENT CIRCULAR 230, THE CORPORATION IS INFORMING YOU THAT (A) THIS DISCUSSION IS NOT INTENDED AND WAS NOT WRITTEN TO BE USED, AND CANNOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING PENALTIES UNDER THE U.S. FEDERAL TAX LAWS THAT MAY BE IMPOSED ON THE TAXPAYER, (B) THIS DISCUSSION WAS WRITTEN IN CONNECTION WITH THE 56

65 PROMOTION OR MARKETING OF THE ARRANGEMENT BY THE CORPORATION, AND (C) EACH TAXPAYER SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR. U.S. Holders of Common Shares or Warrants The receipt of Canadian dollars by a U.S. holder for Common Shares or Warrants pursuant to the Arrangement will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder who surrenders Common Shares or Warrants in exchange for Canadian dollars pursuant to the Arrangement will recognize a capital gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the U.S. dollar value of the Canadian dollars received (generally determined by reference to the spot exchange rate in effect on the Effective Date or, if the Common Shares or Warrants (as applicable) are traded on an established securities market and the U.S. holder is a cash basis taxpayer or an electing accrual basis taxpayer, the spot exchange rate in effect on the settlement date) and the U.S. holder s adjusted tax basis in the Common Shares or Warrants surrendered (determined in U.S. dollars). Gain or loss will be determined separately for each block of Common Shares or Warrants (i.e., Common Shares or Warrants acquired at the same cost in a single transaction) surrendered for Canadian dollars pursuant to the Arrangement. If the holding period in Common Shares or Warrants surrendered pursuant to the Arrangement is greater than one year on the Effective Date, the gain or loss will be long-term capital gain or loss. Certain U.S. holders (including individuals) may be eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains. The deductibility of a capital loss is subject to limitations under the Code. Any such gain or loss recognized by a U.S. holder of Common Shares or Warrants generally will be U.S. source gain or loss for U.S. foreign tax credit limitation purposes. Therefore, if any such gain is subject to Canadian income tax, a U.S. holder may not be able to credit the Canadian income tax against its U.S. federal income tax liability. U.S. holders should consult their own tax advisors as to the foreign tax credit implications of the disposition of Common Shares or Warrants pursuant to the Arrangement. The fair market value of any Canadian dollars received by a U.S. holder in the Arrangement will generally be based on the spot exchange rate in effect on the date of receipt. A subsequent disposition of any Canadian dollars received (including an exchange for U.S. dollars) will generally give rise to ordinary income or loss which generally will be U.S. source income or loss for U.S. foreign tax credit limitation purposes. All cash payments to which a U.S. holder of Common Shares or Warrants is entitled pursuant to the Arrangement will generally be subject to information reporting and will be subject to backup withholding (currently at a rate of 28%), unless the U.S. holder (i) qualifies for certain exempt categories, including corporations and financial institutions, or (ii) provides a certified taxpayer identification number on IRS Form W-9 or substitute IRS Form W-9 and otherwise complies with backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be refunded or allowed as a credit against the U.S. holder s U.S. federal income tax liability, if any, provided that the required information or appropriate claim for refund is timely filed with the Service. Passive Foreign Investment Company Rules The foregoing discussion assumes that the Corporation was not a PFIC for any taxable year during which a U.S. holder held Common Shares or Warrants. In general, a non-u.s. corporation is classified as a PFIC for each taxable year in which (a) 75% or more of its gross income is passive income (as defined for U.S. federal income tax purposes) or (b) on average for such taxable year, 50% or more (by value) of its assets either produce or are held for the production of passive income. To the best of its knowledge and belief and based on information available, the Corporation believes that it should not have been a PFIC in the past and the Corporation expects that it should not be a PFIC for the current taxable year. However, PFIC classification is factual in nature, generally cannot be determined until the close of the taxable year in question, and is determined annually based on application of complex rules which are uncertain in some respects. Consequently, the Corporation cannot provide any assurance that it has never been or will not become a PFIC for any taxable year during which U.S. holders hold or held Common Shares or Warrants. If the Corporation were determined to be a PFIC for any taxable year during which a U.S. holder holds or held Common Shares and/or Warrants, the U.S. holder could be subject to special, adverse U.S. federal income tax rules in respect of the Arrangement (including increased tax liability). U.S. holders should consult their own tax advisors concerning the U.S. federal income tax consequences of the Corporation being or having been a PFIC. DISSENTING SHAREHOLDERS A Dissenting Shareholder will, pursuant to the Plan of Arrangement, be deemed to transfer such person s Dissenting Shares to Acquireco and will be entitled to be paid the fair value of such Dissenting Shares by Acquireco in Canadian dollars. In general, the U.S. federal income tax treatment of a Dissenting Shareholder that is a U.S. holder will be similar to that of a U.S. holder who participates in 57

66 the Arrangement except with respect to interest awarded by a court. Any such interest should be included in the U.S. holder s gross income, as ordinary income, at the time it is received or accrued in accordance with the U.S. holder s regular method of accounting for U.S. federal income tax purposes. See U.S. Holders of Common Shares or Warrants above. Non-U.S. Holders of Common Shares or Warrants The receipt of Canadian dollars by a non-u.s. holder for Common Shares or Warrants will not be subject to U.S. federal income tax, including withholding tax, unless: (a) (b) the gain is effectively connected with the holder s conduct of a trade or business in the United States and, if required by an applicable tax treaty, is attributable to a permanent establishment maintained by the non-u.s. holder in the United States; or in the case of an individual, the non-u.s. holder has been present in the United States for 183 days or more during the taxable year in which the Arrangement is effected and certain other conditions are satisfied. LEGAL MATTERS Certain legal matters in connection with the Arrangement will be passed upon by McCarthy Tétrault LLP and Fried, Frank, Harris, Shriver & Jacobson LLP on behalf of Stelco and by Osler, Hoskin & Harcourt LLP and Morgan, Lewis & Bockius LLP on behalf of U.S. Steel and Acquireco. ADDITIONAL INFORMATION Information contained herein is given as of September 24, 2007, except as otherwise noted. Additional information regarding Stelco can be found in its most current Annual Information Form, its comparative consolidated financial statements for the financial year ended December 31, 2006, together with the report of the auditors thereon, management s discussion and analysis of Stelco financial condition and results of operations for fiscal 2006, the unaudited consolidated financial statements of Stelco for the three months and six months ended June 30, 2006 and June 30, 2005, together with the notes thereto, and management discussion and analysis for the three and six months ended June 30, 2006 and June 30, Copies of those documents, as well as any additional copies of this Circular, the Arrangement Agreement, the 2006 Plan of Arrangement and the 2006 CCAA Plan, are available upon written request to the Corporate Secretary of the Corporation, free of charge, and are available on SEDAR at under the Corporation s profile. 58

