Welcome Ontario Brewers Date: January 14 th 2015 Time: 2:00 pm EST Please note all lines will be muted throughout the presentation. If you have any questions, please click on the Q&A box and enter your questions which will be answered by the host or presenter.
Opening The Beer Store Ownership for Ontario-based Brewers January, 2015
Legal Disclaimer This presentation is for information purposes only and does not constitute a legal offer to sell or a solicitation to purchase shares of The Beer Store (TBS). This presentation is intended to provide prospective purchasers with current information about TBS and is being provided only to prospective purchasers that are familiar with TBS through business contacts. It is only for the confidential use of those persons. Any subsequent issuance of shares to any person will be in reliance on an exemption from the registration or prospectus requirements of applicable securities laws. This presentation contains summary information only. TBS does not make any representations or warranties as to the accuracy or completeness of the information in this presentation. The prospective purchaser should ensure that it receives, reviews and understands the information contained in the Due Diligence and Ownership Documents prior to making a decision to purchase shares of TBS. The prospective purchaser should consult with its legal, financial and other advisors before making a decision to purchase. Certain information contained in this presentation constitutes forward looking statements, all of which are based on certain material factors, assumptions and conditions, some of which may be unknown to TBS. Forward-looking statements are inherently uncertain and actual events or results can and will differ from those projected. Therefore, undue reliance should not be placed on such forward looking statements. Page 3
Objectives of this webinar session to answer your questions Provide further information on our proposal for system change Extend an invitation to become an owner of The Beer Store (TBS) Describe the rights and benefits you will receive as an owner Highlight how rates will be affected and what savings you can expect Share the governance changes to give you a voice / seat at the table Explain the process to evaluate this offer and to access ownership Page 4
Our proposal: Increasing access to TBS for all small brewers Regardless of ownership 1 2 free SKU listings in 5 local stores proximate to your brewery One-time listing fee waived for additional stores, only pay per store fee Applies to all brewers with <1M liters / year sold through TBS 2 2 free seasonal SKUs swaps for 1 existing listed SKU Potential to sell three seasonal brands through TBS at no additional cost Applies to all brewers 1 Listed SKU Seasonal SKUs 2 Page 5
Our proposal: Inviting you to become an owner of TBS Future owners All Ontario-based brewers that meet the following conditions: 1. Licensed by AGCO & CRA Current owners 2. Conduct full brewing process in ON 3. Either (a) produce only in ON or (b) have an ON plant that has >10M L / yr capacity and produces >2.5M L / yr 4. Have signed TBS User Agreement Page 6
Many benefits of new ownership structure For Small Brewer Owners (under 5 million litres/yr) For Large Brewer Owners (over 5 million litres/yr) Fees based on net costs of business Lower fees than large owners Share in all revenues, most costs Do not pay certain capital & pension / benefits costs Governance access: Board representation Transparent reporting: financial & operating Ownership cost: $100 Fees based on net costs of business Same fees paid for same services Will uniquely pay capital investments (above depreciation) & pension / benefit costs Governance access: Board representation Transparent reporting: financial & operating Ownership cost: $1,000 Page 7
What will happen to your rates? Today: The Beer Store operates on a break-even basis Owner user fees determined based on spreading net operating costs Estimated based on budget costs and volumes; trued-up at end of year In our proposal, similar approach will apply to ALL owners All TBS operating costs and revenues shared across all owners Basic fees for owners based on share of net operating costs Changes will reduce 2015 costs for new owners Owner service fees will be based on net costs of the business Owners >5 million litres/yr: All pay the same fees for same services Owners <5 million litres/yr: Get discounted fees as not responsible for certain capital and pension / benefit deficit costs) If any end of year adjustments are required, all owners will participate pro rata Through representation on the Board, all owners will have insight into costs, fee structure to increase transparency. This will alleviate any perceived inequities Page 8
Participating in ownership projected to reduce your costs Average savings for Class F-eligible Ontario-based brewers Small brewer owner savings vs. projected '15 TBS rates Small brewer owner savings vs. large brewer owners rates Small brewer owner savings vs. '15 nontiered rate sheet 2% 9% 13% Based on 2015 TBS budget and projected 2015 rate sheet given November YTD inflation Page 9
Governance model will evolve to allow representation All owners through their Board representatives will have an opportunity to participate in TBS oversight, so they can contribute and provide direction on policy, financing and operations decisions Prior structure Board of directors: Molson: 4 nominees Labatt: 4 nominees New structure Board of directors: Molson: 5 nominees Labatt: 5 nominees Sleeman: 2 nominees Other owners > 5M L / yr: 2 nominees Other owners < 5M L / yr: 1 nominee Executive committee: Molson: 1 representative Labatt: 1 representative Executive committee: Molson: 1 representative Labatt: 1 representative Other brewers: 1 representative Goal: New governance structure will take effect in May Page 10
Anticipated timeline to implement changes Coming weeks / months May By end of the year New listing fees / policies available immediately Ontario-based breweries conduct diligence and join TBS TBS Board of Directors elections take place and new governance structure implemented New owners can vote & stand for seat on board New ownership service fees in effect on the 1st Monday of May Year-end reconciliation payment to all owners who joined in the year Current tiered rate sheet eliminated Jan 1 for Ontario non-owners There is no deadline to accept however, accepting before May allows you to participate in Board of Directors elections Page 11
Note: What will be included in the Due Diligence and Ownership documents? 1 2 3 Financial impact estimate specific to your brewery TBS pro-forma estimates for 2014 LE & 2015 budget Audited financial statements of TBS for fiscal year 2013 4 5 6 Subscription and Shareholders Agreements Summary of Shareholder rights and obligations Framework Agreement between the LCBO and TBS Page 12
The path forward to evaluate and pursue ownership offer 1 2 3 4 Express interest in becoming an owner by contacting Ted Moroz Sign & return Non-Disclosure Agreement You will then be sent a copy of the Due Diligence and Ownership Documents Review the Due Diligence and Ownership Documents and consult with your advisors Sign and return 2 copies of Ownership Documents to TBS Enclose certified cheque for Cdn $100 payable to Brewers Retail Inc. 5 On closing in May, receive Share Certificate for 1 Class F Share registered in your name and 1 signed copy of Ownership Documents for your records Page 13
Summary: What rights and benefits does ownership provide to you? By purchasing one Class F Share for Cdn$100, you receive: 1 Notice of, and right to attend, all annual and special meetings of owners 2 Right to vote at meetings of owners held to elect Directors of TBS Representation on the Board / executive committee Share in decision-making 3 Periodic reporting of financial information relating to TBS 4 Basic service fees that are the same or better than the current owners Larger brewer owners will make additional payments relative to capital expenditures and to cover pension and benefit deficits Page 14
Summary: What rights and benefits does ownership not provide to you? As a Class F shareholder, you will not be contributing to capital expenditures above depreciation & amortization, and you will not: Share in the value of TBS assets because you are shielded from the cost of having to pay for a portion of those assets Be entitled to receive a distribution of assets on liquidation of TBS As a Class F shareholder, your liability is limited to the amount that you invested to purchase your Class F Share ($100) No obligation to invest, lend or pay any additional amount to TBS No additional responsibility to pay for debts, liabilities or obligations of TBS (including matters arising from litigation) except as reflected in basic fees Page 15
Questions? Page 16
Thank you Page 17