67 QUESTIONS AND FURTHER ASSISTANCE If you have any questions about the information contained in this Circular or require assistance in completing your form of proxy, please contact Georgeson, the Corporation s proxy solicitation agent, at: 100 University Avenue, 11th Floor, South Tower Toronto, Ontario M5J 2Y1 North American Toll Free Number: APPROVAL OF STELCO The contents and the mailing of this Circular have been approved by the Board. By Order of the Board Hamilton, Ontario September 24, 2007 D. Chad Hutchison General Counsel and Corporate Secretary 59

68 CONSENT OF CIBC WORLD MARKETS INC. We hereby consent to the references to our firm s fairness opinion dated August 26, 2007 under Summary, The Arrangement Background to the Arrangement Agreement, The Arrangement Reasons for the Arrangement and The Arrangement Fairness Opinions of the Financial Advisors in the Circular and to the inclusion of the fairness opinion in the Circular. Toronto, Ontario September 24, 2007 CIBC WORLD MARKETS INC. (Signed) CIBC World Markets Inc. CONSENT OF UBS SECURITIES CANADA INC. We hereby consent to the references to our firm s fairness opinion dated August 26, 2007 under Summary, The Arrangement Background to the Arrangement Agreement, The Arrangement Reasons for the Arrangement and The Arrangement Fairness Opinions of the Financial Advisors in the Circular and to the inclusion of the fairness opinion in the Circular. Toronto, Ontario September 24, 2007 UBS SECURITIES CANADA INC. (Signed) UBS SECURITIES CANADA INC. CONSENT OF MCCARTHY TÉTRAULT LLP We hereby consent to the reference to our opinion contained under Certain Tax Considerations Certain Canadian Federal Income Tax Considerations in the Circular and to the inclusion of the foregoing opinion in the Circular. Toronto, Ontario September 24, 2007 MCCARTHY TÉTRAULT LLP (Signed) McCarthy Tétrault LLP CONSENT OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP We hereby consent to the reference to our opinion contained under Certain Tax Considerations Certain U.S. Federal Income Tax Considerations in the Circular and to the inclusion of the foregoing opinion in the Circular. Toronto, Ontario September 24, 2007 FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP (Signed) Fried, Frank, Harris, Shriver & Jacobson LLP 60

69 APPENDIX A Special Resolution of Stelco Inc. BE IT RESOLVED THAT: 1. The arrangement (the Arrangement ) under section 192 of the Canada Business Corporations Act (the CBCA ) involving Stelco Inc. (the Company ), United States Steel Corporation ( Parent ) and Alberta ULC ( Subco ), as more particularly described and set forth in the management information circular (the Circular ) of the Company accompanying the notice of this meeting (as the Arrangement may be modified or amended in accordance with its terms) is hereby authorized, approved and adopted. 2. The plan of arrangement (the Plan of Arrangement ) involving the Company, the full text of which is set out as Appendix B to the Circular (as the Plan of Arrangement may be modified or amended in accordance with its terms), is hereby authorized, approved and adopted. 3. Notwithstanding that this special resolution has been passed, and the Arrangement adopted, by the holders of common shares of the Company ( Common Shares ) or that the Arrangement has been approved by the Ontario Superior Court of Justice, the directors of the Company are hereby authorized and empowered without further notice to or approval of the holders of Common Shares (i) to amend the Arrangement Agreement made as of August 26, 2007 between Parent, the Company and Subco (the Arrangement Agreement ) or the Plan of Arrangement, to the extent permitted by the Arrangement Agreement, and (ii) subject to the terms of the Arrangement Agreement, not to proceed with the Arrangement. 4. Any officer or director of the Company is hereby authorized for and on behalf of the Company to execute, under the seal of the Company or otherwise, and to deliver articles of arrangement and such other documents as are necessary or desirable to the Director under the CBCA in accordance with the Arrangement Agreement for filing. 5. Any officer or director of the Company is hereby authorized for and on behalf of the Company to execute or cause to be executed, under the seal of the Company or otherwise, and to deliver or cause to be delivered, all such other documents and instruments and to perform or cause to be performed all such other acts and things as in such Person s opinion may be necessary or desirable to give full effect to the foregoing and the matters authorized thereby, such determination to be conclusively evidenced by the execution and delivery of such document or instrument or the doing of any such act or thing. A-1

70 APPENDIX B Plan of Arrangement Under Section 192 of the Canada Business Corporations Act as amended September 19, 2007 ARTICLE 1 DEFINITIONS AND INTERPRETATION 1.1 Definitions In this Plan of Arrangement, unless there is something in the subject matter or context inconsistent therewith, the following terms shall have the respective meanings set out below and grammatical variations of such terms shall have corresponding meanings: 2006 Plan of Arrangement means the plan of arrangement attached to the certificate and articles of arrangement of the Company issued by the Director on March 31, 2006; 2006 Final Order means the final order of the Court dated February 14, 2006 approving the 2006 Plan of Arrangement; Aggregate Share Consideration shall have the meaning ascribed thereto in Section 2.4(a)(i); Aggregate Option Consideration shall have the meaning ascribed thereto in Section 2.2(c)(iii); Aggregate Warrant Consideration shall have the meaning ascribed thereto in Section 2.4(a)(ii); Applicable Law means, with respect to any Person, any domestic, foreign, national, federal, provincial, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation or other similar requirement enacted, adopted, promulgated or applied by a Governmental Entity that is binding upon or applicable to such Person, as amended unless expressly specified otherwise; Arrangement means an arrangement under the provisions of section 192 of the CBCA on the terms and conditions set forth in this Plan of Arrangement, subject to any amendment or modification thereto made in accordance with the terms of the Arrangement Agreement and this Plan of Arrangement, or made at the direction of the Court in the Final Order (with the consent of the Company and Parent, each acting reasonably); Arrangement Agreement means the arrangement agreement made as of the August 26, 2007 between the Company, Subco and Parent, as same may be amended, supplemented or restated in accordance with its terms providing for, among other things, the Arrangement; Arrangement Resolution means the special resolution of the Shareholders, approving the Arrangement, such resolution to be in substantially the form of Exhibit B attached to the Arrangement Agreement; Articles of Arrangement means the articles of arrangement of the Company in respect of the Arrangement, to be filed with the Director after the Final Order is made; Business Day means a day other than a Saturday, Sunday or other day on which the Ontario Securities Commission or banks located in Toronto or New York City are authorized or required by law to close. CBCA means the Canada Business Corporations Act; Certificate means the certificate or other confirmation of filing giving effect to the Arrangement to be issued by the Director pursuant to section 192(7) of the CBCA after the Articles of Arrangement have been filed; B-1

71 Circular means the notice of Company Meeting and the accompanying management information circular dated September 24, 2007, including the schedules and appendices attached thereto and all amendments from time to time made thereto, sent to Shareholders in connection with the Company Meeting; Company means Stelco Inc., a corporation incorporated under the CBCA; Company Meeting means the special meeting of the Shareholders (including any adjournments or postponements thereof) to be held to consider, among other things, the Arrangement Resolution; Company Shares means the issued and outstanding common shares in the capital of the Company (including common shares issued upon the exercise of Options or Warrants) and shall include any shares into which the Company Shares may be reclassified, subdivided, consolidated or converted and any rights or benefits arising therefrom including any extraordinary distribution of securities which may be declared in respect of the Company Shares (except in accordance with this Plan of Arrangement); Court means the Ontario Superior Court of Justice (Commercial List); Depositary means CIBC Mellon Trust Company at its principal office in Toronto, Ontario; Director means the Director appointed pursuant to the CBCA; Dissent Rights shall have the meaning ascribed thereto in Section 3.1(a); Dissenting Shareholder means a registered Shareholder who has properly and validly dissented in respect of the Arrangement Resolution in strict compliance with the Dissent Rights, who has not withdrawn or been deemed to have withdrawn such dissent and who is ultimately determined to be entitled to be paid the fair value of its Company Shares, but only in respect of the Company Shares in respect of which Dissent Rights are validly exercised by such registered Shareholder; Effective Date means the date upon which the Arrangement becomes effective as established by the date of issue shown on the Certificate; Effective Time means the time at which Articles of Arrangement are issued by the Director on the Effective Date; Final Order means the order of the Court approving the Arrangement as such order may be amended by the Court (with the consent of the Company and Parent, each acting reasonably) at any time prior to the Effective Date or, if appealed, then unless such appeal is withdrawn or denied, as affirmed or amended (provided that any such amendment shall be acceptable to Parent and the Company, each acting reasonably) on appeal; Governmental Entity means any government, regulatory authority, governmental department, agency, commission, bureau, official, minister, Crown corporation, court, body, board, tribunal or dispute settlement panel or other law, rule or regulation-making organization or entity: (a) having or purporting to have jurisdiction on behalf of any nation, province, territory or state or any other geographic or political subdivision of any of them; or (b) exercising, or entitled or purporting to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power; Interim Order means the interim order of the Court, as the same may be amended by the Court (with the consent of the Company and Parent, each acting reasonably) pursuant to section 192(4) of the CBCA, made in connection with the Arrangement following the application therefor contemplated by the Arrangement Agreement; Letter of Transmittal means a letter of transmittal to be forwarded or made available by the Company to either the Shareholders or the Warrantholders, as the case may be, in a form acceptable to Subco, acting reasonably, for use by such Shareholders or such Warrantholders, as applicable, in connection with the Arrangement as contemplated herein; Liens means any hypothecs, mortgages, liens, charges, security interests, encumbrances, restrictions, adverse claims or other claims of third parties of any kind; B-2

72 Notice of Dissent means a written notice provided by a registered Shareholder to the Company setting forth such registered Shareholder s objection to the Arrangement Resolution and exercise of Dissent Rights; Option Consideration has the meaning given in Section 2.2(f); Optionholder means a holder of Options; Option means an outstanding option to purchase Company Shares issued pursuant to the Stock Option Plan; Option Loan has the meaning given in Section 2.2(c); Parent means United States Steel Corporation, a corporation existing under the laws of Delaware; Person means an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated association, a Governmental Entity or any agency, instrumentality or political subdivision of a Governmental Entity, or any other entity or body. Plan of Arrangement means this plan of arrangement, and references to Article or Section mean the specified Article or Section of this Plan of Arrangement; Share Consideration shall mean $38.50 cash, subject to adjustment in accordance with Section 2.6; Shareholders means, at any time and unless the context otherwise requires, the registered holders of Company Shares at such time; Specified Third Party Debt means indebtedness or borrowed money owed by the Company or any Subsidiary that is specified by Parent to be repaid on the Effective Date in accordance with the Arrangement Agreement; Stock Option Plan means the incentive stock option plan of the Company, established on May 10, 2006; Subco means Alberta ULC, an unlimited liability company existing under the laws of Alberta; Tax Act means the Income Tax Act (Canada); Third Party Debt Payoff Loans has the meaning given in Section 2.2(c); Warrant Consideration has the meaning given in Section 2.2(g); Warrant Indenture means the Warrant Indenture dated as of March 31, 2006 between the Company and CIBC Mellon Trust Company, as trustee; Warrant means an outstanding warrant to purchase Company Shares issued pursuant to the Warrant Indenture; Warrant Loan has the meaning given in Section 2.2(c); and Warrantholder means a holder of Warrants. 1.2 Number and Gender In this Plan of Arrangement, unless the context otherwise requires, words importing the singular number include the plural and vice versa, and words importing any gender include all genders. B-3

73 1.3 Interpretation Not Affected by Headings, etc. The division of this Plan of Arrangement into Articles, Sections and other parts and the insertion of headings are for convenience only and shall not affect the construction or interpretation of this Plan of Arrangement. 1.4 Time therein. All times expressed herein or in any Letter of Transmittal are local time (Toronto, Ontario) unless otherwise stipulated herein or 1.5 Currency All references to currency in this Plan of Arrangement are to Canadian dollars, being lawful money of Canada, unless otherwise specified. 1.6 Statutory References Unless otherwise expressly provided herein, any reference in this Plan of Arrangement to a statute includes all regulations made thereunder, all amendments to such statute or regulations in force from time to time, and any statute or regulation that supplements or supersedes such statute or regulations. 2.1 Effectiveness ARTICLE 2 THE ARRANGEMENT This Plan of Arrangement is made pursuant to, and is subject to the provisions of the Arrangement Agreement. This Plan of Arrangement will become effective at the Effective Time (except as otherwise provided herein) and will be binding from and after the Effective Time on: (i) the Company (ii) Subco; (iii) Parent; (iv) all holders and all beneficial owners of Company Shares; (v) all holders and all beneficial owners of Options; (vi) all holders and all beneficial owners of Warrants; (vii) all holders of Specified Third Party Debt; (viii) the registrar and transfer agent in respect of the Company Shares; and (ix) the Depositary. 2.2 The Arrangement Commencing at the Effective Time, the following shall occur and be deemed to occur in the following sequence without any further act or formality required on the part of any Person, except as expressly provided herein: (a) (b) (c) (d) notwithstanding the terms of the 2006 Plan of Arrangement, the 2006 Plan of Arrangement shall be amended to delete section 2.03 in its entirety and the reference to section 2.03 in section 5.01; notwithstanding the terms of the 2006 Final Order, the 2006 Final Order shall be amended to delete paragraph 17 in its entirety; notwithstanding the terms of the Specified Third Party Debt, Parent (or one of its Affiliates) will provide: (i) one or more loans (the Third Party Debt Payoff Loans ) to the Company in an aggregate amount equal to the aggregate of all amounts owing under the Specified Third Party Debt required to repay such Specified Third Party Debt; (ii) a loan to the Company equal to the Aggregate Warrant Consideration (the Warrant Loan ); and (iii) a loan to the Company (the Option Loan ) equal to the amount required for the payment of the Options pursuant to Section 2.2(f) (the Aggregate Option Consideration ). The Third Party Debt Payoff Loans, the Warrant Loan and the Option Loan will be evidenced by demand promissory notes issued by the Company to Parent (or applicable Affiliate of Parent); notwithstanding the terms of the Specified Third Party Debt, immediately upon receipt of the Third Party Debt Payoff Loans, the Company will repay in full all amounts owing under the Specified Third Party Debt; B-4

74 (e) (f) (g) (h) (i) (j) (k) immediately following repayment of the Specified Third Party Debt, the Company will effect any reorganizations that are to be effected in accordance with Section 4.4 of the Arrangement Agreement; notwithstanding the terms of the Stock Option Plan, or the terms of any agreement evidencing the grant of any Options, two minutes after completion of the step in Section 2.2(d) and subject to applicable withholdings determined in accordance with Section 5.4, each Option granted and outstanding immediately prior to the Effective Time shall, without any further act or formality by or on behalf of any Optionholder or the Company, be transferred by the holder of such Option to the Company, free and clear of all Liens, in exchange for a cash payment from the Company equal to an amount (if any) equal to: (A) the product of the number of Company Shares underlying such Option held by such Optionholder and the Share Consideration, less (B) the aggregate exercise price payable under such Option by such Optionholder to acquire the number of Company Shares underlying such Option (the difference (if any) being, the Option Consideration ). All Options granted and outstanding immediately prior to the Effective Time shall thereafter be cancelled and terminated; notwithstanding the terms of the Warrant Indenture, or the terms of any agreement evidencing the grant of any Warrants, two minutes after completion of the step in Section 2.2(d) and subject to applicable withholdings determined in accordance with Section 5.4, each Warrant granted and outstanding immediately prior to the Effective Time shall, without any further act or formality by or on behalf of any Warrantholder or the Company, be transferred by the holder of such Warrant to the Company, free and clear of all Liens, in exchange for a cash payment from the Company equal to an amount (if any) equal to: (A) the product of the number of Company Shares underlying such Warrant held by such Warrantholder and the Share Consideration, less (B) the aggregate exercise price payable under such Warrant by such Warrantholder to acquire the number of Company Shares underlying such Warrant (the difference (if any) being, the Warrant Consideration ). All Warrants granted and outstanding immediately prior to the Effective Time shall thereafter be cancelled and terminated; two minutes after completion of the immediately preceding step, each Company Share in respect of which Dissent Rights have been validly exercised before the Effective Time shall be transferred and deemed to be transferred by the holder thereof, without any further act or formality on its part, free and clear of all Liens, to Subco in consideration for a debt claim against Subco in an amount determined and payable in accordance with Article 3, and the name of such holder will be removed from the register of Shareholders (in respect of the Company Shares for which Dissent Rights have been validly exercised before the Effective Time), and Subco shall be recorded as the registered holder of Company Shares so transferred and shall be deemed to be the legal and beneficial owner of such Company Shares, free and clear of any Liens; two minutes after completion of the immediately preceding step, each Company Share outstanding immediately prior to the Effective Time (including any Company Share issued upon the effective exercise of Options or Warrants prior to the Effective Date), other than Company Shares held by Subco and its affiliates, and other than Company Shares held (or previously held) by a Dissenting Shareholder, shall be transferred and deemed to be transferred by the holder thereof, without any further act or formality on its part, free and clear of all Liens, to Subco in exchange for a payment in cash equal to the Share Consideration, subject to applicable withholdings determined in accordance with Section 5.4, and the name of such holder will be removed from the register of holders of Company Shares and Subco shall be recorded as the registered holder of Company Shares so transferred and shall be deemed to be the legal and beneficial owner of such Company Shares, free and clear of any Liens; notwithstanding the terms of the Warrant Indenture, the Warrant Indenture shall be terminated; and notwithstanding the terms of the Stock Option Plan, the Stock Option Plan shall be terminated. 2.3 Letter of Transmittal At the time of mailing the Circular or as soon as practicable after the Effective Date, the Company shall forward to each Shareholder and each Warrantholder at the address of such holder as it appears on the register maintained by or on behalf of the Company in respect of Shareholders and Warrantholders, respectively, a Letter of Transmittal and instructions for obtaining delivery of that portion of the Aggregate Share Consideration or the Aggregate Warrant Consideration, as the case may be, payable to such holder following the Effective Date pursuant to this Plan of Arrangement. B-5

75 2.4 Delivery of Aggregate Share Consideration, Aggregate Option Consideration and Aggregate Warrant Consideration (a) On or immediately prior to the Effective Date: (i) (ii) Subco shall deliver or arrange to be delivered to the Depositary the cash required for the payment of the aggregate Share Consideration (the Aggregate Share Consideration ) for the Company Shares, which are acquired pursuant to Sections 2.2(h) and 2.2(i), for the benefit of and in trust for the Shareholders entitled to receive Share Consideration for each Company Share held by them in a special account with the Depositary to be paid to or to the order of the respective former holders of such Company Shares without interest; and the Company shall deliver or arrange to be delivered to the Depositary the cash required for the payment of the aggregate Warrant Consideration (the Aggregate Warrant Consideration ) for the Warrants, which are acquired by the Company for cash pursuant to Section 2.2(g), for the benefit of and in trust for the Warrantholders in a special account with the Depositary to be paid to or to the order of the respective former holders of such Warrants without interest. The Aggregate Share Consideration, the Aggregate Warrant Consideration and the Aggregate Option Consideration shall be cash, denominated in Canadian dollars in same day funds payable. Such money shall not be used for any purpose except as provided in this Plan of Arrangement. Upon delivery to the Depositary of the Aggregate Share Consideration and the Aggregate Warrant Consideration, Subco shall be fully and completely discharged from its obligation to pay the Aggregate Share Consideration to the former Shareholders and the Company shall be fully and completely discharged from its obligation to pay the Aggregate Warrant Consideration to the former Warrantholders and upon delivery of the Aggregate Option Consideration to the Optionholders, the Company shall be fully and completely discharged from its obligation to pay the Aggregate Option Consideration, and, in each case, the rights of such holders shall be limited to receiving, without interest, from the Depositary or the Company, as the case may be, their proportionate part of the money so deposited in accordance with this Plan of Arrangement. Any interest on the deposit of the Aggregate Share Consideration shall belong to Subco. Any interest on the deposit or holding of the Aggregate Warrant Consideration or the Aggregate Option Consideration shall belong to the Company. (b) (c) (d) Upon surrender to the Depositary for cancellation of a certificate which immediately prior to the Effective Time represented one or more outstanding Company Shares which were acquired for the applicable Share Consideration in accordance with Section 2.2(i), together with a duly completed Letter of Transmittal and such other documents and instruments as would have been required to effect the transfer of the Company Shares formerly represented by such certificate under the CBCA and the bylaws of the Company and such additional documents and instruments as Parent, Subco or the Depositary may reasonably require, the holder of such surrendered certificate shall be entitled to receive in exchange therefor, and as soon as practicable after the Effective Time the Depositary shall deliver to such holder, by cheque (or, if required by Applicable Law, a wire transfer) for the aggregate Share Consideration such holder is entitled to receive under the Arrangement (together, if applicable, with any unpaid dividends or distributions declared on the Company Shares, if any, prior to the Effective Time) in accordance with Section 2.2(i). Upon surrender to the Depositary for cancellation of a certificate which immediately prior to the Effective Time represented one or more outstanding Warrants which were acquired for the applicable Warrant Consideration in accordance with Section 2.2(g), together with a duly completed Letter of Transmittal and such other documents and instruments as would have been required to effect the transfer of the Warrants formerly represented by such certificate under the CBCA and the bylaws of the Company and such additional documents and instruments as Parent, Subco or the Depositary may reasonably require, the holder of such surrendered certificate shall be entitled to receive in exchange therefor, and as soon as practicable after the Effective Time the Depositary shall deliver to such holder, by cheque (or, if required by Applicable Law, a wire transfer) for the aggregate Warrant Consideration such holder is entitled to receive under the Arrangement in accordance with Section 2.2(g). As soon as practicable after the Effective Time, the Company shall deliver to each Optionholder as reflected on the books and records of the Company a cheque representing payment or otherwise effect payment by direct deposit or wire transfer of the portion of the Aggregate Option Consideration to which such Optionholder is entitled in accordance with Section 2.2(f). B-6

76 (e) In the event of a transfer of ownership of Company Shares that was not registered in the applicable securities register of the Company, the aggregate Share Consideration payable for such Company Shares in accordance with Section 2.2(i) may be delivered to the transferee if the certificate representing such Company Shares is presented to the Depositary as provided in Section 2.4(b), accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable share transfer taxes have been paid. In the event of a transfer of ownership of Warrants that was not registered in the applicable securities register of the Company, the aggregate Warrant Consideration payable for such Company Shares in accordance with Section 2.2(g) may be delivered to the transferee if the certificate representing such Warrants is presented to the Depositary as provided in Section 2.4(c), accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable transfer taxes have been paid. 2.5 Expiration of Rights Subject to applicable escheat laws, any amounts deposited with the Depositary for the payment of the Aggregate Share Consideration or the Aggregate Warrant Consideration which remain unpaid or unclaimed on the date which is six years from the Effective Date shall be forfeited (i) in the case of the Aggregate Share Consideration, to Subco and paid over to or as directed by Subco; and (ii) in the case of the Aggregate Warrant Consideration, to the Company and paid over to or as directed by the Company, and the former Shareholders and Warrantholders shall thereafter have no right to receive their respective entitlement to the Aggregate Share Consideration or the Aggregate Warrant Consideration, as applicable. 2.6 Dividends and Distributions If the Company declares, sets aside or pays any dividend on, or makes any other actual, constructive or deemed distribution in respect of any of the Company Shares, or otherwise makes any payments to the Shareholders in their capacity as such, during the period commencing on the date of the Arrangement Agreement and ending on the Effective Date, Subco may reduce the amount of the Share Consideration by any amount it determines in its sole discretion, provided that such discount shall not exceed the amount of such dividend, distribution or payment received per Company Share. No dividend or other distribution declared or made after the Effective Time with respect to the Company Shares with a record date after the Effective Time shall be delivered to the holder of any unsurrendered certificate which, immediately prior to the Effective Time, represented outstanding Company Shares. 2.7 Transfers Free and Clear Any transfer of securities pursuant to this Plan of Arrangement shall be free and clear of any Liens. 3.1 Dissent Rights ARTICLE 3 RIGHTS OF DISSENT (a) (b) Each Shareholder may exercise rights of dissent with respect to its Company Shares pursuant to and in the manner set forth in section 190 of the CBCA as modified by the Interim Order and this Section 3.1 (the Dissent Rights ); provided that a Notice of Dissent is received by the Company by no later than 5:00 p.m. (Toronto time) on the Business Day that is two Business Days prior to the date of the Company Meeting, or, if the Meeting is adjourned or postponed, 5:00 p.m. (Toronto time) on the Business Day that is two Business Days preceding the date of such adjourned or postponed Company Meeting. Shareholders who duly and validly exercise their Dissent Rights shall be deemed to have transferred their respective Company Shares, without any further act or formality on their part, free and clear of all Liens, to Subco as provided in Section 2.2(h), and such Shareholders who: (i) are ultimately determined to be entitled to be paid fair value for their respective Company Shares shall be entitled to a payment of cash equal to such fair value, and will not be entitled to any other payment or consideration, including any payment that would be payable under the Arrangement in respect of such Company Shares had such Shareholders not exercised their Dissent Rights; or (ii) are ultimately determined not to be entitled, for any reason, to be paid fair value for their respective Company Shares shall have participated and shall be deemed to have participated in the Arrangement, as at the time stipulated in Section 2.2(i), on the same basis B-7

77 as a non-dissenting Shareholder and shall receive cash consideration in respect of their respective Company Shares on the basis set forth in Article 2. (c) (d) In addition to any other restrictions under Section 190 of the CBCA, none of the following shall be entitled to exercise Dissent Rights: (i) Optionholders; (ii) Warrantholders; and (iii) Shareholders who vote in favour of the Arrangement Resolution. In no case shall the Company, Subco, the Depositary, the registrar and transfer agent in respect of the Company Shares or any other Person be required to recognize a Dissenting Shareholder as a holder of Company Shares after the Effective Time and the name of each Dissenting Shareholder shall be deleted from the registers of holders of Company Shares as at the Effective Time as provided in Article 2. ARTICLE 4 CERTIFICATES 4.1 Certificates From and after the Effective Time, until surrendered as contemplated by Sections 2.4(b) and 2.4(c): (a) (b) each certificate formerly representing Company Shares that, under the Arrangement, were transferred or deemed to be transferred to Subco in return for cash pursuant to Section 2.2 shall represent and be deemed, at all times after the time stipulated in Section 2.2(h) or 2.2(i), to represent only the right to receive upon such surrender the applicable Share Consideration specified in Section 2.2(h) or 2.2(i); and each certificate formerly representing Warrants that, under the Arrangement, were transferred or deemed to be transferred to the Company in return for cash pursuant to Section 2.2, shall represent and be deemed, at all times after the time stipulated in Section 2.2(g), to represent only the right to receive upon such surrender the applicable Warrant Consideration specified in Section 2.2(g). 4.2 Lost Certificates In the event that any certificate which immediately prior to the Effective Time represented one or more outstanding Company Shares or Warrants shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such certificate to be lost, stolen or destroyed, the Depositary will pay such Person the cash that such Person would have been entitled to had such share or warrant certificate not been lost, stolen or destroyed. When authorizing such payment in exchange for any lost, stolen or destroyed certificate, the Person to whom cash is to be paid shall, at the sole discretion of Subco, give a bond satisfactory to Subco in such sum as Subco may direct or otherwise indemnify the Depositary and Subco in a manner satisfactory to each of them against any claim that may be made against the Depositary or Subco with respect to the certificate alleged to have been lost, stolen or destroyed. 5.1 Paramountcy ARTICLE 5 GENERAL From and after the Effective Time (i) this Plan of Arrangement shall take precedence and priority over any and all Company Shares, Warrants and Options issued prior to the Effective Time, (ii) the rights and obligations of the registered holders of Company Shares, Warrants and Options, and the Company, Parent, Subco, the Depositary and any trustee or transfer agent therefor in relation thereto, shall be solely as provided for in this Plan of Arrangement, and (iii) all actions, causes of action, claims or proceedings (actual or contingent and whether or not previously asserted) based on or in any way relating to any Company Shares, Warrants or Options shall be deemed to have been settled, compromised, released and determined without liability except as set forth herein. 5.2 Amendment (a) Subject to Sections 5.2(b), 5.2(d) and 5.2(e), the Company, Parent and Subco reserve the right to amend, modify and/or supplement this Plan of Arrangement at any time and from time to time prior to the Effective Date, provided B-8

78 that any such amendment, modification and/or supplement must be contained in a written document which is (i) agreed to in writing by the Company, Parent and Subco, (ii) filed with the Court and, if made following the Company Meeting, approved by the Court subject to such conditions as the Court may impose, and (iii) if so required by the Court, communicated to Shareholders, Warrantholders and/or Optionholders if and in the manner as required by the Court. (b) (c) (d) (e) Notwithstanding anything in this Plan of Arrangement or the Arrangement Agreement, Parent and Subco shall be entitled, at any time prior to or following the Company Meeting, to modify this Plan of Arrangement to increase the consideration Subco is prepared to make available to Shareholders, Warrantholders or Optionholders pursuant to the Arrangement, whether or not the board of directors of the Company has changed its recommendation, provided that Parent and Subco shall use their commercially reasonable efforts to provide not less than one Business Day s prior written notice of such proposal to the Company. Any such proposed amendment, modification or supplement to this Plan of Arrangement shall become part of this Plan of Arrangement for all purposes. Any amendment, modification or supplement to this Plan of Arrangement may be proposed by the Company, Parent or Subco at any time prior to or at the Company Meeting (provided that the Company, Parent and Subco shall have consented thereto in writing), with or without any prior notice or communication, and if so proposed and accepted by the Persons voting at the Company Meeting (other than as may be required under the Interim Order), shall become part of this Plan of Arrangement for all purposes. Any amendment, modification and/or supplement to this Plan of Arrangement that is approved by the Court following the Company Meeting shall be effective only if: (i) it is agreed to by each of the Company, Parent and Subco; (ii) it is filed with the Court (other than amendments contemplated in Section 5.2(b) or 5.2(e), which shall not require such filing), and (iii) if required by the Court, it is consented to by holders of the Company Shares voting in the manner directed by the Court. Any amendment, modification and/or supplement to this Plan of Arrangement may be made by Subco unilaterally after the Effective Date without the approval of the Shareholders, the Company or Parent provided that it concerns a matter which, in the reasonable opinion of Subco, is of an administrative or ministerial nature required to better give effect to the implementation of this Plan of Arrangement and is not adverse to the financial or economic interests of the former Shareholders, Warrantholders and Optionholders. 5.3 Further Assurances Notwithstanding that the transactions and events set out in this Plan of Arrangement shall occur and be deemed to have occurred in the order set out herein, without any further act or formality, each of the parties to the Arrangement Agreement shall make, do and execute, or cause to be made, done and executed, all such further acts, deeds, agreements, transfers, assurances, instruments or documents as may reasonably be required by any of them in order to implement this Plan of Arrangement and to further document or evidence any of the transactions or events set out herein. 5.4 Withholding Rights The Company, Parent, Subco, one or more other subsidiaries of Parent or the Depositary, as the case may be, shall be entitled to directly or indirectly deduct and withhold from any amount otherwise payable pursuant to this Agreement or the Plan of Arrangement to any Shareholder, Optionholder or Warrantholder such amounts as are entitled or required to be deducted and withheld with respect to the making of such payment under the Tax Act or any other provision of domestic or foreign (whether national, federal, provincial, state, local or otherwise) Applicable Law relating to taxes. To the extent that amounts are so deducted and withheld and paid to the appropriate Governmental Entity directly or indirectly by the Company, Parent, Subco or one or more Subsidiaries of Parent or the Depositary, as the case may be, such deducted and withheld amounts shall be treated for all purposes of this Agreement and the Plan of Arrangement as having been paid to the Shareholders, Optionholders or Warrantholders, as the case may be, in respect of which such deduction and withholding was made by the Company, Parent, Subco, one or more Subsidiaries of the Parent or the Depositary, as the case may be, provided that such withheld amounts are actually remitted to the appropriate Governmental Entity within the time required and in accordance with Tax Act or any other provision of domestic or foreign (whether national, federal, provincial, state, local or otherwise) Applicable Law relating to taxes. B-9

79 APPENDIX C Fairness Opinion of CIBC World Markets Inc. CIBC World Markets Inc. BCE Place, 161 Bay Street Toronto, Ontario M5J 2S8 Tel: August 26, 2007 The Board of Directors of Stelco Inc. 386 Wilcox Street Hamilton, Ontario L8N 3T1 To the Board of Directors: We understand that Stelco Inc. ( Stelco or the Company ) is proposing to enter into an arrangement agreement (the Arrangement Agreement ) with United States Steel Corporation (the Purchaser ) providing for, among other things, the acquisition (the Proposed Transaction ) by the Purchaser of all of the outstanding common shares (the Shares ) of Stelco. We understand that pursuant to the Arrangement Agreement: a) the Purchaser will acquire each of the outstanding Shares in consideration for Cdn.$38.50 in cash per Share (the Consideration ); b) the Proposed Transaction will be effected by way of a plan of arrangement under section 192 of the Canada Business Corporations Act; c) the completion of the Proposed Transaction will be conditional upon, among other things, approval by at least two-thirds of the votes cast by Stelco shareholders at the special meeting (the Special Meeting ) of Stelco shareholders and the approval of the Ontario Superior Court of Justice; and d) the terms and conditions of the Proposed Transaction will be described in an information circular and proxy statement of Stelco and related documents (the Circular ) that will be mailed to Stelco shareholders in connection with the Special Meeting. Engagement of CIBC World Markets By letter agreement dated March 15, 2007 (the Engagement Agreement ), the Company retained CIBC World Markets Inc. ( CIBC World Markets ) to, among other things, provide financial advice to the Company in connection with potential strategic alternatives, including the sale of the Company to a third party. Pursuant to the Engagement Agreement, the Company requested that we prepare and deliver our written opinion (the Opinion ) to the board of directors of the Company ( Board of Directors ) as to the fairness, from a financial point of view, of the consideration to be received by the holders of Shares (other than the Purchaser) under the Proposed Transaction. CIBC World Markets will be paid a fee for rendering the Opinion and will be paid an additional fee that is contingent upon the completion of the Proposed Transaction or any alternative transaction. The Company has also agreed to reimburse CIBC World Markets for its reasonable out-of-pocket expenses and to indemnify CIBC World Markets in respect of certain liabilities that might arise out of our engagement. C-1

80 Credentials of CIBC World Markets CIBC World Markets is one of Canada s largest investment banking firms with operations in all facets of corporate and government finance, mergers and acquisitions, equity and fixed income sales and trading and investment research. The Opinion expressed herein is the opinion of CIBC World Markets and the form and content herein have been approved for release by a committee of its managing directors and internal counsel, each of whom is experienced in merger, acquisition, divestiture and valuation matters. Scope of Review In connection with rendering the Opinion, we have reviewed and relied upon, among other things, the following: i) The draft Arrangement Agreement dated August 22, 2007; ii) iii) Stelco s Annual Reports, including the audited financial statements and management s discussion and analysis contained therein, for the years ended December 31, 2005 and 2006; Stelco s unaudited financial statements and management s discussion and analysis in respect thereto for the quarters ended June 30, 2007 and March 31, 2007; iv) Stelco s Annual Information Forms dated March 30, 2007 and March 24, 2006; v) Stelco s Management Information and Proxy Circulars dated May 14, 2007 and May 25, 2006; vi) Certain internal financial, operational, corporate and other information prepared or provided by the management of the Company, including internal operating and financial budgets and projections; vii) The report entitled dated January 17, 2007 Stelco Inc. Pension Plans Projected Solvency Funded Position at December 31, 2015 prepared by Mercer Human Resource Consulting; viii) Certain other information in support of Stelco s pension liabilities and other post employment benefits obligations as at June 30, 2007 prepared by the management of the Company and Mercer Inc.; ix) Certain other reports and memorandums prepared by Hicks Morley Hamilton Stewart Storie LLP and McCarthy Tétrault LLP regarding certain labour and employment matters in the context of a sale of the Company; x) Certain other non-public information relating to the business, operations and financial performance of the Company prepared by the management of the Company; xi) xii) xiii) xiv) xv) Selected relevant reports published by equity research analysts and industry sources regarding Stelco and its peers; Selected public market trading statistics and relevant financial information of the Company and other public entities; Selected financial statistics and relevant financial information with respect to relevant precedent transactions; A certificate from two senior officers of Stelco attesting to the accuracy and completeness of the information; and Such other information, analysis and discussions as we considered necessary or appropriate in the circumstances. In addition to the written information described above, CIBC World Markets participated in and relied upon discussions with the senior management of Stelco with regard to, among other things, the Proposed Transaction, as well as the Company s past and current business, operations, financial position, budgets, key assets and prospects. CIBC World Markets has also participated in and relied upon CIBC World Markets Inc. is a subsidiary of CIBC. C-2

81 discussions with McCarthy Tétrault LLP, external legal counsel to the Company and to the strategic oversight committee of the Company, Mercer Inc., external pension and other post employment benefits advisor to the Company, Hicks Morley Hamilton Stewart Storie LLP, external legal counsel to the Company and with UBS Securities Canada Inc., the Company s other financial co-advisor. Assumptions and Limitations Our Opinion is subject to the assumptions, explanations and limitations set forth below. We have not been asked to prepare and have not prepared a formal valuation or appraisal of any of the assets or securities of the Company, the Purchaser or any of their respective affiliates and our Opinion should not be construed as such. With your permission, we have relied upon, and have assumed the completeness, accuracy and fair presentation of all financial and other information, data, advice, opinions and representations obtained by us from public sources, or provided to us by the Company or its representatives or advisors or otherwise obtained by us pursuant to our engagement, and our Opinion is conditional upon such completeness, accuracy and fair presentation. We have not been requested to or attempted to verify independently the accuracy, completeness or fairness of presentation of any such information, data, advice, opinions and representations. We have not met separately with the independent auditors of the Company in connection with preparing this Opinion. Accordingly, with your permission, we have relied upon and assumed the accuracy and fair presentation of the Company s audited financial statements and the reports of the auditors thereon. With respect to the historical financial data, operating and financial forecasts and budgets provided to us by the Company concerning the Company and relied upon in our financial analyses, we have assumed (subject to the exercise of our professional judgment) that they have been reasonably prepared on bases reflecting the most reasonable assumptions, estimates and judgements of management of the Company, having regard to the Company s business, financial condition, plans and prospects. We have also assumed that all of the representations and warranties contained in the Arrangement Agreement are correct as of the date hereof, that the Proposed Transaction will be completed substantially in accordance with the terms of the Arrangement Agreement and all applicable laws and that the Circular will disclose all material facts relating to the Proposed Transaction and will satisfy all applicable legal requirements. The Company has represented to us, in a certificate of two senior officers of the Company delivered as at the date hereof, among other things, that the information, data and other material (financial or otherwise) provided to us by or on behalf of the Company, including the written information and discussions concerning the Company and referred to above under the heading Scope of Review (collectively, the Information ) are complete and correct at the date the Information was provided to us and that, since the date of the Information, there has been no material change, financial or otherwise, in the financial condition, assets, liabilities (contingent or otherwise), business, operations or prospects of the Company or any of its subsidiaries and no material change has occurred in the Information or any part thereof which would have or which would reasonably be expected to have a material effect on the Opinion. We are not legal, tax, actuarial or accounting experts and we express no opinion concerning any legal, tax, actuarial or accounting matters concerning the Proposed Transaction or the sufficiency of this letter for your purposes. Our Opinion is rendered on the basis of securities markets, economic and general business and financial conditions prevailing as at the date hereof and the conditions and prospects, financial and otherwise, of the Company as they are reflected in the Information and as they were represented to us in our discussions with management of the Company and its representatives and advisors. In our analyses and in connection with the preparation of our Opinion, we made numerous assumptions with respect to industry performance, general business, markets and economic conditions and other matters, many of which are beyond the control of any party involved in the Proposed Transaction. The Opinion has been provided to the Board of Directors for their exclusive use only in considering the Proposed Transaction and may not be published, disclosed to any other person, relied upon by any other person, or used for any other purpose, without the prior written consent of CIBC World Markets. Our Opinion is not intended to be and does not constitute a recommendation to the Board of Directors CIBC World Markets Inc. is a subsidiary of CIBC. C-3

82 as to whether they should approve the Arrangement Agreement nor as a recommendation to any holder of Shares as to how to vote or act at the Special Meeting. The Opinion is given as of the date hereof and, although we reserve the right to change or withdraw the Opinion if we learn that any of the information that we relied upon in preparing the Opinion was inaccurate, incomplete or misleading in any material respect, we disclaim any obligation to change or withdraw the Opinion, to advise any person of any change that may come to our attention or to update the Opinion after the date of this Opinion. Opinion Based upon and subject to the foregoing and such other matters as we considered relevant, it is our opinion, as of the date hereof, that the Consideration to be received by holders of the Shares (other than the Purchaser) pursuant to the Proposed Transaction is fair, from a financial point of view, to the holders of the Shares (other than the Purchaser). Yours very truly, (Signed) CIBC WORLD MARKETS INC. CIBC World Markets Inc. is a subsidiary of CIBC. C-4

83 APPENDIX D Fairness Opinion of UBS Securities Canada Inc. UBS Securities Canada Inc. 161 Bay Street Suite 4100 Toronto, Ontario M5J 2S1 Tel: Fax: August 26, 2007 The Board of Directors Stelco Inc. 386 Wilcox Street P.O. Box 2030 Hamilton, Ontario L8N 3T1 Canada To the Board of Directors: We understand that Stelco Inc. (the Company ), is considering a transaction whereby United States Steel Corporation ( US Steel ) (together with Alberta ULC, the Offeror ), will acquire all of the issued and outstanding common shares (the Shares ) of the Company. Pursuant to the terms of a draft support agreement, dated August 26, 2007 (the Support Agreement ), to be entered into between the Offeror and the Company, the Offeror will make an offer to purchase all of the outstanding Shares at a price of C$38.50 (the Consideration ) for each Share (the Offer ). The terms and conditions of the Offer are set forth in the Support Agreement. You have requested our opinion as to the fairness, from a financial point of view, to the holders of Shares (other than the Offeror) of the Consideration to be received by such holders in the Offer. UBS Securities Canada Inc. (together with certain of its affiliates, UBS ) has acted as financial advisor to the Company in connection with the Offer and will receive a fee for its services, a portion of which is payable in connection with this opinion and a significant portion of which is contingent upon consummation of the Offer. In addition, UBS or an affiliate is a participant in a credit facility of the Company for which it received and continues to receive fees and interest payments and UBS or an affiliate is a participant in a credit facility of US Steel for which it received and continues to receive fees and interest payments. In the ordinary course of business, UBS, its successors and affiliates may hold or trade, for their own accounts and the accounts of their customers, securities of the Company and/or the Offeror and, accordingly, may at any time hold a long or short position in such securities. Our opinion does not address the relative merits of the Offer as compared to other business strategies or transactions that might be available with respect to the Company or the Company s underlying business decision to recommend acceptance of the Offer. Our opinion does not constitute a recommendation to any holder of Shares as to whether or not to accept the Offer or how to otherwise act with respect to the Offer. At your direction, we have not been asked to, nor do we, offer any opinion as to the terms, other than the Consideration to the extent expressly specified herein, of the Offer, the Support Agreement or any related documents or the form of the Offer. You have not requested that we provide a formal valuation (as defined in Ontario Securities Commission Rule ) of the Company or of any of its respective securities or assets, and our opinion should not be construed as such. We also express no opinion as to the price at which Shares will trade at any time. In rendering this opinion, we have assumed, with your consent, that (i) the final executed form of the Support Agreement does not differ in any material respect from the draft that we have reviewed, (ii) the Offeror and the Company will comply with all the material terms of the Support Agreement; and (iii) the Offer will be consummated in accordance with the terms of the Support Agreement without any adverse waiver or amendment of any material term or condition thereof. We have also assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Offer will be obtained without any material adverse effect on the Company or the Offer. UBS Securities Canada Inc. is a subsidiary of UBS AG. UBS Securities is a financial services group of UBS AG. D-1

84 UBS Securities Canada Inc. 161 Bay Street Suite 4100 Toronto, Ontario M5J 2S1 Tel: Fax: In arriving at our opinion, we have, among other things: (i) reviewed certain publicly available business and historical financial information relating to the Company; (ii) reviewed certain internal financial information and other data relating to the business and financial prospects of the Company that were provided to us by the management of the Company and not publicly available, including financial forecasts and estimates prepared by management of the Company; (iii) conducted discussions with members of the senior management of the Company concerning the business and financial prospects of the Company; (iv) reviewed publicly available financial and stock market data with respect to certain other companies we believe to be generally relevant; (v) compared the financial terms of the Offer with the publicly available financial terms of certain other transactions we believe to be generally relevant; (vi) reviewed current and historical market prices of the Shares; (vii) reviewed the Support Agreement; (viii) reviewed a certificate (the Company Certificate ) dated the date hereof from certain senior officers of the Company regarding certain matters; and (ix) conducted such other financial studies, analyses and investigations, and considered such other information, as UBS deemed necessary or appropriate. At your request, we have contacted third parties to solicit indications of interest in a possible transaction with the Company and held discussions with certain of these parties prior to the date hereof. In connection with our review, with your consent, we have not assumed any responsibility for independent verification of any of the information provided to or reviewed by us for the purpose of this opinion and have, with your consent, relied on such information being complete and accurate in all material respects. In addition, with your consent, we have not made any independent evaluation or appraisal of any of the assets or liabilities (contingent or otherwise) of the Company, nor have we been furnished with any such evaluation or appraisal. With respect to the financial forecasts and estimates referred to above, we have assumed, at your direction, that they have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company as to the future financial performance of the Company. Our opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the date hereof. Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Consideration to be received by holders of Shares (other than the Offeror) in the Offer is fair, from a financial point of view, to such holders. This opinion is provided for the benefit of the Board of Directors in connection with, and for the purpose of, their evaluation of the Offer. We disclaim any undertaking or obligation to advise any person of any change in any fact or matter affecting this opinion of which we may become aware after the date hereof. In the event that there is any material change in any fact or matter affecting this opinion after the date hereof, we reserve the right to change (but have no obligation to), modify or withdraw this opinion. Very truly yours, UBS SECURITIES CANADA INC. UBS Securities Canada Inc. D-2